WSJ(10/16) Commodities Report: Oil Falls Below $75 Wed
Wed Oct 15 18:45:45 2008
EDT
(From THE WALL STREET JOURNAL)
By Gregory Meyer
With oil trading at half of its record highs, price forecasts once seen as a
remote possibility are gaining mainstream acceptance.
Crude closed below $75 a barrel for the first time in more than 13 months
Wednesday, as the story of inexorable world demand growth starts to unravel.
Absent aggressive action from the Organization of Petroleum Exporting
Countries, oil now looks on track to fall below $70 -- possibly to $50 -- a low
last reached in January 2007, analysts say.
It's been a punishing few months for anyone who bought crude when it traded
above $147 a barrel in July. After a decadelong climb from $10 a barrel, oil
has fallen 50% in three months. Light, sweet crude settled at $74.54 a barrel
Wednesday, down $4.09, or 5.2%, on the New York Mercantile Exchange. In late
electronic trading, it sank as low as $73.55.
Copper on the Comex division of Nymex fell as weakness in stocks and worries
about the strength of the economy after a weak retail sales report pressured
the commodity. Nearby October copper lost 18.60 cents to settle at $2.2235 a
pound, while most-active December tumbled 18.40 cents to $2.2105.
The declines reflect fears that the credit crisis upending global financial
markets will snowball into a full-blown recession around the world.
Energy-demand growth has also slammed into reverse in large consuming nations,
and some forecasters now see global oil use shrinking next year, potentially
the first contraction since 1983.
Frozen credit has also altered the trading landscape. Investors have grown
leery of doing business with Wall Street firms that fashion complex products
pegged to commodities. Hedge funds with big positions in commodities are facing
redemptions from investors and demands for new collateral on bets made with
borrowed money. The number of open Nymex crude-futures contracts is at its
lowest since July 2006.
Stock markets have also been discouraging. In an industry short of good
supply-and-demand data, stocks indexes have become a "moment-by-moment
indication of future demand prospects," said Tim Evans, a New York-based energy
analyst at Citi Futures Perspective. Crude extended declines after a
late-afternoon plunge in the Dow Jones Industrial Average, which closed down
7.9% at 8577.91.
Having been overwhelmingly bullish amid oil's gains earlier this year, a host
of Wall Street energy analysts have chopped forecasts to account for the price
drop and the future demand scenarios. J.P. Morgan Chase & Co. on Wednesday said
it now sees oil averaging $74.75 a barrel next year; this is $25 lower than its
prior prediction. Prices could dip to as low as $60, the bank said.
Unlike most others, J.P. Morgan sees world demand shrinking next year, albeit
by a modest 320,000 barrels a day, to about 85.5 million barrels a day, as
drivers and businesses in heavily industrialized countries use less oil.
"The world economy is currently in recession," said Lawrence Eagles, J.P.
Morgan's head of commodities research and a former official at the
International Energy Agency. "This global recession, which has occurred very,
very suddenly, has reduced global demand."
Government analysts continue to see world demand growing next year, albeit
hesitantly. OPEC on Wednesday trimmed 100,000 barrels a day from its 2009
demand forecast and now sees consumption growing by 800,000 to 87.2 million
barrels a day.
Oil's slide suggests the cartel may agree to cut output at an emergency
meeting Nov. 18, or perhaps even earlier, if prices fall below $60. Iraq's oil
minister said Wednesday that OPEC should trim production at the meeting. Saudi
Arabia, OPEC's de facto leader and the only member with spare capacity, has yet
to tip its hand.
"Unless OPEC -- by that I mean the Saudis -- are willing to cut output, this
market will remain in free fall," said Nauman Barakat, senior vice president at
Macquarie Futures USA in New York.
Some commodity veterans argue for a rebound. Oil's decline could subside once
the rush by traders is over to unwind oil trades with counterparties they view
as risky, or once hedge funds stop unloading oil bets just to cut down on
leverage. But for now, oil's decline is also being exacerbated by a drying up
of physical oil deals amid the credit crisis: Some refiners and traders can't
get short-term trade financing to move tankers around the world or even to ship
fuel on pipelines.
In other commodity markets:
PLATINUM: Nymex prices tumbled as economic worries threaten demand for
platinum, which is mainly used in automobile catalytic converters and jewelry.
The demand worries at the moment are enough that investors may be reluctant to
hold the metal even if supply cuts should occur, traders said. October platinum
fell $68.40 to $966.70 an ounce.
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101508 22:45 -- GMT
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Thursday, October 16, 2008
Oil Falls Below $75
Asia Outlook
DJ UPDATE: Stks Slide; S&P 500 Loses Most Since Black Monday '87
Wed Oct 15 17:44:34 2008
EDT
(Updates with market data in the second paragraph and further company
information beginning in the fifth paragraph.)
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The 2008 stock-market crash resumed on a Black
Wednesday with the Standard & Poor's 500 suffering its biggest percentage loss
since Black Monday, Oct. 19, 1987. This time, everything from retail-sales data
to a warning from mining giant Rio Tinto to a statement from Federal Reserve
Chairman Ben Bernanke indicated the bank rescue would not prevent a potentially
deep and widespread recession.
The broad S&P 500 index fell 90.17, or 9.03%, to 907.84, its biggest
percentage loss since the 20% decline on Oct. 19, 1987. The Dow Jones
Industrial Average fell 733.08 points, or 7.87%, to 8577.91 for its biggest
percentage loss since Oct. 26, 1987. The Dow trimmed its gains to 1.5% on a
week that started with a "Green Monday" - the biggest point gain ever for the
Dow. After its second biggest point loss ever, the Dow is off 39% from its peak
last October. The technology-oriented Nasdaq Composite fell 150.68, or 8.47%,
to 1628.33, and is now down 1.3% for the week for its lowest close since 2003.
Traders dumped stocks and commodities most tied to economic growth and
consumer spending after U.S. retail sales took the sharpest drop in three years
during S
Asia Outlook
DJ UPDATE: Stks Slide; S&P 500 Loses Most Since Black Monday '87
Wed Oct 15 17:44:34 2008
EDT
(Updates with market data in the second paragraph and further company
information beginning in the fifth paragraph.)
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The 2008 stock-market crash resumed on a Black
Wednesday with the Standard & Poor's 500 suffering its biggest percentage loss
since Black Monday, Oct. 19, 1987. This time, everything from retail-sales data
to a warning from mining giant Rio Tinto to a statement from Federal Reserve
Chairman Ben Bernanke indicated the bank rescue would not prevent a potentially
deep and widespread recession.
The broad S&P 500 index fell 90.17, or 9.03%, to 907.84, its biggest
percentage loss since the 20% decline on Oct. 19, 1987. The Dow Jones
Industrial Average fell 733.08 points, or 7.87%, to 8577.91 for its biggest
percentage loss since Oct. 26, 1987. The Dow trimmed its gains to 1.5% on a
week that started with a "Green Monday" - the biggest point gain ever for the
Dow. After its second biggest point loss ever, the Dow is off 39% from its peak
last October. The technology-oriented Nasdaq Composite fell 150.68, or 8.47%,
to 1628.33, and is now down 1.3% for the week for its lowest close since 2003.
Traders dumped stocks and commodities most tied to economic growth and
consumer spending after U.S. retail sales took the sharpest drop in three years
during S
Asia Outlook
DJ UPDATE: Stks Slide; S&P 500 Loses Most Since Black Monday '87
Wed Oct 15 17:44:34 2008
EDT
(Updates with market data in the second paragraph and further company
information beginning in the fifth paragraph.)
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The 2008 stock-market crash resumed on a Black
Wednesday with the Standard & Poor's 500 suffering its biggest percentage loss
since Black Monday, Oct. 19, 1987. This time, everything from retail-sales data
to a warning from mining giant Rio Tinto to a statement from Federal Reserve
Chairman Ben Bernanke indicated the bank rescue would not prevent a potentially
deep and widespread recession.
The broad S&P 500 index fell 90.17, or 9.03%, to 907.84, its biggest
percentage loss since the 20% decline on Oct. 19, 1987. The Dow Jones
Industrial Average fell 733.08 points, or 7.87%, to 8577.91 for its biggest
percentage loss since Oct. 26, 1987. The Dow trimmed its gains to 1.5% on a
week that started with a "Green Monday" - the biggest point gain ever for the
Dow. After its second biggest point loss ever, the Dow is off 39% from its peak
last October. The technology-oriented Nasdaq Composite fell 150.68, or 8.47%,
to 1628.33, and is now down 1.3% for the week for its lowest close since 2003.
Traders dumped stocks and commodities most tied to economic growth and
consumer spending after U.S. retail sales took the sharpest drop in three years
during S
US Summary on 15102008
DJ MARKET TALK: S&P/ASX 200 Expected Down 5%-6%
Wed Oct 15 18:24:19 2008
EDT
2224 GMT [Dow Jones] S&P/ASX 200 generally expected to fall 5%-6% vs 6.9%
fall in overnight futures. Normal discount to futures would suggest 250 point
fall to 4050.0. Some traders expect bargain hunting to emerge like it did in
midst of despair last Friday. But that's a brave call, given there are more
U.S. economic data due tonight including CPI, industrial production, capacity
utilization, as well as Citigroup, Merrill and Bank of New York results. Also,
while the U.S. is still in the process of buying U.S. banks, there's a sense
that it's fired most of its policy shots in response to the financial crisis.
"There's much more pain to come," says one senior trader. "We haven't seen the
full knock-on effect (of the credit crunch) on the economy and it's going to be
a shock to the markets." Traders fear late selling on Wall Street may have been
related to mutual funds making way for more redemptions. There's risk of
redemption-related selling in Australia, which could soon push index to new
bear market low below 3960.65. Next support 3926.6. Index last 4300.0. (DWR)
Contact us in Singapore. 65 64154 140;
MarketTalk@dowjones.com
(END) Dow Jones Newswires
15-10-08 2224GMT
Copyright (c) 2008 Dow Jones & Company, Inc.
101508 22:24 -- GMT
1012, 1054, 1085, 22766, 22767, 5014, 55115, N/BKG, N/DJGS, N/DJI, N/DJMS, N/EWR, N/FXW, N/WED, N/WER, N/ALMT, N/ASMT, N/AUMT, N/DJMT, N/DJWI, N/MSM, N/SMC, N/STK, M/NND, P/AEQ, R/ASA, R/FE, R/PRM, This content is for use with eSignal products by authorized persons only. Any reference; link, frame, or other use of this material without the explicit permission of eSignal is prohibited.**storysrvr-h-02(WEBSTORY-B-03)(DJF03zsY81015)
The Black Wednesday after 1987 Crash
DJ UPDATE: Stks Slide; S&P 500 Loses Most Since Black Monday '87
Wed Oct 15 17:44:34 2008
EDT
(Updates with market data in the second paragraph and further company
information beginning in the fifth paragraph.)
By Rob Curran
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The 2008 stock-market crash resumed on a Black
Wednesday with the Standard & Poor's 500 suffering its biggest percentage loss
since Black Monday, Oct. 19, 1987. This time, everything from retail-sales data
to a warning from mining giant Rio Tinto to a statement from Federal Reserve
Chairman Ben Bernanke indicated the bank rescue would not prevent a potentially
deep and widespread recession.
The broad S&P 500 index fell 90.17, or 9.03%, to 907.84, its biggest
percentage loss since the 20% decline on Oct. 19, 1987. The Dow Jones
Industrial Average fell 733.08 points, or 7.87%, to 8577.91 for its biggest
percentage loss since Oct. 26, 1987. The Dow trimmed its gains to 1.5% on a
week that started with a "Green Monday" - the biggest point gain ever for the
Dow. After its second biggest point loss ever, the Dow is off 39% from its peak
last October. The technology-oriented Nasdaq Composite fell 150.68, or 8.47%,
to 1628.33, and is now down 1.3% for the week for its lowest close since 2003.
Traders dumped stocks and commodities most tied to economic growth and
consumer spending after U.S. retail sales took the sharpest drop in three years
during September, a reflection of nervousness about job and financial markets.
In one sign of the extent of a global slowdown, mining giant Rio Tinto said
it would reassess expansion spending plans and curtail production of aluminum,
a key economic ingredient. American depositary shares of Rio Tinto fell 39.72,
or 20%, to 154.27, off 72% from the peak this summer. Oil prices slid to below
$75 a barrel as the bust for commodities prices began to rival those of the
1970s and 1980s: The biggest decliner on the Dow, integrated oil giant Exxon
Mobil, fell 10.11, or 14%, to 62.35.
Southwestern Energy fell 9.06, or 29%, to 21.86; steelmaker AK Steel Holding
fell 3.13, or 21%, to 11.50; and fertilizer maker Potash of Saskatchewan fell
21.15, or 22%, to 76.85, its lowest level since the summer of 2007, when the
commodity sector took flight.
"You have recessionary fears coming back into the equation," said Marc
Roberts, director of research and technical analysis at Direct Access Partners.
The selling picked up steam in the late afternoon after most regional Federal
Reserve banks reported that manufacturing slowed and consumer spending
decreased in the Fed's Beige Book for September.
"This drop, although extreme, is quite normal, after the climax on Friday,
and then the big up day on Monday," said Lorenzo Di Mattia, manager of hedge
fund Sibilla Global Fund. Di Mattia said the market was "retesting" lows from
last week.
As on Sept. 29 and during last week's 18% loss for the Dow, the selling fed
on itself. As nervous clients demand cash from hedge funds and mutual funds,
traders say the only option left for many institutions is to sell. Buyers are
much harder to find.
"Some (hedge funds) have definitely slowed or stopped trading," said an
executive at a Wall Street broker Wednesday.
Many financial stocks fell as Fed Chairman Bernanke warned that credit
markets will take time to unfreeze. Bernanke added that the stabilization of
financial markets will not cause an immediate economic recovery. Bernanke
warned about a "feedback loop" where mortgage defaults are hurting banks,
causing them to restrict lending, which slows economic activity, leads to job
losses and triggers yet more defaults.
JPMorgan Chase fell 2.22, or 5.5%, to 38.49. The bank's third-quarter profit
fell sharply, hurt by $3.6 billion in market-related write-downs. JPMorgan
warned that its credit-card loss ratio could increase to 7% next year, from 5%
in the third quarter.
Wells Fargo shed 17 cents to 33.35 as third-quarter earnings declined, hurt
by investments in institutions such as Fannie Mae and Freddie Mac.
Credit-card issuer and Dow component American Express fell 3.78, or 13%, to
24.41.
Hudson City Bancorp rose 63 cents, or 3.9%, to 16.70 after the New Jersey
bank said third-quarter profit increased and boosted its dividend.
EBay (Nasdaq) fell 2.41, or 14%, to 15.33. After the closing bell, the online
auctioneer cut its fourth-quarter revenue and profit projection. EBay's warning
sent shudders though the Internet sector, which has yet to experience a major
recession.
Yahoo (Nasdaq) fell 90 cents, or 7.1%, to 11.75 and shares of the Internet
portal company fell further in after-hours trading.
Intel (Nasdaq) fell 94 cents, or 5.9%, to 14.99. Third-quarter profit grew
12%, but the chip maker projected a wide range of revenue because it was
unclear how the financial crisis has affected end-user demand.
Shares of Coca-Cola tacked on 48 cents, or 1.1%, to 44.21, the only Dow stock
to finish in the green. The soda maker's third-quarter profit outgrew analysts'
expectations, as overseas business made up for lower North American volumes.
Coke's earnings came a session after rival PepsiCo, which gets a smaller
percentage of its revenue from overseas, reported a disappointing drop in
third-quarter results. PepsiCo Chief Executive Indra Nooyi said it was the
first-ever decline of the broad liquid refreshment beverage category in North
America.
On Friday, Brinker International, the operator of eateries such as Chili's
Grill & Bar, slashed its fiscal first-quarter earnings estimate. Wednesday,
shares of Brinker fell 1.13, or 9.7%, to 10.54.
Insurers took another beating as analysts again raised concerns about losses
on their insurance portfolios. Small-cap Protective Life fell 3.61, or 22%, to
12.60 after Moody's Investors Service warned that the life insurer's losses
could hurt its "liquidity profile."
Fellow life insurer Genworth Financial fell 1.51, or 22%, to 5.23. MetLife
shed 3.78, or 10%, to 34.17.
-By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com
(Roger Cheng and Anjali Cordeiro contributed to this article.)
Click here to go to Dow Jones NewsPlus, a web front page of today's most
important business and market news, analysis and commentary:
http://www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use
this link on the day this article is published and the following day.
(END) Dow Jones Newswires
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Copyright (c) 2008 Dow Jones & Company, Inc.
101508 21:44 -- GMT
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