Stocks Higher, Dollar Mostly Lower

Daily Forex Fundamentals | Written by CurrencyThoughts | Nov 27 08 13:07 GMT |

Asian bourses were inspired by China's big rate hike yesterday and rallied by 2.0% in Japan, 4.3% in Taiwan, 3.3% in South Korea, 1.8% in the Philippines, and 1.5% in China. Australian equities advanced 1.4%. In Europe, the Dax is up 2.2%, and the Ftse has gained 2.0%. The Paris Cac shows a 1.7% rise. The dollar lost 0.7% against sterling and 0.4% against the yen, Swissy, and Australian dollar. EUR/USD is flat, and the dollar has dipped 0.1% versus the Canadian dollar. Indian markets were closed today. Over 100 dead in Islamic militant attacks. U.S. markets will be closed today for Thanksgiving. Oil slipped back 2.0% to $53.33/barrel. Gold rose 0.6%. The 10-year JGB yield dipped another 0.5 bp to 1.375% and touched its lowest level since October 7. Economic sentiment in Euroland fell to 74.9 in November from 80.0 in October and 88.5 in August. A significantly smaller drop had been forecast. Industrial sentiment (-25 after -18 in October and -9 in August) worsened more sharply than consumer confidence (-25 after -24 in October). Service sector sentiment dropped to -12 from -7, and construction sentiment had a score of -24 after -20 in October and -13 in August. A separate business climate index worsened to a 15-year low of -2.14 in November from -1.34 in October and -0.82 in September. Price expectations among consumers (11, down from 19) and firms (1 versus 6 in October and 12 in September) show rapidly receding inflation risks. The German labor market showed resilience in November. Unemployment fell 10K, more than anticipated, and remained at 7.5% of the labor force. Employment grew 1.3% in the year to October. Euroland M3 growth failed to slow in October, posting another 8.7% on-year advance as M1 rose on portfolio shifts into cash. But private credit (8.6% after 10.1% in September) and private loans (+7.8%, down from +8.5%) reflected the credit crunch. The figures will not prevent the ECB from easing at least 50 bps next week. Producer prices in South Africa rose 14.5% in the year to October, a bigger-than-expected deceleration from 16% in September. Monetary easing is expected soon. China's Planning Agency warned of sub-8% growth in 4Q08, a 3-year low, saying that the global financial crisis had not bottomed and was being felt more deeply in China. A retail-PMI for Euroland compiled by Bloomberg dropped to 40.6 in November from 44.3 in October, with readings of 41.3 in Germany, 48.7 in France and a record low of 28.5 in Italy. Britain's Nationwide house price index posted the smallest monthly drop (0.4%) in a year and a reduced on-year decline of 13.9% in November versus -14.6% in October. From the “I told you so” department, Bank of England dove Blanchflower scolded his colleagues for not cutting interest rates sooner in a preemptive way rather than reactively. Japanese automakers saw an on-year drop in their global production during October. Toyota -14.7%. Nissan -18.3%. Bank of Japan minutes from the October 31st meeting that cut the overnight target rate to 0.3% from 0.5% revealed that Governor Yamaguchi had to break a 4-4 tie vote. A proposal to cut the rate by 25 basis points was rejected by a vote of 5-3 earlier. Hawk Mizuno opposed any rate reduction, feeling there was no point. Business sentiment in New Zealand worsened in November, as views of own firms and of national economy deteriorated. New Zealand's trade gap widened 21.7% between October 2007 and October 2008. Larry Greenberg CurrencyThoughts

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Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Nov 27 08 13:17 GMT |

EUR/USD Resistance: 1,2935-40-/ 1,2970/ 1,3010/ 1,3070-80/ 1,3120/ 1,3170/ 1,3250/ 1,3300 Support : 1,2870/1,2820/ 1,2780/ 1,2730-40/ 1,2670-80/ 1,2620/ 1,2580/ Comment: Yesterday proved to be corrective, after the reach of 1,3050-00, as we had correctly warned. Despite yesterday’s negative candle, there are no reversal signs yet, as previous day’s lows have not been breached and the decline was limited at 38,2% retracement level at 1,2800-20. Currently, a sideways consolidation is being formed, and it could give more signs regarding the market’s intentions. If the move is limited below 1,2920-30 or 1,2970-80 and we see a clear break of 1,2800 in the hourly chart, it could lead us to lower targets at 1,2650-70, with interim support at 1,2740-50. As we mentioned in our previous analysis, a move below 1,2650 would cancel our upward expectations and a retracement to the base of 1,2400 would be possible once again... According to our upward scenario, the area of 1,2800 the rise or we could see a false break an d a quick retracement above. In that case, a pullback to 1,3000-50 and a sideways consolidation would be possible. A move to new highs could lead to next important resistance at 1,3280-3310, whose break would lead to 1,3750-00 area. STRATEGY : Buy : We keep our positions small to the US market holiday and low liquidity, and try buy positions at 1,2810-30, with tight stops. A possible break of 1,2800 and a quick retracement could also be used for buy orders having as target the tops of 1,3050-80...We could also try buy orders at 1,2650-70... Sell: Sell positions could be tried after a break of 1,2800, with quick target at 1,2740-50 and depending on the move’s strength they could remain open until 1,2650-70. Stops would be set above 1,2850... If support at 1,2800 is confirmed, we could try sell orders at previous tops... FX Greece DISCLAIMER The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market. We assume no responsibility for any kind of losses ,profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action. We reserve the right to change the terms and the characteristics of the analysis. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights.

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Canadian Dollar Crosses Poised For Breakouts, But Will Volatility Come Through?

Daily Forex Technicals | Written by DailyFX | Nov 27 08 13:50 GMT |

Congestion has developed for many of the Forex markets most liquid pairs; but today the DailyFX Analysts' focus turns to the Canadian dollar. Particularly tight ranges through today's thin liquidity points to well-defined technical ranges. Can breakouts be forced before the week ends? Currency Strategist - John Kicklighter My picks: Pending USDCAD Breakout Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week Fundamental drivers in the currency market are in short supply for the currency market - not that it would matter much given the circumstances with liquidity - but my interest in USDCAD is nonetheless falling to technicals. Over the past few months, this pair has been exceptionally volatile through periods of clear direction and broad congestion. Right now, the pair is experiencing the latter. Looking at a higher time frame chart, there is a clear double top formation that was developed just above 1.30. And, while the market has already pulled back from its second failed attempt to break through, the potential for a triple top or trend reversal is still up in the air. Perhaps a more pressing chart formation will decide where the market goes from here. A head-and-shoulders formation has been set with the second peak in the double top as the head in the pattern. Shoulders seem to be congestion zone based and hold a rising trendline for a neck line - both optimal for breakout scenarios. With the top of the shoulder at 1.2430 and the rising neckline at 1.22 (the horizontal barrier to the shoulders pattern is 1.21), there are very clear levels to play with. I will wait for a confirmed breakout for entry; but it will be very important to monitor the type of follow through we would get behind any breaks. During low liquidity conditions, it is hard to build momentum. A break next week would be optimal. Currency Analyst - Ilya Spivak My picks: Short CADJPY Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months The beginning of this week saw CADJPY rebound from near all-time lows to test significant resistance at 78.60, the intersection of a downward sloping trend line connecting the highs since late September and the 23.6% Fibonacci retracement of the 09/25-10/27 decline. Prices have stalled here to two days, signaling increased indecision after yesterday's Shooting Star candlestick. Risk-reward considerations favor a short bias to trade with the dominant bearish trend. However, stops should be kept tight (just above the 11/25 high at 79.36) because noticeably buoyant stock performance amplified by illiquid holiday market conditions could turn even a small rebound in risk appetite into substantial downward pressure on the Japanese Yen. Initial target lies at 72.16, the 11/21 swing low. Currency Analyst - David Song My picks: Long USD/CAD Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days Fears of a global recession paired with fading demands for commodities continue to favor a bullish outlook for the USDCAD. After reaching a high of 1.2986 last week, the pair pulled back as oil prices climbed higher this week, but the dour outlook for the global economy suggests that the pair will move higher over the following week as investors continue to curb their appetite for risk. I anticipate the pair to work its way towards the 1.2400-10 level (38.2% Fib level of 1.1463-1.3020) next week, and a break above this level could push the pair back towards the October high of 1.3020 over the near-term. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Nov 27 08 13:10 GMT |

USD-CHF @ 1.1989/94...Holding Long R: 1.1979-96 / 1.2051-85 / 1.2131 S: 1.1957-55 / 1.1924 / 1.1869-42 Swiss has moved in a very narrow range between 1.1955 and 1.2024 during the day. The pair is making a S-H-S formation on the hourly chart with Support at 1.1955. We are holding Long on the pair. It looks set to move up if the Support at 1.1955 continues to hold during the US session. Holding: Long 10K USD @ 1.1988, SL 1.1940, TP 1.2050 GBP-USD @ 1.5427/31...Support at 1.5380 R: 1.5516 / 1.5757 / 1.5855 S: 1.5380-55 / 1.5344 / 1.5290 / 1.5235 Pound has seen a high of 1.5512 and 1.5312 during the European Session. It has been trading close to the 21-SMA (1.5380) on the daily chart during all this time. It looks bullish till the time it manages to remain above this mark. However, if it does not, it could possibly slip towards 1.5235 during the US session. AUD-USD @ 0.6561/64...Thin range trading R: 0.6617 / 0.6680 / 0.6859 S: 0.6533-10 / 0.6493 / 0.6463-60 Aussie has remained within a very thin range between 0.6492 and 0.6581. The pair could face some Resistance at 0.66. It had throughout the day taken Support at the 13-SMA (0.6466) and faced Resistance at the 21-SMA (0.6582) on the daily chart. A break past any of these could probably decide the direction which the pair could take going forward. It has been seeing some bullishness since the last few days and if the same continues, we could see an upmove with Resistance at 0.6680. We have an upward bias for the pair. Let's wait and watch if that holds. However, in the bigger picture, the pair is consolidating between a 0.60 and 0.68 and it may osciallate between this range going forward over the next few days. Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Lukoil Seeks Bank Financing for Repsol Stake Purchase

By Charles Penty and Gianluca Baratti

Nov. 27 (Bloomberg) -- OAO Lukoil requested financing to buy a stake in Repsol YPF SA, Spain’s largest oil producer, according to Miguel Blesa, chairman of Caja Madrid, one of the banks that may fund the deal.

The Madrid-based bank has asked Russia’s largest non-state oil company for more guarantees, Blesa told reporters today in Madrid. Lukoil spokesman Dmitry Dolgov declined to comment when contacted by Bloomberg.

Lukoil, which owns oil-producing assets in Siberia, wants to boost refine capacity in the Mediterranean to process its crude. Analysts at JPMorgan Chase & Co. and ING Groep NV had expressed skepticism that Lukoil, which already owns refineries in Bulgaria and Romania and has agreed to set up an Italian oil venture next month, could afford another purchase.

“The odds of Lukoil being able to arrange financing are fairly high even with oil prices at $50 per barrel,” Steven Dashevsky, managing director of equities at UniCredit SpA in Moscow, said in a telephone interview today. “Lukoil remains a very profitable company.”

Sacyr Vallehermoso SA, the Spanish builder whose debt is six times its market value, is seeking to sell its 20 percent stake in Repsol to reduce debt as the nation’s housing slump shows no sign of easing. Criteria, a Barcelona-based investment company, has a 9.1 percent direct holding in Repsol.

A 30 percent stake in Repsol is worth about 5 billion euros ($6.5 billion), based on the oil producer’s closing share price on Nov. 20, the day before Criteria first disclosed the talks.

No Board Seat

Any oil producer interested in buying a minority stake in Repsol won’t qualify for a seat on the company’s board, Chief Executive Officer Antonio Brufau said today.

A potential investor seeking to have a say in the running of the oil producer would be required to make a public offer. “They have to cross the magic line,” Brufau told a conference in Madrid.

“It would be hard to keep a 30 percent holder off the board,” said Iain Reid, a London-based analyst at Marquarie Bank. “It would be better to have them inside the tent than outside.”

If a rival oil company were interested in buying a stake in Repsol, it would be limited to 10 percent of voting rights, under company statutes, Brufau said. “Any new entrant has to respect the company’s plan and bring value.”

Repsol, which operates five refineries in Spain, has lost 40 percent of its value this year. Crude oil futures have dropped 64 percent since reaching a record $147.27 on July 11.

‘Track Record’

“A lot will depend on the price, but Lukoil does have a track record of buying undervalued assets at distressed values, and ultimately profiting from them when the cycle turns,” said Dashevsky at UniCredit.

Lukoil currently has $6.9 billion dollars in bonds and loans outstanding, according to Bloomberg data. It had $1.66 billion in cash at the end of June.

Repsol gained 3.6 percent to 15.15 euros as of 2:40 p.m. in Madrid. Sacyr was down 0.8 percent at 7.75 euros. Lukoil added 1.7 percent to 857.20 rubles on the Micex stock exchange.

The cost of protecting Repsol debt from default has surged fourfold to a record since the middle of October.

Credit-default swaps linked to the company rose 4 to 376 today, according to CMA Datavision prices, compared with 94 on Oct. 14. An increase in the contracts indicates a deterioration in the perception of credit quality.

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. A basis point on a contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.

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

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European November Retail Sales Fall as Shopping Halts

By Jurjen van de Pol

Nov. 27 (Bloomberg) -- European retail sales fell the most in at least five years in November as a recession eroded consumer confidence and spending, the Bloomberg purchasing managers’ index showed.

The measure of sales in the euro region declined to 41 from 44 in October, remaining below the 50 limit that indicates contraction for a sixth month. The gauge is based on a survey of around 1,200 executives compiled for Bloomberg by Markit Economics. The drop was the steepest in the near five-year history of the index.

The European, U.S., and Japanese economies will all shrink next year as the global financial crisis pounds companies and households, the Organization for Economic Cooperation and Development reported this week. Unemployment in the euro area is set to rise to 9 percent in 2010 from 7.4 percent this year, the OECD said.

“Consumers have become far more uncertain about keeping their jobs in the past months, they may have lost money in the stock market and in some European countries housing prices are declining, which isn’t exactly a stimulus for consumer spending,” said Martin van Vliet, an economist at ING Groep NV in Amsterdam. “The economic climate makes people step up their precautionary savings.”

Spending Wanes

Sales fell in Germany, France and Italy in November, the Bloomberg survey showed. From a year earlier, euro-area sales declined, led by a slump in Italy.

Store revenue in Germany, Europe’s largest economy, also fell by a record this month as sales “considerably” lagged behind retailers’ targets, Markit said. Consumers postponed purchases and cut back spending on appliances and cars.

Volkswagen AG, Europe’s largest carmaker, and Porsche SE will temporarily halt output to cope with shrinking demand. Production is being cut after Volkswagen’s European sales fell 7.6 percent last month.

European confidence in the economic outlook fell to a 15-year low this month even after radical interest-rate cuts and government stimulus measures aimed at battling the impact of the financial crisis. An index of executive and consumer sentiment dropped to 74.9 from 80 in October, the European Commission in Brussels said today, taking the gauge to the lowest since August 1993.

New Jobs

“Deteriorating labor market conditions and the ongoing problems in the financial sector are likely to continue to exert downward pressure on retail indicators going forward, offsetting the benefit of recent declines in commodity prices,” said Ken Wattret, an economist at BNP Paribas in London, in a note to investors.

Consumers may hold back on holiday gifts during the annual spending peak. “Retailers were highly pessimistic about the prospects for sales during next month’s crucial Christmas period, with just over one-third of panelists expecting sales to underperform initial targets,” Markit said.

Bulgari SpA, the world’s third-largest jeweler this month scrapped a forecast for higher annual profit. Business is the worst since the slump following the attacks of Sept. 11, 2001, Chief Executive Officer Francesco Trapani of the Rome-based company said.

Profit margins are declining as stores offer discounts to attract clients, Markit said. Euro-region sales fell short of expectations in November and more than a third of German and Italian retailers expect to miss their targets again in the coming month.

The Bloomberg retail indicator is based on a panel of companies in Germany, France and Italy, counting for about 80 percent of total euro-area retail sales by value. The panel includes large chain retailers as well as smaller stores.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

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European November Confidence Drops More Than Forecast

By Fergal O’Brien

Nov. 27 (Bloomberg) -- European confidence in the economic outlook fell to a 15-year low this month even after radical interest-rate cuts and government stimulus measures aimed at battling the impact of the financial crisis.

An index of executive and consumer sentiment dropped to 74.9 from 80 in October, the European Commission in Brussels said today. The November decline was bigger than economists had forecast and takes the index to the lowest since August 1993. Separate figures showed European retail sales fell the most in at least five years in November.

Central-bank and government packages have so far failed to boost sentiment after the euro-area economy slipped into a recession that may last through 2009. The European Union yesterday announced plans to coordinate 200 billion euros ($258 billion) in measures for the economy, while the European Central Bank has signaled more rate cuts are possible even after lowering its benchmark rate by a full percentage point in a month.

“The economy took a marked turn for the worse in the fourth quarter,” said Nick Kounis, chief European economist at Fortis Bank in Amsterdam. “This adds to the case for a bigger rate cut from the ECB next week than we have seen up until now.”

The Frankfurt-based central bank already has reduced its key rate to 3.25 percent from 4.25 percent since early October. ECB President Jean-Claude Trichet yesterday said he sees “negative growth” in the euro area in 2009, a forecast echoed by EU Monetary Affairs Commissioner Joaquin Almunia today.

‘Downside Risks’

“Downside risks are materializing,” Almunia said in Brussels. “The crisis may not end next year.”

The EU proposal is the latest in a series of measures to counter the impact of a worldwide financial turmoil that has roiled stock markets, shut down access to funding and curbed company investment and hiring. MAN AG, Europe’s third-largest truckmaker, may shorten the workweek at the commercial-vehicle division next year to cope with declining sales.

Ford Motor Co. plans to cut European production by about 10 percent next year, while Bayerische Motoren Werke AG and chemicals maker BASF SE are also scaling back output.

Economists had forecast that the confidence index would decline to 78 this month, according to the median of 29 estimates in a Bloomberg News survey. The euro gained 0.5 percent to $1.2945 against the dollar today, having dropped 1.4 percent yesterday.

Manufacturers’ Confidence

A measure of manufacturers’ confidence dropped to minus 25 this month, the lowest in 15 years, from minus 18 in October, according to the commission report. Sentiment in the services and construction industries also declined.

Today’s commission report also showed that confidence among consumers dropped to the lowest since 1994 this month. The Bloomberg purchasing managers index for retail sales declined to 41 in November from 44 in October, remaining below the 50 limit that indicates contraction for a sixth month.

The decline in energy prices in the last four months has prompted companies and consumers to scale back their predictions for price growth, according to the commission. A gauge of company selling-price expectations fell for a fourth month in November. A gauge of consumers’ outlook for prices dropped to 11 from 19. Crude oil was at $53.83 a barrel today, down almost two-thirds from its July record of $147.27.

The euro-area inflation rate probably eased to 2.4 percent this month from 3.2 percent in October, according to the median of 24 estimates in a Bloomberg News survey. That would be the lowest since September 2007 and makes it easier for the ECB to lower interest rates.

‘Sharp Decline’

“They should cut by 100 basis points next month, I believe. Monetary policy is already behind the curve,” Marco Annunziata, chief economist at Unicredit Group in London, said in a Bloomberg Television interview. “You’re facing a very sharp decline in inflation by the middle of next year.”

The central bank is due to publish new forecasts for economic growth and inflation at the next meeting of its governing council on Dec. 4. It will likely cut its forecast for inflation in 2009 to about 1 percent from 2.6 percent in September, said Kenneth Wattret, an economist at BNP Paribas in London. For the economy, it may forecast a contraction of as much as 0.5 percent, he said.

The EU statistics office will publish its inflation estimates for November tomorrow.

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

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Almunia Says EU to Cut 2009 Economic Estimates to ‘Negative’

By Meera Louis

Nov. 27 (Bloomberg) -- The European Union will cut its economic forecasts to project a contraction next year as the region continues to reel from the impact of the global financial crisis, EU Monetary Affairs Commissioner Joaquin Almunia said.

“We need to revise our previous estimates to negative growth,” Almunia said in Brussels today. “The crisis may not end next year.”

The financial turmoil has pushed the euro-area economy into its first recession since the introduction of the single currency almost a decade ago, prompting the EU to propose a 200 billion-euro ($258 billion) stimulus package yesterday. The European Commission, the EU executive, on Nov. 3 cut its 2009 growth forecast to 0.1 percent and estimated that gross domestic product will shrink for three consecutive quarters this year.

While Almunia avoided the word recession when talking about next year’s outlook, he is the second policy maker in as many days to suggest economic contraction is in store for 2009. European Central Bank President Jean-Claude Trichet said in a newspaper interview yesterday that there may be “negative figures” for growth next year.

The International Monetary Fund this month predicted that the economies of the euro region, the U.S. and Japan will all shrink next year, which would be the first simultaneous recession in those economies in the post-World War II era. Global growth will slow to 2.2 percent in 2009 from 3.7 percent this year, the IMF said.

New Projections

The European Commission is scheduled to issue updated economic forecasts in February. The ECB is due to publish new projections on Dec. 4, and Kenneth Wattret, an economist at BNP Paribas in London, says the bank may cut its 2009 forecast to a contraction as deep as 0.5 percent. In September, the ECB lowered its 2009 growth outlook to 1.2 percent from 1.5 percent.

The ECB, which lowered its benchmark rate by a full percentage point in a month, has indicated more reductions are possible. Europeans’ confidence in the economic outlook fell to a 15-year low this month even after the rate cuts and stimulus measures aimed at countering the financial crisis, data today showed.

Germany, France and Spain have already announced measures to boost their economies, and Spanish Prime Minister Jose Luis Rodriguez Zapatero plans to announce further actions in Madrid this afternoon. “We may even need more,” European Commission President Jose Barroso said in unveiling yesterday’s coordinated proposal.

To contact the reporter on this story: Meera Louis in Brussels at mlouis1@bloomberg.net.



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Nasdaq, Nord Pool to Start U.K. Power Futures Market

By Lars Paulsson and Paul Dobson

Nov. 27 (Bloomberg) -- Nasdaq OMX Group Inc.’s commodities unit and Nord Pool Spot AS won a competition to set up an exchange for electricity trading in the U.K. to boost liquidity and market transparency.

The tender was run by Britain’s Power-Trading Forum, whose members include Merrill Lynch & Co. and Barclays Capital, Nasdaq OMX said today in a statement. The platform may help the market recover from a dip in trading, according to Paul Beynon, who led the selection committee. Volumes have declined after utilities reduced credit lines to financial institutions.

Nasdaq is expanding in energy and carbon-dioxide emissions trading after taking over most operations of Oslo-based Nord Pool ASA, Europe’s biggest power exchange. In the U.K., Europe’s third-largest electricity market, traded volume was 2.3 times consumption last year, according to Prospex Research Ltd. That compares with 7.3 times in the Nordic region, where Nord Pool handles the majority of transactions.

“The U.K. has the same potential as the Nordic market, and it’s an opportunity to show that the model we have can work,” Geir Reigstad, head of Nasdaq OMX Commodities, said by telephone from Oslo. A more liquid market may encourage new participants.

The companies intend to establish the exchange in the second quarter of next year, eventually offering around-the-clock trading, a daily auction, clearing services and a derivatives market. A platform for gas trading is also part of the plan. A precise start date is yet to be decided, Reigstad said.

Nord Pool Experience

The selection committee studied bidders’ credit rating and operating experience, said Beynon, who is also head of U.K. power trading for RWE AG, Germany’s second-biggest utility. Nord Pool Spot operates the day-ahead power market for Denmark, Finland, Norway and Sweden, and was formed in 1991.

“It’s good to see reputable exchanges getting involved in the U.K. market,” Paul Mead, Citigroup Inc.’s managing director for European power, gas and emissions, said today in a telephone interview. “This may help price formation in the spot market and possibly spur financial trading around that.”

Nasdaq OMX and Nord Pool Spot’s initiative may not necessarily boost U.K. trading volumes, Mead said. “I don’t think it’s a cure for low liquidity. The market mechanism is important but so is the degree of market concentration.”

Market Liquidity

The U.K.’s biggest power suppliers own generation facilities, reducing their need to buy wholesale electricity and lowering market liquidity, according to David Hunter, a consultant at McKinnon & Clarke Ltd., which advises companies on buying energy. The exchange “won’t fix the underlying problem,” he said.

The majority of power trades in the U.K. are currently made through brokers including ICAP Plc, GFI Group Inc. and Spectron Group Ltd. Dutch energy exchange company APX BV offers U.K. contracts including for same-day, next-day and weekend delivery.

Trades on exchanges are cleared, or guaranteed by a central counterparty, to reduce the risk that contracts won’t be honored in the event of one party going out of business.

British Energy Group Plc, the country’s biggest electricity producer, and Germany’s E.ON AG said this month they are reducing risk with regard to financial institutions. Banks that have been active in Europe’s power markets include Fortis, which had to be rescued by the Dutch and Belgian governments, and Lehman Brothers Holdings Inc., which filed for bankruptcy in September.

Raise Volumes

The Power Trading Forum’s project was designed to boost volumes after companies such as Enron Corp., then the world’s biggest energy trader, exited the market in 2001 and 2002. While U.K. trading rose 24 percent to 811 terawatt-hours last year from a year earlier, volumes have since declined.

“Volumes have definitely dropped in the last two months,” Beynon said today by telephone, adding that the slump isn’t “necessarily the start of a trend.” The new venture may allow counterparties to bet on electricity prices without touching the physical market, reducing the complexity of market entry.

The forum, part of the Futures & Options Association, said when opening the competition that its members planned to use the winning platform for U.K. trading. Existing members on the Nord Pool and Nasdaq OMX exchanges won’t need to pay membership fees, according to the Nasdaq statement.

“It’s extremely important that a solution to increase transparency and liquidity in the U.K. power market is delivered,” said Tony Cocker, head of E.ON’s energy-trading unit. “We’re committed to providing Nasdaq OMX Commodities with the support it needs.”

It took more than two years to decide on the trading platform, which will rival APX’s plans to start day-ahead electricity auctions in the U.K. on Dec. 2. Germany’s European Energy Exchange AG and APX also took part in the tender.

Traders in other European markets including Germany, France and the Netherlands already participate in auctions to determine prices for next-day electricity, broken down into hourly pricing blocks.

“We will now jointly work on an implementation plan to make sure that the end product is fit for purpose,” Beynon said.

To contact the reporters on this story: Lars Paulsson in London at lpaulsson@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net



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Hungary Is ‘Most Probably’ in Recession, Economy Minister Says

By Zoltan Simon and Chris Burns

Nov. 27 (Bloomberg) -- Hungary, which is sacrificing its growth prospects to accelerate budget-deficit cuts and reduce its reliance on external financing, is “most probably” already in recession, Economy Minister Gordon Bajnai said.

“Hungary is heading into recession, most probably in the fourth quarter,” Bajnai said in an interview with Bloomberg TV in Budapest on Nov. 25.

A recession in western Europe is compounding problems in the region’s emerging markets that are battered by a lack of credit, weaker currencies and waning demand for their products. Hungary’s economy contracted in the third quarter and is set to follow the euro region into its worst recession in 15 years.

Gross domestic product fell 0.1 percent in the three months through September from the second quarter. The government expects the economy to contract 1 percent next year. The euro-area, Hungary’s biggest export market, slipped into a recession in the third-quarter, its first since 1993.

Hungary is accelerating spending cuts after investors dumped local assets during the financial crisis last month on concern the country may be unable to finance its short-term debt, forcing the government to seek international aid.

Prime Minister Ferenc Gyurcsany froze public sector wages next year and cut pensions to reduce the budget deficit to 2.6 percent of GDP from an estimated 3.4 percent this year. Earlier targets were 3.8 percent for this year and 3.2 percent in 2009.

IMF Loan

The government secured 20 billion euros ($25.9 billion) of loans from the International Monetary Fund, the European Union and the World Bank. The central bank raised interest rates to the highest in the EU to defend the forint, which plunged to a record against the euro on Oct. 23.

Monetary policy makers on Nov. 24 unexpectedly lowered the benchmark two-week deposit rate to 11 percent from 11.5 percent, starting to roll back last month’s 3 percentage-point emergency increase on a strengthening currency and easing inflation pressure.

The benchmark is still the highest in the EU and the central bank will probably have room to reduce it further, Bajnai said.

“Now we can start gradually reducing the otherwise huge margin between funding rates of other countries and Hungary,” he said. “It will take time and has to go alongside the recovery of investor confidence in Hungary.”

The Magyar Nemzeti Bank “can’t rule out” cutting the key interest rate further next month on Hungary’s reduced vulnerability in the global financial crisis, Central Bank Vice President Ferenc Karvalits said on Nov. 25.

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British Pound Climbs Against Dollar, Euro as Equities Advance

By Anchalee Worrachate

Nov. 27 (Bloomberg) -- The British pound rose against the dollar and strengthened for a third day versus the euro as rising stocks rekindled risk appetite, spurring demand for the U.K. currency.

The pound climbed against all 16 major peers monitored by Bloomberg as the FTSE 100 Index, an equity benchmark, gained 1.8 percent, its third advance this week, and the MSCI World Index of stocks climbed for a fourth day. U.K. house prices declined this month by less than economists predicted, a Nationwide Building Society report showed. U.S. markets are closed today for the Thanksgiving holiday.

``Stocks are rising and, on that basis, it's a supportive environment for sterling,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. ``Moves may also be exaggerated by illiquidity in the market as we have a holiday in the U.S. My longer-term view about the pound remains bearish because of the economic fundamentals.''

The U.K. currency rose 1 percent versus the dollar to $1.5429 at 12:24 p.m. in London, from $1.5326 yesterday. Against the euro, it strengthened to 83.57 pence, from 84.04 pence.

The pound dropped 22 percent against the dollar this year and 12 percent versus the euro as slumping house prices sent Britain to the brink of a recession.

The average cost of a home fell 0.4 percent from October and dropped 13.9 percent from a year earlier, the Swindon, England- based mortgage lender said today. Economists surveyed by Bloomberg had expected drops of 1.7 percent and 15.1 percent, respectively.

Gilts Fall

Two-year government bonds fell for a fourth day as gains in stocks sapped demand for the safest assets. Bond prices stayed lower after the Debt Management Office sold 3.75 billion pounds of debt maturing in 2012. The security was sold at an average yield of 3.11 percent, drawing bids for 1.59 times the amount of securities on offer, down from 1.65 times in the previous sale.

The decline in gilts pushed the two-year yield up 14 basis points to 2.37 percent. The price of the 4.75 percent security due June 2010 fell 0.22, or 2.2 pounds per 1,000-pound ($1,543) face amount, to 103.55.

The yield on the 10-year note was little changed at 3.78 percent. Yields move inversely to bond prices.

``It boiled down to gains in stocks and the fact the short- dated gilt auction was not well-received,'' said Charles Diebel, head of European interest-rate strategy at Nomura International Plc in London. ``I see the rise in yields as a blip as interest rates will fall further.''

Long Bonds Gain

A slump in global growth and almost $1 trillion of losses and writedowns at financial institutions fueled demand for the relative safety of government fixed income this year. The Organization for Economic Cooperation and Development said Nov. 25 the world's largest economies need to lower borrowing costs further and cut taxes.

Gilts underperformed their European counterparts this quarter, handing investors a 5.14 percent return since the end of September, compared with a gain of 5.69 percent on German bonds, according to Merrill Lynch & Co. U.K. Gilts and German Federal Governments indexes.

Long-dated bonds rose on speculation coupon payments in the first week of December will be reinvested in gilts with maturities longer than 15 years, and on bets that so-called year-end index rebalancing will boost demand for such securities.

The DMO will make 5.56 billion pounds of coupon payments for 14 bonds on Dec. 7, estimated Royal Bank of Scotland Group Plc, one of the 15 financial institutions that deal directly with the Treasury. Nine of those 14 bonds are long-dated securities.

`Chase Yields Lower'

``About 3.2 billion pounds will come from 15-plus bonds and is likely to be redeployed,'' said Jason Simpson, a fixed-income strategist in London at RBS. ``There remains a risk that market participants are forced to chase longer yields lower.''

Simpson estimated the duration of the iBoxx All Gilts index will extend by 0.28 years going into January after removal of a 5.75 percent security due December 2009. This will require investors who use it as a benchmark to buy longer-dated bonds to match the change. Duration is a measure of the sensitivity of a security's price to changes in interest rates, expressed as a number of years.

The yield on the 15-year gilt fell four basis points to 4.38 percent, while the 30-year bond yield declined 5 basis points to 4.03 percent.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

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Oil Drops as Recession Raises Concerns of Falling Fuel Demand

By Christian Schmollinger and Grant Smith

Nov. 27 (Bloomberg) -- Crude oil fell after economic reports in the U.S. showed a deepening recession that may cut fuel demand in the world’s largest oil user.

Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said yesterday. Gasoline demand dropped 1.3 percent from last week, the Energy Department said in its weekly report.

“Oil prices are very much influenced by fears of recession,” said Sintje Diek, an analyst with HSH Nordbank in Hamburg. “The picture is of falling oil demand. We see inventories of crude oil continuing to rise, also gasoline, as consumers will drive less.”

Crude oil for January delivery dropped as much as $1.82, or 3.3 percent, to $52.62 a barrel in electronic trading on the New York Mercantile Exchange. It was at $53.10 a barrel at 12:55 p.m. London time. Futures have dropped 64 percent since reaching a record $147.27 on July 11.

Markets in the U.S. will be shut today because of the Thanksgiving holiday. Floor trading at Nymex will be halted as electronic transactions continue.

Brent crude oil for January settlement fell as much as $1.94, or 3.6 percent, to $51.98 a barrel on London’s ICE Futures Europe exchange. It was at $52.63 a barrel at 12:54 p.m. London time.

Inventories

U.S. crude-oil supplies rose 7.28 million barrels to 320.8 million barrels last week, the Energy Department said. It was the ninth straight increase, the longest stretch since April 2005. Stockpiles were forecast to climb 1 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.

Gasoline inventories rose 1.84 million barrels, or 0.9 percent, to 200.5 million barrels, the department said. A 500,000 barrel gain was forecast, according to the survey.

Crude oil demand may climb as refineries boost processing. Refineries increased operating rates by 1.3 percentage points to 86.2 percent of capacity, the highest since September. A 0.1 percentage-point gain was forecast.

The Organization of Petroleum Exporting Countries, which controls more than 40 percent of the world’s crude supply, is due to meet in Cairo on Nov. 29.

OPEC nations may cut output for the second time in as many months after recessions in the U.S. and Europe dragged oil below $50 a barrel. Last month, they agreed to cut production by 1.5 million barrels a day.

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



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Euro Rises as Stocks Advance, German Unemployment Declines

By Andrew MacAskill

Nov. 27 (Bloomberg) -- The euro rose against the dollar as European stocks advanced for a fourth day and a report showed unemployment declined in Germany, the region’s largest economy.

The currency shared by 15 European nations also gained versus the Brazilian real and New Zealand dollar as every major stock market in the region rose. German unemployment dropped in November, withstanding the worst recession in 12 years. Indian rupee forwards fell on speculation overseas investors will shun the nation’s assets after terrorist attacks in Mumbai prompted regulators to shut markets.

“We are seeing an increase in risk appetite and the euro is rising along with it,” said Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France’s biggest bank. “People are taking positions with that bullish perception.”

The euro advanced to $1.2906 at 1:04 p.m. in London from $1.2880 yesterday, when it fell 1.4 percent. It bought 123.06 yen from 123.24 yen. The dollar declined to 95.39 yen, from 95.67 yesterday, when it rose 0.5 percent. The euro strengthened 0.4 percent versus the New Zealand dollar to NZ$2.3409 and 1.5 percent to 2.91 real.

The Dow Jones Stoxx 600 Index climbed 1.5 percent, its fourth straight gain, as investors bet government efforts to shore up banks and the economy will support profits. In Germany, the number of people out of work, adjusted for seasonal swings, fell 10,000 in November to 3.15 million, the Nuremberg-based Federal Labor Agency said today. The adjusted unemployment rate held at 7.5 percent, a 16-year low.

India Attacks

Rupee one-month non-deliverable forwards fell 0.7 percent to 50.35 per dollar after terrorists targeted foreigners in five-star hotels in Mumbai, leaving 101 people dead and 290 injured. Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date. Non-deliverable contracts are settled in dollars.

The dollar fell after the biggest drop in U.S. consumer spending in seven years reported yesterday fanned speculation the Federal Reserve will cut interest rates to help avert a prolonged recession. The currency also slid as the Fed’s $800 billion plan to revive mortgage lending and consumer loans sent 10-year credit-default swaps on U.S. government bonds to a record high yesterday.

“Everyone was expecting poor U.S. data and it was even worse,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest bank. “Weak data is a problem for the dollar because it shows there are big economic difficulties that need to be resolved.”

Currency moves may be exaggerated today because U.S. financial markets are closed for the Thanksgiving Day holiday.

U.S. Holiday

“With the U.S. out for Thanksgiving, we are going to see thin liquidity and could see large moves,” said Christian Lawrence, a currency strategist in London at Royal Bank of Canada Capital Markets. “Today is going to be driven by flow, not by fundamentals or news, so we may see jumping around.”

The ICE’s Dollar Index, which tracks the greenback against the currencies of six major trading partners, declined 0.1 percent to 85.543. The U.S. Commerce Department report yesterday showed consumer spending dropped 1 percent in October.

Futures on the Chicago Board of Trade show a 36 percent chance the Fed will cut its 1 percent target rate for overnight bank loans by 0.75 percentage point at its Dec. 16 meeting, up from 32 percent a week ago.

The Fed committed up to $800 billion on Nov. 25 in new funding to thaw credit flow for homebuyers, consumers and small businesses and will take on credit risk by buying debt.

Contraction

The cost of a 10-year credit-default swap on U.S. government bonds jumped seven basis points to 57 basis points yesterday. The contracts rose from below two basis points at the start of the credit crisis in July 2007. A basis point is 0.01 percentage point.

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 borrower fail to adhere to its debt agreements.

The U.S. economy will contract 2.05 percent in the fourth quarter, according to a Bloomberg survey, after shrinking by 0.5 percent in the previous three-month period.

The euro’s gain against the dollar was the fourth in five days. Consumer prices in the euro region rose 2.4 percent in November, slower than a 3.2 percent gain the previous month, a report tomorrow may show.

Rate Cut

The euro region fell into a recession in the third quarter for the first time since the introduction of the common currency in 1999, data on Nov. 14 showed.

“The currency market is more focused on the bad economic outlook,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan’s largest brokerage. “We may see euro selling on expectations for lower rates.”

Traders increased bets the ECB will reduce its 3.25 percent benchmark rate in the second quarter. The implied yield on Euribor futures contracts expiring in June fell to 2.44 percent from 2.91 percent at the end of last month.

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

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Copper Drops in London on Speculation China’s Demand Is Slowing

By Claudia Carpenter

Nov. 27 (Bloomberg) -- Copper fell in London on speculation a slumping U.S. economy will crimp demand in China for industrial metals. Lead dropped to a two-year low.

Some economic indicators in China showed a “faster decline” this month, Zhang Ping, chairman of the National Development and Reform Commission, said in Beijing today. Copper usage in the U.S., the largest buyer after China, fell 9 percent in the first eight months this year while demand in China climbed 13 percent, according to the International Copper Study Group.

“Over the last month or so, the perception is that China was slowing down faster than people thought it would,” said William Adams, an analyst at London-based Basemetals.com. “The western world is putting on the brakes rapidly and therefore China can see their export demand will suffer.”

Copper for delivery in three months declined $70 to $3,685 a metric ton as of 10:53 a.m. on the London Metal Exchange. Aluminum fell $6 to $1,794 and tin dropped $250 to $12,750 a ton.

Copper inventories gained 2,375 tons to 288,725 tons.

Lead inventories rose 250 tons to 41,200 tons, the first increase since Nov. 11.

The three-month lead contract fell $46 to $1,140 a ton and earlier traded at $1,130, the lowest since Aug. 7, 2006.

Zinc declined $27 to $1,233 a ton and nickel dropped $190 to $10,410 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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European Stocks Advance for Fourth Day; Asian Shares Increase

By Adam Haigh

Nov. 27 (Bloomberg) -- European stocks rose, sending the Dow Jones Stoxx 600 Index to its fourth straight gain, as investors speculated government efforts to shore up banks and the economy will support profits.

Barclays Plc and Siemens AG rallied more than 4 percent. President-elect Barack Obama yesterday picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” Air Berlin Plc climbed 15 percent after posting a better- than-estimated 43 percent jump in third-quarter profit.

The Stoxx 600 added 1.6 percent to 201.95 at 1:23 p.m. in London, extending this week’s advance to 11 percent. The index is still down 45 percent in 2008, headed for its worst year since records began in 1987, as economies from Germany and the U.K. to the U.S. slip into recession.

“Investors see the market as discounting a truly cataclysmic event,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which has about $60 billion. “They are gaining reassurance from governments and central banks who are beginning to understand the severity of the situation.”

Trading may be slower than normal today with U.S. markets closed for the Thanksgiving holiday.

The MSCI Asia Pacific Index rose 1.8 percent, with China Vanke Co., the country’s biggest builder, and Aluminum Corp. of China climbing more than 3 percent.

India halted trading of stocks, bonds and the rupee today for the first time in more than three years after terrorist attacks killed 101 people in Mumbai’s financial hub. Stock-index futures and rupee forwards fell, while credit-default swaps rose.

Cutting Rates

Futures on the Standard & Poor’s 500 Index dropped 0.9 percent today. The S&P 500 climbed 11 percent in three days.

Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.

Citigroup Inc. has jumped 87 percent since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.

More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.

‘More Constructive’

“We have reached a bottom,” said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris and has been buying shares of Hewlett-Packard Co. and Alstom SA. “There is a slight change of feeling in the newsflow we are getting, relative to what we saw in October. The problems are far from over, but the newsflow is more constructive.”

Barclays gained 4.1 percent to 166.5 pence today. Siemens, Europe’s largest engineering company, rose 5 percent to 49.10 euros. Daimler AG, the world’s second-biggest luxury-car maker, advanced 1.7 percent to 25.11 euros.

Analysts have slashed earnings estimates this year as the credit turmoil spread. Profit for companies in the Stoxx 600 will slide 12 percent in 2008, compared with 11 percent growth forecast at the start of the year, Bloomberg data show.

“We are not that brave yet” to buy stocks, said Alan Beaney, who manages about $2 billion as head of investments at Principal Investment Management in Leeds, England. “Analysts’ expectations for profit forecasts are too high. We need to see these earnings numbers come down,” he told Bloomberg Television.

Earnings Reports

Earnings for the 324 companies in the Stoxx 600 that have reported results since Oct. 7 declined 15 percent on average, trailing expectations by 6.4 percent, Bloomberg data show.

Air Berlin surged 15 percent to 3.44 euros. Europe’s third- biggest discount airline reported earnings before interest and taxes of 89.1 million euros ($115 million), beating analysts’ expectations of 71.9 million euros.

In Asia, stocks rallied for a third day on speculation China’s rate cut will boost demand for homes and commodities.

China Vanke climbed 3.1 percent to 7.01 yuan. Aluminum Corp., China’s largest producer of the metal, jumped 3.5 percent to HK$3.30. Inpex Corp., Japan’s biggest oil explorer, surged 10 percent to 573,000 yen.

Irish Life & Permanent Plc and Allied Irish Banks Plc rallied after the Irish Association of Investment Managers approached the government about investing in the country’s banks to boost Tier 1 capital ratios. The ratio indicates a bank’s ability to cushion bad debts.

Irish Banks

Irish Life & Permanent, the nation’s largest mortgage lender, soared 17 percent to 1.58 euros, while Allied Irish Banks, the biggest bank by value, rose 14 percent to 2.74 euros.

Separately, the Irish Times reported today that U.S. private equity companies Texas Pacific Group and Kohlberg Kravis Roberts have held talks with Bank of Ireland about a possible investment. The bank was already contacted by a consortium that includes J.C. Flowers & Co, the paper said.

Intesa Sanpaolo SpA advanced 2.2 percent to 2.4475 euros. JPMorgan Chase & Co. upgraded the stock to “overweight” from “neutral,” saying the shares have underperformed since the company reported earnings for the third quarter. The brokerage has a price estimate of 3.1 euros.

Kingfisher Plc dropped 4.9 percent to 113.7 pence after Europe’s biggest home-improvement retailer said consumer confidence has been “shaken” in all its markets and reported a 4 percent decline in third-quarter profit.

ArcelorMittal added 3.9 percent to 19.495 euros. The world’s largest steelmaker said it may cut as many as 9,000 jobs globally after reducing output on falling demand.

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

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Cocoa Climbs to Three-Month High as Fortis Signals Supply Drop

By Marianne Stigset

Nov. 27 (Bloomberg) -- Cocoa gained to the highest in almost three months on speculation that dwindling supply will push the market into a deficit. Robusta coffee and white sugar also rose.

Cocoa production will outpace demand by 21,000 metric tons in the 2008-09 season, less than half what was expected a month ago, because of output cuts in Africa and Asia, Fortis said in an e-mailed report today. The bank reduced its estimate for production in the period to 3.71 million tons, from the 3.76 million tons forecast in October, Fortis said.

“This is a slim margin by any standard and -- so relatively early in the season -- could easily slip back into deficit if adverse weather at the turn of the year were to impact West Africa’s mid crops,” Fortis analyst Ricardo Santos wrote in the report.

Cocoa for December delivery rose as much as 25 pounds, or 1.6 percent, to 1,615 pounds ($2,497) a ton, the highest since Sept. 1, and traded at 1,611 pounds as of 11:30 a.m. on London’s Liffe exchange. Cocoa gained 11 percent last week, the biggest jump since September 2001, and has climbed 55 percent this year.

Cocoa futures for March delivery jumped $78 yesterday, or 3.6 percent, to $2,221 a ton on ICE Futures U.S. in New York. The market is closed today for the Thanksgiving Day holiday. Cocoa traded in New York has been the only gainer in the UBS Bloomberg CMCI Index of 26 commodities this year.

Black Pod

Ivory Coast’s cocoa crop may “barely reach” 1 million tons this season as disease and rainfall crimp output, Ali Lakiss, director of cocoa exporter Saf-Cacao, said last week. Black pod, a fungus that causes cocoa pods to rot, and adverse weather are affecting plantations, Lakiss said.

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

Cocoa production in Indonesia, the world’s third-biggest grower of the chocolate ingredient, may also miss forecasts, Fortis said.

“If supply uncertainty exists, right now the focus ought to be on Indonesia rather than West Africa,” Santos said. “Some long-standing observers of the Indonesian cocoa sector are concerned that aging trees and disease will significantly erode the current season’s output from Sulawesi.”

Among other agricultural commodities, robusta coffee for January delivery rallied $46, or 2.3 percent, to $2,013 a ton in London. White sugar for March delivery climbed $5.30, or 1.6 percent, to $322.90 a ton.

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

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Alfa, Comercial Mexicana, Fras-le, Sadia: Latin Equity Preview

Nov. 27 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index rose 4.5 percent yesterday to 1,995.09.

Brazil

ALL America Latina Logistica SA (ALLL11 BS): All, Brazil’s biggest railroad operator, and other companies are under investigation by Brazil’s Federal Police for misappropriation of government-owned rail wagons and locomotives, TV Globo reported. All gained 16 percent to 11.80 reais.

Fras-le SA (FRAS4 BS): The auto and rail parts maker that is a unit of Randon Participacoes SA plans to repurchase up to 9.8 percent of the company’s outstanding preferred stock after the shares plunged. Fras-le rose 0.4 percent to 2.59 reais.

MPX Energia SA (MPXE3 BS): The energy company said a Federal Court injunction prohibits expansion of the Pecem port, where MPX is building a $1.3 billion coal-fired power plant with EDP- Energias de Portugal SA. MPX rose 3.4 percent to 155 reais.

Petroleo Brasileiro SA (PETR4 BS): Brazil’s Guara oil field may hold as much as 4 billion barrels of oil, Gazeta Mercantil reported, citing unidentified people from state-controlled oil company known as Petrobras. The stock rose 6 percent to 20.52 reais.

Sadia SA (SDIA3 BS): Brazil’s biggest poultry exporter is in talks to sell a stake of as much as 20 percent to help cover losses from wrong-way currency bets, Estado de Sao Paulo reported. The company is seeking to raise as much as 800 million reais ($360 million) with the sale, the Sao Paulo-based newspaper said, citing unidentified people from equity funds in talks with Sadia. Sadia fell 4.5 percent to 4.90 reais.

Construtora Tenda SA (TEND3 BS): The Brazilian homebuilder named Carlos Eduardo Dan Alves Trostli its new chief executive officer. Trostli will replace Wilson Amaral, who will remain as chairman, Sao Paulo-based Tenda said in a regulatory filing today. Tenda gained 7.1 percent to 90 centavos.

Uniao de Bancos Brasileiros SA (UBBR11 BS): Brazil’s third- largest non-government bank agreed to pay $820 million for American International Group Inc.’s stake in a Brazilian insurance joint venture, ending an 11-year partnership. Unibanco gained 5.2 percent to 14.50 reais.

Chile

Masisa SA (MASISA CC): The lumber company with operations in Argentina and Venezuela plans to raise as much as $214 million from the sale of new shares and bonds to repay short-term debt. Masisa rose 2.8 percent to 53.46 pesos.

Mexico

Alfa SAB (ALFAA MM): The world’s largest maker of aluminum engine heads and blocks forecast 2008 operating cash flow of $985 million, lower than the $1.1 billion projection the company gave a year ago. Alfa fell 0.8 percent to 24.72 pesos.

Controladora Comercial Mexicana SAB (COMERUBC MM): The Mexican supermarket operator that filed for bankruptcy protection agreed to sell its 50 percent stake in consumer finance company Prestacomer SA to BNP Paribas for 120 million pesos ($9.09 million). Comercial Mexicana rose 4.5 percent to 2.34 pesos.

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HK shares rise for 3rd day after China rate bonanza

* Shares close off highs on China slowdown worries

* Aggressive rate cuts send Chinese properties soaring

* Air China gains on capital infusion hopes

* Commodities rally on hopes of intact China growth

(Updates to close)

By Parvathy Ullatil

HONG KONG, Nov 27 (Reuters) - Hong Kong shares rose 1.4 percent on Thursday, advancing for a third straight day but closing off highs as investors locked in gains on Chinese stocks after they took the nation's aggressive interest rate reductions as a sign of a sharper-than-expected slowdown.

"The unusually big interest rate cut which was announced ahead of market expectations seems to suggest that China's economic worries are more serious than previously thought," said Patrick Shum, strategist with Karl Thomson Securities.

China's economic growth slowed to 9 percent in the third quarter, falling into single digits for the first time in at least three years.

"There is talk that China's GDP growth will fall below 8 percent in the fourth quarter."

But mainland property counters racked up big gains, with China's higher-than-expected 1.08 percentage point interest rate cut -- its fourth since mid-September and biggest in more than a decade -- coming as a shot in the arm for the ailing sector.

China Overseas Land Investment (0688.HK: Quote, Profile, Research, Stock Buzz) surged 7.5 percent, Guangzhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz) soared 12.2 percent, while China Resources Land (1109.HK: Quote, Profile, Research, Stock Buzz) shot up 5.3 percent.

The benchmark Hang Seng Index .HSI ended 182.61 points higher at 13,552.06.

The index hit a two-week high of close to 14,000 points earlier, partly supported by a fourth day of gains on Wall Street and an overnight rally in commodity prices.

And some analysts expect the global markets to trend higher in coming weeks.

"China's unexpected rate cut and confidence in Obama's new financial team may help the global markets extend their rally, especially if the U.S. can find a solution for its automakers soon after Thanksgiving," said Steven Leung, director with UOB Kay Hian.

Mainboard turnover rose to HK$50.2 billion ($6.4 billion) from HK$41.7 billion on Wednesday.

The China Enterprises Index of top locally listed mainland Chinese firms .HSCE pared gains to 2.7 percent to close at 7,120.83 as bank stocks shed early sharp gains.

Shares in China's top lender, ICBC (1398.HK: Quote, Profile, Research, Stock Buzz), ended up 1.6 percent after China's central bank slashed the reserve requirement at large banks by 1 percentage point. But some analysts said the latest round of interest rate cuts may put further pressure on net interest margins of locally listed Chinese banks.

COMMODITIES RALLY

Metal stocks, which began their sharp ascent on Wednesday on BHP Billiton's scuppered bid for Rio Tinto, extended gains on China's monetary easing.

"With the larger-than-expected interest rate cuts coming sooner than expected it looks like China is determined to preserve its sharp growth rates. This is good news for commodity stocks that have been taking a beating on a projected demand slowdown," said UOB's Leung.

Angang Steel (0347.HK: Quote, Profile, Research, Stock Buzz), advanced 7.3 percent, while the world's most valuable coal miner, China Shenhua Energy (1088.HK: Quote, Profile, Research, Stock Buzz), bulked up 5.3 percent.

Refiner Sinopec Corp (0386.HK: Quote, Profile, Research, Stock Buzz) gained 3.7 percent after the head of China's top economic planning body said on Thursday it would make public the details of its much-awaited fuel price reforms as soon as possible. [ID:nPEK133183]

Asia's biggest oil and gas producer, PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz), which also owns refining operations, jumped 4.2 percent.

Air China (0753.HK: Quote, Profile, Research, Stock Buzz) vaulted 9.4 percent on hopes of state aid after rival airlines said their parent companies had applied for capital injections from the Chinese government amid hedging losses and slower air traffic.

China Southern Airlines (1055.HK: Quote, Profile, Research, Stock Buzz) confirmed on Wednesday its parent was considering infusing 3 billion yuan, secured from the government, into the listed company to boost its capital position. Its stock was suspended from trade.

On Thursday, shares of China Eastern Airlines (0670.HK: Quote, Profile, Research, Stock Buzz) were suspended after it announced a 1.83 billion yuan hedging loss by Oct. 31, as its parent was applying for a capital infusion from the state. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)

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