RBI hints at intervention
US majors flash profit warnings
Stock trading rules relaxed in US
Wall Street gets ready for action
Opec promises prompt action

 
 
RBI HINTS AT INTERVENTION 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, Sept. 15: 
After maintaining a stoic silence over the week when the battered rupee plumbed new depths, the Reserve Bank of India today issued a statement saying that the central bank was closely monitoring the situation and would not hesitate to intervene if the situation demands.

At the same time, RBI also made it clear that it intends to continue with the policy of stable interest rates.

The RBI statement is expected to restore some kind of sanity to the foreign exchange and government securities markets and the Indian currency may get some support when trading resumes on Monday.

“We could see some unwinding by speculators. That could provide some reprieve to the value of the rupee,” a forex analyst said.

The impact of the central bank’s statement was already visible in the government securities market: the price of the benchmark 10-year 11.5 per cent security which crashed Rs 3 to Rs 110 during the day recovered marginally after the announcement to close at Rs 110.60

An RBI spokesperson said the central bank would “continue to watch the markets very closely and will be prepared to sell foreign exchange directly or indirectly, if it considers it necessary to do so, to meet any unusual supply-demand gap in view of the prevailing uncertainties.”

While downplaying the extreme volatility in the forex and government securities markets, the central bank observed that “it expects any temporary hiccups to disappear and markets to function normally as soon as the present international crisis dissipates. As such, the RBI does not intend to shift its monetary policy stance of keeping the interest rates stable with adequate liquidity.”

Hinting that the large forex reserves at its command would be used as a buffer against any large-scale erosion in the value of the rupee, the RBI said it has “more than adequate liquidity in foreign exchange with the reserves at over $ 45 billion.”

At the close of the trading on Friday, the rupee hurtled to a new closing low of 47.82/84 against the dollar due to hectic demand for the greenback from companies amid dwindling supplies as foreign institutional investors have tightened their purse-string sensing US retaliation in this region.

The government security market too witnessed a massive upheaval yesterday as gilt prices were hammered. Prices of few securities even saw a massive drop of Rs 1.50.

Market analysts believe that the government security prices is likely to salvage some of their losses when trading resumes on Monday.

   

 
 
US MAJORS FLASH PROFIT WARNINGS 
 
 
 
New York, Sept. 15 : 
The attacks on the World Trade Center and Pentagon earlier this week are expected to hurt the financial results of a number of companies, including General Electric, Ford, and Delta which issued profit warnings on Friday linked to the devastation.

Ford Motor Co said disturbances in transportation following the attack has hampered delivery of components forcing it to cut its third quarter car production by 110,000 to 120,000 vehicles. “As a result, third quarter results now will fall short of our previous forecast for earnings of 10 cents per share before one-time items,” Ford warned in a statement.

Ford’s warning was followed by GE which said its Employers Reinsurance Corp, its insurance business arm, was facing $ 600 million in claims before tax or $ 400 million after tax, cutting GE’s third quarter forecast by 4 cents a share to 33 cents per share.

Wall Street money managers warned this week that large corporations, crippled by shutdowns, the inability to move goods and services and payouts by insurance companies, were facing costs of billions of dollars.

Insurance and travel-related companies, including hotel chains and airlines, are expected to be the worst hit, but earnings of retailers and other firms relying on consumer sentiment are also expected to fall after the crash of hijacked commercial airliners into the business and military centres of the US.

GE and Ford’s warnings come at a time when corporate profits for Standard & Poor’s 500 index .SPX companies are already being squeezed by a slowing economy.

They are now expected to drop by 14.8 per cent in the third quarter, research firm Thomson Financial/First Call said. That compares with the 14.7 per cent decline in year-over-year profits expected on Tuesday, before analysts began reacting to the attacks.

Profits for S&P 500 companies are expected to drop by 3 per cent in the fourth quarter, compared with the 2.6 per cent decline expected on Tuesday. Expectations for 2001 are for a drop of 10.2 per cent year-over-year compared with a previous forecast of a decline of 10.1 per cent.

GE’s new chairman and chief executive Jeff Immelt said: “There is still uncertainty about the import of this extraordinary event. We are providing the best estimates we can make at this time”.

The GE arm is among several insurance giants, including, American International Group, Zurich Financial and Berkshire Hathaway that have provided insurance coverage to the World Trade Center and on the four hijacked aircraft used on Tuesday. The International Air Transport Association had said revenue losses and extra costs for the industry would be $ 10 billion. Midway Airlines Corp , already in bankruptcy proceedings, said would end all operations immediately, as a result of the attacks.

   

 
 
STOCK TRADING RULES RELAXED IN US 
 
 
 
Washington, Sept. 15 : 
The US authorities invoked emergency powers to relax trading rules for the reopening of stock markets on Monday after the destruction of the World Trade Center.

The main ingredient of the new regime is a wider tolerance for companies to buy back their own shares, opening the way for major securities firms to shore up Wall Street in the case of a freefall.

“These markets are the world’s strongest and most vibrant, in spite of the heinous acts of last Tuesday,” the Securities and Exchange Commission said.

Trading restrictions were relaxed under emergency powers, which were used for the first time.

The new rules stipulate that mutual funds can borrow money from affiliated banks so that, if mutual fund investors rush to redeem shares, fund companies can pay them without being forced to sell stock. It also allows public companies to repurchase their own securities without meeting the normal volume and timing restrictions.

   

 
 
WALL STREET GETS READY FOR ACTION 
 
 
 
New York, Sept 15 : 
Wall Street moved a step closer to resuming business as usual when subway trains began rolling into the financial district early on Saturday for the first time since terror attacks toppled the World Trade Center and shut down stock markets for the longest time since the First World War. The rattle of the city’s famous subway cars in predawn darkness was a prelude to the planned reopening of the stock markets on Monday. The return of public transportation came as emergency workers continued to dig in the rubble of the twin 110-story towers that collapsed after Tuesday’s air attacks that left hundreds dead and thousands more missing.

The New York Stock Exchange, American Stock Exchange and the Nasdaq all assured investors on Friday they would reopen for trading on Monday morning after being closed for four days. The U.S. stock market has not shut down for so long since the outbreak of the First World War.

At a news conference on Friday night, Giuliani outlined plans to open up part of the Lower Manhattan area -- home to America’s key financial institutions -- that has been sealed off to all but rescue workers.

   

 
 
OPEC PROMISES PROMPT ACTION 
 
 
 
Dubai, Sept. 15 : 
The oil minister of United Arab Emirates, Obaid bin Saif al-Nasseri said that the Organisation of the Petroleum Exporting Countries (Opec) would act immediately to tame oil prices if they spiral out of control, but cautioned that speculators, not supply shortages, were driving up markets.

“If we find prices above an acceptable level, Opec would take the necessary measures to halt the prices from going up sharply,” said Nasseri. “Any price above, say $ 30 is obviously unacceptable,” he added.

World oil prices rose on Friday on fears of US military retaliation for Tuesday’s suicide attacks on New York and Washington, with London’s Brent blend futures closing at $ 29.43 a barrel. That rally will push Opec’s reference oil price, which stood just over $ 26 on Thursday, well beyond $ 27 a barrel. Nasseri said Opec would plot a course of action at its September 26 meeting in Vienna.

“Opec has a responsibility for the world, for consumers...we are not going to take advantage of this bad incident which took place in the US,” he said.

Govt on alert

The government said today it is closely monitoring international oil scenario for any radical changes in price and supply situation arising out of a possible US military retaliation. Senior petroleum ministry officials are reviewing the situation everyday with inputs from oil PSUs and oil co-ordination committee, while keeping a close watch on the global price movement, said petroleum minister Ram Naik.

“We holding meetings daily to review what is happening internationally,” he said. India has about one month’s petroleum product inventory and crude oil supply contracts till November have been firmed up.

   
 

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