China to the Rescue - Maybe! And ChartView

Currency Currents

Daily Forex Fundamentals | Written by Black Swan Capital | Nov 10 08 14:38 GMT |

Key News Stocks rose in Europe and Asia and U.S. index futures climbed after China unveiled a $586 billion plan to stimulate the economy and world leaders urged more cuts in interest rates. (Bloomberg) Key Reports Due (WSJ): No economic events are scheduled for today. Quotable "That the sun will not rise to-morrow is no less intelligible a proposition, and implies no more contradiction, than the affirmation, that it will rise." David Hume FX Trading - China to the Rescue - Maybe! And ChartView China's new fiscal stimulus package is receiving rave reviews across the board this morning. Bond prices lower, stocks higher, oil higher, gold higher and the dollar getting whacked—it's déjà vu all over again for the risk appetite crowd. Should we rejoice and jump back in to everything once bubble-icious? Or does China's action represent a sign of real fear and desperation as it watches its export demand crumble around its export-centric world view? Why should China's stimulus package prove any more effective than those conjured up by the smart boys in Washington? One difference of course is the fact that China has the money and doesn't have to go begging. But China also has a more serious potential for social unrest as jobs vanish for the hundreds of millions of migrant workers roaming the manufacturing belts. It seems this stimulus is aimed squarely at that growing problem and will do less than expected in terms of driving a new leg up in global demand for commodities. On Saturday, the day before China's announcement, a couple of investment banks released a dire forecast regarding China's growth prospects for the remainder of the year and into 2009. And last week, Los Angeles reporter Don Lee wrote a very informative piece, "Some owners deserting factories," about the problem China is facing as unemployment and the incredible hardship for migrant worker losing their jobs in the cities. Factories are closing overnight. Workers are left in the cold. "Chinese government statistics show that 67,000 factories of various sizes were shuttered in China in the first half of the year, said Cao Jianhai, an industrial economics researcher at the Chinese Academy of Social Sciences. By year's end, he said more than 100,000 plants will have close... [A]s many as 15% of the 70,000 factories run by Hong Kong businesspeople in the mainland will close this year. He [Stanley Lu, deputy chairman of the Federation of Hong Kong industries] says many more are likely to shut after Chinese New Year in February, when millions of migrant laborers will return home for several days. Once workers go home, they can close down the factory quietly." We have believed for a while that bad news in China would lead to another major leg-down in the emerging market world. After all, it is the prospect/belief/prayer that China can muddle-through this global morass relatively unscathed that has held out hope for emerging market perma-bulls. China's satellite country, know to us as Australia, is having a big day today on the news. The Australian dollar is the biggest winner among the majors, up over 3% against the US dollar. Today's good news comes on the heels of a dire warning by the World Bank about Australia's exposure to a slowdown in China and emerging markets across Asia that represent the bulk of demand for Australian exports. That's the background stuff. We don't think China's stimulus will be any more effective than Washington's have been. We will be surprised if risk aversion turns on a dime—very surprised. But this ebb in risk aversion could have some legs... no doubt! After it all, there's a good chance traders will be buying into the rumors of all good things to come before our government saviors meeting at the G-20 meeting in Washington this weekend. That's a whole five days away. And five days can represent big moves in this market; a market that has been volatile but rangy of late among the currencies. Oil is up over $3 today. It hasn't been playing along with Aussie of late. A minor divergence in here... who leads and who follows we do not know. Nice moves this morning in both the euro and pound, but they are still stuck in a range: And the risk asset class is ranging, but edging higher... S&P 500 futures... . Gold, the good news liquidity-driven asset class, has pooped higher this morning too... And the buck, gold's mirror image, is heading lower on the news... Jack Crooks Black Swan Capital http://www.blackswantrading.com Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html

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U.S. Treasury to Buy $40 Billion AIG Preferred Shares

By Craig Torres and John Brinsley

Nov. 10 (Bloomberg) -- The U.S. Treasury will buy $40 billion in American International Group Inc. preferred shares, and the Federal Reserve will open two new emergency loan units to finance the company's securities, the government said today.

The new terms of the government's assistance are less costly than the Fed's first loan to AIG on Sept. 16, a statement released in Washington said. The New York Fed gave the original loan to prevent widespread default against AIG creditors in the same week that Lehman Brothers Holdings Inc. collapsed.

``These new measures establish a more durable capital structure and resolve liquidity issues,'' as well as ``protect the interests of the U.S. government and taxpayers,'' the statement said.

The Fed and the Treasury are restructuring AIG's bailout so the company will survive credit market turmoil that has worsened in the two months since the company's first loan. A government report Nov. 7 showed the U.S. economy lost 524,000 jobs in September and October and unemployment rose to a 14-year high of 6.5 percent.

The Treasury, in a separate statement, called AIG a ``systemically important company.'' A Treasury official, speaking to reporters on a conference call on condition of anonymity, said Treasury Secretary Henry Paulson and Fed Chairman Ben S. Bernanke late yesterday briefed members of President-elect Barack Obama's transition team on the matter.

Separately, the insurer said today it lost a record $24.5 billion, or $9.05 a share, in the period ended Sept. 30, compared with profit of $3.09 billion, or $1.19, a year earlier.

Smaller Loan

Today's government announcement indicates the Fed will reduce its original credit line to AIG to $60 billion from $85 billion. The interest rate on the facility will be reduced to the three-month London interbank offered rate plus 3 percentage points, from a previous spread of 8.5 percentage points, the statement said. AIG's assets continue to secure the loan.

Under the deal, AIG must comply with the limitations on executive compensation for its top five senior executive officers as required under a bailout package signed into law last month, the Treasury said. Also required are ``golden parachute'' restrictions and a freeze on the size of the annual bonus pool for the top 70 company executives, the government said.

The Fed also invoked emergency authority to set up two new emergency loan facilities.

`Liquidity Pressures'

``These facilities are designed to alleviate capital and liquidity pressures on AIG associated with two distinct portfolios of mortgage-related securities,'' the Fed said.

In one new facility, the New York Fed will lend as much as $22.5 billion to a new limited-liability company to fund the purchase of residential mortgage-backed securities from AIG's U.S. securities lending collateral portfolio. AIG will make a $1 billion subordinated loan to the LLC and bear the risk for the first $1 billion of any losses, the Fed said.

The second lending facility lets the New York Fed lend as much as $30 billion for collateralized debt obligations of AIG.

``The loans will be secured by all of the assets of the LLC and will be repaid from the cash flows produced by these assets as well as proceeds from any sales of these assets,'' the central bank said. ``The New York Fed and AIG will share any residual cash flows after the loans are repaid.''

Treasury's TARP

The capital injection into AIG will come from a $100 billion pool authorized by Congress for Treasury to use at its discretion, rather than the $250 billion allocated to purchase stakes in the country's banks, a Treasury official said. The government will get a 10 percent dividend for its preferred shares in the insurer, the Treasury official said.

A Fed official said on a conference call with reporters that they have been negotiating with AIG since September and that central bankers hired outside consultants to value the assets to be pledged to the facilities.

The modeling assumes that the Fed could recover value over a six-year lending period, a Fed official said, adding that restructuring should reduce their overall risk to the company.

The Fed will loan to the two facilities at the one-month London interbank offered rate plus 1 percentage point, providing the firm with a low-cost way to fund the assets, the official said, speaking on condition of anonymity. The securities that will be moved to the Fed facility were marked to market on Oct. 31, the official said.

The Treasury is working on lobbying restrictions for AIG, the Fed official said.

The Treasury's purchase of $40 billion in newly issued preferred shares from the New York-based insurer uses the agency's $700 billion Troubled Asset Relief Program, a financial rescue package that Congress passed in early October.

``This restructuring will improve the ability of the firm to execute its asset disposition plan in an orderly manner,'' the Treasury said in a statement, calling the insurer a ``systemically important company.''

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; John Brinsley in Washington at jbrinsley@bloomberg.net

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Brown Seeks G-20 `Consensus' on Taxes, Spending

By Mark Deen

Nov. 10 (Bloomberg) -- Prime Minister Gordon Brown called on governments around the world to coordinate tax and spending policies to shore up a slowing world economy, his strongest signal yet that he will cut tax in the U.K.

``What I am determined to do is to get all countries around the world trying to get their economies moving again, and one way you can do that is by putting more money into the economy by tax cuts or by public spending rises,'' Brown said on GMTV in London today.

Brown's comments set out the U.K.'s position before a meeting of world leaders in Washington on Nov. 15. A coordinated program to trim taxes and boost spending would give Brown political cover to allow Britain's budget deficit to swell when the Treasury announces its plans in coming weeks.

Britain's economy shrank in the third quarter, prompting a political consensus in favor of tax cuts. The Conservative opposition, which last month chided Brown's plan to borrow and spend more as the economy slumps, today said it will accept tax reductions that are funded by cuts in future spending.

``Spending our way out of recession will not work,'' George Osborne, the Conservative lawmaker in charge of tax policy, wrote in the Financial Times. ``Targeted tax cuts would help, but they must be properly funded. Any tax cuts must not permanently increase the structural deficit and must be combined with a strategy to reduce it over time.''

Worst Hit

Next year, Britain's economy may shrink 1.3 percent, the most in the Group of Seven nations, according to the International Monetary Fund. The Washington-based lender expects a contraction of 0.7 percent in the U.S., 0.5 percent in the nations sharing the euro and 0.2 percent in Japan.

There are already signs that other countries are ready to heed Brown's call. China, the world's fourth-largest economy, announced a 4 trillion yuan ($586 billion) stimulus plan yesterday, saying the funds will be used by the end of 2010 as part of a ``proactive fiscal policy.''

A similar message came yesterday from Sao Paulo, where finance ministers from the Group of 20 nations met over the weekend to lay the groundwork for the heads-of-state summit in Washington. Ministers agreed to act ``urgently'' to bolster growth as the world's leading industrialized economies battle recession, according to the G-20 statement.

Efforts Overseas

Japanese lawmakers approved a 1.8 trillion-yen supplementary budget as part of a stimulus package on Oct. 16, and Prime Minister Taro Aso on Oct. 30 promised to pump an additional 5 trillion yen into the economy. German Chancellor Angela Merkel on Nov. 5 announced a 50 billion-euro ($65 billion) stimulus package to spur economic growth.

In the U.S., Democrat lawmakers are considering passing two stimulus measures, one during a so-called lame duck session this month and another after President-elect Barack Obama and the larger Democratic majority in Congress take office in January.

``Further fiscal stimulus designed to bridge the gap until monetary policy becomes fully effective can be expected'' around the world, said Holger Schmieding, chief European economist at Bank of America Corp. in London.

In Britain, Brown and Chancellor of the Exchequer Alistair Darling will set out tax and spending plans this month or next. Brown has said he's ready to increase borrowing to ward off recession and that he will bring forward some spending.

Brown's View

``We must use the power of multilateralism to establish a global consensus on a new, decisive and systemic approach to strengthening the global economy,'' Brown will tell bankers in London today, according to a text released by his office. After committing more than $3 trillion to bail out the banking system, policy makers must now turn to ``international co-ordination of fiscal and monetary policy,'' he will say.

Spending is already increasing even though the inflow of tax receipts slows. Since March, Brown's government delivered tax cuts and spending increases worth 4.8 billion pounds ($7.6 billion) to give relief to low-income earners, delay an increase in fuel duties and to help homeowners with mortgages and stamp- duty taxes on property purchases.

Britain had its biggest budget deficit since 1946 in the six months through September. Economists say the shortfall may reach 7 percent of gross domestic product over the next two years, more than double the 3 percent limit set down by the European Union.

Support for Cuts

While central banks from Washington to London have reduced interest rates at unprecedented speed, easier fiscal policy may work more quickly in cushioning the world economy amid the current crisis.

Monetary policy, already near its loosest in history, acts with a lag and is less effective when financial systems are frozen, economists say. Central bankers including Bank of Italy Governor Mario Draghi and Federal Reserve Chairman Ben S. Bernanke are among those recommending action from governments.

``A package of emergency tax cuts'' would be the most effective way of ``increasing demand in the economy,'' Frank Field, a lawmaker with the ruling Labour Party, wrote in the Sunday Telegraph newspaper yesterday. ``Steering these cuts towards the poorest'' would ensure that most of the cash would be spent immediately, he said.

Field is a former welfare minister who earlier this year forced Brown to water down plans to scrap the U.K.'s lowest band of income tax. In his newspaper article, he said that further tax cuts would also offer Brown a boost in popularity, perhaps enough to call and win an election in the first half of 2009.

An ICM Ltd. poll for the Sunday Telegraph showed Labour still trails the Conservatives, with 30 percent support compared with 43 percent for the Conservatives. At the same time, 40 percent of the 1,005 voters interviewed said that Brown is best placed to handle an economic crisis, compared with 38 percent for Conservative leader David Cameron. ICM conducted the poll Nov. 5 and 6. No margin of error was given.

To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net.

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Dubai Mercantile to Trade Oman Crude Futures on CME Globex

By Shaji Mathew

Nov. 10 (Bloomberg) -- Dubai Mercantile Exchange, the Gulf sheikdom's venture with Nymex Holdings Inc., will start trading two Oman oil futures contracts on CME Group Inc.'s Globex electronic platform in the first quarter of 2009.

The Oman Crude Oil Futures Contract will join West Texas Intermediate and Brent crude contracts on the Globex platform at CME, the world's largest futures market, the companies said today in a joint statement. Dubai Mercantile will also trade its Oman Crude Oil Financial Contract on Globex.

Dubai Mercantile is a venture of Nymex, Dubai Holding LLC and the Oman Investment Fund, which have stakes of 25 percent each. The rest is held by companies including JPMorgan Chase & Co., Goldman Sachs Group Inc, Morgan Stanley, Vitol Group and Royal Dutch Shell Plc.

The bourse has traded future contracts based on sour crude oil from Oman since June 2007. It offered financial contracts this year for Brent and Oman crude.

To contact the reporter on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net

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Petrochemical Prices Decline 50% on a Drop in Demand

By Abdulla Fardan and Glen Carey

Nov. 10 (Bloomberg) -- Petrochemical prices have tumbled 50 percent since October as the global credit crisis weakens demand, according to the head of Saudi Basic Industries Corp., the world's biggest chemicals maker by market value.

``The price retreat started precipitously from the end of September and early October,'' Chief Executive Officer Mohamed al-Mady said today in an interview with Dubai-based al-Arabiya television. ``We were expecting the price to fall next year.''

Tightening credit and slowing economies threaten Sabic's payback on last year's $11.6 billion acquisition of General Electric Co.'s plastics unit. The purchase, the largest by a Gulf-based company, gave Sabic a network of factories making resins and thermoplastic sheets used in cars, roofs and lighting, just as the auto and construction industries cut output.

Sabic's fourth-quarter net income will be affected by falling prices for petrochemical products, al-Mady said, adding that the company may benefit from declining production expenses as feedstock costs retreat.

``A combination of lower prices for petrochemical prices and demand are likely to translate into weaker earnings, even if falling oil prices reduce the cost base,'' Laurent Gally, an analyst at Dubai-based Shuaa Capital PSC, said today by telephone. ``Not only is U.S. and European demand slowing, but so is Chinese demand.''

Sabic has reduced its polyethylene price to 3,700 riyals ($986.50) a ton from 7,000 riyals, the Jeddah-based Okaz newspaper reported on Nov. 5. The company is also expected to cut polypropylene prices 35 percent to 3,788 riyals a ton this month from 5,813 riyals in October, al-Riyadh reported Oct. 27.

Sabic slid 2.6 percent to 66.25 riyals in Riyadh trading today, valuing the company at 198.8 billion riyals. The stock has lost 60 percent this year.

To contact the reporters on this story: Glen Carey in Dubai at gcarey8@bloomberg.net; Abdulla Fardan in Bahrain at afardan@bloomberg.net

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Natural Gas Gains on Colder Weather, Surge in Crude Oil Prices

By Mario Parker

Nov. 10 (Bloomberg) -- Natural gas rose more than 6 percent, the biggest gain since September, on speculation colder weather will stoke demand for the heating fuel. Prices also rose along with crude oil after China moved to spur economic growth.

Lower temperatures are probable across much of the U.S. beginning Nov. 17, the Climate Prediction Center in Camp Springs, Maryland, said in its 14-day outlook. Oil advanced after China unveiled a $586 billion stimulus package.

``The realization of winter has finally woken up the trolls,'' said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. ``With the cold weather out there, natural gas is going up because it's the path of least resistance.''

Natural gas for December delivery climbed 45.9 cents, or 6.8 percent, to $7.216 per million British thermal units at 10:34 a.m. on the New York Mercantile Exchange. The gain was the biggest since Sept. 17, when gas advanced 8.7 percent.

Crude oil for December delivery rose $2.07, or 3.4 percent, to $63.11 a barrel.

China, the world's second-largest oil consumer, said yesterday it will spend the money through 2010 on housing and infrastructure, boosting demand for iron ore, crude oil and copper.

``The Chinese stimulus package has renewed hopes of strong energy demand,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago.

About 42 percent of U.S. natural gas demand comes from industrial and commercial users. The winter heating season, in which demand outstrips supply, begins in November. About 52 percent of U.S. households relay on the fuel for heat.

Supply Level

Natural gas stockpiles for the week ended Oct. 31 totaled 3.405 trillion cubic feet, down 3.7 percent from year earlier, the Energy Department said Nov. 6.

``The first real blast of cold weather'' has increased buying, said Carl Neill, an energy analyst at Risk Management Inc. in Chicago. ``It's long overdue. Seasonally, the market should be higher.''

The stimulus package along with higher prices fore stocks and commodities signal that ``you're hopefully getting some confidence back in the markets,'' Neill said.

To contact the reporters on this story: Mario Parker in Chicago at mparker22@bloomberg.net;

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Anadarko, Dana May Be Targets on `Cheaper' Reserves

By Anthony DiPaola and Fred Pals

Nov. 10 (Bloomberg) -- Anadarko Petroleum Corp. and Dana Petroleum Plc, oil drillers that lost more than 25 percent in market value this year, may become acquisition targets as they show it's cheaper to buy oil and gas reserves than to go and find them.

Anadarko's proven deposits had a stock market value of $6.99 a barrel Nov. 7 after its shares tumbled 45 percent this year in New York trading, while Dana's were at $7.80 a barrel. That's more than 39 percent below the $12.87 a barrel Royal Dutch Shell Plc spent last year to find and develop its own fields, data compiled by Bloomberg show, and may attract offers.

Exxon Mobil Corp., Shell, BP Plc, Chevron Corp. and Total SA, the five largest non-state oil companies, held $82 billion of cash at the end of September, enough between them to acquire seven of the 11 members of the Standard & Poor's 500 Oil & Gas Exploration & Production Index. Smaller companies such as Talisman Energy Inc. may also have funds for acquisitions.

``It's cheaper to buy a barrel on Wall Street instead of a barrel that companies need to find and develop,'' said Andrew Bartlett, global head of oil and gas corporate advisory at Standard Chartered Plc in London. ``Companies with cash are looking for infill-opportunities with a large resource base.''

The last time oil plunged, when crude fell to $10 a barrel in 1998, led to a transformation of the industry as BP bought Amoco Corp., Exxon acquired Mobil Corp. and Total Fina SA took over Elf Aquitaine SA. Deals now are for niche targets.

Acquisition Trail

``It may prove better value to buy than to build over the course of the next 12 to 24 months,'' Talisman Chief Executive Officer John Manzoni said Nov. 4. BP CEO Tony Hayward said Oct. 28 the credit crisis may create opportunities which BP would look at ``very closely.''

As oil stocks trade close to their lowest in four years, smaller producers are more vulnerable to takeovers. The 224- member Bloomberg World Oil and Gas index tumbled more than 40 percent this year as crude declined 59 percent from its July record of $147.27 a barrel on forecasts a global recession will cause oil demand to slump to its slowest growth rate since 1993.

International oil companies are seeking reserves as decades-old fields from the North Sea to Alaska dry up and as producing nations keep their best resources and more profits for themselves.

Analysts say targets include The Woodlands, Texas-based Anadarko, the second-largest independent U.S. oil and natural- gas producer. It has been among 25 companies with the lowest ratio of reserves to market value on the World Oil & Gas index.

Stock Decline

Anadarko had 81 percent of revenue last year in the U.S. and in September announced a deep-sea discovery off Brazil. The stock market valuation of its deposits compares with $7.68 a barrel for ConocoPhillips, $14.25 for Chevron and $18.29 for Exxon, according to data as of Nov. 7 compiled by Bloomberg.

``Anadarko has gotten killed,'' Gene Pisasale, who helps oversee about $13 billion at PNC Capital Advisors in Baltimore, said of the company's stock price, which this year has fallen more than Apache Corp., Devon Energy Corp. and EOG Resources Inc. ``All four of those are large enough companies that they'd be attractive,'' Pisasale said.

Anadarko rose as much as 8.4 percent to $39.38 today and traded 6.7 percent higher at $38.77 at 10:29 a.m. New York time. The company's ``capital structure and liquidity position remain very strong,'' said John Christiansen, an Anadarko spokesman. Its market value is $17.8 billion, compared with between $21 billion and $35 billion for Apache, Devon and EOG. ``We don't comment on rumors or speculation,'' said Chip Minty, a Devon Energy spokesman.

Credit Markets

Other U.S. explorers whose asset valuations have plunged include Exco Resources Inc., valued at $2.68 a barrel, and Pioneer Natural Resources Co., at $2.99 a barrel, both as of Nov. 7. Neither could be reached for comment.

``The liquidity crisis is hurting small to midsized companies with difficulty funding growth and operations,'' said Alessandra Pasini, a Milan-based banker at Citigroup Inc.

In Europe companies priced below $9 per barrel of oil equivalent reserves include Aberdeen, Scotland-based Dana Petroleum, DNO International ASA of Oslo and JKX Oil & Gas Plc.

``That's below the finding and producing cost for the majors,'' said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh who recommends buying Shell, Total and Eni SpA shares. ``Market conditions are creating unique opportunities to make targeted acquisitions.''

Algerian Gas

Dana Petroleum produces oil in the North Sea and explores in Africa. ``Dana benefits from an attractive combination of asset backing, exposure to exploration upside and takeover risk,'' Jessica Saadat, oil analyst at Cazenove, wrote in a report Oct. 21.

Dana Petroleum rose to its highest in nearly a week today, adding as much as 7.4 percent, or 71 pence, to 1,032 pence. It traded up 5.5 percent at 1,014 pence as of 3:29 p.m. London time.

Dana has fallen 27 percent this year, valuing it at 881 million pounds ($1.38 billion). Angela Bisset, who handles investor relations, said officials were unavailable for comment.

DNO, whose barrels were valued at $3.26 on Nov. 7, according to Bloomberg data, may be attractive for assets it's developing in the Kurdish area of northern Iraq, ING's Kenney said. JKX operates in Ukraine.

``There are some great opportunities out there,'' said Ian Taylor, CEO of Vitol Group, which is seeking to buy out Awarak Energy Ltd., an explorer in Russia and Kazakhstan of which it already owns 41 percent.

Energy Assets

``When companies are trading so far below their net asset value, then the obvious thing to do is to, quite frankly, buy them.,'' Taylor said at a London conference Oct. 28.

The world's five biggest non-state oil companies have spent more than $12.5 billion on acquisitions in 2008, with Shell agreeing in July to buy Canada's Duvernay Oil Corp. for C$5.9 billion ($5.0 billion), including debt.

Eni agreed Sept. 8 to pay C$923 million for First Calgary Petroleums Ltd. to gain Algerian gas. Oil & Natural Gas Corp. of India said Aug. 26 it would buy Imperial Energy Plc for 1.4 billion pounds to tap Siberian deposits. China Petrochemical Corp., or Sinopec, offered $1.8 billion Sept. 25 for Canada's Tanganyika Oil Co. to gain Syrian resources.

To contact the reporters on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.netFred Pals in Amsterdam on fpals@bloomberg.net

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Nordic Currencies: Norway's Krone Rises as Inflation Quickens

By Bo Nielsen

Nov. 10 (Bloomberg) -- Norway's krone snapped a four-day drop against the euro after a government report showed the inflation rate unexpectedly rose to the highest level since at least 1995, reducing the need for the central bank to lower interest rates. The Swedish krona climbed as stocks rallied.

The Norwegian krone also strengthened versus the dollar as the price of oil, the country's biggest export earner, advanced for a second day amid speculation China's $586 billion economic- stimulus package and measures by the Group of 20 nations will help spur global growth.

``The krone may get a boost from the inflation data because rates could remain elevated, but the effect won't last long,'' said Geoffrey Yu, a currency strategist in London at UBS AG. ``Central banks with strong easing profiles are in favor at the moment and a jump in inflation may keep the Norges Bank from cutting as fast as it could.''

The krone advanced 1 percent to 8.6998 per euro by 4:48 p.m. in Oslo. The currency climbed 1.8 percent to 6.7860 per dollar. Crude rose as much as 7.4 percent to $65.56 a barrel today.

Norwegian consumer prices surged 5.5 percent last month, the most since November 1988, from 5.3 percent in September, the Oslo-based statistic office said today. The median estimate of 13 economists in a Bloomberg survey was a drop to 5.2 percent.

Underlying inflation, excluding energy and taxes, quickened to 3.3 percent, the highest since the office began compiling data in 1995, it said. The central bank's target is 2.5 percent.

Rates Outlook

Norway's krone fell in 10 of the past 11 weeks against the euro, helping fuel inflation, as policy makers reduced rates to 4.75 percent last month. Norges Bank will lower the main rate to 3.75 percent by mid-2009, while Swedish and European Central Bank policy makers will cut their benchmarks to 2 percent, Yu said.

The Swedish krona rose for a third day against the euro, gaining 0.9 percent to 9.9754. It climbed 1.8 percent to 7.7738 per dollar.

The krona was boosted as the Dow Jones Stoxx 600 Index of shares added 1.8 percent, for a second daily gain, and the OMX 30 stock index in Stockholm jumped 2.6 percent. The Standard & Poor's 500 Index rose 1.6 percent.

``Norway's and Sweden's currencies will be helped if risk appetite continues to strengthen,'' David Simmonds, London-based head of currency research at Royal Bank of Scotland Group Plc, wrote in a client note today.

Gains for the krona may be limited before a government report tomorrow that will probably show underlying inflation in Sweden slowed to 2.9 percent, from 3.4 percent in September, according to a Bloomberg survey of 9 economists.

Government bonds fell, with the yield on Norway's 6 percent government bond maturing May 2011 rising 6 basis points to 3.63 percent, according to Danske Bank A/S prices. The yield on Sweden's 5.25 percent note due March 2011 increased 1 basis point to 2.62 percent. Yields move inversely to bond prices.

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

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Ruble Devaluation Looms on Oil; Troika Sees 30% Drop

By Emma O'Brien and Ye Xie

Nov. 10 (Bloomberg) -- Russia's currency reserves, the third-biggest in the world, are no match for tumbling oil prices and an exodus of capital that may force the central bank to accept a devalued ruble.

Just 10 years ago, Russia let the ruble fall as much as 71 percent as the government defaulted on $40 billion of debt and world stock and bond markets collapsed. Now, the combination of a 60 percent drop in oil prices from their peak in July, slowing economic growth and increasing investor concern about emerging markets are draining Russia's foreign reserves, which fell 19 percent to $484.6 billion in the 12 weeks through Oct. 31.

Russia, which uses reserves to curb swings in the ruble that hurt the competitiveness of exports, may find the resistance futile after the currency fell 13 percent against the dollar since Aug. 1. The central bank sold a record $40 billion in October, according to Moscow-based Trust Investment Bank. Troika Dialog, the country's oldest investment bank, said the currency may slump as much as 30 percent in the event of a devaluation.

``When oil falls, capital runs out of Russia and the ruble weakens, it's not justified to hold your positions,'' said Anas El Maizi, who oversees $342 billion in fixed-income assets in Paris at Axa Investment Managers, a unit of Europe's second- largest insurer. ``If oil stabilizes at this level, Russia will have some trouble.'' Axa cut its Russian bond holdings in August.

Long-Term Capital

Bank Rossii, the central bank, may ``gradually'' widen its ruble trading band if the current account falls into a deficit next year, Arkady Dvorkovich, an economic adviser to President Dmitry Medvedev, said Nov. 7. Goldman Sachs Group Inc. said the comment marked a ``departure from the previous party line.''

The ruble strengthened 0.6 percent to 26.8770 per dollar as of 4:49 p.m. in Moscow, from 27.0304 on Nov. 7. Against the euro, it weakened 1 percent to 34.7229, from 34.3773.

When Russia defaulted in August 1998, it caused an investor stampede to the safest assets. Yields on 10-year U.S. Treasury notes dropped more than half a percentage point to 4.98 percent that month and the Standard & Poor's 500 Index slumped 15 percent. Hedge fund Long-Term Capital Management LP collapsed after losing about $4 billion, prompting a Federal Reserve- backed bailout by Wall Street. Gross domestic product in Russia shrank 6.5 percent and inflation accelerated to 84 percent.

100 Billionaires

Since then, rising prices of oil, gas and metals such as nickel and aluminum provided Russia with 10 years of economic growth under former President Vladimir Putin and his hand-picked successor, Medvedev. Foreign reserves grew to $598.1 billion in August, the world's biggest behind Japan's and China's, from $18.4 billion just before the 1998 default.

With average economic growth of about 7 percent a year since 1999, rising commodity and stock prices created more than 100 Russian billionaires, including aluminum magnate Oleg Deripaska and soccer club owner Roman Abramovich. In December last year, Time magazine named Putin ``Person of the Year'' for bringing his country ``roaring back to the table of world power.''

Russia's current account, the widest measure of flows in goods and services, is now headed toward a deficit. Investors pulled about $147 billion out of the country in the past three months, according to BNP Paribas SA, sending the dollar- denominated RTS Index of stocks down 52 percent.

Growth Slows

The benchmark 30-year government bond slumped in 2008, pushing the yield to an almost seven-year high of 12.55 percent on Oct. 27. So far this year, the RTS Index lost 64 percent, headed for the worst performance since 1998.

``With the oil price falling we were concerned that the trajectory of Russia's reserves had changed from building them up to selling them,'' said Kieran Curtis, a fund manager in London at Aviva Investors Ltd., which cut Russian holdings in August from the $787 million of emerging-market assets it has under management.

Russia is poised to grow 7.7 percent this year, the Economy Ministry said Oct. 29, down from 8.1 percent in 2007. Gross domestic product will expand 5.4 percent in 2009, according to a Bloomberg survey of 14 economists.

The combined wealth of Forbes magazine's 25 richest Russians fell more than 50 percent in four months, based on the equity value of stocks and analysts' estimates.

`Slowing Economy'

Bank Rossii, headed by Chairman Sergey Ignatiev, began managing the ruble's exchange rate in February 2005 against a currency basket comprised of about 55 percent dollars and 45 percent euros. Policy makers let it trade within a fixed range in mid-May. Since then, it has dropped 2.2 percent against the basket to 30.4084. Though the central bank doesn't reveal the limits of the band, BNP Paribas considers 30.40 to be its weaker end.

``You can't stimulate a slowing economy by keeping the currency fixed,'' said Lars Christensen, head of emerging- markets currency strategy in Copenhagen at Danske Bank A/S. ``They will have to change their attitude to using reserves for the sake of the economy.''

Dvorkovich increased speculation that Russia will reduce its interference in foreign exchange last week when he told reporters in Moscow a ``prolonged'' period of deficit in the current account may prompt policy makers to ``gradually'' widen the trading band.

`Gradual Depreciation'

The current account, now at a surplus of $91.2 billion, may swing into a deficit as early as next year, though there will be no ``sharp devaluation'' in the ruble in 2008 or in 2009, Dvorkovich said.

``These remarks mark a departure from the previous party line among top officials that there was no reason for the ruble to depreciate,'' Rory MacFarquhar, a senior economist at Goldman Sachs in New York, wrote in a note Nov. 7. ``They confirm our view that there is a strong political preference for gradual depreciation over a steep devaluation, even though the central bank would prefer the latter approach.''

Urals crude, Russia's export oil blend, rose to an all-time high of $142.94 a barrel in July. For the past three weeks, it has averaged $61.15, below the $70 mean price that Finance Minister Alexei Kudrin said in September the government will need to balance its budget next year. It traded at $57.08 today.

`Overly Bearish'

``Without an increase in oil prices or an improvement in the capital account of the balance of payments, the central bank will eventually have to devalue,'' Evgeny Gavrilenkov, Troika Dialog's Moscow-based chief economist, wrote Nov. 7. An average price for Urals crude of $60 a barrel ``would imply a devaluation of the ruble against the bi-currency basket by 25 to 30 percent,'' he said.

Russia's reserves are 25 times bigger today than what it had on the eve of the default, central bank data show. The world's biggest energy exporter, Russia still earns $700 million a day from oil, compared with $100 million 10 years ago, according to Chris Weafer, chief strategist in Moscow at UralSib Financial Corp., Russia's biggest privately owned bank.

``The market is getting overly bearish,'' said Michael Ganske, head of emerging-markets research in London at Commerzbank AG. ``This is a temporary phenomenon and the ruble will stay stable until investors realize the value.''

Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows between their economies, Kudrin said in a Nov. 8 interview in Sao Paulo. Russia, the world's second-biggest oil producer, will also pursue an ``independent'' strategy on production, ignoring the Organization of Petroleum Exporting Countries' moves to cut output, he said.

Global Crisis

While Russia's plight 10 years ago reflected an economy emerging from communist control, the turmoil today is part of a crisis hurting nations worldwide as a shortage of credit prompts investors to sell higher-yielding assets in favor of the safest securities.

OAO Gazprom, Russia's natural-gas exporter, said Oct. 22 it may have trouble getting new loans and refinancing debts even after posting record earnings. OAO GMK Norilsk Nickel, the world's largest producer of the metal, posted a 33 percent decline in first-half earnings on Oct. 3 as demand slumped.

Russians are taking note. Svetlana Malyarevich, a Moscow- based accountant, says she considered changing some of her savings into foreign currency after people in her office said the ruble might slide to 40 per dollar.

``People who have ruble accounts understand that their savings decline if the dollar rises,'' the 36-year-old said. ``The security of my money is directly dependent on the economic situation in Russia.''

To contact the reporters on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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Yen Falls on Speculation China's Stimulus to Boost Carry Trades

By Daniel Kruger and Agnes Lovasz

Nov. 10 (Bloomberg) -- The yen fell the most against the euro in almost a week on speculation China's $586 billion stimulus package will give investors more confidence to buy higher-yielding assets using money borrowed in Japan.

Japan's currency also dropped against the dollar, the Australian dollar and South Africa's rand as the carry trade got a boost from China's announcement yesterday. The dollar weakened against the euro and India's rupee after the Group of 20 nations said they're ready to act ``urgently'' to support global growth, reducing demand for the safety of U.S. assets.

``Any time you have yen carry being put back on, the high- yielders benefit,'' said Andrew Busch, a currency strategist at BMO Capital Markets in Chicago. ``It's part and parcel of the risk being put back on.''

The yen fell 1.2 percent to 126.46 per euro at 10:03 a.m. in New York, from 124.90 on Nov. 7. Against the dollar, it dropped 0.5 percent to 98.74 from 98.24. The euro rose 0.7 percent to $1.2807 from $1.2718.

China announced its stimulus plan, equivalent to almost a fifth of last year's gross domestic product, as major export markets slumped. Japan will contract 0.2 percent next year, the U.S. by 0.7 percent and the euro area 0.5 percent, while China will expand 8.5 percent, said the International Monetary Fund last week, predicting the first simultaneous recession in the U.S., Japan and the euro countries since World War II.

Yen Versus Rand

The yen fell 3 percent to 9.9518 against the rand, 2.8 percent to 68.09 versus the Aussie and 2 percent to 59.26 against New Zealand's dollar on bets investors will resume carry trades, in which they get funds in countries with low borrowing costs and buy higher-yielding assets elsewhere. Japan's target rate of 0.3 percent compares with 12 percent in South Africa, 5.25 percent in Australia and 6.5 percent in New Zealand.

Japan's currency also weakened as volatility implied by one-month dollar-yen options fell to 22.04 percent, the lowest since Oct. 22, indicating reduced risk of exchange-rate fluctuations that can make the carry trade unprofitable.

Global stocks rose as appetite for higher-yielding assets increased. The Standard & Poor's 500 Index climbed 1.9 percent, while the Dow Jones Stoxx 600 Index advanced 1.6 percent.

China's economic stimulus package is giving risk a boost, though ``there's more that needs to be done,'' said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. ``We're seeing a nice bounce, but we don't expect it to last.''

G-20 Meeting

The G-20 industrial and emerging nations, meeting yesterday in Sao Paulo, called on countries to cut interest rates and raise spending to combat the threat of a global recession.

Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview on Nov. 8 in Sao Paulo.

The rupee climbed 0.6 percent to 47.3750 per dollar, the real rose 1.6 percent to 2.1310, the ruble gained 0.2 percent to 26.9846 and China's yuan was little changed at 6.8267.

Russia may be forced to accept a devalued ruble as tumbling oil prices and an exodus of capital erode the country's foreign- exchange reserves, the world's third-largest. The currency may slump as much as 30 percent in the event of devaluation, Troika Dialog, Russia's oldest investment bank, said last week. Reserves fell 19 percent to $484.6 billion in the 12 weeks through Oct. 31.

Gains in the euro may be curbed after European Central Bank President Jean-Claude Trichet told Brazil's TV Globo he can't rule out a further rate reduction, according to traders.

`More' ECB Cuts

Traders increased bets the ECB will reduce its 3.25 percent rate in the first quarter of next year. The implied yield on Euribor interest-rate futures contracts expiring in March fell to 2.935 percent today from 3.005 percent on Nov. 7.

``There's talk of more ECB rate cuts, given the pessimistic outlook on Europe's economies,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``The medium- to long-term downtrend for the euro is likely to persist.''

The dollar may rise this week to so-called resistance at the Nov. 4 high of 100.55 yen, according to Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo, who uses charts to predict currency movements. Resistance is where sell orders may be clustered. The greenback is poised to gain after breaking above its 20-day moving average, Suzuki said.

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net

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Cotton Rises as China Spending Plan May Boost Commodity Demand

By Yi Tian

Nov. 10 (Bloomberg) -- Cotton rose for the first time in four sessions on speculation that China's $586 billion stimulus package will revive growth in the world's fourth-largest economy, boosting demand for commodities.

China said it will spend 4 trillion yuan, or almost a fifth of last year's gross domestic product, by 2010 in response to a slump in its major export markets as the rest of the world slows. Equity markets rose worldwide and the Reuters/Jefferies CRB Index of 19 raw materials advanced as much as 3 percent, led by copper and energy prices.

``The market is probably now trading the Chinese stimulus package,'' said Mike Stevens, an analyst with Swiss Financial Services in Mandeville, Louisiana.

Cotton futures for December delivery gained 0.82 cent, or 2 percent, to 42.89 cents a pound at 9:39 a.m. on ICE Futures U.S. in New York. Prices plunged 9.2 percent in the previous three sessions.

The fiber tumbled 23 percent in October, the steepest monthly drop since at least April 1986, and before today was down 38 percent for the year as a slowing global economy curbs demand for textiles.

China is the world's biggest cotton user and textile exporter. U.S. is the largest shipper of the fiber.

To contact the reporter on this story: Yi



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Copper Surge 10% as China Stimulus Plan Boosts Demand Outlook

By Millie Munshi

Nov. 10 (Bloomberg) -- Copper jumped more than 11 percent, leading a rally in commodity prices, after China unveiled a $586 billion plan to sustain its economy.

China, the biggest contributor to global growth, pledged ``fast and heavy-handed investment'' in housing and infrastructure, easing concern that the world economy would sink into recession. Booming demand in China, the world's biggest metals buyer, fueled a surge in copper prices for six straight years through 2007.

``The stimulus is really going to help the big-picture demand outlook,'' said Michael K. Smith, president of T&K Futures & Options in Port St. Lucie, Florida. ``The market is looking for anything that is going to help global growth.''

Copper futures for December delivery rose 14.3 cents, or 8.4 percent, to $1.84 a pound at 9:22 a.m. on the Comex division of the New York Mercantile Exchange, after earlier jumping as high as $1.89.

The Chinese plan will be supportive for base metals more than other commodities because spending on roads, railways and other infrastructure will boost demand, Smith said. Copper is used to make pipe and wire.

The plan ``may improve the ability of the global economy to start to perform and pick up a little bit more momentum,'' Sean Mulhearn, the global head of commodities and sales at Standard Chartered Bank in Singapore, said in an interview on Bloomberg Television today. ``This is very supportive for commodity markets.''

The Standard & Poor's GSCI Index of 24 raw materials rose as much as 6.1 percent today. Gains were led by energy and metals prices.

On the London Metal Exchange, copper for delivery in three months advanced $300, or 8 percent, to $4,055 a metric ton ($1.84 a pound).

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

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Oil, Metals Rise as China Announces Economic Stimulus Package

By Mark Shenk

Nov. 10 (Bloomberg) -- Crude oil climbed more than $3 a barrel and metals rose after China announced a 4 trillion-yuan ($586 billion) stimulus package that may spur economic growth and consumption of raw materials.

China, the world's second-biggest oil consumer, said yesterday it will spend the money through 2010 on housing and infrastructure. China's plan sent global stock markets higher. Oil also gained after Saudi Aramco told Asian refiners it would cut December supplies.

``It looks like commodities, stock markets, everything in fact, is being supported by the Chinese move,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York.

Crude oil for December delivery rose $3.02, or 5 percent, to $64.06 a barrel at 9:41 a.m. on the New York Mercantile Exchange. Prices, which have tumbled 57 percent since reaching a record $147.27 on July 11, are down 32 percent from a year ago.

Copper futures for December delivery rose 13.3 cents, or 7.8 percent, to $1.83 a pound on the Comex division of Nymex. Gold futures for December delivery rose $25.80, or 3.5 percent, to $760 an ounce on the Comex division of Nymex.

Oil prices fell 10 percent last week as equities dropped, U.S. fuel stockpiles rose more than expected and the nation's unemployment rate climbed to a 14-year high.

The International Monetary Fund is forecasting that the economies of the U.S., Japan, Europe and the U.K. will all contract next year in their first simultaneous recession since World War II.

Chinese Growth

China's economy grew 9 percent in the third quarter, the slowest pace in five years, and export orders dropped to the lowest level since 2005. China will spend the equivalent of almost a fifth of its gross domestic product last year on infrastructure and encourage investments in machinery.

``Fears that Chinese demand would drop have been one of the big concerns in the past few weeks,'' said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. ``This move helps alleviate some of those fears.''

Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows among their economies, Russian Finance Minister Alexei Kudrin said in an interview yesterday.

Saudi Aramco

Saudi Aramco, the world's biggest state oil company, will cut crude oil supplies in December to customers in Japan by about 5 percent to 6 percent below levels agreed to in annual contracts, a refinery official said.

The Dhahran, Saudi Arabia-based producer will reduce mostly supplies of its heavy crude oil, according to the official, who had received notices from the company and asked not to be identified because of confidentiality agreements.

``We grab onto every bit of information that helps us understand what the Saudis are up to because they tend to be secretive and are so important,'' Lynch said.

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, and other members agreed on Oct. 24 to lower output quotas by 1.5 million barrels a day, the first cut in two years, after global demand fell.

``The news that Saudi Arabia is cutting shipments to Asia gives more credibility to the promised OPEC cutback,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``This is a strong signal that substantial cuts are on the way.''

Brent crude oil for December settlement increased $3.28, or 5.7 percent, to $60.63 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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Europe Stocks Advance on China Stimulus; BHP, Arcelor, BP Climb

By Adam Haigh

Nov. 10 (Bloomberg) -- European stocks advanced for a second day after China unveiled a $586 billion plan to stimulate the economy and world leaders urged more cuts in interest rates.

BHP Billiton Ltd., ArcelorMittal and Rio Tinto Group jumped more than 7 percent and BP Plc increased 2.5 percent as copper and oil rallied. Deutsche Post AG added 6.5 percent after Europe's biggest mail carrier confirmed its full-year profit target.

China's plan ``is very encouraging,'' said Virginie Maisonneuve who oversees $19 billion as head of global equities at Schroder Investment Management in London. ``We need a speedy implementation. From a sentiment standpoint and in terms of planning ahead, this will create a positive shift.'' She spoke in a Bloomberg Television interview.

The Dow Jones Stoxx 600 Index rose 1.3 percent to 222.35 at 3:44 p.m. in London, trimming this year's drop to 39 percent. The International Monetary Fund predicts global growth will slow to 2.2 percent in 2009 from 3.7 percent this year, meaning a world recession under the fund's informal definition -- growth of 3 percent or less.

National benchmarks gained in all 18 western European markets except Austria and Spain. The U.K.'s FTSE 100 jumped 1.5 percent with Royal Dutch Shell Plc and Cable & Wireless Plc advancing. Germany's DAX added 2.5 percent, while France's CAC 40 increased 1.8 percent.

Infrastructure Spending

The government of China, the world's fourth-largest economy, announced infrastructure spending, tax deductions and farming subsidies. The central bank has already cut interest rates three times in two months, joining policy makers from Washington and Tokyo to Frankfurt and London in efforts to lower borrowing costs and inject cash to avoid recession.

The yen fell 1.2 percent to 126.46 per euro, and it declined to 98.74 from 98.24 against the dollar on speculation China's package will give investors confidence to buy higher- yielding assets using money borrowed in Japan.

Emerging-market stocks, bonds and currencies gained. The MSCI Emerging Markets Index added 4 percent, with Russia's Micex Index climbing 2.2 percent. The South African rand and Hungarian forint rose against the dollar, and the extra yield investors demand for developing nations' bonds fell against U.S. Treasuries.

``China is very stand alone in having the flexibility to do what it wants,'' said Gary Dugan, chief investment officer for Europe at Merrill Lynch Global Wealth Management in London, which manages $2 trillion. ``With the rest of the emerging market world we are somewhat more skeptical. They can't be as bold as China can.''

More Cuts

The Group of 20 nations said yesterday that it is prepared to act ``urgently'' to bolster growth and called on governments to cut interest rates and raise spending as the world's leading industrialized economies battle the economic slump.

The U.S. economy, the world's biggest, is forecast to expand 1.6 percent this year, down from 2 percent growth in 2007, according to economists' estimates compiled by Bloomberg News. China's will grow 9.9 percent in 2008, down from 11.9 percent, the data show. The IMF last week predicted the economies of the U.S., Japan and the euro zone will all shrink next year.

U.S. President-elect Barack Obama doesn't plan to name a Treasury secretary or fill other top positions on his economic team this week, people familiar with the matter said, as he tries to keep from being drawn into Bush administration decisions he may disagree with.

Worst Year

More than $28 trillion has been erased from the value of global equity markets as credit losses and writedowns totaled $690 billion in the worst financial crisis since the Great Depression. The Stoxx 600 is headed for its worst year on record.

``With China accounting for roughly 27 percent of global economic growth last year, this package should certainly help in averting a global recession,'' said Ben Potter, research analyst at IG Markets in Melbourne.

Money market rates in Europe fell today indicating measures taken by authorities across the globe are unlocking credit markets. The London interbank offered rate, or Libor, the rate banks charge each other for three-month loans in dollars, slid almost 6 basis points to 2.24 percent, according to British Bankers' Association. It was the 21st consecutive decline and the lowest level in four years.

BHP Billiton, the world's biggest mining company, rose 12 percent to 1,133 pence. Rio Tinto, the world's third-largest mining company, added 9.9 percent to 2,878 pence.

Copper jumped 7.9 percent on the London Metal Exchange. Gold rose 2.5 percent.

ArcelorMittal, the world's largest steelmaker, climbed 7.4 percent to 18.775 euros.

Oil Climbs

BP, Europe's second-largest energy producer, increased 2.5 percent to 528 pence. Shell, the region's biggest oil company, gained 1.8 percent to 21.17 euros.

Crude for December delivery rose as much as 7.4 percent to $65.56 a barrel in New York.

Deutsche Post rose 6.5 percent to 9.965 euros after saying it plans to widen workforce cuts by 9,500 jobs. Third-quarter net income more than doubled to 805 million euros ($1.04 billion) from 350 million euros.

Cable & Wireless, the U.K.'s second-biggest phone company, gained 5.1 percent to 141.5 pence. Earnings before interest, taxes, depreciation and amortization are now predicted to reach at least 780 million pounds ($1.2 billion) in the 12 months ending March 31, 2009. The previous forecast was for Ebitda of 702 million pounds to 725 million pounds.

Crucell NV rose 7.4 percent to 10.95 euros after its experimental AIDS vaccine kept six monkeys from getting an animal equivalent of the disease. Crucell is a biotechnology company that markets vaccines and antibodies to treat infectious diseases such as influenza, hepatitis A and B, and typhoid fever.

Santander SA fell 4.7 percent to 7.95 euros after saying it will raise 7.2 billion euros ($9.2 billion) by selling shares. Spain's biggest bank will sell stock at 4.5 euros each.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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