Natural Gas Falls on Smaller-Than-Estimated Supply Decline

By Reg Curren

Dec. 4 (Bloomberg) -- Natural gas futures in New York fell after a government report showed a smaller-than-forecast U.S. supply decline.

Stockpiles dropped 64 billion cubic feet in the week ended Nov. 28 to 3.358 trillion cubic feet, the U.S. Energy Department said. Analysts anticipated a drop of 67 billion cubic feet.

“No one is willing to step into the market right now,” said Michael Rose, a director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “When there’s a miss on the number, people get out. The fear of losing money right now is a lot greater than the anticipation of making money, and that’s especially true in energy.”

Natural gas for January delivery fell 20.8 cents, or 3.3 percent, to $6.139 per million British thermal units at 11:05 a.m. on the New York Mercantile Exchange. Gas was trading at $6.356 before the report was released at 10:35 a.m.

A drop in gas futures, which have lost more than half their value since early July, comes as production rose and demand weakened from a slowing U.S. economy, according to George Hopley, an analyst at Barclays Capital in New York.

To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net

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Addax Says Vessel Attacked Near Nigerian Oil Facility

By Alexander Kwiatkowski

Dec. 4 (Bloomberg) -- Addax Petroleum Corp., the Swiss oil producer focusing on Africa and the Middle East, said a vessel was attacked near one of its crude oil facilities in Nigeria.

The vessel, the Oceanic Orion, was attacked near the Addax- operated Adanga crude oil flow station, Geneva-based spokeswoman Marie-Gabrielle Cajoly said in an e-mailed statement today. “There have been no casualties and no impact on production,” she said. She was unable to give further details.

Nigeria’s crude industry has suffered this year from militant attacks and oil theft, which have at times allowed competing African producer Angola to overtake as the continent’s biggest exporter.

Earlier this week, Eni SpA, Italy’s largest oil company, suspended obligations on some Nigeria oil exports following a pipeline disruption.

Addax pumped an average 103,630 barrels a day of oil in Nigeria in the third quarter of 2008, according to a company statement last month.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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EDF Was ‘Approached’ by Constellation Investors

By Tara Patel and Paul Dobson

Dec. 4 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear reactors, said it was “approached” by Constellation Energy Group Inc. shareholders who were unhappy with a bid from billionaire Warren Buffett.

EDF, which owns 9.5 percent of Constellation, yesterday offered to pay $4.5 billion for half of the U.S. utility’s nuclear business.

The French company wants to gain generating capacity in North America and scupper a rival bid from Buffett’s MidAmerican Energy Holdings Co., which agreed Sept. 18 to buy all of Constellation for $4.7 billion, amid investor concern the financial crisis could wreck its energy-trading business.

Some investors “were just not comfortable with the price,” Chief Financial Officer Daniel Camus said during an investor day in London. “We think we are on solid ground.”

EDF’s Chief Executive Officer Pierre Gadonneix sees no reason why the offer won’t meet with a favorable reception, since it would provide “managerial certainty” as well as cost savings.

“It would transform EDF into a nuclear operator in the U.S., giving geographic and competency synergies,” Gadonneix said.

EDF’s intervention is an attempt to “cherry-pick” Constellation’s best assets, MidAmerican Chairman David Sokol said yesterday in an interview in New York.

‘Best Interest’

“We believe the merger agreement is in the best interest of stakeholders,” Sokol said. “We have a signed merger agreement. We have no intention to alter our bid.”

EDF is proposing a 50-50 venture that would own Constellation’s five reactors and pursue development of at least four Evolutionary Power Reactors, new models that are capable of producing about 1,600 megawatts of electricity.

The Paris-based power producer today said costs to build an EPR in Flamanville, Normandy, have risen 20 percent from an initial estimate because of higher prices for components.

The cost of building the reactor has now risen to 4 billion euros ($5.1 billion). EDF said similar plants planned for the U.S. would cost about the same.

The utility began construction last year on a new-generation nuclear reactor at Flamanville designed by Areva SA, the world’s biggest atomic plant maker.

The project in Flamanville is a gauge of EDF’s ability to export the technology.

“Using a comparable method, the estimated cost for a U.S. EPR is close to the costs presented for Europe,” it said.

Credit Concerns

Constellation agreed to the deal with MidAmerican after its stock plunged 58 percent in three days on credit concerns following the bankruptcy of Lehman Brothers Holdings Inc., a major energy trader. Constellation shareholders are scheduled to vote Dec. 23 on management’s agreement with MidAmerican.

Under EDF’s offer, Constellation would get $1 billion up front and the other $3.5 billion upon closing. Baltimore-based Constellation is the largest U.S. power marketer.

EDF estimates that terminating the accord with MidAmerican would drain $2.4 billion in liquidity, to be replaced by EDF.

MidAmerican would walk away with a 9.9 percent stake, $593 million in cash, and $1 billion of senior notes paying 14 percent interest, Constellation said yesterday in an SEC filing.

The cash portion includes a $175 million breakup fee. Constellation would also have to return any unused portion of a $350 million credit line.

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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Chevron, Total, Exxon, Shell Fined on Air France-KLM Fuel Price

By Heather Smith

Dec. 4 (Bloomberg) -- Exxon Mobile Corp., Royal Dutch Shell PLC, Chevron Corp., and Total SA were fined 41.1 million euros ($52 million) by the French antitrust authority for fixing the price of fuel for certain Air France-KLM Group flights.

The four companies conspired in 2002 to ensure they retained their share of the market for fueling flights during stopovers on Reunion Island, the Paris-based Conseil de la Concurrence said in a statement today.

“By acting jointly to restrict the volumes offered, they gave Air France no other option but to accept all four offers,” the counsel said in the statement on its Internet site.

The investigation showed the practice increased refueling costs for Air France, Europe’s biggest airline, on the island by 30 percent in 2002 and 2003, the statement said. The probe, which entailed raids in Paris, Reunion and London, was the first instance of cooperation between the French and the British Office of Fair Trading.

“Compliance with antitrust rules remains a top priority for management,” said Wendel Broere, spokesman for The Hague-based Royal Dutch Shell, Europe’s largest oil company, which was fined 10.5 million euros. The company hasn’t decided whether to appeal.

Total, Europe’s third-largest oil company, was fined 9.9 million euros. Elisabeth de Reals, a spokeswoman for the Paris- based company, said they hadn’t yet studied the legal reasoning for the decision and so hadn’t decided whether to appeal.

Exxon “acted in an appropriate and legal manner in respect to supplying fuel at the Saint Denis airport on Reunion,” said a statement on the Web site for subsidiary Esso SAF. The unit was fined 10.7 million euros.

A spokesman for Chevron, fined 10 million euros, didn’t immediately return calls seeking comment.

To contact the reporter on this story: Heather Smith in Paris at hsmith26@bloomberg.net.

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Oil May Fall Below $25 Next Year, Merrill Lynch Says

By Grant Smith

Dec. 4 (Bloomberg) -- Crude oil may dip below $25 a barrel next year if the recession that’s slashing fuel demand around the world spreads to China, Merrill Lynch & Co. said.

Global oil demand will contract in 2009 as economic growth slows to its weakest since 1982, Merrill Commodity Strategist Francisco Blanch said in a report today. In October, when oil was around $100 a barrel, the bank predicted that prices may slide to $50. Crude traded at $45.30 in New York today, the lowest since February 2005.

“A temporary drop below $25 a barrel is possible if the global recession extends to China and significant non-OPEC cuts are required,” Blanch said. “In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.”

Crude hasn’t fallen below $25 a barrel on the New York Mercantile Exchange since November 2002.

Global oil demand has slumped as the U.S., Europe and Japan face simultaneous recessions for the first time since World War II. The number of Americans collecting jobless benefits rose to 4 million in the week to Nov. 22, a 26-year high, the Labor Department reported today. European Central Bank President Jean- Claude Trichet said the euro region’s economy will shrink in 2009.

$50 Average

Merrill reiterated a Nov. 26 forecast that oil futures traded in New York will average $50 a barrel next year. Prices “could find a trough” at the end of the first quarter and undergo a “modest recovery” in the second half as economies strengthen, according to today’s report.

“We expect strong cooperation to emerge” among members of the Organization of Petroleum Exporting Countries as prices fall below $50, Blanch said. OPEC, producer of more than 40 percent of the world’s crude, was still pumping about 1 million barrels a day more than its official target of 27.3 million barrels a day last month, according to a Bloomberg survey.

Producers in Canada may shutter almost 800,000 barrels a day if prices decline below $35 a barrel, Blanch added.

Merrill’s $50-a-barrel assessment for 2009 is the second- lowest among 32 analyst estimates compiled by Bloomberg, after a prediction of $43.13 by ANZ Banking Group Ltd. issued on Nov. 18.

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

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Shell Pernis Refinery Fire Under Control, Plant Still Operating

By Alexander Kwiatkowski and Eduard Gismatullin

Dec. 4 (Bloomberg) -- Royal Dutch Shell Plc said a fire continues to burn at its Pernis oil refinery in the Netherlands, Europe’s largest plant.

The fire broke out in a heavy diesel pipeline at the refinery near Rotterdam at 1:20 p.m. local time today, said Wim van de Wiel, a spokesman for Europe’s biggest oil company, based in The Hague.

The refinery is still operating and the fire, although still burning, was brought under control at 3:25 p.m. local time, he said. The Rotterdam fire department sent 40 firefighters to help contain the blaze.

“The pipeline has been blocked in and now the fire is under control,” the Shell spokesman said. “It was heavy diesel oil” that caught fire and no injuries have been reported, he said.

The refinery has been working to restore production at various units that were closed last month for maintenance and repairs. RTV Rijnmond reported earlier that the fire was in catalytic cracker Unit 2.

Shell’s Class A shares in London fell as much as 3.1 percent before recovering. They were up 2 pence at 1,677 pence at 4 p.m.

Pernis has a capacity of 416,000 barrels a day. The plant’s catalytic crackers can process 50,000 barrels of gasoline a day, according to data compiled by Bloomberg.

Shell closed one fluid catalytic cracking, or FCC, units at Pernis in September to repair a fault. That unit was scheduled to resume operations in late November after a two-month halt, a person familiar with the situation who declined to be identified, said on Nov. 20.

The refinery has also had to delay at least twice the restart of a crude distillation unit, two people familiar with shutdown procedures said previously. The crude unit was supposed to restart in late November as well.

Gasoline in Europe traded for $6.73 a barrel below crude oil as of about 1 p.m. in London, compared with a discount of $6.02 yesterday, according to broker PVM Oil Associates Ltd.

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netEduard Gismatullin in London at egismatullin@bloomberg.net

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Merrill Cuts 2009 Growth, Currency Forecasts for East Europe

By Ewa Krukowska

Dec. 4 (Bloomberg) -- Merrill Lynch & Co. cut its growth and currency forecasts for Poland, Hungary and the Czech Republic because of the global economic slowdown.

Merrill said it expected Polish economic growth to slow to 1.8 percent next year from an expected 4.9 percent this year and saw Czech growth easing to 2.1 percent from 4.4 percent, according to a research note published today. Hungary’s economy will shrink by 2 percent next year after growing 1.1 percent this year, the bank predicted.

The Polish zloty will weaken to 4.25 against the euro in June, the Hungarian forint will depreciate to 305 per euro and the Czech koruna will fall to 26.5 versus the euro, Merrill predicted.

The Russian ruble will fall to 32.68 against the dollar and the Turkish lira will drop to 1.87 per dollar, according to the report.

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

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Nordic Currencies: Swedish Krona Declines as Riksbank Cuts Rate

By Bo Nielsen

Dec. 4 (Bloomberg) -- Sweden’s krona traded near a record low against the euro after the Riksbank lowered its benchmark interest rate by the most in 16 years to revive the ailing economy.

The krona snapped a two-day gain as policy makers, who raised borrowing costs as recently as September, lowered the repo rate by 1.75 percentage points to 2 percent, exceeding the median estimate of a 1 percentage-point cut by 18 economists in a Bloomberg News survey. It fell 6.7 percent against the euro and 9.2 percent versus the dollar in the past month as the Swedish economy shrank and the rate of inflation dropped the most in three years.

“It was a huge cut,” said Carl Hammer, a currency strategist in Stockholm at SEB AB. “This will add to the negative outlook for the krona,” which will slip to 10.69 per euro this week, Hammer predicted.

Sweden’s currency fell as much as 2 percent to 10.6229 per euro, and was at 10.5464 by 4:25 p.m. in Stockholm, from 10.4160 yesterday. It dropped to a record 10.6823 on Nov. 21. Against the dollar it declined as much as 2.5 to 8.3987 and was recently at 8.3115.

“There has been an unexpectedly rapid and clear deterioration in economic activity since October,” the Riksbank said in the statement after the rate decision. “A much lower repo rate and repo-rate path are needed.”

Scandinavia’s biggest economy slid into a recession in the third quarter as the global financial crisis curbed demand for the nation’s exports and consumers reined in spending. Seasonally adjusted gross domestic product contracted 0.1 percent from the previous three months, when it also shrank a revised 0.1 percent, Statistics Sweden said last week.

Trade Flows

Sweden’s trade with the euro region is 10 percent higher as a share of the economy than other Scandinavian nations, increasing its vulnerability to a slowdown in the region, according to John Hydeskov, a senior analyst in Copenhagen at Danske Bank A/S, Denmark’s biggest bank.

The krona’s decline may be limited as the European Central Bank cut its main refinancing rate by 0.75 percentage point to 2.50 percent today. The median estimate in a Bloomberg survey was for a half point cut.

In other trading, Norway’s krone weakened 0.4 percent to 9.0724 versus the euro and 0.7 percent to 7.1556 per dollar as the price of oil, the country’s biggest export, fell below $46 a barrel for the first since May 2005.

The Oslo-based Norges Bank, which next meets Dec. 17, will cut the key rate to 3 percent by the end of 2009, from 4.75 percent now, Mansoor Mohi-uddin, a UBS AG analyst in Zurich, wrote in a client note this week.

‘Good Prediction’

“Since we have succeeded in anchoring inflation expectations, that gives us room for maneuver,” Norwegian central bank Governor Svein Gjedrem said this week. “The expectation that we will cut rates is a good prediction.”

Iceland’s krona, which traded at 187 per euro in Iceland yesterday, may weaken after the island nation’s central bank moved the currency closer to a free float. It ended the daily foreign-exchange auctions and named three market makers to determine the price of the krona, the bank said.

“The exchange rate of the krona must be determined by supply and demand in the marketplace and not the sale of foreign exchange from the central bank’s reserves,” the Reykjavik-based Sedlabanki said yesterday on its Web site.

Weaken

The krona, which was quoted at about 300 per euro earlier this week among overseas banks, probably won’t fall to that level under the new rules because of a lack of participation from foreign investors, said Petter Sandgren, head of emerging markets at SEB AB in Stockholm.

The krona may weaken to the “low 200s” as the central bank gradually eases it back into the currency market this week, Sandgren said. The bank “doesn’t want to use its reserves to bail out the krona, it will take it slowly,” he added.

Moody’s Investors Service downgraded the foreign and local currency ratings of Iceland to Baa1 with a negative outlook from A1, the agency said in a statement today.

Nordic government bonds rose, with the yield on Norway’s 6 percent government security maturing May 2011 declining 15 basis points to 3.14 percent. The yield on Sweden’s 5.25 percent note due March 2011 slipped 10 basis points to 1.83 percent. Yields move inversely to bond prices.

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

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Mexican Peso Rises as Global Rate Cuts Boost High-Yield Demand

By Valerie Rota

Dec. 4 (Bloomberg) -- Mexico’s peso rose as central banks around the world cut lending rates to spur economic growth, buoying demand for higher-yielding assets.

Global reductions in borrowing costs “make the peso more competitive,” said Mario Copca, a currency strategist at Metanalisis SA in Mexico City.

The peso advanced 0.4 percent to 13.5445 per U.S. dollar at 9:47 a.m. New York time, from 13.6007 yesterday. Brazil’s real rose 0.7 percent, while Chile’s peso advanced 0.5 percent.

The European Central Bank cut its main refinancing rate today by the most in its 10-year history to 2.5 percent, following rate reductions in the U.K., Sweden and New Zealand. Mexico’s central bank kept its overnight target rate at 8.25 percent on Nov. 28 for a third month.

The yield on Mexico’s 10 percent bond due in December 2024 was little changed at 8.95 percent. The bond’s price increased 0.04 centavo to 108.89 centavos per peso, according to Banco Santander SA.

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

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U.K. Pound Trades Near Record Low Versus Euro as BOE Cuts Rate

By Matthew Brown and Gavin Finch

Dec. 4 (Bloomberg) -- The pound traded close to an all-time low against the euro and near the weakest since 2002 versus the dollar as the Bank of England cut its key interest rate to the lowest level since 1951.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, lowered the benchmark bank rate 1 percentage point to 2 percent, matching the median forecast of 61 economists in a Bloomberg News survey. Britain’s economy shrank 0.5 percent in the third quarter as a collapse in bank lending dried up credit to businesses and consumers.

“Overall the 100 basis-point cut is going to be seen as disappointing,” said Ian Stannard, a foreign-exchange strategist at BNP Paribas in London. “Although 100 basis points was fully priced in, expectations were rising during the day for an even bigger rate cut.”

The pound fell to $1.4638 by 2:30 p.m. in London, from $1.4784 yesterday. It was at 86.54 pence per euro, from 86.01, after weakening to a record low of 86.96 pence.

Central banks are stepping up rate cuts to revive economies battered by the ravages of a collapse in bank lending that’s frozen credit markets around the world.

“Conditions in money and credit markets remain extremely difficult,” the Bank of England said in a statement accompanying today’s decision. “The committee noted that it was unlikely that a normal volume of lending would be restored without further measures.”

Going to Zero

The European Central Bank lowered its benchmark rate by 0.75 percentage point today, the biggest cut since the euro’s debut in 1999. Sweden’s Riksbank cut its rate by the most since 1992. New Zealand policy makers reduced theirs by a record and Bank Indonesia also lowered its rate today.

Today’s interest-rate cut “was disappointing and behind the curve,” said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. “There’s no point in saving bullets when there is nothing left to shoot. The impact on sterling will be negative.”

The U.K. benchmark may fall to zero early next year, forcing officials to consider other means of restarting bank lending and reviving the economy, former policy maker Willem Buiter said this week.

“Those currencies that are moving toward zero interest rates will suffer until they reach zero,” Jones said. “We are in a transition.”

Expectations for U.K. inflation over the next decade rose today, with the difference in yield, or spread, between the 10- year gilt and its index-linked counterpart climbing three basis points to 0.98 percent. The gauge was at a record low of 0.80 percent on Dec. 2, after peaking at 4.16 percent on July 7.

Reduced Bets

Interest-rate futures rose for the first time in six days as traders reduced wagers on cuts in borrowing costs. The yield on the contract expiring in March rose eight basis points to 2.31 percent. The yield was 3.24 percent a month ago.

U.K. home values declined 2.6 percent from October, HBOS Plc said today. In the three months through November, prices fell 14.9 percent from a year earlier. Reports yesterday showed U.K. services shrank at the fastest pace in at least 12 years and consumer confidence worsened.

The Bank of England lowered its key rate five times this year to shield the British economy from the global credit crisis, sending the pound 26 percent lower against the dollar, the most since at least 1972. It cut the benchmark rate by 1.5 percentage points last month.

Backed Up

The pound will weaken to $1.36 by the end of the year and to $1.24 by the end of the first quarter, while staying at around 86 pence to the euro in the same period, Stannard said.

U.K. two-year government bonds fell after the Bank of England decision, erasing earlier gains. The yield on the two- year gilt, which earlier dropped to a 16-year low of 1.57 percent, rose eight basis points to 1.75. The 10-year pared gains, the yield falling four basis points to 3.38 percent. Yields move inversely to bond prices.

“The statement sounds more neutral than the market had hoped for and that’s why yields at the front backed up,” said Jason Simpson, a fixed-income strategist at Royal Bank of Scotland Group Plc, one of the 15 so-called Gilt-Edged Market Makers which deal directly with the Treasury. “The outlook for the U.K. economy is still pretty grim, and there’s no doubt about that. But gilts yields at the current levels would need a more dovish statement to go lower.”

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Matthew Brown in London on mbrown42@bloomberg.net

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Canada’s Dollar Weakens on Oil’s Drop, ‘Political Shenanigans’

By Chris Fournier

Dec. 4 (Bloomberg) -- Canada’s currency fell the most in two weeks as oil prices dropped to the lowest in almost four years and the prime minister prepared to meet the governor general in a bid to save his seven-week-old government.

Crude oil’s decline “doesn’t help, nor do the political shenanigans,” said David Watt, a senior currency strategist at RBC Capital Markets in Toronto. “There are more than enough ingredients for some drama without the need for the folks in Ottawa to kick up a fuss.”

The Canadian dollar dropped as much as 1.2 percent to C$1.2676 per U.S. dollar, from C$1.2521 yesterday. The currency fell 3.2 percent on Nov. 20. It traded at C$1.2656 at 10:17 a.m. in Toronto. One Canadian dollar buys 79.05 U.S. cents.

RBC Capital predicts the Canadian dollar will weaken to C$1.27 by year-end.

Crude oil for January delivery dropped as much as $1.49, or 3.2 percent, to $45.30 a barrel on the New York Mercantile Exchange. That’s the lowest since Feb. 9, 2005. Crude oil accounts for about a tenth of Canada’s export revenue.

Crude may dip below $25 a barrel next year if the recession that’s slashing fuel demand around the world spreads to China, Merrill Lynch & Co. said.

Since July 1, the Canadian dollar has weakened 0.3 cents for every $1 decline in the price of oil, according to Eric Lascelles, Toronto-based chief economics strategist at TD Securities Inc., a unit of Canada’s second-largest bank.

Canadian Prime Minister Stephen Harper will ask the country’s head of state, Governor General Michaelle Jean, to suspend Parliament as he tries to fend off a challenge from opposition parties seeking to bring down his government.

‘Imbroglio in Ottawa’

“In currency terms, there’s little doubt the imbroglio in Ottawa is a contributing factor in maintaining a long U.S. dollar bias,” Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto, wrote in a note to clients yesterday. A long position is a bet that a currency will gain.

Since the two largest opposition parties agreed Dec. 1 to form a coalition to accelerate a stimulus package for the economy, Canada’s dollar has weakened 1.9 percent.

Harper’s party was re-elected on Oct. 14 with the country’s third straight minority government. The government hopes “the governor general will grant a timeout,” Jay Hill, the Conservative lawmaker responsible for day-to-day affairs in the legislature, told the Canadian Broadcasting Corp.

‘Power Struggle’

“The uncertainty is not good for the Canadian dollar,” said Steven Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. “The politicians need to be focused on the economy, not a power struggle.”

Statistics Canada and the U.S. Labor Department are due to release employment data tomorrow. Canadian employers shed 25,000 jobs in November, according to the median forecast of 21 economists surveyed by Bloomberg News.

The yield on the two-year government bond declined four basis points, or 0.04 percentage point, to 1.57 percent. The price of the 2.75 percent security due in December 2010 rose 7 cents to C$102.31.

The 10-year note’s yield fell six basis points to 3.11 percent. The price of the 4.25 percent security maturing in June 2018 climbed 46 cents to C$109.32.

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

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Brazil’s Real Rises on Bets Rate Cuts to Sustain Export Demand

By Adriana Brasileiro

Dec. 4 (Bloomberg) -- Brazil’s real rose for the first time this week on speculation global central banks will reduce interest rates further to revive economic growth, sustaining demand for local exports.

The yield advantage of domestic bonds widened as the European Central Bank and the Bank of England cut borrowing costs today. Brazil’s inflation-adjusted interest rate is 7.34 percent, the highest in the world. The local target lending rate, known as the Selic, is 13.75 percent.

“The rate cuts abroad are positive and have a calming effect on local markets,” said Alexandre de Azara, chief economist at BRZ Investimentos SA in Sao Paulo. “In Brazil, the central bank will probably maintain rates for a while and maybe even increase the Selic if the impact of the currency depreciation on inflation becomes more severe.”

The real increased 1.2 percent to 2.4671 per dollar at 8:45 a.m. New York time, from 2.4975 yesterday. It tumbled 6.5 percent against the dollar this week and is the biggest decliner among major currencies over the past three months, having lost 30 percent.

The European Central Bank delivered the biggest interest- rate cut in its 10-year history to prevent an economic slump from deepening. The ECB lowered the main refinancing rate by 0.75 percentage point to 2.5 percent.

The Bank of England cut its benchmark interest rate from 3 percent to 2 percent, the lowest level since 1951, to try to push lenders to liberate credit.

The yield on the zero-coupon note due in January 2010 increased 3 basis points, or 0.03 percentage point, to 13.87 percent, according to Banco Votorantim.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net

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Euro Falls as ECB Cuts Rate, Trichet Sees ‘Protracted’ Weakness

By Bo Nielsen

Dec. 4 (Bloomberg) -- The euro fell against the yen after European Central Bank President Jean-Claude Trichet said the 15- nation’s economy will keep shrinking next year as global turmoil in the credit markets persists.

The 15-nation currency also fell versus the Brazilian real as the Frankfurt-based ECB lowered its key interest rate by the most in its history to boost the recession-mired economy. “Global and euro-area demand are likely to be dampened for a protracted period of time,” Trichet said at a press conference in Brussels today. The ECB cut its key rate by three quarters of a percentage point to 2.5 percent.

“The bigger picture here is that we need sharply lower rates in the future, and that will mean even more cuts down the line,” said Paul Robson, a London-based currency strategist at Royal Bank of Scotland Group Plc.

The euro dropped 0.5 percent to 118.02 yen at 10:55 a.m. in New York, from 118.64 yesterday. Europe’s currency traded at $1.2732, compared with $1.2717, after falling to $1.2550, the lowest level since Nov. 21. The dollar dropped 0.4 percent to 92.91 yen from 93.30 yen.

The cut in the main refinancing rate was the ECB’s second in a month. The reduction follows cuts in the U.K., Sweden and New Zealand today as central banks act to stem the global economic slowdown.

The single currency pared its declines as some analysts speculated lower borrowing costs will revive growth. The euro region’s gross domestic product shrank 0.2 percent in the third quarter from the previous three months, matching an initial estimate, the European Union’s Luxembourg-based statistics office said today.

‘Ahead of the Curve’

“In pretty much every instance this week, the central banks have delivered more than the market was thinking,” said Jim McCormick, head of foreign-exchange and local-markets strategy at Citigroup Inc. in London. “That’s staring to create the notion that policy responses are beginning to get closer to being ahead of the curve. I wouldn’t be surprised to see a higher euro-dollar and a lower dollar against many crosses soon.

The pound traded near an all-time low against the euro and close to its weakest since 2002 versus the dollar as the Bank of England cut its main interest rate by one percentage point to 2 percent, the lowest level since 1951, to stave off the ravages of the credit crisis. U.K. house prices fell the most since 1992 in November as credit dried up, HBOS Plc said today.

An index based on a survey of about 700 U.K. service companies dropped to 40.1 for November, the lowest since the gauge began in 1996, Markit and the Chartered Institute of Purchasing and Supply said yesterday. Consumer confidence fell to the lowest level since at least 2004, Nationwide Building Society said.

Yen Versus Euro

The yen also rose against the euro on speculation the deepening global slowdown spurred investors to sell higher- yielding assets financed by borrowing in Japan. Investors have been reducing carry trades, in which they get funds in a country with low borrowing costs and invest in one with higher interest rates.

Japan’s benchmark rate of 0.3 percent compares with 4.25 percent in Australia and 5 percent in New Zealand.

“Investors will likely shun risk amid growing worries over a worldwide recession,” said Yuji Saito, Tokyo-based head of the foreign-exchange group at Societe General SA. “The yen may be bought.”

Japanese businesses cut investment at the fastest pace in six years last quarter, a government report showed today. Capital spending excluding software fell 13.3 percent in the three months ended Sept. 30, a sixth quarterly decline, the Ministry of Finance said in Tokyo. Economists surveyed by Bloomberg expected a 10.9 percent decline.

New Zealand Cut

New Zealand’s central bank cut its benchmark rate by a record 1.5 percentage points and signaled more to come as it attempts to steer the economy out of recession.

New Zealand’s dollar fell 0.3 percent to 53.43 U.S. cents and 0.3 percent to 49.55 yen.

Sweden’s krona fell close to a record low against the euro as the Riksbank cut the benchmark interest rate by the most in 16 years to revive the ailing economy.

Policy makers, who raised interest rates as recently as September, reduced the repo rate today by 1.75 percentage points to 2 percent, compared with the 1 percentage-point reduction forecast in a Bloomberg survey.

“We clearly see the Riksbank providing a guideline to what will come from the other banks today,” said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt.

The yuan traded at 6.8837 per dollar, near a five-month low, on speculation U.S. Treasury Secretary Henry Paulson’s calls for a stronger yuan during a Beijing visit this week won’t stop China from weakening its currency to support exporters.

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

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Putin Vows to Avoid ‘Sharp’ Swings as Ruble Falls to 3-Year Low

By William Mauldin and Emma O’Brien

Dec. 4 (Bloomberg) -- Prime Minister Vladimir Putin said Russia will avoid “sharp jumps” in the ruble as it fell to the lowest level in almost three years against the dollar.

The ruble, which the central bank manages against a basket of dollars and euros, weakened as much as 0.6 percent to 28.0708 per dollar, the lowest since March 2006, as the U.S. currency rose against the euro. It was at 27.9869 by 4:09 p.m. in Moscow, taking its decline since Aug. 1 to 16 percent.

“We will not allow sharp jumps in the economy and in the exchange rate of the national currency,” Putin said in televised comments in Moscow today. “We will carefully use our currency reserves and other government funds, and if we carry out a balanced, considered and responsible economic policy, this money will be enough for us.”

Putin and President Dmitry Medvedev are struggling to contain Russia’s worst financial crisis since the government’s default on its debt a decade ago as the price of Urals crude, its biggest export, trades at $41.48 a barrel, below the $70 a barrel needed to balance the 2009 budget. Putin said the government may buy stakes in key companies on a “large scale” after shares plunged 70 percent this year.

The Micex gained as much as 2.5 percent today before slipping to 566.42, 0.1 percent down from the previous close. The dollar-denominated RTS Index climbed 0.8 percent.

Reserves

Russia’s international reserves, the third-largest worldwide, unexpectedly rose last week for the first time in two months as the euro strengthened and banks brought more dollars into the country to make end-of-month tax payments.

The reserves have fallen 24 percent since reaching a peak of $598.1 billion in August as the central bank sold foreign currencies to prop up the ruble.

The dollar gained against the euro after the European Central Bank cut interest rates by 75 basis points, more than expected, reducing the appeal of assets denominated in the European currency.

While the ruble declined against the dollar, it appreciated 0.4 percent to 35.3450 per euro. Those movements left it little changed at 31.3212 against the basket that the central bank uses to control its fluctuations.

Investors have withdrawn about $190 billion from Russia since the start of August, according to BNP Paribas SA.

A weaker ruble may benefit Russian oil producers as they sell crude on a dollar basis and pay most expenses in rubles. OAO Rosneft, Russia’s biggest oil producer, is cutting finance costs by paying back ruble debt with a cheaper currency.

‘Right Decision’

“Most recently we were borrowing in rubles, and the interest rates were a bit higher, but in light of what the ruble has done it’s actually worked out to be the right decision in terms of our dollar costs,” said Peter O’Brien, vice president for finance and investments, in an interview in London.

Currency fluctuations add to risks faced by Russian companies next year, JPMorgan Chase & Co. said in a report today. The New York bank reiterated its “underweight” recommendation on Russian equities for 2009.

Russia’s benchmark 30-year government bond fell for a fourth day, pushing its yield up 14 basis points to 11.151 percent. The Micex Corporate Bond Index fell 0.8 percent to 82.25, the lowest in a week.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net; Emma O’Brien in Moscow at eobrien6@bloomberg.net

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White Sugar Drops to Five-Week Low as Recession Concerns Mount

By Marianne Stigset

Dec. 4 (Bloomberg) -- White sugar fell to a five-week low in London as investors cut their holdings in commodities on concern that a global recession will sap demand for raw materials.

The European Central Bank delivered the biggest interest rate cut in its 10-year history today and warned the euro region’s economy will shrink next year for the first time since 2003. The UBS Bloomberg CMCI Index of 26 raw materials is heading for its sixth consecutive monthly decline.

“Soft commodity futures have suffered a ferocious beating over the past few weeks as investors bailed out over fears a global recession would batter demand for goods like sugar and coffee,” researcher F.O. Licht said in a report yesterday.

White sugar for March delivery fell as much as $6.50, or 2.1 percent, to $308 a metric ton, the lowest since Oct. 27, and stood at $309.60 by 3:25 p.m. on London’s Liffe exchange. Raw sugar for March delivery dropped as much as 2.5 percent to 10.88 cents a pound on ICE Futures U.S. in New York.

“A retracement back up over the short term can be expected, but resistance from the 11.20s will be good and the current trend should send March back under 11 cents,” Peter Hoyt, a sugar trader at Sucden (U.K.) Ltd., wrote in a note today.

Czarnikow Group Ltd. yesterday raised its estimate for the shortfall in sugar supply in the 2008-09 season by 76 percent as tightening credit and weaker prices spur producers to restrain output. Supply will fall 5.8 million tons short of demand, compared with an August forecast of 3.3 million tons.

“Sugar prices have proved more resilient than other commodities during the global economic downturn, helped by relatively strong fundamentals, and analysts believe expectations of tighter supplies in 2008-09 and 2009-10 can give the market a further boost once oil prices begin to normalize back to higher ground,” F.O. Licht said.

Coffee Plunges

Crude oil has plunged 68 percent since reaching a record in July and fell for a fifth day today to the lowest in almost four years after a report showed U.S. fuel demand extended declines.

Among other agricultural commodities, robusta coffee for January delivery dropped $210, or 11 percent, to $1,759 a ton, the biggest decline since Oct. 8. Cocoa futures for December delivery rose 89 pounds, or 5.4 percent, to 1,749 pounds.

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

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Cattle Fall to 2-Year Low as U.S. Beef Demand Wanes; Hogs Drop

By Whitney McFerron

Dec. 4 (Bloomberg) -- Cattle futures fell to a two-year low on signs that U.S. meatpackers are buying fewer animals as beef demand wanes. Hogs also declined.

Wholesale beef prices are the lowest in a month, and slaughterhouses processed 113,000 cattle yesterday, down 11 percent from the same day last week, government data show. The slowdown may increase beef supplies because cattle are spending more time on feedlots eating corn, said Dennis Smith, a senior account executive at Archer Financial Services Inc.

“It sounds like packers are cutting back on slaughter, which is not good,” Smith said in a telephone interview from Chicago. “It tends to make the average animal heavier coming to market. And it indicates an eroding demand base for the animals, so packers are very unlikely to pay high money.”

Cattle futures for February delivery declined 0.4 cent, or 0.5 percent, to 83.675 cents a pound at 9:53 a.m. on the Chicago Mercantile Exchange. Earlier, the price touched 83.55 cents, the lowest for a most-active contract since Aug. 3, 2006. Before today, the price was down 13 percent this year and 23 percent since reaching a record $1.09575 on July 11.

Feeder-cattle futures for January delivery fell 0.025 cent to 88.325 cents a pound in Chicago. The most-active contract was down almost 18 percent this year, as of yesterday.

Wholesale choice beef dropped 2.66 cents, or 1.8 percent, to $1.4875 a pound yesterday, the lowest price since Nov. 5, according to the U.S. Department of Agriculture. That marked the eighth decline in nine sessions.

U.S. meatpackers processed 31.2 million cattle this year through Nov. 29, a gain of 0.1 percent from the same time last year, according to USDA estimates.

Hog futures for February settlement dropped 0.375 cent, or 0.6 percent, to 64 cents a pound in Chicago. Earlier, the price touched 63.85 cents, the lowest for a most-active contract since Nov. 25. The price was up 11 percent this year through yesterday.

Wholesale pork gained 1.32 cents, or 2.2 percent, to 60.96 cents a pound yesterday, the USDA said. The price is up 5.1 percent this year.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

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Copper Prices Head for Longest Slump Since October on Recession

By Millie Munshi

Dec. 4 (Bloomberg) -- Copper prices headed for the longest slide since October as tumbling equity markets spurred concern that the global economic slump may deepen.

The MSCI World Index of shares lost as much as 0.8 percent today, and more than $30 trillion has been erased from the value of global equities in 2008. Base metals, including copper, have the highest correlation of all commodities with the stock market, according to Deutsche Bank AG. Before today, copper plunged 49 percent this year.

“Every eye is on the stock market” and the global economic outlook, said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Tick for tick, copper is trading along with stocks.”

Copper futures for March delivery dropped 3.1 cents, or 2 percent, to $1.5235 a pound at 11:03 a.m. on the Comex division of the New York Mercantile Exchange. The metal has dropped for five sessions in a row, and a decline at settlement would mark the longest slump since Oct. 24.

Before today, the price plunged 64 percent from a record $4.2605 on May 5, including 8.1 percent in the previous four sessions.

Tumbling copper prices have hurt profits for producers and mining companies have announced plans to curb output.

Freeport-McMoRan Copper & Gold Inc. Chief Executive Officer Richard Adkerson said he’s prepared to make a third round of production cuts at the world’s second-largest copper producer after prices dropped by more than half in three months.

“We have to be prepared for a protracted period of low prices because of the uncertainties in the marketplace right now,” Adkerson said in an interview yesterday.

Freeport Production Cuts

Freeport said yesterday production next year will be about 5 percent less than previously forecast and 11 percent lower in 2010 after the company deferred restarting two mines and shut down some of its least-profitable sites in November. A decline to “significantly” less than $1.50 a pound would lead to additional reductions, Adkerson said.

Copper’s decline today occurred as a report showed orders placed with U.S. factories in October fell by the most in 8 years. The metal is used in pipes and wires for electronics, appliances and cars.

On the London Metal Exchange, copper for delivery in three months fell $101, or 2.9 percent, to $3,345 a metric ton ($1.52 a pound.)

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

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Oil Falls to Lowest in Almost 4 Years as Recession Cuts Demand

By Mark Shenk

Dec. 4 (Bloomberg) -- Crude oil fell to the lowest in almost four years as the deepening recession in the U.S., Europe and Japan cuts fuel consumption.

Prices may dip below $25 a barrel next year if the recession spreads to China, Merrill Lynch & Co. said in a report today. U.S. fuel consumption during the four weeks ended Nov. 21 was down 6.2 percent from a year earlier, an Energy Department report showed yesterday.

“We’ve got the U.S, U.K., Europe and Japan all in recession for the first time since World War II and the oil market is reacting,” said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $5 billion energy-company bond portfolio.

Crude oil for January delivery fell 89 cents, or 1.9 percent, to $45.90 a barrel at 10:36 a.m. on the New York Mercantile Exchange. Futures touched $45.30, the lowest since Feb. 9, 2005. Oil prices have tumbled 69 percent since reaching a record $147.27 on July 11.

“There is no sign where it will stop,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “We are now looking at $41.15, which was the pre-Gulf-War high and after that at the $40 and $37 level.”

Oil reached a then-record $41.15 in October 10, 1990, when Iraqi troops were occupying Kuwait. The milestone held until May 2004. Prices were last below $40 a barrel in July 2004.

Refinery Fire

Royal Dutch Shell Plc said that a fire broke out today at its Pernis refinery in the Netherlands, the largest in Europe. The blaze started at the gasoline-making catalytic cracker at the 416,000 barrel-a-day plant, the Rotterdam fire department said.

The four-week average of petroleum products supplied in the U.S. was 19.3 million barrels a day, down from 20.5 million barrels a day a year ago, yesterday’s report showed.

“Nothing except a major shock is going to revive this market as long as risk aversion predominates,” said Andrey Kryuchenkov, an analyst with VTB Group in London. “Demand numbers were down again yesterday, reflecting the economic crisis.”

The U.S. Labor Department will probably say tomorrow that payrolls in November dropped the most since the 2001 terrorist attacks, a Bloomberg news survey showed. The U.S. entered a recession in December 2007, the National Bureau of Economic Research, a private, non-profit panel of economists that dates American business cycles, said on Dec. 1.

European Central Bank President Jean-Claude Trichet said the euro region’s economy will shrink next year for the first time since 2003.

$25 ‘Possible’

“A temporary drop below $25 a barrel is possible if the global recession extends to China and significant non-OPEC cuts are required,” Merrill Commodity Strategist Francisco Blanch said in today’s report. “In the short run, global oil-demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.”

Qatar’s oil minister said yesterday that the Organization of Petroleum Exporting Counties will “definitely” cut output at its next meeting in Algeria on Dec. 17.

OPEC oil ministers agreed on Oct. 24 in Vienna that the 11 members with quotas would cut supply by 1.5 million barrels a day starting in November. Production by the 11, excluding Iraq and Indonesia, declined 725,000 barrels to 28.24 million barrels last month, according to data compiled by Bloomberg News.

“OPEC is sure to cut quotas at the next meeting,” Hodge said. “If OPEC wants to have the desired impact on the market, they are going to have to show us in a physical sense, not just talk about cuts.”

Brent crude oil for January settlement fell 56 cents, or 1.2 percent, to $44.88 a barrel on London’s ICE Futures Europe exchange. Futures touched $43.80, the lowest since Feb. 10, 2005.

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

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Gold Prices Reverse Declines as Dollar Pares Gain; Silver Drops

By Millie Munshi

Dec. 4 (Bloomberg) -- Gold prices rose, reversing an earlier decline, after the dollar pared earlier gains, renewing demand for the precious metal as an alternative investment.

The U.S. Dollar Index, which gauges the greenback against six counterparts, was little changed at 87.003 after earlier adding as much as 0.8 percent. Gold often moves in the opposite direction of the dollar. Before today, the metal dropped 8.1 percent this year as the dollar index gained 13 percent.

“The reason that gold jumped is that the dollar came back down from its highest levels,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York.

Gold futures for February delivery gained $1.60, or 0.2 percent, to $772.10 an ounce at 10:34 a.m. on the Comex division of the New York Mercantile Exchange. The metal lost 1.6 percent yesterday.

Earlier, gold fell as much as 1 percent, in line with the stock market, amid speculation the global economic slump will deepen, said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

Equities in Asia, Europe and the U.S. declined today on speculation the global recession will reduce company earnings.

Silver futures for March delivery lost 9 cents, or 0.9 percent, to $9.50 an ounce on the Comex.

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

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Euro 2012 Draws First Soccer Club to Warsaw Bourse

By Maciej Martewicz

Dec. 4 (Bloomberg) -- Ruch Chorzow SA, a Polish soccer club with a budget about 1 percent of Arsenal’s and a stadium where 90 percent of the seats aren’t covered by a roof, rose as much as 46 percent on its first day of trading in Warsaw.

Ruch, the first soccer club from central and eastern Europe to be traded on a stock exchange, gained 0.79 zloty to 2.49 and closed at 1.84 zloty, advancing 8.2 percent on NewConnect, Warsaw’s market for smaller companies. It was the 55th stock this year to join the trading platform.

“In couple of years’ perspective my dream is to move to the main market,” Chief Executive Officer Katarzyna Sobstyl said in a statement distributed before a news conference in Warsaw today. “It’ll be like a promotion to the first division.”

The 14-time champion of Poland, based in the southern city of Chorzow, sold new shares in a private placement in September, raising 1.81 million zloty ($597,500) for an 11 percent stake. It will spend most of the cash on new players.

Ruch, which isn’t related to kiosk operator Ruch SA, forecasts net income will grow to 1.74 million zloty in 2012, from 233,681 zloty now. It’s banking on the European soccer championships, which Poland hosts with neighboring Ukraine that year, to boost interest in the game.

“Neither the financial crisis, nor the controversy swirling around Polish soccer, could stop us,” Sobstyl said.

‘Right Direction’

Poland last month almost forfeited its World Cup qualifying matches after an arbitration court suspended the management of its football association for not doing enough to fight match- fixing scandals in which more than 100 people have been charged.

“Any move like Ruch’s is a step in the right direction” for Polish soccer, as it will raise transparency and improve the league’s image, Jacek Bochenek, head of Deloitte & Touche LLP’s operations related to the championship, said by phone yesterday.

Polish soccer clubs had sales of 63 million euros ($79.6 million) last season, up 47 percent from a year earlier, according to figures from Deloitte cited in Ruch’s prospectus. Bochenek says they could top 200 million euros. That compares with 2.3 billion euros for England’s Premier League and accounts for 0.5 percent of the European total.

Ruch, now seventh in Poland’s 16-team first division, aims to win the championship again as early as in 2011, by which time it could more than double its revenue from 2007, to 16.5 million zloty. Sales may reach 10.1 million zloty in 2008, about 1 percent of the 223 million pounds ($328.5 million) Arsenal Holdings Plc, a north London-based soccer club, reported for the 12 months ended May 31, according to the prospectus.

Average turnout this season at Ruch’s 10,000-seat stadium is 8,407, compared with a Polish league average of 6,741 and 75,691 at English Premiership champion Manchester United.

Chorzow, like Spain’s FC Barcelona, displays a charitable foundation’s logo on its strip, forgoing revenue from a corporate sponsor. “We do it because we want to make the game more friendly to potential new supporters, such as families,” Marzena Mrozik, Ruch’s marketing director, said by telephone yesterday.

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

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European Options Gain on Concern Rate Cuts Won’t Be Enough

By Gareth Gore

Dec. 4 (Bloomberg) -- The benchmark index for European options increased for the first time in three days on concern that interest rate cuts across Europe won’t be enough to restart the region’s slowing economies.

The VStoxx Index rose 3.6 percent to 56.13 as of 2:54 p.m. in Frankfurt, bringing its rise this week to 9.1 percent. The benchmark measures the cost of using options as insurance against fluctuations in the Dow Jones Euro Stoxx 50 Index, which dropped as much as 1.6 percent today.

“There’s still a lot of concern and instability,” said Gonzalo Lardies, a fund manager at LCF Rothschild Group in Madrid. “It’s one thing to lower rates, but quite another to reinvigorate the wider economy. What’s needed is something much more complex than a simple rate cut.”

The European Central Bank delivered the biggest interest-rate cut in its 10-year history today after the economic slump deepened and the inflation rate plunged. That followed similar cuts earlier in the day from the Bank of England and Sweden’s Riksbank.

Today’s most-active options contracts on the Euro Stoxx 50 were call options expiring in December at a strike level of 2,600 points. European-style call options such as those traded on the index give the purchaser the right to buy at a pre-agreed level on a specific date.

Options are derivatives, or securities that derive their value from an underlying asset, and can be used to protect against a decline or to speculate on the asset’s future value.

To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net.

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U.K. Stocks Gyrate as BOE Cuts Rate, Says Slowdown Has Worsened

By Alexis Xydias

Dec. 4 (Bloomberg) -- U.K. stocks swung between gains and losses after the Bank of England cut the benchmark interest rate to the lowest level since 1951 and said an economic slowdown has gathered pace.

Hays Plc and Michael Page International Plc, Britain’s largest recruitment companies, paced losses. Mining companies Rio Tinto Plc and Xstrata Plc fell as copper declined.

The FTSE 100 Index added 9.44, or 0.2 percent, to 4,179.40 at 3:09 p.m. in London, after earlier falling as much as 1.9 percent. The All-Share Index was little changed at 2,072.89. Ireland’s ISEQ rose 2.5 percent.

The central bank’s Monetary Policy Committee reduced the benchmark rate by 1 percentage point to 2 percent, matching the median forecast of 61 economists in a Bloomberg News survey. The rate-setting committee, led by Governor Mervyn King, said money and credit markets remain “extremely difficult,” and consumer spending and business investment has stalled.

“Don’t be fooled that a rate cut alone is the answer to our prayers,” said London-based Felix Riley, head of binaries products at ChoiceOdds, a spread-betting unit of MF Global Ltd. “The bank and the government need to inject life back into the economy in as many ways as possible and this is just a starting step.”

Michael Page slumped 9.3 percent to 175 pence, the steepest retreat since Ocotber, after saying full-year profit will be at the bottom end of analysts’ estimates. Hays, Britain’s biggest recruiter, dropped 10 percent to 64.75 pence.

Reed Elsevier dropped 3.8 percent to 522 pence, snapping two days of gains. The stock was cut to “hold” from “buy” by analysts at Royal Bank of Scotland Group Plc.

Rio Tinto, the world’s third-largest mining company, fell 4.2 percent to 1,100 pence. Xstrata, the world’s fourth-largest copper producer, declined 3.5 percent to 666.5 pence.

Copper for delivery in three months fell as much as 2.2 percent to $3,370 a metric ton on the London Metal Excahnge.

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

Diageo Plc (DGE LN), the world’s largest liquor company, increased 24.5 pence, or 2.7 percent, to 920 pence. U.S. spirits sales rose 9.9 percent on an annual basis in October, according to a report by the National Alcohol Beverage Control Association cited by UBS AG.

New Star Asset Management Plc (NSAM LN) plummeted 3.63 pence, or 76 percent, to 1.12 pence, the biggest decline in the All-Share Index today. The fund manager started by John Duffield in 2000 said lenders will take control after its share price dropped 95 percent in three months.

Portmeirion Group Plc (PMP LN) tumbled 20 pence, or 16 percent, to 102.5. The U.K. maker of Botanic Garden tableware plunged the most in more than 15 years after saying annual profit will miss analysts’ estimates as sales slump in its main U.S. market.

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

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Europe Stocks Gyrate as Earnings Concerns Offset Rate Cuts

By Michael Patterson

Dec. 4 (Bloomberg) -- European stocks gyrated between gains and losses as concerns that more companies will reduce earnings forecasts offset interest-rate cuts to revive economic growth.

Royal Philips Electronics NV dropped 1.9 percent after the electronics maker said it won’t meet its target of doubling earnings by 2010. TNT NV lost 3.4 percent on a lower profit forecast for its express-delivery unit. ING Groep NV, the biggest Dutch financial-services provider, HBOS Plc of the U.K. and France’s Lafarge SA gained more than 3 percent after the European Central Bank and the Bank of England lowered rates.

Europe’s Dow Jones Stoxx 600 Index dropped 0.1 percent to 198.06 at 3:54 p.m. in London, recouping earlier losses of as much as 1.7 percent. The Stoxx 600 climbed from its lows of the day after ECB President Jean-Claude Trichet said it may be possible for the central bank to purchase financial assets to boost growth.

Central bankers “are recognizing that they’re making up for lost time,” Michael Dicks, head of research and investment strategy at Barclays Wealth, which oversees about $194 billion, said on Bloomberg Television in London. “Almost every day we’re seeing data that’s at a record low.”

The Bank of England cut its key rate by 1 percentage point to 2 percent, matching the median forecast of economists surveyed by Bloomberg. ECB policy makers lowered the benchmark lending rate by 75 basis points to 2.5 percent. Only 17 of 56 economists in a Bloomberg News survey correctly forecast the move, with 35 predicting a 50 basis-point cut and 4 calling for a full percentage-point reduction.

National Markets

National benchmarks advanced in 14 of the 18 western European markets. The FTSE 100 gained 0.4 percent, and France’s CAC 40 added 0.3 percent. Germany’s DAX increased 0.5 percent.

The MSCI World Index of equities in 23 developed countries has tumbled 46 percent in 2008 as the collapse of the U.S. mortgage market froze credit and pushed the U.S., Japan, the U.K. and Germany into recessions. Shares rebounded the past two weeks as central banks flooded the financial system with cash and governments injected fresh capital into banks.

Philips fell 1.9 percent to 12.95 euros today. Europe’s largest consumer-electronics company also said writedowns will lead to the first net loss since the start of 2003 this quarter. Philips will slash the value of stakes in companies including liquid-crystal display maker LG Display Co. and chipmaker NXP BV by 1.1 billion euros ($1.39 billion) this quarter.

TNT Drops

TNT declined 3.4 percent to 14.92 euros. Express division results “will be somewhat below” the company’s earlier outlook, Hoofddorp, Netherlands-based TNT said today in a statement.

Analysts have reduced earnings estimates this year. Profit for companies in the Stoxx 600 will slide 13 percent in 2008, compared with 11 percent growth forecast at the start of the year, according to estimates compiled by Bloomberg.

Since Oct. 7, quarterly earnings for the 331 companies in the Stoxx 600 that reported results declined 14 percent on average, trailing expectations by 6.2 percent, Bloomberg data show.

ING gained 6.4 percent to 6.445 euros. HBOS, the U.K. bank being bought by Lloyds TSB Group Plc, rallied 6.8 percent to 93 pence. Lafarge, the world’s biggest cement maker, rose 3.2 percent to 43.23 euros.

Credit Suisse Group AG said it will cut 5,300 jobs, or 11 percent of its workforce, after losses of 3 billion francs ($2.5 billion) in the first two months of this quarter. The reductions will be primarily in the investment bank and help save 2 billion francs in costs. The shares gained 7.9 percent to 29.9 francs.

Chief Executive Officer Brady Dougan said he foresees no circumstances under which state aid would be required for the bank.

Nokia Oyj climbed 3.2 percent to 10.94 euros. The world’s largest maker of mobile phones aims to win market share next year, saying reduced spending and a push in advanced handsets will help it as the industry shrinks.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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Mexico Exchange Sees ‘Austere’ Cuts as Trading Slumps

By William Freebairn and Aura Campa

Dec. 4 (Bloomberg) -- Mexico’s Stock Exchange is implementing “austere” cost cuts to offset a slump in trading that may last until the second quarter of 2009, exchange Chairman Guillermo Prieto said.

Trading volumes fell to the lowest this year in November, prompting the exchange to take “austerity measures” to lower expenses, Prieto said in an interview with Bloomberg Television yesterday. He didn’t elaborate on the cuts.

“We’re expecting a first quarter of low activity, with trading recuperating in the second quarter or perhaps the second half,” he said.

Trading on Latin America’s second-largest exchange after Brazil’s Bovespa has slumped as the global credit crunch eroded demand for emerging-market assets. The Bolsa Index has declined 38 percent from a record reached April 22. Prieto said trading volumes have climbed this week from November’s levels.

Debt market trading may remain at $15 billion in 2009, said Prieto, who is also chief executive officer of the exchange.

Mexican stock trading resumed today after being halted yesterday at 3:35 p.m. New York time because of a technical glitch. The Bolsa gained 0.5 percent to 20,244.69 at 10:41 a.m.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Aura Campa in Mexico City at acampa2@bloomberg.net.

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