Gold steadies after slip, underpinned by oil, dollar

Mon Jul 28, 2008 9:29am EDT

By Jan Harvey

LONDON (Reuters) - Gold was steady in Europe on Monday as firmer oil and a weaker dollar underpinned prices, with trading light ahead of key economic data due later this week.

The precious metal is expected to remain rangebound as the market takes a breather after Friday's volatile session, with traders eyeing an initial target of $935 an ounce.

Gold was trading at $927.40/929.40 at 9:12 a.m. EDT, unchanged from its level late in New York on Friday, when it moved in a volatile $16 range.

UBS analyst John Reade said light summer liquidity conditions were partly to blame for Monday's directionless trade.

"We have non-farm payrolls this week, which is always the biggest event in the forex market," he added. "People tend not to trade too much ahead of that."

Oil prices meanwhile are underpinning gold. Crude bounced back after its $20-a-barrel slide of the last two weeks, boosting interest in gold as an inflation hedge, and in commodities as an asset class.

Crude futures rose above $124 a barrel on Monday as fresh attacks on oil installations in major producer Nigeria fuelled fears over the outlook for supply.

The dollar also weakened a touch against the euro, adding to the appeal of gold as an alternative investment, as investors concluded the U.S. economic climate remains poor.

Investor interest in the metal has steadied.

Holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, were unchanged on Monday at 673.4 tonnes. The amount of gold held to back ETF Securities' Physical Gold ETC PHAU.L rose 1 percent week-on-week.

PLATINUM STEADY

Among other precious metals, platinum steadied after a second week of decline.

The metal has been pressured by fears over weakening demand as the U.S. and global economic outlook darkened and amid speculation over the financial health of carmakers in the U.S. and Japan.

Platinum is widely used by the car industry in autocatalysts and any sign of a slowdown in the automotive sector could hit demand for the metal hard.

Supply fears linked to a power shortage in South Africa also eased after the country's state power utility Eskom said it sees no further powercuts this year.

The world's top platinum producer AngloPlatinum said on Monday it will meet its annual production target of 2.40 million ounces -- against 2.47 million last year -- and expects output to increase significantly in the second half.

Investment bank JP Morgan on Monday cut its 2008 price target for platinum to $1,885 an ounce from $2,156, and for 2009 to $1,650 from $1,981, citing worsening economic conditions.

Michael Jansen, an analyst at the bank, said in a note that it appears South Africa's major mining companies are "now coping quite successfully with the power situation".

Spot platinum was little changed at $1,746.00/1,766.00 against $1,745.00/1,765.00 late in New York.

Spot palladium rose to $388.50/396.50 an ounce from $380.50/388.50 late in New York.

Jansen added however that "palladium demand is weaker than platinum demand due to the downsizing taking place in term of new vehicle purchases in the U.S. right now".

"Hence, while we are short term bearish platinum - looking for a move down towards $1,500 over the next 9 months - the outlook for palladium is not a great deal better," he added.

Silver was steady at $17.34/17.41 an ounce from $17.35/17.43 late in New York.

(Reporting by Jan Harvey; Editing by Michael Roddy)



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Oil eases to $123, U.S. demand in focus

Mon Jul 28, 2008 10:19am EDT

By Alex Lawler

LONDON (Reuters) - Oil fell to $123 a barrel on Monday, giving up an earlier gain, as dealers focused on renewed signs of faltering demand in top fuel consumer the United States.

The U.S. Transportation Department said the number of miles driven on U.S. highways in May fell a record 3.7 percent from last year. That put a brake on a rally caused by an attack on Nigeria's oil industry.

"It looks like the pattern of last week, of rallies which are then sold into, is going to be repeated," said Christopher Bellew of Bache Commodities.

U.S. crude was down 20 cents at $123.06 a barrel by 10:15 a.m. EDT, off a high of $125.22. London Brent was down 11 cents at $124.41.

The main militant group in Nigeria's Delta region said it had attacked two Royal Dutch Shell pipelines. Shell said it halted some production due to the incident but declined to say how much.

The incident in Nigeria followed the kidnapping of eight foreign oil workers last week and two bomb blasts in Istanbul on Sunday. No one has claimed responsibility for the Turkish attacks.

Oil has fallen from a record high of $147.27 on July 11, pressured by signs that record-high prices and slowing economies are curbing demand. Dealers said prices could still head lower for now.

MILES DRIVEN

In the latest sign that demand is being eroded, the number of miles driven on U.S. highways in May fell a record 3.7 percent, or 9.6 billion miles, on last year, the Transportation Department said.

It was the biggest drop ever for May, which usually sees increased traffic due to Memorial Day vacations and the beginning of summer. However, high gasoline prices discouraged driving.

"We now seem to be in the situation where every rally is being sold," said Glen Ward, joint head of commodities at ODL Securities in London.

"We still have bullish headlines -- bombings of pipelines in Nigeria, tropical storms/hurricanes and the ongoing Iranian nuclear issue -- but these all seem outweighed by the drop in demand due to the high oil price."

Data from the Commodity Futures Trading Commission released on Friday showed that speculative funds were shifting to a net short position -- a bet on falling prices -- for the first time in 17 months.

Developments in Iran provided some support. The country has more than 5,000 active centrifuges for enriching uranium, its president said, suggesting a rapid expansion of nuclear work.

President Mahmoud Ahmadinejad's announcement was likely to annoy major powers which have offered Iran a package of economic and other incentives to persuade Tehran to suspend its enrichment activities.

(Additional reporting by Ikuko Kao in London and Fayen Wong in Perth; editing by James Jukwey)




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JPMorgan Cazenove grabs ex-Barclays FD Kheraj as CEO

Mon Jul 28, 2008 9:54am EDT

By Olesya Dmitracova and Steve Slater

LONDON (Reuters) - JPMorgan Cazenove said on Monday that former Barclays Plc finance director Naguib Kheraj will take over as its new chief executive in October.

The investment bank said on Monday he will take up the position on October 6, filling the gap left at the helm of one of Britain's best-known corporate advisors since its last chief executive stepped down in March.

Analysts said Kheraj was well respected at Barclays and his resignation in October 2006 was a surprise but was partly blamed on the increasing regulatory burden on a finance director and limited chance to move up to chief executive in the near future.

At the time analysts said the well-connected Kheraj was likely to return to investment banking or private equity.

JPMorgan Cazenove was set up in 2005 by British brokerage Cazenove and U.S. investment bank JPMorgan Chase & Co.

Cazenove is financial adviser to Barclays so Kheraj had links with JPMorgan Cazenove during the decade he spent at Britain's third biggest bank.

Aged 44, he was Barclays finance director for three years and before that held senior positions at investment bank Barclays Capital and its wealth management and fund management arms. He was previously chief financial officer in Europe for Salomon Brothers.

"Both we and our clients are very fortunate that he (Kheraj) will now be leading this firm as it consolidates its position as the UK's foremost investment bank and builds on its international franchise," JPMorgan Cazenove's chairman, David Mayhew, said in a statement.

Mayhew, a Cazenove veteran who acted as the venture's chief executive while a successor was sought, added on a conference call with journalists that JPMorgan Cazenove had no job-cutting program in place and would continue to hire selectively.

Many global banks have been reducing headcount since the credit crunch took hold last August.

JPMorgan Cazenove declined to comment on Kheraj's salary.

He was paid over 5 million pounds ($9.9 million) by Barclays in 2007, mainly due to 4.9 million pounds for advisory work from May to December related to the failed attempt to buy Dutch bank ABN Amro.

As finance director from January 2007 to March 2007 he earned 657,000 pounds in salary and bonus. He was paid 2.6 million pounds in 2006.

He also advises Britain's Financial Services Authority on supervision of banks. He has been in that part-time role since April.

(Editing by David Holmes, Greg Mahlich)




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Nearly 200 ships, barges stalled in La. due spill

Mon Jul 28, 2008 9:45am EDT

HOUSTON, July 28 (Reuters) - More than 180 ships and barge tows have stacked up awaiting U.S. Coast Guard permission to move after last Wednesday's oil spill in New Orleans, a Coast Guard spokesman said on Monday.

He said 33 deep-draft outbound, 100 deep-draft inbound and 49 tugs and barge tows were awaiting cleanup of the spill or special permission to move, for a total of 182.

As of Monday, 23 had been allowed to move despite the spill, and 45 others were moving to a vessel-cleaning site to await clearance to move, the spokesman said. (Reporting by Bruce Nichols)



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KKR says market slump good time for going public

Mon Jul 28, 2008 9:48am EDT

(Adds dateline, new throughout)

NEW YORK, July 28 (Reuters) - KKR & Co's proposed merger with struggling affiliate KKR Private Equity Partners , and then going public on the New York Stock Exchange will help the giant buyout firm expand at an ideal time for making acquisitions, executives said on Monday.

On Sunday the New York firm said it would acquire Amsterdam-listed KPE through a share swap. The combined company, one of the biggest and best known leveraged-buyout firms, then would go public by the end of November.

Co-founder George Roberts said during a conference call on Monday that pursuing a public listing during such weak markets showed management's commitment to building KKR. Challenging times, he said, are often the right time to acquire companies.

A listing, which comes more than a year after KKR initially announced plans to go public, will give the firm a currency with which to attract new people and expand.

Co-founder Henry Kravis, on the same call, noted the combined firm would benefit from its recent expansion into fixed income businesses. Kravis also stressed that the firm had generated gross annual returns of 26 percent throughout its history, outperforming public markets in every environment.

KPE investors, Roberts said, will benefit from holding shares in a bigger, more diverse company. (Reporting by Jui Chakravorty and Paritosh Bansal; Writing by Joseph A. Giannone; Editing by Lisa Von Ahn)



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German Confidence Drops To Five Year Low, SEC Limits Short-Selling

Daily Forex Fundamentals | Written by DailyFX | Jul 28 08 11:29 GMT |

Fundamental Headlines EURUSD - The economic outlook for Germany remains bleak as consumer confidence declined to the lowest level in five years. GfK AG's index fell to 2.1 for August from 3.6 in July, the lowest level since June 2003. Soaring energy prices coupled with upwards inflationary pressures have diminished consumer purchasing power. Additionally, record food prices and the U.S. housing slump has decreased demand for exports, also squeezing the economy. AUDUSD - Australian new home sales rose 4.0 percent in May, fueled by record immigration. Despite an increase in living costs, the resources boom in Western Australia has attracted new workers. Overall home sales have risen just 0.4 percent over the first half of 2008, amid record fuel prices and inflation levels currently at a 12-year high. NZDUSD - New Zealand's trade deficit shrunk to NZ$4.48 billion in the year ending June 30, amid a curbed demand for imports and an unexpected rise in exports. The slight turnaround for the contracting economy was unforeseen, as the Bloomberg survey of economists predicted a NZ$4.64 billion fall. As domestic demand cools, New Zealand has faced slowing growth throughout the first half of the year, dropping the economy into its first recession since 1998. KKR Slates Public Offer to Rescue an Affiliate (link) - Wall Street Journal SEC Intensifies Efforts to Rein in Short Selling (link) - Wall Street Journal MPs Seek Windfall Tax on Energy Profits (link) - Financial Times European Stocks, U.S. Futures Fall; Banks, Airlines Lead Drop (link) - Bloomberg Hedge Funds May Post Worst Month in 5 Years as Bank Bets Sour (link) - Bloomberg DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Greenback Mixed in the Markets

Daily Forex Fundamentals | Written by Crown Forex | Jul 28 08 11:20 GMT |

The greenback is still holding its ground in the markets as the Congress passed legislation to support the two giants Freddie Mac and Fannie Mae. They approved Henry Paulson's idea as they believed this would help the U.S out of the worst credit crisis since the Great Depression. Another support to the rising dollar is that they are expecting the GDP annualized reading scheduled later this week to show that the economy has expanded hinting for an interest rate hike. The euro is strengthening against greenback as now the focus is currently on the performance of the U.S economy and the fundamental data due to release later this week. Using the momentum indicators we see that it is providing us with an upside direction. For the EUR/USD pair we see a strong support at 1.5670 while a resistance at 1.5755 and it if breaches this point it will head towards the major resistance level at 1.5833. The pair is currently trading at 1.5738 while recording a high of 1.5743 and a low of 1.5683. As for the UK economy we see that the drop in the house price index continued to put downward pressure on the pair. We see the royal currency trading at 1.9867 around the major support of 1.9855 while a resistance at 1.9980. The GBP/USD recorded a high of 1.9912 and a low of 1.9840. The yen is moving between the support level at 107.35 and the 108.20 resisatnce as the pair is now trading at 107.71. The USD/JPY recorded a high of 108.06 and a low of 107.56, and we believe the pair will remain trading among those levels today due to the lack of major market movers, unless the American session proves otherwise. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Jul 28 08 11:34 GMT |

USD-CHF @ 1.0330/35.... Break below 1.0350 seen R: 1.0350 / 1.0400 / 1.0450 / 1.0500 / 1.0550 S: 1.0300 / 1.0270-250 An important level in the form 1.0350 has been broken in the day. For now, 1.0300 is an important Support that is not expected to break today. If it does 1.0269-80, the Max Low for the day, will come into the picture. To see the chart click on: http://www.kshitij.com/graphgallery/chfcandle.shtml Till 1.0300 holds, a rise towards 1.0400 and beyond could still be possible over the week. GBP-USD @ 1.9877/81.... Support at 1.9850-30 R: 1.9900 / 1.9925-50 / 2.00 S: 1.9850-30 / 1.9780 After finding Support near 1.9830-40 in the day Cable has risen slightly. If the Support continues to hold a further rise in the day towards 1.9900 and beyond could be seen. However, a close above 1.9925 doesnot seem likely and could be bullish for the pair. Overall, the upside remains under serious threat as the UK data continues to disappoint. The Support at 1.9850-30 if broken could lead to a massive slide targeting 1.95-94. AUD-USD @ 0.9579/83... Support held R: 0.9590-0.9610 / 0.9640-50 / 0.9700 S: 0.9550-40 / 0.9500 / 0.9470-60 / 0.9400 A rise in the pair since morning has led to a short rally to 0.9590 in the day so far. As the earlier mentioned trendline at 0.9550 has held a rise from here towards 0.9650 and eventually 0.9700 could be seen over the week. To see the trendline click on: http://www.kshitij.com/graphgallery/audcandle.shtml Over the remainder of the day, there is very little chance that 0.9650 will be seen in the day, as the projected Max High for the day is at 0.9610. A slight dip in the day, close to 30-40 pips is possible from the Max High once Resistance is felt there. Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jul 28 08 11:55 GMT |

Credit concerns continued to plague US marts and led to some selling of the buck in the London session. A news report cited Minneapolis Fed President Stern, a noted hawk, saying that the US credit crunch is poised to worsen. Traders had nothing else to bite on and thus took this as a sign to sell the greenback. EUR/USD was higher despite the German GfK consumer confidence report coming in at a weaker than expected 2.1 for August after a 3.6 print for the prior month. This continued the trend of deteriorating economic data out of the Euro-zone. And whether it is businesses or consumers, the data have not been pretty of late. EUR/USD opened the session near 1.5715 and was sitting near the session highs at 1.5760 at the close. Sterling (GBP/USD) lost some ground against the buck as a report by the Land Registry showed home prices fell -1% in June, the biggest monthly drop on record (survey started in 2000). This pushed Sterling from an open near 1.9895 to a session low near 1.9840. The pair would close around the 1.9880 mark. USD/JPY saw some very choppy trading, but ended the session lower nonetheless. The pair opened near 107.80 and closed around the 107.65 level. Given the intensified concerns about US credit markets -- on Stern’s comments -- USD/JPY is likely to follow the goings on in US stock markets today. If fear grips the market once again, look for sharp declines in banking stocks and JPY crosses to move lower. Upcoming Economic Data Releases (NY Session) Prior Estimate 7/28 16:00 GMT US Fed's Mishkin Speaks on Communication in Washington Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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European Market Recap: EU Bonds Rise Following Low German Consumer Confidence

Market Updates | Written by CEP News | Jul 28 08 11:54 GMT |

(CEP News) - After German consumer confidence declined to multi-year lows, European equity markets are trading lower with the Eurostoxx losing 20.93 points on the day and the UK FTSE 100 down 7.40 points to 5345.199. In Germany, the bund was up 3.0 ticks to 110.64 with yields down 1.9 bps to 4.59% while the 10-year gilt was up 4.0 ticks to 106.04 with yields down 1.2 bps to 4.98%. On Monday, the GfK Group reported that its consumer confidence forecast for Germany fell to 2.1 in August, down from both the 3.5 level expected and the 3.6 reading observed in July. August's reading is the worst recorded since June 2003. Meanwhile, July's figure was revised down from an initial reading of 3.9. There were not major macroeconomic releases from the UK. The five-year Bobl was up 12.5 ticks to 106.35, the two-year Schatz up 3.5 ticks to 102.68 and the June 2008 Euribor contract trading up 0.5 ticks to 94.98. The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 0.209 bps to -50.60. UK 30-year bond yields were down 0.7 bps to 4.62%, five-year bond yields were down 2.1 bps to 4.93%, while yields on the two-year bond were down 2.2 bps to 4.96%. The September 2008 Short Sterling contract was down 0.5 ticks to 94.13. Yields on U.S. 10-year Treasury notes were down 1.8 bps to 4.079%. European stock markets were declining with the Eurostoxx down 20.93 points to 2836.28, the UK FTSE 100 down 7.40 points to 5345.199 and the German DAX down 69.86 points to 6366.85. The Japanese Nikkei was trading up 19.02 points to 13353.78. The Canadian dollar was down 0.02 cents to 0.9804 against the USD (1.02 USD/CAD). Against the euro, the loonie was down 0.20 cents to 0.6223 (1.6069 CAD/EUR). The U.S. dollar was down 0.14 to 107.72 and the euro was up 0.27 to 169.70, both against the yen. The euro was up 0.47 cents to 1.5755 while the pound sterling was down 0.46 cents to 1.9871, both against the USD. The euro was up 0.42 cents to 0.7929 pounds. The Swiss franc was up 0.24 cents to 1.034 against the USD and down 0.10 cents to 1.6289 against the euro. All data were taken at 7:52 a.m. EDT. Generated by CEP Newswires, edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jul 28 08 11:24 GMT |

CHF The assumed test of the key supports for realization of buyers' positions has not been confirmed but the activity parity of both parties revealed by OsMA indicator gives grounds to presume a possible period of range movement of the rate with a preservation of earlier composed trading plans almost without changes. Hence we assume a possibility of pair return to supports 1.0290/1.0310, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.0350/70, 1.0400/20 and/or further breakout variant up to 1.0460/80, 1.0500/20. An alternative for sells will be below 1.0220 with the targets 1.0350/70, 1.0400/20 and/or further breakout variant up to 1.0460/80, 1.0500/20. An alternative for sells will be below 1.0220 with the targets 1.0160/80, 1.0100/20. GBP The presumptions of possible depth of rate correction have not been confirmed and the conditions of possible rise of bullish activity did not dispose to realization of bearish trading plans. At present taking into account the existent parity of parties' activity according to proposed version of descending trading channel, we assume a possibility of another test of channel line '1' in the range of 1,9930/50, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.9860/80 and/or further breakout variant up to 1.9800/20. 1.9760/80. An alternative for buyers will be above 2.0000 with the targets 2.0120/40. JPY The pre-planned breakout variant for buyers has been realized with overlap of minimal assumed target. OsMA trend indicator having marked the considerable rise of buyers' activity gives grounds to change planning priorities in favor of bullish party. Hence and because of descending direction of indicator chart, we assume a possibility of pair return to supports 107.30/40, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For buyers' positions on condition of formation of topping signals the targets will be 107.80/108.00, 108.40/60 and/or further breakout variant up to 109.00/20, 109.60/80. An alternative for sells will be below 107.00 with the targets 106.40/60, 106.00/20. EUR The presumed test of the key resistance range has not been confirmed and the result of rate fall without conclusiveness of development of bearish activity gives grounds to preserve earlier composed trading plans almost without changes. So we assume a possibility of attainment of resistance range 1.5760/80, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.5700/20, 1.5660/80, 1.5600/20 and/or further breakout variant up to 1.5520/40, 1.5460/80. An alternative for buyers will be above 1.5810 with the targets 1.5860/80, 1.5900/20. FOREX Ltd www.forexltd.co.uk

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Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Jul 28 08 11:21 GMT |

EUR/USD Resistance : 1,5740/ 1,1,5765-70/ 1,5800-10/ 1,5850-60 Support : 1,5670-80/ 1,5630-40/ 1,5600/ 1,5570/ 1,5520 Comment : Euro remained below the first resistance level at 1,5750-70 on Friday, forming a sideways consolidation. There is not much to add to Friday's scenario. The cycle lows have passed and the important support level at 1,5570-5630 is reached, and a reaction will be very possible. However any rise will be considered corrective and the move should not breach the area of 1,5900-20. First resistance is found at 1,5750-65, followed by the area of 1,5800-30, where our first basic targets are set. If the price remains below 1,5750 and moves below 1.5650, it would be a sign of weakness. Lower targets at 1,5600 and 1,5570 will be back in the game, levels where bulls should gain momentum... TRADING EUR/USD SWING TRADING : The scenario remains the same 'The move towards 1,5620-30 gave us buy opportunities leading us to our basic target at 1,5790-5810. Depending on the strength of the move, we may keep our positions for higher levels. A possible pullback above 1,5850 until 1,5920 area, will be used for sell positions with target at a retracement to the base of 1,5620-5650...' INTRADAY TRADING : We will try buy positions at 1,5680-00 with stops below 1,5650 (if there is no upward reaction towards higher targets earlier). Sell positions could be tried at 1,5755-65, with stops above 1,5785 or adding more positions at 1,5800-25 and stops above 1,5840... GBP/USD Resistance : 1,9900/ 1,9930/ 1,9970/ 2,0020 Support : 1,9830-40/ 1,9790-00/ 1,9750/ 1,9700 Comment : The reaction towards important support levels at 1,9830-50 managed to lead the pair to the higher targets we had set, but bears gained momentum, leading the pound back below 1.9900 area. The trend is likely to remain bearish and reactions should be limited below 2,0030-50. A downward break of 1,9830 could lead to 1,9750 and 1,9700-10... TRADING GBP/USD : Our strategy on Friday was profitable and today we will keep our positions low, trying sell positions at 1,9920-30 and 1,9970 with stops above 2,0000 and target at 1,9830. A clear break of 1,9800 will be followed with sell positions with basic target at 1,9700-20... USD/JPY USD/CHF FX Greece DISCLAIMER The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market. We assume no responsibility for any kind of losses ,profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action. We reserve the right to change the terms and the characteristics of the analysis. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights.

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U.K. Hometrack House Prices Fall the Most Since 2001

By Brian Swint

July 28 (Bloomberg) -- U.K. house values fell by the most in at least seven years in July and the property slump will continue for months, Hometrack Ltd. said.

The average cost of a residential property in England and Wales slipped 4.4 percent from a year earlier to 168,500 pounds ($336,000), the London-based research company said today in a statement. That's the biggest annual drop since the index started seven years ago. Prices fell 1.2 percent from June.

``With no immediate end in sight to the current uncertainty, activity levels are likely to remain suppressed with prices remaining under pressure into the autumn,'' said Richard Donnell, director of research at Hometrack, in an e-mailed statement. Prices ``are now back to levels last seen in October 2006.''

Banks have raised mortgage rates and limited the supply of credit, reversing a decade-long property boom in which prices tripled. The Bank of England kept the benchmark interest rate at 5 percent this month on concerns that inflation is accelerating even as the economy risks slipping into a recession.

The pound fell after today's report to $1.9873 from $1.9906 on July 25. Against the euro, it fell to 0.3 percent 79.25 pence as of 11:24 a.m. in London.

U.K. house prices fell 1 percent in June, the biggest monthly drop since records began in 2000, the Land Registry said today in a separate report. The declines were led by London, where property values fell 2.5 percent, the report said.

Hometrack said the majority of house-price declines were in southern England. Demand for housing has declined 20 percent in the past three months.

Forecast for Rebound

A shortage of housing supply will still drive prices up by 25 percent by 2013, the National Housing Federation said today, citing research by Oxford Economics. Average home values will drop 4.4 percent this year and 2.1 percent in 2009 before they start rising again, the group, which represents 1300 housing associations in England, said on its Web site.

Central bank policy makers said this month that the housing downturn has ``gathered momentum,'' minutes of their monthly meeting showed last week. The Monetary Policy Committee split three ways in its interest-rate vote. Timothy Besley favored an increase to help stem the fastest in inflation in a decade and David Blanchflower supported a cut to ease the economic slowdown.

Britain's economy grew 0.2 percent in the second quarter, matching the slowest pace since 2001. Unemployment jumped the most in June since the aftermath of the last recession in 1992 as homebuilders and banks cut jobs.

Loan Approvals

Banks are curbing lending following the collapse of the U.S. subprime mortgage market, which so far has cost financial institutions worldwide $469 billion in writedowns and losses. U.K. mortgage approvals slumped in June to the lowest level in at least a decade, according to the British Bankers' Association.

Demand for farmland also declined for the first time since 2005 in the first half of the year, the Royal Institution of Charted Surveyors said in a separate report today.

The deteriorating economic outlook has contributed to the pound's 12 percent decline against a currency basket of Britain's main trading partners, making exports cheaper for overseas buyers.

The weaker pound ``won't prevent the credit crunch, a major housing downturn and a sharp retrenchment in corporate spending from sending the economy into recession,'' Roger Bootle, chief economic adviser to Deloitte & Touche LLP in London, wrote in a report published yesterday.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.



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Arroyo to Keep Philippine Oil Tax to Fund Spending

By Francisco Alcuaz Jr.

July 28 (Bloomberg) -- Philippine President Gloria Arroyo pledged to hold on to a tax on oil, defying pressure to eliminate or reduce it and help ease inflation, saying the revenue is needed to fund food programs.

The government's move in 2005 to extend the value-added tax to include oil helped the economy prepare for a crisis brought about by surging commodity prices this year, Arroyo, 61, said in her annual state-of-the-nation address in Manila today.

``We've come too far and made too many sacrifices to turn back on reforms,'' she said. The value-added tax on goods like oil products have helped the government ``build a shield around our country,'' and this has ``slowed down and somewhat softened the worst effects of a global crisis.''

Arroyo, who lifted the Southeast Asian nation's growth to a three-decade high of 7.2 percent last year from 1.8 percent at the start of her term in 2001, has seen her legacy threatened by record commodity prices and a weakening global economy this year. A June survey gave the economics scholar the lowest approval rating for a Philippine president in the past two decades.

A year ago, Arroyo looked forward to ending her term in 2010 having ``turned around'' the $118 billion economy with the 2005 oil tax and an increase in the value-added rate the following year that would enable the government to end a decade of budget deficits in 2008. Inflation fell to a seven-year low, the peso rose to a seven-year high and the key stock index climbed to a record last year.

Budget Deficit

Now, surging oil and rice prices have pushed inflation to a 14-year high of 11.4 percent in June, hurting consumer spending and further eroding growth that's already poised to ease as a U.S. slowdown crimps Asian exports. The Philippines imports almost all its oil and is the world's biggest buyer of rice.

The government in May cut its economic growth target for 2008 to as little as 5.7 percent, saying inflation is damping consumer spending in a country where a third of the population lives on less than $1 a day.

Arroyo in May had to abandon her plan to balance the government's budget in 2008 in favor of boosting spending on subsidies and programs to help Filipinos cope with accelerating inflation. The government has said it will use increased tax collection from fuel and oil, bolstered by higher prices, to help fund its additional spending this year.

The Philippines plans to provide at least 4 billion pesos ($91 million) in loans to farmers to help boost rice output, Agriculture Secretary Arthur Yap said today. The funds will come from the government's share in production from an underwater gas project.

`Urban Bias'

Critics including former Budget Secretary Ben Diokno say Arroyo should cut the tax on oil, which lead to higher food prices. The government's cash distribution programs to the low- income group, including one based on electricity usage, ``have a distinct urban bias'' because most of the poor live in the countryside and don't have access to electricity, he said.

The government now projects a deficit of as much as 75 billion pesos this year, from 12 billion pesos in 2007. Still, the government's cash spending was 40 percent less than planned in the first half of this year.

``There's a large gap between rhetoric and action,'' said Diokno. ``She may still want to balance the budget. That's the problem she has to reconcile.''

The state-owned National Food Authority, which subsidizes rice prices, and government-owned electricity producer National Power Corp. are projecting losses this year on higher costs, and Arroyo is distributing cash to low-income groups such as public transport drivers.

In her speech today, Arroyo asked Congress to allow state- run pension fund Social Security System to boost housing loans. Philippine mobile-phone companies have agreed to reduce charges for text messages, she said.

``It's inevitable when a government is facing shocks they will have to give those priority,'' said Agost Benard, associate director at Standard & Poor's. ``What's required is consistent effort to reform the collection agencies and expand the revenue base. Given the reforms of the past several years, the country is in a much better position to deal with these shocks.''

To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net



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Thailand Raises Inflation Forecast to 11-Year High

By Suttinee Yuvejwattana

July 28 (Bloomberg) -- Thailand's central bank raised its 2008 inflation forecast for a second time this year, suggesting it may increase borrowing costs further to cool price gains even as economic growth cools.

Consumer prices may rise 7.5 percent to 8.8 percent, the biggest gain since at least 1997, Assistant Governor Duangmanee Vongpradhip said in Bangkok today.

``Officials will have to tighten the screws further to prevent inflationary momentum from being persistent,'' said Frederic Neumann, a Hong Kong-based economist at HSBC Holdings Plc's Global Markets unit.

Surging oil and food costs forced Thailand's central bank to this month raise its key interest rate for the first time in two years, joining countries from Vietnam to Pakistan in raising borrowing costs. Growth in Southeast Asia's second-largest economy is slowing amid legal challenges to the government that are sapping consumer and investor confidence.

Rather than maintaining the interest rate at the current level, ``the appropriate monetary policy will help contain inflation expectations.'' today's central bank statement said.

`Elevated for a While'

Thailand's consumer prices are climbing at the fastest pace in a decade, and averaged 6.3 percent in the first half. That's almost three times the 2.2 percent average for the whole of last year. Inflation of 8.8 percent would be the fastest annual pace since at least 1991, when Bloomberg records began.

Inflation may remain ``elevated for a while,'' central bank Governor Tarisa Watanagase said July 24. Today's prediction compares with the bank's April's forecast that consumer prices would rise by as much as 5 percent this year.

The Bank of Thailand on July 16 increased its one-day bond repurchase rate by a quarter percentage point to 3.50 percent, saying it may raise it further to cool inflation. Adjusted for the pace of price increases, real deposit and lending rates are negative and bad for the economy because they don't encourage saving, Tarisa said July 24.

The $206 billion economy may expand between 4.8 percent and 5.8 percent in 2008, the central bank predicted, citing the effects of higher prices squeezing disposable incomes. The bank previously forecast gross domestic product would grow as much as 6 percent this year.

Confidence Falls

Consumer confidence is at the lowest level this year. Prime Minister Samak Sundaravej said he will reshuffle his Cabinet after two ministers resigned after separate court rulings found they had acted inappropriately.

Another court today said it will hear a case accusing Finance Minister Surapong Suebwonglee and others of illegally creating a state-run lottery five years ago. Surapong, who denies any wrong doing, said today he won't quit the cabinet.

Exports, which make up 70 percent of GDP, will expand by 16 percent to 19 percent this year, the central bank predicted. Shipments abroad grew an average 23.3 percent in the first six months, according to the Commerce Ministry, faster than the 18 percent average in the whole of 2007, buoyed by soaring rice prices.

The current account surplus may narrow to $1 billion to $4 billion this year, the central bank said. That's less than the $7 billion it forecast in April and may contribute to further weakness in the Thai baht, close to its lowest level per dollar this year, as importers sell more of the local currency to buy goods abroad.

The baht fell 0.1 percent to 33.44 per dollar as of 3:36 p.m. in Bangkok, little changed from before the central bank's report. The benchmark SET Index of stocks declined 0.9 percent, also little changed.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net



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Dollar Falls Against Euro, Yen on Widening Bank-Loss Concern

By Kim-Mai Cutler and Kosuke Goto

July 28 (Bloomberg) -- The dollar fell from near a three- week high against the euro and declined from its strongest in a month versus the yen on concern U.S. credit losses will widen.

The currency dropped a second day against the euro after Gary Stern, president of the Federal Reserve Bank of Minneapolis, was cited by the Financial Times as saying the U.S. credit crunch will worsen. The dollar also declined as the price of crude oil rose, rebounding from a seven-week low. The British pound fell against all 16 major currencies after a report showed U.K. house values dropped the most in at least seven years.

``There are still problems in the U.S. financial sector,'' said Antje Praefcke, a currency strategist in Frankfurt for Commerzbank AG, Germany's second-biggest lender. ``We're seeing a retracement of last week's strong gains in the dollar.''

The dollar fell to $1.5739 per euro as of 10:54 a.m. in London, from $1.5709 in New York last week. It slid to 107.73 yen, from 107.84 after earlier rising to 108.07, the strongest since June 26. The euro was at 169.50 yen, near a record 169.96 set July 23, compared with 169.40 at the end of last week.

The dollar may end the quarter at $1.58, Praefcke said.

The U.S. Congress last week sent President George W. Bush legislation to stem foreclosures for 400,000 homeowners and aid Fannie Mae and Freddie Mac, its most sweeping effort to halt the biggest housing slump since the Great Depression in the 1930s. President Bush will sign the measure into law, a spokesman said.

The British pound fell after Hometrack Ltd, a London-based research company, said U.K. house values dropped in July by 4.4 percent from a year earlier. The British currency weakened to 79.24 pence, from 78.87 pence at the end of last week. It was at $1.9862, from $1.9916.

Yuan, Aussie

The Chinese yuan fell 0.2 percent to 6.8345 per dollar after the Communist Party's Politburo said on July 25 growth and inflation are both priorities, fueling speculation the government will curb currency appreciation to aid exporters. The yuan has strengthened 7 percent this year, the most among Asia's 10 most-traded currencies outside Japan.

The Australian dollar was at 95.88 U.S. cents from 95.63 on July 25. It earlier fell to an almost three-week low of 95.27 cents after Australia & New Zealand Banking Group Ltd., the nation's fourth-biggest bank by market value, joined National Australia Bank Ltd., the largest by assets, in warning of increased provisions for non-performing loans.

Weaker Aussie

Six months after correctly identifying the Australian dollar as one of the best bets in the foreign-exchange market, Daiwa Asset Management Co., the biggest investor in the nation's debt, predicts the rally is coming to an end.

Daiwa, which holds 4 percent of the government's bonds, expects the currency to close the year at $1, after earlier forecasting a surge to $1.10. Daiwa cut its estimate as the country's benchmark S&P/ASX 200 Index of stocks dropped to a 2 1/2-year low this month and the Reuters/Jefferies CRB Index of commodities fell 13 percent from its record high on July 2.

Mizuho Asset Management Co., State Street Global Advisors and Putnam Investments are also turning into bears as the U.S. economic slowdown spreads, curtailing the rally in coal, oil and metals that fueled Australia's expansion. Lehman Brothers Holdings Inc., which recommended the currency in February, now predicts it will depreciate 21 percent by 2009.

The U.S. dollar may decline as falling home prices and employment make it difficult for the Federal Reserve to raise interest rates.

Price Index

Home prices in the S&P/Case-Shiller index fell by 16 percent in May from a year ago, the most on record, according to a Bloomberg News survey before the release tomorrow. U.S. nonfarm payrolls fell by 75,000 in July, following a decline of 62,000 in June, according to a separate survey. The Labor Department will release the data on Aug. 1.

``Data on housing and payrolls pose downside risks to the dollar,'' said Akifumi Uchida, deputy general manager of the marketing unit at Sumitomo Trust & Banking Co. in Tokyo. ``Given the state of the housing market, you can't be overly optimistic on the U.S. economy. That makes it almost impossible for the Fed to raise rates.''

The dollar may fall to 106 yen this week, he said.

Futures on the Chicago Board of Trade show a 93 percent chance the Fed will keep borrowing costs on hold at 2 percent when it announces its next decision on Aug. 5, up from 64 percent a month ago.

U.S. GDP

U.S. gross domestic product expanded an annualized 2.3 percent in the second quarter, faster than 1 percent growth in the previous quarter, according to a Bloomberg News survey. The government will release the data on July 31.

Consumer spending accelerated to a 1.5 percent gain in the quarter, the survey shows, as the U.S. handed out tax rebates to support the economy. As of yesterday, the government had already distributed almost 80 percent of the more than $100 billion in tax rebates, Treasury figures show.

``Any dollar gains after the GDP report are likely to prove temporary,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader, in a research note today. ``Growth due to fiscal stimulus is a one-off that will fade away in the second half of the year.''

The euro fell versus the yen after an industry report today showed consumer confidence in Germany dropped to the lowest in more than five years as soaring energy prices sapped purchasing power.

GfK AG's index for August, based on a survey of about 2,000 people, declined to 2.1, the lowest since June 2003, from a revised 3.6 in July, the Nuremberg-based market-research company said in a statement today. Economists predicted the gauge would fall to 3.5 from an initial July estimate of 3.9, according to the median of 25 estimates in a Bloomberg News survey.

``The European economy is facing a major setback,'' Tomoko Fujii, head of Japan economics and strategy at Bank of America in Tokyo, wrote in a research note today. ``The markets cannot price in an ECB rate hike any more. We are recommending euro- selling against the dollar.''

Europe's single currency may fall to $1.54 against the dollar by the end of September, she said.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net



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Pound Falls, Gilts Rise as House Prices Drop Most Since 2001

By Andrew MacAskill

July 28 (Bloomberg) -- The pound fell against the euro and the dollar and gilts rose after U.K. house values dropped in July by the most in at least seven years, increasing concern the economy is headed toward a recession.

The average cost of a residential property in England and Wales slipped 4.4 percent from a year earlier, Hometrack Ltd., a London-based research company, said today in a statement. That's the biggest annual drop since the index started seven years ago. Prices fell 1.2 percent from June.

``This is more bad news coming out of the housing market and adds to the growing sense the economy is slowing,'' said Grant Lewis, the London-based head of fixed-income research at Daiwa Securities SMBC Europe Ltd. ``That puts a bit of downward pressure on sterling given the expectation of rate cuts.''

The British currency weakened to 79.24 pence as of 11:26 a.m. in London, from 78.87 pence at the end of last week. It was at $1.9872, from $1.9916. The pound dropped 7.1 percent versus the euro this year and is little changed against the dollar.

Bank of England data on mortgage approvals to be published tomorrow are likely to signal further weakness in the housing market, according to a survey of analysts. The number of loans agreed for home purchases dropped to 37,000 in June, from 42,000 in May, the median of 24 forecasts gathered by Bloomberg shows.

`Leading Indicator'

``These figures are the leading indicator of where prices are going in the future, and if they come in weak as expected then it points to further declines the remainder of the year,'' said Adam Cole, the head of global currency strategy in London at RBC Capital Markets, the nation's biggest lender.

Slowing economic growth and the prospect of cuts in the central bank's benchmark interest rate will weaken the pound to $1.90 and 79 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The central bank left its key rate at 5 percent on July 10.

The odds of policy makers cutting interest rates for a third time this year was unchanged, with the implied yield on the December short-sterling futures contract at 5.81 percent.

U.K. government bonds rose, with the yield on the 10-year gilt declining 3 basis points to 4.96 percent. The price of the 5 percent security due March 2018 climbed 0.2, or 2 pounds per 1,000-pound ($1,987) face amount, to 100.26. The two-year note yield fell 4 basis points to 4.93 percent. Bond yields move inversely to prices.

Bonds advanced last week, with the 10-year yield slipping 5 basis points to 4.99 percent.

Gains in gilts will lower the yield on the 10-year note to 4.89 percent by year-end, according to a Bloomberg survey.

To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net



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Crude Oil Rises After Nigerian Militants Claim Pipeline Attacks

By Grant Smith

July 28 (Bloomberg) -- Crude oil rose, rebounding from a seven-week low in New York, after a Royal Dutch Shell Plc pipeline in Nigeria was attacked by militants.

The incident occurred on the Nembe Creek trunk line in Rivers State, Shell spokeswoman Caroline Wittgen said. The rebel group, the Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for damaging two pipelines in an e- mailed statement.

``News that Nigerian militants attacked two Shell pipelines has firmed prices this morning,'' said Rob Laughlin, London- based senior broker at MF Global Ltd. ``This comes as the geopolitical risks flare elsewhere with bombs in Istanbul and tough talking from Iran.''

Crude oil for September delivery gained as much as $1.56, or 1.3 percent, to $124.82 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $124.65 a barrel at 10:22 a.m. London time.

Brent crude oil for September settlement rose as much as $1.48, or 1.2 percent, to $126 a barrel on London's ICE Futures Europe exchange, and traded at $125.87 at 10:23 a.m. London time.

The attacks occurred at 1:15 a.m. local time, MEND spokesman Jomo Gbomo said in the statement. Assaults on Nigerian oil facilities have cut output by 20 percent since 2006 and reduced the country to Africa's second-largest producer after Angola.

This year's 30 percent climb in oil led to an 85 percent decline in first-quarter profit at Ryanair Holdings Plc, Europe's biggest discount airline. Other carriers, led by UAL Corp.'s United Airlines, have cut fleets because of fuel costs.

Iran, Israel

Prices had risen to an all-time high on speculation supplies from the Middle East may be disrupted should Iran's nuclear work prompt Israel or the U.S. to resort to military action.

Still, oil has tumbled about $23 a barrel from the record $147.27 a reached on July 11 on concern that record prices have cut demand for fuel in the U.S., the world's largest energy consumer.

Iran's President Mahmoud Ahmadinejad said his country has 6,000 uranium-enriching centrifuges, the Associated Press reported yesterday. The Middle East's second-largest producer has threatened to blockade the Straits of Hormuz, an export channel for a quarter of the world's oil, if its nuclear facilities are targeted.

Two bombs exploded in Istanbul yesterday, killing 16 people and injuring more than 100 in Turkey's worst terrorist attack since al-Qaeda bombed the British consulate and HSBC Holdings Plc's offices in 2003.

Turkish military strikes on rebels operating in the north of Iraq, the country with the third-largest crude reserves, have raised concern that Iraqi supplies may be disrupted.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.



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Yuan Falls Most Since End of Peg as China Signals Growth Focus

By Judy Chen and Kim Kyoungwha

July 28 (Bloomberg) -- China's yuan declined by the most since a dollar peg ended in 2005 after the Politburo signaled a shift in focus to maintaining economic growth, fueling speculation the government will slow gains to aid exporters.

The Politburo, the Communist Party's top decision-making body, wants to cool inflation and maintain ``steady and relatively fast'' expansion, state-run China Central Television reported on July 25. The yuan's 6.8 percent advance this year is eroding the value of overseas sales as manufacturers contend with the slowest domestic growth since 2005.

``The yuan's appreciation will slow significantly in the second half, especially in the fourth quarter,'' said Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai. ``For the first time, the government replaces preventing overheating with maintaining growth among its top priorities.''

The yuan fell 0.32 percent to 6.8410 per dollar in Shanghai as of 5:30 p.m., from 6.8189 late last week, according to the China Foreign Exchange Trade System. The currency has climbed 0.25 percent versus the dollar in July.

The goal of achieving stable growth has been made more difficult due to uncertainties and instabilities of the global economy, CCTV reported, citing the Politburo. Gross domestic product rose 10.1 percent in the second quarter from a year earlier, after expanding 10.6 percent in the first.

China will keep the yuan stable in a ``self-initiated, controllable and gradual manner,'' the People's Bank of China said in a statement on its Web site yesterday, after the monetary policy committee's second-quarter meeting. The statement didn't reiterate the central bank's pledge to ``increase the exchange rate's flexibility,'' included since the third quarter of 2007.

Clear Signal

``The omission of `flexibility' is a clear signal that the central bank will slow the pace of yuan gains,'' said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the country's largest foreign-currency trader. ``It has reduced reliance on using currency appreciation to curb inflation.''

The central bank set a weaker daily reference rate for the yuan today at 6.8277. The yuan is allowed to trade by up to 0.5 percent against the dollar either side of the so-called central parity rate.

Government bonds due in more than three years fell on concern that inflation will erode returns on longer-dated securities. China's inflation was 7.9 percent in the six months through June, the fastest pace since 1996.

``The inflation rate is still at a high level,'' said Yang Hui, a fixed-income analyst with Citic Securities Co. in Beijing. ``Most funds won't enter the debt market first, even if there were some loosening in the monetary policy to maintain growth.''

Yang said yields on longer-term debt rose faster than short-term securities. The People's Bank of China has sold three-month bills at around 3.40 percent during weekly auctions since Dec. 14.

The yield on the 3.69 percent treasury note due in April 2013 rose 6 basis points to 4.2 percent, according to the China Interbank Bond Market. The price of the security dropped 0.25 per 100 yuan face amount to 97.84.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.



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Asian Currencies: Ringgit Weakens on Rate Policy; Won Advances

By David Yong and Kim Kyoungwha

July 28 (Bloomberg) -- Malaysia's ringgit fell, leading losses in Asian currencies, after the central bank unexpectedly refrained from raising interest rates amid the fastest inflation in 26 years.

The currency touched a three-week low after policy makers on July 25 kept the overnight policy rate at 3.5 percent for an 18th straight meeting, citing increased risks to the economy. Fourteen of 20 economists forecast an increase to 3.75 percent before the decision was announced after the market closed. South Korea's won gained after the government said the current-account was in surplus in June for the first time in seven months.

``The sell-off reflects the market's disappointment with the decision,'' said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ``This will increase the likelihood that they will spend some reserves to defend the currency.''

The ringgit fell 0.5 percent to 3.2675 per dollar as of 4:56 p.m. in Kuala Lumpur, the lowest since July 7, according to data compiled by Bloomberg. The won climbed 0.3 percent to 1,006, according to Seoul Money Brokerages Services Ltd.

Eight of the 10 most-traded currencies in Asia outside Japan fell as the U.S. dollar extended gains after Congress passed legislation to stem foreclosures and prop up Fannie Mae and Freddie Mac, the two biggest sources of funding for U.S. mortgages.

Risks Increase

``While both the risks to higher inflation and the risks to slower growth have increased, the immediate concern is to avoid a fundamental economic slowdown,'' Bank Negara Malaysia said in a statement accompanying its rate decision. ``The appropriate monetary policy response will be taken'' should price increases spread beyond food and fuel.

The won has gained 4 percent this month, halting four months of declines, as policy makers supported the currency after the inflation rate rose to 5.5 percent in June, the highest in a decade.

``The atmosphere is turning favorable for the won,'' said Ko Yun Jin, a dealer in Seoul at Kookmin Bank, the nation's largest bank. ``Month-end export settlements may give an additional boost to the currency.''

South Korea had a current-account surplus of $1.82 billion for June, versus a $378 million deficit in May, the Bank of Korea said today. The current account is the broadest measure of trade, tracking goods, services and investment income.

The government this month forecast the nation would have a trade surplus of $3.8 billion in the second half of 2008, led by exports to China. It had a trade deficit of $5.7 billion in the first six months.

Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.

Chinese Yuan

China's yuan fell 0.2 percent to 6.8325, ending two days of gains, after the Politburo said maintaining economic growth and curbing inflation are priorities.

The Communist Party's top decision-making body wants to maintain ``steady and relatively fast'' economic growth, state- run China Central Television reported on July 25. The yuan's 7.2 percent advance this year is eroding the value of overseas sales as manufacturers contend with the slowest domestic economic growth since 2005.

``The yuan's appreciation will slow significantly in the second half, especially in the fourth quarter,'' said Lu Zhengwei, an economist at Industrial Bank Co. in Shanghai. ``For the first time, the government replaces preventing overheating with maintaining growth among its top priorities.''

Thai Baht

Thailand's baht fell 0.1 percent to 33.46 per dollar in Bangkok on concern slowing economic growth and a court case will undermine Finance Minister Surapong Suebwonglee, raising political risks and deterring investors.

Surapong is among three current ministers, who also served in former premier Thaksin Shinawatra's cabinet, facing a lawsuit alleging wrongdoing in the creation of a state-run lottery in 2003. Thailand's Supreme Court accepted the lawsuit, state- controlled Channel 9 television reported today, without saying where it got the information.

``The market remains a hostage to politics,'' said Sompob Asavaritikrai, head of trading at Bank of Ayudhya Pcl in Bangkok. ``If the court rules it will take the case, it will create more political uncertainty. It will hurt investor confidence. It is going to be negative for Thai stocks and the baht.''

The Singapore dollar fell 0.3 percent to S$1.3628 against the U.S. currency as traders reduced bets the central bank will seek a faster pace of currency appreciation at its semi-annual review in October.

Inflation Forecast

The Monetary Authority of Singapore on July 24 raised its inflation forecast for the third time this year and warned of ``considerable downside risks'' to exports, saying currency gains were hurting overseas sales. The agency, which conducts policy by adjusting the Singapore dollar's value, said its current foreign-exchange stance is ``appropriate'' and predicted inflation will cool in the remainder of this year.

``The U.S. dollar will be supported against the Singapore currency this week as expectations for further policy tightening have eased considerably,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore.

Elsewhere, Vietnam's dong gained 0.1 percent to 16,780 per dollar, the Indonesian rupiah was little changed at 9,123 from 9,120 at the end of last week, and the Philippine peso was at 44.04, from 44.07 on July 25.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.



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Wheat Rises for Third Day Amid Adverse Weather, Higher Demand

By Feiwen Rong

July 28 (Bloomberg) -- Wheat climbed for the third day in Asia after hedge-fund managers and speculators reversed prior bets that futures would fall amid expectations adverse weather in Europe may cut output and lift prices. Rice, soybeans and corn also gained.

Futures rose the most in a month July 25 after Poland said its grain output will fall by as much as 9 percent after drought in June and rain in July damaged wheat, rye and barley yields. Reports showing that advance orders for U.S. supplies since June 1 are 8 percent ahead of the year earlier period also fueled buying. Rice jumped the most in almost two months.

``Weather in Europe may delay harvest there and has become a supportive factor now in the wheat market,'' said Kazuhiko Saito, chief analyst at Interes Capital Management Co., from Tokyo.

Wheat for September delivery added as much as 2.6 percent to $8.32 a bushel in after-hours electronic trading on the Chicago Board of Trade. It was at $8.25 at 4:07 p.m. Singapore time. The futures have risen 13 percent since reaching the lowest this year at $7.3075 on May 29.

Poland, the European Union's third-biggest grain producer, said wheat output will fall to 8.1 million to 8.3 million tons, according to the government statistical office. The office said total grain production excluding corn is estimated at 23.1 million tons to 23.6 million tons.

Prices were also supported after exporters shipped 3.75 million metric tons of wheat since the beginning of the marketing year on June 1, up 30 percent from the same period a year earlier, USDA data show.

Rice

Rice rose the most since June 6 today on speculation that Iran is seeking to buy at least 100,000 tons of Thai rice and Bahrain 40,000 tons of Hom Mali rice under government-to- government deals, Bangkok Post reported today.

The rough rice futures for September delivery rose as much 3 percent today to $17.215 per 100 pounds today, before trading at $17.155 at 4:03 p.m. in Singapore.

``Export prices of white rice will likely continue an upward pressure in the next couple of months'' because of a shortage of rice available in the Southeast Asian markets, said the U.S. Department of Agriculture in a report dated July 22.

Thai white rice export and local prices rose by around 3 to 7 percent in the week ended July 21 as the government intervention program is fully implemented, the report said.

The Vietnamese government has also revised up floor prices of 5 percent grade white rice exports to $750 a ton from $720, free-on-board in the previous week, the report said.

CFTC Report

Hedge-fund managers and other large speculators reversed from a net-short position to a net-long position in Chicago wheat futures in the week ended July 22, according to the U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, exceeded short positions by 3,000 contracts on the CBOT, the Washington-based commission said in a report. Last week, traders were net-short 5,345 contracts.

``Traders did position squaring ahead of the month-end because the wheat futures looked oversold,'' Saito said.

Traders also increased their net-long positions in wheat futures traded in Kansas City and Minneapolis in the week ended July 22.

Soybeans for November delivery gained as much as 34.5 cents, or 2.5 percent, to $14.21 a bushel and stood at $14.0750.

Corn for December delivery rose as much as 13.50 cents, or 2.3 percent, to $6.10 a bushel in after-hours trading on the Chicago Board of Trade and traded at $6.0450 as of 4:05 p.m. Singapore time.

To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net



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Incitec to Build Ammonium Nitrate Plant in Australia

By Madelene Pearson

July 28 (Bloomberg) -- Incitec Pivot Ltd., Australia's largest fertilizer maker, will spend A$935 million ($893 million) to build an ammonium nitrate plant in Queensland state to meet soaring demand from mining companies for explosives.

Engineering works at the Moranbah plant are expected to be largely completed by first quarter of 2010, with the plant reaching full capacity in the first quarter of 2011, Alan Grace, Incitec president of major projects, said today on a conference call. The plant will produce 330,000 metric tons a year of ammonium nitrate, the key ingredient in explosives.

Incitec is reviving a project mothballed by previous owner Dyno Nobel Ltd. after paying $2.5 billion this year to take over the company. Orica Ltd., the world's largest explosives maker, has said there's a ``looming shortage'' of ammonium nitrate as buyers including mining companies including BHP Billiton Ltd. expand output to meet Chinese demand for raw materials.

``It gives us great exposure to big growth markets which ties in very much with the super-cycle, a hard commodity and soft commodity super-cycle,'' Incitec Chief Executive Officer Julian Segal said on the conference call. Incitec sees demand staying ``strong for quite a number of years,'' he said.

Incitec rose A$1.71, or 1.1 percent, to A$153.85 on the Australian stock exchange at the 4:10 p.m. close of trade in Sydney. Stock of the Melbourne-based company has more than doubled in the past year.

Dyno Nobel's then-CEO Peter Richards said Dec. 11 that scrapping the project was ``the greatest disappointment.''

Gas Supplies

Incitec's decision to revive Moranbah reactivates a gas supply agreement with Arrow Energy Ltd., a Brisbane-based coal- seam gas producer. Gas supply under the accord, for 7 petajoules (6.6 billion cubic feet) a year for 15 years, is now due to start in the first quarter of 2010, Arrow said today in a statement to the exchange.

AGL Energy Ltd., Arrow's partner in its Moranbah coal-seam gas project, has the right to take a 50 percent interest in the gas contract, Arrow said.

Incitec's Moranbah project includes ammonia, nitric acid and ammonium nitrate plants, as well as infrastructure, utilities, power generation and housing, the company said. It hired a group including United Group Ltd., Bilfinger Berger AG and BCG Contracting Pty to build the project, Incitec said.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net



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Japan's Nikkei Rises, Led by Web, Commodity Shares; Honda Falls

By Masaki Kondo

July 28 (Bloomberg) -- Japan's Nikkei 225 Stock Average rose after Yahoo Japan Corp. said profit grew and commodities producers climbed on an increase in metals prices. Carmakers dropped after Honda Motor Co. cut its full-year earnings target.

Yahoo Japan, operator of the nation's most visited Web site, climbed to a two-week high, while Mitsui & Co. led a gain by trading houses. Honda, the nation's second-largest automaker, posted its biggest drop in a month. Advantest Corp., the world's biggest maker of memory-chip testers, fell the most in more than four months after forecasting a loss.

Internet companies ``are in a relatively safe position,'' said Yoji Takeda, who helps manage the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``There's still room for them to boost profit.''

The Nikkei rose 19.02, or 0.1 percent, to close at 13,353.78 in Tokyo, paring a gain of as much as 1 percent. The broader Topix index added 2.51, or 0.2 percent, to 1,300.79. Nineteen of 33 industry groups on the Topix gained. The total value of shares traded on the main board of the exchange was the lowest all year.

Yahoo Japan said net income rose 18 percent in the three months to June 30, the fastest quarterly gain since June 2007, on increased revenue from online advertising. Analysts at Deutsche Bank AG and KBC Securities raised their ratings on the company. The shares jumped 4.3 percent to 41,700 yen, the highest since July 10 and making it the fifth-biggest winner on the Nikkei.

NTT DoCoMo Inc., the nation's most profitable wireless carrier, rose 2.3 percent to 165,500 yen, while its parent Nippon Telegraph & Telephone Corp. jumped 3.1 percent to 528,000 yen.

DoCoMo Profit

DoCoMo may report more than 250 billion yen ($2.32 billion) in operating profit for the three months to June 30, compared with 203.8 billion yen a year earlier, the Nikkei newspaper reported on July 26. An installment payment plan for handsets helped DoCoMo cut phone subsidies, the newspaper said.

``It would be no surprise if DoCoMo reports a near 30 percent gain in first-quarter operating profit,'' Daisaku Masuno, an analyst at Nomura Securities Co., wrote in a Japanese-language report today. He has a ``neutral'' rating on DoCoMo and a ``strong buy'' on NTT.

Mitsui, which gets more than half its profit from commodities, surged 5.7 percent to 2,230 yen, making it the biggest winner on the Nikkei. Larger rival Mitsubishi Corp. added 2.6 percent to 3,140 yen.

Metals Gain

A measure of six metals traded on the London Metal Exchange, including copper and zinc, added 0.3 percent on July 25, the first gain in three days. Copper rose 0.8 percent, while gold climbed 0.5 percent. Resource prices were given a boost after U.S. durable goods orders unexpectedly rose 0.8 percent in June from the previous month.

``Trading houses are in one of the few industries that is set to announce some strong first-quarter earnings, and investors are buying into that,'' said Mitsushige Akino, who oversees the equivalent of $560 million in Japanese equities at Ichiyoshi Investment Management Co. in Tokyo.

Telecommunication companies and trading houses contributed the most to the Topix's climb.

Honda lost 2.9 percent to 3,650 yen, the sharpest drop since June 19. The company cut its full-year target for operating profit by 3.1 percent because of higher material costs and lower vehicle sales. Hino Motors Ltd., Japan's largest maker of heavy- duty trucks, dropped 4.1 percent to 633 yen after Mizuho Investors reduced its recommendation from ``neutral plus.''

Production Cut

NGK Insulators Ltd. plunged 7.1 percent to 1,749 yen, making it the biggest loser on the Nikkei. A report in the Nikkei newspaper said the company will cut production of emission filters for diesel engines by as much as 50 percent as North American sales of large vehicles fall. A gauge tracking auto- related stocks was the biggest drag on the Topix.

Advantest sank 6.1 percent to 2,170 yen, the sharpest decline since March 3. Tokyo Electron Ltd., the world's second- largest maker of chip gear, dropped 4.8 percent to 5,850 yen.

Advantest's first-half loss will probably be 2.5 billion yen compared with a 16.9 billion yen profit for the same period a year ago as orders plunge 62 percent, it said on July 25.

Nikkei futures expiring in September dipped 0.1 percent to 13,350 in Osaka and rose 0.2 percent to 13,360 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.



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Warsaw Bourse Sees Record Listings, Led by Small-Caps

By Pawel Kozlowski

July 28 (Bloomberg) -- The Warsaw Stock Exchange expects a record number of companies to start trading this year because smaller enterprises are increasing share sales even as the benchmark index falls for the first time in six years.

About 50 companies may debut on Warsaw's main market in 2008 and the number of stocks on its one-year-old NewConnect for firms valued at less than 20 million zloty ($9.8 million) may climb to 100 from 24 last year, Chief Executive Officer Ludwik Sobolewski said in a July 25 interview. A total of 57 companies listed in the first half of this year, compared with 105 in 2007.

Sobolewski's forecast comes after the number of public offerings worldwide dropped to 380 this year, compared with 854 in the same period in 2007, according to data compiled by Bloomberg News. Poland's WIG20 Index fell 24 percent in 2008, compared with an 18 percent drop in the MSCI Emerging Markets Index.

``The pipeline is full,'' Sobolewski, 42, who became CEO two years ago, said in Lodz. ``The question is what the situation will be on world markets.''

More than $11 trillion has been erased from global equity markets this year on concern credit-related losses topping $460 billion worldwide and the economic slowdown will cut profits, Bloomberg data show.

The decline in the WIG20 left its 20 companies trading at an average of 9.6 times reported earnings, compared with 12.7 for MSCI's index of developing countries and 11.1 for the Dow Jones Stoxx 600 Index, a measure for western Europe. The WIG20 almost tripled from 2003 through 2007.

PGE, Enea Sales

The government may sell stakes to the public this year in Polska Grupa Energetyczna SA and Enea SA, with offerings valued at about 4.5 billion zloty and 3 billion zloty, respectively. Poland also plans share sales of chemical maker Zaklady Azotowe Kedzierzyn SA, coal producer Lubelski Wegiel Bogdanka SA and the Warsaw Stock Exchange.

The economic slowdown and retreat in global markets may not bode well for a projected surge in listings this year.

``These forecasts for new listings seem very optimistic,'' said Piotr Zarebski, who helps manage the equivalent of $392 million at BRE Wealth Management SA in Warsaw. ``The second half will be tougher because sentiment is weak and there might not be a lot of demand for new-share offerings, particularly by smaller companies.''

The state-owned exchange attracted 23 companies to its main market in the first half and 34 on NewConnect, which started in August last year.

Poland had the most initial public offerings in Europe after the U.K. in the first six months, the bourse said, citing a report by PricewaterhouseCoopers LLP.

Slowing Economy

The country's growth in gross domestic product will probably slow to 5.5 percent in 2008, from 6.6 percent last year, the government said in May. That's almost triple the 1.8 percent expansion forecast in 2008 for countries that share the euro, based on European Central Bank figures.

The Warsaw exchange is the 17th biggest in Europe with a market value of $187 billion, according to Bloomberg data. There are currently 366 companies traded on its main market, including 25 foreign enterprises, according to the exchange's Web site. Another 61 trade on NewConnect, Sobolewski said.

Companies from the Czech Republic's alternative energy industry may be among the first foreign listings on NewConnect, Sobolewski said. He declined to specify the companies.

NewConnect companies don't need to file a prospectus before selling shares and have to report financial results once a year, not every quarter, as is the case on the main Polish market.

Acquisitions

The Warsaw bourse bought a stake in Romania's futures exchange in 2007 and expressed interest in taking over the Sofia Stock Exchange if the Bulgarian government sells its stake. The Polish bourse acquired 25 percent of Ukraine's Innex stock exchange earlier this month.

``Ukraine is the most important market for our expansion in the region,'' Sobolewski said. ``We treat this investment in the Innex market as an important beachhead for our expansion.''

The Polish government, which owns 98.8 percent of the exchange, wants to sell a 19 percent stake in the bourse in an IPO. A further 28.8 percent of the exchange will be sold to institutional investors who won't be allowed to sell the shares without the state's consent, according to government plans announced in March.

The IPO still has a ``chance'' this year if lawmakers pass legislation by October paving the way for the sale, Sobolewski said. The main change in the legislation for the exchange is allowing it to pay a dividend, he said.

``Without doubt there's political will in this government to carry out this IPO,'' Sobolewski said. ``The sale terms that were announced earlier this year might be changed but the government keeps its plan to sell a minority stake at this stage.''

To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net



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Most Asian Stocks Advance; BHP Billiton Gains, ANZ Bank Drops

By Patrick Rial and Kyung Bok Cho

July 28 (Bloomberg) -- Most Asian stocks advanced as commodity producers rose on higher metals prices, countering a slump in financial shares after Australia & New Zealand Banking Group Ltd. said bad loans will reduce profit.

BHP Billiton Ltd., the world's largest mining company, gained in Sydney after gold and copper increased. Yahoo Japan Corp., operator of Japan's most visited Internet portal, climbed as profit increased and analysts raised their ratings. ANZ, Australia's fourth-largest bank, tumbled the most since 1987 after saying fallout from the collapse of the U.S. housing market has spread to Australia and New Zealand.

The MSCI Asia Pacific Index was little changed at 133.02 as of 7:07 p.m. in Tokyo. Almost four stocks rose for every three that declined. The index has tumbled 16 percent this year as banks and securities company posted $468 billion in writedowns and credit-related losses, and raw-materials prices surged.

``We're still bullish on commodities, since prices are supported by emerging-market demand rather than a speculative bubble,'' said Lee Min Koo, head of investment strategy at SH Asset Management Co. in Seoul, which manages the equivalent of $1.9 billion in equities. ``The U.S. housing market is going to take time to recover and before that happens, financials will continue to harbor risk.''

Most Asian benchmark indexes gained. Japan's Nikkei 225 Stock Average added 0.1 percent to 13,353.78. Australia's S&P/ASX 200 Index lost 1 percent. In Pakistan, the Karachi Stock Exchange 100 index tumbled 4.1 percent on speculation the central bank will increase borrowing costs tomorrow. Taiwan was closed today after Typhoon Fung-Wong struck the island.

Economic Data

In the U.S., the Standard & Poor's 500 Index rose 0.4 percent on July 25, paring a weekly retreat, on speculation the worst of the economic slowdown is over after better-than-forecast reports on durable goods orders, consumer confidence and new-home sales. S&P 500 futures were little changed.

BHP gained 2.9 percent to A$38. Mitsubishi Corp., which jointly controls the world's biggest exporter of coking coal with BHP, added 2.6 percent to 3,140 yen. Mitsui & Co., Japan's second-largest trading company, surged 5.7 percent to 2,230 yen. Mitsui gets more than half its earnings from trading commodities.

A measure of six metals traded on the London Metal Exchange, including copper and zinc, added 0.3 percent on July 25, the first gain in three days. Copper rose 0.8 percent, while gold climbed 0.5 percent. Resource prices were given a boost after U.S. durable goods orders unexpectedly rose 0.8 percent in June from the previous month.

`Strong Earnings'

``Trading houses are in one of the few industries that is set to announce some strong first-quarter earnings, and investors are buying into that,'' said Mitsushige Akino, who oversees about $560 million as chief investment officer of Ichiyoshi Investment Management Co. in Tokyo.

Yahoo Japan gained 4.3 percent to 41,700 yen. Net income for the three months ended June 30 rose 18 percent on increased advertising sales and profit from a new subsidiary, the company said. KBC Securities and Deutsche Bank AG raised their recommendations on the stock.

ANZ Banking dropped 11 percent to A$15.81, the lowest level since March 2003. The bank said earnings per share may fall 20 percent to 25 percent in the 12 months to Sept. 30, as the bank tripled provisions for delinquent loans from a year earlier.

Commonwealth Bank of Australia, the nation's largest lender, slumped 5 percent to A$41.10, while St. George Bank Ltd. lost 8.4 percent to A$26.20.

Australia's five biggest banks have lost a combined A$27.4 billion ($26 billion) of market value since July 25, when National Australia Bank Ltd. said provisions for credit investments jumped more than fivefold. The stock fell 2.9 percent to A$25.80, capping a two-day, 16 percent decline.

Profit Forecasts

Honda Motor Co. and Advantest Corp. dropped in Tokyo after forecasting lower earnings, renewing concern that slowing global growth and faster inflation is curbing demand for goods.

Honda, Japan's No. 2 automaker, sank 2.9 percent to 3,650 yen after cutting its operating profit forecast on rising raw material costs and a weaker outlook for truck sales.

Advantest, the world's biggest maker of memory-chip testers, fell 6.1 percent to 2,170 yen, the biggest drop since March 3. The company forecast a loss in the first half on scaled-back investment in factories by chipmakers.

The World Bank lowered last month its global growth forecast for this year to 2.7 percent from a previous estimate of 3.3 percent. Oil surged to a record this month and food prices have climbed by a half between 2007 and 2008, according to the Food and Agriculture Organization of the United Nations.

Output Cut

Samsung Electronics Co., the world's biggest computer-memory maker, dropped 2.8 percent to 560,000 won as five analysts slashed price targets for the shares after the company's earnings missed estimates.

LG Display Co., the world's second-largest maker of liquid- crystal displays, lost 2.7 percent to 30,150 won. The company said yesterday it plans to reduce output by about 10 percent by the end of August because of ``uncertainty'' in the market.

Orica Ltd. plunged 17 percent to A$22.80, the biggest dive since October 1987. The world's largest explosives maker sold about A$600 million of new shares at a discount to help reduce debt and fund growth.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kyung Bok Cho in Seoul at kcho7@bloomberg.net.



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