The Star Online: Business
The Star Online: Business |
- Oil price falls on economic news and demand worries
- Hewlett-Packard posts higher 3Q earnings
- European bank stocks hurt by borrowing crunch
| Oil price falls on economic news and demand worries Posted: 18 Aug 2011 05:24 PM PDT NEW YORK: Oil fell sharply Thursday along with a broad sell-off in stocks triggered by ongoing worries about the global economy. Benchmark West Texas Intermediate crude for September delivery fell US$5.20, or 5.9 percent, to finish at $82.38 per barrel on the New York Mercantile Exchange. Brent crude, used to price many international oil varieties, dropped $3.61 to end at $106.99 per barrel on the ICE Futures exchange in London. In the U.S., two reports raised concerns about demand for gasoline, which is made from oil. First, more people than expected applied for unemployment benefits last week. And prices for gas, food and clothing rose last month. Higher prices at a time when more people are out of work means Americans could drive even less than they do now. A private survey released earlier this week said U.S. motorists have reduced gasoline purchases for 21 straight weeks. Prices have swung wildly with every report about the U.S. economy. Besides data about unemployment and prices, a private research group forecast sluggish growth for the rest of the year. Oil demand was supposed to pick up in the second half of 2011, but traders now wonder if it will happen. "People are getting spooked," oil trader Stephen Schork says. Meanwhile Libyan rebels claimed control over the country's last functioning oil refinery. Michael Lynch, president of Strategic Energy & Economic Research, says it's reasonable to expect Moammar Gadhafi's departure and a resumption of at least some Libyan exports by the end of the year. Libya's daily exports of almost 2 million barrels of crude have been shut down since unrest began in that country six months ago. "Oil won't be coming out of there immediately, but it'll be sooner than a lot of people think," Lynch says. The dollar rose Thursday as the euro and other currencies fell on worries about the health of European banks and the broader regional economy. A stronger dollar pushes down oil prices because oil is priced in dollars and becomes less attractive to investors with foreign currency as the dollar rises. In other Nymex trading for September contracts, heating oil lost 8.68 cents, or 2.9 percent, to finish at $2.8748 per gallon and gasoline futures dropped 8.71 cents, or 3 percent, to $2.7832 per gallon. Natural gas lost 4.1 cents to end the day at $3.892 per 1,000 cubic feet. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| Hewlett-Packard posts higher 3Q earnings Posted: 18 Aug 2011 05:22 PM PDT PALO ALTO, California: Hewlett-Packard Co. reported an increase in its third-quarter net income on Thursday, but the technology company gave a lower-than-expected outlook for the current quarter and cut its outlook for the year for the second time. While its commercial businesses remained healthy, HP said quarterly revenue in its customer-facing businesses fell 15 percent. HP reported its earnings before the markets closed Thursday after saying it plans to spin off its PC business and stop selling its webOS tablet and mobile phones. The world's largest maker of printers and personal computers has been working to transform itself into more of a technology services company, like its rival IBM. The company earned $1.93 billion, or 93 cents per share, in the latest quarter. That's up 9 percent from $1.77 billion, or 75 cents per share, a year earlier. Its adjusted earnings were $1.10 per share, a penny above analyst expectations. HP's revenue climbed less than 2 percent to $31.2 billion from $30.7 billion. This matched analysts' average expectations, according to FactSet. HP said its software revenue rose 20 percent to $780 million, and its services revenue climbed 4 percent to $9.09 billion, while revenue in its printer segment fell 1 percent to $6.09 billion and revenue in its personal systems group, which includes PCs, fell 3 percent to $9.59 billion. For the current quarter, HP forecast adjusted earnings of $1.12 to $1.16 per share, below analysts' average expectation for $1.32 per share. The company expects revenue of $32.1 billion to $32.5 billion, shy of analysts' estimate of $33.98 billion. The company also lowered its full-year guidance slightly. It now expects revenue of $127.2 billion to $127.6 billion. In May, it forecast revenue of $129 billion to $130 billion, a slightly downward revision from its February outlook. Analysts are predicting $129.12 billion in revenue. HP expects adjusted earnings of $4.82 to $4.86 per share for the year, below its May outlook of $5 per share and below analysts' estimate of $5.01 per share. Shares of Palo Alto, California-based HP fell $1.88, or 6 percent, to close at $29.51. They fell another 68 cents, or 2.3 percent, after hours to $28.83. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
| European bank stocks hurt by borrowing crunch Posted: 18 Aug 2011 05:20 PM PDT PARIS: European bank stocks tanked Thursday as fears mounted about their exposure to the region's debt crisis and weakening economy. The stock prices of Britain's Barclays and France's Societe Generale led the way down, falling 11.5 percent and 12 percent, respectively. Germany's Commerzbank fell 10 percent. Analysts said the plunge was partly a reaction to evidence that European banks are being forced to pay more for the short-term loans they need to finance day-to-day operations. Some European banks with heavy exposure to the debts of Greece and other weak countries are relying on loans from the European Central Bank because other private banks are reluctant to do business with them. The ECB said one bank, which it didn't identify, had paid above-market rates to borrow $500 million a day for seven days. No bank had requested such a loan for nearly six months. Analysts said fears about one bank's troubles are enough to spark concerns about the entire industry. "These are worrying signs," said Neil MacKinnon, an economist at VTB Capital in London. "You could think of it as a mini-Lehman moment: There is the risk that a major eurozone bank might be a casualty." In 2008, the investment bank Lehman Brothers collapsed, causing the global credit markets to freeze up. Banks refused to lend to each other because they feared more failures and greater losses. Companies and consumers couldn't get loans. In a move that could compound fears about European banks' ability to borrow, U.S. regulators are stepping up scrutiny of the banks' U.S.-based subsidiaries, according to two people familiar with the situation. Banks are meeting more frequently than usual with supervisors from the Federal Reserve Bank of New York and the New York State Banking Department, said the people, who spoke on condition of anonymity to discuss confidential matters of bank supervision. Analysts said that regulators are pressing the U.S. subsidiaries to keep more cash on hand, in case their European parent companies falter. Federal Reserve data show that foreign-based banks are storing more cash here in the U.S. - $127 billion near the beginning of August, up from $86.1 billion in June. A similar spike occurred before the 2008 crisis, Keefe, Bruyette & Woods analyst Mark Pawlak said Thursday. He said the memory of that cash crunch is so fresh, it takes less to get investors worried. Fears tend to feed on themselves, causing more banks to hoard money instead of lending to each other. "Any signs of a funding crisis brings back horrific memories," Pawlak said. "There's this visceral reaction." Plunging stocks are not the only sign that investors are pulling back from European banks. They are also charging more to insure the banks' bonds against the risk of default, said Peter Tchir, a former trader who now runs the hedge fund TF Market Advisors. Markets are responding ferociously to rumors in part because no one knows how much Greek government debt each bank holds. That leaves all of them vulnerable to speculation, such as about which bank borrowed $500 million from the ECB, Tchir said. Fears of a potential default by Greece intensified on Thursday after at least five countries demanded that the Greek government set aside cash as collateral in exchange for their contributions to its bailout. On Tuesday, Finland struck a private deal requiring the Greek government to set money aside. By Thursday, four more countries were demanding similar terms. As Greece sets aside more money as collateral, the government there has fewer options for digging out of its debt hole. The amount of cash needed to satisfy the five lender nations probably is not enough to scuttle the rescue entirely, but it could drive up the overall cost of the bailout. It also reflects growing rifts between European nations about how to solve the debt crisis there. Until there is a long-term solution, analysts say, the pain for European banks will continue. Poor economic news in the U.S. helped fuel the flight from bank shares in Europe and on Wall Street. Shares of big U.S. banks plunged faster than the broader market indexes. Bank of America Corp. and Citigroup Inc. closed more than 6 percent lower. Morgan Stanley and Wells Fargo slid more than 4.5 percent. The Dow Jones industrial average closed 4.3 percent lower. "People are putting the pieces together," said Will Hedden, a sales trader with IG Index. Banks have also been under pressure because German Chancellor Angela Merkel and French President Nicolas Sarkozy said earlier this week that their countries were developing a plan to tax financial transactions. That would cut into banks' profits, analysts said. - AP Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by Used Car Search. |
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