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1913
Federal Reserve System
The First Bank of the United States was the first bank chartered by the newly formed United States to act as a central bank in 1811. The First Bank of the United States issued paper money called Continentals backed only by the trust of the people and is based on future tax revenues. Established European countries have currencies that are backed by metal such as silver and gold which is a common perception of value at that time. The value of the Continentals diminished dramatically because no metal is redeemable using the paper currency. In 1816 the Second Bank of the United States was formed by the government granting it a monopoly in printing the nation's paper currency only to be diminished in authority in 1836 by President Jackson. The years went on without a central authority to control the nation's money supply. The wake up call arrived in 1907 during a banking panic that threatened to destroy the stability of the US economy. No central authority can provide financial establishments the needed liquidity to keep them in business other than the private financier John Pierpont Morgan. As a result of the panic of 1907, the United States established a third national bank and called it the Federal Reserve System in 1913. The Federal Reserve acts as the lender of last resort during financial emergencies or as a provider of liquidity during economic contractions.
1992
Japanese asset price bubble
Two days shy of a new year, the Japanese Nikkei 225 price weighted stock index registered an all Time high of 38,957 in December 29, 1989. The rise to this level was so steep that it exhausted all of its momentum and suffered a vicious fall to 21,000 by the fourth quarter of the following year. 21 years later, the Nikkei 225 index is still over 70% below its 1989 peak at a level around 11,000. This is the aftermath of one of the greatest financial bubbles in history, the Japanese asset bubble. At a quick glance, Japan?s economy looked vibrant. With well known giants such as Toyota, Sony, Honda, Nissan, Yamaha and various company brands that takes up top global spots in terms of market capitalization, popularity and quality. Japan also boasts a currency that hovers close to parity with other major world currencies and an economy that trails behind the shadows of the USA. However, Japan?s economy is currently stagnant and growing at a very slow pace. It is projected that within a few years time, if the country?s growth rate remains at its current level, China would soon take over its spot as the second largest economy.
The bubble economy of Japan in the 80s closely resembled the tulip mania of the 1630s where the price of land, art and even golf club membership rose to extraordinarily high levels. The total value of land in Japan in 1980 at one point was over four times the real estate value of the entire United States. Land ownership in Japan projects status for its owners, for a country that is generally mountainous, real estate was seen as a very limited and priced commodity.
Land development is scarce because of the nature of the Japanese terrain, this made it look certain that real estate values would always rise due to its scarcity. However, that proved to be a false assumption. Land is already one of the most illiquid assets to own, the Japanese solidified real estate?s status by encouraging ?long termism?. The government raised short term property gain to 150%, a number that only the most desperate home sellers would take. At the same time, Japanese banks raised their capital reserve ratio allowing them to technically print or create money in the form of new real estate backed loans. With this in place, Japanese banks capital grew in size as a direct result of investor valuations of its stocks.
The increased capital allowed banks to lend more, providing more fuel for the already blazing hot real estate market. As the financial sector?s stocks rose so did the rest of the stocks across the board. The result of this was a country with a very tight fiscal policy as shown with the ridiculously high short term capital gains tax and at the same time a very loose monetary policy that allowed banks to provide more fuel for the bubble economy.
Bank of Japan governor Yasushi Mieno was well aware that an asset bubble is already in place and his objective was to slowly deflate it allowing a smooth landing instead of a crash. Mieno raised the discount rate in December of 1989 and by January of the following year, the Nikkei index fell from a peak of 38,915 to 35,000. He also expressed publicly that the aim of Bank of Japan was to slowly deflate real estate prices. The same party that manipulated the ascent of asset prices in Japan cannot successfully control its way down, instead, the stock market fell and it brought down the property market with it. The move to a higher interest rate surely got its consequence in the form of an equities market crash. By 1992, property prices in Tokyo fell to as much as 60% in value. The central bank of Japan gradually lowered interest rates in an effort to counter the crash. The discount rate got so low that banks were offering a negative interest on deposits. In 1995 Japan has experienced its first bank run when depositors rushed to their banks in order to withdraw their money. A total of 60 billion Yen was withdrawn that day. The continued decline in property prices sent real estate companies into a financial meltdown. The government bailed out most of these mortgage companies. This scenario was so recent that in logical terms, it could take a long time before this mistake is repeated elsewhere. However, the same exact scenario happened across the pacific 12 years after the fact. This time it took place in the United States with its own housing market bubble as if planet finance turned a blind eye on logic when faced with potential quick gains.
1992
Japanese asset price bubble
Two days shy of a new year, the Japanese Nikkei 225 price weighted stock index registered an all Time high of 38,957 in December 29, 1989. The rise to this level was so steep that it exhausted all of its momentum and suffered a vicious fall to 21,000 by the fourth quarter of the following year. 21 years later, the Nikkei 225 index is still over 70% below its 1989 peak at a level around 11,000. This is the aftermath of one of the greatest financial bubbles in history, the Japanese asset bubble. At a quick glance, Japan?s economy looked vibrant. With well known giants such as Toyota, Sony, Honda, Nissan, Yamaha and various company brands that takes up top global spots in terms of market capitalization, popularity and quality. Japan also boasts a currency that hovers close to parity with other major world currencies and an economy that trails behind the shadows of the USA. However, Japan?s economy is currently stagnant and growing at a very slow pace. It is projected that within a few years time, if the country?s growth rate remains at its current level, China would soon take over its spot as the second largest economy.
The bubble economy of Japan in the 80s closely resembled the tulip mania of the 1630s where the price of land, art and even golf club membership rose to extraordinarily high levels. The total value of land in Japan in 1980 at one point was over four times the real estate value of the entire United States. Land ownership in Japan projects status for its owners, for a country that is generally mountainous, real estate was seen as a very limited and priced commodity.
Land development is scarce because of the nature of the Japanese terrain, this made it look certain that real estate values would always rise due to its scarcity. However, that proved to be a false assumption. Land is already one of the most illiquid assets to own, the Japanese solidified real estate?s status by encouraging ?long termism?. The government raised short term property gain to 150%, a number that only the most desperate home sellers would take. At the same time, Japanese banks raised their capital reserve ratio allowing them to technically print or create money in the form of new real estate backed loans. With this in place, Japanese banks capital grew in size as a direct result of investor valuations of its stocks.
The increased capital allowed banks to lend more, providing more fuel for the already blazing hot real estate market. As the financial sector?s stocks rose so did the rest of the stocks across the board. The result of this was a country with a very tight fiscal policy as shown with the ridiculously high short term capital gains tax and at the same time a very loose monetary policy that allowed banks to provide more fuel for the bubble economy.
Bank of Japan governor Yasushi Mieno was well aware that an asset bubble is already in place and his objective was to slowly deflate it allowing a smooth landing instead of a crash. Mieno raised the discount rate in December of 1989 and by January of the following year, the Nikkei index fell from a peak of 38,915 to 35,000. He also expressed publicly that the aim of Bank of Japan was to slowly deflate real estate prices. The same party that manipulated the ascent of asset prices in Japan cannot successfully control its way down, instead, the stock market fell and it brought down the property market with it. The move to a higher interest rate surely got its consequence in the form of an equities market crash. By 1992, property prices in Tokyo fell to as much as 60% in value. The central bank of Japan gradually lowered interest rates in an effort to counter the crash. The discount rate got so low that banks were offering a negative interest on deposits. In 1995 Japan has experienced its first bank run when depositors rushed to their banks in order to withdraw their money. A total of 60 billion Yen was withdrawn that day. The continued decline in property prices sent real estate companies into a financial meltdown. The government bailed out most of these mortgage companies. This scenario was so recent that in logical terms, it could take a long time before this mistake is repeated elsewhere. However, the same exact scenario happened across the pacific 12 years after the fact. This time it took place in the United States with its own housing market bubble as if planet finance turned a blind eye on logic when faced with potential quick gains.
1907
The banking panic of 1907
Cornering stocks are rare nowadays as government regulations limit their existence. However it was a common scene in the early years of the 20th century. The plot is to make gains in a particular stock by squeezing the short sellers, thereby increasing the price further when the short sellers are forced to cover. It is only possible if an individual holds a majority of the stock, and decides to call out all of his holdings from stock brokers. Brokers normally lend out stock shares to short sellers, and this can be exploited by a firm or an individual who, in part, think that they own a vast majority of the lent out shares. By calling out the stock physically, brokers would be forced to recall the shares held by short sellers to comply with the real owner?s request to actually hold all physical shares that he owns. The engineer of this stock corner would profit from inflated prices of his shares, caused by short sellers trying to buy at any price just to cover or return the shares they borrowed. This idea was attempted by Otto Heinze, the brother of the short lived United Copper Company founder Fritz Augustus Heinze in 1907. This corner attempt contributed greatly to the great banking crisis of 1907.
It started with Otto Heinze on the 9th of October 1907. He purchased a $96,000 seat on the New York Stock exchange to start the Otto C. Heinze and Company brokerage house. Thinking that they own a majority of United Copper Company stocks, he engineered a stock corner that would eventually bring down most banks and trust funds at that time. Otto Heinze noticed that stocks of United Copper co. was trading well over 25,000 more shares than the total outstanding shares accounted. He came into a conclusion that, this was mainly due to the other brokerage houses lending out shares to short sellers. For the months to follow, Otto Heinze would try to exploit this heavy short selling activity with United Copper company shares. It required about $2,000,000 to purchase what he thinks would be sufficient to acquire a controlling interest of United Copper shares. However, the president of the Knickerbocker Trust company Charles W. Morse estimated that, it would probably take over $3,000,000 to successfully execute the corner when the Heinze brothers consulted him. Otto Heinze?s plan was well rejected by his brothers and Morse. This was mainly due to the fact that United Copper Co. has been buying its own shares on margin to support its declining stock price. But this share buy back activity was not put into consideration on their verdict that, it was merely due to the short sellers causing the price of United Copper Co. shares to drop in value. The Heinzes were already indebted to their brokers for their margin purchases. Ignoring all of these red flags, Otto Heinze still executed his plan to corner shares of United Copper Co.
1929
October stock market crash
After several years of steadily rising stock prices, the Dow Jones Industrial Average fell from a peak of 381.17 in September 3, 1929 to 230.07 October 29, 1929 a 66% decline in value. The crash of the US stock market was followed by the great depression as the destruction of capital in the markets also affected the liquidity of most businesses that rely on credit. Just like most stock market crashes that followed, the crash of 1929 followed a boom cycle where most securities were bought using borrowed money provided by brokerages and banks. The causes of this crash was deeply contested but during this era investors and traders were highly leveraged as a result of the effect of a market in euphoria which promises nothing but continued growth. Brokerages were also spawning left and right and most has even set up offices on transatlantic liners powered by Radio Corporation of America's (RCA) wireless technology.
The abundant supply of credit and a booming economy helped spur astronomical gains in the equities market. Also during this time, Europe was slowly recovering from the devastations caused by the first world war. As European industry started to come back into its former state, demand for US goods declined slowly. Surpluses forced prices to fall and the value of land which is used to borrow capital from banks also fell. This weakened state on the rural areas has spread through the chain of weakening banks. On July 8, 1932, the Dow Jones Industrial Average was at 41.88 a 90% drop from its peak of 381.17 in September 3, 1929.
2007
U.S Housing Market bubble and crash
After years of quantitative easing and loose government regulation, the U.S Housing market finally revealed that it turned into a bubble and finally collapsed. Houses are assets that are considered hard to liquidate compared to other assets such as stocks and yet real estate was traded not because people need roofs on top of their heads but simply by pure speculation. The housing markets have been far less volatile than that of the stock market in fact, house prices remained at a steady upward direction since the end of WW2 but not until it started go out of control in the 2000s. The world has actually forgotten the lessons learned from numerous bubbles that occured throught history. The most recent one similar to the housing market bubble is the Japanese asset price bubble in the 1980s where house prices shot up to the point that it became too expensive for the average Japanese citizen to afford.
The combination of declining interest rates and government pressure to lenders, made the housing market at first a very affordable venture. The Bush administration further pushed this in 2003 with the American Dream Downpayment Act this subsidized first time homebuyers and asked lenders to ease the pressure on subprime borrowers to provide full personal and financial documentation to obtain a loan. Fanny Mae and Freddie Mac were also put under pressure to open its loan vaults to subprime clients through a government guarantee of the loans. With all the systems in place, this jump started the housing market speculation where the ease of obtaining a loan supplied the needed demand for real estate brokers to finally raise prices in increments, slowly. As house prices went up, the Federal Reserve's concern of rampant inflation caused by this free floating money from easy loans prompted them to slowly tighten interest rates. Most subprime borrowers are on variable interest rate loans which means, it is very affordable if the interest rate is low but as the Fed slowly increased rates to control inflation, their monthly payments also increased to the point that they could no longer afford to pay the mortgage and still have something left for their other basic expenses. House prices in 2006 at its peak has gone up to ridiculously high levels that most lenders are not willing to make loans. The extremely high house prices and the lack of available money from lenders drastically reduced demand for new houses and, combined with the defaulting subprime borrowers, the balance sheets of numerous subprime lenders were permanently damaged.
Some events that lead into the confirmation of the crash started with Freddie Mac's announcement that it would no longer purchase risky subprime loans followed by the subprime lender New Century Financial's bankruptcy. By August of 2007, subprime loans are extinct, finding one is mostly a fantasy American Home Mortgage also filed for bankruptcy.
2000
Dot-com bubble
Internet technology started to pick up its pace during the mid 90?s. Although the technology at its earliest form existed since 1958 in the form of ARPA (Advanced Research Projects Agency), it is not until the last quarter of the 90?s did the internet become practical enough for commercial use. The concept of a global network spurred new business models based entirely on the internet taking advantage of network effects. This effect is supposed to be an efficient means to spread consumer awareness resulting in huge potential profits. In the mid 90?s low interest rates in the United States freed up more investment capital through lending. Most of the available capital was channeled into new internet companies with business plans to monopolize their respective sector. However, every new internet company has the same business plan and most of them were clearly devoid of a plan to be efficiently profitable. Venture capitalists simply funded companies anticipating the enormous potential of the internet. In order to get funded, companies only have to put a .com suffix on their name ignoring their balance sheet as there really is nothing to see there. Internet companies going public such as the globe.com saw their stock jump up to over 606% on the first trading day. Investors totally turned irrational at the height of this mania that companies such as webvan.com also got fresh supply of funds even if its business model, an online grocery is severely flawed like a very low profit margin and the fact that their fleets of delivery trucks are extremely sensitive to the price of crude oil.
Looking beyond the mania generated by the internet bubble, investors are right in a way. The internet has become a global market force with users reaching almost a quarter of the earth?s population. The only thing is, the current dominating state of the internet happened 10 years after the burst of the dot-com bubble. The idea of the internet being a global market force was cashed in too early. Everybody tried to get in to the boom believing that they might get left out once the price has reached a higher plateau. Investors simply overvalued internet companies during the late 90s because the traditional pricing of companies based on its earnings are replaced by the speed on which a company would grow. The capital received by internet companies that failed simply used it for advertisements so that the public would become aware of their presence. The Federal Reserve is aware of this new developing mania and as of 1999, it slowly raised interest rates to slow down the flow of capital. Since internet companies do not have a positive cash flow from their operations, they rely on funding and profits from new share issues. When capital becomes tight as a result of expensive lending rates, dot-com companies are left without cash to burn. The idea of growth over profits failed most of these internet companies when funding is no longer easy to acquire. By March of 2000 the technology heavy NASDAQ fell from its peak of 5132.52 to 3,649 in April. People realized the over valuation of these profitless dot-com companies when capital dried up as a result of higher interest rates and brought insanity back into the market. However, most internet companies with sound business models survived the crash no matter how heavy their stocks got hit like Yahoo and Amazon. The then profitless Google stayed on the sidelines at the height of the bubble and only began offering shares to the public four years later on August 19, 2004.
1997
Asian financial crisis
In July of 1997, Thailand was forced to float its currency the Baht as a result of intense internal pressure from fiscal debt and a surging asset price market. The people of Thailand and foreign currency speculators added more downward pressure on the Thai Baht seeking safety on the US dollar. As a result of this market force, the government devalued the Baht to as much as 20% against the US dollar. The economies around the region were affected as a result of this devaluation. The now much cheaper Thai currency also applied heavy pressure on currencies such as the Indonesian Rupiah which was devalued at 90% of its original buying power and the South Korean Won. The crisis was caused by the effect of inter-connected financial markets where investments of a particular nation like South Korea is exposed in south east Asian markets such as Thailand, Indonesia, Malaysia or the Philippines. The slowing down of the economies of the said countries was caused by an overheated equities market which was followed by price inflation. The International Monetary Fund provided assistance on the region noting that countries need to enforce a high interest rate coupled with higher tax rates and austerity measures.
1973
Oil crisis
Egypt and Syria conducted a surprise military attack on Israel and launched the Yom Kippur War or the 4th Arab-Israeli War on October 6, 1973 after Israel rejected Egypt?s offer of non-participation in the war in exchange for Israel to go back to its pre-1967 borders. This conflict was between the coalitions of Arab states and Israel as a result of a series of wars ignited by the United Nation?s partition plan of 1947 which left most Arabs dissatisfied. A part of the Arab coalition plan to win the war was to use crude oil as a weapon that would be launched to Israel?s primary supporter which the United States in the form of an oil embargo. The United States and its allies were heavily dependent on oil to fuel their massive industrial economies. The price of crude oil was relatively cheap compared to the refined product in the form of gasoline which most of it are eventually shipped back to the Middle East at a much higher price. During this period, most of the Arab states were dissatisfied with the high price of imported commodities coming primarily from the United States such as wheat or sugar. As a response to the great disparity in price between the imported price of commodities from the United States and the relatively cheap price of crude oil, oil producing Arab nations repeatedly stressed about plans to raise the price level of crude oil.
This plan was set into motion as an effective weapon to disrupt the economy of the United States which heavily supported Israel at the time of the conflict. Arab leaders such as King Faisal of Saudi Arabia and Egyptian president Anwar Sadat persuaded the oil cartel OPEC to initiate the embargo. OPEC complied and raised the price of oil from $1.53 to $5.11 a barrel after President Richard Nixon announced a $2.2 billion emergency aid for Israel in October 20, 1973. A series of economic shocks took the US stock market at a steady decline. The suspension of the US dollar?s convertibility to gold in 1971 resulted in spiraling domestic inflation and the oil price increase by OPEC all led to the decline of US equities market. To counter the scarcity of crude oil imports, the US government imposed price controls on most commodities especially oil. The price controls further worsened the situation and created an artificially induced petroleum shortage which made gasoline unavailable to a majority of gas stations. The oil embargo was ended on March 17, 1974 after Israel withdrew its troops in Sinai giving up the land back to Egypt.
Australia shares end volatile day flat, earnings buffet market
A price display board is seen in the foyer of the ASX
(Updates to close)
SYDNEY, Aug 14 (Reuters) - Australian shares finished a volatile session flat on Wednesday, as investors sought to lock-in gains after buying heavily in some of the big names recently, including Commonwealth Bank of Australia which posted a record annual profit.
The S& P/ASX 200 index finished steady at 5,157.4 points. A handful of disappointing earnings shackled the market, with Leighton Holdings Ltd tumbling after its first half results showed weak cashflows.
The benchmark rose 1 percent on Tuesday to notch 2-1/2 month highs. New Zealand's benchmark NZX 50 index also finished flat at 4,524.6 points. (Reporting by Thuy Ong Editing by Shri Navaratnam)
RWE takes plants offline as renewable boom bites
* About 6 pct of European capacity to be idled or shut
* H1 EBITDA at 5.5 bln eur vs 5.54 bln Rtrs poll
* H1 recurrent net income 1.99 bln eur vs 2.09 bln Rtrs poll (Recasts, adds CEO, fund manager quote)
By Christoph Steitz
FRANKFURT, Aug 14 (Reuters) - Germany's No.2 utility RWE followed peers by announcing cuts in generating capacity, blaming an expansion of renewable energy that has pushed many gas and coal-fired plants into losses.
Germany's utilities are suffering from plunging wholesale power prices, down by about a fifth year-to-date, and subsidised renewable energy that takes priority feeding into the grid, reducing the hours that many conventional plants can run.
" In view of the latest price developments on power exchanges and the continuing, subsidy-driven solar boom, the situation is far from being remedied," Chief Executive Peter Terium said in a letter to shareholders.
RWE said it would take offline 3,100 megawatts (MW) of power plant capacity in Germany and the Netherlands, about 6 percent of its European total 52,000 MW, and added it was assessing similar steps for further plants.
A source told Reuters on Monday that the group was planning to idle or shut down thousands of megawatts of capacity.
On Tuesday, larger peer E.ON said it had already shut down or idled about 6,500 (MW) of capacity and may close or mothball more than the 11,000 MW it has previously put under review.
NO GREAT EXPECTATIONS
Operating profit at RWE's conventional power generation business, accounting for 17 percent of the group's total, was down by 62 percent year-on-year at 690 million euros ($913.31 million) in the first half, triggering further savings efforts at its power plant division.
Having recently fallen to a 10-year low, shares in RWE and E.ON have proven to be a challenging investment, with little growth prospects in the foreseeable future.
" You shouldn't have great expectations when it comes to growth. The amount of electricity in Germany shrinks, there is less demand for the product," said Thomas Deser, senior fund manger at Union Investment, which holds 0.55 percent in RWE, according to Thomson Reuters data.
" The company should try to lower costs as much as possible and become a reliable dividend machine," he added.
RWE said recurrent net income rose by 19 percent to 1.99 billion euros in the first half of the year, which the group said was mainly due to an arbitration ruling under which Russia's Gazprom had to reimburse RWE for overpayments on gas purchases.
Analysts had, on average, expected the group to post first-half recurrent net income of 2.09 billion euros. ($1 = 0.7555 euros) (Editing by Peter Dinkloh and David Cowell)
Nikkei rises to 1-week high on strong global econ data, weak yen
Tokyo Stock Exchange building
TOKYO, Aug 14 (Reuters) - Japan's Nikkei share average closed at a one-week high on Wednesday in choppy trade as positive economic data from Europe and the United States spurred buying, while a weak yen lifted exporters such as Toyota Motor Corp and Honda Motor Co. The benchmark Nikkei rose 1.3 percent to 14,050.16 after falling to as low as 13,747.18 earlier. The broader Topix added 1.2 percent to 1,171.34. Traders attributed late buying to short-term investors' high frequency trade.
India stumbles over shale gas contracts
* Private, foreign firms have to wait
* State firms have green light to drill for shale gas
* Policy for others to take at least three months
By Nidhi Verma
NEW DELHI, Aug 14 (Reuters) - India will take at least three months more to draw up a policy framework for shale gas exploration that would allow both private domestic and foreign firms to begin drilling for the fuel, two oil ministry sources said on Wednesday.
India has a chronic power supply shortage and yet many gas-fired electricity plants stand idle as the country lacks the fuel to supply them, or the infrastructure and cash for expensive imports. Shale gas supplies could eventually help meet demand, but India has been slow to open up the sector.
The country could be sitting on as much as 96 trillion cubic feet (tcf) of recoverable shale gas reserves, the U.S. Energy Information Administration estimates, equivalent to around 26 years of the country's gas demand.
India's cabinet will soon approve a policy for shale gas exploration, initially allowing state oil companies holding India's oldest contracts to drill for shale. That would give state-run explorers Oil and Natural Gas Corp and Oil India Ltd a headstart, although neither has yet to show much appetite for drilling for shale.
Of the 356 blocks the two companies hold, India's upstream regulator has said 176 of them possibly hold shale resources.
These contracts were awarded when India first started a push to find and produce oil and gas after it got independence from Britain in 1947.
The old contracts refer to activity related to exploration and output of petroleum, which India's government has interpreted as a broad enough term to cover unconventional energy such as shale.
The wording of new contracts for blocks awarded to companies such as Reliance Industries, BG and Cairn India , specifies activity related to natural gas and oil. The Indian government has interpreted this as excluding unconventional energy.
It is unclear how the government would resolve the issue. It is also unclear if the government would open existing blocks to bidding from companies who want to drill for shale.
BUILDING SHALE EXPERTISE OVERSEAS
Gas demand in the country is expected to jump to 473 million cubic metres a day (mmscmd) by 2016/17 from 286 mmscmd in 2012/13.
India is eager to bring in global energy expertise to help it unlock resources and cut import dependency. It will link local gas prices to global indexes from April 2014 in an effort to incentivise and attract producers and importers.
Reliance Industries, GAIL (India), Oil India and Indian Oil Corp have bought stakes in shale gas assets overseas to help build the expertise needed to pump gas from deposits back home.
ONGC signed a preliminary agreement last year with ConocoPhillips to exploit shale gas reserves, but is unlikely to be able to use the technical expertise of the Houston-based company.
Indian rules do not permit equity participation in these particular blocks and multinationals are reluctant to be just service contractors, said an ONGC official.
" For (these) blocks we have to rely on consultants and service contractors for drilling," said the ONGC official.
Brent slips towards $109 on US stimulus outlook, but supply worries support
* Investors worry Fed could curb stimulus in Sept
* Libya unable to give clear indication on Sept loadings
* Coming up: U.S. weekly EIA stocks data at 1430 GMT (Updates prices)
By Luke Pachymuthu
SINGAPORE, Aug 14 (Reuters) - Brent crude slipped towards $109 per barrel on Wednesday as investors fretted that the U.S. Federal Reserve could start curbing its commodity-friendly stimulus as early as September, but concerns over supply underpinned prices.
Brent was down 51 cents at $109.31 a barrel at 0623 GMT, while U.S. oil dipped 43 cents to $106.40.
Front-month Brent crude oil futures for September delivery had risen for a third straight session on Tuesday, touching their highest in nearly two weeks at $110.06 a barrel.
" Expect to see a lot of volatility over the next few weeks, because investors are paring back and holding out in anticipation not just of U.S. economic data this week, but also of the Fed meeting on September 17," said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates.
U.S. retail sales rose in July, pointing to an acceleration in consumer spending that could bolster the case at the Fed for winding down its major economic stimulus programme.
Atlanta Fed President Dennis Lockhart said it was too early to detail plans for a tapering, but did not rule out the possibility of it starting next month.
" Right now the market is not trading on fundamentals, most of the price action we are seeing is primarily speculative, based on assumptions," Ritterbusch said.
Brent rose back above its 200-day moving average on Monday at $108.17, a technical marker watched by traders. The contract also fully breached its short-term 10- and 15-day moving averages on Tuesday.
EYES ON SUPPLY
But concerns over supply disruptions in OPEC members Libya and Iraq supported prices.
Libya's state National Oil Corp said in a statement addressed to shippers on Tuesday that it could not provide September loading schedules, normally due by now, as unsettled labour disputes at its ports have disrupted operations.
And maintenance work at Iraq's key southern oil export hub is also expected to slash supplies by 500,000 barrels per day in September.
" With the supply issues, and looking at the macroeconomic picture, it does look a little better now, even Europe is surprising on the upside," Ritterbusch said.
" But the market is still oversupplied and we don't quite yet have demand at the kind of levels needed to draw down the overhang."
The American Petroleum Institute's weekly report showed on Tuesday that U.S. crude oil stockpiles fell last week, although the decrease in inventories was smaller than expected.
" To get demand kick started we'll need to see that unemployment number get down under 7 percent."
The U.S. unemployment rate has fallen nearly a percentage point in the last year, though it remains historically high at 7.4 percent.
The world's largest economy will issue a key survey on manufacturing later on Wednesday. (Editing by Joseph Radford and Muralikumar Anantharaman)
Daily Markets Briefing: STI up 0.4%
Index could inch higher towards the 3280 mark.
OCBC Investment Research said:
The recovery on Wall Street overnight and the positive Nikkei start (up 0.6% now) are likely to provide further inspiration to the local bourse this morning.
As such, the STI which gained 0.4% yesterday could continue to inch higher towards the 3280 immediate resistance (recent peak).
Meanwhile, the MACD has also started to head higher this suggesting that the upside momentum is improving as well.
Beyond the 3280 obstacle, the next hurdle lies at the 3320 support-turned-resistance. On the downside, the immediate support is still pegged at the 3200 psychological base, followed by the subsequent support at the 3130 minor troughs.
Recapped on head and shoulder ... ...
Head and Shoulders Reversal Pattern
Another setup is known as the ?head and shoulders? pattern. In figure 20 we see that this pattern can be bullish or bearish. A bearish pattern forms by forming a person-like shape complete with shoulders and a head in the middle. If the pattern were to be completely flipped upside down with the head forming at the bottom, we would call it a bullish head and shoulders pattern.
l
Head and Shoulders Reversal Pattern
Another setup is known as the ?head and shoulders? pattern. In figure 20 we see that this pattern can be bullish or bearish. A bearish pattern forms by forming a person-like shape complete with shoulders and a head in the middle. If the pattern were to be completely flipped upside down with the head forming at the bottom, we would call it a bullish head and shoulders pattern.
info link: http://oakshirefinancial.com/2008/06/10/charting-301-%e2%80%93-advanced/
Daily Markets Briefing: STI up 0.2%
Index predicted to open on a pessimistic tone.
OCBC Investment Research said:
With the US indices turning in a weaker performance last Friday night and the Nikkei having a poor start (down 1.3% now), the local bourse could start the day on a more pessimistic tone.
Despite the 0.2% gain on Wednesday, the STI has already been inching lower gradually before the start of last week?s long weekend break.
With this downside biased momentum likely to persist, we could see the index sliding further towards the 3200 psychological support this morning.
Below the 3200 level, the subsequent base lies at the 3130 minor troughs. On the upside, the 3280 key peak is still the immediate obstacle to overcome, followed by the next hurdle at the 3320 support-turned-resistance.
China data, buoyant banks propel Europe shares higher
European flags in front of the European parliament in Strasbourg, France
* FTSEurofirst 300 up 0.6 pct, Euro STOXX 50 up 0.3 pct
* Jump in Chinese factory output sparks rally in miners
* France's CAC 40, Spain's IBEX indexes hit year highs
By Blaise Robinson
PARIS, Aug 9 (Reuters) - European stocks climbed on Friday as strong Chinese factory data fuelled a rally in mining shares, while buoyant euro zone banks propelled French and Spanish benchmark indices to year highs.
The FTSEurofirst 300 index of top European shares ended 0.6 percent higher at 1,229.58 points, while the euro zone's blue-chip Euro STOXX 50 index gained 0.3 percent to 2,825.62 points.
Paris's CAC 40 and Madrid's IBEX - which have been outperforming the broader European market since late June, driven by rising banking stocks - both hit their highest levels this year on Friday.
The CAC gained 0.3 percent to close at 4,076.55 points, surpassing a May peak and hitting its highest level since mid-2011, following a surprisingly strong earnings season.
Societe Generale gained 1.5 percent while Michelin added 1.9 percent.
" The structure of the rally is encouraging: you see banks and cyclicals leading the way and beaten-down stocks such as Peugeot recovering, while defensive shares underperform," a Paris-based trader said.
" It's a sign that this rally could go on for a little while, although in the short term we're ripe for a pull-back."
The bank-heavy IBEX gained 0.7 percent to 8,735.5 points, after surpassing a January peak and hitting its highest level since early 2012, with BBVA adding 2.4 percent and Banco Santander gaining 0.8 percent.
But heavyweight mining stocks were the top gainers in Europe, after data showed Chinese factory output rose 9.7 percent in July from a year earlier. That was the fastest pace since the start of the year and added to recent data suggesting the world's biggest metals consumer may be stabilising after more than two years of slowing growth.
Lonmin was up 7.7 percent and Antofagasta up 7.5 percent.
The STOXX Europe 600 basic resources sector index has jumped 7.5 percent since Wednesday's close but remains down 15 percent in 2013, by far the worst sector performance this year.
The broader FTSEurofirst 300 is up 8.6 percent year-to-date, while the Euro STOXX 50 has rallied some 13.4 percent since late June. Alpari market strategist Craig Erlam warned the blue-chip index could be range-bound for the rest of the month, however, as the earnings season draws to a close and with no U.S. Federal Reserve policy meeting before September.
" May's highs around 2,850 should continue to cap any upside moves throughout the month, while 2,700 should provide significant support," he said. " I don't expect any break outside of this range unless we get any more significant hints about Fed tapering, or disaster once again strikes in the euro zone, which looks unlikely at this stage especially ahead of the German elections in September."
Wall Street ends worst week since June dollar rises
Graph with stacks of Australian dollars
* Wall Street slips as investors pull back from record highs
* China factory output rise eases concerns over growth outlook
* Brent oil rises above $108, dollar rebounds off recent lows
By Leah Schnurr
NEW YORK, Aug 9 (Reuters) - Wall Street closed out its worst week since June on Friday, pulling back from record highs as investors focused on when the Federal Reserve will start to wind down its stimulus program, while the dollar rebounded from a seven-week low.
U.S. stocks ended modestly lower as investors found few catalysts in light volume. For the week, the S& P 500 lost 1.1 percent, after several Fed officials alluded to a decline in stimulus before long. The Fed's support has been a major driver in the rally that has pushed the S& P 500 up more than 18 percent so far this year.
" People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.
The dollar rebounded slightly on Friday from recent losses, but it ended the week about 1 percent lower. The dollar index gained 0.2 percent on Friday.
Investors have been betting heavily on dollar strength in recent months, expecting that Fed plans to reduce bond purchases, along with the relative outperformance of the U.S. economy against other markets, would bolster the dollar and drive U.S. yields higher.
The repositioning in these trades dominated moves this week in currencies, bonds and foreign stocks. Along with the big bet on the dollar, bets on Japanese stocks, a falling yen and higher U.S. bond yields were all hit hard this week, causing investors to cover these positions ahead of what looks to be a seasonally slow period in the next two weeks.
Better-than-expected economic figures in Europe have supported the euro and sterling of late. Britain's trade deficit narrowed sharply, supporting the pound, which traded close to the Thursday level of $1.5574 that was its strongest since June 19.
Bond prices were little changed on Friday. The 10-year Treasury note edged up 4/32 in price, to yield 2.578 percent. However, yields are still sharply lower than the levels seen just before the release on Aug. 2 of the monthly U.S. jobs report, which disappointed investors.
The Fed has said it will reduce its $85 billion in monthly mortgage-backed securities and Treasury bond purchases later this year if the economy progresses as expected.
Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its purchases from September if economic data keeps improving. There was no fresh information on Friday.
Signs of stabilization in China's economy supported European stocks, which closed up more than half a percent, and the data also pushed crude prices higher.
Investors pulled a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week, data from Thomson Reuters' Lipper service showed. The outflow from Treasury funds in the week ended Aug. 7 was the biggest since Lipper's records began in 1992.
The Dow Jones industrial average ended down 72.81 points, or 0.47 percent, at 15,425.51. The Standard & Poor's 500 Index was off 6.06 points, or 0.36 percent, at 1,691.42. The Nasdaq Composite Index lost 9.02 points, or 0.25 percent, at 3,660.11.
But Europe's broad FTSE Eurofirst 300 index gained 0.6 percent as the data out of China lifted stocks of mining companies higher. World shares were flat.
Upbeat Chinese data in the past two days helped ease investor concerns that a sharp slowdown in the world's second-largest economy could derail global growth.
China said factory output rose 9.7 percent in July, beating forecasts, and retail sales grew 13.2 percent while inflation held steady. The data added to Thursday's trade figures showing exports from China running at a surprisingly strong pace.
The promising numbers, along with supply disruptions in the Middle East, lifted Brent oil above $108 a barrel. Brent was up $1.52 to $108.20 a barrel, while U.S. crude gained $2.70 to $106.10.
Wall St eases for fourth day in five
The New York Stock Exchange seen with a Wall street sign in front
* U.S. stock indexes poised for worst week since June
* Priceline gains on results, near $1,000 a share
* BlackBerry open to going private, sources tell Reuters
* Dow down 0.4 pct, S& P 500 off 0.3 pct, Nasdaq off 0.1 pct
By Caroline Valetkevitch
NEW YORK, Aug 9 (Reuters) - U.S. stocks dipped in light volume on Friday, putting the three major indexes on track for their worst week since June, as investors found little incentive to buy with equity prices not far below last week's record levels.
Wall Street has struggled this week as an absence of trading incentives kept buyers at bay. Comments from Federal Reserve officials, which created confusion over when the central bank would begin to scale back its stimulus, added to uncertainty.
The lack of clarity over the Fed's plans gave investors a compelling reason to pull a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week ended Aug. 7, data from Thomson Reuters' Lipper service showed on Thursday.
Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated late Thursday that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.
" People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist, RDM Financial, in Westport, Connecticut.
While many investors are concerned that economic growth will stall without the Fed's help, stock prices have been supported by some strong earnings and encouraging data overseas.
In China, industrial output rose more than expected, adding to a string of data that indicated the economy may be stabilizing after an extended period of tepid growth.
The Dow Jones industrial average was down 63.56 points, or 0.41 percent, at 15,434.76. The Standard & Poor's 500 Index was down 4.45 points, or 0.26 percent, at 1,693.03. The Nasdaq Composite Index was down 4.89 points, or 0.13 percent, at 3,664.23.
For the week, the Dow is down 1.7 percent, on track to snap a six-week string of gains. The S& P 500 is down 1.1 percent and the Nasdaq is down 0.7 percent.
A week ago, both the Dow and the S& P 500 ended on Friday at record closing highs, with the blue-chip average at 15,658.36 and the broad benchmark at 1,709.67.
J.C. Penney Co., down 5.3 percent at $12.93, was ranked among the S& P 500 biggest percentage decliners. Bill Ackman, the company's top investor, fired back at the retailer's board on Friday, requesting that it meet as soon as possible so it can select a new chairman and decide on other matters.
Home Depot Inc shares dropped 1.4 percent to $78.89 and were the top drag on the Dow.
U.S.-listed shares of BlackBerry Ltd jumped 3.6 percent to $9.57 after Reuters reported that the company was warming to the idea of going private, citing sources familiar with the situation.
Economic data showed U.S. wholesale inventories unexpectedly fell 0.2 percent in June, marking a second straight month of declines, versus expectations calling for a gain of 0.4 percent.
Priceline.com Inc, rose 5.1 percent to $981.40 a day after the online travel company reported earnings that beat expectations and gave a strong outlook. Some analysts speculate the stock's price will cross $1,000 soon, which would be a first for a Standard & Poor's 500 stock.
Monster Beverage Corp rose 1.6 percent to $64.47 after JPMorgan raised its price target on the stock to $70 from $52. Late Thursday, the energy drinks company reported earnings that missed expectations.
Of 446 companies in the S& P 500 that had reported results through Friday morning, Thomson Reuters data showed that 68 percent have exceeded analysts' expectations, slightly above the 67 percent beat rate over the past four quarters.
