RTRS: CANADA STOCKS-Gold, oil slide pull TSX 2 pct lower at open

31 Oct 19:55

TORONTO, Oct 31 (Reuters) - The Toronto Stock Exchange's main index .GSPTSE fell more than 2 percent at the open on Friday, snapping three straight days of gains, as commodity prices fell.

The S&P/TSX composite index .GSPTSE dropped 204.53 points, or 2.08 percent, to 9,651.68. (Reporting by Ka Yan Ng; Editing by Peter Galloway)

AFP: Stocks as Good as Gold

31 Oct 19:55

At the very mention of gold, images of value, stability, and growth pop into my head.

It's not hard to understand why. For decades, the precious metal has been marketed as an attractive investment and a great way to hedge inflation, recession, and almost every other economic bogeyman.

In spite of gold's allure in volatile times such as this, the true long-term performance of gold lags stocks by a significant margin. But investors don't need to give up the shiny lure of stability to earn better returns in stocks -- there are stocks that are as good as gold. In fact, many are even better.

Chasing shiny trinkets
As a new investor, I was drawn to the allure of growth. This led me to buy -- or seriously consider buying -- shares in tech darlings such as Dell (Nasdaq: DELL) and Hewlett-Packard (NYSE: HPQ) at the height of speculation in 2000. But while these stocks were shinier than gold in the few years leading up to the millennium, the luster soon wore off. Stock in each company shed more than 50% of its value in the year following and only Hewlett-Packard has made significant progress in recovering since.

These computing stalwarts aren't necessarily poor businesses -- the fundamental conditions just didn't support the share price at the time. I would have been far better off had I understood what demented guru Jeremy Siegel pointed out in his book, The Future for Investors: Regular investments in stable, dividend-paying stocks are ultimately the best place for long-term cash.

You can have it all
Dividend payments to shareholders are a significant stabilizing factor in a stock's return, because they help smooth out the ups and downs of the market over time, and they indicate that the company is generating cash. Just like gold, steady dividends protect investors from bear markets. But even better than gold, dividends also help boost returns.

For instance, look at the long-haul performance of these dividend-paying stocks:

Company
20-Year Return
McDonald's (NYSE: MCD)
1,147%
ConocoPhillips (NYSE: COP)
874%
Boeing (NYSE: BA)
401%
General Electric (NYSE: GE)
784%
Coca-Cola (NYSE: KO)
1,078%
S&P 500
243%
Gold
86%
Now, lest I be accused of cherry-picking these examples, consider this: The Vanguard Windsor II (VWNFX) fund, our proxy for stocks with above-average yields, returned a market-beating 467% over the trailing 20 years.

Each company above had a long operating history in a relatively stable sector, providing investors a defensive edge with low long-term risk. Even with the dramatic increase in the price of gold in the last few years, the table above shows that dividend-paying stocks leave gold in the dust over extended time frames.

To their advantage, many of these companies have maintained (and sometimes even raised) dividend payments to shareholders -- sometimes even during down economic cycles. This consistency of a cash yield helps boost shareholder returns in the company, because more shares are purchased when the stock is depressed. One crucial point, though: To realize the full benefits these stocks provide, investors must reinvest the dividends.

Regain your luster
Dividend-paying stocks give investors the ability to not only survive years of market turmoil, but, through reinvesting, to make more money along the way. That's about the best hedge against economic bogeymen there is.

If you're short on time or ideas, the Motley Fool Income Investor service is a great place to find dividend payers -- the average recommendation is beating the S&P by 4 percentage points and offers more than a 4% yield. You can click here for a free, 30-day trial to see the team's top dividend stocks for right now.

This article was originally published on July 18, 2007. It has been updated.

Fool contributor Dave Mock still has a soft spot for gold, but satisfies it with dividend stocks. The longtime Fool owns no shares of companies mentioned here. Coca-Cola and Dell are Motley Fool Inside Value selections. Vanguard Windsor is a Champion Funds choice. The Motley Fool's disclosure policy is pure 24 karat, through and through.

BLBG: U.S. October Michigan Consumer Sentiment Index Falls (Update1)

31 Oct 19:52

By Timothy R. Homan

Oct. 31 (Bloomberg) -- Confidence among U.S. consumers fell in October by the most on record, signaling spending will continue to weaken.

The Reuters/University of Michigan final index of consumer sentiment dropped to 57.6 from 70.3 in September, the biggest decline since monthly data began in 1978. The measure averaged 85.6 in 2007.

The dimming outlook is likely to drag down spending, which contracted last quarter by the most in three decades and accounts for more than two-thirds of the U.S. economy. Americans are cutting back on purchases of necessities and big-ticket items as home values fall, stock prices slump and job losses climb.

``The collapse in confidence is directly tied to perceptions about economic conditions, and that is likely to mean that households will keep their wallets closed,'' Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. ``Given this is the holiday shopping season, that is not good news for retailers.''

The confidence index was forecast to fall to 57.5, according to the median of 60 economists surveyed by Bloomberg News. Estimates ranged from 50 to 63.

A government report earlier today showed spending by U.S. consumers fell 0.3 percent in September, capping the worst quarter in three decades.

Business Slump

Separately, a survey of Chicago purchasing managers showed business contracted in October at the fastest pace since the 2001 recession. The Institute for Supply Management-Chicago said its index slumped to 37.8 this month, the lowest reading since May 2001, from 56.7 in September. Fifty is the dividing line between growth and contraction.

The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 57 from 67.2.

A gauge of current conditions, which reflects Americans' perceptions of their financial situations and whether it is a good time to buy big-ticket items like cars, slumped to 58.4, the lowest level ever, from 75.

There was good news on price expectations. Consumers said they projected an inflation rate of 3.9 percent over the next 12 months, compared with 4.3 percent in the September survey. Over the next five years, the figures tracked by Federal Reserve policy makers, Americans expected a 2.9 percent rate of inflation, down from the prior month and the slowest pace since March.

Survey Details

The final Reuters/University of Michigan consumer confidence report reflects about 500 responses, compared with 300 households for the preliminary survey.

Cutbacks in consumer spending are likely to drag down company earnings during the holiday season. Amazon.com Inc., the world's largest Internet retailer, said last week that its 2008 sales may be $1 billion less than analysts estimated.

Chief Financial Officer Tom Szkutak said in an Oct. 22 conference call that growth slowed toward the end of the third quarter, ``coinciding'' with disruptions in the financial markets. Holiday shopping in the fourth quarter last year accounted for 43 percent of Amazon.com's annual profit.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

BLBG: Gold Heads for Biggest Monthly Drop in 25 Years as Dollar Gains

31 Oct 19:52

By Pham-Duy Nguyen

Oct. 31 (Bloomberg) -- Gold futures fell, heading for the biggest monthly drop in 25 years, as the dollar climbed, reducing the appeal of the precious metal as an alternative investment. Silver also declined.

The dollar rebounded against a weighted basket of six major currencies after dropping 2.8 percent in the previous two days. Equities worldwide were poised for the biggest monthly decline on record. Before today, gold dropped 12 percent this year, while the dollar index gained 10 percent.

``Global liquidation means more money from foreign assets are going into the dollar,'' said Adrian Day, the president of Adrian Day's Asset Management in Annapolis, Maryland. ``The dollar is seen as a safe haven. There's also liquidation of gold itself, which is easily sold.''

Gold futures for December delivery fell $4.70, or 0.6 percent, to $733.80 an ounce at 8:34 a.m. on the Comex division of the New York Mercantile Exchange. This month, the price has dropped 17 percent, the most since February 1983.

Silver futures for December delivery dropped 18.5 cents, or 1.9 percent, to $9.60 an ounce. The metal is down 22 percent this month.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

GS: Gold Investments Market Update - Gold is Up 12% while S&P is Down 37% Since Credit Crisis Began

31 Oct 19:51

Gold continues to surprise to the downside on the COMEX and the futures markets in spite of huge physical demand, increasing supply issues and surging premiums on bullion products.

Speculative paper players using huge leverage continue to exit positions for the relative safety of cash due to margin calls on other bets and some investment banks continue to short gold despite the incredibly strong fundamentals for bullion itself. Once the AM and PM gold fixes for physical bullion took place yesterday (at $772.25 and $755.25 respectively) gold was again aggressively sold short by some US investment banks. The selling is very determined and suggests that there is a strong desire not to have gold surging back above $800/oz.

Gold remains extremely oversold as evidenced in the commitment of traders report (COT) which shows that open interest has recently dropped to just over 300,000 open contracts from a record of 490,000 contracts last October. This is due to the relentless unwinding of long positions by speculators in the massive deleveraging seen in recent months.

However, the unwinding of leveraged positions and short term manipulations by the leveraged paper players will prove to be just that - short term manipulations. The laws of supply and demand will triumph over the irrational casino type behavior seen in the gold market in recent weeks.

The laws of supply and demand will result in sharply higher bullion prices in the coming weeks. Already the premiums on one ounce gold coins and bars are as high as 15% - if the coins or bars can be sourced at all. Silver coins and bars are attracting even higher premiums of as high as 50% to 100% as there is little or no supply of 1 oz, 10 oz and 100 oz silver products. Only 1000 oz silver bars are available and even they are seeing their premiums rise.
Investors are increasingly wary of high risk, new fangled and complex financial derivative products designed to make large returns. Return of capital is now more important than return on capital.

Wealth accumulation is rightly being shunned in favour of wealth preservation and bullion and those investors who have wisely diversified into bullion will be the beneficiaries of this in the coming weeks.

Investors want hard tangible assets in their portfolio that have little or no counterparty risk and cannot collapse in value in a matter of days as many share prices have done in recent weeks. Systemic risk also has savers concerned about the security of their deposits despite recent government guarantees. The counterparty risk posed by spread betting companies and CFD providers is now being reassessed.

Gold is Up 12% while S&P is Down 37% Since Credit Crisis Began

As expected, the finite currency that is gold has held up better than any of the commodities. Gold had fallen about 32% since hitting a record nominal high in March, compared with a 57% decline in oil, 54% drop in copper, and 65% decline in platinum. Stock markets have not fared much better than commodity markets in the last year with declines of between 35% and 50% seen on the major international indices.

The Performance Table above and the table below (Physical Gold Versus the S&P 500) conclusively show how gold has acted as a safe haven in recent months and gold will continue to act as a safe haven in the medium to long term as it always has.

Physical Gold Versus the S&P 500

The table above is a clear example of gold's historic role as a safe haven asset in times of economic uncertainty. It shows the industry performance of Physical Gold Versus the S&P 500 during eleven stock market declines of 15% or more in the Post-War period (since 1946).

Since August 2007 gold has risen from $650 to $730 today or more than 12% and the S&P 500 has fallen by 37% (1500 to 954). Other stock market indices have fallen by much more.

This is clear evidence if any were needed of gold's role as a safe haven in a properly diversified investment portfolio.

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RTRS: FOREX-Dollar trims losses vs yen after UMich report

31 Oct 19:50

(Updates with market reaction to U.S. data)

NEW YORK, Oct 31 (Reuters) - The dollar trimmed losses against the yen on Friday after a U.S. consumer confidence report for October came in broadly in-line with market expectations.

The dollar edged up to 98.40 yen from 97.98 before the survey.

The Reuters/University of Michigan Surveys of Consumers said its final reading of its index of confidence plunged to 57.6 in October from 70.3 in September, which was slightly below economists' expectations for a reading of 57.5. For report, see [ID:nN31351574]. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Theodore d'Afflisio)

RTRS: Dollar trims losses vs yen after UMich report

31 Oct 19:49

NEW YORK (Reuters) - The dollar trimmed losses against the yen on Friday after a U.S. consumer confidence report for October came in broadly in-line with market expectations.

The dollar edged up to 98.40 yen from 97.98 before the survey.

The Reuters/University of Michigan Surveys of Consumers said its final reading of its index of confidence plunged to 57.6 in October from 70.3 in September, which was slightly below economists' expectations for a reading of 57.5.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Theodore d'Afflisio)

MW: Consumer sentiment drops in October

31 Oct 19:31

By Ruth Mantell

WASHINGTON (MarketWatch) -- U.S. consumer sentiment dropped in October from the prior month, according to a media report on the University of Michigan/Reuters index released Friday. The index fell to 57.6 in late October, compared with a reading of 70.3 in late September. Earlier in October, the reading hit 57.5. Economists surveyed by MarketWatch were expecting a final October reading of 57.5.

MW: ECONOMIC REPORT: Consumer sentiment drops in October

31 Oct 19:31

By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) -- As the financial crisis takes its toll, U.S. consumer sentiment dropped in October from the prior month, reaching a record monthly decline, according to the University of Michigan/Reuters index released Friday.
Despite falling gas prices, the index fell to 57.6 in late October, compared with a reading of 70.3 in late September. Earlier in October, the reading hit 57.5. Economists surveyed by MarketWatch were expecting a final October reading of 57.5.
"Consumer confidence had already declined by mid 2008 by more than prior to any past recession and the steep October loss indicates that accelerated cutbacks in spending can be expected during the months ahead," according to Richard Curtin, director of the consumer survey.
A separate reading earlier this week showed that consumer confidence plunged in October, reaching an all-time low in the series' 41-year existence. The UMich data indicate that holiday spending will be the "bleakest" since 1980.
"Consumers held the least favorable assessments of their finances in more than a half century and viewed their job prospects more negatively than at any other time since the end of 1980," Curtin said in a statement.

RTRS: NYMEX-Crude slips amid persistent demand worries

31 Oct 19:27

NEW YORK, Oct 31 (Reuters) - U.S. crude futures slipped Friday as
continued concerns about demand being curbed by a slowing economy pressured
oil futures as November products contracts approached expiration.
Slumping U.S. consumer spending and global stock markets under pressure
combined to weigh on oil futures, despite growing evidence of OPEC members'
preparations to cut output by 1.5 million barrels per day from Saturday.
"Failure of the rally yesterday turning sentiment bearish again," said
Tom Bentz, analyst at BNP Paribas Commodity Futures Inc.
PRICES
* On the New York Mercantile Exchange at 9:37 a.m. EDT (1337 GMT),
December crude CLZ8 was down $1.33 or 2.02 percent at $64.63 a barrel,
trading from $63.12 to $65.77.
* In London, December Brent LCOZ8 fell $1.75 or 2.75 percent to
$61.96 a barrel, trading from $60.62 to $62.52.
NYMEX November refined products contracts expire Friday.
* NYMEX November RBOB RBX8 fell 2.95 cents or 2.01 percent to $1.4375
a gallon, trading from $1.42 to $1.4430.
* NYMEX November heating oil HOX8 fell 3.74 cents or 1.88 percent to
$1.9467 a gallon, trading $1.9230 to $1.9710.
* The December heating oil crack spread <0#CL-HO=R> was at $18.24 a
barrel, and the RBOB crack spread <0#RB-CL=R> was in negative territory at
minus $4.88.
* The spread between the current front-month and the five-year forward
December crude contract CLc61 showed an indicated plus $22, based on the
asked price of $87.05 for the December 2013 crude.
TECHNICALS
NYMEX crude 10-day/20-day moving average: $66.89/$73.71
Technical support/resistance:
NYMEX crude: $61.30/$66.95
NYMEX heating oil: $1.80/$2.00
NYMEX RBOB: $1.4240/$1.50
For a report on oil market technicals click [ID:nLV110594]
MARKET NEWS
* Shares in Asia and Europe fell on Friday, heading for their worst
month ever amid concerns about the deteriorating global economic outlook.
[MKTS/GLOB]
* The dollar rose against most major currencies as global share prices
bumped lower on recession fears. [USD/]
* U.S. consumers cut their spending for the first time in two years
during September. [ID:nN31336271]
* OPEC member Kuwait has notified at least two Asian term customers
that it will cut their crude oil supplies by 5 percent from November,
industry sources said. [ID:nT261409]
* China denied a news report saying domestic fuel prices will be cut by
20 percent, the official Shanghai Securities News reported on Friday, amid
mounting speculation over how and when Beijing will adjust pump rates.
[ID:nPEK314821]
(Reporting by Robert Gibbons; Editing by John Picinich)

MW: Gold falls on dollar; worse month since 1983

31 Oct 19:04

By Moming Zhou, MarketWatch

NEW YORK (MarketWatch) - Gold futures fell Friday for a second session, heading for the biggest monthly loss since early 1983, as a strengthening U.S. dollar and fund liquidations pounded the precious metal and other commodities.
Gold for December delivery fell $4.10, or 0.6%, to $734.40 an ounce on the Comex division of the New York Mercantile Exchange. The metal has lost 16% so far in October, the biggest percentage loss since February, 1983. Copper futures also slumped.
"The stronger dollar is weighing on the metals complex," wrote Edward Meir, a metals analyst at MF Global.
Also reducing gold prices, "speculative paper players using huge leverage continue to exit positions for the relative safety of cash due to margin calls on other bets," said Mark O'Byrne, executive director at Gold and Silver Investments.
Gold closed up nearly 2% Wednesday. Before ending the day weaker Thursday, the benchmark contract had risen to $778.30, the highest since Oct. 21.
"Given the ongoing need for cash dollars we continue to expect rallies to be used as selling opportunities," said James Moore, an analyst at TheBullionDesk.com.
In currencies trading, the U.S. dollar rose against the euro and the British pound. A rising greenback reduces gold's appeal as an alternative investment.
The metal is now 27% lower than its record high above $1,000 an ounce hit in March.
In gold spot trading, the London gold-fixing price -- used as a benchmark for gold for immediate delivery -- stood at $728.50 an ounce Friday morning local time, down $26.75 from Thursday afternoon.
Gold in the SPDR Gold Trust , the largest gold exchange-traded fund, remained at 749.21 tons Thursday, unchanged from Wednesday, according to the latest data from the fund. Gold held by the fund hit a record high of 770.64 tons on Oct. 10.
In other metals trading, December copper slumped 4.3% to $1.81 a pound, while December silver fell 2.6% to $9.535 an ounce.
December palladium slid 0.4% to $196 an ounce, and January platinum dropped 2.2% to $812 an ounce.

RTRS: UPDATE 5-Global demand concerns drag copper 9 pct down

31 Oct 19:01

* LME copper to hit biggest monthly loss since at least 1970

* European equity markets on course for worst ever month

* Aluminium well off week high of $2,199 a tonne

(Updates with official prices, adds comment, U.S. data)

By Michael Taylor

LONDON, Oct 31 (Reuters) - Copper pulled industrial metals deep into negative territory on Friday, losing 9 percent as concerns over global demand triggered a sell-off across commodities. The bleak economic picture was highlighted by the FTSE 100 .FTSE falling about 1 percent, with European shares on track for their worst month ever. [ID:nLV388920]

Adding to negative sentiment, U.S. consumers cut their monthly spending for the first time in two years during September, evidently bracing for hard times as jobs continue to disappear and credit conditions tighten. [ID:nN30398097]

Copper for three month delivery MCU3 on the London Metal Exchange fell to $3,990 a tonne in official trading rings, from $4,210 at the close on Thursday and compared with a session low at $3,832.

"It's been pretty volatile again today," said one LME trader. "We are heading lower. I'm a bear and have been for a while - copper is overvalued..."

Prices of the metal used in power and construction have fallen more than 50 percent since a record high of $8,940 in July.

Analysts said fears over global demand in the face of a worldwide economic downturn are to blame for the slump in prices.

"(Base metals are) not looking too clever," said Dan Smith, a metals analyst at Standard Chartered. "We are going to see prices remaining under pressure for the time being ... it's a sell-off across all the base metals in response to worries about the demand outlook."

"This tone is going to be with us for a while because people are waiting to get some clarity on the underlying picture. Certainly demand is getting softer," Smith said.

In industry news, Chile's Codelco, the world's largest copper producer, said its copper output fell 8.2 percent in the first nine months of the year, citing a strike by subcontract workers and falling ore grades. [ID:nN30290469]

BLBG: U.S. Treasuries Rise After Report Shows Consumer Spending Fell

31 Oct 18:57

By Dakin Campbell and Bo Nielsen

Oct. 31 (Bloomberg) -- Treasuries rose, with two-year notes headed for the best month since February, on speculation the U.S. economy will continue to deteriorate, boosting demand for the safest assets.

Treasuries gained after a U.S. government report showed consumer spending fell 0.3 percent in September, more than forecast. Federal Reserve Bank of San Francisco President Janet Yellen said last night the central bank would lower benchmark interest rates close to zero percent if the economy stayed weak. The Bank of Japan became the latest central bank to slash rates to help stave off recession.

``There is concern about weak economies around the world getting worse,'' said Theodore Ake, the head of Treasury trading in New York at Mizuho Securities USA Inc., one of the 17 primary dealers that trade with the Fed. ``We saw Japan chop rates last night by 20 basis points, Yellen's statement overnight about possibly going to zero percent interest rates in the U.S., and when you put it all together you end up with a steeper curve.''

The yield on the 10-year note tumbled 11 basis points, or 0.11 percentage point, to 3.85 percent at 8:38 a.m. in New York, according to BGCantor Market Data. The 4 percent security maturing August 2018 rose 27/32, or $8.44 per $1,000 face amount, to 101 5/32. Two-year yields declined 8 basis points to 1.48 percent.

U.S. debt returned 4.6 percent so far in 2008, on top of a 9 percent return last year, according to Merrill Lynch & Co.'s Treasury Master index.

Mizuho Forecast

Ten-year yields will drop to 3.4 percent by year-end, according to Mizuho Asset Management, which oversees the equivalent of $40.7 billion as part of Japan's second-largest bank.

Futures on the Chicago Board of Trade show a 75 percent chance the Fed will reduce its target rate to 0.5 percent at its Dec. 16 meeting. The odds a week ago were zero. The rest of the bets are for a quarter-percentage point reduction.

The Fed cut its target rate for overnight bank lending by half a percentage point Oct. 29 to 1 percent, the lowest level since June 2004, saying ``downside'' risks to growth remain. The economy declined in the third quarter the most since 2001, a Commerce Department report showed yesterday.

Consumer Confidence

A Reuters/University of Michigan index due at 10 a.m. will likely say consumer sentiment this month fell to 57.5 from 70.3 in September, another survey showed.

``Well, let's face it, things are bad and rate cuts for core markets are the way to go in the coming months,'' Padhraic Garvey, head of investment-grade debt strategy at ING Bank NV, wrote in a note today. ``There's still a steepening theme with extra supply next year also likely to hurt the 10-year area more than other maturities.''

The difference in yield, or spread, between two- and 10- year securities widened to 2.38 percentage points, near the most since 2004, from 2.17 points a week ago. The so-called yield curve has steepened as longer-term securities lagged behind in anticipation of increased government debt auctions.

Treasuries trimmed gains from earlier in the month because of concern U.S. efforts to thaw credit markets and prop up the financial system will swell sales of long-term government debt.

U.S. borrowing needs will almost double this fiscal year to $2 trillion, Goldman Sachs Group Inc. forecast. The government auctioned off $64 billion in 2- and 5-year notes and five-year Treasury Inflation Protected Securities this week.

The Treasury is scheduled to announce Nov. 5 how it will boost debt sales. It has said it will have a decision at that time on reviving the three-year note and holding more frequent 10- and 30-year securities sales.

`Huge Amount of Supply'

``A huge amount of supply is coming,'' said Kei Katayama, who oversees $1.6 billion of non-yen debt as leader of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., part of Japan's second-biggest investment bank. ``No one wants to go to the longer end of the market.''

U.S. government securities returned 0.04 percent this month as of yesterday, according to Merrill Lynch's U.S. Treasury Master index. German government bonds handed investors 2.7 percent in October, and Japanese debt earned 0.4 percent.

Yields indicate banks are more willing to lend than they were three weeks ago after governments bailed out lenders and policy makers slashed interest rates and pumped trillions of dollars into money markets to restore confidence.

The difference between banks and the Treasury pay to borrow money for three months, the so-called TED spread, narrowed to 2.64 percentage points from a high of 4.64 percent Oct. 10.

To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net.

MW: ECONOMIC REPORT: Biggest drop in consumer spending in four years

31 Oct 18:50

By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) -- Reluctance on the part of consumers to shop for big-ticket items like cars led U.S. consumer spending to its biggest drop in over four years, the Commerce Department reported Friday.
This is bad news for those worried about a recession. The health of the consumer is a key issue for the economy. September's weak performance is a clear sign that a recession is underway.
The weakness of consumers was not a surprise.
The government estimated Thursday that the U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined 3.1%, the fastest rate in 28 years. See full story.
The Federal Reserve has already reacted to the weakness, slashing its target interest rate down to 1% earlier this week. See full story.
Inflation-adjusted spending on durable goods fell 0.2% in September. This was the second straight monthly decline.
Real spending on nondurable goods was up 0.2% in September, while spending on services rose 0.1%. See full report.
Also last month, personal incomes increased 0.2% after rising 0.4% in August. Disposable incomes adjusted for inflation rose 0.1% after a sharp 1.0% decline in the previous month.
Adjusted for inflation, consumer spending fell 0.4% in September.
With income rising faster than spending, the personal savings rate rose to 1.3% in September, up from 0.8% in August.

MW: Oil falls as demand concerns continue

31 Oct 18:48

Futures are poised for biggest monthly loss since early 1980s

By Moming Zhou, MarketWatch

NEW YORK (MarketWatch) -- Crude-oil futures fell Friday for a second session, poised for the biggest monthly loss since futures started trading in New York in 1983, on continued concerns that a slowdown in global economic growth will reduce oil demand.
Crude for December fell $2.08, or 3.2%, to $63.88 a barrel in early electronic trading. Crude's front-month contract has lost 37% so far this month, the biggest monthly percentage decline. Crude is now 57% lower than its record high of $147.27 hit in July.
Crude were "still under pressure from renewed demand concerns, following negative GDP growth figures in the U.S.," wrote Nimit Khamar, Sucden Research.
The U.S., the world's largest oil consumer, said Thursday that its third-quarter gross domestic product contracted at a 0.3% annualized rate, the biggest decline since the end of the last recession in late 2001. The U.S. accounts for about a quarter of the world's oil demand.
Also in energy trading, November reformulated gasoline fell 2.8% to $1.4266 per gallon, while November heating oil shed 2.2% to $1.94 per gallon.
The average U.S. retail price for a gallon of regular gasoline fell to $2.504 Friday, down from $2.547 Thursday and well below the year-ago average of $2.913, according to data from AAA's Daily Fuel Gauge Report.
December natural gas fell 0.9% to $6.375 per million British thermal units.

MW: Bank of Japan cuts rates to 0.3% in split decision

31 Oct 18:46

Uncertainties over outlook said rising; split evident over size of rate cut

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- The Bank of Japan's policy board decided Friday to cut its base lending rate to 0.3%, abandoning its goal of normalizing interest rates in favor of injecting stimulus into the No. 2 global economy in an effort to head off recession.
The policy board vote was split 4-to-4, with central bank governor Masaaki Shirakawa casting in favor, which carried the motion.
The overnight call rate was at 0.5%, the lowest among industrialized nations, before the rate cut, which marked the first time Japan has lowered interest rates in seven years and seven months.

The Nikkei 225 Average
suffered sharp losses in the wake of the announcement, ending the trading session 5% lower. See Asia Stocks for more.
And in midday London trading, the dollar was quoted at 97.74 against Japan's yen, down from 98.48 yen in North American trading late Thursday. See Currencies.
Shirakawa, in a post-rate meeting that took place about three hours after the decision was announced, said that three of the four dissenting votes came from board members who had sought a larger cut of a quarter of a percentage point.
Analysts said the failure to clarify the division may have contributed to the sharp sell-off in the Nikkei, as the initial impression was of a board divided on the direction of monetary policy.
"Communication was miserable, this has just made huge confusion in the financial markets," said Masamichi Adachi, senior economist with J.P. Morgan Chase & Co. in Tokyo.
Shirakawa also reportedly said late Friday that uncertainty over the outlook for the Japanese economy had increased.
The rate cut had been widely tipped by analysts, who were of the view that the Bank of Japan would likely move to stem gains in the yen and shore up an economy battered by recession worries that helped send the Nikkei to a 26-year low on Monday.
"Today's move seemingly demonstrated the bank's unwillingness to aggressively ease monetary policy in the foreseeable future," wrote Hiromichi Shirakawa, senior economist with Credit Suisse in Tokyo in a research note.
In cutting interest rates by one-fifth of a percentage point, defying expectations of a quarter-point cut, the Bank of Japan appeared to be trying to save up its rate-cutting ammunition before hitting zero, he added.
Analysts were skeptical about the impact of the cut.
"There is very little that a rate cut can actually achieve; it's certainly not going to weaken the yen dramatically, it's not going to support the equity market and it's not going to bolster the economy, so if anything it is likely going to be symbolic," said Glenn Maguire, Asia-Pacific economist with Societe Generale, in Hong Kong.
Shirakawa may also be concerned that further rate cuts could see Japan slip back into a liquidity trap, where monetary policy become ineffective is driving credit growth, Maguire said.
'Increased sluggishness'
In a statement accompanying the announcement, the policy board downgraded its domestic outlook, saying: "Increased sluggishness in Japan's economic activity will likely remain over the next several quarters with exports leveling off and the effect of earlier increases in energy and materials prices persisting."
In its biannual Outlook for Economic Activity and Prices report, also released Friday, the Bank of Japan cut its growth estimate for the current fiscal year ending March 31 to 0.1% in real terms from its July estimate of 1.2%.
In addition, the central bank said it would introduce an annual 0.1% interest rate on excess reserves held in its accounts from November through March, in an effort to pump additional liquidity into the system ahead of the year-end and the fiscal year-end.

BLBG: Commodities Head for Worst Month in 52 Years as Economies Slow

31 Oct 18:46

By Chanyaporn Chanjaroen and Grant Smith

Oct. 31 (Bloomberg) -- Commodities headed for their worst month since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials.

The Reuters/Jefferies CRB Index of 19 raw materials has plunged 23 percent this month, the steepest decline in at least a half-century. Crude oil is set for a record monthly drop, copper its biggest retreat in two decades and gold its worst performance in 25 years.

``October is at last ending -- the worst month in commodity history,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``Investors are expecting lower growth for the longer term and that is putting prices under pressure.''

The world's central banks are cutting borrowing costs as the financial crisis that started with the U.S. housing slump threatens to tip the global economy into recession. UBS AG cut its forecast for global growth next year to 1.3 percent, from 2.2 percent, prompting reduction of as much as 48 percent in its 2009 forecasts for commodities such as copper.

Crude oil for December delivery fell as much as $2.84, or 4.3 percent, to $63.12 a barrel in New York and was at $63.94 a barrel as of 11:28 a.m. in London. The fuel has dropped 36 percent this month, surpassing a record 30 percent plunge in February 1986.

``The outlook for demand remains weak while we wait for economic rescue measures to feed their way through the system,'' said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. ``Even in emerging markets the growth there is likely to be lower than was previously expected.''

Energy Demand

Gross domestic product contracted in the third quarter at the fastest annual pace since 2001, the U.S. Commerce Department said yesterday. The U.S. is the world's biggest energy consumer. Showa Shell Sekiyu K.K., Royal Dutch Shell Plc's Japanese unit, will cut its crude processing by 7 percent during the fourth quarter on falling domestic demand.

On the London Metal Exchange, copper for delivery in three month fell $320, or 7.6 percent, to $3,880 a metric ton, taking this month's loss to 39 percent, the biggest in two decades. The implied volatility of the metal climbed to 90.78 percent this week, the highest since at least 2004. Aluminum fell $57, or 2.8 percent, at $2,003, down 17 percent for October.

The LME index of six industrial metals has dropped 27 percent this month through yesterday, heading for the biggest monthly drop since at least May 2000.

Gold for immediate delivery fell $11.63, or 1.6 percent, to $726.50 an ounce in London. The metal has fallen almost 16 percent this month, the steepest retreat since February 1983, according to data on Bloomberg. The U.S. Dollar Index, which measures the U.S. currency's performance against six counterparts, has risen 7.9 percent this month, the best performance since October 1992.

Dollar Strength

``The dollar is definitely driving the gold market lower,'' Robert Martin, chief executive officer of Dubai-based GTL Trading Ltd., which trades gold and currencies for 4,000 clients, said by phone from Dubai.

Platinum dropped $30.50, or 3.7 percent, to $800 an ounce. The metal, used in car catalysts, has slid 65 percent since trading at a record $2,301.50 on March 4.

Goldenport Holdings Plc, a U.K-listed shipowner, fell by a record amount in London trading after saying trade in commodity shipping has ``virtually halted.''

``Activity in the dry-bulk segment has virtually halted, with minimal trade taking place globally,'' Chief Executive Officer Paris Dragnis said in a statement today. Dry bulk refers mostly to coal, iron ore and grains.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

MW: Treasury yields fall along with stock futures after data

31 Oct 18:46

By Nick Godt

NEW YORK (MarketWatch) -- Treasurys rose early Friday, pushing yields sharply lower, as stocks futures pointed to a lower open and data showed the largest drop in U.S. consumer spending in four years. Ten-year note yields fell 13 basis points to 3.844%. The government reported that consumer spending fell 0.3 percent in September. On Thursday, a report showed the U.S. economy contracted at a 0.3% annualized rate in the third quarter, as consumer spending declined 3.1%, the fastest rate in 28 years. Following on the heels of the Federal Reserve's 50 basis point cut in interest rates on Wednesday, the Bank of Japan cut rates Friday.

BLBG: Yen, Dollar Head for Record Monthly Gains on Slumping Economy

31 Oct 18:41

By Ye Xie and Lukanyo Mnyanda

Oct. 31 (Bloomberg) -- The yen and the dollar rose against the euro and headed for record monthly gains as signs of a global recession led investors to take refuge.

Japan's currency also advanced after the Bank of Japan lowered the target lending rate by 0.2 percentage point to 0.3 percent. The euro fell as inflation in the 15 nations that share the currency slowed to the lowest since January, making it easier for the European Central Bank to lower borrowing costs.

``There's decent dollar repatriation, and you cannot fight the flows,'' said Steven Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada's third-biggest bank. ``I cannot remember any time that we had so much volatility and illiquidity.''

The yen climbed 2.2 percent to 124.49 per euro at 8:34 a.m. in New York, from 127.31 yesterday. The yen increased 0.9 percent to 97.74 against the dollar from 98.61. The dollar rose 1.4 percent to $1.2743 versus the euro from $1.2915.

Japan's currency has risen 17 percent against the euro in October, the biggest monthly gain since the European currency's introduction in 1999. The dollar has increased a record 10.6 percent versus the euro. The greenback is down 7.8 percent against the yen, the biggest decline since 1998, when hedge fund Long-Term Capital Management LP collapsed.

Against the Australian dollar, the yen advanced 4.8 percent to 64.24, heading for a 31 percent gain this month. It also rose 3.1 percent to 56.63 versus the New Zealand dollar, and is up 25.6 percent in October.

Carry Trades

The Japanese currency is popular in carry trades, in which purchases of higher-yielding assets are funded in nations with lower rates. The BOJ lowered its benchmark rate from 0.5 percent today. Key borrowing costs are 6 percent in Australia and 6.5 percent in New Zealand.

BOJ Governor Masaaki Shirakawa told a press briefing that the Japanese economy had clearly worsened this month and that three dissenters had wanted a quarter-point cut. One favored no reduction and four voted for the move.

``The reluctance of the BoJ to join the more aggressive moves of the Fed has hit risk appetite,'' analysts led by Hans- Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a client note. The move suggests the Japanese central bank ``is nowhere near ready to introduce quantitative easing steps.''

Volatility implied by dollar-yen options expiring in one month, a measure of expectations for future currency moves, fell to 31.75 percent today from 35.38 percent at the end of last week. It reached 41.79 percent on Oct. 24, the highest since Bloomberg began compiling data in December 1995.

Weaker Pound

The pound weakened 1.7 percent to $1.6165 after London- based researcher GfK NOP Ltd. said U.K. consumer confidence in October fell toward the lowest since at least 1974. It has dropped 9.2 percent this month, the biggest since investor George Soros drove sterling out of Europe's system of linked exchange rates in 1992.

The Bank of England will lower benchmark rates by a half- point to 4 percent when it announces its next decision on Nov. 6, according to a Bloomberg survey of 30 economists.

``We remain concerned about the British pound given the deteriorating economic outlook in the U.K., and recent signals from the BOE suggest scope for more aggressive easing than previously,'' wrote New York-based Sophia Drossos, a strategist at Morgan Stanley in a research note yesterday.

The Federal Reserve reduced the target lending rate by a half-percentage point to 1 percent on Oct. 29, the lowest since June 2004 and matching the level during the Eisenhower administration in the late 1950s. Central banks in China, Taiwan, Hong Kong and the Middle East also cut borrowing costs this week as policy makers race to avert a global recession.

The euro stayed lower as inflation in the countries sharing the currency eased to 3.2 percent in October from 3.6 percent the month before, matching the median of 27 economists in a Bloomberg News survey.

ECB Rate

The ECB participated in a coordinated interest-rate reduction by global central banks on Oct. 8 to prevent the collapse of the global financial system, reducing its benchmark rate by half a point to 3.75 percent.

Policy makers meet Nov. 6, when they will probably cut the region's main refinancing rate by half a percentage point to 3.25 percent, according to a Bloomberg survey of 26 economists.

Spending by U.S. consumers dropped more than forecast in September, capping its weakest quarter in three decades and signaling the economy will continue to slump in coming months.

The 0.3 percent decrease in purchases was the biggest in four years and followed no change in August, the Commerce Department said today in Washington. The Federal Reserve's preferred measure of inflation cooled.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

BLBG: India copper extends losses as recession fears grow

31 Oct 18:33

MUMBAI, Oct 31 (Reuters) - Indian copper futures extended their previous session losses and plummetted more than 4 percent as growing recession fears triggered a broad-based commodity sell off, analysts said.

Copper has fallen more than 35 percent in October as growing recession fears raised worries about the demand for industrial metals and dented investor appetite.

"Base metals are expected to slide further as there is no significant trigger to aide a pullback," said Roopa Kataria, analyst with Anagram Securities Ltd.

At 5.45 p.m., benchmark November copper MCCX8 on the Multi Commodity Exchange of India (MCX) was down 3.87 percent at 199.7 rupees per kg.

Prices also fell on Friday tracking data that showed a contraction in the U.S. economy, the second largest consumer of industrial metals.

U.S. gross domestic product shrank at a 0.3 percent annual rate in the third quarter, which is the sharpest pullback by consumers since 1980. [ID:nN30534111]

The dollar, which rose against major currencies on Friday as global share prices fell on fears of a possible recession, also weighed on sentiment.

Shanghai copper stocks fell 20 percent or 6,265 tonnes to 24,788 tonnes in the week ended Thursday, but failed to underpin sentiment.

In industry news, Chile's Codelco, the world's largest copper producer, said its copper output fell 8.2 percent in the first nine months of the year, citing a strike by subcontract workers and falling ore grades. [ID:nN30290469

Nickel, zinc and lead futures also extended declines as continuing demand worries pushed prices down.

At 5.46 p.m., benchmark October nickel MNKV8 was down 4.58 percent at 548 rupees per kg.

October zinc MZIV8 was down 1.82 percent at 53.8 rupees and lead for October delivery MLDV8 was down 1.17 percent at 71.9 rupees per kg from the previous close.