Dollar touches fresh lows

The dollar hit a record low against the euro for the third session on Monday on concerns that the troubles in the housing sector could crimp economic growth and trigger more interest rate cuts in United States.
Trade was light with market attention shifting to housing and consumer confidence data due on Tuesday.
Investors are worried that additional monetary easing after last Tuesday's half-percentage-point rate cut by the Federal Reserve could further erode the dollar's appeal against higher yielding currencies such as the euro.
"We have interest rate differentials and growth differentials working against the dollar and speculators continue to seek record highs against the euro," said Michael Woolfolk, currency strategist at Bank of New York in New York. "There is simply no reason to be buying the dollar."
Several Wall Street firms have downgraded their outlook on U.S. gross domestic product over the next several quarters.
The euro rose earlier to a record high at $1.4130, according to Reuters data. It last traded at $1.4095, almost flat on the day. Analysts saw technical resistance at $1.4210.
The dollar traded at 114.94 yen, 0.43 percent lower on the day.
Still, analysts say the recent sharp declines in the dollar may provide to some investors a short-term buying opportunity.
"The U.S. dollar feels quite weak, but I wouldn't be surprised to see some short-term profit-taking, people buying some U.S. dollar and selling some euro, but I do not expect it (the euro) to move too much lower than here," Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto.
Interest rate futures are pricing in a roughly 66 percent chance of a 25 basis point Fed rate cut in October, down from 72 percent at Friday's close. At least one more quarter-point cut has been factored in by year-end on top of any move at the Fed's next meeting in October.
"It's all about interest rates. Once the Fed starts an easing cycle, I don't believe it's ever gone one move and out. I am confident we will have more easing, at least 25 (basis points), probably another following early next year," said Askari.
The dollar index, which tracks the dollar's move versus a basket of six currencies, slipped to a 15-year low of 78.313, but recouped some losses to trade at 78.487.
Market players are keeping a close eye on whether the dollar index breaks the all-time low of 78.19 struck in September 1992, a level analysts said would provide a key test of whether the U.S. currency's sell-off deepens or pauses.
Investors shrugged off more criticism of the European Central Bank by the French government. An aide to French President Nicholas Sarkozy in an interview published on Sunday repeated recent comments arguing the euro's strength is eroding the competitiveness and productivity of businesses.
ECB President Jean-Claude Trichet dismissed the criticism, calling it an outdated debate and saying the central bank's first mandate was to ensure price stability.

Wall St slips as dollar's fall raises worries

U.S. stocks fell on Thursday as weakness in the dollar raised worries about inflation two days after the Federal Reserve's aggressive interest-ate cut and FedEx Corp. (FDX.N: Quote, Profile, Research) cut its earnings outlook.
Oil prices touched a record high above $84, adding to the inflation worries.
The move by package delivery company FedEx raised doubts about growth in the economy. In addition, the National Retail Federation said U.S. holiday sales are expected to rise at their slowest pace in five years.
A drop in the dollar to a record low against the euro, now worth more than $1.40, was a worrying side effect of the Fed's decision Tuesday to cut benchmark lending rates by a hefty half a percentage point, analysts said. The Fed cut rates to keep the economy from slipping into recession.
Financial stocks, which surged following the Fed's move, were among the top drags. The S&P financial index (.GSPF: Quote, Profile, Research) was down 1.8 percent. Home builders' stocks also dropped.
"It's waves of profit-taking, and concern about the lower dollar, which is in reaction to the Fed cutting rates as aggressively as it did," said Marc Pado, U.S. market strategist in the San Francisco office of Cantor Fitzgerald & Co.
The Dow Jones industrial average (.DJI: Quote, Profile, Research) was down 64.30 points, or 0.47 percent, at 13,751.26. The Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) was down 12.43 points, or 0.81 percent, at 1,516.60. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was down 17.77 points, or 0.67 percent, at 2,648.71.
While a weakening dollar can give a lift to shares of companies that are big exporters, it also threatens to worsen inflation because of the United States' heavy reliance on imported goods. A weaker dollar may make owning U.S. shares less attractive to foreign investors.
FedEx lowered its full-year earnings outlook due to the weaker-than-anticipated economic environment, sending its shares down 1.8 percent to $105.55.
Shares of Circuit City Stores Inc (CC.N: Quote, Profile, Research) sank 18.4 percent to $8.63 after the home electronics seller reported a larger-than-forecast quarterly loss.
Bear Stearns Co Inc (BSC.N: Quote, Profile, Research) shares declined 0.4 percent to $115.24, reversing earlier gains, when they climbed as high as $119.50. The investment bank posted a sharply lower profit but its chief financial officer Sam Molinaro said the worst of times are behind the company. He said he sees business returning to normal in 2008.
Among retailers, shares of Home Depot Inc. (HD.N: Quote, Profile, Research) fell 2.7 percent to $35.22. The S&P retail index (.RLX: Quote, Profile, Research) was down 2.5 percent.
At midday, stocks had briefly pared losses after stronger-than-expected data on factory activity in the U.S. mid-Atlantic region from the Federal Reserve Bank of Philadelphia.

Euro hits record high vs dollar just shy of $1.40

The euro struck a record high against the dollar on Thursday, extending gains after the Federal Reserve's deep half percentage-point cut in interest rates earlier this week sparked a broad sell-off in the U.S. currency.
The euro climbed to $1.3997 on electronic trading platform EBS, the highest since the launch of the single European currency in 1999 and just shy of the psychologically important $1.4000 level.

AAR Corp (AIR.N: Quote, Profile, Research), a provider of parts and maintenance services to the aviation industry, said it is maintaining its company-wide forecast of top line growth in the mid teens for the full year.
In repsonse to an analyst's query in a conference call, a company executive said the company still sees near-term margins of 10 percent and longer-term margins of 12.5 percent.
Earlier, the company had reported first-quarter earnings of 36 cents a share, which fell short of analysts' expectations of 39 cents a share.

Wal-Mart Stores Inc's (WMT.N: Quote, Profile, Research) Japanese unit Seiyu Ltd (8268.T: Quote, Profile, Research) said on Tuesday it would aim to cut about 450 jobs as part of a restructuring plan.
Seiyu said it planned to book a special loss of 4.5 billion yen ($39.2 million) for the early retirement programme, and accordingly widened its group net loss forecast for 2007 by that amount to 10.4 billion yen.

Stocks may rise on expected interest rate cut

Wall Street expects Federal Reserve policy-makers to cut interest rates next Tuesday to help ease a global credit squeeze, a much anticipated event that spurred stock prices higher this week and could boost them next week.
Investors expect the Federal Open Market Committee to cut the federal funds rate in response to growing concerns that the U.S. economy is slowing and may be heading into recession.
Short-term interest rate futures on Friday indicated investors believe a half a percentage point cut in the federal funds rate is slightly more likely than a quarter percentage point cut when the FOMC meets.
Some investors say the stock market has priced in a quarter-percentage point rise, limiting any upside. But if the past is a guide, investors will react to the actual event, said David Bianco, chief U.S. equity strategist at UBS in New York.
"I think the market's going to have a positive reaction to it, I really do," said Bianco, who expects a 25 basis point cut in the federal funds rate and a 50 basis point cut in the discount rate.
"It will signal a response to what's going on, to try to prevent credit market troubles from spreading to the real economy," he said.
Reuters polls showed on Thursday that economists see about a 30 percent chance that the United States enters recession in the next 12 months should the effects of a housing slowdown continue to seep into the wider economy.
Major U.S. stock market gauges moved up this week in anticipation of a rate cut, with the Dow Jones industrial average (.DJI: Quote, Profile, Research) posting its best week since April.
For the week, the Dow rose 2.5 percent, the benchmark Standard & Poor's 500 Index (.SPX: Quote, Profile, Research) gained 2.1 percent and the Nasdaq Composite Index (.IXIC: Quote, Profile, Research) rose 1.4 percent.
On Friday, the Dow closed up 17.64 points, or 0.13 percent, at 13,442.52; the S&P 500 closed up 0.30 points, or 0.02 percent, at 1,484.25, and the Nasdaq closed up 1.12 points, or 0.04 percent, at 2,602.18.
OPTIONS EXPIRATION TO STIR VOLATILITY
Investors will want to see if the subprime mortgage trauma has worsened for four big investment banks -- Lehman Brothers (LEH.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), Bear Stearns Cos. Inc. (BSC.N: Quote, Profile, Research) and Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research) -- when they release fiscal third-quarter earnings results over three days next week.
The release of third-quarter earnings for most companies doesn't begin in earnest until October.
The banks have diversified business models and are able to profit from worldwide economic growth, which will alleviate any downdraft of credit market issues, said Michael Cuggino, chief investment officer of the Permanent Portfolio family of funds in San Francisco.
"We may be surprised to find the negative impact was not as great in the third quarter as people may have expected," Cuggino said.
Volatility is likely to intensify at week's end because of the expiration of four different options and futures contracts, a quarterly event known as "quadruple witching."
Investors also will be parsing inflation data for August, information on housing starts and building permits, also for August, and unemployment claims for the week ending September 15.
According to a Reuters poll of economists, producer prices, which are a measure of prices paid at the farm and factory gate, are expected to decline 0.2 percent in August when the Labor Department releases data on Tuesday.
The following day, a Labor Department reading for the Consumer Price Index, a key inflation gauge, is expected to be unchanged from July.
Also on Wednesday, housing starts for August are expected to decline to 1.35 million and building permits are expected to decline to the same amount, 1.35 million.
On Thursday, a Labor Department report on U.S. workers signing up for jobless benefits is expected to show initial claims of 321,000.
Although the labor market has shown recent softness and the housing sector is clearly suffering, both Bianco and Cuggino said the overall U.S. economy is not in that bad shape.
"It's been almost astounding how good things have been outside of the financial economy," Bianco said. "For the most part the energy companies, the industrial companies and the technology companies are on the verge of a full recovery of the dip."
Cuggino said that "for every financial service firm that's having difficulties, there's a technology firm that's experiencing pretty good earnings growth and pick-up in business."

Argentina 2008 budget bill sees 7.7 pct inflation

Argentina's 2008 budget bill, presented to Congress on Friday, sees inflation of 7.7 percent and calculates gross domestic product growth at 4 percent.
Latin America's number-three economy is in its fifth straight year of expansion at about 8 percent. In the country's 2007 budget bill, the center-left government of President Nestor Kirchner had also underestimated growth.
The strategy has allowed the government to announce economic results that have exceeded the budget's stipulations.
A central bank survey carried out among analysts last month gave a median outlook for 2008 growth of 6.2 percent (BCRA31: Quote, Profile, Research), with inflation for the year estimated at 10 percent.
High inflation has dogged Kirchner's government. Last year's budget included estimates for inflation in a range of 7 percent to 11 percent.
Inflation has come in below market expectations since January, when the government replaced the head of the consumer price unit at INDEC, the national statistics unit, with a political ally, prompting fears of government meddling with the data.
As a result, investors have become increasingly wary of the country's inflation-indexed bonds, which account for more than 40 percent of total public debt.
Inflation in the first eight months of the year stands at 5 percent, with 12-month inflation through August of 8.7 percent.
In relation to the local currency, the budget bill for next year envisages an exchange rate of 3.21 pesos per dollar. The peso closed on Friday at 3.1950/3.1975 against the dollar in informal trade as measured by Reuters .
The budget will be in force for the first year of a new government following a presidential election on Oct. 28. First lady and senator Cristina Fernandez de Kirchner has a wide lead in opinion polls.
It calculates a primary budget surplus of 3.15 percent of gross domestic product and a $10.06 billion trade surplus.
Official details of the bill broadly confirmed those given by an Economy Ministry source earlier this week.

Tokyo Star lifts year profit forecast by 35 pct

Tokyo Star Bank Ltd (8384.T: Quote, Profile, Research), up for sale by its majority owner, private equity fund Lone Star [LS.UL], lifted its full-year profit forecast by 35 percent on Friday, helped by a property sale.
Dallas-based Lone Star has been in exclusive talks to sell its two-thirds stake in Tokyo Star, a regional bank, to Japanese private equity firm Advantage Partners.
For the year to March 2008, Tokyo Star said it now expected a net profit of 23 billion yen ($200 million), up 35 percent from its previous forecast of 17 billion yen.
Recurring profit was unchanged from the lender's previous estimate of 21.5 billion yen.
The bank said it would book a larger-than-expected special profit of 18.1 billion yen from the sale of property in central Tokyo.
Although a niche player in Japanese banking, Tokyo Star has benefited from solid growth of its deposit-linked mortgages and consumer loans to high-income borrowers.
Tokyo Star said before the close of Tokyo stock trading that it would revise its forecasts later in the day, sending its shares down 3.3 percent to 322,000 yen as investors bet on a downward revision.
The Tokyo bank index (.IBNKS.T: Quote, Profile, Research) finished up 3.3 percent.
Lone Star acquired Tokyo Star's predecessor, Tokyo Sowa Bank, in 2001 for 40.4 billion yen after the lender collapsed under a pile of problem loans. ($1=114.98 yen)

Canada industrial capacity use rises in 2nd-qtr

Canadian industries ran at 83.0 percent of capacity in the second quarter of 2007, the second straight gain after four quarterly declines as stronger output in most sectors offset weakness in autos, mining and forestry.
The figure, reported by Statistics Canada on Thursday, was below the average market forecast for a 83.2 percent industrial capacity utilization rate. Statscan revised the first-quarter rate to 82.8 percent from 83.0 percent and revised all data back to 2005.
The Bank of Canada said last week that the economy is operating further above its production potential than it had estimated in July, a situation that would normally create inflationary pressures.
In its July projections, it said the economy was running at 0.6 percent above capacity in the second quarter.
Manufacturers ramped up their capacity use in the second quarter to 81.3 percent from 81.0 percent in the first quarter despite pressures from a strong Canadian dollar and softer U.S. demand. That followed declines or stagnation in manufacturing capacity use in the previous four quarters.
But weakened U.S. demand for vehicles and parts dampened output at Canadian auto plants and led to a decline in capacity use by transportation equipment manufacturers to 80.5 percent from 82.4 percent in the previous quarter.
Mining capacity use tumbled to 74.4 percent from 82.6 percent because low natural gas prices discouraged exploration. A tough market for lumber meant wood products manufacturers dropped their capacity use to 73.9 percent, the lowest since 1991.

Dollar hits low vs euro, Nikkei dips as PM resigns

The dollar sunk to a record low versus the euro on Wednesday as an expected cut in U.S. interest rates was seen eroding the U.S. currency's yield appeal, while Japanese stocks and the yen slipped after Japan's embattled Prime Minister Shinzo Abe resigned.
Shares elsewhere in Asia rose, with energy stocks in favor after U.S. crude hit a record closing high the previous day, and on expectations the Federal Reserve will lower its benchmark interest rate next week.
European stocks were seen steadying after making strong gains on Tuesday, with financial bookmakers anticipating Britain's FTSE 100 (.FTSE: Quote, Profile, Research), Germany's DAX (.GDAXI: Quote, Profile, Research) and France's CAC 40 (.FCHI: Quote, Profile, Research) all to open little changed.
MSCI's measure of Asia Pacific stocks excluding Japan climbed 0.2 percent by 0630 GMT, adding to Tuesday's 0.7 percent rise, but the Nikkei average (.N225: Quote, Profile, Research) ended 0.5 percent lower after Abe resigned.
"One of the reasons why Japanese stocks have been underperforming, compared to other global markets, was political uncertainty," said Hiroshi Motoki, managing director and chief investment officer at AIG Global Investment Corp in Japan.
"That news will add another negative factor."
Analysts said Japanese stocks would remain under selling pressure until Abe's successor is announced. They added that political uncertainty would support the JGB market, which rose on the news.
Japanese government bond futures ended up 0.23 point at 136.33, after climbing to 136.41, the highest level hit by a lead contract since February 2006.

The impact on the yen was short-lived, with attention more closely focused on weak U.S. economic fundamentals.
"Amid strengthening expectations for interest rates to be cut in the United States, interest rate differentials in the United States and the euro zone seem likely to narrow," said a trader at a Japanese trust bank.
"It looks like the euro will continue to be well supported."
The euro climbed to $1.3880, edging up around 0.3 percent on the day.
The dollar traded at 113.90, retreating from the day's high of 114.40 yen after initial reports that Abe would resign.
The euro was supported by European Central Bank Executive Board member Juergen Stark saying interest rate rises had not been abandoned.
Stark said on Tuesday the ECB had to remain "very vigilant" on inflation developments, comments which suggested the ECB may press ahead with tightening borrowing costs once the current market volatility abates.
Against the yen, the single currency traded around 158.00 yen, after climbing as high as 158.27 yen.

STOCKS GAIN

Although Japanese stocks struggled, bourses elsewhere in the region continued their rally from recent sell-offs.
The MSCI index has risen around 19 percent from a five-month trough plumbed on August 17, and is now just 5 percent below the July 24 record high.
Hong Kong's Hang Seng Index (.HSI: Quote, Profile, Research) climbed 1 percent, while Chinese stocks rose 0.6 percent, recovering after posting their biggest drop in two months on Tuesday on concerns about rising inflation and tighter monetary policy after consumer inflation jumped to a 10-year high.
In favor were energy firms such as Japan's Nippon Oil Corp (5001.T: Quote, Profile, Research) and Australia's Santos (STO.AX: Quote, Profile, Research) after U.S. crude traded around a record high close of $78.23 on Tuesday, not far off the lifetime high of $78.77 set on August 1.
The rise in oil came after an OPEC deal to ramp up production failed to calm concerns about thinning world inventories, which in turn helped boost base metals.
Gold miners including Lihir Gold (LGL.AX: Quote, Profile, Research) powered ahead after the precious metal hit 16-month highs above $714 an ounce on bearish sentiment toward the dollar and chart-based buying. At 0605 GMT, spot gold was at $713.25.

Soaring food prices propelledChina's annual consumer price inflation to 6.5 percent inAugust, the fastest pace in nearly 11 years, cementingexpectations the central bank will defy the global trend andkeep raising interest rates. The inflation rate published on Tuesday, up from 5.6
percent in July, easily surpassed economists' forecasts of 5.9
percent and was the highest reading since December 1996. "Going forward we believe there are non-trivial risks that inflation may continue to edge up," economists at Goldman Sachs
said in a note to clients. "We expect the central bank to respond to higher
inflationary pressures with decisive tightening measures, including two interest rate hikes to the benchmark lending and deposit rates by the end of this year." China also reported a trade surplus for August of $24.97 billion. It was the second biggest on record but slightly lower
than forecast as the ending of some tax rebates dented exports. The ruling Communist Party, aware that inflation has touched off unrest in China down the ages, has voiced increasing concern about the speed of price rises. A senior party researcher warned on Monday that inflation becomes difficult to control once it exceeds 5 percent, while a local paper said Beijing had told schools and colleges in the capital not to raise canteen food prices as inflation climbs. The National Bureau of Statistics said inflation was driven by an 18.2 percent leap in the cost of food, which accounts for a third of the consumer price basket. Meat prices rose 49.0 percent in August from a year earlier, reflecting a shortage of pork, China's staple meat. China's pig population has fallen 10 percent due to blue-ear disease and reduced incentives to rear hogs, including fast-rising feedgrain costs and low prices last year. China, the world's biggest producer and consumer of pork, could quadruple its imports of the meat this year to 100,000
tonnes to ease the shortage, industry sources said on Tuesday. The government has already introduced a raft of incentives to increase the supply of pork. In one downtown Beijing alley
on Tuesday, the inducements seemed to be working: a woman was taking an oinking piglet, and her dog, for an early-morning walk.
CENTRAL BANK ON ALERT
Most economists accept that a central bank can do little about supply shocks such as a shortage of pigs; non-food prices, moreover, rose just 0.9 percent in August from a year earlier. But the People's Bank of China has voiced worries that inflation will start rippling through the economy as people start to expect prices to keep rising and demand higher wages. "The risk is that if the economy continues to grow very rapidly, this inflation, which looks concentrated in food,
starts spreading and influencing inflationary expectations," said Rob Subbaraman, chief Asia economist for Lehman Brothers in Hong Kong. But if people do respond to higher prices by rearing more pigs, food prices could start to fall sharply at a time when weaker U.S. growth might be sapping Chinese exports, he said. "That could unmask severe oversupply in China's industrial sector, which could lead to a flip from concern about inflation to worries about deflation. So you don't want to overtighten," Subbaraman added. To keep a lid on inflation and prevent the world's fourth-largest economy from overheating, the central bank has
raised interest rates four times this year and ordered banks on seven occasions to tie up more of their deposits in reserve. CONCERNED Joerg Wuttke, president of the European Chamber of Commerce in China, said he was not too concerned by current inflation as it was confined to food; supply shortages were likely to ease. But, like many economists, he frets that too much cash is pouring into the banking system from the trade surplus, which jumped 71 percent in the first eight months to $161.76 billion. "What worries me more is the liquidity in the market. There is so much money, and given all these exports and the money that comes back in U.S. dollars and also this easy credit, that really causes a major concern," Wuttke told reporters. Li Mingliang, an analyst with Haitong Securities in Shanghai, expects inflation to accelerate in September, triggering another rate rise in October. Food oil cost 34.6 percent more in August than a year earlier, eggs were up 23.6 percent and vegetables 22.5 percent. It is the rising cost of such everyday goods that has people grumbling and China's leaders worried. Inflation was an
important ingredient in the unrest that led to the 1989 Tiananmen Square pro-democracy protests that were crushed by troops. Zhao Qingming, an economist with China Construction Bank in Beijing, said the near-term outlook for inflation could depend on the autumn harvest. "It seems China will have a bad harvest this year because of droughts and other disasters, and that will push up food prices further," he said.

Average house price near £200,000

The UK's biggest mortgage lender said prices rose by another 0.4% in August, taking the average price to £199,770.
Its latest survey says the increase pushed the annual rate of house price inflation up from 11.2% to 11.4%, despite higher interest rates.
However, the lender predicts prices will slow down this autumn, as the past year's five rate rises take effect.
"The increase in mortgage rates since last summer is having an effect on housing affordability and will bite further during the coming months," said Martin Ellis, the Halifax chief economist.
"Negative real earnings growth in the first six months of this year, and rising food prices, are also reducing the income households have available for housing."
Further slowdown?
The strong economy, growing employment and shortage of housing were among the factors pushing prices higher, said the lender.
But it pointed to evidence that the market would slow down soon.
Lenders approved fewer mortgages during the summer months, interest from new buyers has fallen for eight months in a row, and actual property sales in July were 10% lower than a year ago.
Meanwhile, the higher level of interest rates has been eating into most people's take home incomes.
"Prices rose by 1.6% between June and August, compared with 4.5% in the three months to March," said Mr Ellis.
"Whilst the market remains robust, this provides further evidence that house price inflation has slowed since the beginning of the year."
Price breakthrough?
This is not the first time that a house price survey has claimed that average prices are at or near £200,000.
The monthly survey from the Communities and Local Government department (DCLG) said UK prices passed that level last December.
It takes its figures from a very large sample of all completed house sales, whereas those of the Halifax and Nationwide are taken from a sample of mortgage offers made to their own customers.
The effect that different methodologies can have on the final figures is illustrated by the experience of the Land Registry for England and Wales.
Its recently-introduced monthly survey of house prices, measured when they are registered with it at the end of the house buying process, says that they currently stand at £181,460.
But a previous quarterly survey, now discontinued by the Land Registry, reported last year that the £200,000 mark for England and Wales was passed between July and September 2006.

Oil holds above $74, investors on hurricane watch

Oil held above $74 on Tuesday, as investors tracked a potentially catastrophic hurricane threatening Central America and OPEC stuck to supply curbs ahead of its meeting next week.
U.S. crude (CLc1: Quote, Profile, Research) was up 10 cents at $74.14 by 1122 GMT, after trading electronically on Monday when the U.S. Labor Day holiday shut the New York trading floor. London Brent crude (LCOc1: Quote, Profile, Research) was down 10 cents at $73.31.
Felix, now a dangerous Category 5 hurricane, was due to hit land in Nicaragua and Honduras on Tuesday, though oil and gas producers had yet to evacuate rigs in the Gulf of Mexico, home to a third of U.S. crude and 70 percent of Mexican crude output.
"Helpfully for the oil price and OPEC, Hurricane Felix is on a westerly path that could reach Mexico's Cantarell, the world's third-largest oilfield, by the end of the week which suggests a picture of tight market supply," said Richard Batty of Standard Life Investments.
Traders were also waiting for OPEC's meeting on September 11, with expectations the exporter group will retain output curbs. A Reuters survey showed OPEC kept supply restricted last month.
Consumer nations have been urging the Organization of the Petroleum Exporting Countries to pump more crude as U.S. oil climbs back towards its all-time high of $78.77.
Analysts also are convinced OPEC must boost supplies to keep pace with growing demand this winter.
An OPEC source told Reuters on Tuesday the 12-member group may have to raise supplies by up to 1 million barrels per day (bpd) later this year.
OPEC officials have said repeatedly that -- for now -- the
world has more than enough crude. The only member suggesting the possibility of an imminent supply boost was Indonesia, OPEC's second smallest producer.
OPEC agreed last year to lower production by 1.2 million barrels per day (bpd) from November 1 and by a further 500,000 bpd from February 1.

HSBC to buy 51 pct of Korean bank for $6.3 billion

HSBC (HSBA.L: Quote, Profile, Research) has agreed to buy a 51 percent stake in Korea Exchange Bank (KEB) (004940.KS: Quote, Profile, Research) from U.S. private equity firm Lone Star for about $6.3 billion in cash to boost its profile in Asia's third-largest banking market.
The deal will mark Lone Star's (LS.UL: Quote, Profile, Research) exit from a controversial investment in South Korea, if it goes through, and allow the private equity fund to more than quadruple its initial investment in KEB.
HSBC, Europe's biggest bank, said it did not intend to make a tender offer to remaining KEB shareholders and that South Korea's sixth-biggest bank would remain listed on the Korea Exchange.
It said the deal would boost its earnings in the first full year of ownership. The deal is subject to governmental and regulatory approvals, and HSBC said the purchase price would increase by $133 million if the deal was completed after January 31, 2008.
"Our stated strategy is to focus on expanding HSBC's presence in important growth economies," HSBC Chairman Stephen Green said in statement. "This prospective acquisition reflects that strategy."
A deal would be the second-largest acquisition in South Korea's financial sector after Shinhan Financial Group's (055550.KS: Quote, Profile, Research) $7.2 billion acquisition of LG Card (032710.KS: Quote, Profile, Research) in 2006 and comes after Citigroup (C.N: Quote, Profile, Research) and Standard Chartered (STAN.L: Quote, Profile, Research) bought Korean banks.
HSBC may have to brace for a long, tough battle to get its KEB purchase approved by local regulators, however.
South Korean authorities have said that they would put on hold a review of the current deal until all legal issues surrounding KEB are resolved.
Prosecutors say a former government official colluded with a lawyer hired by Lone Star and KEB's chief executive to inflate KEB's losses, allowing Lone Star to buy it in 2003 for around $900 million less than it was worth.
The allegation is being reviewed by a Seoul district court.
The head of the South Korean unit of Lone Star, Paul Yoo, has meanwhile been standing trial on suspicion he tried to lower the share price of the former credit card unit of KEB by spreading incorrect information and thus to making it cheaper to absorb the card unit.
The protracted legal tussle led the U.S. investment fund to cancel a $7.3 billion agreement to sell KEB to top local bank Kookmin (060000.KS: Quote, Profile, Research) last November.
Kookmin and KEB had no immediate comment.
Singapore's DBS Group Holdings (DBSM.SI: Quote, Profile, Research) said in June it had ended talks to buy Lone Star's stake in KEB, hinting at legal issues to explain why it walked away from KEB.

The crisis in U.S. mortgages is unlikely to have a direct impact on Spain's housing market or financial systems, Prime Minister Jose Luis Rodriguez Zapatero said in a newspaper interview published on Sunday.
The remarks were more upbeat than those of Spanish Economy Minister Pedro Solbes on Friday, who said the economy faced risks from the global liquidity squeeze via its potential impact on other big world economies and the euro zone.
"Our financial systems, our lending institutions are among the most solvent in the world," Zapatero said in an interview with left-leaning newspaper El Pais.
The prime minister said he believed interest rates had reached their upper limit, echoing comments made on Friday by Solbes, and that Spain's economy was growing at a solid pace.
"The message is one of calmness and confidence," he said.
The subprime crisis coincides with the end of a nine-year residential construction and property boom in Spain and a rise in mortgage rates to a seven-year high.
Spanish growth, still well above average euro zone growth, came off a six-year high during the second quarter due to a slowdown in construction and consumer spending.
Economists expect growth to fall further as Spanish banks become more risk averse and reduce lending to firms and households that have some of Europe's highest debt levels.
Zapatero also said in the interview that he expected to book a public sector budget surplus equivalent to 1.8 percent of gross domestic product in 2007.
This is higher than previous government estimates of a full-year surplus of 1 percent of GDP and in line with 2006's surplus of 1.83 percent.

Bernanke: Fed ready to act

Federal Reserve chairman Ben Bernanke described the recent housing downturn as "sharp" and added "that further declines in homebuilding are likely" in a highly anticipated speech Friday morning.
But he also hinted that the central bank was prepared to cut rates if necessary, news that may soothe jittery investors.
Stocks, which were trading significantly higher before Bernanke's prepared remarks were made public, initially gave up some of their gains following the release of the speech. But they bounced back a bit as the day progressed and investors turned to President Bush's speech about reforming the mortgage market. The Dow closed up more than 119 points, or 0.9 percent, while the S&P 500 and Nasdaq both gained more than 1 percent.
Bernanke, making the remarks at the Federal Reserve Bank of Kansas City's Economic Symposium in Jackson Hole, Wy., said that "if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the broader economy." He added that the Fed was "following these developments closely."
Concerns about increased defaults by subprime mortgage borrowers, consumers with poor credit histories, have rattled Wall Street, causing wild swings in stocks over the past month and prompting the Fed to cut its discount rate two weeks ago.
Bernanke further explained the reason behind the cut of the discount rate, which is what banks pay to borrow money from the Fed, in his speech and added that the Fed was ready to take more action if need be.
He said that the purpose of the discount rate cut was to assure that funds would be available to banks and "alleviate concerns about funding that might otherwise constrain depositories from extending credit or making markets" and that "the Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets."
Investors were eagerly awaiting Bernanke's comments ahead of the long Labor Day holiday weekend Friday in order to see if there would be any clues as to whether the Fed would lower the federal funds rate, which influences the rates on various consumer loans, at its next meeting on September 18, if not before.
One economist said that it is increasingly likely the market's growing wish for a rate cut will be met.
"This looks like the Fed will cut rates on September 18. Obviously, events between now and then can change things but the markets are priced to the expectation that the fed, will at the very minimum, cut rates by a quarter of a point," said Keith Hembre, chief economist with First American Funds in Minneapolis.
Ashraf Laidi, chief currency analyst with CMC Markets US, a currency brokerage firm, added that he thinks the Fed will cut the fed funds rate by a quarter of a percentage point in September and one more time after that, leaving rates at 4.75 percent by the end of the year.
"The market is getting some sense of assurance from Bernanke's remarks, the reiteration that the Fed will do what is needed," he said.
Hembre said that investors might also be encouraged by the fact that Bernanke said the Fed would rely more on anecdotal evidence going forward and not solely on hard, historical data.
Bernanke, an academic by training, has been criticized by some for being out of touch with what is really going on in the economy and that he should be more like his predecessor Alan Greenspan, who was quicker to react to economic and market crises.
"Even though he's an academic, he has to realize the limitations of hard data. The Fed is going to have to take into account anecdotal pieces of information and make judgments based on them," Hembre said.
In his speech, Bernanke conceded that "in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation. Consequently, we will pay particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts around the country."
But Bernanke maintained that it is not the Fed's responsibility to bail out borrowers who took on risky loans or the financial institutions that made them, saying that it would not be "appropriate...to protect lenders and investors from the consequences of their financial decisions."
Nonetheless, he did say that "developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."
Bernanke also said that there is a risk that "the further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected, with possible adverse effects on consumer spending and the economy more generally."
Still, both Laidi and Hembre said Bernanke's remarks were not too surprising since they differed little from what the Fed said about the economy in the minutes from its August 7 meeting, which were released earlier this week.
The Fed indicated in those minutes that it was keeping an eye on the woes in the credit markets but it ultimately decided against a rate cut at that meeting.
But David Resler, chief economist for Nomura Securities International Inc., said it was important for Bernanke to further hammer home the notion that the Fed now gets how significant the mortgage crisis is. And Resler thinks he succeeded in that regard.
"It's more than a reiteration. It's reiteration with added context. Bernanke didn't say anything substantively new but he verifies the obvious. The turmoil has the potential to change the economic outlook and until we know more, the Fed needs to proceed cautiously," Resler said.

Peru ministry ups 2007 growth view despite quake

Peru's finance ministry said on Friday it raised its forecast for economic growth this year to 7.2 percent from 7 percent.
The ministry had said it might have raised the estimate to 7.5 percent but a powerful earthquake on Aug. 15 trimmed the new forecast.
"It is expected that the economy will expand 7.2 percent this year and 6.2 percent in 2008. The most dynamic sectors of the economy will be services like construction and commerce," the ministry said in a statement.
Peru, a minerals exporter, plans to spend millions of dollars to rebuild infrastructure along its central coast that was damaged in the earthquake. Peru's economy has been growing for six years.