Berkshire Hathaway Profit Falls 77% on Investments, Insurance

By Erik Holm and Linda Shen

Nov. 8 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. posted a fourth straight profit drop, the longest streak of quarterly declines in more than a decade, as hurricanes hurt returns at insurance operations and investments lost value.

Third-quarter net income decreased 77 percent to $1.06 billion, or $682 a share, from $4.55 billion, or $2,942, a year earlier, the Omaha, Nebraska-based company said yesterday. Further declines in debt and equity markets reduced shareholders equity, a measure of assets minus liabilities, by $9 billion in October, after the quarter ended.

``It's not as good as it might have been, but neither was it as bad as it might have been,'' said Frank Betz, a partner at Carret Zane Capital Management, which holds Berkshire shares. Declining investments, hurricanes and falling property and casualty rates caused net losses at 14 of the 23 companies in the KBW Insurance Index that reported third-quarter results so far.

Buffett, 78, is finding opportunity amid the turmoil, investing in nuclear power, chewing gum and Wall Street as results slump at Berkshire's insurance units and businesses tied to housing. He committed at least $28 billion this year to acquire companies, finance buyouts and purchase securities as prices fall and competitors are hobbled by limited access to credit.

Berkshire said profit from underwriting insurance fell 83 percent to $81 million amid the most costly hurricane season since the record storms of 2005. Its reinsurance group, which sells catastrophe coverage to other insurers, posted a $166 million pretax loss for the quarter. Profit from selling policies at car insurer Geico Corp. fell 27 percent to $246 million. Berkshire typically gets about half its revenue from insurance.

Hurricanes Ike and Gustav cost insurers a combined $10 billion when they struck the Gulf Coast in September, according to preliminary data from Insurance Services Office Inc.

Derivative Losses

Decreases in the value of some holdings and derivatives lowered earnings by $1.01 billion in the period ended Sept. 30, compared with a $1.99 billion gain in the year-earlier quarter when Berkshire booked profits from selling a stake in energy firm PetroChina Inc.

Berkshire believes market declines this year are ``temporary, and that equity prices will ultimately rise,'' the company said in a filing.

Buffett Bet

Losses from derivatives result in part from accounting rules related to bets Buffett made on four stock indexes, including the Standard & Poor's 500. If the indexes fall below contractually agreed-upon levels at expiration dates beginning in 2019, Berkshire will lose the bets. Berkshire has collected $4.85 billion on the contracts and can profit from investing the funds, the firm said.

The investment loss ``doesn't look great,'' said Tom Russo, a partner at Gardner Russo & Gardner, whose largest holding is Berkshire stock. ``But shareholders should rejoice that he was able to obtain that capital to invest on such attractive terms for years before the chance comes that he'll have to pay.''

Buffett in the past two months agreed to spend $5 billion of Berkshire's cash for a stake in Goldman Sachs Group Inc., betting the Wall Street firm would be among the survivors of a worldwide credit crisis, and another $5 billion in preferred shares of General Electric Co.

He also agreed in July to lend $3 billion to Dow Chemical Co. to help fund that firm's takeover of Rohm & Haas Co., and committed $6.5 billion in April to help Mars Inc. buy chewing gum maker Wm. Wrigley Jr. Co. Berkshire's MidAmerican Energy Holdings Co. struck a deal in September to pay $4.7 billion for Constellation Energy Group Inc.

Shares Decline

Deals and investments reduced Berkshire's cash holdings to $33.4 billion on Sept. 30 from $47.1 billion a year earlier. Buffett spent about $5.8 billion on fixed-maturity securities and $3.9 billion on equities in the quarter.

Berkshire shares, which rose in 17 of the last 20 years, are down 20 percent since Dec. 31 as some of the firm's largest stock investments slumped. American Express Co. has plunged 51 percent this year and Coca-Cola Co. dropped 25 percent.

Berkshire said its stock portfolio was worth $76 billion at the end of September, a 9.4 percent increase over three months. Berkshire reported holding about $3.2 billion in auction-rate securities, half as much as on June 30.

The worst housing slump since the Great Depression hurt building-related units including Acme Brick, Benjamin Moore paints and Shaw Industries. Profit at Shaw, the world's largest carpet manufacturer, fell 61 percent to $49 million.

Furniture, Jewelry

Profit at furniture stores, jewelry shops and the candy business declined 67 percent to $11 million. Earnings from Berkshire's energy and utilities unit dropped 8.5 percent to $324 million.

Buffett built Berkshire over four decades from a failing textile maker into a $175 billion company by buying out-of-favor stocks and businesses whose management he deemed superior. His views on the economy and markets are followed by investors and politicians. He participated yesterday by phone in a meeting convened by President-elect Barack Obama to discuss the economy.

To contact the reporters on this story: Erik Holm in New York at eholm2@bloomberg.net; Linda Shen in New York at lshen21@bloomberg.net

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General Motors Says It May Run Out of Operating Cash This Year

By Jeff Green and Mike Ramsey

Nov. 8 (Bloomberg) -- General Motors Corp., seeking U.S. aid to avoid collapse, said it may not have enough cash to keep operating this year and will be ``significantly short'' by the end of June unless the auto market improves or it adds capital.

Available cash fell to $16.2 billion on Sept. 30 from $21 billion at the end of June, the largest U.S. automaker said yesterday as it reported a $4.2 billion third-quarter operating loss. Merger talks with Chrysler LLC were suspended.

``Things are clearly deteriorating more quickly than people expected,'' said Jill Fields, who manages $2 billion in high- yield debt as managing director at Babson Capital Management LLC in Springfield, Massachusetts. ``They're either going to need aid or they're at risk for filing'' for bankruptcy.

GM's outlook and Ford Motor Co.'s $7.7 billion cash burn added urgency to automakers' pleas for government help after a quarter in which U.S. industrywide sales plunged 18 percent. The companies are asking for $50 billion in new loans, a person familiar with the plan said.

Chief Executive Officer Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli renewed the push for assistance in meetings with U.S. House and Senate leaders in Washington on Nov. 6. Wagoner said GM also has been in contact with the staff of President-elect Barack Obama.

``We have sufficient liquidity to continue on plan,'' Mulally, 63, said in an interview with Bloomberg Television. Dearborn, Michigan-based Ford reported an operating loss of $2.98 billion.

Ford rose 4 cents to $2.02 in New York Stock Exchange composite trading, paring the shares' decline this year to 70 percent. Detroit-based GM fell 44 cents, or 9.2 percent, to $4.36. The stock has tumbled 82 percent this year.

$73 Billion in Losses

Yesterday's cash forecast was the bleakest yet from GM, which has lost almost $73 billion since the end of 2004. Using $6.9 billion in cash last quarter pushed GM closer to the $11 billion minimum it says is needed to pay bills.

A bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,'' Wagoner, 55, said in a Bloomberg Television interview. GM said on Oct. 24 that bankruptcy ``is not an option.''

Should GM take such a step, the result would be 2.5 million jobs lost in the first year among automakers, suppliers and related businesses, according to a Nov. 4 report by the Center for Automotive Research, based in Ann Arbor, Michigan.

Bailout Optimism

A U.S. rescue package for GM, Ford and Chrysler is likely before President George W. Bush leaves office in January, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor.

``Either the federal government provides money for a bailout and lets the industry retool, restructure, and move ahead, or the industry dies,'' Virag told Bloomberg Television.

Babson Capital's Fields said GM and Ford bonds already are trading at ``bankruptcy levels,'' so the automakers are relying on ``a political decision'' to avert that fate. She wouldn't say whether the holdings she manages include GM or Ford debt.

GM's 8.375 percent bond due in July 2033 fell 4.3 cents to 24 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 34.83 percent.

Ford's 7.45 percent note due in July 2031 dropped 3.5 cents to 34 cents on the dollar, yielding 22 percent.

Chrysler Talks

While GM didn't specify any prospective partners in saying merger discussions were being halted, the biggest U.S. automaker had been in negotiations on a tie-up with Auburn Hills, Michigan-based Chrysler, people familiar with the plans said.

Consideration of a strategic acquisition was ``set aside'' to focus on ``immediate liquidity challenges,'' GM said.

GM's per-share operating loss was wider than the average estimate on an adjusted basis of $3.94, based on 10 analysts surveyed by Bloomberg.

Including a non-cash, $4.9 billion one-time gain related to unloading retiree medical bills, GM had a net loss of $2.5 billion, compared with a $38.9 billion year-earlier loss on a tax-accounting charge. GM's auto sales in the U.S., its largest market, fell 21 percent.

GM's cash use in the fourth quarter should be closer to the levels in this year's first and second quarters, when it was about $3.6 billion, Chief Financial Officer Ray Young said on a conference call.

GM said it is trying to boost cash by $20 billion by the end of next year, an increase from a July 15 plan for $15 billion.

Asset sales, a part of the strategy, have been hampered because potential buyers can't get financing, Chief Operating Officer Fritz Henderson said. GM's Hummer brand of sport-utility vehicles is among the businesses on the block.

Ford's Loss

Ford also said it was accelerating savings programs including a 10 percent reduction in salaried-job costs, expanding on a 15 percent slash this year; deeper cuts in production; and a smaller capital-spending budget.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Revenue plunged 22 percent to $32.1 billion.

The loss for Ford excluded a gain for shedding future retiree medical bills under a new union contract. Including the gain, Ford had a net loss of $129 million, or 6 cents. The net loss a year earlier was $380 million, or 19 cents.

Ford's U.S. auto sales tumbled 25 percent in the quarter.

To contact the reporters on this story: Jeff Green in Detroit at jgreen16@bloomberg.net; Mike Ramsey in Detroit at mramsey6@bloomberg.net.

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Merck Embraces Heart Research and Deals as Rival Pfizer Flees

By Shannon Pettypiece

Nov. 8 (Bloomberg) -- Merck & Co. is boosting its research in heart disease, the leading cause of death in the U.S., even as rival Pfizer Inc. abandons the field.

Merck has about 1,200 researchers working on heart medicines and wants to buy or collaborate with companies with promising cardiac treatments, said Richard Pasternak, the Whitehouse Station, New Jersey-based drugmaker's head of cardiovascular research, in a telephone interview. Pfizer Inc., the world's biggest drugmaker, said in September it was ending early-stage heart research.

Pfizer and other drug companies are plowing resources into cancer, diabetes and neurological disorders that have higher sales potential and might face easier regulatory approval. Merck remains committed to treatments for heart disease because it would be ``foolish and irresponsible,'' said Pasternak, to walk away from a field that kills 17 million people worldwide each year. Heart drugs generated more than $30 billion in global sales last year, according to IMS Health Inc.

``As a public company, we have a responsibility not only to our shareholders, but also to the public,'' said Pasternak in a telephone interview. ''I think it is a responsible position.''

Merck is experimenting with drugs to reduce blood vessel inflammation, which can contribute to a heart attack or stroke, and developing blood pressure medicines with fewer side effects. It is also studying a treatment to raise so-called good cholesterol, believed to flush out artery-clogging plaque.

Cardiac Trove

Merck has eight heart drugs in human testing, almost a fifth of all the company's late-stage research projects. That's a bigger devotion to heart drugs than GlaxoSmithKline Plc, Europe's largest drugmaker, with 5 percent of its experimental drugs for heart disease.

Pasternak said the company wanted to reaffirm its commitment to heart research after the Pfizer announcement. He said many employees at Merck have been asking him whether Merck will be following Pfizer's lead.

The shift by drugmakers away from heart disease has made it difficult for smaller companies working on heart medicines to raise cash from venture capitalists, Pasternak said.

``I don't think numerically there are as many early biotech opportunities in the cardiovascular space as on neuroscience or oncology,'' said Pasternak. ``I think there are really rich opportunities, but venture capitalists and hedge funds and investors are saying the same thing as some of the drugmakers, which is that cardiovascular is a tougher road and it isn't as attractive a road and that we've done most of what we can do so let's go into new areas.''

Long Trials

Testing drugs against cholesterol, blood pressure and other chronic heart conditions can involve 10,000 patients and take nearly a decade because the medicines are typically taken long- term and by a large population. More specialized drugs, like treatments for cancer or rare genetic disorders, usually require smaller trials.

Pasternak said drugmakers should develop ``more creative ways'' to study experimental drugs, such as using genetic profiling to identify those most likely to benefit or targeting products toward specific groups of patients.

To contact the reporter on this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net

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Pound Posts Biggest Weekly Decline Versus Euro Since 2004

By Agnes Lovasz

Nov. 8 (Bloomberg) -- The pound posted its biggest weekly decline against the euro since December 2004 after the bigger- than-forecast interest-rate cut by the Bank of England stoked concern Britain's economic slump is deepening.

The U.K. currency also logged a weekly drop versus the dollar after policy makers, led by Governor Mervyn King, reduced the benchmark rate to 3 percent, the lowest level since 1955. Two-year gilts rose for a third week, pushing yields down more than 1 percentage point in that period. 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, Germany's second-biggest lender. ``The Monetary Policy Committee will go for further interest- rate cuts.''

The pound traded at 81.02 pence per euro in London late yesterday, from 81.38 pence on Nov. 6, and was down 2.3 percent in the week. It climbed to $1.5763 from $1.5627, trimming a weekly loss to 1.9 percent.

Monetary policy is being eased as the 15-month credit crisis inflicts harsher blows to growth and inflation than central bankers anticipated. The International Monetary Fund cut Nov. 6 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, accounting for three-quarters of the economy, 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 Nov. 6 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 falling 5 basis points to 2.48 percent, from 2.93 percent at the end of last week. The 4.75 percent security due June 2010 rose 0.05, or 50 pence per 1,000 face amount, to 103.47. The 10- year yield dropped to 4.19 percent from 4.52 percent on Oct. 31.

The implied yield on the December short-sterling futures contract fell 12 basis points to 3.56 percent, after dropping 43 basis points Nov. 6, 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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Saudi Shares Fall on U.S.-Iranian Concern; Saudi Basic Tumbles

By Glen Carey

Nov. 8 (Bloomberg) -- Saudi Arabian shares fell, led by Saudi Basic Industries Corp., after U.S. President-elect Barack Obama said Iran's potential development of a nuclear weapon was unacceptable.

Saudi Basic Industries, the Middle East's biggest publicly traded company, tumbled to a four-year low in Riyadh trading. Samba Financial Group retreated and Zamil Industrial Investment Co. lost for the first time in six days.

The Tadawul All Share Index snapped a three-day gain, falling 5.8 percent to 5,732.03 in Riyadh. It has retreated 48 percent this year. The Tadawul is the only Arab exchange monitored by Bloomberg that's open on Saturdays.

``Obama's speech about Iran wasn't good,'' Abdulla al-Aqil, a trader at Samba Financial Group, said in telephone interview in Riyadh today. ``It didn't give comfort to investors.''

Iran's efforts to develop a nuclear weapon were unacceptable, and an international effort should prevent this from happening, Obama told reporters in Chicago yesterday. He also called on Iran to stop supporting terrorism.

Iran wants Obama to review U.S. policy toward the Middle East, citing his promise as a candidate to bring change.

Saudi Basic Industries, also known as Sabic, fell 8.8 percent to a four-year low of 67.5 riyals ($18.5). Samba, the kingdom's second-largest bank, dropped 4 percent to 66.5 riyals after Egyptian Financial Group-Hermes Holding forecast a drop in profit.

``With the decline in equity values across the board, we expect Samba's profitability to remain under pressure in the medium term,'' EFG-Hermes said in an e-mailed report today.

Zamil Industrial Investment Co. declined the most since May 2006, falling 10 percent to 67.5 riyals. The Saudi Arabian investor in building materials, chemicals and real estate, said today it started a 75 million riyal venture with New Delhi Tele- Towers Ltd. to supply telecommunication towers, air-conditioning units and power equipment in India.

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net.

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European Stocks Fall This Week on Profit Outlook; Arcelor Drops

By Alexis Xydias

Nov. 8 (Bloomberg) -- European stocks resumed their losses this week as interest-rate cuts failed to ease concern the economy and corporate earnings will deteriorate.

The Dow Jones Stoxx 600 Index dropped 1.1 percent in the five days, following the steepest weekly gain since 2001 a week earlier. ArcelorMittal sank 13 percent after the world's biggest steelmaker cut production and Lafarge SA slid 9.4 percent as the largest cement producer abandoned its 2010 profit target. Money managers Man Group Plc and 3i Group Plc dropped more than 10 percent after the value of their assets declined.

Europe's Stoxx 600 retreated 2.47 to 219.6, taking this year's loss to 40 percent as almost $700 billion in credit losses dragged down economic growth. Profit concern this week also overshadowed speculation that U.S. President-elect Barack Obama may boost growth with a stimulus package.

``We are only at the beginning of what we anticipate will be a severe earnings downgrade,'' said Simon Davis, London-based chief investment officer for Putnam Investments' international equities team, which oversees about $10 billion. ``Interest-rate cuts help, but act with a lag. More is needed. Buying now, you do have to take the long-term view. Valuations are not a sufficient driver for sustainable outperformance in the short term.''

U.S. reports this week showed the unemployment rate climbed to the highest level since 1994 and service industries contracted the most on record in October as credit dried up and consumers reined in spending.

Borrowing Costs

Policy makers in the euro zone, the U.K., Switzerland and Denmark lowered rates to ease the effects of the global credit squeeze. The Bank of England unexpectedly cut its benchmark lending rate by 1.5 percentage points to the lowest since 1955. The European Central Bank reduced borrowing costs by 50 basis points to 3.25 percent.

Analysts have scaled back their estimates for 2008 profits at Stoxx 600 companies to a 6.8 percent drop, from an 11 increase forecast at the start of the year, according to Bloomberg data.

The European Commission said on Nov. 3 that the region's economy probably entered a recession in the third quarter and trimmed its growth forecast for this year to 1.2 percent from 1.3 percent.

The Stoxx 600 declined 13 percent in October, its worst month since September 2002.

National benchmark indexes fell in seven of 18 western European markets. Germany's DAX Index dropped 1 percent. France's CAC 40 slipped 0.5 percent, while the U.K.'s FTSE 100 advanced 0.3 percent.

Earnings Analysis

Earnings for the 1,123 companies in western Europe that reported quarterly results since Oct. 7 declined 9.1 percent on average, trailing expectations by 7.1 percent, according to Bloomberg data.

The Stoxx 600 is now trading at 9.3 times its members' reported earnings, Bloomberg data show. The measure was valued on Oct. 27 at 7.9 times earnings, the cheapest level since at least January 2002.

ArcelorMittal, based in Luxembourg, tumbled after it doubled production cuts and said earnings will drop as an economic slowdown erodes demand from builders and carmakers. ThyssenKrupp AG, Germany's biggest steelmaker, lost 6.9 percent.

Lafarge fell 9.4 percent. The Paris-based cement maker said it will scale back expansion and widen a disposal program to meet the terms of debt agreements as demand for cement and aggregates slows in the U.S. and Europe. Holcim Ltd., the world's second- largest cement maker, slipped 10 percent.

Asset Values

London-based Man Group slid 23 percent, the worst week since the largest publicly traded hedge-fund manager went public in 1994. Assets under management, which stood at $70.3 billion as of Sept. 30, slipped to begin November at $61 billion, the least since March 2007, the company said. Profit from continuing operations fell more than analysts estimated.

3i Group Plc, also based in London, tumbled 11 percent. Europe's largest publicly traded private equity firm posted its first drop in asset values for five years on stock market declines that eroded investment values.

JCDecaux SA retreated 10 percent. The world's second-biggest seller of outdoor advertising cut its forecast for sales growth and profitability this year as the slowing economy weighs on advertisement spending in the U.K.

Volkswagen AG declined 20 percent as Deutsche Boerse AG, operator of the Frankfurt bourse, cut the stock's weighting in the DAX to 10 percent as of Nov. 3, forcing index trackers to sell the shares. Europe's biggest carmaker now has a weighting of 8.1 percent in the German benchmark, compared with 13.9 percent at the end of last week, according to Bloomberg data.

Automotive companies were the worst performers among 19 industry groups in the Stoxx 600, with a measure for the sector slumping 11 percent.

Premier Foods Plc soared 30 percent. The second-largest U.K. bread baker said Will Carter became the latest company director to purchase shares. Carter, managing director of Premier's Ambient foods unit, bought 26,579 shares for 27.5 pence each on Oct. 31, the St Albans, England-based company said Nov. 4.

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

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Indian Panel to Study Impact of Credit Crisis on Local Business

By Thomas Kutty Abraham

Nov. 8 (Bloomberg) -- India, the world's second-fastest- growing major economy, has set up a panel to study the impact of the global credit crisis on domestic companies.

The panel will be headed by the finance ministry and include top bureaucrats from the departments of commerce, industrial policy and promotion, and the planning commission, the ministry said in a statement on its Web site.

Indian companies have sought deeper cuts in interest rates and reserve requirements to increase the availability of cash. Prime Minister Manmohan Singh said the government will help companies tide over the effects of the financial crisis, which he said was worse than expected and may be ``prolonged.''

The central bank on Nov. 1 deployed all three of its main tools for shoring up growth, for the first time since 1997. It pared the repurchase rate to 7.5 percent from 8 percent, reduced the amount of deposits lenders need to set aside as reserves to 5.5 percent from 6.5 percent, and cut the amount of cash banks must keep in government bonds to 24 percent from 25 percent.

Output at India's factories, utilities and mines in August rose 1.3 percent from a year earlier, the slowest pace on record, as higher prices and borrowing costs damped consumer spending.

A coordination committee on financial markets, including Reserve Bank of India Governor Duvvuri Subbarao and Securities and Exchange Board of India Chairman C.B. Bhave, met in Mumbai yesterday to review the impact of the global financial turmoil on the nation's financial sector.

The group discussed measures taken to address the crisis and reviewed policy agenda for the future, the central bank said in a statement late yesterday.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net

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Mexico's Economy, Prices Justify Lowering Rate, Werner Says

By Jens Erik Gould and Carlos M. Rodriguez

Nov. 8 (Bloomberg) -- Mexican Deputy Finance Minister Alejandro Werner said a slowing economy and lower food and commodities prices justify a reduction in the country's benchmark interest rate in the coming months.

While Banco de Mexico should keep in mind that a rate cut may weaken the peso and speed inflation, exchange rate volatility has a smaller effect on consumer prices in Mexico than it did in the 1990s, Werner said in an interview with Bloomberg Television.

``Medium-term inflationary pressures associated with raw- material prices and the situation in the international economy and its impact on the Mexican economy mean interest rates like the one we have now are no longer necessary,'' Werner said.

Inflation accelerated to a seven-year high in October, led by higher costs for electricity, gasoline and food. Economists who cover Mexico predict policy makers will reduce the key lending rate to 7 percent from its current 8.25 percent by the end of 2009, according to the median estimate of analysts surveyed Nov. 4 by Citigroup Inc.'s Banamex unit.

Mexico's government cut its 2009 economic growth forecast to 1.8 percent from 3 percent last month because of the global credit crisis. The central bank kept its benchmark interest rate unchanged at its last meeting as policy makers weighed concerns the economy will slow with predictions inflation may quicken. The next rate decision is on Nov. 28.

The majority of companies that suffered losses tied to currency derivatives when the peso fell the most in 14 years last month have closed their positions or acquired enough dollars to cover their positions, Werner said. Some companies have yet to finalize negotiations with banks and quantify losses, making it difficult to estimate the total losses from derivatives, he said.

Impact `Digested'

``The main impact of these operations on the currency market has been digested,'' Werner said. ``We don't think this will be the cause of any additional surprises.''

Mexico's National Banking and Securities Commission is reviewing whether banks that sold financial derivatives, and companies that bought them, violated regulations on disclosure or other rules. Losses on such contracts caused the bankruptcy of retailer Controladora Comercial Mexicana SAB.

Mexican companies including Grupo Posadas SAB, Alfa SAB and Vitro SAB last month disclosed losses tied to derivatives, which are financial instruments used to hedge risks or for speculation.

To contact the reporter on this story: Jens Erik Gould in Sao Paulo at jgould9@bloomberg.net; Carlos M. Rodriguez in New York at carlosmr@bloomberg.net

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European Stocks Fall This Week on Profit Outlook; Arcelor Drops

By Alexis Xydias

Nov. 8 (Bloomberg) -- European stocks resumed their losses this week as interest-rate cuts failed to ease concern the economy and corporate earnings will deteriorate.

The Dow Jones Stoxx 600 Index dropped 1.1 percent in the five days, following the steepest weekly gain since 2001 a week earlier. ArcelorMittal sank 13 percent after the world's biggest steelmaker cut production and Lafarge SA slid 9.4 percent as the largest cement producer abandoned its 2010 profit target. Money managers Man Group Plc and 3i Group Plc dropped more than 10 percent after the value of their assets declined.

Europe's Stoxx 600 retreated 2.47 to 219.6, taking this year's loss to 40 percent as almost $700 billion in credit losses dragged down economic growth. Profit concern this week also overshadowed speculation that U.S. President-elect Barack Obama may boost growth with a stimulus package.

``We are only at the beginning of what we anticipate will be a severe earnings downgrade,'' said Simon Davis, London-based chief investment officer for Putnam Investments' international equities team, which oversees about $10 billion. ``Interest-rate cuts help, but act with a lag. More is needed. Buying now, you do have to take the long-term view. Valuations are not a sufficient driver for sustainable outperformance in the short term.''

U.S. reports this week showed the unemployment rate climbed to the highest level since 1994 and service industries contracted the most on record in October as credit dried up and consumers reined in spending.

Borrowing Costs

Policy makers in the euro zone, the U.K., Switzerland and Denmark lowered rates to ease the effects of the global credit squeeze. The Bank of England unexpectedly cut its benchmark lending rate by 1.5 percentage points to the lowest since 1955. The European Central Bank reduced borrowing costs by 50 basis points to 3.25 percent.

Analysts have scaled back their estimates for 2008 profits at Stoxx 600 companies to a 6.8 percent drop, from an 11 increase forecast at the start of the year, according to Bloomberg data.

The European Commission said on Nov. 3 that the region's economy probably entered a recession in the third quarter and trimmed its growth forecast for this year to 1.2 percent from 1.3 percent.

The Stoxx 600 declined 13 percent in October, its worst month since September 2002.

National benchmark indexes fell in seven of 18 western European markets. Germany's DAX Index dropped 1 percent. France's CAC 40 slipped 0.5 percent, while the U.K.'s FTSE 100 advanced 0.3 percent.

Earnings Analysis

Earnings for the 1,123 companies in western Europe that reported quarterly results since Oct. 7 declined 9.1 percent on average, trailing expectations by 7.1 percent, according to Bloomberg data.

The Stoxx 600 is now trading at 9.3 times its members' reported earnings, Bloomberg data show. The measure was valued on Oct. 27 at 7.9 times earnings, the cheapest level since at least January 2002.

ArcelorMittal, based in Luxembourg, tumbled after it doubled production cuts and said earnings will drop as an economic slowdown erodes demand from builders and carmakers. ThyssenKrupp AG, Germany's biggest steelmaker, lost 6.9 percent.

Lafarge fell 9.4 percent. The Paris-based cement maker said it will scale back expansion and widen a disposal program to meet the terms of debt agreements as demand for cement and aggregates slows in the U.S. and Europe. Holcim Ltd., the world's second- largest cement maker, slipped 10 percent.

Asset Values

London-based Man Group slid 23 percent, the worst week since the largest publicly traded hedge-fund manager went public in 1994. Assets under management, which stood at $70.3 billion as of Sept. 30, slipped to begin November at $61 billion, the least since March 2007, the company said. Profit from continuing operations fell more than analysts estimated.

3i Group Plc, also based in London, tumbled 11 percent. Europe's largest publicly traded private equity firm posted its first drop in asset values for five years on stock market declines that eroded investment values.

JCDecaux SA retreated 10 percent. The world's second-biggest seller of outdoor advertising cut its forecast for sales growth and profitability this year as the slowing economy weighs on advertisement spending in the U.K.

Volkswagen AG declined 20 percent as Deutsche Boerse AG, operator of the Frankfurt bourse, cut the stock's weighting in the DAX to 10 percent as of Nov. 3, forcing index trackers to sell the shares. Europe's biggest carmaker now has a weighting of 8.1 percent in the German benchmark, compared with 13.9 percent at the end of last week, according to Bloomberg data.

Automotive companies were the worst performers among 19 industry groups in the Stoxx 600, with a measure for the sector slumping 11 percent.

Premier Foods Plc soared 30 percent. The second-largest U.K. bread baker said Will Carter became the latest company director to purchase shares. Carter, managing director of Premier's Ambient foods unit, bought 26,579 shares for 27.5 pence each on Oct. 31, the St Albans, England-based company said Nov. 4.

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

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European 2-Year Notes Post Seventh Weekly Gain as ECB Cuts Rate

By Kim-Mai Cutler

Nov. 8 (Bloomberg) -- European two-year government notes advanced for a seventh week, the longest sequence of gains in 12 years, after policy makers cut interest rates to head off a recession in the 15-nation economy.

The gains sent the two-year yield to the lowest level in three years after the European Central Bank lowered the main refinancing rate by half a point on Nov. 6 and the International Monetary Fund cut growth forecasts for the region. Industrial output in Germany, Europe's biggest economy, slipped the most since 1995.

``We are still in a crisis on a global scale,'' said David Schnautz, an interest-rate strategist in Frankfurt at Commerzbank AG, Germany's second-biggest lender. ``Central banks are all in easing mode so shorter-dated notes are the place to be.''

The yield on the two-year German note, most sensitive to interest-rate expectations, fell 14 basis points in the week to 2.4 percent. The 4 percent security due September 2010 climbed 0.19, or 1.9 euros per 1,000-euro ($1,275) face amount, to 102.79.

The yield on the German 10-year bund, Europe's benchmark government security, declined 20 basis points to 3.69 percent. Yields move inversely to bond prices.

Factory output fell an adjusted 3.6 percent from August, the Economy Ministry in Berlin said yesterday. Economists expected a decline of 1.7 percent, the median of 36 forecasts in a Bloomberg News survey showed. The outlook for production has ``dimmed markedly,'' the ministry said.

Weaker Growth

Central banks around the world are lowering borrowing costs to stave off the worst of the global banking crisis. The Bank of Korea cut its main rate for a third time in four weeks on Nov. 6 to prevent the economy entering a recession. Policy makers in the U.K., Switzerland and the Czech Republic trimmed their benchmark rates on the same day.

ECB President Jean-Claude Trichet said Nov. 6 momentum in the region's economy has ``weakened significantly.'' Policy makers reduced the benchmark rate to 3.25 percent, matching the forecasts of all but one of 55 economists surveyed by Bloomberg.

Further interest-rate reductions in the region are ``possible,'' ECB policy maker Erkki Liikanen told the Helsinki- based broadcaster MTV3 yesterday. French Finance Minister Christine Lagarde told France 3 national television last week the ECB's rate reduction was ``clearly not'' sufficient to boost the economy and that she expects a further cut by year-end.

The spread, or difference, in yield between two- and 10-year German notes was near the widest in four years at 1.3 percentage point, as traders bet interest rates will be cut further.

`Room to Maneuver'

``The ECB will decide in favor of more rate cuts in coming months,'' wrote Patrick Jacq, senior fixed-income strategist in Paris at BNP Paribas SA. ``At 3.25 percent, the ECB still has considerable room to maneuver,'' and at least 1 to 1.5 percentage points in rate cuts to deliver.

Jacq said the German yield spread may widen by at least a further 10 basis points.

Every Group of Seven economy except Canada will contract next year, the IMF said yesterday in an update to its World Economic Outlook report. Economic growth in the euro area will slump to just 0.1 percent, the worst performance since 1993, the Brussels-based European Commission forecast Nov. 3. The economy, which shrank in the three months through June, will probably continue to weaken in the third and fourth quarters, it said.

European bonds have outperformed Treasuries since September, handing investors a 2.3 percent return, compared with 1.3 percent for their U.S. counterparts, according to Merrill Lynch & Co.'s EMU Direct and Treasury Master indexes.

To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net

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Poland's Alchemia Cuts Forecast, Citing Higher Scrap-Metal Cost

By Maciej Martewicz

Nov. 8 (Bloomberg) -- Alchemia SA, a Polish metal producer and distributor, cut its 2008 net income forecast citing higher scrap-metal prices rose and a stronger-than-expected currency.

Warsaw-based Alchemia reduced the forecast by as much as 82 percent to a range of 110 million zloty ($38.4 million) to 130 million zloty, the company said in a regulatory statement late yesterday. The previous projection was for 180 million zloty to 200 million zloty.

The company is owned by billionaire Roman Karkosik.

Scrap metal prices were 27 percent higher than the company had assumed, at an average to 1,000 zloty per ton. The zloty, which Alchemia had forecast at 3.6 per euro, traded at levels from 3.2 to 3.3 against the euro until September, the company said in the statement.

To contact the reporter on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net

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Fota's Stankiewicz Resigns as CEO of Polish Auto Parts Trader

By Maciej Martewicz

Nov. 8 (Bloomberg) -- Fota SA majority owner Bohdan Stankiewicz resigned as chief executive officer of the Polish auto-parts trader without giving a reason.

Fota delegated the supervisory board to take over from Stankiewicz for three months, and appointed Pawel Gizycki, the company's financial director, to join the management board, the Gdynia, northern Poland-based company said in three regulatory statements late yesterday.

To contact the reporter on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net

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Hungarian Financial Regulator Halts Trade in Real Estate Funds

By Balazs Penz

Nov. 8 (Bloomberg) -- Hungary's financial regulator has suspended trading in the country's real estate to ``protect the savings'' of investors.

Customers won't be able to buy or sell real estate funds for 10 days, during which time managers will be required to provide information to investors and modify their procedures, the Budapest-based regulator known as Pszaf said on its Web site late yesterday.

``To protect the savings of investors, the institutions involved should inform fund owners about the nature of investments to real estate funds and real estate funds of funds, the projection of their value and their risks, thus helping well-founded investment decisions,'' Pszaf said.

Hungary's economy is being hurt by the global financial crisis as investors shun emerging-market assets in favor of safer investments. The country's stocks, bonds and currency have declined since last month and the government was forced to take out an emergency credit line from the International Monetary Fund, the European Union and the World Bank.

The ruling affects 29 Hungarian-run funds, managed by companies including the local units of Credit Suisse Group AG, Erste Bank AG, Intesa Sanpaolo SpA, Bayerische Landesbank, OTP Bank Nyrt., UniCredit SpA and Raiffeisen International Bank AG.

To contact the reporter on this story: Balazs Penz in Budapest at bpenz@bloomberg.net.

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G-20 Urges Stimulus to Ease Impact of Global Slump

By Ben Sills

Nov. 8 (Bloomberg) -- Finance officials from the Group of 20 nations will press their European colleagues to join a coordinated stimulus plan to tackle an impending recession when they meet in Sao Paulo this weekend.

U.K. Prime Minister Gordon Brown yesterday urged countries to heed the International Monetary Fund's call for coordinated action, even as other European Union leaders fretted about reining in budget deficits. A coordinated package would add 50 percent more to growth than a similar amount spent in ad hoc measures by individual nations, said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York.

``There are big areas of difference out there,'' Weinberg said. ``The U.S. and IMF view is clearly that fiscal stimulus is needed. The Europeans are not quite so clear on this.''

The world's biggest industrialized economies will all contract next year for the first time in more than half a century as the financial market seizure leaves companies and consumers starved of credit, the IMF forecast last week.

The G-20 meetings beginning today reunite officials for the second time in a month, after their first-ever emergency meeting in Washington in October. They'll meet again in Washington at a Nov. 14-15 summit of G-20 heads of state.

``It's very clear that to navigate a path through the current difficulties and to regain some momentum in the world economy, the biggest economies need to be working together,'' U.K. Treasury Minister Stephen Timms said in an interview in Sao Paulo yesterday.

`Discipline'

The push for coordinated action by the U.S., U.K. and developing nations including Brazil suffered a setback Nov. 6 when France dropped calls for a joint stimulus package.

A memo prepared for the French-led summit of EU leaders in Brussels underscored the need for ``macroeconomic discipline,'' bowing to resistance to a pump-priming program. The memo, proposing a European strategy to take to next week's global economic crisis summit in Washington, endorses ``macroeconomic policies that are sustainable and oriented toward stability.''

``Interest in a fiscal stimulus varies considerably from country to country,'' Michael Mussa, former IMF chief economist, said in an interview from Washington. ``Germany is not very enthusiastic.''

Central banks are already coordinating their response to the financial crisis, which began with the collapse of the U.S. subprime-mortgage market. The Fed, the European Central Bank and the Bank of England led a coordinated interest rate cut on Oct. 8 and they have all followed up with further reductions in the past two weeks.

`Real Momentum'

``What we're going to see this weekend is some real momentum for action building up for the meeting in Washington,'' said U.K.'s Timms, adding that one area of focus will be ``international coordination.''

The finance ministers of Brazil, Russia, India and China issued a joint statement yesterday calling for a coordinated push to halt the spread of financial turmoil. A stimulus plan is ``essential'' for the global economy, they said.

Brazil has been pressing for a greater role for G-20 in resolving the crisis, which has drained capital from Eastern Europe to Latin America at a time when emerging markets are being counted on to sustain almost all of the world's projected 2.2 percent economic growth next year, according to an IMF forecast.

Delegates will discuss ``important fiscal measures that can help revive economic growth,'' Brazilian central bank President Henrique Meirelles said yesterday.

Balancing Act

Canadian Prime Minister Stephen Harper said governments and central banks face a balancing act deciding how much to stimulate the global economy. There is ``a very real concern'' that policy makers may overdo support for the economy, jeopardizing longer term growth, he said Nov. 6. At the same time, he said his government is not ``by any means finished in terms of further steps that have to be taken.''

While Europe is dragging its feet on the fiscal stimulus, the U.S. may be the main opponent to tightening up financial regulation. European leaders want to give the IMF responsibility for financial stability around the world. The U.S. opposes any international regulator with cross-border authority, according to a senior U.S. official.

This weekend's meeting will explore ways ``to regulate global financial transactions that are outside government's control,'' Meirelles said.

One problem facing negotiators today: There will be no representatives to deal with from the incoming administration of President-elect Barack Obama. That limits the scope for a deal ahead of the Washington meeting.

House speaker Nancy Pelosi said Nov. 6 that she's negotiating with the Senate and outgoing President George W. Bush a $61 billion stimulus package, the second in a year, and Congress may introduce further measures when Obama takes office on Jan. 20.

``The magnitude of action taken is unprecedented in postwar era,'' Mussa said. ``What has not happened is for them to sit in a room and decide anything in coordination.''

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

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Latvia's Slakteris Says Parex Is Interested in State Guarantee

By Aaron Eglitis

Nov. 8 (Bloomberg) -- Latvian Finance Minister Atis Slakteris said Parex Banka AS, the Baltic country's second- biggest lender, may tap a government program to provide state guarantees for loans.

``Parex Banka has shown interest and approached us about this possibility,'' Slakteris said in an interview late yesterday with the LTV1 news show Panorama. Hipoteku Un Zemes Banka AS, the only state-owned lender, may also need to apply, he said.

Latvia's government is offering state guarantees for loans to ease funding pressures for local lenders, who fund operations with syndicated loans, after the Swedish government offered a similar program that covered Swedish subsidiaries in the Baltic states. Latvia's central bank said Nov. 3 that about 1.2 billion euros ($1.53 billion) in syndicated loans come due next year.

``At the moment borrowing in the global financial markets is almost impossible without a state guarantee,'' Slakteris said. About eight Latvian banks have to repay syndicated loans, he added.

Martins Jaunarajs, a senior vice-president for Parex Banka, declined to comment on whether his bank was seeking a guarantee when contacted by phone today. Parex has syndicated loans of 775 million euros that need to be refinanced next year, Jaunarajs said.

The government may decide at a meeting today on state loan guarantees for a local lender and steelmaker Liepajas Metalurgs AS, which wants a guarantee for 160 million euros, the Leta newswire reported yesterday, without saying where it got the information.

Three of Latvia's five biggest lenders are Swedish-owned so can drawn on the government plan in Sweden.

`Peculiar Situation'

``It's a peculiar situation where those banks that have a parent company, for example in Sweden, they have support, but those that do not have parent banks, they do not,'' Slakteris said. ``That's why Latvia has acted just like other European countries.''

Moody's Investors Service yesterday downgraded Latvia's credit rating to A3 from A2, the third-lowest investment grade level, saying the state may have to offer assistance to some locally owned institutions.

Domestic demand is waning as the Baltic country's economy contracted a preliminary 4.2 percent in the third quarter, compared with an expansion of 10.3 percent last year.

To contact the reporters on this story: Aaron Eglitis in Riga, Lia, at aeglitis@bloomberg.net

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East European Currencies: Czech Koruna Posts Record Weekly Drop

By Ewa Krukowska

Nov. 8 (Bloomberg) -- The Czech koruna had a record weekly drop against the euro after the central bank cut interest rates by more than forecast and signaled they may go lower. The Hungarian forint slumped after a rating downgrade.

The koruna was the second-biggest loser among emerging- market currencies this past week as the Prague-based Ceska Narodni Banka lowered its main rate 75 basis points to 2.75 percent to spur growth. Central bank Governor Zdenek Tuma said Nov. 6 he did not rule out further rate reductions.

``We expect the Ceska Narodni Banka to cut by another 50 basis points in three months,'' Anna Zadornova, an economist in London at Goldman Sachs Group Inc., wrote in a note yesterday. ``Then by another 25 basis points in six months from now, taking rates to 2 percent, with risks skewed to the downside.''

The koruna fell as much as 1.4 percent to 25.254 per euro, the weakest level since Oct. 27, and was at 25.130 by late yesterday in Prague. It dropped 4.6 percent in the week, the steepest decline since the debut of the euro in 1999.

Czech international reserves shrank to $34 billion in October, from $36.3 billion in September, a central bank report showed yesterday. In euro terms, the reserves rose to 26.650 billion euros, from 25.383 billion a month ago.

The 75 basis-point reduction in the two-week repurchase rate defied the predictions of 16 of 18 economists in a Bloomberg survey who forecast a quarter-point reduction. The central bank will cut the rate by 25 basis points to 50 basis points at its Dec. 17 meeting and will ultimately reduce it to 2 percent, Gillian Edgeworth, an economist in London at Deutsche Bank, wrote in a note.

Falling Rates

The Bank of England lowered its key rate by 1.5 percentage point on Nov. 6 and the European Central Bank and Swiss National Bank lowered theirs by 50 basis points to limit the economic damage from the global financial crisis. The euro area is the largest trading partner for central European countries.

In other trading, the forint tumbled as much as 3.1 percent to a two-week low of 270.48 against the euro after Moody's Investors Service lowered Hungary's sovereign ratings by one step to A3 and assigned a negative outlook.

``This underscores the problems of the Hungarian economy and the fact it is going to face a recession very soon,'' Bartosz Pawlowski, strategist at TD Securities in London, wrote in a client note yesterday.

The forint last traded at 265.15 against the euro, from 262.37 on Nov. 6, extending its weekly decline to 3.7 percent, the most since period ending Oct. 17.

The International Monetary Fund approved a $15.7 billion loan to the country to shore up the economy. It said it would make $6.3 billion of the 17-month loan available immediately and the rest after quarterly reviews.

Zloty, Leu

The zloty lost 2.5 percent in the week to 3.6215 per euro and the Romanian leu dropped 1.5 percent to 3.7275 against the common currency. The Slovak koruna rose 0.1 percent to 30.418 per euro.

The Turkish lira advanced 1.8 percent to 1.5398 per dollar today and was 0.1 percent stronger in the week.

``Rate-easing in Romania, Turkey and South Africa is still a long way off in our view, unless the emerging-markets capital flow backdrop radically improves, which we don't expect,'' Martin Blum, head of emerging-markets economics and currency strategy in Vienna at UniCredit SpA, wrote in a client note.

To contact the reporter on this story: Ewa Krukowska in Warsaw at ekrukowska@bloomberg.net

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Canada's Dollar Strengthens Versus World's Major Currencies

By Chris Fournier

Nov. 8 (Bloomberg) -- Canada's dollar outperformed the world's most-actively traded currencies as the eighth-largest economy unexpectedly added jobs last month and looked poised to withstand a global economic slowdown.

The Canadian dollar, dubbed the loonie for the aquatic bird on the one-dollar coin, rose 2 percent this week against its U.S. counterpart. The International Monetary Fund predicted all of the Group of Seven economies will contract next year except Canada's.

``The ability of the Canadian economy to continue to generate jobs is truly outstanding and astounding,'' said Andrew Busch, a currency strategist at BMO Capital Markets in Chicago. ``The Canadian financial architecture has been so much better than the rest of the world. It certainly has been a contributing factor to why the Canadian dollar has performed well recently.''

The Canadian dollar rose to C$1.1893 per U.S. dollar, from C$1.2125 on Oct. 31. One Canadian dollar buys 84.08 U.S. cents.

Canada's economy added 9,500 jobs last month after a gain of 106,900 positions in September, Statistics Canada said yesterday in Ottawa. The median forecast of 21 economists surveyed by Bloomberg News was for a decrease of 10,000 in October.

`Dial Down the Pressure'

Canada's employment data ``will also dial down the pressure on the Bank of Canada to cut rates even more aggressively,'' Doug Porter, deputy chief economist with BMO Capital Markets in Toronto, wrote in a note to clients.

The central bank 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.

Canada's dollar has rebounded 7.1 percent since Oct. 28, when it touched C$1.3017, the weakest in more than four years.

``Early in the week we saw commodity currencies doing quite well alongside strong equity markets,'' said Stephen Malyon, co- head of currency strategy in Toronto at Scotia Capital Inc., a unit of Canada's third-largest bank. ``We may have averted the worst-case scenario, but it's far too late to avoid a protracted economic slowdown.''

Malyon said he ``wouldn't be terribly shocked'' to see the Canadian dollar slip back to C$1.30. Busch predicted the loonie would trade between C$1.15 and C$1.30 this quarter and could finish the year at about C$1.235.

The MSCI World Index, a gauge of stocks in 23 developed nations, climbed 5 percent in the first two days of the week. The central bank's Commodity Price Index rose 1.9 percent this week.

Meeting in Washington

World leaders meeting in Washington next week will discuss ways of reviving the global economy on top of holding talks on financial regulation, an aide to Canadian Prime Minister Stephen Harper said.

The U.S. is hosting the economic summit in Washington on Nov. 14 and Nov. 15 to discuss the causes of the financial crisis and review progress made in addressing them.

Crude prices have sunk 59 percent since reaching a record $147.27 a barrel on July 11. Canada's dollar has depreciated 15.1 percent since then. Oil accounts for a tenth of the nation's exports.

Canada's government will release housing starts and manufacturing data next week.

Canadian oil-sands developers are cutting investment plans by 20 percent after a slew of delayed projects, an official at the main trade group for Canada's oil producers said in an interview.

Oil must be at $60 a barrel for oil-sands projects completed after 2001 to be viable, RBC Capital Markets senior currency strategist Matthew Strauss wrote in a Nov. 4 report. It traded at $61.06 yesterday.

The yield on Canada's two-year government bond fell 11 basis points, or 0.11 percentage point, in the week to 1.91 percent. It touched 1.89 percent on Nov. 6, the lowest since at least 1989 when Bloomberg records begin. The price of the 2.75 percent security due in December 2010 climbed 20 cents to C$101.69.

The 10-year note's yield dropped 5 basis points to 3.71 percent during the period. The price of the 4.25 percent security maturing in June 2018 rose 33 cents to C$104.28.

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

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Vietnam Lowers Gasoline Prices as Global Oil Costs Decrease

By Nguyen Dieu Tu Uyen

Nov. 8 (Bloomberg) -- Vietnam's government has allowed state-run fuel retailers to cut gasoline prices by about 7 percent, in line with the decline in the global oil market over the past month, the nation's largest fuel importer said.

``The Ministry of Finance has told us to reduce by 1,000 dong per liter,'' said Vuong Thai Dung, deputy chief executive officer of Vietnam National Petroleum Corp., which supplies almost 70 percent of the country's demand.

The price of 92-RON gasoline, the most common grade used in the country, will be lowered to 14,000 dong ($0.82) a liter from 15,000 dong and that of kerosene to 14,500 dong from 15,500 dong, Dung said by telephone from Hanoi. Diesel prices will also be cut by 1,000 dong a liter, he said. The new prices are effective from noon today.

The Southeast Asian country last month cut gasoline prices four times to curb inflation and reduce the cost of doing business. The government this week pared its 2008 economic growth forecast to 6.7 percent from 7 percent, and set a lower target of expansion for next year at 6.5 percent.

Benchmark crude oil in New York plunged 32 percent over the past month, trading at $61.04 a barrel yesterday. Prices have declined 58 percent since reaching a record $147.27 a barrel on July 11.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

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Australia's Turnbull Wants Limits to ABC Bailout, Says Herald

By Shani Raja

Nov. 8 (Bloomberg) -- Australian Federal Opposition Leader Malcolm Turnbull said taxpayers shouldn't be expected to keep bailing out troubled childcare operator ABC Learning Centres Ltd., the Sydney Morning Herald reported on its Web Site today.

Turnbull was concerned about the ``level,'' ``tenure,'' and ``extent'' of the government's support to the ailing business, the Herald reported, citing comments made to reporters in Canberra. The opposition leader said the government didn't act quickly enough to stem the crisis.

ABC Learning, which looks after one in three Australian children in daycare at almost 1,100 centers, owes the country's four biggest banks A$762 million ($507 million). The government pledged yesterday as much as A$22 million to keep the business running until the end of the year.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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Saudi Aramco Says Oil Price Falls May Curb Investment

By Wang Ying

Nov. 8 (Bloomberg) -- Saudi Aramco, the world's biggest state-owned oil company, said a further drop in crude oil prices may curtail investments needed to offset declining output in aging fields.

Investment is also needed to expand production capacity to meet long-term demand growth, Chief Executive Officer Abdallah Jum'ah said in a handout distributed today at an industry summit in Beijing.

Benchmark crude prices in New York have declined 58 percent since reaching a record $147.27 a barrel in July, because of concerns a slowing world economy will erode demand. The world will need to invest more than $26 trillion, almost twice the annual domestic product of the U.S., by 2030 to ensure energy supply, the International Energy Agency said on Nov. 6.

``It is clear that collapsing oil prices are not only detrimental to the economies of oil-producing states but also to future upstream investments to sustain future oil demand consumption,'' Vienna-based consultant JBC Energy said in its weekly market report issued today.

Saudi Arabia, which has the world's largest proved reserves of oil, is implementing large-scale energy projects to boost production and refining capacity. The country has pledged to spend some $250 billion on energy by 2012, including raising oil output to 12.5 million barrels a day by next year, and increasing refining capacity by 50 percent.

Risks of Underinvestment

``Notwithstanding the current dip in consumption and the widespread uncertainty we see in the global economy, global energy demand will be on the rise due to the further development of developing countries' economy,'' Jum'ah said in the handout at the fifth National Oil Companies summit.

The impact of the current global financial crisis on demand won't be sufficient to offset rising consumption in developing countries, led by China and India, the IEA said in an executive summary of its annual World Energy Outlook on Nov. 6.

``There remains a real risk that underinvestment will cause an oil supply crunch'' by 2015, the Paris-based adviser to 28 oil-consuming nations said. ``The current financial crisis is not expected to affect long-term investment, but could lead to delays in bringing current projects to completion.''

Aramco and ConocoPhillips will halt the bidding process for a planned 400,000 barrel-a-day export refinery in Saudi Arabia because of market ``uncertainties,'' the companies said on Nov. 6.

Current oil supplies, Jum'ah said, are adequate as demand growth slows.

Global energy demand to 2030, including oil, natural gas and coal, is set to grow 1.6 percent a year to 17.01 billion metric tons of oil equivalent, the IEA said.

Takeover Opportunities

The credit crisis has created acquisition opportunities for companies such as PetroChina Co. and India's Oil & Natural Gas Corp., the chairmen of both companies said at the Beijing summit.

Jiang Jiemin, chairman of PetroChina, said today that Asia's biggest oil producer is studying the possibility of buying companies affected by the credit crunch. PetroChina is the Hong Kong-listed unit of China National Petroleum Corp.

Capital expenditure in 2009 ``won't decrease or increase,'' Jiang said. Spending for this year will be unchanged at 207.9 billion yuan ($30.5 billion), Jiang said on Oct. 21.

Oil & Natural Gas, India's state oil explorer, said it may seek to acquire energy assets in Africa and Latin America to secure supplies.

``Now is a good time to buy,'' ONGC Chairman R.S. Sharma said today. The world financial crisis and slumping oil prices have made energy assets more attractive, Sharma said.

Crude for December delivery rose 0.4 percent to settle at $61.04 a barrel on the New York Mercantile Exchange yesterday. Prices are down 37 percent from a year ago.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net;

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