Wednesday July 08, 2009

NEW YORK: US stocks fell to their lowest level in 10 weeks on Tuesday as talk of a second government stimulus plan heightened fears that the economy is not yet on the path to recovery and that the corporate earnings season starting this week will be weak. A member of the Obama administration's economic advisory panel said the United States should plan to possibly provide a second round of stimulus funds to prop up the economy. The comments come as investors question earlier optimism for a quick recovery, which had driven stocks as much as 40 percent higher since early March. "It's clear that over the last three plus weeks that investors are becoming concerned that the recovery in the economy will not come as soon as expected and will not be as strong as expected," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. "When there's talk about another stimulus plan that adds fuel to that fire, it intensifies the concerns about the timing and strength of the recovery." Cyclical stocks in the materials, energy, and industrial sectors, which had ridden a recent upswing in raw material prices on recovery hopes, led the market down as commodity prices eased. Copper, a barometer of global economic strength, fell nearly 2 percent. Caterpillar Inc, a maker of heavy machinery for construction and mining companies, shed 4.5 percent to $30.29. The Dow Jones industrial average dropped 161.27 points, or 1.94 percent, to 8,163.60. The Standard & Poor's 500 Index fell 17.69 points, or 1.97 percent, to 881.03. The Nasdaq Composite Index lost 41.23 points, or 2.31 percent, to 1,746.17. The S&P 500 closed at its lowest level since May 1 while the Dow industrials closed at their lowest level since April 28. An initial snapshot of the second-quarter performance of natural resource companies will come on Wednesday when Alcoa Inc kicks off quarterly earnings season. The aluminium producer, a Dow component, is expected to post a third consecutive quarterly loss. S&P 500 corporate earnings are expected by analysts to have declined about 36 percent from a year ago, according to data compiled by Thomson Reuters. That would be roughly the same as the decline seen in the first quarter. Doubts about the strength of an economic recovery and subsequent demand for oil have sent crude prices tumbling in the last week. New York crude fell 1.8 percent on Tuesday and is down about 14 percent from the intraday peak hit on June 30. Its slide has pressured energy stocks. Oil services company Schlumberger Ltd fell 4.4 percent to $49.20 while blue chip Exxon Mobil Corp lost 2.3 percent to $66.56. The S&P energy sector index lost 2.5 percent. Non-cyclical areas of the market, which have been stronger in recent weeks as investors sought out companies better positioned to weather a weak economy, initially withstood the sell-off on Tuesday. But by the end of the day even the defensive sectors fell victim to selling. Health care, a classic defensive sector, traded in positive territory for most of the day but by the close the S&P healthcare index fell 0.3 percent -- still outperforming the wider market. Drug maker Pfizer Inc, one of the few Dow stocks to finish in positive territory, edged up 0.1 percent to $14.59. A rally in the broad S&P 500 index that had boosted it about 40 percent from 12-year lows hit in early March has wilted in the last month as investors sought stronger evidence that economic conditions were improving. Trading was below average on the New York Stock Exchange, with about 1.11 billion shares changing hands, under last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.04 billion shares traded, below last year's daily average of 2.28 billion. Declining stocks outnumbered advancing ones on the NYSE by 4 to 1 while decliners beat advancers on the Nasdaq by about 10 to 3. (Reuters)

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Wednesday July 08, 2009

ISLAMABAD: The Supreme Court on Tuesday suspended the operation of notification issued by the Oil and Gas Regulatory Authority (Ogra) on June 30/July 1 pertaining to imposition of 'carbon surcharge' on petroleum products. The court directed the Ogra to issue a fresh notification in compliance with the orders of the court. "This arrangement is being made temporarily; the final decision would be taken on later, after going through the detailed report submitted by the Commission (headed by Justice Rana Bhagwandas looking into the oil pricing mechanism) and other components," said Chief Justice Iftikhar Muhammad Chaudhry in the order. A carbon tax is an environmental tax on emissions of carbon dioxide and other greenhouse gases. In other words it is an example of a pollution tax. In this regard, the court summoned Secretary, Ministry of Environment, on July 9 (next date of hearing) along with the summary (if any) for the purpose of imposing carbon tax. According to budget documents, a development surcharge on petroleum products was levied under the petroleum products (Development Surcharge) Ordinance 1961 and rules were framed accordingly. The word 'development surcharge' was substituted with the words 'Petroleum Development Levy' (PDL) on June 29, 2001. In budget 2009-10, PDL has been converted into 'carbon surcharge' on POL products. Attorney-General Latif Khosa asked the court that it could not withdraw carbon surcharge as it was approved by the parliament through the Finance Bill 2009. Chief Justice Iftikhar Muhammad Chaudhry made it clear that the court had merely suspended the operation of notification issued by the Ogra regarding imposition of the tax. Khosa then pleaded with the court to replace 'carbon tax' with the 'PDL', saying that otherwise the budget, already in deficit, would be disturbed. The court declined to take its words back and asked him to argue the point on next date of hearing, saying, Chief Justice Iftikhar Muhammad Chaudhry observed that 'carbon surcharge' was not the only means to bridge the deficit. Justice Chaudhry Ijaz Ahmed, after being disturbed by the helplessness of the citizen of the country, observed that the spirit of the constitution is welfare of the state and all the organs help in this respect. The document of constitution is made for the people of Pakistan but in last 60 years nothing has been done for them, he added. Advocate Ikram Chaudhry, counsel for Zafar Iqbal Jhagra, censuring the carbon tax, said that saving a poor was much more important than the environment. A three-member bench of the apex court, comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Chaudhry Ijaz Ahmed and Justice Mahmood Akhtar Shahid Siddiqui, heard the petition of Zafar Iqbal Jhagra, of PML-N, against hike in petroleum prices and overcharging worth billions of rupees by the government on petroleum products. According to the Finance Bill 2009-10 and the notification issued by Ogra the government is charging Rs 8 per litre carbon surcharge on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (MS), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil (LDO) and Rs 14 per litre on HOBC. The calculation reveals that the impact of this surcharge is equivalent to 17 percent hike in prices of petroleum products. The court asked Khawaja Saeed Zafar to inform it who had proposed for imposition of carbon surcharge and what was the purpose. In order to ascertain the price difference with imposition of carbon surcharge the court asked Khawaja Saeed to give break-up of prices of petrol, diesel and kerosene oil as it stood on June 30, prior to the issuance of notification, and July 1, after the notification. On June 30, per litre price of petrol was Rs 56.21 and it included Rs 31.91 ex-refinery price, Rs 10.54 PDL, Rs 1.39 oil marketing companies' margin, Rs 2.88 inland freight charges, Rs 1.74 dealers' margin and Rs 7.75 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of petrol per litre was Rs 62.13 and it included Rs 36.59 ex-refinery price, Rs 10 for carbon surcharge, Rs 1.60 oil marketing companies' margin, Rs 3.37 inland freight charges, Rs 2 dealers' margin and Rs 8.57 sales tax. The price of diesel on June 30 was Rs 55.71 per litrer and it included Rs 34.78 ex-refinery price, Rs 8.53 PDL, Rs 1.35 oil marketing companies' margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 7.68 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge, the price of diesel per litre was Rs 62.65 and it included Rs 40.94 ex-refinery price, Rs 8 for carbon surcharge, Rs 1.35 oil marketing companies margin, Rs 2.22 inland freight charges, Rs 1.50 dealers' margin and Rs 8.64 sales tax. Similarly, the price of kerosene oil on June 30 was 51.87 per liter and it included Rs 32.77 ex-refinery price, Rs 6.88 PDL, Rs 1.46 oil marketing companies' margin, Rs 3.61 inland freight charges and Rs 7.15 sales tax. On July 1, after the withdrawal of PDL and imposition of carbon surcharge the price of kerosene oil per litre was Rs 59.35 and it included Rs 39.26 ex-refinery price, Rs 6 for carbon surcharge, Rs 1.74 oil marketing companies' margin, Rs 4.16 inland freight charges and Rs 8.19 sales tax. The court expressed displeasure over change in inland freight charges and dealers' margin, saying that these have to be constant. It was also revealed that sales tax was charged over the cumulative price including other taxes, meaning thereby it was a kind of double taxation. The court termed it illegal, saying that tax on other taxes cannot be levied. At court's query, Mehmood Saleem, Secretary, Petroleum, informed the court that 80 percent of petrol and 30 percent of diesel was produced within the country, and the rest was imported. The court adjourned the hearing till July 9. (BRecorder)

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Wednesday July 08, 2009

TOKYO: The dollar was mixed in Asian trade Wednesday as fresh uncertainty over prospects for a US economic recovery and the outcome of a Group of Eight summit hung over the market. The dollar dropped to 94.56 yen in Tokyo morning trade from 94.81 in New York late Tuesday. The euro fell to 1.3885 dollars from 1.3926 and to 131.24 yen from 132.06. Traders were cautious ahead of the G8 summit that was due to start later Wednesday in Italy amid fresh jitters about the economic outlook. Japanese core machinery orders, a closely watched barometer of business investment, fell to their lowest level on record in May, data showed. Doubts over a US recovery resurfaced after a top White House economic advisor suggested that Washington may need a second stimulus package, NAB Capital strategist Spiros Papadopoulos wrote in a note. "The question is whether the US economy has reached a level of stabilisation yet, but the recent unemployment numbers tell me it hasn't," Laura Tyson, a member of President Barack Obama's Economic Advisory Panel, said in Singapore. US unemployment surged to a new 26-year high of 9.5 percent in June, government data showed last week. Traders were turning their attention to the G8 summit in Italy where leaders were expected to discuss efforts to tackle the global economic crisis. China had said last week that it wanted a broader global monetary system, sparking speculation that G8 leaders might discuss the dollar's status as an international reserve currency, potentially weighing on the greenback. "China fears its massive holdings of US debt ... are increasingly at risk alongside a falling dollar," said Papadopoulos. "But a quick glance at the agenda makes it pretty clear there will be little time for serious debate on the creation of a new global reserve currency," he added. Chinese President Hu Jintao cut short his trip to Italy to return to China because of unrest in the northwest Xinjiang region, leaving State Councillor Dai Bingguo to take part in the summit on his behalf. (AFP)

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Wednesday, July 08, 2009

SINGAPORE: Oil remained under 63 dollars a barrel in Asian trade Wednesday amid rising concerns that a recovery from the worldwide recession was unlikely to happen soon.

In morning trade New York's main contract, light sweet crude for August delivery, was down 63 cents to 62.30 dollars a barrel, extending sharp falls in US trade overnight.

Brent North Sea crude for delivery in August eased 58 cents to 62.65.

New York crude has lost more than 11 dollars and Brent over 10 dollars since June 30 when prices for both contracts rose to more than 73 dollars a barrel, their highest levels this year.

"Oil continues to trade along with the financial markets," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"Weeks ago, both stock markets and oil markets traded hand in hand going up. Now, stock markets are tumbling and oil is also tumbling, and that's because of renewed concerns that the recovery from the global recession is likely to be slow."

Doubts over a global economic bounce were rekindled following the June unemployment report in the United States, which showed a bigger-than-expected number of jobs losses.

On Tuesday, Laura Tyson, a member of US President Barack Obama's Economic Advisory Panel, said the United States may need a second stimulus package to put the world's biggest economy firmly on the path to recovery.

Investors are also being cautious as companies around the world start reporting their June quarter earnings, which could give an indication on the health of the global economy and its prospects for the rest of the year, Shum said.

"For oil futures, the fundamentals have been weak all along so the pullback is consistent with the weak fundamentals," he said, referring to demand lagging a glut in oil supplies.

Shum said that with appetite for risky assets in check, investors are going for relatively safer investments such as the US dollar, pushing the US currency higher.

A stronger dollar makes dollar-priced oil more expensive for holders of weaker currencies, a situation that dampens demand for the commodity and leads to lower prices.

Prices are likely to fall below 60 dollars in the near term, Shum said.


(AFP)

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