Daily Market Commentary - Fundamental Outlook

Daily Forex Fundamentals | Written by GCI Financial | Nov 11 08 13:48 GMT |

€ The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2675 level and was capped around the $1.2800 figure. Traders are deliberating the likelihood of additional monetary easing from both the European Central Bank and Federal Reserve before the end of the year and again in Q1 2009. ECB President Trichet and other ECB members have made it abundantly clear that they have not prejudged monetary policy but that it is possible rates could come down in December. At the Fed, policymakers continue to implement multiple liquidity provision facilities to support commercial banks, investment banks, primary dealers, and the commercial paper market. Data released in Germany today saw the November ZEW survey's economic sentiment indicator rise to -53 from -63 in October. In U.S. news, the regulator of Fannie Mae and Freddie Mac will today announce new initiatives to reduce home foreclosures. September trade data will be released on Thursday. Euro bids are cited around the US$ 1.2135 level. ¥/ CNY The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.50 level and was capped around the ¥98.30 level. Traders paid close attention to comments from Bank of Japan Deputy Governor Yamaguchi in Japan's parliament overnight. Many dealers are wondering if the BoJ will be easing monetary policy further, particularly if other central banks continue to reduce borrowing costs to contend with the ongoing credit crisis. Data released in Japan overnight saw the October service sector sentiment index print at 22.6 while October outstanding bank loans were up 2.2% y/y. Also, the October M3 money supply was up 0.6% y/y while the September current account surplus was off 48.8% y/y. Additionally, October corporate bankruptcies were up 13.4% y/y. The Nikkei 225 stock index lost 3.00% to close at ¥8,809.30. U.S. dollar offers are cited around the ¥104.15 level. The euro moved lower vis-à-vis the yen as the single currency tested offers around the ¥123.80 level and was capped around the ¥125.50 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥151.90 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥83.50 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8251 in the over-the-counter market, down from CNY 6.8266. The government yesterday announced a major US$ 586 billion economic stimulus package and People's Bank of China Governor Zhou reported the central bank's monetary policy is being shifted to “moderately easy” from “prudent and flexible.” Data released in China saw the October trade surplus reach a record US$ 35.24 billion while consumer price inflation receded to a seventeen-month low of +4.0% y/y in October as domestic demand lessened. ₤ The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5545 level and was capped around the $1.5700 figure. Many data were released in the U.K. today. First, BRC reported October retail sales were off 0.1% y/y, their first decline since August 2005. Second, the U.K.'s global goods trade deficit narrowed to ₤7.5 billion in September from a revised ₤8.0 billion in August. Third, U.K. home sales reached their lowest level in at least 30 years in October. Economists are concerned with these data because they portend a weak holiday shopping period for retailers and evidence the weak state of final private demand. U.K. Prime Minister Brown has suggested the government may reduce taxes to help stimulate the economy. Cable bids are cited around the US$ 1.5275 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8205 level and was supported around the ₤0.8110 level. GCI Financial http://www.gcitrading.com DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Nov 11 08 13:02 GMT |

The London session was very tame and saw the USD move slightly higher against most of the majors. In terms of economic data, the pleasant surprise was the better than expected German ZEW reading which came in at -53.5 in November after a -63.0 print the prior month. German wholesale prices came in much lower than expected at -1.5% for October after a -0.6% decline previously. While the ZEW improved, it remains well in the dumps and suggests economic activity in Germany is likely to remain quite tepid. The lower inflation readings meanwhile throw some cold water on the ECB's assessment that inflation remains a problem in the short term. Yesterday's US stock market weakness carried over into global marts as Asia and Europe shed a little more than -3%. EUR/USD slipped despite the better than expected economic data as this was outweighed by the shunning of risk trades. The pair slipped about -20 pips in London trading and was sitting near 1.2700/05 just ahead of the NY open. The 1.2700 mark still looks like a good trigger for downside here, but we likely need to see through 1.2650 for weakness to really accelerate. US stock futures suggest the market open will be pretty ugly this morning, on the heels of some pretty sharp declines in yesterday's session. Look for JPY crosses to remain heavy. USD/JPY should find support near 97.50 while the EUR/JPY trigger looks be near 123.80 next. The lack of economic data coupled with the US bond market close due to the Veteran's Day holiday should have everyone focused exclusively on stocks today. Expect equities to provide direction. Upcoming Economic Data Releases (NY Session) Prior Estimate 11/11/2008 15:00 GMT US IBD/TIPP Economic Optimism NOV 41.1 - - 11/11/2008 20:00 GMT NZ Reserve Bank Financial Stability Report 11-Nov Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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Sterling Remains Under Pressure

Daily Forex Fundamentals | Written by Investica | Nov 11 08 12:48 GMT |

Underlying Sterling confidence will remain weak in the short term as major economic stresses continue. The global downturn should still provide some protection in relative terms. After testing record lows beyond 0.82 against the Euro, the UK currency found some support on Monday, but was still generally on the defensive and it also failed to hold above 1.58 against the dollar with a slide to lows below 1.56. The latest BRC retail sales data was again weak with a 2.2% decline in like-for-like sales in the year to October which maintain fears over consumer spending levels. The Bank of England inflation report will, therefore, be watched closely on Wednesday for further details on the bank's assessment of economic conditions and a very severe downgrading of prospects would continue to undermine the UK currency. Comments on fiscal policy will also remain under close scrutiny with Sterling marginally higher in early Europe on Tuesday. The visible trade deficit fell to GBP7.5bn for September from GBP8.0bn the previous month, but the impact will be limited as there were special factors supporting the account. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

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Slovakia Cuts Key Rate to ECB Level Before Euro Entry

By Andrea Dudikova and Yon Pulkrabek

Nov. 11 (Bloomberg) -- The Slovak central bank unexpectedly cut its benchmark interest rate to 3.25 percent, bringing it to the level of the European Central Bank as the eastern European nation prepares to adopt the euro at the beginning of next year.

The Bratislava, Slovakia-based Narodna Banka Slovenska board today unanimously voted to cut the rate half a percentage point, matching a Nov. 6 ECB decision. The reduction was needed because Slovakia needs to merge its monetary policy with the ECB when it becomes a euro-zone member, though the timing was unscheduled.

Slovakia will be the second former communist country to adopt the common currency when it joins the euro zone on Jan. 1, completing its transition to western economies. The Slovak bank cut the key rate for a second time in a row as the ECB has dropped borrowing costs to ward off recession in western Europe following a collapse in markets.

``It's all about closing the interest rate differential with the eurozone ahead of adopting the euro,'' said Neil Shearing, an emerging-market economist at Capital Economics Ltd. There are ``further cuts to come'' if the Frankfurt-based ECB continues to reduce its key rate.

The central bank said it decided to follow the ECB in cutting interest rates ahead of its regular Nov. 25 rate-setting meeting as it needs to complete preparations before of the euro switch, it said in an e-mailed statement.

``Such a decision will simplify some processes related to the euro adoption, allow a smoother switch to the common currency in the area of interest rates and at the same time will contribute to stabilization of conditions on the money market,'' the bank said.

The current development of commodity prices and expectations of local and global demand allowed it to reduce interest rates ``without a negative impact on inflation developments,'' the bank said.

The harmonized inflation rate, the rate used to judge its qualifications for euro entry, was at 4.5 percent in September.

The koruna traded at 30.484 per euro at 1:47 p.m. in Bratislava, compared with 30.463 late yesterday and a switchover rate of 30.126 set in July.

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German Investor Confidence Unexpectedly Increased

By Simone Meier

Nov. 11 (Bloomberg) -- German investor confidence unexpectedly rose in November as governments and central banks stepped up efforts to fight the turmoil on financial markets.

The ZEW Center for European Economic Research in Mannheim said today that its index of investor and analyst expectations increased to minus 53.5 from minus 63 in October. The index reached minus 63.9 in July, the lowest on record. Economists expected an unchanged reading, the median of 41 forecasts in a Bloomberg News survey shows.

Germany's benchmark DAX share index rebounded from a three- year low last month as the yearlong credit crisis shows signs of abating. Interbank lending rates in Europe have fallen to the lowest since February after central banks injected cash into the financial system. Chancellor Angela Merkel's Cabinet agreed on a stimulus package worth 50 billion euros ($64 billion) on Nov. 4.

``Investor confidence should have reached a turning point,'' said Ralph Solveen, an economist at Commerzbank AG in Frankfurt. ``That doesn't change the subdued outlook for the German economy over the coming months. It should shrink in the fourth quarter of this year as well as into 2009.''

Investor sentiment remained negative for a 16th month in November, suggesting pessimists outnumber optimists in the survey. The indicator's long-term average is 27.1, according to the ZEW. A gauge measuring investors' assessment of the current situation fell to minus 50.4 from minus 35.9 in October.

Recession

The European Commission said last week that the euro region entered a recession in the third quarter. The International Monetary Fund in Washington has called on central banks to lower borrowing costs further to ``support financial markets'' and ``help limit the decline in world growth.''

Central banks around the world have already taken steps to limit the economic damage of the financial turmoil, reducing interest rates and providing liquidity to banks. The euro interbank offered rate, or Euribor, for three-month loans declined more than 6 basis points to 4.34 percent today, the lowest level since Feb. 14, according to the European Banking Federation.

The European Central Bank last week cut its key rate by 50 basis points for the second time in a month, taking it to 3.25 percent, and President Jean-Claude Trichet said a further reduction is possible.

Cutting Forecasts

``It's more than probable'' that the ECB ``will have to modify substantially its projections in December for growth and inflation,'' council member Guy Quaden told Bloomberg News late yesterday in Sao Paulo. ``It's surely not excluded that the revision of the projections will have consequences on the field of our monetary policy.''

Germany's economy may have failed to grow in the third quarter and will weaken further, the Finance Ministry said last month. The government's two-year program to shore up the economy ranges from tax breaks for buyers of new cars to greater financial help for improving buildings' energy efficiency.

``If my optimistic scenario holds, the ZEW indicator has now entered an upward trend and should increase continuously in the coming months,'' said Edgar Walk, an economist at Bankhaus Metzler in Frankfurt.

`Very Weak'

``The ECB will cut its key rate by at least another 50 basis points next month,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``It depends on incoming economic data, which will be very weak, giving them room to lower the benchmark to an even larger extent.''

The DAX has shed about 38 percent of its value this year as the global slowdown prompted companies to reduce profit forecasts.

German business confidence dropped to the lowest in more than five years in October and manufacturing contracted for a third month. European investor confidence fell to a record in November.

Still, crude oil prices have retreated 59 percent from a July record to around $60 a barrel, reducing the pressure on companies' margins, and the euro has depreciated 13 percent against the dollar this year, making exports more competitive.

Sales abroad rose more than economists expected in September and unemployment declined below 3 million for the first time in 16 years in October.

Bayerische Motoren Werke AG, the world's largest maker of luxury cars, said on Nov. 4 it expects ``clearly positive'' earnings this year and is sticking to its targets through 2012. The Munich-based company ``will overcome the current difficult situation,'' Chief Executive Norbert Reithofer said.

``We have seen a slight easing of tensions in money markets, we had coordinated central bank action and the government rescue package also helped,'' said Sandra Schmidt, an economist at ZEW, in an interview with Bloomberg Television. ``Central banks have more room to lower interest rates. That's an important factor'' influencing investor sentiment.

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

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E.ON's German Expansion Plans Blocked by High Court

By Karin Matussek

Nov. 11 (Bloomberg) -- E.ON AG, Germany's biggest utility, lost a high court ruling that may stop it from buying additional stakes in local utilities.

E.ON and competitor RWE AG have a ``market-dominant oligopoly'' on Germany's power market and allowing E.ON to buy into the utility of Eschwege, Germany, would have strengthened its dominance, Germany's highest civil court said today.

``There is not yet a free competition for electricity generated in Germany or imported to Germany,'' the Federal Court of Justice said in a statement on its Web site. Little power can cross borders into Germany, ``so foreign electricity producers can exert only very limited competitive pressure.''

Other utilities in Germany including EnBW Energie Baden- Wuerttemberg AG and Vattenfall AB can't exert ``sufficient competitive pressure'' against E.ON and RWE, the court said.

Josef Nelles, a spokesman for Dusseldorf-based E.ON, didn't immediately return a call seeking comment.

The Federal Cartel Office in Bonn, Germany's antitrust regulator, in 2003 blocked E.ON's plan to buy a 33 percent stake in Stadtwerke Eschwege GmbH.

``The ruling backs the line decisions we've taken for several years in the electricity sector,'' the regulator said. ``The Cartel Office has proved in two nationwide surveys the dominating position of E.ON and RWE in the power production and the distribution.''

E.ON and RWE already have acquired stakes in 204 power- distribution companies and further acquisitions would curtail competition, the court said.

The ruling is the first by the high court on a merger in Germany's power industry since the market was liberalized in 1998, the Karlsruhe-based court said.

Today's ruling is KVR 60/07.

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Crude Oil Falls as IEA May Cut Demand Forecast a Third Month

By Mark Shenk

Nov. 11 (Bloomberg) -- Crude oil fell on speculation the International Energy Agency will lower its 2009 oil-demand forecast as slowing economic growth cuts fuel consumption.

The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report tomorrow, according to four former IEA analysts. The euro-area economy will probably contract 0.7 percent next year, Morgan Stanley said in a report.

``It all comes back to the economy and how deep folks think the recession will be,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Demand is poor and should get worse as the recession deepens.''

Crude oil for December delivery declined $2.23, or 3.6 percent, to $60.18 a barrel at 9:07 a.m. on the New York Mercantile Exchange. Prices, which have tumbled 56 percent since reaching a record $147.27 on July 11, are down 38 percent from a year ago.

The IEA already has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week, it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million.

``The view of the market is very pessimistic,'' said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut. ``The only news I foresee that can move prices higher is a cold spell, which would boost heating oil demand, and that would have only limited impact.''

Brent crude oil for December settlement increased $1.87, or 3.2 percent, to $57.21 a barrel on London's ICE Futures Europe exchange. Futures touched $56.11, the lowest since Feb. 13, 2007.

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

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Ruble Devaluation Concern Triggers 10% Plunge in Russian Stocks

By Laura Cochrane and Emma O'Brien

Nov. 11 (Bloomberg) -- Russia's ruble fell the most in two months and stocks tumbled after the central bank said it may scale back its defense of the currency as officials grapple with the worst financial crisis since the 1998 devaluation.

The ruble slumped 1 percent against a basket of dollars and euros after central bank chairman Sergey Ignatiev said the currency has a ``tendency toward weakening,'' during a televised press conference yesterday. Russia's Micex Index plunged 10 percent, the biggest decline worldwide today.

``They're going to move the line in the sand back a little bit, where they hope they can defend it,'' while resisting a formal devaluation that would erode confidence in ruble deposits, Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, said in an interview today. ``If people start to lose confidence in the banking system, we could have a massive run on the banks as we saw twice in the nineties, and then the game is up.''

Fitch Ratings yesterday followed Standard & Poor's in warning of a possible Russian downgrade after the central bank used 19 percent of its currency reserves to stem a 16 percent slide in the ruble against the dollar since the start of August. Financial turmoil has forced the country's largest oil and steel producers to seek tax breaks, while the defense industry is failing to meet government orders.

Russia, the world's second-largest oil producer, is suffering among the worst losses in financial markets as the global economic slowdown crimps demand for its exports. Russian stocks fell 67 percent this year, compared with a 42 percent slide in the MSCI World Index of developed nations.

Government Support

Crude fell as much as 3.4 percent in New York today, extending its decline to 59 percent from a July record, on speculation the International Energy Agency may lower its 2009 oil-demand forecast. Urals crude, Russia's main export blend of oil, has slumped 61 percent to $54.70.

If oil falls below a ``psychologically important'' $50 a barrel, pressure on the ruble will intensify, Weafer said.

The ruble, which Bank Rossii manages to limit the effect of fluctuations on the competitiveness of exports, slid as much as 1.3 percent against the dollar and 1 percent versus the euro.

``This has put fear into the market,'' said Lars Christensen, head of emerging-market research at Danske Bank A/S in Cophenhagen. ``It may lead to domestic Russian players leaving the ruble, triggering panic-selling.''

The central bank has a policy of not commenting on its day- to-day actions in the currency market and didn't immediately respond to questions faxed to the press department.

Deficit

Troika Dialog, Russia's oldest investment bank, said last week the decline in oil may drive the ruble as much as 30 percent lower against the basket that the central bank uses to peg the currency. Igor Yurgens, head of the Institute of Contemporary Development, which advises President Dmitry Medvedev, told Ekho Moskvy radio station today that the government won't allow a ``significant'' depreciation.

OAO Severstal and Evraz Group SA led five steelmakers pushing for government support including tax breaks, Vedomosti reported last month. Oil companies are also discussing tax breaks with the government, Interfax reported today, citing Energy Minister Sergei Shmatko. Deputy Prime Minister Sergei Ivanov said on state TV today that defense companies are facing difficulties in meeting orders from the government because of the global credit crunch.

OAO Magnitogorsk Iron & Steel said today it cut fourth- quarter spending by 40 percent.

Goldman Sachs Group Inc. economist Rory MacFarquhar in Moscow warned today that Russia faces a current account deficit. The country had a current-account surplus of $91.2 billion in the first nine months of this year.

-- With reporting by Ken Prewitt in New York. Editor: Gavin Serkin, Justin Carrigan

To contact the reporter on this story: Laura Cochrane in London at lcochrane3@bloomberg.netEmma O'Brien in Moscow at eobrien6@bloomberg.net

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Mexico's Currency Drops on Concern Economic Slump to Deepen

By Valerie Rota

Nov. 11 (Bloomberg) -- Mexico's peso fell on mounting concern the global economic slump will deepen, sapping demand for developing-nation exports and reducing financial flows.

The peso slipped 0.8 percent to 12.9214 per U.S. dollar at 8:31 a.m. New York time, from 12.8222 yesterday.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.

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Latin America Currencies: Chilean Peso Falls Amid Stock Decline

By Andrea Jaramillo

Nov. 11 (Bloomberg) -- Chile's peso fell the most in more than two weeks as a drop in global stocks and commodity prices hurt demand for higher-yielding, emerging-market assets.

The peso also weakened after Fitch Ratings on Nov. 9 lowered the outlook for Chile's foreign and local-denominated debt to stable from positive, saying that ``a global recession will disproportionately affect Chile's small open economy while declining commodity prices will negatively affect its external liquidity position.'' The agency rates the South American nation's debt A, the sixth-highest investment grade level.

``The reversal in commodities is hurting Latin American currencies in general,'' said Cristian Gardeweg, head economist at Celfin Capital in Santiago. ``The global market is very volatile with a certain level of panic.''

The peso plunged the most since Oct. 24, weakening 2.2 percent to 643 per U.S. dollar at 8:37 a.m. New York time, from 629.05 yesterday.

Copper, Chile's biggest export, fell 3.1 percent in New York trading.

The yield for a basket of Chilean five-year peso bonds in inflation-linked currency units, called unidades de fomento, fell 7 basis points, or 0.07 percentage point, to 3.39 percent, according to Bloomberg composite prices.

In Argentina, the peso rose 0.06 percent to 3.3045 per dollar, from 3.3065 yesterday. The yield on the nation's 8.28 percent dollar bonds due in 2033 rose 1 basis point to 21.12 percent.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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Yen Rises Against Euro as Stock Slump Damps Demand for Risk

By Agnes Lovasz and Stanley White

Nov. 11 (Bloomberg) -- The yen rose against the euro as declines in stocks damped demand for purchases of higher- yielding currencies funded by loans in Japan.

Japan's currency gained most versus the Brazilian real and the South African rand as commodities fell after China reported the slowest growth in imports since June 2007. The pound dropped to an all-time low against the euro amid further evidence of a housing slump. The Russian ruble fell the most in at least a month versus the central bank's dollar-euro basket as traders speculated the central bank is allowing it to weaken.

``Yen strength will continue,'' said Neil Jones, head of European hedge fund sales in London at Mizuho Capital Markets. ``The biggest theme in currency markets is the lack of confidence going through the whole planet. The price action is telling you there's more contagion ahead. This is certainly not over.''

The yen strengthened to 124.50 per euro as of 6:42 a.m. in New York, from 124.95 yesterday. It advanced to 97.75 per dollar, from 98.00. The euro was at $1.2739, from $1.2748.

Trading volumes may be lower than normal because U.S. financial markets are closed today for a public holiday.

Japan's currency gained versus the currencies of commodity- exporting nations such as Brazil and South Africa after China's customs bureau said import growth slowed to 15.6 percent, signaling weakening domestic demand in the world's fourth- largest economy. The yen will rise to 90 per dollar and 100 per euro by the end of March, Jones predicted.

Carry-Trade Demand

The yen typically gains when demand for higher-yielding currencies declines as investors cut carry trades, where they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate is the lowest among major economies.

Stocks fell, with the MSCI World Index losing 1.1 percent as all 10 industry groups decreased. Futures on the Standard & Poor's 500 Index slid 0.3 percent. Europe's Dow Jones Stoxx 600 Index declined 1.4 percent.

The ruble declined 1 percent versus the currency basket that the central bank uses to manage its fluctuations. The basket consists of about 55 percent dollars and 45 percent euros.

Bank Rossii Chairman Sergey Ignatiev said yesterday he doesn't exclude ``an increase in the flexibility of the ruble exchange rate.'' Under current conditions, the ruble may have a ``certain tendency toward weakening,'' he said.

Against the dollar, the Russian currency slid as much as 1.3 percent to 27.3975, from 27.0535. It weakened to 34.8290 per euro, from 34.4886.

Euro Falls

The euro declined versus the dollar as traders increased bets the European Central Bank will reduce its 3.25 percent rate in the first quarter of next year to kickstart economic growth. The implied yield on Euribor futures contracts expiring in March fell to 2.86 percent yesterday, from 3.005 percent on Nov. 7. The ECB benchmark is 0.39 percentage point higher than the Euribor contract yield, compared with a 12-month average of 19 basis points below the futures rate.

ECB council member Guy Quaden said he expects the bank to reduce its forecasts for economic growth and inflation ``substantially'' next month, paving the way for lower rates.

``It's more than probable'' that the ECB ``will have to modify substantially its projections in December for growth and inflation,'' he told Bloomberg News yesterday in Sao Paulo. ``It's surely not excluded that the revision of the projections will have consequences on the field of our monetary policy.'' The ECB will publish revised growth and inflation projections at its next policy meeting on Dec. 4.

ZEW Index

``The euro area's economy isn't doing well and rate cuts are likely to continue,'' said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France's second- largest bank by market value. ``The euro may be sold.'' The euro may decline to $1.2600 and 123.50 yen today, he said.

The euro strengthened earlier following a report showing German investor confidence unexpectedly rose in November as governments and central banks stepped up efforts to fight the turmoil on financial markets. The ZEW Center for European Economic Research said its index of investor and analyst expectations increased to minus 53.5, from minus 63 in October. Economists expected an unchanged reading, according to a Bloomberg survey.

Leaders of the Group of 20 industrial and emerging nations, due to gather Nov. 14 and Nov. 15 in Washington, will consider steps ranging from raising bank-capital standards to regulating hedge funds to address the financial crisis. Member nations' finance ministers called for interest-rate cuts and increased government spending after meeting two days ago in Sao Paulo.

Pound's Record Low

The pound fell to a record low against the euro after the Royal Institution of Chartered Surveyors said U.K. home sales declined to the lowest level in at least three decades. The British currency slipped to an all-time low of 82.15 pence per euro, from 81.67 pence yesterday.

Japan's Nikkei 225 Stock Average dropped 3 percent as Citizen Holdings Co., the world's biggest maker of mechanical watches, cut its annual earnings target by a third. More than half of the 922 Japanese companies that have already reported first-half earnings reduced full-year profit targets, according to a report by Shinko Research Institute Co.

Japan's economy will contract 0.2 percent next year, the U.S. by 0.7 percent and the euro area 0.5 percent, the International Monetary Fund forecast last week.

The dollar may fall to 96.85 yen as soon as this week, according to an Elliott Wave chart that predicts price movements, said Andrew Chaveriat, a technical analyst at BNP Paribas SA in New York.

The chart shows the U.S. currency has begun a third wave, where the dollar may decline against the yen, wrote Chaveriat in a research report yesterday. Support at 96.85 yen is a 38.2 percent Fibonacci retracement of the dollar's climb from the Oct. 24 low of 90.93 yen to the Nov. 4 high of 100.55 yen. Support is where buy orders may be clustered.

To contact the reporters on this story: Agnes Lovasz in London at alovasz@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net

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Gold Falls for First Time in Three Days in London as Oil Drops

By Nicholas Larkin

Nov. 11 (Bloomberg) -- Gold fell for the first time in three days in London as crude oil declined, reducing the metal's appeal as a hedge against inflation.

Demand for gold as an alternative investment to the dollar also waned as the U.S. currency rebounded against a weighted basket of six major currencies. Oil dropped today on concern the International Energy Agency will lower its 2009 demand forecast as slowing economic growth cuts fuel consumption.

``There's no particular reason to buy oil at the moment and that's taking all commodities down,'' Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. ``The dollar is strengthening against all major currencies.''

Gold for immediate delivery lost $7.82, or 1.1 percent, to $738.38 an ounce as of 1 p.m. in London. December futures declined $9.30 to $737.20 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

Today's drop followed a 1.3 percent increase yesterday after China unveiled a $586 billion spending package to maintain growth in the world's fourth-largest economy. The metal has declined 29 percent since reaching a record $1,032.70 an ounce in March.

Gold fell to $741.75 in the morning ``fixing'' in London used by some mining companies to sell production, from $753 at the previous afternoon fixing.

German investor confidence unexpectedly rose in November as governments and central banks stepped up efforts to fight the turmoil on financial markets, according the ZEW Center for European Economic Research, which aims to predict economic developments six months ahead. Some investors buy gold as a haven in times of financial crisis.

`Remain Robust'

``With recessions only beginning in all major economies and the likelihood that recessions will be protracted and deep, safe haven demand for gold is set to remain robust,'' Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, wrote in a note.

The dollar rose 0.2 percent against a basket of six currencies after earlier slipping 0.3 percent. Gold generally moves in the opposite direction of the U.S. currency. Oil for December delivery in New York slid 3.9 percent to $59.99 a barrel.

Gold assets held in exchange-traded funds managed by ETF Securities Ltd. fell 1.3 percent to 1.514 million ounces on Nov. 7, according to the company's Web site. They were unchanged as of today. Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, was at 749.2 metric tons yesterday.

Among other metals for immediate delivery, silver lost 2.6 percent to $9.92 an ounce. Platinum fell $31.50, or 3.7 percent, to $825.50, and palladium was $2.75, or 1.2 percent, lower at $218.75 an ounce.

ETF Securities' holdings of silver slipped to 14.299 million ounces on Nov. 7 from 14.304 million ounces and palladium assets fell to 231,689 ounces from 231,789 ounces. Platinum assets were unchanged from the Oct. 30 level of 136,264 ounces.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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Tight Range of Trade for Majors

Daily Forex Fundamentals | Written by Crown Forex | Nov 11 08 12:50 GMT |

Majors continue to trade in tight ranges as stock markets continue to slide and the focus is on recession and dampened profits outlook for companies. The data released from Europe today had little effect on the markets as it barely changed the flow though they came in with a better beat than what markets had expected. Business in the euro zone and Germany had better comprehension to the economic sentiment, though despite that in Germany they still are not continent with the current situation which reflects the continued deceleration! The euro was trading in tight ranges yet with an upside bias as the pair struck the high at 1.28 levels and seemingly that resistance level continues to strengthen as on intraday basis over four-hour interval the level is close to the 50 MA which is also slightly below the 100 hours MA; the conflicting signals from momentum indicators over several intraday basis reflects still more volatility to be seen today so the euro might continue to decline. Sterling that is suffering from the blues of and economic recession and aggressive and rapid decline in interest rates is affecting the appeal for the royal currency; the pair continues to trade within the short term downside channel that also within the medium downside channel. Over daily and intraday basis sterling still lingers in oversold areas which supports the upside correction for the pair. After the dollar recorded gains against the yen yesterday the pair still declined to end trading below the 38.2% correctional level which provided further downside momentum for the pair, especially after failing to breach the strong 99.50-70 resistance area. Today the pair is trading in tight ranges yet biased to the downside as it continues to trade below 98.30 which is the 100 hours MA conflicting signals are seen from momentum to direction indicators and for that more volatility is to be seen though confirmations are likely to hint for an upside move. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Copper Falls as China's Consumption May Take Months to Rebound

By Claudia Carpenter

Nov. 11 (Bloomberg) -- Copper fell in London on speculation China's $586 billion spending to support its economy will take months to spur demand for the metal used in cars and homes.

China's copper use will probably slow to 3 or 4 percent growth next year from 8 percent this year, Barclays Capital forecasts. Copper jumped 3.2 percent yesterday after China pledged ``fast and heavy-handed investment'' in housing and roads and other infrastructure.

``It is definitely going to be a good thing for metals consumption but just not immediately,'' said Gayle Berry, an analyst at Barclays in London. ``The export market is deteriorating so sharply that they need some stimulus.''

Copper fell $115, or 3 percent, to $3,760 a metric ton as of 1:08 p.m. on the London Metal Exchange. Aluminum dropped $22, or 1.1 percent, to $1,963 a ton after jumping 1.3 percent yesterday. The UBS Bloomberg CMCI Index of 26 commodities fell 2.1 percent, erasing all of yesterday's 2 percent gain.

China's exports climbed 19 percent in October from a year earlier, the slowest growth in four months, the customs bureau said in a statement on its Web site today. Imports of copper and copper products were 231,212 tons in October, the customs bureau said. That was up 13 percent from a year earlier.

``Smelters are cutting back production and premiums are falling,'' Berry said. ``These things are much better indicators of what the physical market in China is doing.''

Some copper manufacturers and traders in China said their orders, mainly for exports, were down 20 to 40 percent from a year earlier, Berry said after a visit to China two weeks ago.

`Hundreds Closed'

``Hundreds have literally closed,'' she said. About 20 percent of China's copper demand is for exports, she estimated.

Chinese producers are seeking rebates on tax exports so they can sell more products overseas as domestic demand slows. The government will ``definitely'' restore the benefits by early next year, Wang Qinhua, head of the markets and trade department of the China Nonferrous Metals Industry Association, said today.

``For the location where those exports are heading to, it could be bad news, unless demand is strong enough,'' Berry said. ``That's not in Europe, not in the U.S. and not in Japan.''

Stockpiles of the metal in warehouses monitored by the LME gained 4,625 tons, or 1.8 percent, to 265,475 tons, the 15th consecutive increase. Inventories are at their highest since March 2004.

Lead for three-month delivery fell $55 to $1,295 a ton and nickel declined $110 to $11,195 a ton. Zinc rose $4 to $1,109 and tin dropped $375 to $14,300 a ton.

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

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U.K. Stocks Decline; BHP Billiton, Rio Tinto Lead the Retreat

By Adam Haigh

Nov. 11 (Bloomberg) -- U.K. stocks dropped for the first time in three days after reports showed home sales fell to the lowest in more than 30 years, consumer spending slowed and Morgan Stanley forecast the economy will shrink.

BHP Billiton Ltd. and Rio Tinto Group retreated more than 4 percent as metal prices declined. InterContinental Hotels Group Plc lost 6.2 percent after saying there was a ``sharp deterioration'' in the lodging market.

U.K. home sales declined to the lowest level in at least three decades as the lending freeze pushed down prices for a 15th month, the Royal Institution of Chartered Surveyors said. Retail sales fell an annual 2.2 percent in October, the first drop since April 2005, the British Retail Consortium said in a separate report today.

``The market sentiment is against us today,'' said David Buik, a market analyst at BGC Partners in London. ``We are going to be endorsed by the fact we have problems with retail and housing. People are really in fear,'' he told Bloomberg Television.

The benchmark FTSE 100 Index retreated 124.47, or 2.8 percent, to 4,279.45 at 12:34 p.m. in London. The index has lost 34 percent this year, heading for its worst year on record. The FTSE All-Share Index slid 2.8 percent today and Ireland's ISEQ Index advanced 0.5 percent, led by CRH Plc.

More than $28 trillion has been erased from the value of global equity markets this year as credit losses and writedowns totaled $690 billion in the worst financial crisis since the Great Depression.

GDP Forecast Cut

Morgan Stanley now expects 2009 GDP growth in the U.K. to drop by 0.3 percent. The brokerage had previously forecast zero percent growth. The international Monetary Fund last week predicted the economies of the U.S., Japan and the euro zone will all shrink next year.

BHP Billiton, the world's largest mining company, slid 4.4 percent to 1,074 pence. Rio Tinto, the third biggest, lost 4.1 percent to 2,728 pence. Both stocks soared yesterday on China's planned stimulus package to shore up economic growth in the world's fourth-largest economy.

Copper lost 3.2 percent in London and lead, nickel, tin and zinc declined on concern the slowing global economy would damp demand for raw materials and extend rising stockpiles.

InterContinental Hotels, the owner of the Crowne Plaza lodging brand, lost 6.2 percent to 506.5 pence after reporting a drop in third-quarter profit as sales in October slowed.

Taylor Wimpey Plc, battling to survive the biggest homebuilding slump in 25 years, tumbled 13 percent to 11.5 pence after saying orders have fallen 40 percent as it continues to negotiate new loan conditions with lenders.

Vodafone Group Plc added 7.7 percent to 116.6 pence. The world's largest mobile-phone company today said it aims to cut costs to protect earnings amid falling demand.

CRH added 5.7 percent to 17.55 euros. The world's second- biggest building materials maker said there's significant political momentum in the U.S. Congress for a fiscal stimulus package that would benefit demand for building materials.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

Cookson Group Plc (CKSN LN) lost 28.25 pence, or 16 percent, to 151.25. The world's biggest maker of molds for steelmakers said it will miss its targets as metal makers cut production to counter slowing demand.

Electrocomponents Plc (ECM LN), the U.K. supplier of 350,000 products ranging from cables to calculators, lost 7.25 pence, or 4.9 percent, to 141.75. Sales in October dropped 3 percent, led by falling orders from British customers.

Yell Group Plc (YELL LN) added 4 pence, or 6.1 percent, to 69.5. The publisher of the U.K.'s Yellow Pages phone directory said it will cut about 1,300 more jobs to counter falling revenue and save 100 million pounds ($156 million).

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

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Stocks Decline in Europe, Asia; U.S. Index Futures Decrease

By Sarah Jones

Nov. 11 (Bloomberg) -- Stocks fell in Europe and Asia, led by financial shares and commodity producers, on a worsening profit outlook and drop in oil and metals prices. U.S. index futures retreated.

Julius Baer Holding AG slipped 5.9 percent in Zurich after saying assets under management declined, while Taylor Wimpey Plc tumbled 11 percent as the U.K. homebuilder said orders have fallen 40 percent. Citizen Holdings Co. dropped 9.5 percent in Tokyo after the world's largest watchmaker cut its profit forecast. Starbucks Corp., the world's biggest chain of coffee shops, sank 6.1 percent on worse-than-expected earnings.

The MSCI World Index lost 1.6 percent to 925.40 at 1:38 p.m. in London, falling for the first time in three days. More than $28 trillion has been erased from the value of global equity markets as credit losses and writedowns topped $920 billion in the worst financial crisis since the Great Depression.

``Markets are shifting their concern from the financial sector to the wider economy and very clear signs of recession,'' said Andrew Popper, chief investment officer at SG Hambros in London where he helps manage about $13.7 billion. ``There is a lot of negative news out there and a lot of negative news about the economy which continues to weigh on the market and how that will impact on earnings.''

Futures on the Standard & Poor's 500 Index slid 1.9 percent. Credit Suisse Group AG cut its mid-2009 forecast for the S&P 500 by 13 percent to 1,050 on expectations developed economies are headed for the worst recession since 1945. The gauge closed down 1.3 percent to 919.21 yesterday.

Europe's Dow Jones Stoxx 600 Index declined 2.9 percent with Erste Group Bank AG and BHP Billiton Ltd. losing at least 5 percent. The MSCI Asia Pacific Index dropped 3.5 percent as Australian business confidence fell to a record low.

Earnings Tally

Earnings for the 1,246 companies in western Europe that reported results since Oct. 7 declined 11 percent on average, trailing expectations by 4.5 percent, Bloomberg data show. Profits for the 428 companies in the S&P 500 that have reported, including Boeing Co. and AT&T Inc., have shrunk 17 percent, while missing predictions by 4.7 percent, the data show.

The euro-area economy will probably contract 0.7 percent next year, Morgan Stanley wrote in a report, citing the financial market turmoil and slowdown abroad. That's down from 0.2 percent growth forecast earlier, the brokerage said.

``This puts the current recession on par with the early 1990s,'' Elga Bartsch, chief European economist at Morgan Stanley in London, wrote.

Growth in the U.S. economy will slow to 1.1 percent next year, down from 1.6 percent predicted for 2008, according to economists' estimates compiled by Bloomberg News.

Emerging Markets

The MSCI Emerging Markets Index slumped 4 percent as stocks in Russia, the world's second-biggest oil producer, sent the Micex down 9.4 percent. The Dubai Financial Market General Index fell 7.3 percent to the lowest in almost four years, led by developers.

China's CSI Index slipped 1.1 percent, as export growth cooled to 19.2 percent in October from a year earlier. That compares with 21.5 percent in September.

Taylor Wimpey, battling to survive the biggest homebuilding slump in 25 years, sank 11 percent to 11.75 pence after orders fell 40 percent as it continues to negotiate new loan conditions with lenders.

The U.K.'s largest homebuilder has an order book of 6,607 homes, compared with 11,074 units this time last year.

U.K. home sales tumbled in October to the lowest in at least three decades, with prices falling for a 15th month, the Royal Institution of Chartered Surveyors said.

Citizen lost 9.5 percent to 504 yen in Tokyo. The company slashed its net income forecast for the year ending in March due to a worsening overseas sales outlook for wristwatches and mobile phone components.

Starbucks, Baer

Starbucks fell 6.1 percent to $9.58 after saying 2009 earnings per share may be as low as 71 cents or as high as 90 cents, depending on how steeply sales deteriorate. In July it forecast earnings per share of 90 cents to $1. Analysts had estimated 87 cents.

Financial stocks fell as Julius Baer said assets under management declined, Erste sought backing to raise capital from shareholders and Goldman Sachs Group Inc. downgraded U.S. life insurers on concern they may need more capital and their credit ratings may fall.

Julius Baer retreated 5.9 percent to 41.40 francs after Switzerland's biggest independent wealth manager said assets under management fell in the year to date as markets eroded the value of portfolios and its hedge funds businesses recorded net outflows.

Erste, Swiss Life

Erste, Austria's biggest publicly traded lender, lost 6.7 percent to 18.19 after saying it will seek shareholder approval to raise 2.7 billion euros ($3.4 billion) by issuing participation certificates, opening the bank's proposed government rescue to investors.

Allianz SE, Europe's largest insurer, dropped 6.4 percent to 61 euros. Swiss Life Holding, Switzerland's biggest life insurer, slumped 8 percent to 109.2 francs.

Banco Bilbao Vizcaya Argentaria SA dropped 6.3 percent to 8.80 euros after Merrill Lynch & Co. downgraded Spain's second- largest bank to ``underperform'' from ``neutral,'' saying the lender's Mexican business will be affected by the global credit crisis.

Intesa Sanpaolo SpA fell 9.1 percent to 2.75 euros. Italy's second-biggest bank canceled its cash dividend after third- quarter profit declined 54 percent to 673 million euros on lower income from trading and fees.

BHP, the world's largest mining company, retreated 6 percent to 1,056 pence as copper declined in Asia on slowing demand concerns. Rio Tinto Group, the third-biggest mining company, lost 5.3 percent to 2,694 pence.

Demand Outlook

Total SA, Europe's third-largest oil company, fell 3 percent to 41.30 euros as crude oil slumped as much as 5 percent to $59.32 in New York. Royal Dutch Shell Plc, the region's biggest oil company, lost 2.4 percent to 1,657 pence.

The International Energy Agency may cut its 2009 oil demand forecast for a third month as the threat of the worst recession since World War II saps fuel consumption, former IEA analysts said.

InterContinental Hotels Group Plc fell 6.2 percent to 506.5 pence. The owner of the Holiday Inn brand reported a 28 percent drop in third-quarter profit after selling properties and said October sales slowed on a ``sharp deterioration'' in the lodging market.

Cookson Group Plc sank 16 percent to 144.5 pence after the world's biggest maker of molds for steelmakers said it will miss targets as metal makers cut production to counter slowing demand.

Vodafone Group Plc rose 8.2 percent to 117.15 pence after the world's largest mobile-phone company reiterated its full- year forecast for adjusted operating profit of 11 billion pounds to 11.5 billion pounds and raised its predictions for free cash flow in the full year.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Brick Group, CI, DundeeWealth, Norbord: Canada Equity Preview

By John Kipphoff

Nov. 11 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading today. Stock symbols are in parentheses, and share prices are from the yesterday's close in Toronto.

The Standard & Poor's/TSX Composite Index rose 1 percent to 9,688.80.

Brick Group Income Fund (BRK-U CN): The Toronto-based owner of ``The Brick'' furniture stores is a potential buyer of the closely held Canadian unit of Circuit City Stores Inc., valued $40 million to $100 million, the National Post reported, citing a report from RBC Capital Markets analyst Tal Woolley. Brick units fell 6 percent to C$2.82.

CI Financial Income Fund (CIX-U CN): Canada's second- biggest mutual-fund company is scheduled to report third-quarter results. The Toronto-based company may say that profit was 46 cents a unit, the average of five analyst estimates in a Bloomberg survey. The shares fell 1.5 percent to C$15.76.

Crew Gold Corp. (CRU CN): The Vancouver-based explorer of the precious metal in Greenland and Guinea fell to a record in Oslo trading after shutting an unprofitable mine. The Nalunaq mine in Greenland will be suspended as the cost of mining, shipping and processing makes it ``uneconomic for the company to pursue at this time,'' Crew Gold reported in a statement to the Toronto Stock Exchange. The Toronto-traded shares slid 17 percent to 15 cents.

DundeeWealth Inc. (DW CN): The Toronto-based money manager with C$30.8 billion ($25.8 billion) of mutual-fund assets cut more than 15 percent of its workforce since the start of the year to lower costs. The cutbacks have cost C$13 million and will save C$30 million annually starting next year, the company said in a regulatory filing. The shares climbed 2.9 percent to C$6.43.

European Goldfields Ltd. (EGU CN): The owner of the Stratoni mine in Greece posted a third-quarter loss of 5.04 million, or 3 cents a share, compared with a profit of $12.16 million a year earlier. Sales dropped to $16.1 million from $21.7 million. The shares added 11 percent to C$1.94.

Ivernia Inc. (IVW CN): The company that used to produce 3 percent of the world's mined lead said that it remains in talks with Western Australia state to ship 8,000 metric tons of the metal that's been blocked from export since last year on environmental concerns. The shares fell 1 cent to 5 cents.

Norbord Inc. (NBD CN): The second-largest maker of oriented strandboard suspended its dividend and said that it will raise as much as C$240 million by selling shares, to cut costs and boost capital.

Brookfield Asset Management Inc. (BAM/A CN), Norbord's biggest shareholder, has agreed to purchase any stock not bought by other investors, Toronto-based Norbord said in a statement distributed by Canada Newswire. Norbord, which also said that it renewed bank loans until 2011, gained 7.2 percent to C$1.78. Brookfield rose 1 percent to C$21.60.

Uranium One Inc. (UUU CN): The company mining the metal in Africa and Central Asia will cut 86 percent of the 1,175 employees from its Dominion mine in South Africa that was closed last month, according to labor union Solidarity. The shares fell 9.6 percent to C$1.32.

To contact the reporters on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.

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Focus Media, Fossil, Genworth, Optimer: U.S. Equity Preview

By Elizabeth Campbell and Whitney Kisling

Nov. 11 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8 a.m. in New York.

Citigroup Inc. (C US) fell 2.1 percent to $10.97. The fourth-biggest U.S. bank by market value said it will halt some foreclosures as it modifies about $20 billion in mortgages.

Focus Media Holding Ltd. American depositary receipts (FMCN US) dropped 32 percent to $10.90. China's largest publicly traded advertising company said it expects to earn 46 cents a share at most in the fourth quarter. That trailed the 57-cent average estimate from analysts in a Bloomberg survey.

Fossil Inc. (FOSL US) dropped 5.9 percent to $14.10. The seller of namesake watches and accessories lowered its fourth- quarter earnings forecast to 70 cents a share, less than the average analyst estimate of 76 cents, because of the strengthening dollar.

Genworth Financial Inc. (GNW US) declined 10 percent to $2.44. The insurer spun off by General Electric Co. said it's no longer eligible to participate in a federal program that buys short-term debt because its credit ratings were cut.

KKR Financial Holdings LLC (KFN US) gained 34 percent to $4.39 in extended trading yesterday. The debt-investment affiliate of private-equity firm KKR & Co. halted its dividend and arranged $400 million in loans from banks and KKR to pay off other debts.

Optimer Pharmaceuticals Inc. (OPTR US) surged 96 percent to $9. The company said its anti-infective drug candidate, OPT-80, helped patients in a study with a drug-resistant intestinal superbug.

Sangamo BioSciences Inc. (SGMO US) fell 61 percent to $2.55. The company said tests of a treatment for diabetic neuropathy showed ``no significant differences'' between people receiving the drug and those given placebos.

Starbucks Corp. (SBUX US) dropped 6.9 percent to $9.50. Chief Executive Officer Howard Schultz backed away from his goal of opening 40,000 stores after the world's largest chain of coffee shops reported fourth-quarter profit that plunged 96 percent.

Wynn Resorts Ltd. (WYNN US) gained 2.5 percent to $47.99. The biggest U.S. casino company by market value was picked to replace Ashland Inc. (ASH US) in the Standard & Poor's 500 Index. Dentsply International Inc. (XRAY US), which will take the place of Hercules Inc. (HPC US) in the benchmark, rose 4.1 percent to $30.30 in extended trading yesterday.

To contact the reporters on this story: Elizabeth Campbell in New York at ecampbell11@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net

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Persian Gulf Shares Fall on Real-Estate Concern; Emaar Drops

By Ayesha Daya

Nov. 11 (Bloomberg) -- Persian Gulf shares declined, sending Dubai's benchmark down for a fourth day, on concern a global recession and falling oil prices will slow the region's property market.

Emaar Properties PJSC, the Middle East's biggest publicly traded developer, dropped to the lowest in four years, as HSBC Holdings Plc and Lloyds TSB Group Plc reduced lending in the United Arab Emirates amid the credit crunch. Sorouh Real Estate Co. tumbled the most in almost a month after curbing the amount of shares foreigners can own. Investment Dar Co., the Kuwait- based owner of half of Aston Martin, retreated the most in more than four years.

The Dubai Financial Market General Index fell 7.3 percent to 2,343.15, its lowest close since December 2004. The measure has tumbled 61 percent this year. The Abu Dhabi Securities Exchange General Index declined 4.9 percent, while the Kuwait Stock Exchange Index dropped 2.2 percent.

Persian Gulf countries, which used a five-year rally in oil that ended in July to boost infrastructure development in the region, may suffer as access to credit tightens and demand for new housing falls. Oil for December delivery fell as much as 5 percent to $59.32 a barrel on the New York Mercantile Exchange.

Job Cuts

``The main concern for real-estate companies is prospects for selling projects,'' Motaz Herzallah, senior broker at Emirates Securities LLC in Abu Dhabi, said in a phone interview.

Lloyds TSB, the London-based bank that entered the U.A.E. market in 1977, stopped offering mortgage loans for apartments in Dubai and reduced the amount it will lend to 50 percent of the price of a villa from 80 percent. HSBC, Europe's largest bank, will require customers in the emirate to earn at least 20,000 dirhams ($5,445) to get a personal loan.

The Dubai government is monitoring the property market and a ``high-level committee'' has been exploring initiatives to boost market confidence, Emaar Chairman Mohammed Alabbar said. Damac Holding, a closely held Dubai-based property developer, eliminated 200 jobs, or 2.5 percent of its workforce.

In Saudi Arabia, the Tadawul All Share Index retreated 5.2 percent to 5,465.85. Qatar's Doha Security Market 20 Index slumped 6.3 percent to 6,342.48, the lowest since April 2007. Oman's Muscat Securities Market 30 Index lost 2 percent, while the Bahrain All Share Index dropped 2.7 percent.

Emaar slid 9.9 percent to 3.74 dirhams, its lowest close since November 2004.

Sorouh, Abu Dhabi's second-largest property developer, dropped 9.5 percent, the most since Oct. 16, to 2.96 dirhams. Sorouh curbed its foreign-ownership limit to 15 percent from 20 percent after the stock lost 62 percent this year.

Investment Dar tumbled 12 percent, the most since May 2004, to 355 fils.

The following stocks also rose or fell in the region. Stock symbols are in parentheses after company names:

Al-Dar National Real Estate (ADNC KK) declined 8.6 percent to 53 fils. The Kuwait-based property developer said it posted a loss of 4.9 million dinars ($18.2 million) in the third quarter.

Jeezan Holdings Co. (JEEZAN KK) dropped 7.5 percent to 62 fils. The Kuwaiti property owner said third-quarter profit fell to 340,000 dinars compared with 9.8 million a year earlier.

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

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U.S. Stock Futures Drop on Earnings Concern; Starbucks Retreats

By Daniela Silberstein and Lynn Thomasson

Nov. 11 (Bloomberg) -- U.S. stock futures pointed to a second day of declines as Starbucks Corp. reported profit that trailed estimates and Credit Suisse Group AG said developed economies are headed for the worst recession since 1945.

Starbucks slid 7.4 percent after the world's biggest chain of coffee shops predicted slowing sales and backed away from expansion plans. Goldman Sachs Group Inc. told clients to sell shares of Prudential Financial Inc., the second-biggest U.S. life insurer, pushing the stock down 3.1 percent. Exxon Mobil Corp. and ConocoPhillips slumped more than 1.7 percent as oil declined.

``The bad news keeps coming,'' said Roger Kunz, head of investment strategy at Clariden Leu AG in Zurich, which manages the equivalent of about $120 billion. ``More and more companies are showing that they have problems and the economic outlook keeps worsening.''

Futures on the Standard & Poor's 500 Index dropped 1.7 percent to 906.2 at 8:15 a.m. in New York. Dow Jones Industrial Average futures retreated 155 points, or 1.7 percent, while Nasdaq-100 Index futures fell 1.6 percent to 1,236.75.

Europe's Dow Jones Stoxx 600 Index lost 2.9 percent and the MSCI Asia Pacific Index declined 3.5 percent. U.K. homebuilder Taylor Wimpey Plc said orders have fallen 40 percent while Citizen Holdings Co., the world's largest watchmaker, cut its profit forecast.

Credit Crisis

Credit Suisse lowered its mid-2009 target for the S&P 500 to 1,050 from 1,200. The U.S. stock benchmark retreated 37 percent this year as concern deepened that the credit crisis sparked by a surge in U.S. mortgage defaults will drag down the global economy.

The S&P 500 dropped yesterday on a worsening profit outlook for companies, including Goldman Sachs and Google Inc. Third- quarter earnings shrank 17 percent for S&P 500 companies that reported results, according to Bloomberg data. Profits for 2008 will decrease an average 8.5 percent and rise 12 percent next year, based on a survey of analysts' estimates.

Starbucks fell 75 cents to $9.45. Excluding costs to close underperforming stores and cut jobs, the company earned 10 cents a share, missing analysts' average estimate by 3 cents.

Prudential slid 95 cents to $30. Goldman Sachs reduced its rating on the life-insurance industry to ``cautious'' from ``neutral'' and advised selling shares of Prudential, Lincoln National Corp., Principal Financial Group Inc. and Hartford Financial Services Group Inc. The companies may need to raise more capital after equity and debt markets fell, and their credit ratings may get cut, Goldman analyst Chris Neczypor wrote.

Exxon Mobil declined 1.7 percent to $72.75. ConocoPhillips slumped 1.8 percent to $50.

Crude oil fell below $60 a barrel in New York amid speculation the International Energy Agency will lower its 2009 demand forecast as slowing economic growth cuts fuel consumption.

AIG, Toll Brothers

American International Group Inc. dropped 8 cents to $2.20. The company, which posted a record third-quarter loss, has led North American insurers to more than $120 billion in debt-market losses, helping to push the tally for the world's biggest financial firms toward the trillion-dollar mark.

Toll Brothers Inc. lost 36 cents to $18.59. The largest U.S. luxury homebuilder reported its 10th straight quarterly revenue decline as home prices plunged and consumer confidence fell. Homebuilding revenue dropped to about $691 million in the fiscal fourth quarter from $1.17 billion a year earlier.

Fannie Mae, Freddie Mac and housing industry officials plan a new mortgage modification program designed to cut payments for hundreds of thousands of homeowners facing foreclosure, according to people briefed on the matter.

American Express

Under the proposal, mortgage servicers will work with borrowers to reduce monthly payments to 38 percent of their income, a level considered a threshold for affordability, using a combination of lower principals, interest-rate reductions and extensions, the people said.

American Express Co. added 1.8 percent to $24.42. The company won U.S. Federal Reserve approval to become a commercial bank, gaining access to government funds as credit-card defaults climb with economies slowing around the world.

The Fed waived a 30-day waiting period on the application because of ``the unusual and exigent circumstances affecting the financial markets,'' according to a Fed statement released yesterday in Washington. Chairman Ben S. Bernanke and his colleagues unanimously approved the plan.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.

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