The Best auto finance

Enter your search terms Submit search form Bridging Finance For Business Developers By Groshan Fabiola Expansion is a step that should come naturally in any business that is successful. Some business owners even think of expansion as absolutely necessary and strive to make it happen. But it often happens that the entrepreneur lacks the necessary finance to take his or her business to the next level and reach a wider network of consumers. If temporary cash shortfall is your problem, bridging finance is the best solution. Bridging finance can be granted for many types of properties, such as commercial properties, land, farms, etc. In fact, bridging finance is typically used for business and commerce. Bridging loans are the ideal solution when you need instant capital for the purchase of a commercial property. They are short-term loans and their repayment period is usually up to two years. Bridging finance also comes with the advantage that it can be approved fast and easily. Furthermore, unlike other loans that entrepreneurs can take out in order to purchase a commercial property and expand their business, the availability of bridging finance is normally not affected by bad credit

 Midday Market Roundup 19/12/08
The market is down 25 - down 72 at worst - about double the 37 point fall predicted by the SFE Futures this morning. Resources underperforming - down 2.4%. BHP and RIO down 3.2% and 2.4%. Energy stocks down 4.0% on the lower oil price (-8.5%) - Origin down 3.3% and Woodside down 5.4%. Fortescue down another 3.0% - in the process of getting sued & #36;180m by Splendour Special Maritime Enterprise due to an alleged 5-year ship charter cancellation. Oz Minerals in a trading halt until the 29th of December as it explores all options to solve its dire debt position and liquidity problems - looking at selling entire company, selling certain assets or raising capital. Financials up 0.3% and banks mixed. Big industrials down 0.6%. Little news, quite day after low volumes on Wall Street last night.The Dow was down 219. Up 59 at best. Down 297 at worst. George Bush considering an & quot;orderly bankruptcy & quot; as a solution to the impending collapse of the auto industry - something of a & quot;soft-landing & quot; and perhaps a & quot;Chapter 11 bankruptcy. & quot; General Motors down 13%. Obama's crew assembling a two-year stimulus plan worth US & #36;850bn - focusing on new jobs, middle-class tax relief, and expanded aid for the poor and unemployed. Material stocks down considerably. Gold down & #36;7.90 to & #36;860.60. Treasuries up with yields falling to all-time new lows. Fed Ex and Nike top earnings.Making the news today...Commonwealth Bank of Australia (CBA) says its higher impairment expectations were not material.Macquarie Airports (MAP) - November traffic fell 2.6% from last year. Closure of the Bangkok International Airport impacted traffic.Rio Tinto (RIO) has had their rating lowered by Standard & #38; Poor to 'BBB/A-3' due to higher debt and & quot;market downturn & quot;.Paperlinx (PPX) gave an update on European property sales saying some sales will be complete by early 2009. Said it will breach lending covenants and is in talks with lenders. Said earnings for the period will be 15% lower.Atlas Iron (AGO) has entered into a long term off-take agreement with a medium-sized Chinese steel mill.Futuris (FCL) says it has no idea why its share price fell to 63c from 78c this week.Cour d'Alene Mines (CXC) has enhanced its liquidity position by entering into a new & #36;20m facility with Mitsubishi International Corporation.Molopo Australia (MPO) completes first triple seam dual lateral well.Broker Stuff today...Plenty of downgrades from brokers this morning on Ten Network (TEN) after they announced their 1Q09 result and said it would cut its dividend by 80%. UBS and Citi both have Sell recommendations, Credit Suisse expects it to Underperform as does Macquarie Equities who has a 77c target price.UBS Warburg has lowered its target price on Minara Resources (MRE) to 34c from 55c and cut its earnings estimates due to anticipation of a low nickel prices in calendar year 09.Macquarie Equities cut Orica (ORI) to Neutral from Outperform saying they expect 1% EPS growth in FY09 and that the stock will trade at a discount as uncertainty eases. & #160;Other stuff today...The Dow Futures suggest a 28 point fall on Wall Street tonight.Information provided to you by Marcus Today
Record Lows For Bonds
Normally it would be cause for concern: Australia's key bond rate is on its way to falling under 4% after hitting another all time low this week in the wake of the US Federal Reserve's shock decision to set a rate band of 0% to .25% for the foreseeable future for its key rate.Falling rates are usually a sign of impending slowdown and problems; and there of course are ahead for the economy in 2009. & #160;The yield on our 10 year bond hit record low of 4.04% yesterday; 0.21% under the cash rate set on December 2 by the Reserve Bank.In addition the 10 year bond's yield is now lower than rates for short term near cash securities: 30, 90 and 180 day bills.That's contrary to the current situation in the US where cash and short term government bond yields are from 1% down to almost zero: and the 10 year US bond is around 2.05 %. It will go under 2% before Christmas.Both are signs that there is no money being lent in the US of any volume; banks and other lenders are keeping their funds in cash, fearful of going back into the loan market and worried about the possibility of default among their peers and customers.The Fed is the only lender and in 2009, the fate of the country and the global economy are in the hands of one man and one organisation: the US Federal Reserve and its chairman, Ben Bernanke.This editorial in the Financial Time sums up why we in Australia and everyone around the world will be looking to Ben Bernanke and the Fed next year to save us from depression. & quot;We are flying blind. The Federal Reserve's announcement this week that it was abandoning conventional rate measures in favour of directly propping up lending represents a bold experiment in policy. & #160; & quot;Ben Bernanke, Fed chairman, is taking a gamble - but he had little choice. Aggressive easing, however, creates its own difficulties. & quot;The US real economy is crumbling and continues to deteriorate; the global downturn has been exacerbated by a crippled domestic financial system. Credit is not flowing to consumers and businesses because risk spreads are too high. & quot;This week, the Fed responded decisively. It cut rates to a band between zero and 0.25 per cent. Although nominally a deep cut from 1 per cent, market interest rates were already plumbing these depths. & quot;By just aiming to keep the short-term rate within a range rather than on a point target, the Fed gives itself the flexibility to focus on restoring lending. & quot;The Fed aims to drive down punitive borrowing costs by ensuring adequate support for loan demand in the secondary market. & #160;In order to increase the flow of affordable lending, it currently plans to buy agency debt, mortgage-backed securities and consumer loans as the situation warrants. & quot;The Fed is focusing on unclogging credit lines, but there is another good reason to pursue this policy. This week, the volatile US headline inflation measure fell to 1.1 per cent on an annualised basis - and looks likely to turn negative. & #160; & quot;There is no problem with a spell of falling prices but if expectations of a sustained price decline become embedded, these little movements could turn into full-blown deflation. & quot;In a heavily indebted country such as the US, persistent deflation would be poisonous. Debts which are denominated in fixed prices would increase in value, pulling balance sheets apart. & #160; & quot;Insolvencies would rise, demand would fall, and prices would tumble yet further. Restoring credit may be the Fed's primary aim, but its measures are also an insurance policy against falling into a deflationary spiral. & quot;That about sums up the outlook for us here and the rest of the planet in 2009. It's a real devil and deep doodah (to use an Americanism) situation.We have to hope it works.But contrary to the situation in the US, here in Australia money is being lent here and some tough decisions made, as we saw this week with two groups of banks rolling over the recapitalising struggling big debtors in PBL Media ( & #36;4.2 billion) and the Centro group (with just over & #36;6 billion).In both cases the loan terms were changed to help the stricken borrowers and new money advanced: not much, but certainly more than you'd have seen in any similar deal in the US recentlyMacquarie Bank interest rate strategist, Rory Robertson says the yield on the 10 year bond is heading under 4% and had dropped 1.50% since mid October.He said he believes the RBA will cut in February by 0.50% to 3.75% & quot;but the possibilities range from nothing done to another 1% cut & quot;.Certainly the Australian dollar is helping: it hit a 2 month high in overnight trading above 70.70 US cents as the US dollar continued to lose ground against the euro and the yen in particular. & #160;It fell back 1.3 cents Thursday night to around 67.80 US & #160;cents, then recovered the 68 US cent mark. The US dollar continued to weaken, falling through & #36;US1.42 to the euro. & #160;Our dollar lost more than 1 US cent Thursday night, even as the US dollar fell. The pound is moving closer to parity with the euro as well.The US dollar has now lost more than 9% in four trading days against the greenback and has hit new 13 year lows against the stronger yen.The weak dollar is now starting to attract more and more attention with some offshore strategists seeing a rate of & #36;US1.50 to the euro sooner rather than later.That means the pressure will be off the Aussie and the RBA, which cut its support for the currency to just & #36;134 million in November, compared with the & #36;3.2 billion of support in the last 10 days of October when it seemed the world financial system would shake apart.Oil prices continued to sag after the OPEC meeting in Algeria cut its production target by a record 2.2 million barrels a day, to go with earlier cuts of 2 million barrels.Prices continued around & #36;US40 a barrel yesterday, but overnight they fell sharply, down more than 9% to just over & #36;US36 a barrel as traders assessed the aftermath of the OPEC meeting and found that it wouldn't really impact the market in the short term..Copper fell to around & #36;1.29 a pound, which was down on the level two weeks ago: the metal has lost the 10% increase of that time as concerns grow that the US slowdown is deeper and nastier than thought, with China also hurting as the housing slump drags the economy towards stall mode. (Remember the news from China this week wasn't good at all.)Our 10 year bond rate & #160;is following cash and US rates lower, but because there's a huge 4% interest rate differential, the Aussie dollar should hold up.If conditions settle in January after the end of year squeeze, don't be surprised if Japanese yen investors appear bearing money to invest.That could happen earlier than that if the Bank of Japan cuts its key rate from 0.30% to around 0.10% as suggested in the market ahead of the meeting today.We have to remember that the current cash rate here of 4.25% is low because the RBA has cut deeply to provide a buffer for the economy ahead of a worsening in the economy next year.At that level or even around 3%, it is also a sign that our level of economic activity will still be stronger and more soundly based than Japan, the US and Europe.It's as much recognition of the small inflationary risks that still accompany the Australian economy as anything else. (Which is a good thing, trust me)Those inflationary pressures will stand us in good stead next year when deflation stalks the economies of the US, UK, Europe and Japan.That's the bottom line of the Fed's rate cut and quantitative easing: it wants to see some inflationary fires kindled by forcing banks to lend and consumers to consume.No lending, no spending makes for a really depressed economy!
Big Miners Cut: But Not BHP
The pressure is mounting on BHP Billiton to detail just how it plans to meet the rising pressures from the global recession and the slump in commodity prices, especially oil and copper, and next year iron ore and coal.Already its rivals like Xstrata and one time takeover target Rio Tinto, have cut deep.Iron ore major, CVRD has cut production in nickel, iron ore and sent staff on holidays around the world.And now another major, Anglo American has taken an axe to its business with deep cuts, like Rio did.Rio's credit rating was cut yesterday by Moody's from the A3 to Baa1.2009 is going to be tough and it's going to test the managements of resource companies large and small.This week has also seen Xstrata closing a big coal mine in Queensland and cutting jobs; Macarthur Coal chopped output 22% because of cancelled contracts and dropping staff. Oz Minerals axed staff in Queensland and Fortescue Metals revealed problems with 10 shipping contracts covering iron ore shipments.BHP had been largely silent until yesterday when a letter to shareholders was released from chairman Don Argus in which the company said it would try and struggle through the slump.To protect itself, the company said it would focus on & quot;lower risk brown-field expansions & quot; rather than & quot;start up projects in new geographies & quot;.It also said it was ready to respond if production cuts become necessary or if & quot;any of our operations are cash negative & quot;.In his letter, Mr Argus said the company had the flexibility, through its balance sheet and its portfolio, to respond to changes & #160;in business conditions. & #160; & quot;I want to be very clear that BHP Billiton, as a standalone company, is in a strong financial and operating position. & quot;We believe we are better placed than our competitors in these challenging times to respond to the fluctuating demand for our products. & quot; & quot;There is no doubt that these are challenging times for all of us. Uncertainty in the world's commodity markets remains particularly high in the short-term, and we do not expect to be immune from these changes. & quot;However, we have excellent customer relationships and so far we have been able to substantially maintain our sales volumes through a combination of our normal long term contract and spot business. & quot;If these uncertain conditions persist and significant production cuts become necessary, or any of our operations are cash negative and are set to remain so, we will respond accordingly and advise shareholders and the market. & quot;Our priorities for cash flows remain to invest in core businesses, manage our balance sheet to a solid single A credit rating, maintain our progressive dividend policy and return any surplus cash to shareholders. & quot;BHP shares finished up 3c at & #36;30.78 as investors appreciated the message from the chairman who, when he last wrote in September, was confident the Rio bid would be successful.Mr Argus said the decision to discontinue its bid for Rio had been & quot;difficult ... but one we believe (it was) right for BHP Billiton shareholders. & quot;As to the future, we have a portfolio of long-life, low-cost, expandable, tier one assets, & quot; he said. & quot;As a result of this portfolio, and low-cost position, BHP Billiton's margins are the highest among the industry and in these difficult times, we expect to outperform our peers. & quot;BHP Billiton also had & quot;a very strong balance sheet, & quot; with net debt of & #36;US6.3 billion ( & #36;A8.95 billion) at October 31, 2008, against a market capitalisation of around & #36;US115 billion ( & #36;A163.42 billion) as at December 18, he said in the letter.That A rating for BHP was & #160;shared by Rio, but not after Moody's cut it on & #36;US5 billion of its debt citing the failure to meet asset sale targets.Moody's warned that Rio's earnings may also be affected by falling metal prices, including expected declines in iron ore next year, and put the company on a negative outlook.Rio has revealed plans to cut 14,000 jobs, more than halve capital spending to around & #36;US4 billion, and sell mines to reduce debt by & #36;US10 billion by the end of next year. It cancelled a big alumina project in & #160;Saudi Arabia.Moody's said Rio needs to sell assets over the next few months to help clear debt. Rio has already postponed asset sales from this year aimed to cut the debt taken on from the Alcan purchase in 2007.Rio currently has around & #36;US38 billion of debt. & quot;A key factor in the company's rating will be its ability to execute on its divestiture program and reduce debt over the next 12 months, & quot; Moody's said. That includes & #36;8.9 billion due next October and & #36;10 billion due a year later.Rio shares fell 32c to & #36;40 on the ASX yesterday They are down 38% since BHP scrapped its hostile takeover bid on November 25, blaming Rio's debt, slumping metal prices and global financial markets turmoil.Meanwhile Anglo American has followed Rio in hacking into capital spending for the next year, announcing a & #160;50%-plus chop yesterday.Anglo is a top five global miner (with Rio, BHP, Xstrata and CVRD of Brazil) and controls the world's biggest platinum producer, a metal that has been badly hurt by the global recession in the car industry, especially in the US, Japan and Europe.Anglo CEO, Cynthia Carroll said in the statement that & quot;We have taken decisive action as a result of the fast changing economic climate. & quot;Capital expenditure for 2009 has been capped at & #36;4.5 billion, a reduction of more than 50%, including & #36;1.3 billion of stay-in-business capital expenditure, a lower level than the projected amount for 2008. & quot;The substantial changes to planned capital expenditure will be achieved principally by rescheduling many of the Group's development projects; revised capital expenditure levels, their impact and guidance on 2009 production are set out below. & quot;The Group's capital expenditure programmes for 2010 will continue to be monitored against prevailing and forecast market conditions. & quot;Anglo Platinum, 75%-owned by Anglo American cut next year's capital expenditure plan to & #36;US910 million because of plunging prices for platinum and palladium.Anglo American delayed its Amandelbult No. 4 Shaft platinum expansion in South Africa and the Los Bronces copper project in Chile by eight months. & #160;In Brazil, commissioning of the Minas-Rio iron-ore project and the Barro Alto nickel project were deferred by as long as a year.Kumba Iron ore, controlled by Anglo American, will curb output & quot;marginally & quot; in the fourth quarter and cut 2009 capital expenditure by 20% to & #36;US425 million.Anglo American's share price has dropped 48% in London trading this year; BHP is down 19% and Rio by 72%, thanks in part to BHP abandoning its bid. & #160;
The Media: 2009's Problem Child
The outlook for the Australian media got worse yesterday with the news from the Ten Network, the country's third TV network, that underlying earnings fell 25.2% in the three months to the end of November.It means the entire sector will enter 2009 under a cloud with earnings down, sales slowing, viewing and circulation figures under pressure and share prices weak for the listed groups.The company, 56% owned by the struggling CanWest Global network of Canada told the ASX and yesterday's annual meeting in Sydney that group earnings before interest, tax, depreciation and amortisation (EBITDA) fell to & #36;91.6 million in the period, from & #36;122.5 million in the prior corresponding quarter.It cut its interim dividend 80% to 2c a share joining Fairfax Media which chopped its interim by a similar amount, and regional TV and newspaper group, Macquarie Media which yesterday cut its distribution 80% to 4.5 cents a share.(it' is also Ten's regional TV affiliate).Ten also scrapped the 10% share buyback that was designed to support the shares in the market. It had acquired only 2.3 million shares, with no further purchases since August as the economic slowdown and volatile markets increased pressure on Ten's revenues and earnings.Ten won't be alone in Australia, the US, UK or other big economies next year. The Media will be one of the victims of 2009 as newspapers fold; TV and cable TV networks contract or restructure and radio contracts.It is going to be bloody and there will be quite a few losers, starting perhaps with Ten and its owner, CanWest of Canada.,Ten has cut staff across the company as it feels the impact of the advertising slump, but the company wouldn't give any numbers.The cuts have come at the TV business and at Eye, its outdoor advertising arm.Ten shares ended yesterday down 3.5c, or 3.3%, at & #36;1.01The profit fall came on a worrying 10.6% drop in revenue to & #36;292.3 million for the quarter, which includes a bit of the end of year Christmas 'spendathon'. That helps explain the job and cost cuts.December is the best month of the year for the media and this will be reported in the quarter to the end of February. & quot;Group revenue was & #36;292.3 million, and group earnings before interest, tax, amortisation and depreciation (EBITDA) was & #36;91.6 million. & quot;Revenue from the television business Network Ten (TEN) was & #36;244.8 million, which was 12.1 per cent lower than the same time last year. & quot;On a normalised basis (excluding the AFL Grand Final and the Rugby World Cup which occurred in the corresponding period in 2008), TEN's revenue for the first quarter of financial year 2009 was down approximately 5 per cent. & quot;Revenue from the out-of-home advertising division, Eye Corp (EYE), was broadly in line with the prior year at & #36;47.5 million. & quot;Given that it is for the toughest period so far this year: September-November, when the global economy fell off a cliff and the local economy slowed noticeably, Ten's news is a sign the malaise in the media sector won't end soon.Ten's slump came at the end of a week that saw the struggling PBL Media bailed out by its banks who agreed to a recapitalistion and easing of important restrictions called covenants on its loans (on how much profit the group will earn).And another stock to watch is APN News and Media where a controlling 30.1% stake is on the market with Tony O'Reilly's Independent News & #38; Media doing the selling, under the pressure of its banks. INM's UK papers, The Independent and its Sunday stablemate are under pressure with sales and ad revenues down.Ten is in a similar position with its Canadian parent, CanWest under pressure with huge debts of more than & #36;C3 billion and much of that falling due in the next year to 18 months.Ten was its best performing business, but no longer.Ten's part-time executive chairman, Nick Falloon told the AGM that & quot;As we flagged at our full year results in October, the revenue market continues to be challenging and visibility remains short across the sector. & quot;Ten Holdings is not immune from this tough economic operating environment, & quot; Mr Falloon told the meeting.Mr Falloon said the group had undertaken a review of its costs in recent months with an immediate positive impact to the television business. (That saw the children's TV news show BTN shut down and staff deployed.) & quot;Notwithstanding the launch and ongoing commitment to our new multi-channel ONE in early 2009, as well as deployment of funds to new international and domestic program initiatives, Ten is expected to deliver zero cost growth for the full year. & quot;Mr Falloon said it was & quot;prudent & quot; to cut its first half dividend payout to two cents per share, down from 10 cents in the first half of the 2008 financial year. & quot;We will continue to assess the ongoing level of payout, taking into account the prevailing market conditions. & quot;This payment represents approximately 40% of earnings since 1 July 2008. We will continue to assess the ongoing level of payout, taking into account the prevailing market conditions, & quot; Mr Falloon said.Mr Falloon said that despite the difficult market, Ten continued to be a highly effective and efficient television operator in its youth-focused demographic.Mr Falloon said that Ten's 2009 schedule would include seven new Australian programs including a fourth major franchise - MasterChef Australia - which will take a prime position mid year, from Sunday to Friday night. That will be in addition to Australian Idol, which had a good year and The Biggest Loser, which will have a couples component this year.Ten also said its outdoor advertising business, Eye Corp, was reviewing all segments of its operations. & quot;For Eye, the out of home market continues to be impacted by the prevailing economic factors, particularly in the international markets of the United Kingdom and US, & quot; Mr Falloon said.Eye Corp and Ten has spent millions expanding into the US retail and airport markets and the business has been hurt badly by the huge slump in consumer spending and the drop off in flying from the surge in oil prices and air fares, and then the deepening recession.In October, Ten posted a fall in annual profits after grappling with a severe downturn in advertising and softer ratings over the prior months. & #160;
Cars: Crunch Time Nears
The battle for survival among American car companies is slowly reaching a tipping point.President Bush continues to bumble his way towards a possible short term & #36;US14 billion package of short term loans for General Motors and Chrysler; Ford doesn't want any yet, and foreign builders like Toyota, Nissan and Honda are in the process of winding back their output.Overnight he indicated, in the same paragraph, that he may or may not organise aid for the car groups, after a spokesman had earlier suggested the White House was very near a decision. & #160;George confused everyone by saying he didn't like the idea of a & quot;disorderly bankruptcy & quot;, and then went on to add that he didn't like throwing good money after bad.No wonder so many people will be glad to see the back of this man next month.Even if the money comes it will merely put off the tough decisions until the new Administration takes power on January 20.It's a story that will continue to rattle confidence in US and global financial markets until there is some conclusive resolution.For regulators and governments, the plight of the US car giants and some other car and truck groups around the world, is looming as the big concern at year's end and in early 2009.If could be that the Fed ends up as the lender of last resort to effectively support the three companies until there's a stabilising of the economy and demand for cars starts recovering as the car makers restructure.To further concentrate the minds of the US government and its advisers, GM, Chrysler and Ford have stepped up the pressure to where someone has to blink to stop a collapse further damaging confidence and sending the US economy deeper into recession.GM, Ford and Chrysler will shut about 60 factories over the next month as they struggle to adapt to the worst sales in 26 years and await the decision from the Bush Administration on the short term aid package.While the temporary closures are designed to save cash and slow the 'burn' and cut production of unwanted cars and stocks of unsold vehicles, they are sending a message to the government, financial markets, unions and car buyers that suggests the worst could be possible if aid is delayed.Having closed a plant, however temporarily, it is much easier to keep it closed if cash gets short or the company needs to protect itself by going into bankruptcy protection.The slump in credit lines for dealers and loans for car buyers is also damaging demand, as are the rumours about the shaky state of the companies: suppliers are getting worried and reportedly demanding to be paid early.Sitting on the sidelines the foreigners such as Nissan, Honda, Toyota, BMW, etc know that if any of the big three collapse, the industry will be badly hurt, costs will rise and unemployment will rise, further depressing demand for cars and cutting sales, raising costs and increasing losses. & #160;They are quietly cheering for the bailout plan, knowing that it will help them as well to avoid larger losses and lower sales.Bloomberg reported a man called Ed Kim, the director of industry analysis for consulting firm AutoPacific Inc in California as saying that. The industry is & quot;imploding to a degree I've never imagined could happen, and at a speed I'd never expected & quot;.Bush had told Fox News on Wednesday he was still & quot;thinking through & quot; details of any government assistance. A day later he was worried about a & quot;disorderly bankruptcy & quot;, a strange phrase because while its an option, it's not an either or option right now, or is it?The Wall Street Journal reported that GM and Chrysler have also re-opened merger talks. The paper says Chrysler owner, Cerberus Capital Management initiated the move and has signalled a willingness to cut the value of its interest. GM denied a day later that those talks were happening.GM and Cerberus also own GMAC, the finance arm and home lender which is struggling towards raising enough new capital to become a bank and get saved by the Fed. reports overnight suggest that GMAC & #160;may fall short of the required figures to do an exchange with bond holders and raise the required amount of new capital.Chrysler will shut all 30 of its plants for at least a month starting tonight and Ford said it will idle 9 of 15 North American assembly plants in the first week of January.GM said a new & #36;US370 million factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash.GM has already announced it is cutting production in the March quarter by 250,000 vehicles, which is a 30% cut compared with the first quarter of 2008.Ford said its move was part of a previously announced plan to reduce first-quarter output in its North American plants by 38%GM, had & #36;US16.2 billion at September 30 and needs at least & #36;US11 billion on hand for working capital and to keep the business ticking over.Chrysler ended last quarter with & #36;US6.1 billion and needs at least & #36;US3 billion in working capital.Chrysler Financial has also said that it might temporarily stop the loans used by dealers to finance their purchases of vehicles from the car maker as the retailers drain & #36;US60 million a day from the account that helps finance their borrowing.But the big foreigners are also suffering. Toyota, Nissan and Honda, Japan's three biggest car companies, have cut North American output this year by more than 300,000 units compared with this time a year ago.All three have announced cuts to scheduled production.Toyota stopped assembly work at its San Antonio pickup truck plant for 15 weeks this year because of rising inventory and this week, it indefinitely halted construction of a Mississippi plant that was to produce Prius hybrids by 2010. & #160;That was to be a big part of combating higher fuel costs and meet pent up demand for the hybrid vehicle from customers.Japan's number 2, Honda, has revealed a 64% cut in forecast March 2009 earnings (Source) and there are suggestions its bigger rival, Toyota will confirm speculation of a huge second half loss above & #36;US1 billion in the next few days.Honda blamed plunging US and Japanese sales, plus the higher yen which hit a 13 year high against the US dollar overnight and will put further pressure on the export positions of the likes of Honda and Toyota.Honda last Friday cut its 2009 North American production forecast by 119,000 vehicles, the second cut in four months.Honda's 2009 financial year sales forecast has been cut by 10% and the estimated operating profit of around & #36;US2 billion will be just 20% of the 2008 figure. No wonder it quit Formula 1 racing.Production cuts in North America, Europe and Japan will total 246,000 units in the year to next March. Honda says it will also suspend production for two months in England.And in Europe, car sales plunged 25.8% last month from a year before, according to the European Automobile Manufacturers' Association.Australia's drop in October was 22%, America's fall last month was 34%.That's the biggest fall since 1999, and before that, 1993.GM's decision to not finish the & #36;US370 million factory in Michigan that will make 4-cylinder engines for the Volt and the Chevrolet Cruze small car in 2010 is another important message.The company says the plant is still scheduled to produce the engines in 2010, when the Volt is supposed to debut.The Volt is being designed to run 40 miles (64 kilometers) on battery power before needing a recharge from the onboard petrol engine and has been touted by the company as a big part of its future, if it gets the money from the US government.But the longer work is delayed the less likely the car will appear in 2010.The company's move to delay the plant is a cost saving, but it's also one with a message to the government and Congress that GM will not spend while its fate hangs in the balance.If it goes bankrupt, the car will be someone else's responsibility, and that goes for the entire industry and US economy come January 20. & #160;
Deflation: Why We have To Trust Ben Bernake And The Fed
Earlier this year inflation was a big worry, now with inflation fading rapidly around the world there is more and more talk of deflation. The AMP's Dr Shane Oliver looks at the situation and why we need the US Fed and its chairman, Ben Bernanke to succeed making sure deflation doesn't grab control in 2009.
Midday Market Roundup 18/12/08
The market is down 37- down 54 at worst, in-line with the 45 point fall predicted by the SFE Futures this morning. Resources down 0.5% - BHP and RIO down 0.1% and 1.0% respectively. BHP said it was better placed than its peers to weather the downturn but would make production cuts if necessary. Property underperforming - down 1.3% with Stockland down another 2.3% after yesterday's writedowns. Industrials down 0.4% - Telstra up 1.1% as it sends a letter to shareholders regarding the Government's rejection of TLS participating in the NBN process and said as a company they would move on. Orica down 5.7% on a downgrade from UBS.The Dow was down 99. Up 37 at best. Down 146 at worst. Sold off hard in the final half hour. Sectors mixed. The Russell 2000 of small stocks outperformed - up 0.8%. Market digests the 75-100bp cut by the Fed - bit of a fall expected after the 5% gains yesterday. Morgan and Stanley posted a larger-than-expected loss for the 4Q. Citigroup down the most among financials on reports of more oversight by regulators. Large cap technology stocks perform the worst - down 1.7%. Financials down 1.3%. Defensive retailers outperformed. OPEC aiming at cutting production much more than expected - oil still fell as the US dollar falls the most against the Euro since its float in 1999 - oil down 8.4% to & #36;40.17. Government bonds higher on fears surrounding all other riskier investments. BHP up 0.8% in ADR form and RIO down 1.85%. Metals mostly up overnight. Gold up & #36;25.80 to & #36;868.50.Domestic financials down 1.8 %- CBA came out of its trading halt 11% lower at 2500c - actually went ahead and raised & #36;2bn at a 10.8% discount at & #36;26.00 per share, underwritten by UBS after their failed & #36;2bn institutional raising yesterday with Merrills. It announced impairment charges of around & #36;2.5bn (which includes & #36;365m write-off on ABC Learning), more than consensus estimates of & #36;2.02bn. It says charges are mostly in the 1H of 2009.National Australia Bank (NAB) will combine Australia and group CEO roles. Incoming CEO Cameron Clyne says he wants to be closer to customers and employees.Caltex Australia (CTX) has upped its 2008 FY profit forecasts - now expects a profit in the range of & #36;135- & #36;155m, up from the previous forecast of & #36;115- & #36;145m.Ten Network (TEN) has held its AGM - it is undertaking a cost review and says 1Q 2009 EBITDA is down 25.2% to & #36;91.6m. Long term contracts are in place but expects challenging operating conditions in 2009.Babcock & #38; Brown Wind (BBW) has terminated its management agreement with Babcock & #38; Brown (BNB) for a total cash payment of & #36;40m.CFS Retail Property (CFX) has revalued 12 assets down & #36;99.2m.ING Industrial Fund (IIF) has suspended its distribution reinvestment plan.Invocare (IVC) have made some management changes.No distribution for security holders of Centro Retail (CER) for the half year to Dec 31.Babcock & #38; Brown Infrastructure Group (BBI) said its B & #38;B WA Rail Holdings subsidiary has agreed to extend a & #36;66m debt repayment until March 2009 with its lenders. It was due December 15.Downer EDI (DOW) has won contracts totaling more than & #36;350m. & #160;Broker Stuff today...Citi cut their target price on Stockland (SGP) to 389c from 434c despite maintaining their HOLD recommendation saying the stock is trading on a & quot;fairly attractive FY10e & quot; yield of 9.1%, although earnings are at risk after yesterdays & #36;105m in writedowns.GSJB Were maintain their HOLD recommendation on Westpac Bank (WBC) and maintain their 1944c target price after WBC provided an update on merger integration with SGB. They say its early days but at this stage the merger appears to be performing well in terms of customer retention and cost synergies.Credit Suisse upped their recommendation on AED Oil (AED) to Neutral from Underperform due to recent share price depreciation. They have a 155c target price. & #160;Other Stuff...The number of people in the UK claiming unemployment benefits has reached 1m for the first time in 8 years after increasing at the fastest rate since 1991.Futuris down to share price levels not seen since 1992 on no announcements.The Dow Futures suggest a 2 point fall on Wall Street tonight.Information provided to you by Marcus Today
Stockland's Unmerrry Xmas Pressie
Just as rival Centro was nailing down its future (hopefully), its more viable peer, Stockland Holdings, was downgrading 2009 earnings guidance by a rather large 25%.Lower earnings, returns and some big hits to asset values were the main drivers, especially in the UK and in the group's residential division.All up total asset value write downs of over & #36;500 million (and as much as & #36;555 million) were trundled out by the company in the market update.The bulk of these in the development division, are below the line and won't affect distributions, but they will hit asset backing at December 31.And the company made clear it will sit on its stakes in struggling GPT, plus developers FKP and Aveum and do nothing except review them and participate in reviews by the groups concerned.It has invested hundreds of millions in these three groups, for not much return. even for Stockland, that situation can't continue for long.And the company held out the possibility of a further cut in the 2010 financial year when a review of distribution policy is completed in the first half of 2009.Directors indicated that it was possible distribution policy would be more aligned with operation earnings: a move most property and infrastructure players have been forced to move to because the market no longer likes debt and companies paying distributions from borrowings, no matter how tax-effective that might be.Rival developer Mirvac was forced to move this way earlier in the year when its shares tanked on debt and stability concerns, while infrastructure players like Transurban were very early off the mark in aligning earnings with distributions.The moves sent the Stockland Holdings share price to a day's low of & #36;3.30, 2c off its 52 week low, before the securities recovered in the afternoon to end off 3% at & #36;3.53.And another property group, Valad raised more than & #36;138 million from the sale of assets in Australia, New Zealand and elsewhere. The money will be used to pay down debt.Given that both Centro and Valad are stricken companies, the downgrade from Stockland was of greater importance to investors.It is at least a fairly viable group, but under some earnings pressure, especially in the US.Stockland cut 2009 earnings guidance 25%; from 46.7c a security to 35c, following write-downs in its residential (6.8c off earnings) and UK inventories (3.7c per security off earnings).Both are savage hits, and taken with small costs for the stakes in Aveum, FKP and the & #36;300 million funding move in October, it's going to be a glum time for investors who have backed this property and retail mall giant through the crunch. & quot;We recognise that market conditions in Australia are getting tougher and we are managing our business prudently, with a strong focus on capital management to ensure we come through the downturn in sound shape, & quot; Stockland managing director Matthew Quinn told the ASX in a statement. & quot;We are also adapting our strategy in response to the changing market dynamics to ensure we maintain our position as a leading Australian property group, delivering high quality, sustainable returns to our security holders. & quot;The company told the ASX that it had conducted a review of its business operations and asset carrying values as part of the determination of its estimated first half distribution/dividend and in light of current market conditions. & quot;Stockland's underlying operating profit remains in line with previous forecasts, although there is downside risk if residential sales momentum declines. The previous forecast was for a nominal increase in EPS for FY09 to 46.7 cents. & quot;Stockland's policy is to take inventory write-downs above-the-line in its net profit, which is used for determining its distribution/dividend. & quot;The company said EPS would be cut to around 35c per security by the residential and UK inventory write-downs, combined with other adjustments post 30 June 2008.Therefore, & quot;Based on Stockland's current policy of paying out 100% of Trust operating profits and 90% of Corporation operating profits, the estimated distribution/dividend for FY09 is 34 cents per ordinary stapled security. & quot;The timing of residential sales will result in a skew in profits to the second half of the year. However, Stockland will pay an interim distribution/dividend equal to half of the total estimate for FY09, or 17 cents per security. & quot;The record date for determining entitlement to Stockland's interim distribution/dividend is 31 December 2008 and securities will trade ex distribution/dividend from 23 December 2008. Payment of the interim distribution/dividend will be made on 27 February 2009. & quot;Stockland said it has proactively managed its refinancing risk since 30 June 2008 and all necessary debt refinancing for FY09 has been completed. & quot;Stockland continues to comply with all of its debt covenants and has approximately & #36;1.1 billion of debt headroom, with circa & #36;500 million of available committed facilities currently in place. & quot;The Stockland Board can confirm that while the current distribution policy will remain in place for FY09, the policy for FY10 and beyond will be reviewed in the first half of 2009. & quot;It is expected that this review will result in future distributions more closely aligned to funds generated from operations (AFFO). & quot;The distribution/dividend reinvestment plan (DRP) will be operational for the interim payment and will be underwritten to about 50% in addition to natural take-up. & quot;The company said the & #160;Federal Government's First Home Owners Boost (FHOB) and recent interest rate cuts have had a material impact on activity at the affordable end of the market. Stockland's sales to first home owners are increasing as a proportion of total sales.Based on current sales activity, Stockland's Residential business will achieve its single lot sales targets for FY09. & quot;Stockland flagged in August 2008 that over 30% of its Residential gross margin in FY09 would come from super lot sales. Super lot sales comprise both normal course of business sales (such as school sites) and bulk project disposals. & quot;Normal course of business sales are tougher in the current market climate, but are generally on track. Stockland is working on a number of bulk project disposals in line with its capital recycling strategy. & quot;Last month a bulk project disposal was achieved at Craigieburn in Victoria that will contribute a profit of around one-quarter of the FY09 target for such disposals. & quot;Active negotiations are currently underway for a number of other project disposals which are due to settle in the second half of FY09 and an update will be provided with the 1H09 results announcement in February 2009. & quot;A thorough review has been conducted of all residential project feasibility and asset carrying values. Stockland has a number of projects pitched at the top end of the market, where sentiment remains fragile and value is impaired. Stockland will also sell some development projects wholesale which were previously earmarked for development at lower margins. & quot;As a result, Stockland will book an after-tax write-down relating to a number of residential projects of around & #36;105 million in its 1H09 results. This represents around 5% of the total Australian residential inventory book value. & quot;This write-down reflects the need to reconfigure some top end projects, adjust selling prices for completed stock and reduce site values for those projects to be sold & quot;In commercial property, asset sales of & #36;211.1 million have been achieved since 30 June 2008, and in addition, Stockland has pre-sold its Edmund Barton Building in Canberra for & #36;186.0 million on completion of the current redevelopment, subject to conditions. & quot;Stockland can reaffirm that its Commercial Property portfolio is expected to record an increase in average capitalisation rate of around 50 basis points for the six months to 31 December 2008, to a portfolio average of 7.2%. This will be partially offset by rental growth, with a net reduction in values of around & #36;350 million - & #36;400 million. & quot;These reductions are below-the-line and do not impact earnings per share (EPS). & quot;Given the higher cost and scarcity of capital, a review of Stockland's development pipeline is being conducted and it is likely that a number of projects will be deferred. It should be noted that such deferrals result in minimal additional holding costs, as most projects are existing income producing properties. & quot;Despite the very tough market conditions in the UK, Stockland can reaffirm its October 2008 guidance for a break-even FY09 UK operating result and inventory write-downs of around & #36;50 million after tax. & quot;No significant new capital will be invested in the UK business in the short term and goodwill impairment may be higher than anticipated. & quot;Stockland's UK operations make up less than 5% of the group's asset base. & quot; & #160;
Centro Holders Wiped Out
Securities in Centro Properties and its associate, Centro Retail Trust Group went for a nice run yesterday in the wake of the two groups bedding down financing a year after they confessed to being broke and unable to repay debt.The two groups obtained a one-month interim extension for all of their debt facilities, totalling & #36;6.01 billion that expired on Monday, to enable a final agreement to be reached.If that is done the first bit of debt falling due will be at December 31, 2010 for the Super LLC business in the US where & #36;US1.3 billion of facilities will be converted into term loans expiring on that date. The Super LLC is the joint venture between Centro Properties and the Retail Trust and covers shopping centres in the US.So there's a two year period for the Centro management to try and raise cash by selling assets.There's a further & #36;4 billion of facilities to be turned into term loans expiring a year later on December 31, 2011.And then there's the hybrid note, with which the lenders (and with a 14.9% stake to be issued soon to payoff fees) will give the banks and other groups effective control, and allow them up to four more years to see if Centro's value rises as the economies of the world recovery.Centro Properties shares jumped 80% at one stage before settling back to close up 1.8c or up 20% at the close last night. Centro Retail jumped sharply and ended up more than 49% at 9.1c.They are hardly getting out of jail figures, but make a welcome change to the unremitting gloom of the past 12 months.The way the shares slowly eased in the afternoon after the early surges is also testimony to the realisation that when the final deals are done, the existing security holders will take a bath, especially those in Centro Properties.Centro says it has reached & #160;an in-principle agreement with all of its 23 financiers to achieve a long-term refinancing and stabilisation plan following a series of meetings which ended Tuesday afternoon.The interim extension gives Centro time to complete the formal documentation for the refinancing and stabilisation. Under the agreement, Centro can use a revolving working capital facility set at up to & #36;35 million. & #160;The extension also allows it to get through the vital Christmas-New Year trading periods in Australia and the US which will generate a rise in cash, especially here.Centro had until 5pm New York time on Monday of this week (9 am Tuesday, Sydney time) to repay debt of & #36;2.3 billion to its 13 Australian and US bankers and & #36;US450 million ( & #36;684 million) owed to 10 US insurance company noteholders.Centro's bankers in the Australian syndicate are the Commonwealth, NAB, ANZ, BNP Paribas, Sumitomo Mitsui Banking, the German bank WestLB, JP Morgan and Royal Bank of Scotland.The Commonwealth, which had raised the most objections to the proposed rescue package, agreed to sign the deal at the last minute.Centro said that the & #36;1.05 billion hybrid security will be senior secured convertible bonds (Hybrid Securities) subscribed for by the Australian lending group. & quot;The hybrid security will have a seven year maturity date and the potential for conversion into ordinary stapled securities. All interest payable on the Hybrid Securities is expected to be capitalised. Any conversion to ordinary stapled securities would be subject to a number of conditions, including approval of Centro ordinary securityholders. & quot;At the moment that could convert to 80% of Centro's issued securities. & quot;The A & #36;4.0 billion of remaining existing senior secured debt owed to the Australian lending group and US private placement noteholders will be converted into term loans maturing on 15 December 2011. & quot;Centro stapled securities equivalent to 14.9% of existing issued securities will be issued on or before 15 January 2009 to the Australian lenders and US private placement noteholders on a pro rata basis at market value, the proceeds of which will be used for payment of outstanding lender fees and expenses; & quot;If converted in full, the Hybrid Securities would constitute, in aggregate with the 14.9% of stapled securities referred to above, 90.1% of the post-conversion (fully diluted) ordinary stapled securities of Centro. & quot;That would wipe out existing security holders, leaving them with less than 10% and unable to gang together to block any deal.Centro said & quot;No distributions to ordinary securityholders are permitted to be paid for the duration of the senior secured debt facility, and it is unlikely that distributions would be paid prior to conversion of Hybrid Securities; & quot;Facilities of US & #36;1.3 billion associated with Super LLC, Centro's joint venture with Centro Retail Trust (CER) will be converted into term loans maturing on 31 December 2010; & quot;A facility of US & #36;370 million will be provided to Super LLC by the existing US lenders. This facility will be used primarily for the repayment of indebtedness and will provide additional liquidity; and & quot;Centro will provide certain collateral to the Super LLC lenders to secure the release of Centro guarantees within the Super LLC structure. & quot;Centro Chairman Paul Cooper said in the statement: & quot;The Board has carefully considered all alternatives available to Centro over the last 12 months and has concluded that the transaction agreed in principle with our financiers provides the best outcome for our shareholders. & quot;The outcome provides a future for Centro and retention of some value for our existing shareholders and is superior to the prospect that Centro otherwise faced of entering administration or liquidation. & quot;
CBA's Funding Debacle
The Commonwealth bank's shares face a major pounding later today when they are re-listed after the stuff up involving a & #36;2 billion fund raising that was done by Tuesday night, undone yesterday morning, and then finally put away last night.The unprecedented debacle has left the bank and its management looking foolish and incompetent as the issue finally had to be done by a second manager, at a lower price.And it looks like lawyers at close range between the CBA and Merrills over the debacle.UBS arranged the & #36;1.65 billion of new shares to institutions at & #36;26 apiece, a 10.8% discount to the last traded price of & #36;29.15.The CBA had been forced to pull a & #36;2 billion offering (in total) at & #36;27 a share it announced Tuesday night after Merrill Lynch walked away after the bank had said bad debts would be higher than previously forecast.It was this paragraph in that Tuesday night statement that upset Merrills and other investors: & quot;Volume and revenue growth in both lending and deposits has remained strong over the two months since the September quarterly update. However, the Group expects credit conditions to continue to deteriorate and the full year loan impairment expense to gross loans and acceptances is now expected to be around sixty basis points, with the majority in the first half. & quot;Merrills have reportedly claimed they weren't told of the higher bad debts before the deal was done. Other investors reportedly have confirmed they weren't told either.At one stage yesterday it looked as though the deal wouldn't go through.The CBA raised & #36;1,643m in the institutional placement priced at & #36;27.00; and & #36;357m under the previously announced & #36;750m placement at a price of & #36;28.37. (That was with Merrill Lynch last week).The Commonwealth terminated the placement agreement because Merrill didn't inform investors of various disclosures made yesterday, the bank said in a statement & #160;yesterday. & quot;The Commonwealth Bank confirmed that it had terminated the previous placement arrangements made with Merrill Lynch International Australia Limited. & quot;It also confirmed the termination of the remainder of the VWAP placement as previously announced. & quot;Proceeds from the raising will be used to redeem the PERLS II securities, strengthen the Group's balance sheet and allow the Group to take advantage of organic growth opportunities arising in the current market. In addition, this will allow the Group to maintain its strong capital position throughout the current economic slowdown and deteriorating credit conditions. & quot;The bank raised & #36;1.65 billion through a placement at & #36;26.00 underwritten by UBS; and the & #36;357 million raised under the VWAP placement at & #36;28.37 per share (which had already been raised by Merrills).The Tuesday statement on bad debts when the bank said it expects bad debts to rise to 0.6% of total loans compares with a November. 13 forecast of as much as 0.5%.As result brokers like Goldman Sachs JBWere reached for the downgrade button and activated it.The firm told clients yesterday:Goldman Sachs JBWere said today there was & quot;Bad debt driven guidance downgrade: CBA increased guidance for FY09 impairment charge to 60bp, versus previous guidance of 40-50bp and GSJBW revised forecast of 65bp of average gross loans. & quot;The & quot;majority & quot; of the bad debt charge is expected to be seen in 1H09. This relates to previously announced large single name exposures. & quot; & quot;We have downgraded earnings Per Share by -5.9% FY09, -3.0% FY10. Whilst our FY09 bad debt charge was previously in line with CBA's downgraded guidance, we have added additional cushioning given the increasing uncertainty around CBA's bad debt position (i.e. 2nd bad debt driven downgrade in 5 weeks). & quot;That is what the market will not be focusing on until the bank reports its interim result next February & #160;
US Bad, Aust To Get More Rate Cuts
No wonder the US Federal Reserve cut its key interest rate to its lowest level ever and promised to do everything to promote & quot;resumption of sustainable growth & quot; in the US economy after saying that the economic outlook confronting the US had & quot;weakened further & quot;.In fact the health of the US economy is worse than even the Fed had thought a few weeks ago and more figures this week confirmed that the economy is heading towards a very deep recession.So it was no surprise the Fed adopted a range of 0% to 0.25%, which gives an effective rate cut of a minimum of 0.75% and up to 1%, according to the state of money markets.It is going to help the Reserve Bank continue cutting rates here because the Fed's move has taken pressure off the Aussie dollar and added it to the greenback.The attitude of currency markets gives us the clue: the US dollar's recent losses against the euro have accelerated and it is now down 11% since its peak on & #160;November 21: and its off more than 8% in the last three trading days. & #160;The Aussie dollar clambered back over 70 US cents this morning in early Asian trading.But for the moment America is in terrible shape. & #160;No one else is lending, the economy is stranded on a shoal of debt and stricken by a crisis of confidence: something dramatic had to be done.So for all intents and purposes the official cost of money in America will carry no interest cost. & #160;Market rates will exist, but even those look out of whack: the US 10 year bond yield hit an all time low of 2.13% overnight.Here, our 10 year bond rate hit an all time low of 4.20% yesterday.What the Fed is saying is that so dire are the current and future prospects for the US economy, that to stop them worsening further into perhaps a mild depression, it has been force to cut its key economic tool to zero cost.And to further cushion the economy, the Fed also clearly stated that it would step up its purchases of a range of securities to help business of all types, households, homeowners, car owners and anyone who was having trouble getting credit or money.In effect the Fed is now the ONLY funder of the entire US economy, and has supplanted the enfeebled banks who are so short of cash and confidence that they will lend to practically no one.These are unchartered waters and apart from Japan in the 1990s no other major economy has been here before.And there's no parallel with Japan when it had interest at zero because it failed to use the situation to restructure its banks and companies and try and kick start the economy as the Fed is now starting to do.The Fed is holding the economy together and hoping it won't slide too further before the rumoured & #36;US1 trillion stimulus package from the new Obama administration kicks in midway through 2009.The Fed's move will force central banks in Europe, Japan and the UK to look at lowering their key rates to 0%.Here in Australia it should actually support the dollar and give the RBA room to cut further in February.The rate cut, which pushes the federal funds rate to its lowest level since the Fed started targeting it, was larger than most economists had expected.It could present problems for money market funds and for the repo market which has technical difficulties operating near zero rates.With the actual federal funds rate consistently trading below the target rate, the actual fed funds will be around zero for months to come, perhaps all of 2009.It was the 10th rate cut in 14 months, all of which have done nothing to stop the headlong plunge of the US economy into a very deep recession.Money market rates for cash are now a fraction of even the 0.25%, being just above zero, so the new target range is a concession to the flood of liquidity in the US economy as banks and other investors maintain their reluctance to lend.Rory Robertson of Macquarie Bank had this to say about the Fed's move and statement. & quot;US headline CPI inflation will fall into negative territory in Q1, driven mainly by the dramatic fall in petrol prices. & quot;But US core inflation is falling too: while the latest year-to rate is 2.0%, the core CPI was pretty well flat over the latest three months. & quot;With US unemployment rising sharply and excess capacity growing fast, trend US wages and prices will remain under substantial downward pressure for the foreseeable future. & quot;The US policy rate at 0-0.25% now is lower than the 0.3% rate in Japan. & quot;Policy rates in the Euro-zone and the UK may end up in the same place by the end of 2009. & quot;With the global recession deepening, policy rates everywhere else - including Australia (see below) - will continue to drop until (local) unemployment stops rising. & quot;Short of & quot;printing money and distributing it willy-nilly & quot;, the Fed obviously needs to do all it can to boost shrinking aggregate demand and counter growing deflationary forces. & quot;Unsurprisingly, the biggest paragraph in the statement confirmed the Fed's ongoing focus on unconventional measures:
Oil Down After OPEC's Record Cut
OPEC has approved a record output cut of 2.2 million barrels a day and wants non-member oil producers Russia and Azerbaijan to make reductions of their own.But it didn't work. & #160;World oil prices fell straight away; the price of New York crude oil sank to the lowest point in four and half years, dropping under & #36;US40 US a barrel to touch & #36;US39.88. It closed a touch over & #36;US40 a barrel.Combined with the cuts Russia and Azerbaijan said they were prepared to implement, the OPEC move could take about 2.8 million barrels a day out of the oil market to try and halt the slide in price.OPEC agreed to cut 4.2 million barrels a day from the actual September 2008 11 member production of 29.045 mb/d, with effect from 1 January 2009. & quot;Member Countries strongly emphasizing their firm commitment to ensuring that their production is reduced by the individually agreed amounts, & quot; the statement said.Nymex crude in New York dropped because traders don't believe OPEC & #160;members will maintain the cuts, especially some of the financial challenged members like Nigeria. Nor do they believe non-member countries like Russia will apply cuts as well.On London's InterContinental Exchange (ICE), Brent North Sea crude for February slid 83 cents to 45.82 US dollars a barrel. The January contract had expired Tuesday at & #36;US44.56.OPEC's decision came after London trading has ended for the day.The Paris-based International Energy Agency has said it expects global oil demand to fall this year for the first time since 1983 and OPEC officials themselves have voiced deep concern about the world's dwindling appetite for their crude oil.OPEC ministers called the meeting here to try and halt the slide in oil prices, which are now 70% off their high points of 147 US dollars a barrel in July, as demand dries up in recession-hit industrialised consuming nations.Just before talks opened, non-members Russia, which attended the session, and Azerbaijan said they were ready to cut their own oil production by about 300,000 barrels a day each.The biggest producer, Saudi Arabia has led the drive to cut output by calling for the largest production cut in the history of the group: around two million barrels a day.The Saudis want a circuit breaker to try and arrest the rapid fall in oil that has wiped around & #36;US103 a barrel off the global price since mid-July.Western newsagencies reported Ali al-Naimi, Saudi Arabia's oil minister, as saying that about 2 million barrels a day, on top of the 2 million barrel cut already agreed to over the past eight weeks, should be the result of the meeting overnight in Algeria.Mr Naimi was quoted as saying that OPEC had already delivered 1.7 million barrels a day of cuts from that first 2 million: the Saudis have cut their output by 1.2 million barrels a day.A feature of this OPEC meeting is the apparent move by Russia to align itself to OPEC, even though its economy is slumping into recession as export income dries up with the plunging oil and metal prices. Russia has also had to spend upwards of & #36;US100 billion and more stabilising its banks and financial system in the past three months.OPEC member Qatar was reported to have said that the group needed the help of non-OPEC oil producers, notably Russia, to carry out the planned cut. & quot;OPEC alone cannot do everything, & quot; Qatar Oil Minister Abdulla al-Attiyah was quoted by newsagencies as saying in the Mediterranean port city of Oran.OPEC wants to see non-members slash their oil production by between 500,000 and 600,000 barrels a day. That would take the cut to around 2.6 million barrels and 4.6 million including the earlier trims.Besides Russia, Azerbaijan Norway, Indonesia, the US and the UK are important non-OPEC producers.Russian Deputy Prime Minister Igor Sechin said late Tuesday that Russia may slash daily oil export by up to 320,000 barrels, on top of a similar cut made in November. He's in Algeria for the meeting.The organisation's official daily output target is 27.3 million barrels, but analysts say it is producing slightly more than this as some members seek to boost income. (Nigeria and Venezuela are the main culprits).Several OPEC members heavily dependent on oil exports, notably Nigeria, Ecuador (which has defaulted on foreign loans for the third time in 14 years) and Venezuela, are being squeezed financially by the savage drop in prices from those July highs.The organisation said in a report on Tuesday that & quot;the growing imbalance on the oil market... presents a real challenge for all market participants and will be the main focus of discussion & quot; at the Oran meeting.OPEC president Chakib Khelil has said producers are & quot;very pessimistic about demand & quot; and that within the cartel there was unanimous support for an output cut.In a commentary on its website OPEC said: & quot;As we move into the northern hemisphere winter, the news gets no better for the global economy. This is slowing down faster than expected, and, increasingly, forecasters are suggesting that oil demand will fall next year. & quot;The immediate outlook for oil producers is, therefore, a gloomy one. & quot;However, the same is true for other parties in the international oil market, as we look further into the future. Low prices mean less investment. And less investment may mean that this year's volatility will return to the market in the not-too-distant future. & quot;Two distinct ways of assessing oil prices have emerged recently, and they must ultimately be in line with each other, if the market is to function in a stable and orderly manner. & quot;The first relates to the present dynamics of the market, with the spiralling down of oil prices since July to half the levels of the start of the year. In this case, prices are responding to current drivers in the market and perhaps even generating their own momentum. & quot;And the second is the realization that the plunging prices have already passed the critical levels where decision-makers have begun reassessing the viability of existing and planned investments in expanding production capacity, to meet the forecast rising levels of demand in future years. & quot; & quot;Therefore, when the OPEC Conference meets at times like these, it does so with its eyes wide open to the fundamental, enduring realities of the international oil market and the pivotal role of secure, stable oil supplies. OPEC is committed to this, as well as to the health of the world economy, in good times and in bad. & quot;While OPEC's market stabilization measures are sometimes tailored around addressing a short-term development in the market, the Organization prefers to focus on sustainable, longer-term actions, from which the world community as a whole will ultimately benefit. & quot;And OPEC is strongly inclined to adopt the latter approach in addressing today's pressing market challenges. & quot;And funnily enough the IEA and other analysts think OPEC & #160;isn't too far from the mark in pointing out the medium and longer term dangers from the present price slump. It is building up future pressures; upward pressures.The days of oil going above & #36;US100 a barrel and higher again, are not that far away. & #160;
US Slashes Rates As Economic Slump Worsens
No wonder the US Federal Reserve cut its key interest rate to its lowest level ever this morning, and promised to do everything to promote & quot;resumption of sustainable growth & quot; in the US economy after saying that the economic outlook confronting the US had & quot;weakened further & quot;.
Midday Market Roundup 17/12/08
The market is up 29 - was up 80 at best outperforming the 58 point rise predicted by the SFE Futures this morning. Resources up 1.6% - BHP and RIO up 1.2% and 1.8% respectively following the strong lead on Wall Street and despite the lower metals prices. Financials underperforming - down 0.8% - Banks down - ANZ underperforming, down 3.2%. CBA in a trading halt pending a statement having done a & #36;2bn institutional capital raising last night. Big industrials outperforming - up 2.3%. Wesfarmers up 3.5%. Leighton Holdings down 1.3% on a downgrade by Merrills. Qantas up 2.7% on confirming October passenger numbers. Goodman Group up 21.2% on confirming their 1H distribution of 9.65c. Property sector up 0.5% - Stockland Group getting flogged - down 7.1% on a profit downgrade.The Dow was up 359. Up 393 at best. Up all session. Fed slashed its key rate to a record low of between 0.00%-0.25%. First time below 1% in 50 years. US dollar index fell 1.9% on the Fed rate cut with the weakening economy confirmed. The US housing market hemorrhaging - November housing starts down 18.9% - building permits down 15.6%. Financials up 11.3% despite Goldman Sachs' quarterly losses and credit rerating by Moody's. Automaker bailout to be announced possibly by Wednesday. & #160; Materials up +5%. Both BHP and RIO up in ADR form overnight, 6.4% and 10.9% respectively. Oil price down 77c to & #36;43.84. Gold up & #36;6.20 to & #36;842.70. Bonds up with the 10 year yield down to 2.29%.The Commonwealth Bank of Australia raised & #36;2bn in an institutional share placement last night and suggested the credit markets could get a lot worse. The issue was fully subscribed in two hours between 4pm and 6pm at 2700c a share, a 5 year low. The closing price last night was 2915c (done at 7.3% discount). This comes after a 56% fall in the share price.Talk of the National Bank of Australia being in advanced talks with Wizard Home Loans.Valad Property Group (VPG) has raised & #36;138.7m from asset sales.AGL Energy (AGK) has acquired the Gloucester Basin coal seam gas assets for a total of & #36;370m.FKP Property Group (FKP) has provided a strategic review update - Stockland Group (SGP) has told them that further analysis is needed before it makes a formal proposal for its retirement assets.Goodman Group (GMG) says its 1H distribution will be 9.65c a security.Australian Wheat Board (AWB) announced growers will receive & #36;330m from AWB National Pool.Macmahon Holdings (MAH) has been awarded the & #36;40m Bunbury Port Access contract.Bannerman Resources (BMN) announces settlement of the Savanna litigation. Savanna will get up to & #36;3.5m and 9.5m Bannerman shares.St Barbara Mines (SBM) has appointed a new CEO and MD.Santos (STO) has appointed former CEO of Xstrata, Peter Coates, as its deputy chairman.Mirabella Nickel (MBN) announces a maiden underground resource for the Santa Rita site.Nido Petroleum (NDO) has provided a Galoc Field update.Australian Agriculture (AAC) announced a strategy update and outlook.Broker Stuff Archive...A few downgrades around for Macarthur Coal (MCC) after it cut profit and production guidance yesterday. Merrill Lynch maintain their Underperform and cut their target price to 380c from 470c, GSJB Were say Hold and UBS Warburg also cut their recommendation to Neutral from Buy and cut their target price from 890c to 250c.Merrill Lynch cut their recommendation on Leighton Holdings (LEI) to Underperform from Neutral and their target price to 2600c from 3719c after cutting their earnings expectations.Others StuffThe Dow Futures suggest 14 point fall on Wall Street tonight.Information provided to you by Marcus Today
Coal Slump Grows
The great Australian resources boom is starting to fly apart at the seams with a major coal mine shut, production cut and another Queensland metal mine affected yesterday.The global slowdown and crunching of the commodities boom continues with three major Australian based producers revealing dramatic moves to counter slumping demand.Queensland based coal miners, Xstrata and Macarthur Coal have both cut production in response to slowing offtake by customers, while the WA based Fortescue Metals is looking at possible legal action over contracts not honoured by offshore customers/ (See story below).And the embattled OZ Minerals is cutting staff in Queensland.Here's the toll yesterday:Xstrata will cut 190 contractors and 40 permanent workers at its Okay Creek coal mine in central Queensland.Australia's largest zinc miner, OZ Minerals, laid off 110 workers at its Lawn Hill site and 25 at its Karumba port in north-western Queensland this Friday.Macarthur Coal will lay off 180 employees and contractors.The news of the job cuts follows Rio Tinto's announcement it will axe 14,000 jobs worldwide.The three events are a dramatic underlining of Monday's downgrading of our 2009 financial year commodities export income by & #36;22 billion, or 10%, by ABARE, the government's principal commodity forecaster.The estimate might have to be increased if yesterday's news from Queensland is any indication with & #36;2 billion (annual rate) in lost sales and production revealed by Xstrata and Macarthur Coal.ABARE said returns for iron ore and coking coal would be higher until March 31 under the current contracts with higher prices, and then prices will fall, while volumes will be under continuing pressure. & quot;The outlook for steel and steel-making raw materials has deteriorated in the past three months, & quot; ABARE said. & quot;The global financial crisis has led to a decline in investment and consumer spending in the world's largest economies. & quot;In particular, the United States, the European Union and Japan are now in recession and economic growth in China has slowed. Consequently, global construction and manufacturing activity, which is the primary end use for steel, has weakened. & quot;The weakening world steel market has reduced global demand for iron ore and metallurgical coal, Australia's two largest export earners. & quot;Xstrata revealed that its local coal division had suspended operations and cut 230 jobs at its Okay Creek coking coal mine in Queensland. & quot;The suspension of long wall operations is in response to reduced market demand and sales for hard coking coal, resulting from the continuing global economic crisis and downturn in the steel and manufacturing industries, & quot; the Swiss based company said in a statement yesterday.The Okay Creek No. 1 mine, part of Xstrata's Okay Creek complex in central Queensland, produced 6.2 million tonnes of coal last year, out of a total 11 million tonnes from the various mines in the area.That's a huge cut in revenue: around & #36;1.8 billion: the Macarthur cut, based on around 850,000 tonnes of lost sales, will be upwards of & #36;180 million. & quot;We remain committed to meeting our customer needs from stockpiles, & quot; Ian Cribb, chief operating officer of Xstrata Coal Queensland was quoted as saying in the statement.Mr Cribb said customer needs will be supplied from stockpiles and the continuing operation of the Okay North longwallMacarthur Coal, the world's biggest producer and exporter of pulverised injection quality coal has taken a bigger axe to its business, with the dividend also suspended.The market hated the news, sending the shares down more than 22% to a new closing low of & #36;2.70 (and an intraday low of & #36;2.66).Macarthur cut its first half & #160; & #160;by as much as 53% and reduced its sales estimate after customers sought to defer shipments because of slumping steel demand around the world.Three of its biggest shareholders are among its major customers: the giant ArcelorMittal the world's biggest steel group which has cut steel production by 30%-35% this quarter, Posco of South Korea which has also cut output sharply and the big Chinese commodities group, and Citic, which has just bailed out its Hong Kong arm with a & #36;US2 billion loan after it got into trouble with foreign exchange contracts over the Australian dollar that went bad. Arcelor asked to suspend shipments this quarter because of its production cut.Some of these companies bought their Macarthur shares for around & #36;18- & #36;20 each.Macarthur said that profit for the current half ending December 31 may be between & #36;75 million and A & #36;125 million against the forecast a month ago of between & #36;150 million and & #36;160 million.The company & quot;has experienced a sudden and unprecedented reduction in coal sales as a result of postponement of coal shipments by some customers, & quot; the statement said. & quot;There is considerable uncertainty as to future movements in demand and when recovery will take place. & quot;Macarthur will suspend its interim dividend and will consider a final dividend at the end of the 2009 fiscal year after June 30 next, the company said.Production from its Moorvale and Coppabella mines in Central Queensland will be reduced, resulting in a 22% fall 2009 financial year sales forecast to 3.9 million tonnes.Chairman Keith De lacy said in the statement: & quot;We are confident there will be a recovery in coal demand although we cannot predict when that is likely to happen. We are acting now to manage cash flow and costs in order to weather the current storm. & quot;The company said that the November profit guidance was subject to achieving the budgeted shipping schedule which has now been impacted by the recent central Queensland coal ports. & quot;The revised half year profit range also remains sensitive to the following assumptions: Achieving the revised shipping schedule given shipping delays at both Abbot Point and DBCT ports (Macarthur Coal's share 2.2Mt total sales); there being no change in the valuation of financial derivatives from 30 June 2008. & quot; & #160;