U.S. July Existing Home Sales: Statistical Summary (Table)

By Alex Tanzi

Aug. 25 (Bloomberg) -- Following is a summary of U.S. existing home sales from the National Association of Realtors.

==============================================================================
                   July     June      May    April    March     Feb.  3 month
                   2008     2008     2008     2008     2008     2008  Average
==============================================================================
Total sales        5.000    4.850    4.990    4.890    4.940    5.030    4.947
Single Family     4.390    4.260    4.410    4.340    4.360    4.470    4.353
Condos/Co-ops     0.610    0.590    0.580    0.550    0.580    0.560    0.593
                  --------------Monthly Percent Change--------------  -YoY%-
Total sales         3.1%    -2.8%     2.0%    -1.0%    -1.8%     2.9%   -13.2%
Single Family      3.1%    -3.4%     1.6%    -0.5%    -2.5%     2.8%   -12.4%
Condos/Co-ops      3.4%     1.7%     5.5%    -5.2%     3.6%     3.7%   -18.6%
                  -------------------Months Supply------------------ 3mth Avg.
Total sales        11.2     11.1     10.8     11.2     10.0      9.6      11.0
Single Family     10.6     11.0     10.5     10.7      9.6      9.2      10.7
Condos/Co-ops     15.1     12.1     14.1     14.2     12.8     12.6      13.8
------------------------------------------------------------------------------
==============================================================================
                   July     June      May    April    March     Feb.
                   2008     2008     2008     2008     2008     2008  -YoY%-
==============================================================================
                  --------------------Median Price------------------
Total sales     $212,400 $215,100 $207,900 $201,200 $200,100 $195,600    -7.1%
Single Family  $210,900 $213,600 $206,000 $199,600 $197,600 $193,600    -7.7%
Condos/Co-ops  $223,400 $225,900 $222,500 $213,400 $218,500 $211,800    -2.7%
                  -------------------Average Price-----------------
Total sales     $254,000 $257,900 $252,600 $247,200 $247,100 $242,000    -8.0%
Single Family  $252,900 $256,800 $251,200 $246,200 $245,400 $240,700    -8.8%
Condos/Co-ops  $262,000 $265,500 $263,400 $255,000 $259,600 $252,100    -2.0%
==============================================================================
NOTE: All levels are in millions and seasonally adjusted
at annual rates except for prices.

SOURCE: National Association of Realtors

To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net

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U.S. Must Avert Fannie-Freddie Failure, Survey Shows

By Christopher Anstey

Aug. 25 (Bloomberg) -- The U.S. government must avert any failure of Fannie Mae or Freddie Mac, the two largest sources of American mortgage financing, business economists said in a survey.

``Fully 75 percent agreed that these institutions are `too important to fail,''' the National Association for Business Economics, based in Washington, said in its semiannual economic policy poll. Just 20 percent of the panel of 278 NABE members said that any public aid for Fannie Mae and Freddie Mac ``would necessarily amount to nationalization.''

Fannie Mae Chief Economist Douglas Duncan was one of four analysts who ``conducted the analysis for this report,'' NABE said.

Legislation that President George W. Bush signed into law July 30 that provides as much as $300 billion refinance distressed mortgages won't hasten a recovery in the housing market, two-thirds of the respondents said in the survey. Subprime defaults were cited as the biggest short-term risk to the economy, followed by energy prices, the survey showed.

Fifty-five percent of the survey participants said the Federal Reserve's policy response to the slowdown is ``about right,'' up from 48 percent polled in March. The economists were evenly divided among those who forecast an increase in interest rates in the next six months and those anticipating no change, according to the survey.

To contact the reporter on this story: Chris Anstey at canstey@bloomberg.net



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U.S. Existing Home Sales Rose 3.1% in July to 5 Million Rate

By Shobhana Chandra

Aug. 25 (Bloomberg) -- Sales of previously owned homes in the U.S. rose in July from a 10-year low as declining prices helped stabilize demand.

Resales rose 3.1 percent, more than forecast, to an annual rate of 5 million from 4.85 million in June, the National Association of Realtors said today in Washington. The median price dropped 7.1 percent from July 2007, and the number of homes for sale jumped to a record.

Record foreclosures have pushed property values down even more, luring some bargain hunters into the market. Still, tougher lending rules, rising unemployment and a glut of unsold houses signal the outlook for residential real estate remains grim.

``It'll be a while before we get a real recovery in housing,'' Stephen Gallagher, chief U.S. economist at Societe Generale in New York, said before the report. ``These things take time to work through. Prices have come off, so that's helping home sales a little.''

Resales were forecast to rise to a 4.91 million annual rate, according to the median estimate of 75 economists in a Bloomberg News survey. Projections ranged from 4.69 million to 5 million. July's sale rate was the highest since February.

Sales were down 13 percent compared with a year earlier. Resales totaled 5.65 million in 2007.

The increase in sales wasn't enough to keep up with the surge in properties coming into the market as foreclosures mount. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month's supply at the current sales pace, matching the highest ever. The group has said a 5 to six month's supply is consistent with a stable market.

Inventory Jumps

The jump in inventory was driven by an increase in the supply of condos as projects started one or 2 years ago came on the market, the Realtors group said.

The median price of an existing home fell to $212,400 from $228,600 in July 2007.

``We are in a very tight credit-availability condition,'' Lawrence Yun, NAR's chief economist, said in a press conference. ``Inventories continue to remain very high.''

Resales account for about 85 percent of the market, while purchases of new homes make up the rest. Sales of existing homes are compiled from contract closings and may reflect contracts signed one or two months earlier.

For that reason, economists consider new-home sales, which are recorded when a contract is signed, a more timely barometer of the market. A report tomorrow from the Commerce Department may show new home sales fell in July for the third consecutive month, according to the Bloomberg survey median.

Breakdown

Today's report showed resales of single-family homes increased 3.1 percent to a 4.39 million annual pace. Sales of condos and co-ops climbed 3.4 percent to an 610,000 rate, the most since November.

Purchases increased in three of four regions, led by a 9.7 percent jump in the West. Sales fell 0.5 percent in the South.

Tight credit conditions and ongoing declines in residential construction will weigh on economic growth in coming months, Federal Reserve policy makers said at their Aug. 5 meeting. The Fed's quarterly survey of bank loan officers showed 75 percent had made it tougher for prime borrowers to get a mortgage, more than in the April survey.

``I worry a lot about what's happening in housing,'' Martin Feldstein, a member of the committee that charts American business cycles, said in an interview on Bloomberg Television last week. ``The number of negative-equity homes is exploding. Housing prices will continue to go down, driven by the large oversupply of houses and the increasing number of foreclosures.''

Bank Sales

The number of unsold previously owned homes has piled up as some owners resist lowering prices and banks repossess more properties.

For their part, builders are working to pare the inventory of new homes. Ground was broken on the fewest new houses in 17 years in July, and permits, a sign of future construction, also fell, a report from the Commerce Department last week showed.

The S&P/Case-Shiller index of home prices in 20 metropolitan areas dropped in May, extending a string of declines that started in August 2006. June figures are due tomorrow.

``Buyers are coming back into the market,'' Tom McCormick, president of Astoria Homes, said in a Bloomberg Television interview last week. ``Remarkably low'' prices do ``seem to be bringing people in off the sidelines.''

While lower home values may be reviving interest among some homebuyers, the declines also reduce household wealth, just as job losses and borrowing costs are rising. That's contributing to a slowdown in consumer spending, the biggest part of the economy.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net



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Thai Economic Growth Slows More Than Expected to 5.3%

By Suttinee Yuvejwattana and Shanthy Nambiar

Aug. 25 (Bloomberg) -- Thailand's economic growth slowed more than expected in the second quarter, increasing the likelihood the central bank will soon stop raising interest rates.

Southeast Asia's second-biggest economy expanded 5.3 percent in the three months ended June 30 from a year earlier after a revised 6.1 percent gain in the first quarter, the government said today in Bangkok. Growth was forecast to be 5.8 percent, according to the median estimate of 10 economists surveyed by Bloomberg.

The economy slowed for the first time in more than a year as higher exports of rice and rubber failed to offset a decline in domestic spending. Growth may ease further in the second half as protests and court cases against Prime Minister Samak Sundaravej's six-month-old government erode consumer confidence.

``Investment has suffered, and given that political uncertainty is likely to linger, growth is likely to be depressed for quite some time,'' said Frederic Neumann, an economist at HSBC Global Markets in Hong Kong. ``One big risk for Thailand is that exports are likely to slow and in the face of weak domestic demand it is likely to lead to a sharp deceleration of economic growth.''

The Thai baht fell on speculation slower growth will damp overseas investors' demand for local assets. The currency slipped 0.6 percent to 34.11 per dollar as of 12:27 p.m. in Bangkok, according to data compiled by Bloomberg.

Rate Rises May End

Weaker growth means the Bank of Thailand may be on the verge of its last interest-rate increase this year, according to a Bloomberg survey. Governor Tarisa Watanagase is under pressure from the government to keep borrowing costs on hold to spur the economy. Bank of Thailand policy makers meet on Aug. 27.

Thailand's central bank will raise its one-day repurchase rate by a quarter of a percentage point to 3.75 percent, the second increase in two months, according to eight of 13 economists surveyed by Bloomberg. The rest expect borrowing costs to be left unchanged. Of the eight predicting an increase this week, four say it will be the last for this year and the others forecast at least a further quarter-point rise.

Lower fuel costs will start to slow inflation from October onwards, Finance Minister Surapong Suebwonglee said Aug. 15.

``Inflation should be at a controllable level,'' Ampon Kittiampon, secretary general of the government's National Economic and Social Development Board, said today. ``It shouldn't exceed 6.5 percent to 7 percent for the whole year due to the government's measures and softening oil prices.''

Government Criticism

The central bank last month raised its key rate by a quarter point to 3.5 percent, the first increase in two years, after inflation hit a decade-high 9.2 percent in July.

The move has been criticized by members of the government including Deputy Finance Minister Suchart Thadathamrongvej, who said this month that Governor Tarisa should resign if the central bank's policy differs from the government's pro-growth position.

The central bank and the finance ministry agree that Thailand's economic growth may ease in the second half as a global slowdown reduces demand for the nation's exports.

``Private investment and spending may not recover quickly given higher oil prices and inflation,'' Ampon from the National Economic and Social Development Board said today.

The board revised its full-year growth target to between 5.2 percent and 5.7 percent, from a range of 4.5 percent to 5.5 percent, because exports were stronger than expected in the first six months, Ampon said.

`Under Pressure'

Exports from Thailand, which account for about 70 percent of gross domestic product, rose 26.3 percent in the second quarter from a year earlier. That was faster than the 22.9 percent pace recorded in the previous three-month period.

``The overall growth momentum will come under pressure in the second half because of slowing external demand,'' said Song Seng-Wun, an economist at CIMB-GK Securities Ltd. in Singapore. `` Thailand will not be able to decouple from the rest of Asia and the world.''

Spending by local consumers and companies hasn't been that strong. An index of consumer confidence fell from April through June in line with surging oil costs, and protests and court cases against Samak's government.

``When you have political turbulence, one thing you will see is corporates holding back investment,'' said Nicholas Bibby, an economist at Barclays Bank Plc in Singapore.

Samak is under fire from protesters who say he is a stand-in for former premier Thaksin Shinawatra and want him to quit. Thousands of protesters marched to the British embassy in Bangkok on Aug. 19 to demand the extradition of Thaksin, who fled to the U.K. to avoid corruption charges.

Consumption, Investment Slow

Thailand's gross domestic product expanded a seasonally adjusted 0.7 percent in the second quarter from the previous three months, when it grew a revised 1.3 percent, according to today's statement.

Private consumption rose 2.4 percent from a year earlier in the quarter, after gaining 2.6 percent in the first quarter. Total investment in the second quarter rose 1.9 percent from a year earlier, slowing from 5.4 percent in the previous three months. Manufacturing expanded 8 percent, from a revised 9.9 percent pace in the previous three months.

Thailand's $245 billion economy may expand more than 5 percent in the second half of the year, said Ampon. The economy grew 5.7 percent in the first six months, he said. Economists in a Bloomberg survey expect growth of 5 percent this year and 5.2 percent in 2009.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net.

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Mersch Says ECB to Change Collateral Rules Soon

By John Fraher

Aug. 25 (Bloomberg) -- The European Central Bank will announce changes to the rules governing its money-market auctions in coming weeks to head off the risk of abuse by financial institutions, council member Yves Mersch said.

``At the margins there can still be cases where you see dangers of gaming the system,'' Mersch said in an interview on Aug. 23 in Jackson Hole, Wyoming. ``The Governing Council has been discussing the whole issue'' and has agreed on a ``certain amount'' of refinement to the existing rules, he said.

ECB officials have become increasingly concerned that banks are taking advantage of collateral rules that are broader than those used by the Federal Reserve and the Bank of England. The danger is that banks struggling to sell securities damaged by the credit-market turmoil will dump them on the ECB and become overly reliant on central-bank funds.

Dutch policy maker Nout Wellink said in an interview with the Het Financieele Dagblad newspaper published Aug. 21 that banks shouldn't become too dependent on the ECB for funding.

``It's not a broad-based revolution,'' said Mersch, who is attending a meeting of central bankers and financial officials organized by the Fed. ``We are satisfied with our framework. But since there are always on the margins evolutions, we have to adjust our framework regularly to market practices.''

``The precisions'' planned by the ECB ``concern some instruments,'' Mersch said, declining to elaborate. Unlike the Fed and the Bank of England, the ECB hasn't had to change its operation rules since the credit crisis began.

Lender of Last Resort

``The ECB is in an unenviable situation,'' said Paul McCulley, a fund manager at Pacific Investment Management Co, in an interview at Jackson Hole. ``The lender of last resort should be just that, a last resort, and not a permanent provider of funds to the private sector.''

Central bankers including Federal Reserve Chairman Ben S. Bernanke met in the Teton Mountain retreat at the weekend to discuss ways to address the past year's credit rout. ECB President Jean-Claude Trichet said ``we are still in a market correction'' and Bank of Israel Governor Stanley Fischer said the crisis has yet to run its course.

Spain's banks in particular are struggling to attract investors as a decade-long property boom ends and mortgage delinquencies soar to the highest in at least six years. Investors demand higher rewards to buy bonds backed by Spanish mortgages than any other home loans in Europe. The ECB lent Spanish banks a record 49.4 billion euros ($73.1 billion) in July.

Demand From Outside

The ECB's money-market system is also attracting demand from outside the euro region. The Frankfurt-based central bank said in June it will accept asset-backed bonds sold by Macquarie Group Ltd., Australia's biggest securities firm, and backed by Australian consumer loans as collateral.

U.K. mortgage lender Nationwide Building Society said Aug. 18 it's planning to expand into Ireland, a member of the euro region, to take advantage of ``funding opportunities.''

Banks with operations in the countries sharing the euro can raise funding from the ECB by pledging certain types of collateral including asset-backed securities. Bonds backed by mortgages and other assets accounted for 18 percent of the ECB's loan collateral at the end of 2007, up from 4 percent in 2004, Fitch Ratings data show.

Taking Advantage?

``It has been suspected for some time that banks could be taking advantage of the broad collateral framework since they no longer publicly place asset-backed securities and these securities now only serve as collateral in central bank funding,'' Michael Schubert, an economist at Commerzbank AG in Frankfurt, wrote in a note to investors today. ``This means that a necessary market correction in the ABS segment is being put off.''

The ECB lends to banks mostly through the main refinancing operations maturing in one week. Longer-term auctions provide financing to banks during three- and six-month periods.

Mersch said the central bank prefers to tackle any individual instances of abuse with ``moral suasion.''

``Our framework is complex, and if we can warn people that this is not acceptable beforehand, and they adjust in due time, we would be satisfied,'' Mersch said. While the ECB hasn't yet taken ``specific action,'' the central bank plans to strengthen its powers. He didn't say what that action might be.

Mersch said the ECB's response to any abuse case ``would not necessarily be a question to be discussed publicly.''

The financial crisis is taking its toll on Europe's economy, which contracted in the second quarter.

Mersch said ``the question is whether the slowdown will last a little bit longer'' and Bundesbank President Axel Weber, who was also in Jackson Hole, said Aug. 22 the current quarter may show ``some weakness.'' The economy may expand below its potential rate of 2 percent ``into next year,'' he said.

At the same time, ``you shouldn't be getting too hung up about the volatility in quarter-to-quarter GDP readings,'' Weber said. Weber and Mersch both said inflation will exceed the ECB's 2 percent limit next year, with Weber saying there's a ``substantial risk' that price pressures will persist. The ECB will publish revised projections next month.

To contact the reporter on this story: John Fraher in Jackson Hole, Wyoming at jfraher@bloomberg.net



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EverQ, Solar IPO Candidate, Needs Over EU500 Million

By Joseph Heaven

Aug. 25 (Bloomberg) -- EverQ GmbH, the German solar cell maker that's planning an initial public offering, needs more than 500 million euros ($736 million) to finance its expansion plan, Chief Executive Officer Ted Scheidegger said in an interview.

EverQ, whose shareholders include Renewable Energy Corp. and Q-Cells AG, will decide on the share sale's arrangers in ``the next couple of weeks,'' Scheidegger, 50, said. It aims to complete the sale, followed by a Frankfurt listing, by the first quarter of 2009 and may top up the proceeds with debt, he said.

EverQ, using manufacturing technology from Evergreen Solar Inc., has production capacity of 100 megawatt peak, a measure of the optimal power output of solar cells produced in a year under standardized conditions. It's installing equipment this month in a third factory that will raise EverQ's capacity to 180 megawatt peak. EverQ, based in the German town of Bitterfeld-Wolfen, wants to expand its capacity to 600 megawatt peak by 2012.

``On the path to 600 megawatt peak we will be looking at well in excess of half a billion euros investment,'' Scheidegger said at the company's headquarters. ``The next step is to raise the funds for the next 200 megawatt peak.''

Hovik, Norway-based Renewable Energy, Q-Cells of Thalheim, Germany and U.S.-based Evergreen Solar each owns a third of EverQ. Renewable Energy, the largest maker of polysilicon for solar panels, supplies the purified silicon to be melted and drawn into ribbons. Q-Cells advises on the cells' handling and treatment to maximize electrical efficiency.

New Shares

``This capital increase will be new shares,'' Scheidegger said. ``Including what we can leverage off our balance sheet, our requirements will be several hundred million euros'' for a fourth factory, new technology, sales and marketing staff as well as new corporate rebranding, he said.

Existing investors may also sell their holdings, he added.

Revenue will rise to about 200 million euros this year, 44 percent more than last year's 139 million euros, Scheidegger said. Earnings before interest and taxes as a percentage of sales is in the ``low double-digit'' range, with net income as a percentage of sales a ``high single-digit,'' the executive added.

``This is much, much faster, more dynamic, higher growth rate,'' said the Swiss-Canadian, who led tropical forestry company Precious Woods Holding AG's listing on the Zurich stock exchange in 2002. ``The business itself it not as complex as Precious Woods.''

`String-Ribbon'

The third plant, called EverQ3, will begin large-scale production starting in March, the CEO said. Investments in the 80 megawatt peak factory cost 150 million euros, he said.

Marlboro, Massachusetts-based Evergreen Solar is the license holder of the manufacturing technique, called ``string-ribbon,'' which uses the surface tension of molten silicon between metal wires to draw ribbons for cells of the correct thickness. This technique is cheaper than conventional production because it uses less energy and less silicon than rival polycrystalline, according to EverQ.

Renewable Energy lost 4 kroner, or 2.3 percent, to 167 kroner at 12:16 p.m. in Oslo trading. Q-Cells dropped 74 cents, or 1.1 percent, to 67.11 euros in Frankfurt.

To contact the reporter on this story: Joseph Heaven in Zurich at jheaven1@bloomberg.net



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PTC India Seeks Coal Supply to Spur Power Trading

By Archana Chaudhary

Aug. 25 (Bloomberg) -- PTC India Ltd. plans to start importing coal to supply power stations in return for electricity to defend its position as the nation's biggest energy trader.

PTC has agreed to supply 1.5 million metric tons of coal by December 2009, Chairman T.N. Thakur said in an interview in New Delhi. The company plans to invest in mines in Indonesia and India to secure as much as 15 million tons, equivalent to three- quarters of India's annual imports, he said.

The energy trader faces competition from new power exchanges and is using part of the 12 billion rupees ($275 million) it raised in a January share sale to invest in power projects and assets. PTC will pay generators to use its coal and sell the power produced to its customers, Thakur said.

``Coal is going to be king in the next few years and those who own the resource will grow,'' Prasad Dahapute, a Mumbai-based analyst with Antique Stock Broking Ltd., said today. PTC ``will make more money through generation than it can through trading.'' He recommends investors buy the company's shares.

PTC shares fell 1.3 percent to 79.1 rupees at the close in Mumbai trading after gaining as much as 2.4 percent. The shares have fallen 53 percent so far this year. India's benchmark stock index rose 0.3 percent today.

Demand for coal, which fires more than half of India's generation capacity of 141,000 megawatts, is rising as the country grows at the second-fastest pace among major economies. PTC has signed an agreement with a Singapore-based company to buy a stake in mines in Indonesia, the world's biggest exporter of power-station coal, Thakur said, without giving details.

`Expedite Generation'

``The idea behind developing this business model was to expedite generation and for this, you can't depend on Indian coal alone,'' Thakur said.

India may import about 20 million tons of coal in the year through March, according to the Central Electricity Authority, a statutory body that advises the government on power policy and sets technology standards for the industry. Imports may double by 2012, Anil Razdan, the most senior bureaucrat in the Power Ministry said May 21.

State and private utilities in India plan to almost double the country's generation capacity to 250,000 megawatts by 2017. New power exchanges are expected to help reduce shortages by conducting spot trades in electricity, which is usually sold through contracts, allowing captive plants run by companies to sell surplus power.

PTC owns 26 percent of Indian Energy Exchange, the country's first, which started on June 27. Financial Technologies (India) Ltd. is the exchange's founder and majority owner of the world's third-biggest gold bourse. The National Commodity & Derivatives Exchange said in June it won approval to set up a competing platform.

Capacity Addition

NTPC Ltd., India's biggest generator, and Power Finance Corp., which both partly own PTC, plan to set up the country's third electricity exchange.

Power generators haven't kept pace with rising demand from homes, factories, shopping malls and cinemas. India's peak electricity shortage may widen to 18.1 percent in the year to March 31, when it plans to add 10,178 megawatts of capacity, according to the Central Electricity Authority. The government targets adding 78,700 megawatts by March 2012.

Bulk of the capacity addition will come from nine coal-fired plants, each capable of generating 4,000 megawatts. These so- called ultra mega projects are planned near coal mines or along the coast to enable them to use imported fuel.

Tata Power Ltd., India's biggest electricity generator outside state control, is setting up one of the projects at Mundra in western India and has invested $1.2 billion in two Indonesian mines to secure coal supplies.

Prices at Australia's Newcastle port, the world's biggest exporter of thermal coal, reached a record $194.79 a ton in the week ended July 4. Prices have since declined to $162.15 a ton in the week ended Aug. 22, according to the globalCOAL NEWC Index.

To contact the reporter on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.



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BP Says Tankers to Resume Loadings Tomorrow From BTC

By Ayla Jean Yackley and Ladane Nasseri

Aug. 25 (Bloomberg) -- Tankers will begin loading oil tomorrow from the Baku-Tbilisi-Ceyhan pipeline for the first time since a fire affected the main outlet for Azeri crude to U.S. and European markets almost three weeks ago.

``The first tanker will dock after midnight tonight,'' said Murat Lecompte, an Istanbul-based spokesman for BP Plc, the main operator of the BTC link. ``Loadings have not actually started yet,'' he said, revising an earlier statement from BP saying tankers were being loaded today.

Tomorrow's start to loadings follows repairs and testing after the pipe was closed on Aug. 5 when an explosion sparked a blaze on the 1,768-kilometer (1,100-mile) pipeline. The BTC carries as much as 1 million barrels of Azeri crude each day through Georgia to Turkey's Mediterranean coast.

The first tanker will take up to 15 hours to fill, depending on its size, Lecompte said in a phone interview. An average of two tankers are loaded daily when oil flows at normal levels.

``Flows will increase throughout the day today,'' Lecompte said. ``Maximum rates will be reached overnight.''

Export Route

Azerbaijan sent oil to export via Iran because of the disruption, with Iranian Oil Terminals Co. receiving the first cargo for transit yesterday, according to the Iranian Oil Ministry's news agency, Shana. Iran can handle 200,000 barrels a day of Caspian and Central Asian crude and could boost the volume to 500,000 barrels daily under swap agreements, Shana said on its Web site. It didn't specify how much Azeri crude Iran received.

The pipeline is pumping at about 70 percent capacity, said Huseyin Sagir, a spokesman for Botas International Ltd., BP's Turkish partner. Crude was pumped over the weekend to replenish storage depots at Ceyhan and has now reached sufficient levels, he said. The depots have a capacity of 7 million barrels, and would take at least a week to fill if the line were running at full strength.

Sabotage wasn't the cause of the BTC fire, the ministry said, disputing claims by the Kurdistan Workers Party, or PKK, that it bombed the pipeline. The PKK is seeking autonomy for Kurds in Turkey.

To contact the reporter on this story: Ayla Jean Yackley in Istanbul at ayackley@bloomberg.net.



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TNK-BP's Considine Resigns as Dudley Appeals Ban

By Torrey Clark

Aug. 25 (Bloomberg) -- TNK-BP Executive Vice President Tony Considine resigned, the second top manager to leave the venture this month as BP Plc and its billionaire partners fight for control of Russia's third-largest oil producer.

Considine will continue overseeing refining, trading and marketing operations until Sept. 15 before returning to his family in Australia, TNK-BP spokesman Peter Henshaw said by phone in Moscow today. The executive has served five years in his post after helping to set up the venture, Henshaw said.

Considine's decision follows the exit of James Owen, who quit as TNK-BP's chief financial officer Aug. 4, as London-based BP struggles for control of the 50-50 venture with its billionaire partners. Henshaw declined to say whether more managers may leave.

``We regret we are losing Tony,'' Chief Operating Officer Tim Summers said in an e-mailed statement today. ``His team has embodied what TNK-BP was set up to achieve - a unique and powerful blend of Russian and international expertise and talent which leads the industry.''

BP, Europe's second-largest oil company, relies on its half of the Russian company for almost a quarter of its reserves and production. The other half of TNK-BP is split between companies controlled by billionaires Mikhail Fridman, German Khan, Viktor Vekselberg and Len Blavatnik, together known as AAR.

Chief Executive Officer Robert Dudley left Russia July 24, citing ``sustained harassment'' amid court battles and labor and tax inspections that led to him being disqualified from his post in Russia for two years. His lawyers appealed that ban for breaching labor rules today, Henshaw said.

Dudley, who is running the venture from a location that hasn't been disclosed by BP or TNK-BP, sent a letter protesting the actions of the labor inspectorate to the Prosecutor General and heads of five other state bodies last week, according to a copy of the complaint obtained by Bloomberg News.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.



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South Africa's Rand Declines Against Dollar for a Second Day

By Garth Theunissen

Aug. 25 (Bloomberg) -- South Africa's rand weakened against the dollar and bonds fell before a report that will probably show inflation in the continent's biggest economy exceeded the central bank's ceiling for a 15th month.

The rand fell for a second day and benchmark two-year bonds declined for a fifth session on bets consumer-price growth, excluding mortgage costs, quickened to 12.9 percent in July, from 11.6 percent a month earlier, according to the median estimate of 20 economists surveyed by Bloomberg News. Pretoria-based Statistics South Africa will publish the data on Aug. 27.

``The rand and bonds are trading a touch weaker as traders square-off their positions before the inflation data,'' said Victor Mphaphuli, a portfolio manager who helps oversee about $45 billion at Stanlib Asset Management in Johannesburg. ``Inflation is nearing a peak but there's an outside chance of a nasty number, which would have a negative impact on the market in the short term.''

The rand fell as much as 0.9 percent to 7.7453 per dollar and was at 7.7180 by 2:25 p.m. in Johannesburg, from 7.6776 on Aug. 22. It weakened versus all but one of 16 major currencies monitored by Bloomberg, losing 0.4 percent to 11.3977 per euro.

``Guys are staying long dollar, short rand and are waiting to see what the inflation numbers are going to look like,'' said Marc Copeland, a currency trader at Investec Asset Management in Cape Town. A long position is a bet an asset will strengthen.

`Rand Struggling'

The rand's ``struggling to fight a stronger dollar, and we should see more rand weakness this week.'' It may fall to about 7.80 per dollar by the end of the week, Copeland predicted.

The yield on South Africa's 13 percent note due August 2010, which is more sensitive to interest rates, climbed 4 basis points to 9.91 percent. The price of the bond dropped six cents per 100- rand face amount to 105.53. The yield on the benchmark 13.5 percent security due September 2015 added 2 basis points to 9.28 percent. Yields move inversely to bond prices.

The South African Reserve Bank has raised its key interest rate 10 times since June 2006 to quell inflation, which has exceeded its 6 percent ceiling since April 2007. The bank's monetary policy committee kept interest rates on hold at its meeting Aug. 14 as consumer spending slowed and oil prices fell, easing pressure on prices.

South Africa's relatively high interest rates make the rand a popular purchase in so-called carry trades. In such transactions, investors borrow a currency at a low interest rate and invest the proceeds in markets where returns on assets are higher. Investors earn the spread between the two, taking the risk currency moves will erase their profit.

`Tricky Stage'

South Africa's 12 percent main interest rate compares with borrowing costs of 0.5 percent in Japan and 2 percent in the U.S.

``The carry trade is at a tricky stage, as far as the rand is concerned,'' said Mphaphuli. ``If rates are hiked again it may benefit the currency in the short term but in the long term it will hurt the rand because of the negative impact high rates have on the economy.''

The rand also fell as the prices of gold and platinum, South Africa's biggest export earners, slipped for a second day as a stronger U.S. dollar eroded the appeal of the metals as alternative investments.

Gold, which is priced in dollars and often moves in the opposite direction to the U.S. currency, declined as much as 0.7 percent to $817.58 an ounce. Platinum fell 1.2 percent to $1,418 an ounce. South Africa produces almost 80 percent of the world's platinum and about 10 percent of its gold, typically causing the rand to move in tandem with the metals' prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net



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Canada's Currency Gains as Crude Oil Climbs Above $115 a Barrel

By Chris Fournier

Aug. 25 (Bloomberg) -- Canada's dollar rose as crude oil surpassed $115 a barrel.

The Canadian dollar strengthened versus 15 of the 16 most- actively traded currencies. Commodities account for more than half of the nation's export revenue.

``With crude posting gains right now, that's likely to reflect itself in better gains for the'' currency, said Jack Spitz, managing director of foreign-exchange trading at National Bank of Canada in Toronto, who predicts Canada's currency will weaken to C$1.08 against its U.S. counterpart by year-end.

The Canadian currency rose 0.2 percent to C$1.0445 per U.S. dollar at 8:16 a.m. in Toronto, from C$1.0470 on Aug. 22. One Canadian dollar buys 95.72 U.S. cents.

Canada's dollar has dropped 3.4 percent since July 11 when oil reached its record high of $147.27 per barrel.

Crude oil for October delivery advanced as much as $1.21 to $115.80 on the New York Mercantile Exchange.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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Dollar Trades Near Six-Month High Against Euro on Oil, Economy

By Ye Xie and Anchalee Worrachate

Aug. 25 (Bloomberg) -- The dollar traded near a six-month high against the euro on speculation a 20 percent drop in crude oil prices from the record will support economic growth of the world's largest energy consumer.

Crude oil for October delivery fell the most in more than three years on Aug. 22. The euro fell against the yen before a survey tomorrow forecast to show business confidence in Germany dropped to the lowest level since 2005.

``The decline of oil prices took some pressure off the dollar,'' said David Watt, senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. ``The dollar bull market is in place.''

The dollar traded at $1.4785 per euro at 9:10 a.m. in New York, compared with $1.4793 on Aug. 22. The U.S. currency fell 0.4 percent to 109.62 yen, from 110.07 at the end of last week. The euro declined 0.4 percent to 162.20 yen, from 162.83.

Crude oil has fallen almost 20 percent since reaching the all-time high of $147.27 on July 11. It tumbled 5.4 percent on Aug. 22, the biggest drop since December 2004. Crude oil for October delivery rose 0.5 percent today to $115.37 a barrel in New York after touching $114.03, the lowest since Aug. 20. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they moved in lockstep.

German Confidence

The euro weakened against the yen and the dollar on speculation a decline in German business confidence will discourage the European Central Bank from raising interest rates. The Ifo institute's confidence index probably fell to 97.2 in August, the lowest since September 2005, according to the median forecast of 35 economists surveyed by Bloomberg News. The report is due tomorrow.

``The euro has downside risks before the Ifo data,'' said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``European growth isn't looking that good, so people are likely to react more to data that support that view.''

Futures traders increased bets the euro will fall against the dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts --was 20,364 on Aug. 19, compared with 19,427 a week earlier.

`Short' on Euro

``We put up a recommendation to go short on the euro at $1.4858 and targeting $1.4350,'' wrote Nizam Idris, a currency strategist at UBS AG in Singapore, in a research note today. ``Going forward, we expect a trend of deteriorating growth conditions to remain intact, and this will most likely keep the euro in a broad downtrend.''

UBS forecasts the ECB will cut its 4.25 percent benchmark rate by 0.75 percentage point over the next one to two months, Nizam wrote. The firm initiated a new short euro-dollar position on Aug. 22, betting the euro will decline, according to Geoffrey Yu, a currency strategist in London.

Resales of homes in the U.S. probably rose 1 percent in July to a 4.91 million annual rate, staying near June's 10-year low, according to the median forecast of 75 economists surveyed by Bloomberg News. The National Association of Realtors' report is due at 10 a.m. Washington time.

`Weak' Data

``Weak economic data are likely to pull the dollar lower,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``We can't be optimistic about the outlook for growth. The subprime problem will also weigh on dollar sentiment well into the future.''

While the ouster of Pakistan President Pervez Musharraf was hailed by the government as a chance to turn around a crumbling economy that has left half of the 168 million population short on food, investors aren't convinced.

A rally in the Pakistani rupee from its Aug. 15 record low of 76.50 per dollar last week faltered after two days, leaving the currency down 19 percent this year. The rupee is the world's fourth-worst performer, behind the Zimbabwean dollar, Turkmenistan manat and Icelandic krona.

Templeton Asset Management Ltd. and Aberdeen Asset Management Plc said they doubt Pakistan's new leaders have the resolve to slash outlays or raise borrowing costs to help curb the fastest inflation in 30 years at a time when the economy is slowing. The risk of failure has prompted investors, stung by a global slump in stocks and debt markets, to shun developing economies from India to Chile that face similar dilemmas.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net



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Investors Should Buy IOI, Maybank on Reduced Risk, Citi Says

By Chan Tien Hin

Aug. 25 (Bloomberg) -- Investors should refocus on ``oversold'' stocks such as IOI Corp. and Malayan Banking Bhd. as political uncertainties subside, Citigroup Inc. said.

Opposition leader Anwar Ibrahim is likely to win a by- election in Penang state tomorrow, which will allow him to return to parliament, a move that may result in fewer demonstrations in the country, Citigroup said in a report today.

``It may not be a bad thing after all for Anwar to return to parliament to make most of his speeches,'' Choong Wai Kee, an analyst at Citigroup said in a report today. This will ``keep him busy that there would be less time for outside activities.''

The Kuala Lumpur Composite Index has slid 16 percent since opposition parties won almost half the states in the March 8 election and denied the ruling coalition a two-thirds majority in parliament for the first time since 1969. Anwar is seeking to oust the ruling coalition before Sept. 16 by convincing enough lawmakers to defect to his opposition alliance.

Prime Minister Abdullah Ahmad Badawi, facing a weakened government, has said he'll transfer power to his deputy Najib Razak after the party's annual meeting in December.

Anwar became eligible in April to run for a parliamentary seat after serving time in jail on corruption charges that he denies.

``Fears of political uncertainty should start to subside,'' Choong said. ``We expect the unusually high equity risk premium to start falling.''

Citigroup said investors should buy plantation, property and banking stocks. Among its top picks are Kuala Lumpur Kepong Bhd., Sime Darby Bhd., Public Bank Bhd., Bumiputra-Commerce Holdings Bhd., SP Setia Bhd. and KLCC Property Holdings Bhd.

The Kuala Lumpur Composite Index fell 0.l percent at 11:31 a.m. local time.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net



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Nordic Currencies: Norway's Krone Gains Before Jobless Report

By Bo Nielsen

Aug. 25 (Bloomberg) -- Norway's krone rose against the euro before a report this week that will probably show the June unemployment rate held near the lowest level in two decades.

The jobless rate stayed at 2.5 percent, according to the median estimate of 15 economists in a Bloomberg News survey. The data will be released by Statistics Norway on Aug. 27. The mainland economy, which excludes oil activities, grew 1 percent after shrinking 0.1 percent in the first quarter, a government report last week showed.

``A steady number suggests that the previously existing inflation pressure is going to be maintained,'' said Geoffrey Yu, a currency strategist in London at UBS AG, the second-biggest foreign-exchange trading bank. ``Norges Bank is almost certainly going to hike rates next month.''

The Norwegian krone was at 7.9326 per euro by 1:08 p.m. in Oslo, from 7.9411 on Aug. 22. and little changed at 5.3724 per dollar. The Swedish krona slipped to 6.3354 per dollar, after falling to 6.3639 earlier, from 6.3246.

Sweden's krona pared declines against the dollar after a government report showed the country's trade surplus widened in July as demand for its exports increased.

The unadjusted trade balance reached 9.4 billion kronor ($1.48 billion), from a revised 9 billion kronor in June, Statistics Sweden said on its Web site today. Danske Bank, Scandinavia's second-biggest bank, forecast the surplus would narrow to 6 billion kronor.

The country's main trading partner is the European Union, whose economy contracted in the second quarter for the first time since the launch of the euro almost a decade ago.

Fiscal Changes

Finance Minister Anders Borg said last week the Swedish government will slash taxes and raise spending by a total of 30 billion kronor next year to counter slowing economic growth and rising unemployment.

Norges Bank, which next sets rates on Sept. 24, raised its key rate to 5.75 percent in June and indicated it may lift it to 6 percent to prevent inflation from accelerating. Consumer-price growth reached a 7 1/2-year high of 2.9 percent in July.

Iceland's krona snapped a two-day gain, falling 0.3 percent to 81.68 per dollar.

Nordic government bonds declined, with the yield on Sweden's 5.25 percent note due March 2011 falling 3 basis points, or 0.03 percentage point, to 4.37 percent. The yield on Norway's 6 percent government note maturing May 2011 fell 2 basis points to 5.05 percent. Yields move inversely to bond prices.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net



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Crude Rises After Russian Vote on Georgia's Breakaway Regions

By Ayesha Daya

Aug. 25 (Bloomberg) -- Crude oil rose above $115 a barrel after Russian lawmakers voted to recognize the independence of two breakaway Georgian regions, raising fears of new tensions in the area.

Both chambers of Russia's Parliament called on President Dmitry Medvedev to recognize the independence of South Ossetia and Abkhazia, the two regions that sparked Russia's first foreign incursion since the Soviet era.

``This may lead to new tensions between Russia and the West over Georgia, and may lead to more oil supply disruptions,'' said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. ``The market was hoping that supply was returning to normal but this new development, including an explosion on a Georgian train carrying oil over the weekend, is a reminder that things are not over.''

Crude oil for October delivery rose as much as $1.21, or 1 percent, to $115.80 a barrel on the New York Mercantile Exchange, and traded at $115.20 a barrel at 1:19 p.m. London time.

A fuel train exploded when it struck a mine about 7 kilometers (4.5 miles) from the city of Gori amid the continuing standoff with Russia, the Georgian government said Aug. 24.

A Georgian operation on Aug. 7 to retake South Ossetia led to a Russian invasion and the stationing of Russia soldiers in security zones disputed by Georgian leader Mikheil Saakashvili after a cease-fire accord.

Caspian Flows Resume

Futures fell 5.4 percent on Aug. 22 to $114.59, the biggest drop since Dec. 27, 2004, after the Baku-Tbilisi-Ceyhan pipeline, which transports oil from Azerbaijan through Georgia to Turkey's Mediterranean coast, resumed oil flows following a fire earlier this month that halted exports.

``The pipeline restart was a contributing factor, putting more supply in the market,'' said Jonathan Barratt, managing director of Commodity Broking Services in Sydney. ``Oil is trading in a very volatile, wide range. The volatility is telling me that a base is trying to form'' and prices won't sink much further, he said.

Oil flows from the Caspian began this weekend and loadings will start tomorrow, a spokesman for BP Plc, the main operator of the 1 million-barrel-a-day transport link, said today.

Azerbaijan sent oil to export via Iran because of the disruption, and Iranian Oil Terminals Co. received the first cargo for transit yesterday, according to the Iranian Oil Ministry's news agency, Shana.

Brent crude oil for October settlement rose as much as $1.41, or 1.2 percent, to $115.33 a barrel on London's ICE Futures Europe exchange. It was at $114.79 at 1:19 p.m. London time. The contract declined $6.24, or 5.2 percent, to $113.92 a barrel on Aug. 22.

To contact the reporter on this story: Ayesha Daya in Dubai adaya1@bloomberg.net



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Hong Kong Stocks Jump Most in Five Months; Cathay Pacific Gains

By Hanny Wan

Aug. 25 (Bloomberg) -- Hong Kong stocks rose, lifting the benchmark index to its biggest advance in five months, after crude oil prices tumbled and China Construction Bank Corp. reported higher profit.

Cathay Pacific Airways Ltd., which posted this month a first-half loss on higher jet-fuel costs, advanced 5.2 percent after oil prices dropped more than $6 on Aug. 22. Construction Bank, the nation's second-biggest bank, climbed 3.7 percent after saying first-half profit surged 71 percent.

``I like Chinese banks,'' said Winson Fong, a fund manager at SG Asset Management Hong Kong Ltd., which oversees $3 billion in Asia outside Japan. ``They are the driving force of the Chinese economy. If we're talking about fundamentals, I don't think we need to worry too much'' about the banks, he said. Fong said his fund holds Construction Bank's shares.

The Hang Seng Index added 712.73, or 3.5 percent, to close at 21,104.79, its sharpest advance since March 25. The gauge closed on Aug. 21 at its lowest since Aug. 17, 2007. It has dropped 24 percent this year as soaring inflation assailed global economies and the world's largest financial companies posted writedowns and credit losses of more than $500 billion.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, climbed 3.7 percent to 11,324.25, its highest close since Aug. 12.

The city's markets were closed on Aug. 22 due to a storm.

Cathay Pacific advanced 5.2 percent to HK$14.88. Fuel accounts for about half of Cathay Pacific's operating costs. Air China Ltd., the nation's largest international carrier, added 2.2 percent to HK$3.75.

Oil Tumbles

China Petroleum & Chemical Corp. climbed 3 percent to HK$7.82. Asia's biggest oil refiner said yesterday first-half net income fell 77 percent to 8.26 billion yuan ($1.21 billion). That beat the median estimate of 7 billion yuan in a Bloomberg analyst survey.

Crude oil futures tumbled 5.4 percent to $114.59 a barrel in New York on Aug. 22, the biggest drop since Dec. 27, 2004. The contract was at $115.07 in after-hours trading as of 4:21 a.m. New York time. The price of jet fuel, a product of crude oil, has dropped 11 percent this month through Aug. 22.

Construction Bank climbed 3.7 percent to HK$6.19. The bank said on Aug. 22 its first-half profit surged 71 percent to 58.7 billion yuan as it boosted lending revenue and increased fee- based services. The median estimate of five analysts surveyed by Bloomberg News was for a profit of 59 billion yuan.

Industrial & Commercial Bank

Industrial & Commercial Bank of China Ltd., the world's most profitable bank, rose 4.3 percent to HK$5.34, its largest advance since July 9. CLSA Asia-Pacific Markets initiated coverage on the stock with a ``buy'' rating and share-price estimate of HK$6.25, according to an Aug. 22 research note.

Shares on the Hang Seng Finance Index accounted for 44 percent of the broader Hang Seng Index's advance.

All stocks on the 43-member Hang Seng Index climbed, except for Yue Yuen Industrial (Holdings) Ltd., the world's largest maker of sports shoes, which was unchanged. August futures added 4 percent to 21,190.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Aluminum Corp. of China Ltd. (2600 HK), the nation's biggest producer of the metal and known as Chalco, advanced 13 cents, or 2 percent, to HK$6.71. Its parent Aluminum Corp. of China, or Chinalco, got Australian approval to raise to 11 percent its stake in Rio Tinto Group, the world's third-largest mining company. Chinalco, in partnership with Alcoa Inc., bought 9 percent of Rio in February.

China Netcom Group Corp. (906 HK) rose 85 cents, or 4.2 percent, to HK$21, its biggest jump since July 9. The fixed-line phone company being acquired by China Unicom Ltd. (762 HK) said first-half profit rose 12 percent to 5.88 billion yuan as stronger sales of high-speed Internet services compensated for lower phone revenue. The profit, which excluded gains from connection fees, beat the 5.3 billion yuan median estimate of five analysts in a Bloomberg survey.

Cosco Pacific Ltd. (1199 HK) climbed 46 cents, or 4.5 percent, to HK$10.64. Asia's No. 3 container-terminal operator boosted first-half profit by 11 percent as China's surging exports of toys, furniture and clothes fueled sea-cargo traffic. Net income climbed to $153.2 million, the company said during the lunchtime trading break.

Ping An Insurance (Group) Co. (2318 HK), China's second- biggest insurer, rose HK$2.50, or 4.9 percent, to HK$53.90. The company is in talks to acquire Guangzhou Commercial Bank, the Economic Observer reported, citing people it didn't identify.

Tingyi (Cayman Islands) Holding Corp. (322 HK) climbed 16 cents, or 1.9 percent, to HK$8.80. The company's first-half profit climbed 33 percent after China's biggest maker of packaged food boosted sales of instant noodles and cold drinks. Net income rose to $127.6 million, the company said during the trading break.

Yanzhou Coal Mining Co. (1171 HK) climbed 66 cents, or 5.7 percent, to HK$12.34, its largest advance since July 9. The company, a unit of China's fourth-biggest producer of the fuel, said yesterday first-half profit more than doubled to 3.91 billion yuan because of rising energy demand and record prices. Yanzhou Coal also said profit may increase more than 260 percent in the first three quarters from a year earlier.

Separately, the company said prices of its coal sold under contracts rose 38 percent this year.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net



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Danish Central Bank to Lead Takeover of Roskilde Bank

By Christian Wienberg and Tasneem Brogger

Aug. 25 (Bloomberg) -- The Danish Central Bank will lead a buyout of Roskilde Bank A/S to avert a financial ``contagion'' after a slumping property market drove the lender into insolvency and a private purchaser couldn't be found.

Roskilde will receive 4.5 billion kroner ($890 million) in cash from the central bank and Danish lenders, who will also assume 37.3 billion kroner of debt, the bank said in a statement yesterday. Roskilde was suspended in Copenhagen trading today, after falling 88 percent from a peak in April 2007.

``We wanted to secure financial stability in Denmark,'' central bank Governor Nils Bernstein said at a press conference in Copenhagen today. ``The alternative would have been that Roskilde went bankrupt and that would have resulted in a considerable contagion throughout the financial sector.''

Writedowns on real estate loans led to a pretax loss of at least 1 billion kroner in the first half, double an estimate the bank published on July 14, Roskilde said yesterday. Denmark entered a recession in the first quarter, the first European economy to do so since the global credit crisis began last year. The bailout is the first by the Danish central bank in 15 years.

Danish financial companies fell in Copenhagen trading, led by Amagerbanken A/S, which dropped as much as 6.8 percent. Forstaedernes Bank A/S, which cut its profit outlook the day after Roskilde first announced it was being bailed out by the central bank, shed 6 percent.

Roskilde's market value has fallen to 1.02 billion kroner from 7.6 billion kroner at the end June 2007.

Failure `Unique'

Roskilde's failure was ``unique'' and linked to a ``very large exposure to the real-estate market,'' Bernstein said. ``In general, Danish banks are well prepared'' to cope with declines in the property market and a contracting economy, he said.

Michael Dithmer, a spokesman from the ministry of the economy, said the government is prepared for an additional 3.5 billion kroner in writedowns at Roskilde. The government ``does expect that further losses will be revealed,'' he said at the press conference.

Roskilde, based in the Danish city of the same name, received ``unlimited liquidity'' from the central bank on July 10 and the Danish Bankers Association agreed to cover as much as 750 million kroner of losses. The central bank said at the time the backing was conditional on Roskilde finding a buyer within six months.

`Severe Uncertainty'

``Potential buyers have expressed severe uncertainty as to the general credit culture of the bank,'' and therefore didn't submit bids for the bank in whole or in part, Roskilde said in the statement.

The central bank is acting with more than 100 of the country's private lenders, which last year pledged to cooperate in case of a bank failure. The central bank will put up 3.75 billion kroner, and the private financial institutions 750 million kroner.

Roskilde Chief Executive Officer Soeren Kaare-Andersen said last month the bank hadn't been able to reduce the size of its real-estate loan portfolio fast enough. He will remain as CEO of the new bank, the company said yesterday.

Roskilde's failure is ``absolutely, deeply disheartening,'' he said at a press conference held at the central bank today. The bank will remain in operation until it's been sold on by the central bank.

``The government backs the solution found for Roskilde Bank,'' Economy Minister Bendt Bendtsen said in a statement on the ministry's Web site. ``We had preferred that a private buyer had been found, but in the current serious situation, this solution is necessary.''

Housing Slump

Roskilde said on July 14 it would write down as much as 900 million kroner for the first six months of the year. Since the July announcement, ``a large number of clients'' have pulled their assets out of the bank, it said yesterday.

Danish housing prices will drop as much as 10 percent this year and next year following a boom and rising interest rates, Svenska Handelsbanken estimates. Homeowner foreclosures rose in July to the highest since 2003, Statistics Denmark said.

Roskilde asked the Copenhagen OMX Stock Exchange to suspend the trading of its shares and the Oslo ABM and Irish Stock Exchange to suspend the trading of its issued bonds.

The central bank last bailed out a commercial lender in 1993, when, together with Sydbank A/S, it was forced to dismantle the assets of Varde Bank.

Scandinavia's last financial crisis occurred in the early 1990s following the real-estate boom of the 1980s. Nordbanken and Gota Bank went bankrupt and were merged in 1993 in a state- engineered restructuring. Nordbanken, Finland's Merita Bank, Denmark's Unidanmark and Norway's K-Bank were then merged from 1998 to 2000 to create Nordea Bank.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net



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Norilsk Nickel Rises on $2 Billion Share Buyback Plan

By William Mauldin and Yuriy Humber

Aug. 25 (Bloomberg) -- OAO GMK Norilsk Nickel, the world's largest miner of nickel and palladium, jumped in Moscow on a plan to buy back as much as 49 billion rubles ($2 billion) in shares.

Norilsk announced the buyback, at 6,167 rubles a share, late on Aug. 22 on its Web site. United Co. Rusal, billionaire Oleg Deripaska's aluminum producer that owns 25 percent of the mining company, said it opposes the buyback because it doesn't give value to all Norilsk investors.

``This should be positively received, although minority shareholders need to be aware that these actions are not necessarily in their best interests,'' UralSib Financial Corp. analysts Michael Kavanagh and Dmitry Smolin said in a report today. The plan is ``a continuation of the conflict between Rusal'' and Norilsk's biggest shareholder, Vladimir Potanin.

Norilsk jumped as much as 6.7 percent on the Micex Stock Exchange. It traded at 5,079.99 rubles, or 4.2 percent higher, at 1:51 p.m. in Moscow, valuing Norilsk at 967 billion rubles.

Rusal and Potanin have clashed over Norilsk's strategy and performance, as Deripaska, Russia's richest man, wants Rusal to combine with Norilsk to create a diversified base metals company capable of competing with BHP Billiton Ltd. Potanin is seeking a merger with Alisher Usmanov's iron ore miner, OAO Metalloinvest, and also wants Norilsk to acquire producers of uranium and potash.

Treasury Shares

The buyback should win minority shareholder ``cheer'' for Potanin against Rusal and will offer support for Norilsk's stock, which has declined 21 percent this year, Troika Dialog analyst Mikhail Stiskin said in a note to investors today.

The bought-back shares will be stored as treasury shares, which need to be sold or canceled within a year. Still, Norilsk management loyal to Potanin will be able to ``mobilize'' the shares when needed, Stiskin said. The shares can be used for mergers, sold to Metalloinvest, or even an offshore subsidiary, thus regaining voting rights, he said.

Norilsk's buyback is planned on a pro-rata basis, equal to about 4.2 percent of shareholders' equity, and the price is 27 percent higher Norilsk's Aug. 22 closing price. Less than a year ago, Norilsk sold 7.5 million of its shares to institutional investors for 11 percent more than the buyback offer, or $285 apiece.

``The company could be perceived to be trading against its shareholders,'' UralSib's Kavanagh and Smolin said.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net; Yuriy Humber in Moscow at yhumber@bloomberg.net



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German Stocks Pare Decline; Allianz, Infineon, Daimler Advance

By Daniela Silberstein

Aug. 25 (Bloomberg) -- German stocks pared earlier declines, led by Allianz AG after the Sunday Times reported Commerzbank AG may be close to making a takeover bid for Allianz's Dresdner Bank division. Infineon Technologies AG and Daimler AG also advanced.

The DAX Index fell 4.10, or less than 0.1 percent, to 6,338.32 at 1:40 p.m. in Frankfurt after falling 0.5 percent. The HDAX Index of Germany's 110 biggest companies slipped 0.1 percent to 3,245.12.

Allianz climbed 2.74 euros, or 2.6 percent, to 110.20. Commerzbank may be close to making a 9 billion-euro ($13.3 billion) takeover bid for Allianz's Dresdner Bank division, the Sunday Times reported yesterday, citing unidentified people.

Infineon, Europe's second-largest chipmaker, added 10.5 cents, or 1.7 percent, to 6.05 euros. Daimler, the world's second-largest luxury carmaker, gained 50 cents, or 1.2 percent, to 41.04 euros.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.



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Bancolombia, Embraer, Molinos, Petrobras: Latin Equity Preview

By Alexander Ragir and William Freebairn

Aug. 25 (Bloomberg) -- The following companies may have unusual price changes in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.

The MSCI Latin America Index was little changed at 4,026.80.

Brazil

Banco do Brasil SA (BBAS3 BS) and Banco Nossa Caixa SA (BNCA3 BS): Banco do Brasil, Latin America's biggest bank, and Nossa Caixa, Brazil's largest regional lender in government hands, disagree about the amount Banco do Brasil should pay for assets of the bank it's in talks to acquire, Valor Economico reported without saying where it obtained the information. Banco do Brasil rose 0.9 percent to 23.51 reais. Nossa Caixa fell 1.2 percent to 39.70 reais.

Empresa Brasileira de Aeronautica SA (EMBR3 BS): The world's fourth-largest aircraft maker may sell planes to Argentina's government for Aerolineas Argentinas SA and may open a plant in the South American country, Telam reported on Aug 23, citing Argentine Planning Minister Julio de Vido. Embraer gained 3.2 percent to 13.52 reais.

Petroleo Brasileiro SA (PETR4 BS): Brazil's Mines and Energy Minister Edison Lobao said the government is studying how to manage so-called pre-salt oil fields and ``has no interest in breaking contracts,'' O Globo newspaper reported on Aug. 24. Petrobras, as Brazil's state-controlled oil company is known, fell 0.3 percent to 35.29 reais.

Tim Participacoes SA (TCSL3 BS): Brazil's second-biggest mobile-phone company denied that it's in talks to be taken over by rival Vivo Participacoes SA. ``The rumors circulating in the market lack any fundamentals,'' according to a Tim statement e- mailed to Bloomberg Aug. 22. Tim voting shares jumped 5.1 percent to 5.83 reais after Banif Invetimentos said Vivo may buy Tim.

Colombia

Bancolombia SA (BCOLO CB): Colombia's biggest lender plans to sell 191 billion pesos ($102 million) in mortgage loans to Titularizadora Colombiana SA. The loans will be secured by Titularizadora through the issuance of local mortgage-backed securities, the Medellin-based bank wrote in a statement distributed by PR Newswire on Aug. 22. Bancolombia rose 1.6 percent to 15,040 pesos.

Molinos Rio de la Plata SA (MOLI AF) and Cresud SACIF y A (CRES AF): A prolonged drought in Argentina, the world's second- largest corn exporter and third-largest for soybeans, has eroded field conditions as farmers prepare to sow new crops, the Buenos Aires Cereals Exchange said. The northern and western areas of the Pampas agricultural zone are experiencing a ``severe drought,'' with scant rainfall and rising temperatures, the exchange said Aug. 22 in an e-mailed report. Molinos, which makes soybean oil and other food products, gained 2 percent to 7.54 pesos. Cresud, which farms soybeans and other crops, rose 1.8 percent to 3.46 pesos.

Mexico

Cemex SAB (CEMEXCP MM): The largest cement maker in the Americas will resume talks Aug. 25 with Venezuela's government to negotiate compensation over the nationalization of its local unit, Vice President Ramon Carrizalez said Aug. 22 in a televised comment. Venezuela seized Cemex's local unit last week as part of a plan to nationalize key industries. Mexico City-based Cemex fell 1.8 percent to 20.93 pesos.

Peru

Sociedad Minera El Brocal SAA (SMB PE): Peru's second- largest zinc producer will boost capacity at its Huaraucaca copper facility as part of a $160 million investment plan, El Brocal said in a filing with Peruvian regulators Aug. 22. El Brocal rose 4.3 percent to 24.50 pesos when it last traded Aug. 21.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;



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European Stocks Drop, Led by Banks; U.S. Index Futures Decline

By Alexis Xydias

Aug. 25 (Bloomberg) -- European stocks fell as concern deepened that credit losses will spread and oil's advance above $115 a barrel pushed retailers and consumer companies lower. U.S. index futures declined, while Asian shares advanced.

Natixis SA, the French bank planning a 3.7 billion-euro ($5.5 billion) rights offer to replenish capital, dropped 2.5 percent, and KBC Group NV, Belgium's second-biggest financial- services firm, lost 1.8 percent. Bouygues SA, the world's second-largest builder, led a retreat by companies whose earnings are more sensitive to the pace of economic expansion, sliding 1.7 percent. Carrefour SA slipped 1.9 percent in Paris, while Wal-Mart Stores Inc. sank 0.8 percent in German trading.

Europe's Dow Jones Euro Stoxx 50 Index, the benchmark gauge for the nations sharing the euro, decreased 0.7 percent to 3,290.91 at 1:57 p.m. in London. The index is down 25 percent this year even after a 4.7 percent jump since mid-July, as credit losses at banks topped $500 billion, inflation accelerated and oil rose to a record.

``We still have severe writedowns and as markets undergo a squeeze, banks will face even bigger problems in trying to sell assets,'' said Madrid-based Cesar Martinez, a fund manager at Gesmadrid, which has about $18 billion. ``We still see much volatility, a very complicated macroeconomic picture and further downgrades to earnings estimates.''

Indexes extended declines on reports the International Monetary Fund trimmed its forecast for euro-zone economic growth. The fund cut this year's outlook for the region to 1.4 percent from 1.7 percent, Reuters said. Next year's growth estimate was reduced to 0.9 percent from 1.2 percent, the article, which cited an unidentified finance official for the Group of 20 nations, said.

Bank Collapse

The Danish Central Bank said yesterday it will buy Roskilde Bank A/S after no buyers were found for the regional operator, which last month became the first bank in the country to be bailed out for 15 years. U.S. regulators closed Columbian Bank and Trust Co. of Topeka, Kansas, the nation's ninth bank to collapse this year, according to a statement late on Aug. 22.

Profit for companies in the pan-European Stoxx 600 will drop 2 percent in 2008, according to analysts' estimates compiled by Bloomberg. That's down from growth of 11 percent forecast at the start of the year.

Futures on the Standard & Poor's 500 Index fell 0.6 percent today, while the MSCI Asia Pacific Index rose 1.5 percent.

Morgan Stanley cut its year-end forecast for the S&P 500 by 7.1 percent to 1,300 on expectations that banks will post more writedowns and the slowing global economy will curb profits at technology and industrial companies. The index for U.S. equities closed at 1,292.20 on Aug. 22.

National Markets

National benchmark indexes declined in 14 of the 17 western European markets that were open. Trading will probably be slower than average today with the U.K. market closed for a holiday. France's CAC 40 fell 0.7 percent, while Germany's DAX slipped 0.5 percent.

The yearlong credit crisis has yet to run its course, with continued turmoil likely in housing and banking, Bank of Israel Governor Stanley Fischer said Aug. 23 at the Federal Reserve's annual symposium for central bankers in Jackson Hole, Wyoming.

Natixis lost 2.5 percent to 5.92 euros, while KBC fell 1.8 percent to 61.55 euros. Bouygues retreated 1.7 percent to 41.50 euros. Vestas Wind Systems A/S, the world's biggest wind-turbine maker, declined 2.2 percent to 656 kroner.

``The market focus will soon shift from writedowns to unprecedented credit-cycle deterioration,'' Cheuvreux analysts wrote in a note to investors today. Lower asset quality ``coincides with capital, funding and liquidity constraints, making the downturn more severe,'' said the brokerage, which forecast earnings for European banks will drop 23 percent next year.

Carrefour, Europe's biggest retailer, fell 1.9 percent to 34.12 euros. Adidas AG, the world's second-largest sporting- goods maker, slipped 1.6 percent to 39.15 euros.

Wal-Mart

Wal-Mart, the world's largest retailer, decreased 45 cents to $58.99 in Germany as crude rose for the fourth time in five days. Oil rose as much as 0.9 percent to $115.67 on the New York Mercantile Exchange.

Consumer stocks in the S&P 500 have climbed 7.6 percent in August, headed for the biggest monthly rally in five years. As the shares advanced, the extra yield bond investors demanded to own the industry's debt rose to 2.5 percentage points over U.S. Treasuries.

Every time bondholders sought that much compensation to guard against default, shares of retailers, restaurants, and hotels slumped an average 16 percent, according to data compiled by Bloomberg.

Metall Zug AG slumped 6.1 percent to 2,160 francs, the most in almost seven years, after the Swiss maker of dishwashers reported lower first-half profit.

Allianz SE added 3 percent to 110.64 euros. The insurer may be close to an agreement to sell its Dresdner Bank unit to Commerzbank AG, Germany's second-largest bank by assets, for 9 billion euros ($13 billion), Welt am Sonntag and the Sunday Times reported.

NicOx SA tumbled 7.1 percent to 7.50 euros. The French drugmaker developing treatments with Pfizer Inc. said the U.S. pharmaceutical company won't develop an experimental glaucoma medicine after a study in Japan failed to reach its goal.

VMetro ASA, the Norwegian computer-technology provider, jumped the most in six years in Oslo trading after Curtiss- Wright Corp. offered to buy the company. The shares rallied 16 percent to 11.35 kroner, the steepest gain since March 2003.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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Consumer Stock Rally Doesn't Signal Economic Recovery

By Fabio Alves and Michael Tsang

Aug. 25 (Bloomberg) -- Just because consumer stocks are staging the biggest rally in five years doesn't mean the economy is about to recover.

As Lowe's Cos., Wendy's International Inc. and Starwood Hotels & Resorts Worldwide Inc. led a 7.6 percent advance in consumer stocks this month, the extra yield bond investors demanded to own the industry's debt rose to 2.5 percentage points over U.S. Treasuries. Every time bondholders sought that much compensation to guard against default, shares of retailers, restaurants, and hotels slumped an average 16 percent, according to data compiled by Bloomberg.

Standard Life Investments, Harvard University's endowment and hedge fund Appaloosa Management LP, which manage almost $300 billion, are avoiding the shares as Americans rein in spending to cope with the highest unemployment rate in four years and faster inflation. Profits at consumer discretionary companies are forecast to be the worst since 2001, Bloomberg data show.

``It's a rally that we think will inevitably roll over,'' said Andrew Milligan, the Edinburgh-based head of global strategy at Standard Life Investments, which oversees about $242 billion. ``Investor confidence has started to ease back and earnings numbers have generally been negative. The credit side just reinforces our downbeat views.''

Stocks Versus Bonds

Consumer shares have risen almost four times as fast as the Standard & Poor's 500 Index in August, sending the S&P 500 Consumer Discretionary Index toward its biggest monthly advance since an 8.9 percent increase in October 2003. A 22 percent drop in oil since its July peak and speculation the Federal Reserve will hold off raising interest rates after seven cuts in the past year improved prospects Americans will spend more. Consumer stocks in the MSCI World Index are up 1.8 percent this month.

Futures on the S&P 500 lost 0.4 percent at 11:14 a.m. in London as oil's climb above $115 a barrel sent retailers lower.

This month's gains in consumer stocks coincided with an increase in the difference between yields of U.S. retailers' bonds and those of government debt to 2.47 percentage points as investors demanded more protection against the likelihood of default, according to data from New York-based Merrill Lynch & Co.

When the gap exceeded 245 basis points in 2000, 2002, 2005 and March of this year, the consumer discretionary gauge lost an average of 16 percent over the same span, the data show. A basis point is equal to 0.01 percentage point.

Shares of Mooresville, North Carolina-based Lowe's, the world's second-largest home-improvement retailer, surged 22 percent this month as the extra yield investors demanded to own the company's 5.6 percent bond due in 2012 widened 23 basis points over U.S. Treasuries.

`Voting With Bondholders'

That's more than three times the average increase of A- rated corporate bonds over the same period, Merrill's data show.

The premium on Wendy's 7 percent bond due in 2025 climbed as much as 33 basis points above U.S. government debt this month, almost triple the gain in spreads of similar BB-rated debt. The Dublin, Ohio-based hamburger chain's stock added 16 percent.

The disparity between the stock and bond markets comes as analysts are forecasting the industry's biggest full-year profit decline since the last recession in 2001. Earnings at S&P 500 consumer-discretionary companies will drop 22.9 percent this year, data compiled by Bloomberg show.

``I would be inclined to vote with the bondholders,'' said Jack Ablin, who oversees $65 billion as chief investment officer at Harris Private Bank in Chicago. ``They're sensing there's still credit deterioration going on in the group.''

Earnings Plummet

Lowe's, Wendy's and Starwood, the White Plains, New York- based company that runs the Westin, St. Regis and W hotels, all reported lower earnings for the second quarter. Industry profits have dropped 54 percent on average, the highest on record for Bloomberg data that started in 2001.

LPL Financial's Jeffrey Kleintop expects consumer stocks will continue to do well as profits decline less than analysts estimate. More than 91 percent of the S&P 500 retailers that have reported second-quarter results so far topped Wall Street's consensus forecast, data compiled by Bloomberg show.

``The outlook isn't rosy, but certainly better than what had been priced into those stocks,'' Kleintop, the Boston-based chief market strategist at LPL, which oversees $273 billion, said in a Bloomberg Television interview.

Fed Rate Cuts

Consumer stocks in the U.S., where the Federal Reserve cut its benchmark interest rate to 2 percent from 5.25 percent in the past year, are outperforming the rest of the world. The MSCI Brazil Consumer Discretionary Index lost 9.8 percent in August, while retailers, automakers and electronics makers in the MSCI Asia Pacific Index fell 2.3 percent.

To maintain the advantage, U.S. retailers will have to defy an unemployment rate that rose to 5.7 percent last month and the fastest inflation in 17 years. The economy, buffeted by the biggest U.S. housing slump since the Great Depression and more than $500 billion in bank losses, may grow 0.45 percent next quarter, or about a third the annual rate of 1.2 percent forecast this quarter, according to data compiled by Bloomberg.

``You only have so many dollars or francs or euros in your pocket,'' said Robert Weissenstein, who helps oversee $1.3 trillion as chief investment officer at Credit Suisse Private Bank. It's difficult to turn bullish ``as long as you get mixed to negatively biased jobs data,'' he said from Tucson, Arizona.

Harvard Endowment

Harvard's $34.9 billion endowment, the biggest of any university, sold its holdings in 79 of 92 consumer companies including Lowe's, Wendy's and Starwood, during the second quarter, the Boston-based college fund's filing with the U.S. Securities and Exchange Commission compiled by Bloomberg show.

Appaloosa, the Chatham, New Jersey-based hedge-fund firm run by former Goldman Sachs Group Inc. bond trader David Tepper, held 10.4 percent less in consumer stocks at the end of the second quarter, partly after selling its 175,000 share stake in Starwood, filings compiled by Bloomberg show. Appaloosa, which owned equities valued at $3.1 billion as of June 30 and also invests in bonds, has posted average annual returns of about 25 percent in its Palomino Fund since the beginning of 1995.

``The corporate bond market has sold off first, fastest, and then equities follow after,'' said Standard Life's Milligan. ``What the credit markets are telling us is that we need to still be cautious.''

To contact the reporters on this story: Fabio Alves in New York at falves3@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.



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FirstEnergy, LDK, People's United, SAIC: U.S. Equity Preview

By Lynn Thomasson and Fabio Alves

Aug. 25 (Bloomberg) -- The following companies may have unusual price changes in U.S. markets. Stock symbols are in parentheses after company names, and prices are as of 8 a.m. in New York, unless stated otherwise.

AMR Corp. (AMR US) lost 0.5 percent to $10.47. The parent of American Airlines, the world's largest carrier, may sell as much as $300 million worth of newly issued shares and possibly use the proceeds to repay debt or help purchase aircraft, according to a government regulatory filing. Issuing new shares may dilute existing stockholders' stakes.

China Sunergy Co. (CSUN US) added 4.2 percent to $12.21. The Nanjing, China-based maker of solar-power cells was raised to ``buy'' from ``hold'' at Jefferies Group Inc.

CF Industries Holdings Inc. (CF US) climbed 2.8 percent to $148.50. The operator of North America's two biggest nitrogen- fertilizer plants will replace Electronic Data Systems Corp. (EDS US) in the Standard & Poor's 500 Index, S&P said.

FirstEnergy Corp. (FE US): The owner of electric utilities in Ohio, Pennsylvania and New Jersey may rise to $82 a share in 12 months as the company benefits from a 5 percent rate increase in Ohio, Barron's reported, citing Citigroup Inc. analyst Greg Gordon. The stock advanced 0.3 percent to $73.63 in regular trading Aug. 22.

Hanger Orthopedic Group Inc. (HGR US): The maker of medical devices may sell as many as 13.6 million shares, according to a regulatory filing. The stock increased 1.1 percent to $17.75 in regular trading.

LDK Solar Co. (LDK US) added 4.5 percent to $47.90. The Chinese maker of silicon wafers said in a PRNewswire statement that it forecast 2009 sales of as much as $3 billion. Analysts had expected $2.42 billion, the average of 12 estimates in a Bloomberg survey.

People's United Financial Inc. (PBCT US): The Bridgeport, Connecticut-based bank may rise 20 percent based on its balance sheet, the lack of subprime mortgage exposure and stronger returns, Barron's reported, without citing anyone. The shares rose 1.7 percent to $17.06 in regular trading.

Precision Drilling Trust (PDS US) fell 3 percent to $20.70. Canada's largest oilfield-services provider said in a statement that it agreed to buy Grey Wolf Inc. (GW US) for about $2 billion to add drilling in the U.S. market. Grey Wolf rose 1 cent to $8.60.

SAIC Inc. (SAI US): The military contractor specializing in computer services will replace CF Industries in the Standard & Poor's Midcap 400 Index, S&P said. The shares rose 3.2 percent to $19.66 in extended trading Aug. 22.

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Fabio Alves in New York at falves3@bloomberg.net



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Morgan Stanley's Chakrabortti Lowers S&P 500 Forecast to 1,300

By Michael Patterson

Aug. 25 (Bloomberg) -- Morgan Stanley cut its year-end forecast for the Standard & Poor's 500 Index by 7.1 percent to 1,300 on concern banks will report more credit-related writedowns and the global economic slowdown will curb profits at technology and industrial companies.

Abhijit Chakrabortti, Morgan Stanley's chief global equity strategist, lowered his 2008 per-share operating profit estimate for S&P 500 companies to $78 from $86, according to a research note dated yesterday. He introduced a 2009 earnings projection of $84 a share.

Chakrabortti's new S&P 500 forecast ``is heavily dependent on lower headline inflation readings by year-end in line with our view of weak global growth conditions, a stronger dollar and downward pressure on oil and commodity prices,'' he wrote.

The New-York based strategist's estimate amounts to a 0.6 percent gain for the U.S. equity benchmark index from its close at 1,292.20 on Aug. 22. The prediction is 10 percent lower than the 1,446 average estimate of nine other Wall Street strategists who provide year-end forecasts to Bloomberg News.

``Our biggest concern for 2009 earnings estimates is that a combination of global growth slowdown, declining operating leverage, a stronger U.S. dollar, less share count reduction and a long tail to dysfunctional credit markets will create powerful headwinds for what appear to very optimistic consensus expectations,'' Chakrabortti wrote in the note.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.



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U.S. Stock-Index Futures Fall as Oil Climbs; UAL, Lehman Drop

By Henrietta Rumberger and Elizabeth Stanton

Aug. 25 (Bloomberg) -- U.S. stock-index futures fell as oil's climb above $115 a barrel sent consumer companies lower and the nation's ninth bank failure of 2008 dragged down financial shares.

UAL Corp., parent of United Airlines, lost 2.2 percent as crude rose for the fourth time in five days. Bank of America Corp. and JPMorgan Chase & Co. dropped more than 1 percent each after Columbian Bank and Trust Co. of Topeka, Kansas, collapsed amid bad real-estate loans. Lehman Brothers Holdings Inc. declined more than 3 percent on concern a Korean bank will reconsider a potential investment in the fourth-biggest U.S. securities firm.

``The market's going to struggle until we get a clear indication that we know what the bottom is in the financials, and that may be a while,'' Peter Sorrentino, senior portfolio manager at Cincinnati-based Huntington Asset Advisors, which manages about $17 billion, told Bloomberg Television.

S&P 500 futures expiring in September dropped 7.5, or 0.6 percent, to 1,284.7 as of 8:56 a.m. in New York. Dow Jones Industrial Average futures retreated 54 to 11,563 and Nasdaq-100 Index futures decreased 10.5 to 1,919.

Futures indicated the S&P 500 will extend its first weekly decline since July. The benchmark for American equities slipped 0.5 percent last week as energy prices climbed and concern grew that the government may need to bail out Fannie Mae and Freddie Mac.

Morgan Stanley cut its year-end forecast for the index on concern banks will report more credit-related writedowns and the global economic slowdown will curb profits at technology and industrial companies.

`Long Tail'

``Our biggest concern for 2009 earnings estimates is that a combination of global growth slowdown, declining operating leverage, a stronger U.S. dollar, less share count reduction and a long tail to dysfunctional credit markets will create powerful headwinds for what appear to very optimistic consensus expectations,'' Abhijit Chakrabortti wrote in a note to clients dated yesterday.

Oil's rebound today from a 5.4 percent drop on Aug. 22 reignited concern that higher fuel costs will curb profits at retailers and automakers. Crude rose as much as 1 percent to $115.80 on the New York Mercantile Exchange as Russian lawmakers voted to recognize the independence of two breakaway Georgian regions, raising fears of new tensions in the area.

UAL retreated 28 cents to $12.44. AMR Corp., parent of American Airlines, lost 31 cents to $10.21.

Stocks and Bonds

Consumer stocks in the S&P 500 have climbed 7.6 percent in August, the biggest monthly rally in five years. As the shares advanced, the extra yield bond investors demanded to own the industry's debt rose to 2.5 percentage points over U.S. Treasuries.

Every time bondholders sought that much compensation to guard against default, shares of retailers, restaurants, and hotels slumped an average 16 percent, according to data compiled by Bloomberg.

JPMorgan dropped 40 cents to $37.27. Bank of America retreated 36 cents to $29.85.

Columbian Bank, with $752 million in assets and $622 million in total deposits, was shuttered by the Kansas state bank commissioner's office and the Federal Deposit Insurance Corp., on Aug. 22.

The pace of bank closings is accelerating as global financial firms have reported more than $500 billion in writedowns and credit losses since 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter to 90 banks with combined assets of $26.3 billion. Prior to yesterday, the FDIC had closed 36 banks since October 2000, according to a list at fdic.gov. The U.S. shut 12 banks in 2002, the highest in the period, and 2005 and 2006 had no closures.

`Bad Memories'

``The closure of Columbian Bank awakened investors' bad memories and shows that we are not through with the topic yet,'' said Monika Rosen, head of research at BA-CA Asset Management in Vienna, which manages the equivalent of $41 billion.

Lehman slipped 46 cents to $13.95. Shares of the securities firm rose 5 percent in New York trading on Aug. 22 after Korea Development Bank said it's ``considering'' an investment in the company.

Lehman Talks

The Korean bank ended talks on a possible investment after Lehman demanded a price 50 percent higher than its book value, the Maeil Business newspaper said, citing an unnamed official in the banking industry. South Korea's financial regulator said today that state-controlled banks including Korea Development Bank should consider the risks of buying overseas rivals amid the global credit crisis.

New York-based Lehman has dropped 78 percent this year, the worst performance in the 11-company Amex Securities Broker/Dealer Index.

Lehman Chief Executive Officer Richard Fuld may face an ``internal coup'' to strip him of his executive duties, the Observer reported, citing bank ``sources.'' Mark Lane, a spokesman for Lehman Brothers, was not immediately available when contacted by Bloomberg News via telephone and e-mail.

Freddie Mac lost 11 cents to $2.70 and Fannie Mae declined 35 cents to $4.65. The cost to the largest U.S. mortgage finance companies of raising capital is getting more prohibitive by the day, making it likely that the government will have to inject cash into the two firms.

Bailout Concern

Declines in the common stocks of Freddie Mac and Fannie Mae accelerated last week to more than 90 percent for the year and yields on their preferred shares more than doubled on speculation Treasury Secretary Henry Paulson may need to bail them out, reducing or wiping out the value of the securities.

Financials shares last week fell the most in six weeks for the biggest drop among 10 S&P 500 industries. The group has retreated 29 percent this year as losses from the subprime mortgage collapse exceeded $500 billion. One year into the financial crisis, central bankers and scholars at the Federal Reserve's annual retreat this weekend couldn't agree on how to prevent a repeat.

Fed Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, split over whether policy makers should be made responsible for financial stability and how closely to heed the concerns of Wall Street.

The yearlong credit crisis has yet to run its course, with continued turmoil likely in housing and banking, Bank of Israel Governor Stanley Fischer said Aug. 23 at the Fed's symposium.

Oilfield Acquisition

Energy producers climbed as oil rose and Precision Drilling Trust, Canada's largest oilfield-services provider, agreed to buy Grey Wolf Inc. for about $2 billion to add drilling in the U.S. market. Stockholders of Grey Wolf, based in Houston, will get $5 and 0.1883 trust unit per each share, the companies said today in a statement. The agreement comes two months after a previous bid was rejected.

Acquisitions of oilfield-services providers and drillers accelerated this year as record prices raised demand for rigs and support equipment. Grey Wolf rejected three previous bids from Calgary-based Precision in favor of its April agreement to acquire Basic Energy, a Midland, Texas-based oilfield contractor. Shareholders voted that deal down in July.

XTO Energy Inc., the oil and gas driller that's made more than two dozen acquisitions since 2000, advanced 51 cents to $48.85. Chesapeake Energy Corp., the second-biggest independent U.S. natural-gas producer, climbed 30 cents to $47.95.

Sales of existing houses in the U.S. probably rose in July from a 10-year low as declining prices helped stabilize demand, economists said before a report from the National Association of Realtors due at 10 a.m. in Washington today.

Dell Inc., Sears Holdings Corp. and Big Lots Inc. are among the companies scheduled to report earnings this week. Second- quarter profits for S&P 500 companies slumped 22 percent on average, based on Bloomberg data. Fewer than 50 companies in the U.S. stock benchmark have yet to release results.

To contact the reporters on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net; Elizabeth Stanton in New York at estanton@bloomberg.net.

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