Luxury Shoppers Shut Their Purses

(Businessweek) - Purveyors of luxury goods are finding that even their well-cushioned customers are feeling the economic pinch and putting their credit cards away

 

Luxury stores have finally caught the economy's cold.

For months, high-end retailers posted healthy sales increases, thumbing their noses at dismal reports of slumping home sales, risky mortgages, and rising energy prices. But now it looks as though even well-heeled consumers are pulling back. On Jan. 10, the upscale department store Nordstrom ( JWN) said that December sales at stores open at least a year fell 4% from last year, compared with an 8.7% increase in November. Saks (SKS), New York's Fifth Avenue luxury mainstay, also reported that its same-store sales were up a mere 0.8%, compared with a 25.7% increase in the previous month. And blue-blood retailer Neiman Marcus eked out a tepid 2.9% sales increase, vs. 5.8% in November and 8.5% in October.

"Everyone's shopping for the bare necessities, and people have stopped treating themselves," says Patricia Pao, founder of the Pao Principle, a New York retail consultant.

 

Read more at Businessweek

India sweetens Ethopian sugar

(Fin24) - India has agreed to give Ethiopia a $640m credit out of a total $1.3bn needed to boost Ethiopia's sugar production, say officials from the two countries.

Late last year Ethiopia announced plans to increase its annual sugar production to 1.3 million tons by 2011 from a current 300 000 tons.

India's Exim Bank will finance the $640m.

"It is the largest ever line of credit that India has provided to any country so far," Gurjit Singh, the country's ambassador to Ethiopia, said while signing an agreement between India and Ethiopia.

New factory

The remaining $660m will be covered by the Ethiopian government.

The money will mainly go towards erecting a new factory at Tendaho in the country's Afar region, and expansion of Finchaa, one of four existing sugar factories in Ethiopia within the next two years.

"With the completion of Tendaho... and the enhanced production of the existing four sugar factories... annual sugar production is expected reach up to 1.3 million tons within the next two years," Trade and Industry Minister Girma Birru said.

Tendaho will have an annual production capacity of 600 000 tons and will be Ethiopia's largest sugar factory. It will be located in the lower Awash Valley, in the Afar region, along the Addis Ababa-Djibouti highway and railway line.
 

Read more at Fin24

Less Moz miners in SA

(Fin24) - Fewer Mozambican workers were hired by South African mines in 2007, indicating a move away from the former
migrant labour system of old.

According to recruiting agency Teba, South Africa's mining industry recruited 44 849 Mozambican workers in 2007 - 3.6% fewer than the 46 528 recruited in 2006.

Of the total number of miners recruited last year, 36 702 were contract renewals, 7 950 were new hires with experience in the mining sector, and just 227 were cases of individuals who had never previously worked in mines.

José Carimo, regional director for Teba in Mozambique and Swaziland, this week told Mozambican newspaper Notícias, that the lower number of
Mozambicans recruited by South Africa's mines was primarily the result of South Africa's new migrant labour laws, which among other things restrict access to employment by non-qualified foreign workers.

 

Read more at Fin24

China Mobile Apple talks over

(Fin24) - China Mobile Limited says that it has discontinued talks with Apple over the launch of iPhone handsets in China.

"We have held talks with Apple to launch the iPhone device in China. However, those talks have ended," China Mobile spokesperson Rainie Lei said. She declined to say why the talks ended.

China Mobile Chairperson Wang Jianzhou said in November last year that the two companies had been unable to agree on a revenue-sharing model.

Calls to Cupertino, California-based Apple were not answered today.
 

Read more at Fin24

Metorex plunge may hurt deals

(Fin24) - The share price of Metorex is plunging inexplicably and has fallen 38% from its 12-month high at a time of bullish conditions for two of its main products - copper and gold.

The fall is particularly embarrassing in terms of Metorex's bid to minority shareholders in Copper Resources Corporation (CRC) which has just been extended for the second time to January 18.

CRC owns three copper projects in the Democratic Republic of Congo (DRC) with resources and reserves totalling up to 2.4 million tonnes of contained copper metal.

Metorex bought 38.7% of CRC in July last year plus a 5% stake in its 75% held subsidiary MMK from the Forrest group for R600m. The Metorex share price stood around 2 400c at the time and it subsequently rose to an all-time high of 2 950c.

The CRC share price at the time sat around 87p and, when Metorex pitched its equity offer to the CRC minorities, it also included an alternative cash offer of 125p per CRC share.

But Metorex shares hit 1 725c today before recovering to around 1 830c while CRC shares have risen to around 160p.

Read more at Fin24

Ford sees challenges in first half of 2008

(Reuters) - Ford Motor Co (F.N: Quote, Profile, Research) expects a challenging first half of 2008 for all automakers in the United States with a drop in industrywide retail sales, Ford's North American president said on Monday.

Mark Fields also said he hopes prior Federal Reserve rate cuts would begin to support the economy in the second half of the year, and that the U.S. government would take a look at tax rates as part of an economic stimulus package.

 

Read more at Reuters

 

 

Gulf funds eyed for further U.S. bank bailouts

(Reuters) - The sovereign funds of Kuwait and other Gulf states were in the spotlight on Monday as Citigroup sought extra emergency funding and its fellow U.S. bank Merrill Lynch was said to want more cash too.

The moves came as one newspaper report raised questions over whether previously agreed Chinese funding for Citigroup may fall through.

Citigroup, the largest U.S. bank by assets, is looking for more funds to help it through losses from the subprime crisis after securing $7.5 billion from the Abu Dhabi Investment Authority in November, a source familiar with the situation told Reuters in New York.

Merrill is seeking about $4 billion from the Kuwait Investment Authority and others as it faces as much as $15 billion in credit market losses, The Financial Times newspaper reported.

The newspaper said a Merrill deal could be announced as soon as midweek, and that other investors could come from Europe.

A public relations official for the KIA, which manages funds for Kuwait, referred calls to Managing Director Bader al-Sa'ad, who could not be reached in his office or on his mobile phone.

In December, Merrill shored up its capital base by as much as $7.5 billion after selling a stake to Singapore state fund Temasek and asset manager Davis Selected Advisers.

 

Read more at Reuters

Gold, Platinum Rise to Record on Declining Dollar; Silver Gains

(Bloomberg) -- Gold and platinum rose to records and silver extended its rally to the highest in 27 years as a declining dollar increased demand for precious metals as alternatives to stocks and bonds.

The dollar fell as traders increased bets that the Federal Reserve will lower U.S. interest rates to avoid a recession. Gold has gained 9 percent this year and the dollar has fallen more than 2 percent against the euro, to a seven-week low.

``We're in a falling rate environment. I think that works in gold's favor,'' Richard Urwin, London-based head of asset allocation at BlackRock Investment Management, said in an interview with Bloomberg Television. ``We're probably in an environment in which on average the dollar is going to depreciate. Gold is a good hedge against it.''

The metal for immediate delivery rose $12.31, or 1.4 percent, to $907.71 an ounce at 1:38 p.m. in London. It earlier reached $914.30.

Gold futures for February delivery rose $11.60, or 1.3 percent, to $909.30 an ounce at 8:38 a.m. on the Comex division of the New York Mercantile Exchange. The price earlier reached $915.90, the highest ever for a most-active contract.

Twenty-three of 29 traders, investors and analysts surveyed by Bloomberg from Mumbai to New York on Jan. 10 and Jan. 11 advised buying gold this week. Five said sell, and one was neutral.

``The market is still extremely bullish,'' said James Moore, an analyst at TheBullionDesk.com in London. ``With the U.S. potentially cutting interest rates while those in Europe stay firm, the dollar looks set to add additional upside momentum.''

Gold Bets

Hedge-fund managers and other large speculators increased bets on higher New York gold futures, to a record net 205,404 contracts on the Comex as of Jan. 8, figures from the U.S. Commodity Futures Trading Commission on Jan. 11 showed. Net long positions were up from 199,438 contracts from a week earlier.

Fed funds futures contracts on the Chicago Board of Trade show 100 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting. The odds have risen from 66 percent a week ago.

Demand for gold will be less affected by a global slowdown than silver, platinum and palladium, said Walter de Wet, head of commodity research in Johannesburg at Standard Bank Group Ltd., Africa's largest lender.

Industrial uses for gold, such as dentistry and electronics, made up 15 percent of total demand in 2006 compared with more than 50 percent for platinum and 47 percent for silver, according to estimates by London-based research company GFMS Ltd. Jewelry accounts for almost 60 percent of gold consumption.

ETF Gold

``The investment component of demand for all of these precious metals is dominating,'' De Wet said. ``We're likely to see an increase in all of these metals but gold is probably going to outpace.'' The gains may last until the second half of this year, he said.

Assets in the StreetTracks Gold Trust, the world's biggest exchange-traded fund backed by gold, are up 2.2 percent this year at a record 641.81 metric tons.

Gold also gained as equities declined. The Standard & Poor's 500 Index has fallen for three weeks, losing 4.6 percent, the worst start since 1982, according to Bloomberg data.

``People are looking at precious metals as principally a safe haven while they ride out a correction in equity markets,'' Peter McGuire, managing director at Commodity Warrants Australia Ltd., said by telephone from Sydney today.

The euro traded as high as $1.4915 today. It reached a record $1.4967 on Nov. 23.

Gold has had a correlation of 0.71 against the euro-dollar exchange rate in the past three months, compared with 0.67 in the previous three months. A reading of 1 would mean the two moved in lockstep.

 

Read more at Bloomberg

Dollar Falls to Within a Cent of Euro Record on Bets Fed to Cut

(Bloomberg) -- The dollar fell to within a cent of its all-time low versus the euro on speculation U.S. interest rates will drop below those of the 15 nations that share the single European currency for the first time in three years.

The dollar extended three weeks of declines as Federal Reserve officials including Chairman Ben S. Bernanke last week signaled they favor greater ``insurance'' against an economic slowdown amid the slump in the housing market. European Central Bank council member Klaus Liebscher today said he sees ``significant'' upside risks to inflation.

``Interest rates in the U.S. are falling below those in Europe,'' said David Watt, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. ``There are few reasons to buy the dollar.''

The dollar fell to as low as $1.4915 against the euro, the weakest since declining to a record low on Nov. 23 of $1.4967, and traded at $1.4888 as of 9:16 a.m. in New York, from $1.4776 on Jan. 11. It depreciated the most against the yen since Jan. 2, to 107.86 from 108.84. Watt said the dollar could weaken to $1.50 per euro this week.

The U.S. currency may fall to $1.55 per euro by the end of the first quarter, said London-based Bilal Hafeez, global head of currency strategy at Deutsche Bank AG, the world's largest foreign-currency trader. That compares with a median forecast of $1.47, compiled by Bloomberg from reports by 45 strategists and economists. Investment banks including UBS AG, the world's second-biggest currency trader, cut their dollar forecasts last week.

Euro Record

The euro rose to a record against the currencies of the region's 24 biggest trading partners on Jan. 11. It advanced against all but five of the 16 most-active currencies today. The single currency also climbed to a record 76.08 British pence and was recently at 76.06 pence, from 75.52 pence on Jan. 11.

The pound declined against 15 of the 16 major currencies even as a report showed U.K. factories increased prices at the fastest annual pace since 1991 in December. Investors are still betting the Bank of England will cut interest rates again later this year.

The common European currency extended gains against the dollar after rising beyond $1.4825 and $1.4850, where orders to buy the euro were placed, said Lee Wai Tuck, a strategist at Forecast Pte Ltd. in Singapore. Traders sometimes use automatic instructions to limit losses in case bets go the wrong way.

The dollar fell against all of the 16 most-active currencies before a Commerce Department report economists in a Bloomberg News survey say will show retail sales were unchanged in December. The data will be released tomorrow. The currency dropped for a third consecutive day against the Swiss franc and was trading at 1.0927 from 1.1014.

Bank Writedowns

The dollar also declined amid speculation U.S. investment banks will announce writedowns of as much as $25 billion worth of assets this week, strategists at UBS wrote in a note to clients. Citigroup Inc., Bank of America Corp. and Merrill Lynch & Co. may report their worst-ever quarter, beset by $35 billion of writedowns that threaten to crimp profit through 2008.

The euro has risen 15 percent in the past 12 months against the dollar as the Fed cut borrowing costs three times since Sept. 18 to prevent the worst housing slump in 16 years from dragging the economy into recession.

``We're expecting continued U.S. dollar weakness,'' Tobias Davis, senior foreign-exchange dealer at Custom House Global Foreign Exchange in Sydney, said in an interview with Bloomberg Television. ``It really is a concern that growth is grinding to a halt faster than some people expect.''

Futures Bets

Fed funds futures contracts on the Chicago Board of Trade show 58 percent odds the Fed will cut its 4.25 percent target rate for overnight bank loans to 3.75 percent at its Jan. 30 meeting. The odds have risen from no chance a month ago. The odds of a decrease to 3.5 percent were 44 percent, compared with zero a week ago. The ECB kept its benchmark rate unchanged at 4 percent last week.

The yield spread between German two-year notes and same- maturity Treasuries was 1.1 percentage points, near the widest since November 2002.

The ECB is under pressure to keep interest rates unchanged even as inflation stays above its 2 percent ceiling.

 

Read more at Bloomberg