LONDON (Reuters) –
The U.S. Federal Reserve is studying the idea of borrowing from money market mutual funds as part of eventual steps to withdraw stimulus, the Financial Times reported on Thursday.
The Fed would borrow from the funds via reverse repurchase agreements involving some of the huge portfolio of mortgage-backed securities and U.S. Treasuries that it acquired as it fought the financial crisis, the newspaper reported, without citing any sources.
This would drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered.
The FT said Fed officials had in recent days held discussions with market participants on how it might implement such a scheme.
The Fed is considering whether to conduct a pilot scheme, but worries such a test might be seen as a signal that the central bank was about to drain liquidity on a large scale, the newspaper said. In the near term, a big drain remains unlikely, it added.
The central bank held interest rates at close to zero on Wednesday and upgraded its assessment of the U.S. economy, saying growth had returned after a deep recession.
The Fed also said it would slow its purchases of mortgage debt to extend that program's life until the end of March, in a move toward withdrawing the central bank's extraordinary support for the economy and markets during the contraction.
The idea of the Fed using reverse repos to help unwind policy is not new; Fed chairman Ben Bernanke identified them as a potential means of soaking up liquidity in July. But the market had previously expected the repos to be done with primary dealers, including former Wall Street investment banks.
The central bank is now considering dealing with money market funds because it does not think the primary dealers have the balance sheet capacity to provide more than about $100 billion, the Financial Times said.
Money market mutual funds have about $2.5 trillion under management so they could plausibly provide between $400 billion and $500 billion, it said.
The newspaper added that the Fed did not think it would need to drain liquidity all the way to where it was before the crisis, because it was confident it could raise interest rates even with a much larger amount of reserves in the system than existed before the crisis.
(Reporting by Andrew Torchia, editing by Mike Peacock)
TOKYO (AFP) –
Japan's Sony said Thursday that global retail sales of its latest, cut-price model of the PlayStation 3 videogame console had hit one million in the three weeks since its launch.
The new PS3 was went on sale on September 1 in North America, Europe and in Asia, except for Japan where it debuted in stores two days later.
The model is priced at 29,980 yen (330 dollars) in Japan, 10,000 yen less than its earlier version. The recommended retail price is 299 dollars in North America and 299 euros (440 dollars) in Europe, Sony says.
The new version, like its predecessors, allows users to play games and movies on Blu-ray discs, but is slimmer and uses less power.
"The console packs cutting-edge technologies, including the (pre-installed) 120 gigabyte hard-disk drive and Blu-ray capability, at a lower price," said Sony Computer Entertainment Inc. spokeswoman Makiko Noda.
PERTH (Reuters) –
Oil prices extended losses and fell closer toward $68 a barrel on Thursday, as data showing an unexpectedly high build up in U.S. oil and products stockpiles reminded traders that oil prices may have run ahead of the demand fundamentals.
Crude oil prices fell nearly 4 percent in the previous session and are on track to shed about 5 percent this week, as demand concerns resurface.
U.S. crude for November delivery fell 63 cents to $68.34 a barrel by 0512 GMT (1:12 a.m. EDT), after settling down $2.79 on Wednesday.
London Brent crude fell 55 cents to $67.44 a barrel.
"A few factors were at play last night and the most notable was the U.S. inventories number and that was unambiguously bearish," said Toby Hassall, a commodities analyst at CWA Pty Ltd in Sydney.
A bounce in the U.S. dollar and a weak equities market also combined to exacerbate oil's fall on Wednesday.
"The market has been very well supported by the recent economic optimism and the falling dollar, but the latest EIA numbers show there's that underlying downside risk for the oil market," Hassall said.
The U.S. Energy Information Administration reported commercial stockpiles of crude rose 2.8 million barrels in the week to September 18, against analysts' expectations of 1.5 million barrels fall.
Gasoline inventories increased by 5.4 million barrels to 213.1 million, and distillates gained 3.0 million to hit a 26-year high of 170.8 million, according to the EIA.
In a sign that oil demand was also struggling in Asia, data showed August crude imports by Japan, the world's third-largest energy consumer, fell 12.4 percent from a year ago and hit its lowest in 20 years.
Meanwhile, the dollar softened against higher-yielding currencies on Thursday as investors shifted their funds away from the greenback on expectations the Federal Reserve will keep interest rate very low for a long time. [USD/
The worst global recession since the Great Depression has battered demand in the United States and other big consumer nations, shaving crude prices off record highs near $150 a barrel struck in July 2008 to below $33 a barrel in December.
But with prices having risen about 54 percent this year to reach a 2009 high of $75 a barrel in August on ebullience about the economic outlook, most analysts feel some convincing evidence of a recovery in global demand is now needed to push oil out of the top of the $68-$75 price range where it has traded in the third quarter.
BNP Paribas also cautioned that a recent string of positive economic data could potentially overstate actual growth as it was hard to distinguish if the rebound in indicators, such as factory output, was merely reinstatement of previously canceled orders or a genuine return to growth.
"Industrial output is recovering after undershooting final demand but the improving surveys could potentially overstate actual growth as the economy comes back from the lows of Q1 and Q2," BNP's senior analyst, Harry Tchilinguirian, said in a report.
Analysts said investors would keep a keen watch on some key economic data due to be released later on Thursday, including weekly U.S. jobless claims number and August home sales data, to get more clues on the pace of recovery in the world's largest energy consumer.
(Reporting by Fayen Wong)