Mid-Day Report: Dollar and Yen Continue to Retreat as Improved Sentiments

Market Overview | Written by ActionForex.com | Nov 21 08 13:06 GMT |

Economic data takes a back seat again today as investors sentiment turned follow the speculations of Citigroup's sale. Asian stock markets shrugged off a lower open and rebounded strongly. The strength carried on to European markets which could pass on to the US markets too. Dollar and yen retreat from yesterday's rally following rebound in the stock markets. Though, from a short term point of view, the up trend in dollar index should still be intact as long as 86.12 minor support holds and further upside is still expected from the greenback in general. As mentioned before, EUR/USD is possibly near to the end of a triangle consolidation and a break below 1.2389 will likely trigger some broad based rally in the dollar. Released in early US session, Canadian CPI dropped more than expected by -1.0% mom in Oct, dragging yoy rate down to 2.6%, below expectation of -0.6% mom, 3.1% yoy. Core CPI also dropped -0.2% mom with yoy rate unchanged at 1.7%. USD/CAD retreats mildly after failing below 1.3015 high but still, further rise is expected as long as pull back is contained above 1.2545 minor support. Data from Eurozone continues to suggest deep and long recession. Services PMI dropped to record low of 43.3 in Nov. Manufacturing PMI dropped even shaper to record low of 36.2. Nevertheless, the Euro paid little attention to the data as consolidation continues. Also, BoJ left rates unchanged at 0.3% as widely expected. USD/CAD Mid-Day Outlook Daily Pivots: (S1) 1.2657; (P) 1.2817; (R1) 1.3124; More. USD/CAD retreats mildly after extending rally to as high as 1.2984, just inch below 1.3015 high. At this point, though, intraday bias remains on the upside as long as 1.2545 minor support holds. Firm break of 1.3015 will confirm that medium term up trend has resumed and should target 61.8% projection of 1.0297 to 1.3015 from 1.1464 at 1.3144 next. On the downside, below 1.2545 will turn intraday outlook neutral first but short term outlook will remain bullish as long as 1.2098 support holds. In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Hence, some medium scale consolidation might be seen now. However, note that firstly, downside of such consolidation should be contained by bottom of the fourth wave in a lower degree at 1.1304. Secondly, sustained break of 1.3015 will confirm that the medium term up trend has resumed, with the fifth wave started and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.1783 at 1.3469.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
03:30	JPY	BOJ rate decision	0.30%	0.30%	0.30%
08:30	EUR	Germany PMI manufacturing Nov Flash	36.7	42	42.9
08:30	EUR	Germany PMI service Nov Flash	46.2	47.5	48.3
09:00	EUR	Eurozone Manufacturing PMI Nov Flash	36.2	40.5	41.1
09:00	EUR	Eurozone Services PMI Nov Flash	43.3	45	45.8
12:00	CAD	Canada CPI M/M Oct	-1%	-0.60%	0.10%
12:00	CAD	Canada CPI Y/Y Oct	2.60%	3.10%	3.40%
12:00	CAD	Canada CPI core M/M Oct	-0.20%	0.00%	0.40%
12:00	CAD	Canada CPI core Y/Y Oct	1.70%	1.90%	1.70%

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Canadian Consumer Price Inflation Fell to 2.6% in October from 3.4% in September

Daily Forex Fundamentals | Written by CurrencyThoughts | Nov 21 08 13:36 GMT |

On-year CPI inflation of 3.4% in both September and 3Q08 gave way to a 2.6% in October, as the seasonally adjusted index fell 0.5% and the unadjusted index tumbled by 1.0% in month-on-month terms. In the three months between July and October, the so-called headline (all items) CPI slid 1.4% at a seasonally adjusted annual rate. Gasoline prices dropped 13.4% between September and October and posted a sharply lower 12-month gain of 13.3% after jumping 26.5% in the year to September. Non-energy consumer prices increased 1.8% from October 2007, down from a 1.9% pace in September. For a third consecutive month, core CPIX, which excludes the eight most volatile CPI components, posted a year-over-year rise of 1.7%, which is below the central bank target of 2.0%. In its semi-annual Monetary Policy Report released last month, Bank of Canada officials projected core inflation of 1.7% in the first half of 2009, 1.6% in the second half of the year, and 1.9% in 2010. This disinflationary environment illustrates why in recessionary periods like the present, currency weakness is preferred to currency strength. It is hard to pass on any boost to import costs from depreciation, so the typical lift to inflation and constraint on monetary policy easing does not occur. Canadian officials have halved their target rate to 2.25% since December and are likely to ease another 50 bps on December 9th. At the same time, export competitiveness benefits. the Canadian dollar has declined 29.2% since peaking a year ago at US$0.9061. One area of resilient inflation continues to be food, whose cost advanced 0.4% m/m in October and by 6.1% from a year earlier compared to a 5.6% rise in the year to September. Larry Greenberg CurrencyThoughts

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Bank of Japan Resists Cutting Rates

Daily Forex Fundamentals | Written by CurrencyThoughts | Nov 21 08 13:35 GMT |

As expected, the Bank of Japan did not reduce its 0.3% rate target for overnight money, but a released statement painted a bleak picture with recession persisting for some time. Officials moreover identified downside price and growth risks associated with the pessimistic baseline forecast. The assessment of exports was downgraded, for instance, to “decreasing” from “peaking out.” In contrast to multi-hundred basis point cuts by other central banks, the Bank of Japan has eased by a total of 20 basis points since the global financial crisis began. The rate of loosening in monetary policy is just as important as the level of interest rates. No central bank should understand that concept better than the Bank of Japan, which administered quantitative monetary stimulus with zero interest rates from March 2001 until the spring of 2006. That experience promoted faster economic growth and alleviated deflation, underscoring that the zero line in interest rates is not the end of the monetary policy spectrum. The Bank of Japan resisted the idea of quantitative easing for years before agreeing to that approach. Once again, officials are raising objections to such a radical measure and only saying that they will think about it. In the meantime, the BOJ Policy Board promised to study and undertake steps to pump liquidity into their financial market, such as broadening what commercial paper they are willing to buy. This distinction between overall monetary policy and selected actions to combat market illiquidity is where many central banks like the ECB were at until this past summer. Now that a global recession has spread to most advanced and many developing economies and as price pressures recede rapidly, the Bank of Japan has become quite isolated in adhering to an old logic. The Policy Board was unanimous in its opinion. Nobody argued for more drastic action. Larry Greenberg CurrencyThoughts

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U.K. Repossessions Increased 12% in Third Quarter

By Jennifer Ryan

Nov. 21 (Bloomberg) -- U.K. home repossessions by mortgage lenders rose 12 percent in the third quarter as higher unemployment and the shrinking economy left more Britons unable to pay their debts.

Foreclosures totaled 11,300, compared with 10,100 in the second quarter, the Council of Mortgage Lenders, which represents British home-loan providers, said today. Applications to foreclose increased 9 percent to 38,511 and repossession orders jumped 24 percent to 29,516, the Ministry of Justice said on its Web site.

Prime Minister Gordon Brown last month ordered judges to ensure that home repossessions are only made by banks as a last resort as the country becomes mired in a recession. Unemployment jumped the most in 16 years last month and house prices dropped as banks curtailed lending, undermining consumers' ability to extend borrowings or pay down debt.

``Looking ahead, conditions in the wider economy suggest a worsening picture for mortgage arrears,'' Michael Coogan, director general of the CML, said in a statement. ``The government has taken some helpful steps towards targeted support for some of the most vulnerable households, but with a worsening economy now needs to make it a priority to go further.''

The CML's figures cover the entire U.K. and represent 0.1 percent of all mortgaged properties. The Ministry of Justice data is for England and Wales. The CML repeated its forecast that the total number of repossessions in 2009 will reach 45,000, compared with 26,200 in 2007.

Loan Arrears

The number of households in more arrears ``is likely'' to exceed its earlier prediction of 170,000, the CML said. Mortgages in arrears totaled 1.44 percent of outstanding loans in the third quarter, compared with 1.33 percent in the previous three months.

``Rising unemployment will lead to a marked rise in the number of forced house sales, and it will also reduce the number of potential house buyers,'' Howard Archer, economist at IHS Global Insight, said in a statement. ``Even if the government measures to tackle the financial crisis work on a sustained basis, it will clearly take time for confidence to improve and mortgage lending to pick up significantly.''

Brown and Chancellor of the Exchequer Alistair Darling are urging banking executives to resume lending after offering a 50 billion-pound ($75 billion) rescue to lenders facing big losses from the credit squeeze. Global writedowns have surpassed $965 billion since the collapse of the U.S. subprime mortgage market.

Tax Plans

Darling plans tax cuts and infrastructure projects to limit the recession, and will announce new measures in his annual pre- budget report to Parliament on Nov. 24. He will announce an agreement with banks for a three-month freeze on repossessions to allow borrowers to work out a deal.

``We are clearly determined to help people who are concerned with home repossessions,'' said Michael Ellam, a spokesman for Brown. ``Specific announcements will have to wait for the pre- budget report.''

The central bank reduced the benchmark interest rate to 3 percent this month, the lowest since 1955, as the slowing economy threatened to push the inflation rate below its 2 percent target from the current 4.5 percent. The bank forecasts the economy to contract through most of next year.

Falling house prices push a greater number of homeowners into so-called negative equity, where the value of the home drops below the amount of the loan used to buy it. The Bank of England has estimated that a 15 percent drop in house prices would push 10 percent of mortgage-holders into that predicament.

``The worsening economic climate is beginning to have a marked impact on both the levels of arrears and repossessions in the property market,'' Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said in a statement. ``With unemployment set to rise sharply as the recession bites, it is inevitable that both indicators will rise further in 2009.''

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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Europe's Services, Manufacturing Recession Worsens

By Fergal O'Brien

Nov. 21 (Bloomberg) -- Europe's manufacturing and service industries contracted in November at the fastest pace in at least a decade, putting pressure on the European Central Bank to step up the pace of interest rate cuts.

Royal Bank of Scotland Group Plc's composite index dropped to 39.7, the lowest since the survey began in 1998, from 43.6 in October. Economists forecast a decline to 42.8, according to the median of 16 estimates in a Bloomberg survey. The index is based on a survey of purchasing managers by Markit Economics in London and a reading below 50 indicates contraction.

Europe's economy fell into its first recession in 15 years in the third quarter after the worst financial crisis since the Great Depression pushed up lending costs, hurt export demand and eroded confidence. The ECB has cut its benchmark rate by 1 percentage point to 3.25 percent since early October and signaled more cuts are ahead.

``The data strengthen the case for a more aggressive ECB response,'' said Holger Schmieding, chief European economist at Bank of America Corp. in London. ``The chance that the ECB may cut interest rates by 75 basis points instead of the expected 50 basis points at its December meeting continues to rise.''

The euro, which has dropped 15 percent in the past two months, rose 1 percent to $1.2574 today.

ECB President Jean-Claude Trichet, who said this week the world is experiencing its worst financial crisis in six decades, may give investors clues on his intentions when he gives a speech in Frankfurt at 2 p.m. local time.

Pragmatic

The central bank's board, which met yesterday to reassess the economic outlook, has never cut rates by more than 50 basis points.

``We have to be totally pragmatic and to stick to facts and figures,'' Trichet said in London on Nov. 18. ``We said in the last press conference, it was not excluded that we would continue to lower rates.''

Markit's manufacturing index dropped to 36.2 from 41.1 in October, while the services gauge fell to 43.3 from 45.8. Separate figures today showed that French consumer spending on manufactured goods slipped the most in four months in October.

Some council members have expressed concern that larger rate cuts may unsettle markets. Yves Mersch said in an interview with Dow Jones conducted Nov. 18 that such a move would hurt ``confidence'' and Austria's Ewald Nowotny told Market News International that the ECB wants to preserve ``firing power.''

`No Doubt'

``We have no doubt that the current exceptional circumstances require a bold ECB move next month, probably twice the 50 basis point cut we have penciled in,'' said Marco Valli, an economist at Unicredit MIB in Milan. ``However, as appears clear from recent rhetoric, many at the ECB still think that large rate cuts can be counterproductive.''

As companies across Europe face weakening demand, they're finding it more difficult to raise prices and are cutting jobs. The index of manufacturing employment fell at a record pace this month and the gauge for services jobs dropped the most in five years. The report also showed that prices charged in both industries declined.

``Owing to a remarkable decline in inflationary pressures in the medium term and rapidly deteriorating economic prospects, euro-area monetary policy in my view has enough leeway for further easing if necessary,'' ECB council member Axel Weber said at a banking conference in Frankfurt today.

Outlook Worsens

The slump isn't confined to the euro region. U.K. automobile production declined 25 percent in October to the lowest level in that month since 1991. Japan's economy will probably shrink this year and next in the first back-to-back contractions in a decade, according to economists surveyed by Bloomberg News.

In the U.S., the index of leading economic indicators fell more than forecast in October, signaling a deepening recession.

As the economic outlook deteriorates, the European Union is crafting a coordinated stimulus package to spur its 27-nation economy. In Germany, the government will expand its 2009 net borrowing requirement to 18.5 billion euros ($23.3 billion) from an earlier forecast of 10.5 billion euros as it stretches the budget to pay for programs to stabilize the economy.

Shrinkage

``Our forecast for next year suggests that the euro area will experience its worst recession in more than 50 years,'' said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Group Plc in London. He expects the euro region's economy to contract 1.5 percent next year.

BASF SE, the world's largest chemical company, this week lowered its profit forecast for the second time and said it plans to idle 80 factories after customers reduced orders.

It's not just manufacturers that are feeling the pinch. Air France-KLM Group, Europe's biggest airline, has limited capacity increases this winter and next summer to no more than 2 percent as passenger demand cools. Ryanair Holdings Plc is paring costs by grounding planes at London Stansted and Dublin airport.

Today's figures ``will come as a shock to the ECB,'' said Dominic Bryant, an economist at BNP Paribas in London. ``Aggressive action is needed.''

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.

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Fed's Lacker Says Economy May Regain Momentum in '09

By Scott Lanman and Craig Torres

Nov. 21 (Bloomberg) -- Federal Reserve Bank of Richmond President Jeffrey Lacker said the economy could begin a recovery in 2009 as low interest rates, falling energy prices and a diminished drag from housing shore up spending.

``Many analysts expect the U.S. economy to regain positive momentum sometime in 2009,'' Lacker said today in a speech in Bethesda, Maryland. ``That strikes me as a reasonable expectation.''

A credit crunch sparked by the collapse of U.S. mortgage finance has triggered a recession that is showing signs of deepening, with U.S. job losses totaling 1.2 million this year. First-time claims for U.S. unemployment insurance unexpectedly rose last week to the highest level since 1992, Labor Department figures showed yesterday.

``Once households are convinced that an end to the deterioration in labor market conditions and the fall in equity and home prices is in view, however, consumer spending growth will be based on improving longer-run income prospects and is likely to pick up substantially,'' Lacker said in remarks to the Tech Council of Maryland.

The Fed has reduced its benchmark interest rate by 4.25 percentage points since September 2007, to 1 percent, and economists forecast further rate cuts. JPMorgan Chase & Co. predicted this week that the Fed will probably lower interest rates to zero percent over the next two months to staunch deflation.

Policy Now `Stimulative'

Lacker didn't give his support to such a move today, saying that ``monetary policy is now quite stimulative.''

``While the downturn in real economic activity is going to pose challenges for monetary policy in the period ahead, it's essential that we not let inflation drift from view,'' Lacker said.

At the same time, Lacker said it is ``reasonable'' to expect overall inflation to drop as oil prices fall. A decline in core inflation, or price indices minus food and energy, could be influenced by expectations of how the central bank will guide monetary policy, he said. Lacker said he would also be cautious about relying on the view that economic slack will reduce core inflation.

Inflation Outlook

``Inflation may not moderate obediently during the downturn, and may firm with the ensuing recovery,'' Lacker said. ``It is crucial that we not allow expectations of future inflation to creep higher during this recession.''

The credit crisis has resulted in $967 billion in writedowns and losses for financial companies worldwide since the start of 2007. In response, Congress approved a $700 billion financial bailout program that is injecting capital into banks. The Fed has rescued Bear Stearns Cos. and American International Group Inc. from failure with emergency loans.

Fed Chairman Ben S. Bernanke has also created six borrowing programs providing more than $1 trillion in loans to aid banks, bond dealers and U.S. companies that issue commercial paper.

Lacker reiterated his remarks from two days ago that the scope of the government's financial safety net ``ultimately must be rolled back.'' Any new regulations should set ``boundaries around central bank lending and public sector support and accordingly reconstruct the relationship between the public sector and financial markets,'' he said.

Deflation Threat

The U.S. consumer price index plunged 1 percent last month, the most since records began in 1947, according to a report this week, signaling that deflation may worsen the downturn. The U.K.'s inflation rate fell the most in at least 11 years in October.

Europe and Japan slipped into a recession last quarter, and China's economy, the biggest contributor to global growth in 2007, is slowing. The German economy, Europe's largest, is in the worst recession in at least 12 years.

U.S. foreclosure filings in October jumped 25 percent from a year earlier, compared with average monthly gains of about 50 percent so far in 2008, according to RealtyTrac, a seller of foreclosure data. Filings increased 5 percent from September after California passed a law delaying foreclosures for some borrowers.

``I would be surprised if we don't see a bottom in housing construction around the middle of 2009,'' Lacker said today. ``This is the third straight year, however, that I've been expecting a bottom in the housing market in the middle of next year, so my outlook is tempered by more than the usual amount of humility.''

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

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Goldman Slashes U.S. Growth Forecasts, Says Recession Deepens

By Dave Liedtka

Nov. 21 (Bloomberg) -- Goldman Sachs Group Inc. increased its recession estimates, saying gross domestic product is declining at a 5 percent annual rate in the current quarter and will drop 3 percent and 1 percent in the next two quarters.

Unemployment will reach 9 percent by the fourth quarter of 2009, Goldman economists led by Jan Hatzius wrote in a research note today.

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German 2009 Power Heads for Biggest Weekly Drop as Fuels Slump

By Lars Paulsson

Nov. 21 (Bloomberg) -- German power for 2009 delivery headed for its biggest weekly decline on record as a contraction in the manufacturing and service industries curbed demand and dragged down fuel prices.

Electricity for next year in Europe's biggest electricity market has dropped 12 percent this week, trading at 57.10 euros ($72) a megawatt-hour as of 1:20 p.m. Berlin time, according to broker GFI Group Inc. That's the lowest in more than 13 months.

Major global economies including Germany, the U.S. and Japan have entered recessions that will cut energy consumption from steel producers to car manufacturers. BASF SE, the world's biggest chemical maker, plans to idle 80 factories because of lower demand from the auto, construction and textile industries.

``The industrial sector is a major point of consumption and you just can't discount that,'' Chad Tschudi, a portfolio manager at Czech utility CEZ AS, said today by telephone from Prague.

Europe's manufacturing and service industries contracted in November at the fastest pace in at least a decade, Royal Bank of Scotland Group Plc said today.

Hard coal, the fuel for more than a fifth of Germany's power production, extended its decline today, falling to a 15-month low. Coal for next-year delivery to Amsterdam, Rotterdam or Antwerp, the European benchmark contract, slid 3.1 percent to $82.50 a metric ton, according to ICAP Plc.

The weakening economy and rising coal stockpiles pushed the price down, according to Emmanuel Fages, a commodities analyst at Societe Generale in Paris, while CEZ's Tschudi said lower coal may drag electricity down further.

``Coal is the big question, and now the floor seems like $80,'' Tschudi said. Power may continue to slide, he said, adding that it would be ``without too much on the downside.'' CEZ is central Europe's biggest power company.

The generic next-year contract in Germany had its biggest weekly decline in the week ended Apr. 28, 2006, when it lost 14 percent.

To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

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Sabic Shuts Naphtha Cracker After Fault; Repairs Are Under Way

By Nidaa Bakhsh

Nov. 21 (Bloomberg) -- Saudi Basic Industries Corp., the world's biggest chemicals maker by market value, is repairing a naphtha cracker plant in the Netherlands after shutting it because of a fault earlier this week.

``We had an incident and we had to flare,'' Susan Haenraets, Sabic's spokeswoman, said by telephone today. A compressor fault on Nov. 18 forced the unit in Geleen to shut down, she said.

Haenraets couldn't say how long the repairs would last.

Naphtha crackers are used in the production of ethylene and propylene, used in plastics for bags and water bottles.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

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Exxon Is Said to Plan Halt of Fawley Gasoline Cracker Next Year

By Nidaa Bakhsh

Nov. 21 (Bloomberg) -- Exxon Mobil Corp. plans to shut a gasoline-making unit at its Fawley oil refinery, the U.K.'s largest, in the fourth quarter of next year, two people with knowledge of the work said.

A so-called fluid catalytic cracker, or FCC, will be halted in October to tie in new pipes, the people said, declining to be identified because the information is confidential. They didn't say how long the shutdown would last.

``It's our practice not to comment on the operational status of our facilities,'' David Eglinton, Exxon's spokesman in the U.K., said in an e-mailed statement.

The catalytic cracker has a capacity of 72,000 barrels a day, according to data compiled by Bloomberg.

Other refineries in Europe are scheduled to halt cracker operations in the same quarter, potentially boosting gasoline prices in the region. Petroplus Holdings AG will close an FCC and associated units at its 172,000-barrel-a-day Coryton refinery in the U.K. for maintenance, while Cia. Espanola de Petroleos SA will shut all processing units at its 98,000-barrel-a-day Huelva plant in Spain to install a new crude-distillation facility.

Gasoline in Europe is trading below the price of its crude oil feedstock as the global recession forces consumers to cut spending, curbing demand for the motor fuel.

European gasoline for December loading traded $6.89 a barrel below Brent crude yesterday and was at a discount of $9.43 a barrel for the fourth quarter of 2009, according to broker PVM Oil Associates Ltd. Typically fuels trade above their feedstock to reflect processing costs.

Exxon's Fawley refinery, near Southampton in southern England, can process about 320,000 barrels of oil a day, according to the U.K. Petroleum Industry Association. It supplies 14 percent of Britain's petroleum products, according to Exxon's Web site.

To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

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E.ON, EdF Lead $22 Billion of Bond Sales in Europe

By Shelley Smith

Nov. 21 (Bloomberg) -- Electricite de France SA, Europe's biggest power generator, and German utility E.ON AG, led 17.9 billion euros ($22 billion) of bond sales, close to a three-month high, as investors snapped up record yields over government debt.

Sales were 47 percent more than the weekly average of 12.2 billion euros. Electricite de France SA, raised 2 billion euros by selling four-year bonds, while German utility E.ON AG got 1 billion euros by issuing two-year debt, according to data compiled by Bloomberg.

``The new issue market is opening up during a time of intense volatility, which tells us investors are pricing risk appropriately and are being richly rewarded,'' said Mehernosh Engineer, a credit strategist at BNP Paribas SA in London. Chief executives are ``finally recognizing reality and are willing to pay the recessionary premium,'' he said.

Investors are demanding the highest yield spreads to buy company bonds on concern the worst financial crisis since the Great Depression will make it harder for borrowers to repay debt. The risk of protecting investment-grade corporate bonds from default surged close to a record as the prospect that U.S. automakers may fail fueled concern of a deeper global recession.

Bond buyers increased the extra yield they charge investment-grade companies to sell debt to 412 basis points over government debt, the highest level since Merrill Lynch & Co. started collating the daily data in 1999. The gap is four times last year's level, Merrill's European Investment-Grade Corporate Bond Index shows. A basis point is 0.01 percentage point.

Credit-default swaps on the Markit iTraxx Europe index of 125 investment-grade companies traded as high as 193 basis points today, JPMorgan prices show. It reached a record 195 on Oct. 27.

Car Trouble

General Motors Corp., Ford Motor Co. and Chrysler LLC executives left Washington empty handed this week after two days of pleading with lawmakers for a $25 billion bailout. The Big Three must re-submit their case for aid next month. GM Chief Executive Officer Rick Wagoner said Nov. 19 that allowing U.S. automakers to fail would trigger a ``catastrophic collapse'' of the economy.

The European Union is crafting a 130 billion-euro coordinated stimulus package for the 27-nation economy after the region was pushed into its first recession since the euro's start almost a decade ago. European Commission President Jose Barroso said yesterday the EU executive will announce a plan next week.

E.ON, EdF

E.ON, based in Dusseldorf, sold 1 billion euros of two-year bonds priced to yield 150 basis points more than the benchmark mid-swap rate. That compares with 45 basis points the utility agreed on 750 million euros of three-year bonds issued in August, Bloomberg data show.

Paris-based EdF sold 2 billion euros of five-year bonds priced to yield 299.5 basis points more than similar-maturity government debt. The power company raised 1.2 billion euros of 12-year bonds in May at a yield of 117.2 basis points, Bloomberg data show.

``There's a worry that there was too much issuance too soon,'' said Georg Grodzki, London-based head of credit research at Legal & General Group Plc, the U.K.'s third-largest insurer which manages more than 110 billion pounds ($163 billion) of fixed-income assets. ``We may have reached the limit of what the market can take.''

U.K., Ireland Banks

Banks in the U.K. and Ireland raised a total 5 billion euros this week under the governments' pledges to guarantee bank debt to shore up confidence in the financial system.

Bank of Scotland Plc, a unit of HBOS Plc, sold an extra 1.2 billion pounds of its government-guaranteed bonds maturing in 2011 at a yield of 108 basis points more than U.K. gilts.

RBS increased its sale of 3.75 percent 2011 bonds by 1 billion euros to 3 billion euros at a spread of 123.5 basis points. The Edinburgh-based lender boosted its 4.125 percent 2011 notes by 600 million pounds to 2 billion pounds, yielding 103.8 basis points more than government debt.

Allied Irish Banks Plc, the nation's biggest lender by market value, became the first issuer in Ireland to sell government-guaranteed bonds. The Dublin-based bank raised 2 billion euros from two-year bonds yielding 161.7 basis points over government benchmarks, Bloomberg data show.

In other sales, Vodafone Group Plc raised 450 million pounds of 10-year bonds at yield spread of 400 basis points over government notes. Deutsche Telekom, Europe's largest phone company, raised 250 million pounds of 20-year bonds yielding 400 basis points more than U.K government debt.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates deterioration in the perception of credit quality.

To contact the reporters on this story: Shelley Smith in London at ssmith118@bloomberg.net:

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OPEC Cuts Supply 3.8% This Month, PetroLogistics Says

By Grant Smith

Nov. 21 (Bloomberg) -- OPEC will cut oil supplies by 3.8 percent this month as the group implements its Oct. 24 resolution to reduce production, according to provisional data from Geneva-based consultant PetroLogistics Ltd.

Thirteen members of the Organization of Petroleum Exporting Countries, which provides more than 40 percent of the world’s oil, supplied 30.98 million barrels a day this month, compared with 32.2 million a day in October, PetroLogistics founder Conrad Gerber said today by telephone from Geneva.

The reduction was led by Saudi Arabia, which trimmed supplies to 8.95 million barrels a day in November from 9.49 million the previous month, PetroLogistics data showed. The 11 OPEC states subject to output quotas will produce 27.8 million barrels a day in November, in excess of their official limits, Gerber said. That’s down from 29.05 million barrels last month.

“They haven’t achieved their target yet, but they did reduce,” Gerber said.

OPEC is due to meet in Cairo on Nov. 29 and again in Algeria on Dec. 17 after its decision last month to slash production by 1.5 million barrels a day failed to stop oil prices crashing to below $50 a barrel in New York. That Oct. 29 resolution gave the 11 members bound by quotas a ceiling of 27.3 million barrels a day.

Iran, the organization’s second-largest member, trimmed supplies by 80,000 barrels a day to 3.67 million a day in November, according to PetroLogistics.

Kuwait’s supplies fell to 2.5 million barrels a day from 2.68 million; the United Arab Emirates declined to 2.33 million from 2.56 million; Nigeria contracted to 1.93 million from 1.95 million; and Venezuela to 2.32 million from 2.33 million barrels a day.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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Lukoil May Purchase $6.3 Billion Stake in Repsol

By Stephen Bierman and Gianluca Baratti

Nov. 21 (Bloomberg) -- OAO Lukoil, Russia's biggest non- state oil company, may buy a stake of as much as $6.3 billion in Repsol YPF SA of Spain to extend its refining investments in the Mediterranean.

Repsol, the largest Spanish oil company, rose as much as 11 percent in Madrid trading to 15.14 euros after Criteria Caixacorp SA said it and Sacyr Vallehermoso SA may sell a combined holding of up to 30 percent. Based on Repsol's closing share price yesterday, that would amount to 5 billion euros ($6.3 billion). Lukoil declined to comment on any purchase.

Lukoil already owns refineries in Bulgaria and Romania and Chief Executive Officer Vagit Alekperov agreed in June to pay 1.35 billion euros to buy into a refining venture in Italy with ERG SpA. Analysts at JPMorgan Chase & Co. and ING Groep NV expressed skepticism that Lukoil could afford another purchase.

``The current conditions and the value of the stake make any deal highly unlikely in our view,'' JPMorgan analyst Alex Kantarovich said in a note to clients today.

Lukoil has $1.9 billion in debt and loans due at the end of 2008. Obligations will drop to $609 million in 2009 and then to $525 million the year after that. The company had $1.66 billion in cash at the end of June.

With its gas assets, Repsol would have been a ``much better match'' for OAO Gazprom, according to Igor Kurinnyy, an ING analyst in London.

Gazprom Ruled Out

Gazprom, Russia's natural-gas exporter, said last week it's not interested in the Repsol stake.

Repsol is looking to boost its stake in West Siberian Resources Ltd., a Stockholm-traded Russian oil producer, to 10 percent. It has also expressed interest in taking part in Russia's offshore Pacific Sakhalin-3 acreage.

The refineries in Romania, Ukraine and Italy aren't enough for Lukoil to be considered a ``global company,'' said Alexei Kokin, an analyst at Metropol in Moscow. A stake in Repsol would boost Lukoil's refining presence in Europe and ``catapult Lukoil into South America as well,'' Kokin said.

Repsol is aware of talks between one of its ``significant'' shareholders and interested third parties and isn't involved in any discussions, according to a statement. A Sacyr spokeswoman, who didn't want to be identified in line with official policy, said the company was open to talks about selling any of its subsidiaries.

Although Spain's Prime Minister Jose Luis Rodriguez Zapatero said yesterday that he would prefer for Repsol to remain under a ``Spanish flag,'' he also said the possible stake sale was a matter for ``private companies.''

Refining Operations

Repsol operates five refineries in Spain, three in Argentina and one in Peru. It has holdings in another refinery in Argentina and two in Brazil, giving the company a total refining capacity of 1.23 million barrels a day, according to the Madrid-based company's Web site.

El Economista said today that Lukoil has offered Criteria and other shareholders 28 euros a share for a stake of just under 30 percent in Repsol. An offer at this price would value the combined stake at about 10.2 billion euros.

``Lukoil would have trouble financing the deal,'' Evgenia Dyshlyuk, an oil analyst at Renaissance Capital, said. ``They don't have much cash because they need to spend it on capital spending.''

Sacyr jumped 11 percent to 8.15 euros as of 1:45 p.m. in Madrid. Repsol was 5.2 percent higher at 14.30 euros. Lukoil fell 3 percent to 792 rubles on the Micex stock exchange.

The nation's fifth-biggest builder said last week it's in talks on the possible sale of its 20 percent interest in Repsol.

Debt-Laden

Sacyr, which has a market value of 2.6 billion euros, ended September with debt of 16.5 billion euros. The construction company spent 6.5 billion euros buying the Repsol holding in 2006, paying an average of 26.71 euros a share.

Criteria has a 9.1 percent direct stake in Repsol as well as a smaller indirect interest through Repinves, taking its total stake to 12.7 percent, according to the company's third- quarter earnings report.

In June, the Russian producer agreed to set up a joint venture with ERG that will control the 320,000 barrel-a-day Isab refinery, storage tanks, and a 99-megawatt power plant in Priolo, Sicily.

To contact the reporter on this story: Gianluca Baratti in Madrid gbaratti@bloomberg.net.

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Petrobras Finds 1.5 to 2 Billion Barrels of Light Oil

By Jeb Blount and Joao Lima

Nov. 21 (Bloomberg) -- Petroleo Brasileiro SA, Brazil's state-controlled oil company, found light oil in two wells off the coast of Brazil's Espirito Santo state, expanding its ``pre- salt'' discoveries in an area that's already producing crude.

There are probably 1.5 billion to 2 billion barrels of recoverable oil equivalent, Petrobras, as the company is known, said today on its Web site. The discovery has enough oil to supply all of Brazil's needs for two and a half years, according to BP Plc. The wells are located in the Parque das Baleias area, near the Jubarte oil field, Rio de Janeiro-based Petrobras said.

The oil off Espirito Santo state is in reservoirs beneath fields that are already producing crude, increasing chances that the company can use some of its existing rigs, pipelines and other infrastructure to get the oil.

``Finding oil in an area that already has infrastructure helps work a lot,'' said Gilberto Pereira de Souza, an energy analyst with Banco Espirito Santo in Sao Paulo. ``This discovery in an area that already has oil makes it much more interesting and Parque das Baleias will probably be made a focus in the company's strategic planning.''

On Nov. 11 Petrobras Chief Executive Officer Almir Barbassa said falling oil prices and a world credit crunch was pushing the company to focus on investments that will generate cash.

Another 1 billion barrels of recoverable oil and natural- gas equivalent are in the shallower reservoirs in Parque das Baleias, Petrobras said. Six wells have been drilled to pre-salt depths in Espirito Santo and all have found oil.

The 6-BFR-1-ESS and 6-BAZ-1DB-ESS wells were drilled about 80 kilometers (50 miles) from the coast in waters 1,348 meters and 1,426 meters deep. The oil was found beneath a 700-meter- thick salt layer after drilling 4,200 to 4,800 meters below the sea floor.

Petrobras preferred shares, the company's most-traded class of stock, fell 5.7 percent to 17.45 reais, the lowest since Nov. 30, 2005, at 11:12 a.m. in Sao Paulo.

To contact the reporters on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net; Joao Lima in Lisbon at jlima1@bloomberg.net

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Argentina, Colombia: Latin American Bond, Currency Preview

By Jamie McGee

Nov. 21 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day’s session.

Argentina: The unemployment rate fell to 7.8 percent in the third quarter from 8.0 percent in the second quarter, according to the median estimate of nine analysts in a Bloomberg survey.

The National Institute of Statistics is scheduled to release the report at 1 p.m. New York time.

The peso fell 0.1 percent to 3.33 per dollar.

The yield on the country’s inflation-linked peso bonds due in December 2033 rose 45 basis points, or 0.45 percentage points, to 22.90 percent, according to Citigroup Inc.’s local unit.

Colombia: The central bank will likely hold its interest rate at 10 percent, according to 27 of 31 analysts in a Bloomberg survey.

The central bank is slated to release the report today.

The peso fell 0.2 percent to 2,347 per dollar.

The yield on Colombia’s benchmark 11 percent bonds due in July 2020 was unchanged at 12.650 percent, according to Colombia’s stock exchange.

Mexico: Gross domestic product, the broadest measure of a country’s output of goods and services, expanded 1.2 percent in the third quarter, from 2.8 percent in the second quarter, according to the median estimate of 18 analysts in a Bloomberg survey.

The National Institute of Statistics is slated to release the report at 3:30 p.m. New York time.

The peso fell 2.8 percent to 13.9527 per dollar.

The yield on Mexico’s 10 percent bond due December 2024 rose 10 basis points to 9.86 percent, according to Banco Santander SA.

Other prices in Latin American markets:

Chile: The peso fell 0.6 percent to 661.60 per dollar.

The yield for a basket of five-year peso bonds in inflation-linked currency units, called unidades de fomento, rose 7 basis points to 3.47 percent, according to Bloomberg composite prices.

Peru: The sol was little changed at 3.1015 per dollar. The yield on Peru’s 8.6 percent bond maturing August 2017 rose 10 basis points to 8.35 percent, according to Citibank Peru.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net

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Canada’s Dollar Advances as Global Stock Markets Rebound

By Chris Fournier

Nov. 21 (Bloomberg) -- Canada’s currency rose for the first time in four days as global stocks rebounded.

Canada’s dollar strengthened as much as 1.7 percent to C$1.2746 per U.S. dollar, from C$1.2962 yesterday. It traded at C$1.2788 at 7:04 a.m. in Toronto. One Canadian dollar buys 78.20 U.S. cents.

Stocks in Europe and Asia and U.S. index futures rose as speculation Citigroup Inc. may be up for sale and the cheapest commodity shares on record spurred rallies in banks and raw- material producers.

Consumer prices increased 2.6 percent from October 2007 after a 3.4 percent annual increase through September, Statistics Canada reported today in Ottawa. Annual inflation was slower than the 3.1 percent median forecast of 20 analysts surveyed by Bloomberg News.

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

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Yen Weakens as Stocks Rebound, Reviving Demand for Higher Yield

By Andrew Macaskill

Nov. 21 (Bloomberg) -- The yen declined as stocks rebounded on speculation that a sale of Citigroup Inc. will reduce risk in the financial system, stoking demand for higher-yielding assets financed with loans in Japan.

The yen also weakened against the Australian dollar, a favorite of so-called carry trades, after the Reserve Bank of Australia bought its own currency for at least the fifth time in four weeks. The dollar dropped versus the euro on speculation the Federal Reserve will cut interest rates and flood the financial system with cash as a recession causes prices to fall.

``The main driver is the rebound in equity markets that are gaining on speculation Citigroup could merge or sell off,'' said Lee Hardman, a currency strategist in London at Bank of Tokyo- Mitsubishi Ltd. ``This is taking some of the steam out of the yen's recent rally.''

The yen fell to 94.82 per dollar as of 7:25 a.m. in New York from 93.69 yesterday, trimming this week's gain to 2.3 percent. The currency may strengthen to 90 against the dollar by year-end, Hardman said. It dropped to 119.26 per euro from 116.68. The euro bought $1.2579 from $1.2453, paring its weekly decline to 0.2 percent.

Japan's currency weakened 3.1 percent versus Australia's dollar to 58.99 yen. The Australian dollar traded at 62.19 U.S. cents from 61.07 cents.

The MSCI Asia-Pacific Index of regional shares gained 3.1 percent, after earlier sliding as much as 2.3 percent. Europe's Stoxx 600 advanced 0.6 percent and U.S. stock-index futures climbed, pointing to gains after the Standard & Poor's 500 Index yesterday closed at an 11-year low.

Attractive Yen

Citigroup's board meets today to discuss the bank's options, a person familiar with the matter said, after Chief Executive Officer Vikram Pandit's efforts to rebuild investor confidence failed to halt the stock's descent to a 15-year low. The panel may consider selling off pieces of the bank or the entire company, the Wall Street Journal reported, citing people familiar with the matter.

The RBA bought a record A$3.15 billion in the market in October, it said yesterday, as the Australian dollar touched 60.10 U.S. cents, the lowest level since 2003. An RBA spokesman confirmed the bank bought Australian dollars today.

The yen has gained 17 percent against the dollar this year and 37 percent versus the euro as global recession concerns spurred a reduction in so-called carry trades, where investors get funds in a country with low borrowing costs and invest in one with higher interest rates.

Recession Concern

The Bank of Japan kept its benchmark rate at 0.3 percent today and said it will consider pumping more money into the financial system to prop up an economy that fell into a recession last quarter. Japan's rate compares with 6.5 percent in New Zealand and 5.25 percent in Australia.

``There's strong possibility that the yen will continue appreciating as the global recession may deepen,'' said Tohru Sasaki, chief currency strategist in Tokyo at JPMorgan Chase & Co. and a former chief foreign-exchange trader at the Bank of Japan. ``It's an environment where losses in cross-yen currencies are likely to be even bigger than those in the dollar-yen.''

The yen will advance to 87 against the dollar and 103 per euro by year-end, JPMorgan forecast.

``The yen will retain its attractiveness as the world potentially faces a long, long recession,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., which has $23 trillion of assets.

Dollar Gains

Gains in the dollar may be limited before speeches by Fed officials today. Richmond Fed President Jeffrey Lacker speaks about the economy at 8:15 a.m. in Bethesda, Maryland. Philadelphia Fed President Charles Plosser and Chicago Fed President Charles Evans also speak today.

The Fed's record injections of liquidity to stabilize the financial system have driven the overnight lending rate between banks to less than half the 1 percent target set by officials last month. The gap is shifting investor focus toward the amount of money in the system as a better gauge of Fed intentions.

``I don't think there's a way of avoiding the fact that extremely low interest rates and excess liquidity are negative for the dollar,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney.

Euro Boost

The euro rose versus the yen, the dollar and the Swiss franc as equity-market gains cut demand for haven currencies, said Paul Robson, a currency strategist at Royal Bank of Scotland in London.

``The bounce in stocks is helping to drive the euro higher,'' he said. ``The relationship between currencies and equity markets remains very much intact. Risk sentiment is the main force driving the currency market at the moment.''

The euro may gain 16 percent against the dollar in the next 12 months as Chinese demand drives up prices for oil, reducing the U.S. currency's attractiveness, Barclays Capital said.

Two-thirds of the euro's 22 percent slide since the July peak of $1.6038 stems from falling oil prices, Barclays said. Crude oil may rebound after dropping 67 percent from a record $147.27 a barrel on July 11 as the Chinese economy expands, it said.

To contact the reporters on this story: Andrew Macaskill in London at amacaskill@bloomberg.net

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Cocoa Heads for Second Weekly Gain on Ivorian Supply Concern

By Marianne Stigset

Nov. 21 (Bloomberg) -- Cocoa headed for its second consecutive weekly gain in London on concern that supply from Ivory Coast, the world's biggest grower, will decline.

A ban on the export of poor quality beans has already hurt the country's coffee trade. Exports fell 93 percent in October to 1,020 metric tons compared with a year earlier, the west African nation's ports of Abidjan and San Pedro said yesterday. Ivory Coast's cocoa crop may ``barely reach'' 1 million tons this season as disease and rainfall crimp output, according to Ali Lakiss, director of cocoa exporter Saf-Cacao.

``There is hardly any cocoa,'' Lakiss said by phone from the western port of San Pedro yesterday. ``So far this season, I've bought 8,000 tons while last year I already had about 30,000 tons.''

Cocoa for December delivery rose 13 pounds, or 0.9 percent, to 1,483 pounds ($2,230) a metric ton as of 11:10 a.m. on the Liffe exchange in London. Cocoa has gained 8.6 percent this week, extending this year's advance to 42 percent.

Cocoa futures for March delivery climbed $41, or 2 percent, to $2,050 a metric ton on ICE Futures U.S. in New York. Cocoa traded in New York has been the best performer in the UBS Bloomberg CMCI Index of 26 commodities this year.

The Ivorian state-run Coffee and Cocoa Management Committee on Oct. 5 said that poor quality coffee and cocoa beans wouldn't be exported.

Shipments from Abidjan dropped to 911 tons in October from 11,247 tons a year earlier, while exports from San Pedro declined to 109 tons from 3,177 tons.

Drier Weather

Black pod, a fungus that causes cocoa pods to turn black and rot, and adverse weather is affecting plantations, according to Lakiss.

``Drier weather through the major cocoa areas of Ghana and Ivory Coast, west Africa, favor late developing cocoa and any early harvesting,'' forecaster Meteorlogix LLC said yesterday. ``Although some areas of the south may be wet due to periodic isolated thunderstorm activity.''

Global production will outpace demand by 52,000 tons in the 2008-09 season, according to Fortis.

Cocoa stockpiles rose for the first time since September while robusta coffee inventories dropped for a third consecutive period, Liffe exchange data show.

Warehouses monitored by the exchange held 156,990 tons of cocoa on Nov. 17, up from 134,860 tons two weeks ago, the exchange said on its Web site.

Robusta stockpiles totaled 32,641 lots, each equal to 5 metric tons, as of Nov. 17, compared with 34,179 lots two weeks earlier.

Robusta coffee for January delivery rose $7, or 0.4 percent, to $1,826 a ton in London.

White sugar for March delivery fell $1, or 0.3 percent, to $321.50 a ton.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

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Gold Rises a Second Day in London as Dollar Falls, Oil Gains

By Nicholas Larkin

Nov. 21 (Bloomberg) -- Gold rose in London, heading for a third weekly gain, as the dollar weakened against the euro and oil advanced, increasing bullion's appeal as an alternative investment and hedge against inflation.

The U.S. currency may weaken 16 percent against the euro in the next 12 months as oil prices gain, Barclays Capital said. Oil rose today from close to the lowest since May 2005 on speculation governments will increase efforts to revive economic growth.

Bullion is ``following the stronger euro,'' Gerry Schubert, a director at Fortis in London, said by phone. Higher oil prices ``are having a positive effect,'' he said.

Gold for immediate delivery gained $13.90, or 1.9 percent, to $758.96 an ounce as of 11:01 a.m. in London. December futures were $9.90, or 1.3 percent, higher at $758.60 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal rose to $758.50 in the morning ``fixing'' in London used by some mining companies to sell production, from $738 at the previous afternoon fixing. Gold, heading for a 2.3 percent gain this week, has slipped 27 percent since reaching a record $1,032.70 an ounce in March.

The dollar dropped for the first time in four days against the euro and pound. Bullion generally moves in the opposite direction to the U.S. currency. Crude oil rose as much as 2.5 percent to $50.64 and last traded at $50.18.

Gold demand increased 18 percent to 1,133.4 tons in the third quarter from a year earlier, as lower prices encouraged purchases by jewelers and as investors sought a haven, according to the World Gold Council. Declining production this year and next adds to the metal's attractiveness, said Evy Hambro, who runs BlackRock Investment Management's $5 billion World Mining Fund.

`Wonderful Outlook'

``Looking at gold today, it's just a wonderful, wonderful outlook,'' Hambro said in an interview in London. ``Demand has been very strong'' and production ``is going to be down probably 3 percent this year and probably 5 percent next year.''

Among other metals for immediate delivery in London, silver added 25.75 cents, or 2.9 percent, to $9.2250 an ounce. Platinum rose $24.25, or 3.1 percent, to $801.75 an ounce and palladium was $4.25, or 2.4 percent higher, at $184.50 an ounce.

Platinum has slumped 47 percent this year as sales at automakers, the biggest users of the metal, plummeted amid rising unemployment and tighter consumer lending. Honda Motor Co., the only major automaker to expand North American auto output so far this year, is trimming production plans at U.S. plants by 18,000 more vehicles as sales decline.

`Equities Rebound'

``A rebound in U.S. equities could support platinum and palladium in particular,'' Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a note today. ``An equities rebound could be spurred by prospects of a bailout plan for U.S. carmakers.''

Congress is trying to reach a compromise on giving U.S. automakers $25 billion they say they need to survive the next year, either by speeding up the use of funds already approved to develop more fuel-saving technologies and models or providing a new source of funds.

Automakers account for more than half of global platinum consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.

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

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Copper, Aluminum Rebound as Mine Shutdowns May Erode Oversupply

By Claudia Carpenter

Nov. 21 (Bloomberg) -- Copper and aluminum rebounded from three-year lows on speculation mine shutdowns will help erode supply surpluses caused by reduced demand.

Copper has dropped 47 percent this year and aluminum is down 25 percent as auto plant shutdowns suggested global demand for industrial metals will continue to slow. Copper output topped consumption by 125,000 metric tons in August, the International Copper Study Group said yesterday.

``The longer prices stay at these levels, more mines will be forced to cut back and the mining industry will be poorly placed for a pickup in demand,'' said Leon Westgate, an analyst at Standard Bank Ltd. in London. Until demand picks up, ``any rallies are likely to be sold into,'' he said.

Copper for delivery in three months rose $58.75, or 1.7 percent, to $3,538.75 a ton as of 10 a.m. on the London Metal Exchange after earlier falling to $3,375, the lowest since July 21, 2005. Aluminum gained $25 to $1,810 a ton, rebounding from a three-year low of $1,765.

The UBS Bloomberg CMCI Index of 26 commodities yesterday declined to the lowest since December 2005 as the dollar extended its gain against the euro this year to 16 percent. The U.S. currency declined today on speculation the Federal Reserve will cut interest rates and flood the banking system with cash.

Today's reverse in the dollar is also supporting industrial metals, Westgate said. The dollar fell 0.7 percent against the euro, the first decline in four days.

Stockpiles Increase

Alcoa Inc., the biggest U.S. aluminum producer, and Namibia copper miner Weatherly International Plc are cutting output. Aluminum output worldwide in October was the lowest daily average since March, the International Aluminium Institute said yesterday.

Aluminum stockpiles tracked by the London bourse climbed 2,025 tons to 1.7 million tons and copper inventories gained 1,500 tons to 283,125 tons.

Lead gained $25 to $1,210 a ton, zinc increased $20 to $1,200 a ton and nickel advanced $350 to $10,300 a ton. Tin rose $275 to $11,575 a ton after inventories fell 75 tons to 4,290 tons, the first drop since Nov. 10.

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

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Crude Oil Rises on Potential Rescue Packages, OPEC Supply Data

By Grant Smith and Nesa Subrahmaniyan

Nov. 21 (Bloomberg) -- Oil rose for the first time in six days on speculation governments will step up efforts to revive economic growth and OPEC members cut production.

OPEC members will likely cut supplies by 3.8 percent this month to 30.98 million barrels a day following a decision in October to lower production, according to consultant PetroLogistics Ltd. The Bank of Japan said it will consider pumping more money into the financial system, while the European Commission will announce a fiscal-stimulus plan next week, President Jose Barroso said yesterday.

“If the market believes these packages are working then they can put a floor under prices,” said Andy Sommer, an analyst with HSH Nordbank in Hamburg. “Many analysts think these prices are not justified by fundamentals and are saying now is the time to buy.”

Crude oil for January delivery rose as much as $1.23, or 2.5 percent, to $50.65 a barrel on the New York Mercantile Exchange. It was at $50.32 at 1:12 p.m. in London.

The contract earlier fell as much as $1.17, or 2.4 percent, to $48.25 a barrel, the lowest since May 23, 2005. Futures have dropped 67 percent since reaching a record $147.27 a barrel on July 11.

The MSCI World Index of equities added 0.8 percent to 777.51 at 12:30 p.m. in London, trimming this week’s decline to 11 percent.

Opec Trims

Thirteen members of the Organization of Petroleum Exporting Countries, due meet in Cairo eight days from now, are set to supply 30.98 million barrels a day this month, compared with 32.2 million a day in October, PetroLogistics founder Conrad Gerber said today by telephone from Geneva.

The reduction was led by Saudi Arabia, which trimmed supplies to 8.95 million barrels a day in November from 9.49 million a day in the previous month, Petrologistics data showed. The 11 OPEC states subject to output quotas are still producing in excess of their official limits, Gerber said. OPEC members meet in Cairo in eight day’s time.

Bank of Japan Governor Masaaki Shirakawa has instructed his staff to study new ways of making money available for lending, such as accepting corporate debt as collateral, the central bank said in a statement in Tokyo today.

German officials have put the size of the European economic stimulus package at 130 billion euros ($162.5 billion), a figure that European Commission President Barroso refused to confirm yesterday.

Brent crude oil for January settlement rose as much as $1.62, or 3.4 percent, to $49.70 a barrel on London’s ICE Futures Europe exchange.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net.

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