Dollar tumbles vs euro, pound
The dollar fell to a 14-year low against pound sterling and a 20-month low against the euro, as investors continued to put pressure on the US currency. The dollar plunged to $1.9748 against the pound, its lowest level since September 1992, just before sterling’s exit from the European Exchange Rate Mechanism. The speed at which the dollar has plunged against the pound prompted many analysts to predict that the greenback could move through the psychological $2 level. Separately, the dollar plunged to a 20-month low of $1.3282 against the euro and a six-month low of SFr1.1947 against the Swiss franc. The only saving grace was the dollar's advance against the yen. The euro also advanced against the yen. The appetite to sell the yen was reinforced by an unexpected drop in Japanese core annual consumer price inflation, a measure targeted by the Bank of Japan. In an effort to soothe markets, Ben Bernanke, the chairman of the US Federal Reserve, tried to dampen speculation that interest rates would be cut next year in order to boost economic growth, which would put more pressure on the greenback. The currency fell further after he spoke.
OECD cuts global growth forecast
he OECD issued its latest economic outlook. The world economic expansion will fade in 2007 to its weakest in four years, dragged down by a US slowdown that will force the Federal Reserve to cut interest rates, it said. However, the Paris-based organisation that advises 30 industrialised countries said that a rebalancing in the world economy will see growth in Europe and Asia compensate for a slowdown in the US. Growth among it's 30 members will slow to 2.5% in 2007 from 3.2% estimated for this year and the weakest since 2% in 2003, the group said in its semi-annual economic outlook. The 2007 forecast was below the 2.9% forecast in May. The OECD cut its estimate for GDP growth in the US to 2.4% in 2007 from the 3.1% it forecast six months ago. "We’re not expecting the apple cart to be overturned," OECD chief economist Jean-Philippe Cotis said. "Rather than a major slowdown, what the world economy may be facing is a rebalancing of growth." Inflation, as measured by the GDP deflator, was predicted at 2.2% next year, the same as this year and above May’s 2.1% forecast.
US Q3 GDP revised upwards
The US economy grew at a 2.2% annual pace in the third quarter, faster than the initial estimate of 1.6% on strong business investment, even as the housing sector posted its biggest decline in more than 15 years. The revision to GDP was largely due to higher building of inventories and lower imports than originally assumed. A key measure of core inflation was revised by a tenth lower to 2.2%. The world's largest economy has grown 3% in the past year. Economists had forecast GDP to be revised up to 1.8%. The third quarter gain was still weaker than the 2.6% advance in the second quarter. Corporate profits increased 4.2% at a quarterly rate, and are up 30.9% in the past year. The report also showed that wage and salary growth was much lower than expected in the second quarter. Real disposable incomes fell 1.5% in the second quarter, rather than rising 1.7% as previously reported. Consumer spending, which accounts for roughly two-thirds of the US economy, grew at a 2.9% annual rate during the quarter, a weaker reading than the 3.1% advance first estimated.
Japan's industrial output rises unexpectedly
In a development that might increase the chances of another hike in interest rates, Japan's industrial output surprisingly rose to a new record last month from September, the Government said. In October, production at factories and mines climbed to a seasonally adjusted 1.6% from the previous month, bringing the industrial output index to 107.8, the highest on record, topping the previous all-time high of 106.8 set in August. Gains were led by autos and semiconductors as production rose 7.4% from a year earlier, the biggest jump in more than two years, from a month earlier, the Ministry of Economy, Trade and Industry said. The economists had been looking for a reduction to 0.4%. Year-on-year, industrial output rose 7.4% in October, the 15th straight month of increase. The ministry predicts that output will jump by 2.7% in November from October and increase by a further 0.1% in December from November. In September, factory output in the world's second-largest economy fell 0.7% from a month earlier. The report fueled speculation that the Bank of Japan (BOJ) will raise interest rates again in coming months. Central bank Governor Toshihiko Fukui has said that a rate increase is unavoidable to ensure that the country's economy keeps expanding. But, some economists say that an increase in interest rates before the end of this year still depends on more economic data.
Corus defers EGM to allow formal bid by CSN
In a new twist to the battle for Corus Group Plc, the Anglo-Dutch steel major postponed its extraordinary general meeting (EGM) in order to give Brazil's Companhia Siderurgica Nacional SA (CSN) enough time for submitting its counter bid. Corus, whose Board has already agreed to be acquired by India's Tata Steel Ltd., will delay the shareholders' meeting to Dec. 20, from Dec. 4, the London-based steelmaker said in a regulatory filing. "The Board of Corus has decided that it is in the best interests of Corus shareholders to allow CSN some additional time to satisfy its pre-conditions and to determine whether it will put forward a formal offer," Corus said. CSN, based in Rio de Janeiro, offered Corus shareholders 475 pence a share on Nov. 17, subject to due diligence. Tata Steel had bid 455 pence for Corus on Oct. 20, valuing the former British Steel Plc at US$8.3bn. CSN is currently going through the books of Corus to decide whether to table a firm offer. A successful takeover by either CSN or Tata Steel would create the world's fifth-largest steelmaker.
Ford seeks debt for turnaround
Ford, struggling to overcome record losses this year, plans to borrow as much as US $18bn to pay for US job cuts and factory shutdowns. Because of the carmaker's poor credit-rating it will, for the first time in its history, put up its factories and other assets as collateral. The new debt will primarily be secured by liens on principal domestic manufacturing facilities and all of the company's other domestic automotive assets, intellectual property, real property, stock of subsidiaries including Ford Motor Credit Co. and Volvo, inter company payables and notes, and up to US $4bn of domestic cash, the company said. Standard & Poor's and Moody's Investors Service assigned bank loan ratings for Ford's new US$15bn senior secured credit line. The company, which is restructuring, has lost around US $7bn so far this year as its share of the US market continues to erode. Separately, Ford said 38,000 factory workers agreed to take buyout and early-retirement offers to leave the company, pushing the automaker past its job-cut target. The company said that 30,000 accepted the latest round of offers, after 8,000 took earlier incentives made at individual plants. The total departures top Ford's goal of trimming 30,000 blue-collar jobs in North America by 2008. It's paying as much as US $140,000 to get United Auto Workers members to quit or retire.