Mid-Day Report: Little Reaction to Bad Non Farm Payroll Report

Market Overview | Written by ActionForex.com | Nov 07 08 14:39 GMT |

Markets showed little reaction to a bad non-farm payroll report today. Dollar is mildly lower but remains in range against majors. Stocks even open higher. Non Farm Payroll report released today showed -240k contract in Oct, much worse than expectation of -200K. Sep's figure was even worse after downward revision from -159k to -284k. Sep and Oct together recorded the worse two month slide since 2001. Unemployment rate surged much more than expected to 6.5%, highest level since 1994. Canadian dollar, on the other hand, is lifted by unexpected expansion in the employment market. Canada added 9.5K jobs in Oct versus consensus of -10K. Unemployment climbed to 6.2% though. Other data released earlier saw Swiss unemployment rate rose from 2.4% to 2.5% in Oct. Germany Trade surplus cam in at 13.7b. Germany industrial production dropped sharply by -2.1% mom, -3.6% yoy in Sep. USD/JPY Mid-Day Outlook Daily Pivots: (S1) 97.26; (P) 97.96; (R1) 98.44; More. USD/JPY recovers mildly but after all it's still staying in tight range of 96.35 and 100.54. Outlook remains neutral for the moment. As discussed before, rebound from 90.92 could have completed at 100.54 already. Break of 96.35 minor support will confirm and bring deeper decline to retest 90.92 low. On the upside, above however, 100.54 will indicate that such rise from 90.92 is still in progress for 103.06 cluster resistance (61.8% retracement of 110.66 to 90.92 at 103.12). In the bigger picture, stronger than expected rebound from 90.92 mixed up the near term picture. Nevertheless, as long as 103.06 cluster resistance holds, medium term outlook remains bearish. Prior break of 95.77 low confirms that whole down trend from 124.13 has resumed and should target 100% projection of 124.13 to 95.77 from 110.66 at 82.3 next. Also, note that the current development clears out the long term picture too. Price actions that started from 79.75 (95 low) has completed in form of a triangle that needed with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which could extend further to retest 79.75 low. On the upside, sustained break of 103.06 cluster resistance will firstly argue that fall from 110.66 has completed. Secondly, it will also argue that a medium term low is in place at 90.92 and outlook will be turned neutral with focus back to 110.66 high.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
06:45	CHF	Swiss Jobless rate Oct	2.50%	2.50%	2.40%
07:00	EUR	Germany Trade balance (euro) Sep	13.7B	13.7B	13.1B
07:00	EUR	Germany Current account Sep	15.0B	10.3B	7.3B	7.5B
07:00	EUR	Germany Export M/M Sep	0.70%	0.40%	-0.50%	-0.30%
07:00	EUR	Germany Import M/M Sep	0.90%	-1.40%	-2.50%	-2.70%
11:00	EUR	Germany Industrial prod'n M/M Sep	-2.1%	-2.00%	3.40%	1.60%
11:00	EUR	Germany Industrial prod'n Y/Y Sep	-3.60%	-0.50%	1.70%	3.20%
12:00	CAD	Canada Unemployment rate Oct	6.20%	6.20%	6.10%
12:00	CAD	Canada Jobs change Oct	9.5K	-10.0K	106.9K
13:30	USD	U.S. Non-farm payrolls Oct	-240K	-200.0K	-159.0K	-284K
13:30	USD	U.S. Unemployment rate Oct	6.50%	6.30%	6.10%
13:30	USD	U.S. Avg. hourly earnings M/M Oct	0.20%	0.20%	0.20%
13:30	USD	U.S. Avg. hourly earnings Y/Y Oct	3.50%	3.50%	3.40%
15:00	USD	U.S. Pending home sales Sep		N/A	93.4M
15:00	USD	U.S. Pending home sales M/M Sep		-3.00%	7.40%
15:00	USD	U.S. Wholesale inventories Sep		0.30%	0.80%

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Non-Farm Payrolls Instant Insight: -524K Jobs Lost in 2 Months

Daily Forex Fundamentals | Written by GFT | Nov 07 08 14:32 GMT |

There is nothing good about today's labor market report - between September and October, 524k jobs were lost in the US economy. Even though last month's job losses were worse than the market expected (-240k), it was not as bad as everyone had feared. But if you count the big downward revision to the September number, the labor market is in its weakest shape in the past 5 years. What is the most shocking however is the fact that the unemployment rate jumped to 6.5%, the highest level in 14 years. The manufacturing sector reported a 90k drop in jobs while average weekly hours and the monthly change in average hourly earnings remained stable. Expect the Fed to respond with another 50bp rate cut this month as the job losses mount. The bottom line is that the tenth consecutive month of negative job growth confirms that the labor market is in a recession and that the US economy is in trouble. Although we don't expect the job losses to end in October, we are very close to the -300k level and once we see that number exceeded, the slope or magnitude of job losses will begin to slow. In the past 3 recessions, job losses have extended beyond 10 months but the largest single month job loss was marginally above 300k. The longest stretch of job losses in the past 30 years was between 1980 and 1982, when we saw 17 consecutive months of job losses. With market caps evaporating and lending still frozen, US companies will continue to tighten their belts and shed jobs. The reaction in the currency market has been relatively tepid because there was an air pessimism going into the non-farm payrolls number. Everyone thought that NFPs would drop by 300k including myself and when you add the -125k September revision with the -240k October job loss, it has exceeded that number. As we indicated in our non-farm payrolls preview, a weak NFP number may not permanently stop the dollar's rise. The dollar is appreciating not because of the strength of the US economy, but because money flocks into low yielding currencies during a global recession. In a very short period of time, the US dollar has become the second lowest yielding G7 currency. The NFP number should be bearish for US equities today and by extension, USD/JPY and other the Japanese Yen crosses. Kathy Lien http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.

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U.S. Non-Farm Payrolls Fall 240K in October, Unemployment Rate Surges to 14 Year High But What About the Dollar?

Daily Forex Fundamentals | Written by DailyFX | Nov 07 08 14:16 GMT |

U.S. Non-Farm Payrolls fell 240K in October following a 284K decline in September, and has certainly raised concerns that conditions may only get worse over the coming months as fears of a global meltdown intensify. In addition, the unemployment rate surged to 6.5% from 6.1% in the previous month to reach its highest level in 14 years. Meanwhile, Manufacturing Payrolls declined 90K during the same period despite expectations for a 65K decline. The data suggests that private-sector consumption will weaken further as employment opportunities become increasingly scarce, which could lead policy makers to increase their efforts in order to avoid a deep and prolonged recession. Moreover, the larger than expected decline in employment failed to trigger a sell off in the U.S. dollar as the markets were already pricing a turn for the worst in the labor market. Despite the lack of reaction to the dismal data, the growth outlook for the world's largest economy has become increasingly bleak throughout the second half of the year, and economic activity may remain subdued well into 2009. Forecast for U.S. dollar There is a growing concern among foreign investors that any politically motivated measure will fail to restore investor's confidence in the global financial system and given the current market environment of uncertainty and de-leveraging in financial markets, the U.S. dollar is likely to remain vulnerable against lower yielding currencies like the Japanese yen. Moreover, even though the United States Federal Reserve has been taking a number of actions to stabilize financial markets, the U.S. economy will continue to face substantial challenges including further job losses, high energy prices and a rapid deleveraging in the financial sector. In addition, other investors are concerned with the fiscal impact of the bailout plan which could cost almost 5 percent of GDP. Currently, the United States federal government runs a deficit of $438bn, or 3 per cent of gross domestic product and the bailout costs could push the fiscal deficit next year to $1 trillion or 7% of GDP. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Nov 07 08 14:05 GMT |

The action in the London session was relatively lackluster as the market looked ahead to the US nonfarm payroll report in early NY trading. EUR/USD was relatively unchanged and went into the US NFP number around the 1.2780/85 area. USD/JPY meanwhile was about -20 pips lower in the session and went into the number around the 97.45/50 mark. The number disappointed by coming in at a terrible -240K while the unemployment rate jumped to 6.5% from 6.1% the prior month. The initial market reaction was as we had anticipated in terms of the weakness in USD/JPY which shot down to 96.75/80 shortly after the release. JPY crosses were eventually bought back a touch as US stock futures looked to have shrugged off the number. Futures have been poor at predicting actual results once markets open and thus the risk remains that traders trash US stocks today and that JPY crosses head lower. Thus the focus ahead of the weekend will be on US equities yet again. Upcoming Economic Data Releases (NY Session) Prior Estimate 11/7/2008 15:00 GMT US Wholesale Inventories SEP 0.80% 0.20% 11/7/2008 15:00 GMT US Pending Home Sales MoM SEP 7.40% -3.70% 11/7/2008 17:00 GMT US Fed's Lockhart Speaks on U.S. Economic Outlook in Palm Beach 7-Nov Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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U.S. October Employment Situation: Statistical Summary (Table)

By Kristy Scheuble

Nov. 7 (Bloomberg) -- Following is a summary of the October employment situation from the Labor Department.

==============================================================================
                       Oct.    Sept.   Aug.    July    June     May   3-month
                       2008    2008    2008    2008    2008    2008   Average
==============================================================================
Unemployment rate         6.5%    6.1%    6.1%    5.7%    5.5%    5.5%    6.2%
Rate (3 decimals)      6.502%  6.125%  6.055%  5.682%  5.505%  5.492%  6.227%
Avg. hourly earnings      0.2%    0.2%    0.4%    0.3%    0.3%    0.3%    0.3%
Avg. weekly hours         33.6    33.6    33.7    33.7    33.7    33.7    33.6
------------------------------------------------------------------------------
Nonfarm employment        -240    -284    -127     -67    -100     -47    -217
Previous estimate        n/a     -159     -73     -67    -100     -47    n/a
Net Revision             -179
Manufacturing              -90     -56     -61     -40     -44     -21     -69
Previous estimate        n/a      -51     -56     -40     -44     -21    n/a
Household employment      -297    -222    -342     -72    -155    -285    -287
------------------------------------------------------------------------------
==============================================================================
                       Oct.    Sept.   Aug.    July    June     May   3-month
                       2008    2008    2008    2008    2008    2008   Average
==============================================================================
                        ------------Monthly Change in Employment------------
Nonfarm employment        -240    -284    -127     -67    -100     -47    -217
Total private             -263    -243    -139    -106    -110     -99    -215
Goods-producing          -132     -83     -70     -54     -86     -51     -95
Construction              -49     -35     -20     -23     -50     -38     -35
Manufacturing             -90     -56     -61     -40     -44     -21     -69
Service providing         -108    -201     -57     -13     -14       4    -122
Trade, transport          -67     -68     -47     -38     -20     -45     -61
 Retail trade             -38     -45     -28     -22      -8     -24     -37
Information                 0      -3      -4      -9      -5      -5      -2
Financial                 -24     -16     -10      -7     -13      -3     -17
Business services         -45     -39     -50     -23     -55     -49     -45
 Temporary help           -34     -28     -38     -24     -36     -36     -33
Education, health          21     -16      62      44      71      63      22
Leisure, hospitality      -16     -21     -16     -24       0     -11     -18
Government                 23     -41      12      39      10      52      -2
------------------------------------------------------------------------------
==============================================================================
                       Oct.    Sept.   Aug.    July    June     May   3-month
                       2008    2008    2008    2008    2008    2008   Average
==============================================================================
                       ----------------------Earnings-----------------------
Avg. hourly earnings    $18.21  $18.17  $18.14  $18.06  $18.00  $17.95  $18.17
MOM% change              0.2%    0.2%    0.4%    0.3%    0.3%    0.3%    0.3%
YOY% change              3.5%    3.4%    3.6%    3.4%    3.4%    3.5%    3.5%
Avg. weekly earnings   $611.86 $610.51 $611.32 $608.62 $606.60 $604.92 $611.23
MOM% change              0.2%   -0.1%    0.4%    0.3%    0.3%    0.0%    0.2%
YOY% change              2.9%    2.8%    3.3%    3.1%    2.8%    3.2%    3.0%
                       --------------------Hours of Work--------------------
Total private             33.6    33.6    33.7    33.7    33.7    33.7    33.6
MOM% change              0.0%   -0.3%    0.0%    0.0%    0.0%   -0.3%   -0.1%
Manufacturing             40.6    40.6    40.9    41.0    41.0    41.0    40.7
MOM% change              0.0%   -0.7%   -0.2%    0.0%    0.0%    0.0%   -0.3%
 Overtime                 3.6     3.6     3.7     3.8     3.8     3.9     3.6
                       --------------------Aggregate Hours--------------------
Aggregate hours index    105.9   106.2   106.8   106.9   107.0   107.1   106.3
3-month annualized      -2.6%   -2.1%   -1.8%   -1.7%   -0.9%   -0.4%    n/a
MOM% change             -0.3%   -0.6%   -0.1%   -0.1%   -0.1%   -0.4%   -0.3%
==============================================================================
                       Oct.    Sept.   Aug.    July    June     May   3-month
                       2008    2008    2008    2008    2008    2008   Average
==============================================================================
                       -----------Labor Force Status (thousands)-------------
Pool available labor    15,046  14,544  14,172  13,781  13,387  13,253  14,587
Level change              502     372     391     394     134     872     422
Augmented Unemp. Rate     9.4%    9.1%    8.9%    8.6%    8.4%    8.3%    9.1%
Civilian labor force   155,038 154,732 154,853 154,603 154,390 154,534 154,874
Level change              306    -121     250     213    -144     577     145
Participation rate      66.1%   66.0%   66.1%   66.1%   66.1%   66.2%   66.1%
Employment            144,958 145,255 145,477 145,819 145,891 146,046 145,230
 Level change            -297    -222    -342     -72    -155    -285    -287
Employment ratio        61.8%   62.0%   62.1%   62.4%   62.4%   62.6%   62.0%
Unemployment           10,080   9,477   9,376   8,784   8,499   8,487   9,644
 Level change             603     101     592     285      12     861     432
Avg. duration (wks)      19.7    18.4    17.4    17.1    17.5    16.6    18.5
Median duration          10.6    10.2     9.2     9.7    10.0     8.3    10.0
Not in labor force      79,575  79,628  79,253  79,261  79,237  78,871  79,485
Level change              -53     375      -8      24     366    -370     105
Job leavers               9.3%   10.2%   10.7%    9.8%    9.9%   10.3%   10.1%
==============================================================================
                       Oct.    Sept.   Aug.    July    June     May   3-month
                       2008    2008    2008    2008    2008    2008   Average
==============================================================================
                       --------------------Diffusion Index--------------------
Private nonfarm          37.6    38.1    46.2    38.3    42.3    46.4     40.6
3-mo. average           40.6    40.9    42.3    42.3    44.8    46.5     n/a
Manufacturing            27.4    26.2    37.5    26.8    30.4    44.6     30.4
3-mo. average           30.4    30.2    31.6    33.9    36.7    39.3     n/a
==============================================================================
NOTE: All figures seasonally adjusted. Employment figures in thousands.
The augmented unemployment rate is the number of job wanters plus the number
unemployed divided by the labor force plus the number of job wanters.

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net

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U.K. Personal Insolvencies Rise as Crisis Spreads

By Brian Swint and Jennifer Ryan

Nov. 7 (Bloomberg) -- U.K. personal insolvencies increased in the third quarter as unemployment rose, a sign that the worst economic slump since the early 1990s is hitting consumers.

The number of individuals in England and Wales no longer able to meet debt obligations rose 8.8 percent from the second quarter to 27,087, the government Insolvency Service said today on its Web site. Company liquidations increased 10.5 percent.

The Bank of England yesterday reduced the benchmark interest rate to the lowest since 1955 to shore up an economy on the brink of recession as lenders restrict credit. Gross domestic product fell 0.5 percent in the third quarter and unemployment rose to the highest in almost two years in September.

``Insolvencies will continue to rise into next year as the credit crunch moves through the economy,'' Louise Brittain, partner at accountancy firm Baker Tilly in London, said in an interview. ``A lot of creditors are getting more aggressive about collecting. The rate cut won't have a huge impact.''

From a year earlier, personal insolvencies climbed 4.6 percent and company liquidations increased 26.3 percent.

House prices fell 14.9 percent in October from a year earlier, HBOS Plc said yesterday. The Bank of England said Oct. 28 that a 15 percent drop in house prices would push 10 percent of mortgage holders into negative equity, where the value of a home is worth less than the loan used to buy it.

Royal Worcester

Companies are also having more trouble pay back loans. Royal Worcester & Spode Ltd., the U.K. porcelain maker founded in 1751, collapsed into administration yesterday after failing to sell property to reduce debt.

The U.K. central bank lowered the benchmark interest rate by 1.5 percentage points yesterday, the biggest single move since 1992. Britain's economy will shrink 1.3 percent next year, making it the worst performer among Group of Seven countries, the International Monetary Fund said yesterday.

``There can be little doubt that the marked rise in the number of individual insolvencies in the third quarter is only the beginning of the storm,'' said Howard Archer, chief European economist IHS Global Insight in London. ``While the sharp cut in interest rates will obviously be of some help, it is likely to be insufficient to save many people.''

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net. Jennifer Ryan in London at jryan13@bloomberg.net

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ECB May Be Forced to Cut Deposit Rate Further

By Simone Meier

Nov. 7 (Bloomberg) -- The European Central Bank may be forced to lower its deposit rate further if banks continue to park record amounts of cash with it overnight, economists said.

``That's the only way to take the incentive away and put the money back into the system,'' said Jacques Cailloux, chief euro- area economist at Royal Bank of Scotland Plc in London. ``They'll wait to see whether there's an improvement over the coming days, but it has started to become an issue.''

Overnight deposits have exceeded 200 billion euros ($255 billion) for 16 of the past 17 working days, showing banks remain reluctant to lend to each other even after the ECB flooded the banking system with cash and cut interest rates. While money- market rates have declined, deposits yesterday surged to a record 297.4 billion euros. In the year to Sept. 15, deposits with the ECB averaged just 534 million euros a day.

``The ECB is certainly not happy with the fact that banks are still depositing huge amounts of cash,'' said Rainer Guntermann, an economist at Dresdner Kleinwort in Frankfurt. ``It could only be a matter of days'' before they act.

The ECB yesterday announced its second rate reduction in less than a month and President Jean-Claude Trichet declined to rule out lowering the deposit rate even further. While the rate will fall to 2.75 percent from 3.25 percent on Nov. 12, when the latest cuts take effect, the gap with the new benchmark rate of 3.25 percent will remain 50 basis points.

Narrowed Gap

The ECB narrowed the gap from 100 basis points on Oct. 8 as part of a range of emergency measures designed to ease pressure on banks. The next day, overnight deposits more than doubled to 155 billion euros.

Money-market rates have declined as central banks pump record amounts of extra cash into the system. The euro interbank offered rate, or Euribor, that banks charge each other for three-month loans fell 12 basis points to 4.47 percent today, the lowest level since March 6, according to the European Banking Federation. The one-month rate declined 15 basis points to 4.10 percent.

Still, the ECB ``seems to be the only place where you can put money and know you won't lose it,'' Cailloux said.

Lending between banks ran dry after Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15, shattering confidence and sending borrowing costs to records. Financial institutions worldwide have reported more than $690 billion in losses and writedowns since the U.S. housing slump triggered the credit crisis last year.

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

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King Helps Brown Press U.K. Banks to Curb Loan Costs

By Brian Swint

Nov. 7 (Bloomberg) -- Bank of England Governor Mervyn King is helping Prime Minister Gordon Brown turn up the heat on financial institutions refusing to cut interest rates for U.K. homeowners and businesses.

Ministers from Brown's government today met with officials from lenders including Barclays Plc and Lloyds TSB Group Plc to press for easier credit. King's central bank yesterday cut its key rate 1.5 percentage points to a five-decade low of 3 percent, the biggest reduction since 1992.

``The size of the cut is so glaringly large, they'll just have to make some effort to pass along some of it,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``For banks to say they're not in a position to pass any of the cut on would increase the political heat so much they potentially don't want to go there.''

Brown is pushing banks to comply with the strings attached to last month's 50 billion-pound ($78 billion) rescue plan. While the Treasury wants lending to return to 2007 levels, mortgage approvals are near a record low as banks rebuild capital to cope with turmoil in financial markets.

``We are determined that lending resumes,'' Brown said at a press conference in London today. ``We've given liquidity to the banks. We've now recapitalized the banks. It's now up to the banks.''

Reluctance

So far, banks are still reluctant to comply on concern credit markets will stay strained. Yesterday, Nationwide Building Society pulled all its mortgage offers tracking the Bank of England's rate. Northern Rock Plc, which was nationalized this year, and Abbey National earlier this week increased rates on tracker deals even as most economists forecast a 50 basis-point cut from the Bank of England.

``Although bank rate has come down, the level at which we fund is still a long way above bank rate,'' said Martin Ellis, chief economist at HBOS Plc, the U.K.'s largest lender. ``It's going to take a while to come through. The cut will help the market, but it's hard to quantify by how much.''

At 5.56 percent, the cost of borrowing pounds for three months was 1.06 percentage points above the Bank of England's benchmark rate yesterday morning. The gap was 0.2 point before credit markets seized up last year.

Bank Response

Abbey National cut its standard variable rate to 5.44 percent from 6.94 percent, matching the central bank's reduction. Lloyds TSB also said it would match the rate cut.

The British Bankers' Association said many banks are cutting their rates but suggested lower rates would make people with savings unhappy.

``Banks are committed to doing their part to help rebuild the U.K. economy as well as ensuring we help and support all our customers, both lenders and savers,'' said Angela Knight, chief executive of the BBA.

The lending drought is putting pressure on the U.K.'s housing market, which is the biggest store of wealth for British citizens. Banks approved 33,000 mortgages in September, a third of last year's monthly average, and property prices plunged 14.9 percent in October from a year ago, HBOS said yesterday.

Banks have barely cut their lending rates since December of last year. The average rate on home loans that track the central bank's rate was 6.12 percent in September, when the Bank of England's benchmark was 5 percent. That compares with 6.2 percent in December when the key rate was at 5.75 percent.

Lending Drought

The government also is concerned about a drought of lending for small businesses. About 40 percent companies say their overdraft charges have risen from a year ago in spite of central bank rate reductions, according to the Federation of Small Businesses.

``I want to ensure that banks pass the benefit on to people,'' Chancellor of the Exchequer Alistair Darling told BBC television after the rate decision. ``Banks need to play their part. They now have to help their customers.''

The rate cut may also help spark interest in a housing market that's been falling for a year. Traffic on Rightmove Plc's Web site, which displays more than 90 percent of U.K. homes for sale, leaped 20 percent after the decision.

``Buyer affordability and the start of recovery in the housing market is now in the hands of lenders,'' said Miles Shipside, commercial director at Rightmove.

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

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Zero Rate World May Lie Ahead as King, Trichet Cut

By Gabi Thesing

Nov. 7 (Bloomberg) -- Banks are making it harder and more costly for companies in Europe to get loans as the economic outlook worsens, the European Central Bank said.

Credit standards for loans to companies tightened ``significantly'' in the third quarter, the Frankfurt-based ECB said in its quarterly bank lending survey published today. ``Expectations for the fourth quarter of 2008 point to the net tightening of credit standards being broadly unchanged from the net tightening observed in the third quarter,'' it said.

Banks in Europe remain reluctant to lend to each other even after the ECB flooded them with cash and governments announced rescue packages to prevent banking failures. The world's biggest financial companies have posted almost $700 billion in writedowns since the start of last year, when the collapse of the U.S. subprime mortgage market triggered a global credit crisis.

The ECB said the main reasons that banks are tightening credit standards are ``expectations regarding future economic activity'' and ``banks' ability to access market financing.''

``The euro area is experiencing the most severe credit crisis since its inception'' in 1999, said Aurelio Maccario, an economist at Unicreditgroup in Milan. There's a risk the economy will fall into ``a more severe recession,'' he said.

The net percentage of banks reporting a tightening of loan standards for companies surged 22 percentage points to 65 percent in the third quarter, the ECB said. Banks also tightened standards for loans to consumers, including those for house purchases, it said.

To contact the reporter on this story: Christian Vits in Frankfurt at cvits@bloomberg.net

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German Industrial Production Drops Most Since 1995

By Gabi Thesing

Nov. 7 (Bloomberg) -- Industrial production in Germany declined the most in almost 14 years in September, increasing the likelihood of a recession in Europe's largest economy.

Output dropped a seasonally adjusted 3.6 percent from August, the Economy Ministry in Berlin said today. That's the most since January 1995. Economists expected a decline of 1.7 percent, the median of 36 forecasts in a Bloomberg News survey showed. From a year earlier, production adjusted for working days fell 2.1 percent.

German companies are scaling back production as the global economy buckles under the credit crisis and higher borrowing costs, hurting export markets and causing consumers to cut back on spending as they worry about their jobs. Factory orders recorded the biggest monthly drop ever in September and business confidence last month slumped to a five year low.

``It's looking grim and will continue to look grim for quite some time,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt who forecasts Germany's economy will contract 1.5 percent next year. ``Germany's fortunes are tied to export markets and they are all collapsing. The German consumer won't be able to outspend the decline in exports.''

The ministry revised last month's figure to a 3.2 percent increase from an initially reported 3.4 percent, according to today's statement. Last month's gain was overstated on holidays.

Washing Machines

This month's drop was led by a 7.2 percent slump in the production of durable goods such as washing machines and televisions, the ministry said in the statement.

``Due to continued weak demand in manufacturing and the construction industry the outlook for production remains markedly dimmed,'' the ministry said in the statement.

Banks have recorded almost $700 billion in writedowns and losses tied to the U.S. mortgage market since the start of 2007. That's forced central banks to slash interest rates and governments to bail out lenders. The European Central Bank and the Swiss National Bank yesterday lowered their key rate by 50 basis points, while the Bank of England cut by 150 basis points.

The yearlong credit crunch is already feeding into the economy. German luxury carmakers Bayerische Motoren Werke AG and Daimler AG have both scaled back production after they had to scrap their 2008 profit forecasts, citing declining markets.

The association of German chemical makers, VCI, which includes BASF SE and Bayer AG, cut its 2008 production forecast to 1 percent growth from a previous estimate of 2.5 percent. Already production in the third quarter fell by 1 percent from the previous three months, the group said Nov. 4.

German Exports

The European Commission said earlier this week that the European Union's economy, which accounts for 62 percent of German exports, will probably enter a recession in the fourth quarter, and said Germany won't grow at all next year.

Households are cutting spending and have boosted savings on increased concern about job security. Retail sales contracted for a fifth month in October, the Bloomberg Purchasing Managers Index showed Oct. 30. At the same time, households increased their savings to 11.3 percent of disposable income in the first quarter, the Federal Statistics office said Oct. 20.

Germany's DAX benchmark index has shed 9 percent over the past month, bringing declines to almost 40 percent this year.

Chancellor Angela Merkel's government hopes to soften the impact on the economy with a package of measures aimed at unlocking 50 billion euros ($64 billion) of investments.

Tax Relief

The program, which also includes increased tax relief on household repairs, loans to small and medium-sized businesses and money for roads and railways, is ``bold and targeted'' and will help revive economic growth in 2010, Merkel said on Nov. 5.

Companies may also get some relief from lower oil prices and a weaker euro. The price of crude oil has more than halved from its July record of $147 a barrel, while the euro has tumbled almost 20 percent in the past four months.

This helped boost German exports in September, which rose more than economists expected, a report showed this morning. Sales abroad gained 0.7 percent from August.

Still, it may not be enough to shield German industry from the impact of the financial crisis.

``The worst is still to come for manufacturers,'' said Carsten Brzeski an economist at ING Group in Brussels. ``The industrialized world is heading for a recession and the German economy is in the middle of the storm.''

To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net

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U.S. Unemployment Rate Climbs to 14-Year High of 6.5%

By Bob Willis

Nov. 7 (Bloomberg) -- The U.S. unemployment rate climbed to the highest level since 1994 as payrolls tumbled, signaling that the economic slump inherited by Barack Obama will last well into his first year as president.

The jobless rate rose to 6.5 percent in October from 6.1 percent the previous month, the Labor Department reported today in Washington. Employers cut 240,000 workers after a loss of 284,000 in September, the biggest two-month slide since 2001.

Unemployment may only worsen by the time Obama takes office in January, making it easier for congressional Democrats to push through another economic stimulus package. Obama meets today with his transition economic advisers, including billionaire investor Warren Buffett and former Federal Reserve Chairman Paul Volcker. He’ll also hold his first post-election press conference.

“The U.S. economy is in a very deep recession,’’ John Herrmann, president of Hermann Forecasting LLC in Summit, New Jersey, wrote in a note to clients after the release. “We look for a $500 billion fiscal stimulus from President-elect Obama.’’

Stock futures dropped immediately after the report’s publication, then recouped losses. Futures on the Standard & Poor’s 500 Stock Index were up 1 percent at 913.50 at 8:44 a.m. in New York. Benchmark 10-year Treasury note yields rose to 3.74 percent from 3.69 percent late yesterday.

Economists’ Estimates

Payrolls were forecast to drop by 200,000 after declining by a previously estimated 159,000 in September, according to the median of 78 economists surveyed by Bloomberg News. Estimates ranged from declines of 85,000 to 300,000. October’s unemployment rate compared with a projected 6.3 percent and was the highest since March 1994.

Job losses for August and September were revised up by 179,000. The economy has lost 1.18 million jobs so far this year.

Factory payrolls fell 90,000, the biggest monthly loss since July 2003, after decreasing 56,000 in September. A strike by 27,000 machinists at Boeing Co., which was resolved earlier this month, contributed to the drop, the Labor Department said.

Economists had forecast a drop of 65,000 manufacturing jobs. The decrease included a loss of 9,100 jobs in auto manufacturing and parts industries.

Today’s report also reflected the housing slump and credit crunch. Payrolls at builders dropped 49,000 after decreasing 35,000. Financial firms reduced payrolls by 24,000, after a 16,000 decline the prior month.

Auto Dealers Cut

Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 108,000 workers after dropping 201,000 in the previous month. Retail payrolls decreased by 38,100, led by a loss of 20,300 jobs at auto dealerships, after a decline of 44,800.

Government payrolls increased by 23,000 after a loss of 41,000.

American Express Co., the largest U.S. credit-card company by purchases, said Oct. 30 it would eliminate 10 percent of its workforce, or about 7,000 people, to cut costs amid rising defaults as consumers fail to repay their debts.

The job cuts “will help us to manage through one of the most challenging economic environments we’ve seen in many decades,” Chief Executive Officer Kenneth Chenault said in a statement.

“Broad-based sector weakness in payroll numbers is consistent with past recessions,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. “Layoff announcements suggest further weakness in the pipeline.”

Hours Worked

The average work week was unchanged at 33.6 hours, today’s report showed. Average weekly hours worked by production workers were also unchanged at 40.6 and average overtime hours remained at 3.6.

Workers’ average hourly wages rose 4 cents from the prior month, or 0.2 percent, to $18.21. Hourly earnings were 3.5 percent higher than in October 2007.

The loss of jobs, plunging home prices, and a record tightening of bank lending may cause consumers and businesses to keep retrenching.

Gross domestic product shrank at a 0.3 percent annual pace in the third quartet and consumer spending fell at a 3.1 percent pace, the most since 1980. Economists surveyed by Bloomberg project the economic slump will deepen this quarter.

The faltering economy and imploding financial markets helped push Obama ahead of Republican rival John McCain, a senator from Arizona, particularly in hard-fought states like Ohio and Florida where unemployment rates have jumped.

Americans also gave Democrats larger majorities in the House and Senate as voters blamed Republicans for the economic malaise. House Speaker Nancy Pelosi said this week Democrats may seek two stimulus packages if President George W. Bush limits the size of a plan to be considered during the post-election session later this month.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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North Sea Brent Crude Daily Shipments to Rise 11%

By Alexander Kwiatkowski

(Corrects to December in third paragraph.)

Nov. 7 (Bloomberg) -- Daily shipments of North Sea Brent crude, part of the price benchmark for almost two-thirds of the world's oil, will rise 11 percent in December.

Tankers are set to load 159,484 barrels a day of Brent crude next month, compared with 144,000 barrels a day scheduled for November, according to the loading schedule.

A total of 4.94 million barrels will be shipped in December, compared with 4.32 million barrels in November.

Brent is one of the four North Sea oil varieties used to price crude from the Middle East, Africa and Russia. The other grades are Forties, operated by BP Plc, StatoilHydro ASA's Oseberg blend and ConocoPhillips's Ekofisk.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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Mazeikiu Sees No `Significant' Effect on Refining From Fire

By Milda Seputyte and Katarzyna Klimasinska

Nov. 7 (Bloomberg) -- AB Mazeikiu Nafta, the only oil refinery in the Baltic states, doesn't expect a fire today to have any ``significant'' effect on production, Rosvaldas Gorbaciovas, a spokesman for the company, said by phone.

The blaze burned for 20 minutes in the visbreaking unit at the subsidiary of PKN Orlen SA, Poland's largest oil company, spokesman Jacek Komar said by phone.

The unit at the refinery in Juodeikiai, Lithuania, has been shut down, Gorbaciovas said.

A visbreaking unit increases the amount of diesel and heating oil that can be processed from a barrel of crude.

To contact the reporter on this story: Milda Seputyte in Vilnius at mseputyte@bloomberg.netKatarzyna Klimasinska in Warsaw at kklimasinska@bloomberg.net

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BP's December BTC Oil Exports to Rise Near to Normal

By Alexander Kwiatkowski

Nov. 7 (Bloomberg) -- Crude oil shipments through BP Plc's Baku-Tbilisi-Ceyhan pipeline in December will return close to levels last seen before a gas leak slashed output in September.

Thirty-three cargoes totaling 24.2 million barrels are expected to be shipped at the Ceyhan terminal in Turkey next month, averaging 780,645 barrels a day, according to the loading program obtained by Bloomberg.

In the first six months of the year, prior to any output disruptions, the pipeline was scheduled to pump an average of 755,625 barrels a day, according to loading schedules. BP, the operator of the link, said in June exports were about 850,000 barrels a day.

Supplies through the BTC pipe were cut by a fire in August and reduced to as low as 300,000 barrels a day after a gas leak on Sept. 17. BP has since been increasing output and the pipeline was due to export about 548,571 barrels a day between Oct. 18 and Nov. 21.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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Saras Third-Quarter Profit Rises 10% as Margins Widen

By Gianluca Baratti and Michele Seghizzi

Nov. 7 (Bloomberg) -- Saras SpA, owner of the Mediterranean region's largest refinery, said third-quarter profit rose 10 percent as refining margins increased by a third.

Earnings adjusted to exclude inventory changes rose to 60.1 million euros ($76.7 million) from 54.8 million euros last year. That was lower than the 68 million-euro median estimate of eight analysts in a Bloomberg survey.

Saras is boosting capacity for diesel production, which is more profitable than gasoline or fuel oil, in response to demand. Chief Financial Officer Corrado Costanzo, in an interview with Bloomberg Television, confirmed a plan to double investment to 1.23 billion euros during the next four years, though the global economic slowdown may affect the timing.

``We might consider delaying some investments in certain periods and decide to accelerate in others,'' he said. The refiner earmarked the funds in part to boost diesel output at its Sarroch plant on the island of Sardinia. The facility has full daily capacity of 300,000 barrels a day.

Refining margins in the third quarter rose 36 percent to $8 a barrel, the company said. The amount of crude oil processed through the refinery rose 1 percent to 28.4 billion barrels.

Refineries

``The mid-term outlook for complex refineries will remain positive, driven by sustained demand for middle distillates, and potential shortages in the European markets caused by the imminent change in specifications for diesel,'' said Chairman Gian Marco Moratti in a statement. Costanzo said diesel margins will be ``satisfactory'' during the winter months.

New European regulations will be enforced limiting sulfur content in diesel from Jan. 1 next year.

Refining at the Saras plant will run at full capacity for the rest of the year because no maintenance has been scheduled.

The credit crunch has made financing purchases difficult, though the conditions should improve ``in several months,'' Costanzo said in today's interview.

Saras rose as much as 5 percent, and traded up 4 cents, or 1.3 percent, to 2.80 euros at 12:42 p.m. in Milan.

To contact the reporter on this story: Adam L. Freeman in Rome at afreeman5@bloomberg.net

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Imperial Energy Jumps After Russia Approves Takeover by ONGC

By Stephen Bierman

Nov. 7 (Bloomberg) -- Imperial Energy Plc surged the most in four months in London trading after Russia's antitrust agency approved its 1.4 billion-pound ($2.2 billion) takeover by India's Oil & Natural Gas Corp.

Imperial Energy, the U.K.-based explorer developing deposits in Siberia, rose as much as 25 percent to 1,103 pence. The shares traded at 1,083 pence as of 12:15 p.m. local time.

The acquisition by India's biggest exploration company, known as ONGC, ``has already been approved,'' Sergei Noskovich, a spokesman for the Federal Anti-Monopoly Service, said by telephone from Moscow today. Approval was granted after the country's subsoil agency ruled that Imperial's reserves weren't deemed to be ``strategic.''

``This is a green light for the deal,'' Artem Konchin, a Moscow-based analyst at Aton UniCredit, said in a telephone interview. ``The only major concern now is if the price will remain.''

A slump in energy prices and falling oil output in Russia have hammered shares in the nation's biggest oil companies, OAO Gazprom and OAO Rosneft. Urals crude prices have fallen more than 41 percent since ONCG first made its offer.

ONCG's cash offer of 1,250 pence a share was 61.9 percent more than Imperial Energy's stock price on July 11, the day before it first said it had received a bid.

`Illogical'

``It's illogical on ONGC's part to pay at prices set three months ago when oil was so high,'' UBS AG oil analyst Dmitry Loukashov said by telephone in Moscow today.

ONGC doesn't have any official information as of yet, Chairman R.S. Sharma said by telephone today. Imperial Energy Chairman Peter Levine couldn't be reached for comment.

Today's ruling from the antitrust service follows talks between India's Oil Minister Murli Deora and Russian Prime Minister Vladimir Putin earlier this week.

ONGC agreed Aug. 26 to buy Imperial Energy in what would be its biggest acquisition overseas to tap Siberian deposits and make up for dwindling output at home.

Imperial had a total of 920 million barrels of oil equivalent of proven and probable reserves as of December 2007, according to an audit by DeGolyer and MacNaughton cited on Imperial Energy's Web site.

The U.K. explorer reported a ``major new discovery'' at its Tomsk regional Kiev Eganskoye field in July.

ONGC declined 3.7 rupees, or 0.5 percent, to 740 rupees in Mumbai today, after earlier gaining as much as 5.7 percent. The stock has lost 40 percent so far this year.

India wants to participate in the offshore Sakhalin-3 project in Russia's Far East and form a venture with OAO Rosneft to explore eastern Siberia, the Indian government said earlier this week. In return, India would consider partnership with Russian companies in Indian exploration.

To contact the reporter on this story: Stephen Bierman in Moscow sbierman1@bloomberg.net.

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Rand Climbs Against Dollar on Widening Interest-Rate Advantage

By Garth Theunissen

Nov. 7 (Bloomberg) -- South Africa's rand snapped two days of declines against the dollar and the euro as interest-rate cuts in Europe and Asia increased the relative attractiveness of the country's higher-yielding assets.

The gains pared the currency's decline versus the dollar this week to 2.9 percent. The Bank of Korea lowered its key interest rate for the third time in four weeks today following reductions yesterday in the euro region, U.K. and Switzerland. The rand has lost more against the dollar this week than all but two of 16 major counterparts.

``We are seeing a technical rebound in the rand after rate cuts around the world,'' said Russell Lamberti, an analyst in Johannesburg at Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions. ``Relatively high domestic interest rates cushion the rand by making it more expensive to short. It does give us a yield advantage over other markets.'' A short position is a bet an asset will weaken.

The rand strengthened as much as 3.5 percent to 9.9251 per dollar and was at 10.0852 by 1 p.m. in Johannesburg, from 10.2850 yesterday. South Africa's currency will trade toward 8 per dollar by mid-2009, according to Lamberti.

It also appreciated 1.5 percent to 12.8937 per euro, paring its weekly decline against the European currency to 3.6 percent.

Gains for the currency may be limited after the South African Reserve Bank said the nation's foreign-currency reserves fell 4.4 percent to $32.9 billion by the end of October, compared with September. Reserves were expected to drop 1.2 percent, according to the median estimate of five economists surveyed by Bloomberg.

Rate Differential

Yesterday's interest-rate cuts left South Africa's 12 percent benchmark rate 900 basis points higher than the U.K.'s and 875 basis points more than the euro-region's. It's also 1,170 above Japan's key rate.

``In an environment where you have an overvalued yen and an undervalued rand, one has to assume investors are going to start nibbling at the carry trade again,'' said Lamberti. ``That's especially true given the interest-rate differential between the two countries.''

In carry trades, investors borrow a currency at a low interest rate and invest the proceeds in markets where returns are higher. They earn the spread between the two, while taking the risk currency moves will erase their profit.

Government bonds advanced in the week, with the yield on the benchmark 13.5 percent security due September 2015 losing 45 basis points to 8.64 percent. The yield on the 13 percent note maturing in August 2010 dropped 56 basis points to 9.11 percent. Yields move inversely to bond prices.

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

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Gilts Rise, Pound Set for Weekly Decline, on Recession Concern

By Agnes Lovasz

Nov. 7 (Bloomberg) -- U.K. government bonds rose and the pound headed for its biggest weekly drop versus the euro since December 2004 as yesterday's bigger-than-forecast interest-rate cut by the Bank of England stoked concern about the depth of Britain's economic slump.

Two-year gilts were set for a third weekly gain, with yields down more than 1 percentage point in that period. Policy makers, led by Governor Mervyn King, reduced the benchmark rate to 3 percent yesterday, the lowest level since 1955. Traders raised bets more cuts will follow, interest-rate futures show.

``Continuing weak fundamentals will not yet allow the pound to recover,'' said Antje Praefcke, a currency strategist in Frankfurt at Commerzbank AG. ``Despite yesterday's decision, we believe that the Monetary Policy Committee will go for further interest-rate cuts.''

The pound traded at 81.23 pence per euro by 12:10 p.m. in London, from 81.38 pence yesterday, and was down 2.4 percent in the week. It climbed to $1.5723, from $1.5627, trimming a weekly decline to 2.2 percent.

Monetary policy is being eased because the 15-month credit crisis is inflicting harsher blows to growth and inflation than central bankers anticipated. The International Monetary Fund yesterday cut its month-old forecast for global expansion in 2009 to 2.2 percent from 3 percent. The U.K. economy will contract 1 percent, the European Commission predicted Nov. 3.

Reports this week showed U.K. services shrank in October and factory production had its longest streak of declines for almost three decades. Production slid 0.8 percent from August, the biggest drop in 19 months.

Bonds Climb

The European Central Bank lowered its main rate by half a percentage point to 3.25 percent, its second cut in less than a month. ECB President Jean-Claude Trichet declined to rule out further reductions.

U.K. government notes rose, with the yield on the two-year gilt dropping 5 basis points to 2.50 percent, from 2.93 percent at the end of last week. The 4.75 percent security due June 2010 climbed for an eighth day, its longest run of gains in a year, adding 0.03, or 30 pence per 1,000 pound ($1,576) face amount, to 103.43. The 10-year yield dropped 10 basis points to 4.23 percent, down from 4.52 percent on Oct. 31.

The implied yield on the December short-sterling futures contract fell 13 basis points to 3.56 percent, after dropping 44 basis points yesterday, indicating traders increased bets for more rate reductions.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

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Brazilian Real Strengthens on Increase in Commodity Prices

By Adriana Brasileiro

Nov. 7 (Bloomberg) -- Brazil's real rose as a recovery in commodity prices lured investors to local assets.

The real rose 1.2 percent to 2.1910 per dollar at 7:58 a.m. New York time, from 2.2182 yesterday. Brazil's currency has lost 29 percent from a nine-year high of 1.5545 per dollar reached on Aug. 1.

``The mood is a bit better today because of a recovery in commodities and advances in stock markets around the world,'' said Paulo Fujisaki, a foreign-exchange strategist at Socopa Corretora in Sao Paulo.

U.S. stock-index futures climbed on bets the government's payrolls report today may give the Federal Reserve more room to reduce interest rates. European stocks rose as higher copper and oil prices buoyed commodity shares.

Yields on local-currency bonds and interest-rate futures contracts rose after inflation was faster than economists forecast.

Brazil's consumer prices as measured by the benchmark IPCA index rose 0.45 percent in October from the previous month, the national statistics agency said. The increase was more than the median estimate of 0.42 percent in a Bloomberg survey of 36 economists.

Annual inflation was 6.41 percent in October, more than the median estimate of 6.40 percent in a Bloomberg survey of 19 economists.

The yield on Brazil's zero-coupon bond due in January 2010 rose 7 basis points, or 0.07 percentage point, to 15.53 percent, according to Banco Votorantim. The yield on Brazil's overnight futures contract for January 2009 delivery fell 1 basis point to 13.74 percent.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net

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Latin America Currencies: Chilean Peso Climbs on Fed Cut Bets

Nov. 7 (Bloomberg) -- Chile's peso rose on speculation the U.S. Federal Reserve will again lower interest rates, sparking appetite for higher-yielding, emerging- market assets.

Chile's peso rose 0.8 percent to 631.20 per dollar, from 636.38 yesterday, at 7:54 a.m. New York time.

The yield for a basket of five-year peso bonds in inflation- linked currency units, known as unidades de fomento, declined 5 basis points, or 0.05 percentage point, to 3.35 percent, according to Bloomberg composite prices.

For Related News: Stories on emerging markets: NI EM Stories on Latin America: TOPL Stories on emerging-market currencies: TNI EM FX

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Canada's Dollar Little Changed on Unexpected Addition of Jobs

By Chris Fournier

Nov. 7 (Bloomberg) -- Canada's dollar was little changed after a government report before the release of U.S. payroll data showed the country unexpectedly added jobs in October.

``On balance you would think it would be Canada-positive, but the market isn't really moving much,'' said Adam Cole, head of global currency strategy at RBC Capital Markets in London. ``We're just kind of paralyzed ahead of the U.S. payroll numbers. Nothing is moving ahead of that.''

The Canadian dollar traded at C$1.1975 per U.S. dollar at 7:19 a.m. in Toronto, compared with C$1.1980 yesterday. One Canadian dollar buys 83.51 U.S. cents.

The economy added 9,500 jobs last month after a gain of 106,900 positions in September, Statistics Canada said today in Ottawa. The median forecast of 21 economists surveyed by Bloomberg News was for a decrease of 10,000 in October. Canada's unemployment rate rose to 6.2 percent from 6.1 percent.

The Bank of Canada cut borrowing costs six times in the past 12 months, lowering its overnight rate to 2.25 percent from 4.5 percent. Policy makers next meet Dec. 9.

The U.S. jobless rate climbed to a five-year high of 6.3 percent in October, according to the median forecast of 77 economists surveyed by Bloomberg News. The payroll report from the Labor Department is due at 8:30 a.m. in Washington.

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

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Copper, Aluminum Need `Severe' Cuts, Investec's Cheveley Says

By Claudia Carpenter

Nov. 7 (Bloomberg) -- Copper and aluminum producers need to make ``severe'' cutbacks to prevent supplies from overwhelming demand as customers cancel orders amid a global economic slowdown, said George Cheveley, a fund manager at Investec Asset Management Ltd.

Aluminum supplies may exceed usage by 1 million metric tons next year unless output is reduced, Cheveley said in an interview yesterday in London. The price of copper may have to fall to $3,000 a ton, or 23 percent below its current level, before mining companies are forced to reduce supplies to match demand, he said.

They ``need severe cutbacks to move into balance in the short term,'' said Cheveley, who helps manage $200 million of natural-resource stocks and commodities at Investec. Aluminum ``is in a massive surplus right now. I think copper can go significantly lower before there will be enough reaction by the industry.''

Rio Tinto Group, United Co. Rusal and Cia. Vale do Rio Doce are among mining companies cutting production of industrial metals after commodity prices plunged. Copper miners have cut 151,000 tons of production for 2009, equal to about 1 percent of 2008 output, Barclays Capital said yesterday. Aluminum cutbacks are equal to about 5 percent of production, Barclays said.

``Demand has fallen rapidly since September,'' said Cheveley, a former BHP Billiton Ltd. analyst. ``Some customers are canceling orders and some are deferring them. This process of destocking is greater than the last recession because cash is so tight.''

Metal Stockpiles

Copper miners may maintain production and stockpile unsold metal. Aluminum smelters in China, the world's largest producer of the metal, are seeking export tax rebates to ship more metal out of the country, Cheveley said.

``If that happens, it will be even worse'' for the aluminum industry, he said.

Tin is the only industrial metal that will have a supply deficit next year, Cheveley said. Still, a turnaround in demand may be quicker than in previous cycles because of rapid declines in inventories held by manufacturers, Cheveley said.

``Once the manufacturers have finished destocking, their orders will have to increase,'' he said.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

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Copper, Aluminum Need `Severe' Cuts, Investec's Cheveley Says

By Claudia Carpenter

Nov. 7 (Bloomberg) -- Copper and aluminum producers need to make ``severe'' cutbacks to prevent supplies from overwhelming demand as customers cancel orders amid a global economic slowdown, said George Cheveley, a fund manager at Investec Asset Management Ltd.

Aluminum supplies may exceed usage by 1 million metric tons next year unless output is reduced, Cheveley said in an interview yesterday in London. The price of copper may have to fall to $3,000 a ton, or 23 percent below its current level, before mining companies are forced to reduce supplies to match demand, he said.

They ``need severe cutbacks to move into balance in the short term,'' said Cheveley, who helps manage $200 million of natural-resource stocks and commodities at Investec. Aluminum ``is in a massive surplus right now. I think copper can go significantly lower before there will be enough reaction by the industry.''

Rio Tinto Group, United Co. Rusal and Cia. Vale do Rio Doce are among mining companies cutting production of industrial metals after commodity prices plunged. Copper miners have cut 151,000 tons of production for 2009, equal to about 1 percent of 2008 output, Barclays Capital said yesterday. Aluminum cutbacks are equal to about 5 percent of production, Barclays said.

``Demand has fallen rapidly since September,'' said Cheveley, a former BHP Billiton Ltd. analyst. ``Some customers are canceling orders and some are deferring them. This process of destocking is greater than the last recession because cash is so tight.''

Metal Stockpiles

Copper miners may maintain production and stockpile unsold metal. Aluminum smelters in China, the world's largest producer of the metal, are seeking export tax rebates to ship more metal out of the country, Cheveley said.

``If that happens, it will be even worse'' for the aluminum industry, he said.

Tin is the only industrial metal that will have a supply deficit next year, Cheveley said. Still, a turnaround in demand may be quicker than in previous cycles because of rapid declines in inventories held by manufacturers, Cheveley said.

``Once the manufacturers have finished destocking, their orders will have to increase,'' he said.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

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