Canadian dollar climbs with oil prices, bonds fall

Reuters: [2008-05-06 23:33:00]

    By John McCrank 
    TORONTO, May 6 (Reuters) - The commodity-linked Canadian 
dollar climbed nearly 1 percent against the U.S. dollar on 
Tuesday, boosted by record high oil prices. 
    Canadian bond prices fell as investors shifted assets into 
equities, which were led higher by energy stocks. 
    The Canadian dollar closed at C$1.0029 to the U.S. dollar, 
or 99.71 U.S. cents, up from C$1.0135 to the U.S. dollar, or 
98.67 U.S. cents, at Monday's close. 
    The currency briefly rose above parity with the greenback 
for the first time in two weeks, hitting US$1.0001, making a 
greenback worth 99.99 Canadian cents. 
    Driving the increase was a surge in the price of oil <CLc1> 
to a record $122.73 on supply worries ahead of the U.S. summer 
driving season. See [ID:nSIN170894] 
    Canada is a major producer of oil and its currency is often 
influenced by moves in its price. 
    "Canada is outperforming all the majors (currencies)," said 
Camilla Sutton, currency strategist at Scotia Capital. 
    "The commodity currencies are generally doing well today, 
but I would suspect there is probably a flow in there too, just 
because we are outperforming to such an extent." 
    Sutton said such a flow could have been related to hedging 
or mergers and acquisitions. 
    Canadian economic data during the day was mixed, with 
building permits falling 4.5 percent in March from February, 
compared with market expectations for a 1.4 percent gain. 
    The currency dropped on the news, but quickly rebounded as 
the data also showed an upward revision of February building 
permits to a gain of 0.8 percent, compared with the 1-percent 
drop previously reported. 
    Other data showed that Canadian purchasing activity rose in 
at a slower pace in April than in March, but it was above 
market expectations and helped the Canadian dollar rally. 
    The Ivey Purchasing Managers Index fell to 57.6 in April 
from 59.0 in March. The market was expecting a reading of 
54.5. 
    Upcoming data include April housing starts on Thursday and 
March international merchandise trade data on Friday. Also set 
for Friday is the April employment report, which Sutton said 
will be the main event as far as the Canadian dollar is 
concerned. 
    
BONDS FALL 
    Canadian bond prices fell across the curve as a rally in 
the stock market, led by energy stocks, took away the safe 
haven appeal of government debt. 
    "Canada is certainly benefiting from the runup in commodity 
prices," said Mark Chandler, fixed income strategist at RBC 
Capital Markets. "It's been the story for a while, but it's 
certainly increasing in magnitude, so that's obviously, in the 
grander scheme of things, better for Canada's economy than in 
the U.S." 
    The two-year bond fell 7 Canadian cents to C$101.87 to 
yield 2.814 percent. The 10-year bond slid 47 Canadian cents to 
C$102.38 to yield 3.687 percent. 
    The yield spread between the two- and 10-year bonds was 
87.3 basis points, up from 84.2 at the previous close. 
    The 30-year bond shed C$1.16 to C$113.79 to yield 4.176 
percent. In the United States, the 30-year treasury yielded 
4.668 percent. 
    The three-month when-issued T-bill yielded 2.59 percent, 
down from 2.64 percent at the previous close. 
 (Editing by Peter Galloway) 
 ((john.mccrank@thomsonreuters.com; +1 416 941 8083; Reuters 
Messaging: john.mccrank.reuters.com@reuters.net)) 
    For Reuters bond and money market pricing information 
double click on one of the following: 
 <CAD=>      Canadian dollar live quote, high/low 
  <FXNEWS>  Headlines from global forex markets 
 <CDBN>      Canadian bond prices 
 <CDMM> <CDMN> <0#CAMMKT=> Canadian money market prices 
 <CABONEA>   Canada-U.S. spreads (live) 
 <YLDS1>     World yield index 
 <CA30YT=RR> 30 year benchmark 
 <0#CGB:> <CGBc1> <CA/FACTOR1> <MEIRP> - Montreal Exchange 
   bond futures pricing information 
 <CAMCI=>    Bank of Canada monetary conditions index (Reuters 
calculation) 
 <CACALL=>   Canada's call loan or overnight lending rate 
 <=CAD>      Canadian dollar G10 trade-weighted index. 
 
   For the fixed-income market speed guides, double click on 
one of the following: 
  
  <CA/MMKT1> <CA/MMKT2> <CA/DEBT> <BONDS> <TREASURY> For 
related news, double click on one of the following: 
 [CAN]  Canadian news 
 [NAT]  North American Treasuries news 
 [M]    Money news 
 [D]    Debt news 
 [MF]   Markets news 
 [GVD]  Government debt news 
 [MMT]  Money market news 
 [INT]  Interest rate news 
 [CEN]  Central bank news 
 [CA/]  Canadian bond market stories 
Keywords: MARKETS CANADA DOLLAR BONDS 
    

POLL-Peru central bank seen keeping rates stable

Reuters: [2008-05-06 23:19:00]

* What: Peru's central bank interest rate decision

* When: Around 6 p.m. (2300 GMT) Thursday, May 8

* Most economists reckon rate will remain unchanged

By Ricardo Serra

LIMA, May 6 (Reuters) - Peru's central bank will likely hold its benchmark interest rate steady at 5.5 percent on Thursday after its monthly monetary policy meeting, according to a Reuters poll.

One of 10 economists surveyed saw a rate rise to 5.75 percent, but all the others expect rates to remain unchanged. after inflation for April slowed to 0.15 percent from 1.04 the previous month.

In April, the bank raised its benchmark rate by a quarter percentage point and hiked reserve requirements for banks, the latest in a series of efforts to curb inflation.

The central bank's inflation target for this year is 2 percent, plus or minus a one percentage point tolerance band.

Most economists expect prices to rise about 4 percent this year, mainly on an uptick in international food prices, and as the economy grows around 9 percent a year.

(Writing by Terry Wade; Editing by Diane Craft)

((terry.wade@thomsonreuters.com; +511 421 1733)) Keywords: PERU ECONOMY/RATES

Chile stocks slip on weak growth data, oil; peso firms

Reuters: [2008-05-06 23:08:00]

(Adds quote, details, closing stock figures)

SANTIAGO, May 6 (Reuters) - Chilean stocks closed lower for a second day on Tuesday, after oil prices hit record highs and following weak local growth data.

Chile's peso gained as the dollar retreated from a two-month high.

On the stock exchange, the all-market IGPA index <.IGPA> retreated 0.60 percent to 13,883.35 points, while the blue-chip IPSA index <.IPSA> fell 0.73 percent to 2,957.49 points.

"Domestic growth data was weak and foreign investors have been getting rid of retail," said Marcelo Ogaz. "And with oil at historic highs airlines worldwide are falling."

March economic growth reported on Monday fell to 0.7 percent year on year, well below expectations, while oil prices touched new all-time highs on Tuesday.

Transport company losses included LAN Airlines <LAN.SN> down 2.35 percent, and shipper Vapores <VAP.SN> closing 2.5 percent lower.

Drinks bottler Andina <AND_pb.SN>, down 2.54 percent, and department store chain Ripley <RIP.SN> falling 1.65 percent led declines among consumer stocks.

Paper and wood pulp producer CMPC <CAR.SN> saw its shares retreat 2.04 percent.

Of Chile's 40 blue-chip stocks, 30 ended lower.

The Chilean peso <CHILJ> <CLP=CL> closed 0.43 percent higher at 466.50/467.00 per dollar compared with Monday's close at 468.50/469.00.

"The peso's rise is a correction due to profit-taking after the dollar's recent gains," a broker said. "The market seems confused about what the dollar's equilibrium price should be, which makes the exchange rate volatile."

Chile's central bank bought $50 million worth of dollars on Tuesday, a continuation of the daily purchases begun on April 14 as part of an $8 billion currency intervention program.

The peso, which had appreciated by about 15 percent against the dollar since the beginning of the year, has seen its gain fall to about 6.7 percent. (Reporting by Lisa Yulkowski and Froilan Romero; Editing by Diane Craft) ((lisa.yulkowski@reuters.com; +56-2-370-4250)) Keywords: MARKETS CHILE/

Argentine stocks rise on oil prices; bonds fall

Reuters: [2008-05-06 23:06:00]

BUENOS AIRES, May 6 (Reuters) - Argentine stocks rose on Tuesday as record crude oil prices lifted energy-related shares, while the peso and bonds finished weaker.

The MerVal index <.MERV> of leading stocks ended up 1.02 percent at 2,127.09 points. Volume on the broad market was a healthy $49.7 million and of active issues, 76 advanced, 22 declined and 17 were unchanged.

U.S. crude oil futures ended above $121 a barrel amid supply concerns and a report by investment bank Goldman Sachs predicting oil could rise to $150 to $200 a barrel.

"The record price helped Petrobras and Tenaris," said Marcelo Paccione, an analyst at ConsultCapital.

The MerVal also got a boost from stronger-than-expected first-quarter earnings from steelmaker Siderar <SID.BA>, he said.

On Monday, Siderar reported its net profit in the first three months of the year rose by 87.5 percent to 566.1 million pesos due in part to higher sales. Siderar shares closed 0.75 percent higher at 26.1 pesos.

Shares in index heavyweight and steelmaker Tenaris <TENA.BA> -- the world's leading producer of seamless steel tubes for the energy industry -- rose 0.77 percent to 88.7 pesos due to optimism about its first-quarter earnings, due later on Tuesday.

The local listing of Brazilian state-run energy Petrobras <APBR.BA> gained 2.8 percent to close at 104.5 pesos.

Argentina's locally traded bonds <AR/BONOS> slipped 0.7 percent on average on Tuesday in light trade marked by investor caution over the outcome of a meeting between farmers and the governemnt aimed at averting a repeat of March's farm strike.

Peso-denominated debt was the hardest hit on Tuesday, with the Par bond plunging 2.9 percent in over-the-counter trade.

Tension over the farm talks also triggered dollar purchases, sending the peso lower.

In formal interbank trade, the peso fell 0.08 percent to 3.1750/3.1775 per dollar <ARS=RASL>. In informal trade between foreign exchange houses, as measured by Reuters, it weakened by 0.24 percent to 3.23/3.2325 per dollar <ARSB=.

About 40 percent of currency trade takes place informally between foreign exchange houses. (Reporting by Jorge Otaola and Walter Bianchi; Writing by Helen Popper; Editing by Leslie Adler) ((helen.popper@thomsonreuters.com; +54-11-4318-0655; Reuters Messaging: helen.popper.reuters.com@reuters.net)) Keywords: MARKETS ARGENTINA/

Mexico peso hurt by credit jitters; stocks gain

Reuters: [2008-05-06 23:04:00]

(Adds quotes, closing prices, details)

MEXICO CITY, May 6 (Reuters) - Mexico's peso weakened on Tuesday amid renewed Wall Street credit jitters, while local stocks gained, led by telecommunications bellwether America Movil.

The peso <MXN=> <MEX01> weakened nearly 0.20 percent at the official central bank close to 10.4995 per dollar while the benchmark IPC stock index <.MXX> gained 0.85 percent to 31,223.42 points.

Fannie Mae, the largest provider of U.S. home financing, reported its third straight quarterly loss and forecast further falls in home prices and continued problems in the mortgage market.

But reassuring comments from Fannie Mae executives about the company's stability helped stocks in New York recover from early losses.

But peso traders in Mexico said the news stirred fears that the worst may not be over for the credit crisis, curbing investor appetite for riskier emerging market assets and serving as a pretext to take profits after the peso's recent gains.

"There is still a worry that the subprime (mortgage) issue is still present and keeps causing damage to the financial sector," said Alejandro Martinez, a fixed-income and currency strategist at HSBC in Mexico City.

Traders also said investors were ruling out the possibility of further interest rate cuts in the United States.

Mexico's peso has gained around 4 percent since the beginning of the year as the spread between the U.S. target interest rate and Mexico's key rate widened to 5.5 percent.

"If you don't have the expectation that the spread could widen further, you don't have that additional attraction," Martinez said.

The U.S. Federal Reserve cut its target rate last week for the seventh time since September in a bid to prop up the stumbling economy, but it signaled that its may pause with its rate cutting cycle.

Also last week, Mexico's central bank revised upward its inflation outlook, which analysts have interpreted as meaning the bank will keep interest rates on hold for some time.

In debt trading, the government's benchmark 10-year peso bond <MX10YT=RR> rose 0.067 of a point in price to 98.914, pushing its yield down 1 basis points to 7.91 percent.

In stock trading, shares of America Movil <AMXL.MX>, Latin America's biggest cell phone operator and the heaviest weighted stock on the IPC, gained 0.72 percent to 30.89 pesos. Its New York-traded shares <AMX.N> edged up 0.44 percent to $58.87.

"The stock was unfairly punished after its first-quarter earnings report, and people are realizing it is cheap," said Gerardo Roman, head of equity trading at Actinver brokerage in Mexico City.

HSBC on Tuesday cut the price target for America Movil's New York shares to $82 from $91, but kept its rating unchanged at "overweight."

Top retailer Walmex <WALMEXV.MX> added 1.56 percent to 44.22 pesos.

Shares of Cemex <CMXCPO.MX> gained 1.79 percent to 30.73 pesos while its New York traded stock <CX.N> added 4.34 percent to $29.10. (Reporting by Michael O'Boyle; editing by Gary Crosse) ((michael.oboyle@reuters.com; +5255-5282-7160; Reuters Messaging: jason.lange.reuters.com@reuters.net)) Keywords: MARKETS MEXICO/