Not Much Has Changed...

Daily Forex Fundamentals | Written by Crown Forex | Dec 10 08 14:40 GMT |

With a rather fundamental free calendar today, movements haven't been much in the markets after the initial approval of the US auto makers bailout plan that somewhat increased investor's risk appetite to help majors incline in the markets. Compared to other majors in the markets, the euro experienced a bumpy ride after the fundamentals released from the Euro Zone showing that industrial production in France and Italy have dropped alongside the GDP reading from Italy showing that the economy has contracted during the third quarter. We see the Euro has fallen to record a low for the day so far at 1.2902 which is the 14 day MA on the four hour chart. This resulted in a significant rebound where the 15 nation currency is currently trading at the 1.2980s level as it is facing difficulties in breaching the 1.2990 resistance level. Technical indicators still show the potential for upside movements, yet the breach of the mentioned level will not be seen unless the pair declines to 1.2890 to gather enough bullish momentum and break the level. As for the Royal pound, trading is still within a contracting triangle where it has failed to breach the key resistance for the triangle at 1.4864 which is the high for the day. A Bollinger band at 1.4790 is also limiting further losses for the pair as it seems like the volume of trading is weak. The trend will continue within the triangle since the relative strength indicator is showing a neutral trend but the ADX indicator is still showing signs of a weakened upside movement. A four hour close above the key resistance that is now at 1.4850 and matches with the 50 day MA on the four hour chart will help the pair target higher levels near the 1.49 - 1.4915 levels. We still see the greenback advancing versus the yen after rebounding from the 92.00 support level yesterday taking the pair to the 92.70 levels. Trading will most likely remain around these levels as technical indicators remain neutral with no signals of divergence to the downside or strength to the upside that could take the pair to 93 as an initial target. The pair might have to correct to the downside to 92.30 at the very least to gather enough bullish momentum and reach the previously mentioned target. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Dec 10 08 13:28 GMT |

The price action was relatively mild in London as another dovish batch of economic data from across the pond helped the buck catch a modest bid. Inflation in the Euro-zone continues to look less threatening as German wholesale prices plunged by a steeper than expected -3.3% in November. Economic activity also continued to turn lower as French industrial production for October came in a paltry -2.7% after a prior -0.8% print. European bourses still managed to eke out a modest gain thus far, in the face of the poor data. EUR/USD slipped -30 pips and was sitting near 1.2950 ahead of the NY open. The 1.30 mark still looms as a good barrier to upside and we would expect a break through 1.3010 to usher in good strength here. The yen crosses saw little price action as USD/JPY rose a modest 15 pips towards 92.60/70 while EUR/JPY was about -5 points lower and near the 120.00/10 area. GBP/USD was up an uninspiring 10 pips to 1.4820/30 while USD/CAD managed to add about 15 points towards the 1.2570/80 zone. Upcoming Economic Data Releases (NY Session) Prior Estimate 12/10 8:30 3Q CA Labor Productivity QoQ -0.20% 0.20% 12/10 10:00 OCT US Wholesale Inventories -0.10% -0.20% 12/10 10:00 10-Dec US Kashkari Testifies About Tarp Oversight 12/10 10:35 5-Dec US DOE U.S. Crude Oil Inventories -456K 1300K 12/10 10:35 5-Dec US DOE U.S. Gasoline Inventories -1534K -400K 12/10 13:15 10-Dec GE ECB's Stark Speaking in Tuebingen 12/10 14:00 NOV US Monthly Budget Statement -$98.2B -$171.0B 12/10 16:30 NOV NZ Business NZ PMI 43.5 - - Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Dec 10 08 13:26 GMT |

USD-CHF @ 1.2060/65...Supported at 1.20 R: 1.2115 / 1.2204 / 1.2257 S: 1.2034-28 / 1.1947-20 / 1.1894-68 Though Swiss dipped towards 1.1997 during the day today, it had then moved up a little. It took Support of the lower end of the channel and has managed to stay in the narrower channel. Till it manages to stay above this Support, it could potentially move up towards 1.2350. However, if it dips below this, it could then enter the broader channel that we have been mentioning for some time now. To see the chart of Swiss, click on: http://www.kshitij.com/graphgallery/chfcandle.shtml GBP-USD @ 1.4815/18...Resistance at 1.49 R: 1.4961 / 1.4997-5016 S: 1.4386 / 1.4351 / 1.4311 Though the pair did go up towards 1.4866, during the day, the overall bearish outlook remains. It continues to be pressured down as can be seen from the candle charts. To see the chart of Cable, click on: http://www.kshitij.com/graphgallery/gbpcandle.shtml AUD-USD @ 0.6580/84...Resistance at 0.6650 R: 0.6597 / 0.6898-915 / 0.6931 S: 0.6551-35 / 0.6515-499 / 0.6477-69 The pair manages to continuously stay above the 21-day MA but a further push up is being curbed by the Resistance at 0.6650. To see the graph of Aussie click on: http://www.kshitij.com/graphgallery/audcandle.shtml#candle If both of these hindrances continue curbing the mobility of the pair, we could see it intending to break free once again and choose its direction. A slip downwards could be restricted to 0.62 over the next few days or a rise could take it towards 0.68 over the next few days. To see the graph of Aussie click on: http://www.kshitij.com/graphgallery/audcandle.shtml 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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French, Italian Output Falls, Signaling EU Slump Is Deepening

By Sandrine Rastello and Lorenzo Totaro

Dec. 10 (Bloomberg) -- French and Italian industrial production fell more than expected in October, adding to evidence that the euro region’s first recession since the start of the single currency is deepening.

French manufacturing fell 3.2 percent, the most in 11 years, while total production dropped 2.7 percent from September, the Paris-based statistics office said today. Italian output declined 1.2 percent in the month. Economists surveyed by Bloomberg News forecast French and Italian production would drop 0.5 percent and 1 percent respectively.

The numbers are “the latest in a long string of disappointing data,” said Marco Annunziata, chief economist at UniCredit MIB in London. “Euro-zone GDP faces the sharpest contraction yet in the fourth quarter, as many corporations seem to have been wrong-footed by the speed of the collapse in domestic and external demand. It looks more and more like the euro zone is plunging into a deep and prolonged slump.”

The economy slipped into recession in the third quarter and the International Monetary Fund predicts the euro region will contract 0.5 percent next year as the world’s advanced economies suffer their first simultaneous recession in more than 60 years on the fallout of the U.S.-originated financial crisis. The European Union has proposed 200 billion euros ($258 billion) of measures to try to spur growth and the European Central Bank may be preparing further cuts in interest rates to fuel lending.

Confidence Slumping

Production in Germany also declined in the month and the Bundesbank forecast Dec. 5 that Europe’s biggest economy would shrink the most in 16 years in 2009. The dimming prospects for the region’s three largest economies contributed to European business and consumer confidence slipping to a 15-year low in November.

The global slowdown may worsen as China’s economy, an engine of growth over the past decade, starts to weaken. China’s exports fell for the first time in seven years in November, declining 2.2 percent from a year earlier, after gaining 19.2 percent in October, the customs bureau said today.

European manufacturing has been particularly hurt by plunging demand for durable goods such as cars. Western European vehicle sales plunged 25 percent in November, Carlos Ghosn, Renault SA chief executive officer, said last week, echoing forecasts by consulting firms J.D. Power and Global Insight. The French company is cutting 6,000 positions. Competitor PSA Peugeot Citroen plans to trim 3,550 jobs through voluntary departures.

Temporary Layoffs

Fiat SpA, the maker of the Punto and 500 car models, has been trimming production in Italy since September and plans to increase temporary layoffs to combat declining orders. The carmaker’s sales in Italy fell 29 percent in November, the 11th monthly decline.

“We’re going to slam the brakes on, use as many temporary layoffs as needed,” Fiat Chief Executive Officer Sergio Marchionne said in an interview with Automotive News Europe on Dec. 6. “I am going to have one week of production between now and the beginning of January. After that we’re in the dark because I have no idea what demand will be.”

The euro’s 12 percent slide against the dollar this year is failing to boost exports and the decline in oil prices hasn’t been enough to spur demand. Crude has fallen about 70 percent from its July record, cutting production costs and leaving consumers with more to spend.

ECB President Jean-Claude Trichet said Dec. 4 that “global and euro-area demand are likely to be dampened for a protracted period of time.”

The ECB cut its benchmark rate by an unprecedented 1.75 percentage points in the past two months to 2.5 percent.

To contact the reporters on this story: Sandrine Rastello in Paris at +33-1-5365-5052 or srastello@bloomberg.netLorenzo Totaro in London at +44-20-7330-7794 or ltotaro@bloomberg.net

To contact the editor responsible for this story: John Fraher at +44-20- 7673-2058 or jfraher@bloomberg.net

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IEA’s Birol Says Drop in Oil Prices May Halt Project Investment

By Tara Patel

Dec. 10 (Bloomberg) -- A further decline in global oil prices may delay or halt investment in exploration and production projects, according to Fatih Birol, chief economist of the International Energy Agency.

“If prices were to go lower, investments could be delayed or canceled and we would pay the cost in the future,” Birol said today at a conference in Paris. “We could get a supply crunch.”

Birol urged OPEC countries, meeting next week in Algeria, “to consider the fragile situation of the global economy today” and noted the need for $80 oil to ensure the viability of “marginal” production such as deep offshore projects.

Members of the Organization of Petroleum Exporting Countries are scheduled to meet Dec. 17 to discuss output quotas in a bid to bolster oil prices, which have slumped almost 70 percent since reaching a record in July.

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

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Petrobras Sells Two LNG Cargoes Amid Terminal Delay

By Ben Farey

Dec. 10 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil company, plans to sell two cargoes of liquefied natural gas that it bought earlier this year because its import terminal isn’t ready, a company executive said.

Marcio Demori, LNG trading manager for the company known as Petrobras, said Brazil is “rearranging” its schedule for LNG imports. The sale of cargoes aboard BP Plc’s British Innovator LNG carrier and the Celestine River vessel is nearly complete, he said.

Both tankers have been unable to offload their cargoes in Brazil and were anchored off the coast of Trinidad until recently, AISLive data show. Only the Celestine River remains off Trinidad now, according to AISLive.

Brazil is importing liquefied natural gas to reduce its dependence on Bolivia, the source of about half its daily demand of about 60 million cubic meters. Bolivian President Evo Morales has nationalized Petrobras assets in the country and sought price increases.

Petrobras has two LNG carriers on 10-year charters from Golar LNG Ltd. Both are being adapted to regasify LNG on board and pump the gas into Brazil’s pipeline network.

The first ship, the Golar Spirit, arrived at the Pecem terminal in July. Imports there were due to begin this summer but were delayed by onshore pipeline work, Petrobras said last week. The first LNG is now expected to be unloaded in January.

LNG Facilities

Demori said the Golar Winter, also being refitted to regasify LNG, will arrive at Guanabara Bay near Rio de Janeiro in May. The ship was due to arrive some time this year. Petrobras may build a third facility to meet growing demand for the fuel, he said.

Maria das Gracas Foster, head of the company’s gas and energy unit, said last week she needs to maintain access to gas to contain costs for generating electricity, even if that means keeping cargoes anchored with no place to go.

“I’d rather have a string of LNG ports all up and down my coast than be dependent on a single pipeline for my gas,” she said in a Dec. 5 interview. “If I didn’t have the gas to fire up Petrobras’ thermal plants I have to pay the spot market price.”

To contact the reporters on this story: Ben Farey in London at bfarey@bloomberg.net;

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Nordic Currencies: Norway’s Krone Advances as Oil Prices Climb

By Bo Nielsen

Dec. 10 (Bloomberg) -- Norway’s krone advanced against the euro as the price of oil increased, making the assets of the world’s fifth-biggest exporter of the commodity more attractive.

The krone also strengthened versus the dollar as a report showed Norway’s inflation rate fell more than expected in November, making it easier for the central bank to cut rates next week to stimulate the ailing economy. The Swedish krona rose as stock-market gains spurred demand for higher-yielding currencies.

“The krone is trading as an exotic currency, rising and falling with the appetite for risk,” said Bjoern-Erik Orskaug, an economist at DnB NOR ASA in Oslo, Norway’s biggest lender.

Norway’s krone strengthened 0.4 percent to 9.1199 per euro by 1 p.m. in Oslo, and appreciated 0.3 percent to 7.0647 versus the dollar.

Crude climbed as much as 6.3 percent to $44.72 a barrel. The krone has fallen 13 percent against the euro and 23 percent versus the dollar this year as the price of oil tumbled 70 percent from a record $147.27 on July 11. Norway’s oil output fell 0.5 percent in November, the Norwegian Petroleum Directorate said today.

The krone pared gains versus the euro as a report showed underlying inflation, which excludes energy costs and taxes, slowed to 2.7 percent, from 3.3 percent in October, Oslo-based Statistics Norway said on its Web site today. The median estimate of 10 economists surveyed by Bloomberg was for a rate of 3.2 percent.

Consumer-price growth slipped to a five-month low as demand for oil and other commodities wanes in line with a faltering global economy.

‘Bearish on Krone’

The Norges Bank is scheduled to decide on interest rates on Dec. 17 in Oslo. Policy makers will cut the key deposit rate to 2.5 percent next year from 4.75 percent now, said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s biggest foreign-exchange trader

“There’s a lot of pressure on the central bank to cut rates,” Gullberg said. “I’m slightly bearish on the krone in the short term.”

Sweden’s currency strengthened 0.1 percent to 10.5745 per euro, after slipping to a record low of 10.7975 on Dec. 5. It was at 8.1710 per dollar, from 8.1903 yesterday.

Stock markets in Asia, and some in Europe, gained today on speculation U.S. lawmakers will approve a $15 billion bailout to keep automakers afloat. S&P 500 futures expiring in December added 1.3 percent.

The krona has fallen 11 percent against the euro and 21 percent versus the dollar this year as the biggest economy in Scandinavia cooled. The Riksbank on Dec. 4 cut its benchmark rate 1.75 percentage point to 2 percent, the most in 16 years.

‘Risk Aversion’

Sweden’s krona declined yesterday against the euro after inflation slowed more than expected in November, giving the Riksbank more reason to cut interest rates.

“Aggressive policy making and interest-rate convergence will limit losses on the krona in coming quarters, but the currency is exposed to new rounds of risk aversion,” wrote Geoffrey Yu, a currency strategist in London at UBS AG, in a note to clients today.

Sweden’s economy will contract 0.4 percent next year, adjusted for calendar days, the Riksbank said after last week’s decision. Inflation will slow to an average 1.2 percent in 2009 from 3.5 percent this year, and said rates probably won’t fall any further.

Nordic government bonds rose. The yield on Norway’s 6 percent government security maturing May 2011 fell three basis points to 3.24 percent. The yield on Sweden’s 5.25 percent note due March 2011 dropped six basis points to 2.06 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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U.K. Pound Rallies on Automaker Plan, as Stock Futures Advance

By Matthew Brown

Dec. 10 (Bloomberg) -- The British pound rose against the dollar as optimism U.S. lawmakers will approve a bailout for automakers fueled demand for the currencies of countries with higher interest rates.

The pound also strengthened against the yen and the euro even after the London-based National Institute for Economic and Social Research said the U.K. economy may shrink this quarter at the fastest pace since 1990. U.S. lawmakers reached a tentative agreement to rescue General Motors Corp. and Chrysler LLC that would protect jobs and parts suppliers. The MSCI World index of stocks gained 0.4 percent and Standard & Poor’s 500 futures expiring this month rose 1.4 percent.

“Hopes on the auto-recovery package and stronger equities helped currencies bounce back against the dollar,” said Steven Barrow, head of G10 currency research at Standard Bank Plc in London. “Data everywhere is just horrible and the market’s ability to filter this and determine if some place is doing worse or better than another is quite limited right now.”

The pound advanced to $1.4822 by 11:45 a.m. in London, from $1.4750 yesterday, and traded as high as 1.4865. It climbed to 87.38 pence per euro, from 87.60 pence.

The pound slipped 26 percent against the dollar and 19 percent versus the euro this year as the Bank of England reduced its benchmark interest rate to 2 percent, from 5 percent, to fend off the U.K.’s first recession in 17 years. There is a 98 percent probability the Federal Reserve will cut its key rate to 0.25 percent at its next meeting Dec. 16.

Shrinking Economy

Gross domestic product fell 1 percent in the three months through November and will probably plunge more than that in the last three months of the year, said the London-based National Institute, whose clients include the central bank. The economy last shrank at such a speed in the third quarter of 1990, when it contracted 1.2 percent.

The pound was also buoyed as Chancellor of the Exchequer Alistair Darling is said to be considering credit guarantees for U.K. households and companies to spur bank lending. Darling is looking at a range of options to revive credit including whether to expand a 250 billion pound ($370 billion) Treasury program to support bank debt so it covers mortgages and other loans, a person familiar with the plan said.

U.K. government bonds rose, pushing the yield on the 10-year gilt down three basis points to 3.55 percent. The 5 percent security due March 2018 gained 0.21, or 2.1 pounds per 1000-pound face amount, to 111.33. The two-year note yielded 1.86 percent.

Gilt Returns

Gilts returned 8.5 percent this year, compared with 10.4 percent for European bonds and 11.9 percent for Treasuries, according to Merrill Lynch & Co indexes.

The pound will rise to between $1.50 and $1.55 “in the next few weeks,” Barrow predicted. “In the first few months of next year sterling will be on the back foot again, in the $1.35 to $1.40 range.”

The pound will fall versus the dollar and the yen because the U.K. economy will deteriorate more than is implied in the current sterling price, Societe Generale SA said today.

“Staying short of sterling also continues to be a key conviction of ours,” a team of fixed-income and currency strategists headed by London-based Vincent Chaigneau wrote in a report. “We do not judge that all the bad news is fully priced in the currency.”

To contact the reporters on this story: Matthew Brown in London on mbrown42@bloomberg.net

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Congress May Vote Today on $15 Billion Auto Aid Plan

By John Hughes and Holly Rosenkrantz

Dec. 10 (Bloomberg) -- Congress will vote as early as today on a $15 billion plan Democrats reached with the Bush administration to keep U.S. automakers afloat while forcing them to restructure.

The tentative agreement calls for appointment of a so- called car czar who could force General Motors Corp. and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.

“Hard work has paid off,” Senator Carl Levin, a Michigan Democrat, said in a statement. “This gets us to the 20-yard line, but getting over the goal line will take a major effort, particularly in the Senate where we need 60 votes.”

GM and Chrysler have said they need at least $14 billion in combined aid to keep operating through March 31. Until late yesterday, talks stalled over disputes such as Democrats’ demand to require automakers receiving federal loans to end lawsuits challenging state auto-emission rules. The administration official said that provision is being dropped.

“We are making progress and are optimistic that we will have a reasonable compromise that will protect taxpayers and ensure the long-term viability of the American auto companies,” said Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi, a California Democrat.

House leaders plan a vote as early as today once a final version of the proposal is completed. Senate Majority Leader Harry Reid, a Nevada Democrat, warned lawmakers yesterday of a session this weekend if objections are raised to voting earlier.

CEOs’ Views

GM Chief Executive Officer Rick Wagoner and Chrysler CEO Robert Nardelli both testified last week they will accept strict oversight and operating restrictions to win government loans.

“We welcome that oversight,” GM North American President Troy Clarke said yesterday in a Bloomberg Television interview.

Senate passage is uncertain because Democrats hold a 50-49 edge in that body and need at least 10 Republican votes to overcome a threatened filibuster, a delaying tactic of extending debate.

Levin said “personal involvement” will be needed from President George W. Bush and President-elect Barack Obama for the plan to win approval. An Obama spokeswoman had no comment.

Republican Opposition

A spokesman for Senator Tom Coburn said earlier yesterday that the Oklahoma Republican would support an effort to stop a bill through a filibuster. “He believes it’s naive to trust Congress to manage the auto industry when it can’t manage itself,” said spokesman John Hart.

Senator John Ensign, a Nevada Republican, also is prepared to filibuster. “It doesn’t put the Big Three on a path to compete over the long term,” said spokesman Tory Mazzola.

Senator Jim DeMint, a Republican of South Carolina, said Senate Republicans have the 41 votes needed to force Democrats to allow amendments to the proposal.

The senior administration official said the president’s designee could grant one 30-day extension beyond the March 31 deadline to devise a plan for long-term viability if he or she decides a company is negotiating in good faith.

The car czar would have the power to block the automakers’ financial transactions over a certain amount. The administration official said the level at which the government could intervene would be significantly higher than the $25 million in earlier drafts. The official didn’t specify the new figure.

Limits on Loans

The official said the bill would seek to ensure that U.S. loans aren’t the first in a series to an industry that refuses to make fundamental changes. Automakers would be barred from getting additional federal funds if they reach the deadline without an acceptable plan for viability.

The administration will consult with representatives of Obama on the appointment of the car czar, the official said.

GM gained 28 cents, or 6 percent, to $4.98 at 8:01 a.m. before regular New York Stock Exchange composite trading. GM’s 81 percent plunge this year before today made it the worst performer among the 30 companies on the Dow Jones Industrial Average.

Ford Motor Co. rose 12 cents, or 3.7 percent, to $3.35. The shares tumbled 52 percent this year through yesterday. While the second-largest U.S. automaker would be eligible to apply for the loans, it has said it doesn’t expect to.

Pelosi said former Federal Reserve Chairman Paul Volcker is qualified to be the czar. He has “the bipartisan confidence and public and private confidence,” Pelosi, a California Democrat, said on NBC when asked who Bush should name.

Obama last month named Volcker, 81, to become chairman of the president’s Economic Recovery Advisory Board, a new panel that will include experts from outside government and propose ways to revive growth.

White House spokeswoman Dana Perino declined to discuss Pelosi’s suggestion and a spokeswoman for Obama didn’t comment.

“We don’t even have legislation yet so we’re not going to comment on rumors about personnel announcements,” Perino said.

To contact the reporters on this story: Holly Rosenkrantz at hrosenkrantz@bloomberg.net; John Hughes in Washington at Jhughes5@bloomberg.net

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Canada’s Dollar Climbs as Crude Oil Rises, Stock Futures Gain

By Chris Fournier

Dec. 10 (Bloomberg) -- Canada’s currency strengthened against its U.S. counterpart as commodities such as crude oil gained and U.S. stock-index futures advanced.

“Crude’s up and that’s going to underpin the Canadian dollar,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. Investors “seem to be biased toward buying equities rather than selling them so that would be helping the Canadian dollar as well.”

The Canadian dollar climbed 0.2 percent to C$1.2606 per U.S. dollar at 8:11 a.m. in Toronto, from C$1.2626 yesterday. One Canadian dollar buys 79.33 U.S. cents. National Bank predicts the currency will strengthen to C$1.22 by year-end.

Crude oil futures for January delivery rose as much as 4.5 percent to $43.96 a barrel in electronic trading on the New York Mercantile Exchange.

Oil accounts for 21 percent of the Bank of Canada’s Commodity Price Index, the largest component.

The Canadian dollar rises 0.3 cents for every $1 gain in the price of the commodity, according to a study at TD Securities Inc., a unit of Canada’s second-largest bank.

Futures on the Standard & Poor’s 500 Index expiring in December added 0.8 percent to 896.3, while Dow Jones Industrial Average futures rose 1.4 percent to 8,842. The MSCI World, a benchmark index for 23 developed markets, advanced 0.5 percent to 891.76.

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

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Brazil, Argentina, Mexico: Latin America Bond, Currency Preview

By Drew Benson

Dec. 10 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day’s session.

Brazil: Economic growth unexpectedly accelerated in the third quarter to the fastest pace in four years, cementing expectations the central bank will leave interest rates on hold for a second straight meeting today.

Gross domestic product jumped 6.8 percent from a year earlier, more than any of the 31 economists in a Bloomberg survey expected, from a revised 6.2 percent increase in the previous three months, the national statistics agency said yesterday. Brazil’s central bank will leave its benchmark interest rate unchanged at 13.75 percent, according to 45 of 47 economists in a Bloomberg survey.

The real rose 1.7 percent to 2.4717 per dollar.

The yield on the zero-coupon, real-denominated bond due in January 2010 climbed four basis points, or 0.04 percentage point, to 13.28 percent, according to Banco Votorantim.

Argentina: Argentine inflation probably slowed during November as consumers curbed spending amid the worst global financial crisis since the Great Depression.

The consumer price index rose 8.1 percent from a year earlier, compared with 8.4 percent in October, according to the median forecast of a Bloomberg survey of three economists. Argentina’s statistics agency is scheduled to release November inflation data at 1 p.m. New York time.

The peso rose 1.1 percent to 3.4315 per dollar.

The yield on the country’s inflation-linked peso bonds due in December 2033 fell 50 basis points, or 0.5 percentage point, to 18.655 percent, according to Citigroup Inc.’s local unit.

Mexico: Yields on Mexico’s two-year bond will fall 0.4 percentage point by the end of the first quarter after inflation peaks and the central bank considers reducing lending rates, according to TD Securities Ltd.’s Bartosz Pawlowski.

The yield on the 8 percent peso-denominated security due in December 2010 will decline to 7.25 percent by the end of March, from 7.65 percent, said Pawlowski, a London-based emerging-market strategist. It would be the lowest yield on the 2010 bond since January 2007, according to Banco Santander SA.

Rate cuts by the central bank designed to spur economic growth will help push up the peso to 12.5 per dollar by the end of next year, he said.

Mexico plans to repurchase as much as 18 billion pesos ($1.3 billion) of bonds due between five and 16 years. The government will hold the auction between 1:30 p.m. and 2 p.m. New York time.

The peso slid 0.9 percent to 13.5564 per dollar.

The yield on Mexico’s 10 percent bond due December 2024 rose three basis points to 8.581 percent, according to Banco Santander SA.

Other prices in Latin American markets:

Chile: The peso rose 1.1 percent to 666.47 per dollar.

The yield for a basket of five-year peso bonds in inflation- linked currency units, called unidades de fomento, was unchanged at 3.43 percent, according to Bloomberg composite prices.

Colombia: The peso rose 1.1 percent to 2,312.4 per dollar.

The yield on Colombia’s benchmark 11 percent bonds due in July 2020 declined 19 basis points to 11.69 percent, according to Colombia’s stock exchange.

Peru: The sol climbed 0.2 percent to 3.116 per dollar.

The yield on Peru’s 8.6 percent bond maturing August 2017 was unchanged at 7.95 percent, according to Citigroup’s local unit.

To contact the reporter on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net.

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Copper Rises in London on Dollar’s Decline; Aluminum Pares Gain

By Claudia Carpenter

Dec. 10 (Bloomberg) -- Copper rose in London on expectations a drop in the dollar will boost demand for industrial metals priced in the currency. Aluminum pared a gain and zinc fell.

The dollar fell against a basket of six currencies including the pound and euro. The UBS Bloomberg CMCI Index of 26 commodities has declined 37 percent this year, while the dollar has climbed 13 percent against the euro.

“A weaker dollar helps a little bit,” said Andrew Montgomery, U.K. manager of Concorde Metals Recycling Ltd., a Coatbridge, Scotland-based processor and exporter of scrap metals.

Copper for delivery in three months rose $28, or 0.9 percent, to $3,228 a metric ton by 1:29 p.m. on the London Metal Exchange. The benchmark contract has dropped 64 percent from a record $8,940 a ton in July.

U.S. stock-index futures climbed on speculation lawmakers will approve a $15 billion automaker bailout, the latest effort to revive the economy, adding to prospects declines in metal prices will slow. At least “demand won’t go to zero,” said Tim Mercer, chief investment manager at Hong Kong-based hedge fund Musashi Capital Ltd.

Copper prices in Shanghai gained for the first day since Nov. 27, increasing 1.5 percent on speculation lower interest rates will help revive growth in China, the world’s largest user of copper.

China Demand

Buying interest from China has picked up in the past two or three weeks after being absent since October, according to Montgomery, who has followed the industry for two decades.

Copper inventories rose 1,025 tons to 303,600 tons, the most since February 2004. Of the increase, 87 percent was in the U.S., the second-biggest buyer of copper. LME-monitored inventories scheduled for withdrawal, known as canceled warrants, increased 1,150 tons to 5,175 tons, signaling supplies may be reduced.

Tin gained $75 to $11,875 a ton. Yunnan Tin Co., the world’s biggest producer of the metal, said yesterday it was suspending output for at least a month. It’s “probably a reflection of weak demand in China,” Peter Kettle, research manager at St. Albans, U.K.-based producer group ITRI Ltd., wrote in an e-mail today.

Aluminum was unchanged at $1,512 a ton, after trading up as much as $34. Norsk Hydro ASA, Europe’s second-largest aluminum producer, will close 120,000 tons of annual production at its Karmoy smelter in Norway. Output will halt by the end of the first quarter, Oslo-based Hydro said.

“Western producers are having to step up now that China has signaled it won’t be cutting in a hurry,” said David Thurtell, an analyst at Citigroup Inc. in London. China may end a tax on primary aluminum so producers can boost sales overseas, said traders and analysts.

Nickel rose $176 to $9,576 a ton and lead jumped $25 to $995 a ton. Zinc dropped $5 to $1,110 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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Gold Rises for Third Day in London on Higher Oil, Haven Buying

By Nicholas Larkin

Dec. 10 (Bloomberg) -- Gold rose for a third day in London as higher oil prices and a worsening global economic outlook increased the metal’s appeal as a safe haven and hedge against inflation. Platinum also advanced.

Crude oil gained as traders closed out bets prices will drop and on signs that OPEC will cut production twice in as many months. China’s exports fell for the first time in seven years, while Rio Tinto Group said it will eliminate 14,000 jobs and slash $5 billion in spending as the recession curbs demand.

“The oil price is up which is obviously positive for gold,” Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin, said by phone. “Long-term concerns about the economic outlook are still leading more people to diversify.”

Gold for immediate delivery climbed as much as $17.08, or 2.2 percent, to $794.03 an ounce and traded at $788.33 by 1:03 p.m. in London. A close at that price would be the highest since Nov. 28. February futures jumped $15, or 1.9 percent, to $789.20 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal rose to $785.75 in the morning “fixing” in London used by some mining companies to sell production, from $767.75 at the afternoon fixing yesterday. Bullion has dropped 23 percent since reaching a record $1,032.70 an ounce in March as gains in the dollar and slowing world growth reduced demand for commodities.

Dollar Slips

Oil rose as much as 6.3 percent to $44.72 a barrel in New York. The U.S. Dollar Index, which tracks the currency against those of six trading partners, dropped as much as 0.5 percent, and was down 0.1 percent after brief gains in late morning. Bullion typically moves in the opposite direction to the dollar.

“If the dollar goes down, you tend to buy gold,” said Jesper Dannesboe, senior commodity strategist at Societe Generale in London, by phone today.

Highland Gold Mining Ltd. said it will delay commissioning its Novoshirokinskoye mine in Russia until next quarter, and defer construction and cut costs at other projects, because of a “dramatic” drop in metal prices.

“The market seems to be selling highs and buying dips because no-one is taking positions right now,” Walter de Wet, an analyst at Standard Bank Ltd. in Johannesburg, wrote in a note.

Among other metals for immediate delivery in London, silver added 1.4 percent to $9.985 an ounce. Platinum rose 2 percent to $829.50 an ounce, and palladium was 0.6 percent lower at $177.

Congress will vote as early as today on a plan Democrats reached with the Bush administration to keep U.S. automakers afloat while forcing them to restructure. General Motors Corp. and Chrysler LLC have said they need at least $14 billion in combined aid to keep operating through March 31.

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

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

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Crude Oil Rises on Speculation OPEC, Russia Will Coordinate Cut

By Alexander Kwiatkowski

Dec. 10 (Bloomberg) -- Crude oil rose on speculation that Russia may coordinate a production cut with OPEC next week to end the five-month slump in prices.

Energy Minister Sergei Shmatko said Russia will announce proposals for reducing output by Dec. 17, when the Organization of Petroleum Exporting Countries meets, Interfax reported. OPEC, which pumps more than 40 percent of the world’s oil, may reduce its output limit by as much as 2.5 million barrels a day, billionaire hedge-fund manager Boone Pickens said yesterday.

“It would be a boost to OPEC if they commit something forward,” said Olivier Jakob, managing director of Zug, Switzerland-based PetroMatrix. “The cuts from Russia are already happening, producers are not making money.”

Crude oil futures for January delivery rose as much as $2.65, or 6.3 percent, to $44.72 a barrel in electronic trading on the New York Mercantile Exchange. It was at $44.10 a barrel at 12:57 a.m. London time.

Russia’s Shmatko said he had spoken on the phone to the president of OPEC and that the oil-producers’ group is preparing “significant” production cuts, Interfax said. Russia is the world’s second-largest exporter after Saudi Arabia. Norway, the next biggest non-OPEC exporter, has no plans to cut production, the petroleum ministry said.

Oil also rose as traders bought contracts to close out bets that prices will fall further. Traders who held short positions, or bets prices would fall, are purchasing futures after oil dropped more than 20 percent in the past two weeks. Yesterday, futures fell $1.64, or 3.8 percent, to $42.07 a barrel, capping a 23 percent drop since Nov. 26.

‘Substantial’ Cut

OPEC should make a “substantial” output cut when it meets on Dec. 17 in Algeria, Shokri Ghanem, Libya’s top oil official, said on Dec. 8. Oil has tumbled more than 30 percent since the group announced a 1.5 million-barrel-a-day reduction in supply on Oct. 24.

OPEC will “work it back up to $100,” Pickens said in an interview in New York. “It will all be determined by the global economy. If you get a recovery in the global economy, you will get it back up.”

The International Energy Agency and OPEC have lowered demand forecasts in the past month because of the economic contraction.

The Paris-based agency reduced its demand forecast by 170,000 barrels a day from its November estimate to 86.37 million barrels a day, analyst David Martin said on Dec. 5. OPEC cut its forecast for next year by 530,000 barrels a day, or 0.6 percent, to 86.68 million barrels a day, in its monthly oil market report on Nov. 17.

The IEA is likely to lower its 2009 demand growth forecast again in its monthly oil report which will be released tomorrow, said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna.

“They should come out with a negative demand revision,” Loacker said. “Their number is still too high.”

China Imports

China’s November crude-oil imports fell to the lowest in a year, the first decline since July. Imports fell 1.8 percent from a year earlier to 13.36 million metric tons last month, or 3.25 million barrels a day, the Beijing-based Customs General Administration of China said on its Web site today.

A government report today is forecast to show U.S. crude- oil inventories rose 1.3 million barrels last week, according to the median of 14 responses in a Bloomberg News survey. The report will probably show a drop in U.S. supplies of gasoline and distillate fuel, which includes diesel and heating oil.

The Energy Department is scheduled to release its weekly report at 10:35 a.m. today in Washington.

Brent crude oil for January settlement rose as much as $2.31, or 5.6 percent, to $43.84 a barrel on London’s ICE Futures Europe exchange. It was at $43.38 a barrel at 12:36 p.m. local time.

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

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European Stocks to Advance Next Year, Merrill Says

By Alexis Xydias

Dec. 10 (Bloomberg) -- European stocks may be poised for a year-end rally and will likely climb 9.1 percent through 2009, according to Merrill Lynch & Co. The advance would help investors recoup only about one-tenth of their 2008 losses.

The Dow Jones Stoxx 600 Index may end next year at 224, Merrill’s European strategists wrote in a report today, and climb in coming weeks as interest-rate cuts, government bail- outs and a new U.S. administration ignite investors’ appetite for stocks. In the case of a “severe recession,” which is not their central scenario, the index would drop to 156, Merrill said. The European benchmark closed at 205.33 yesterday.

“We see scope for a trading rally in equity markets into the New Year as risk trades re-open, cash is put to work and policies introduced in the third quarter start to gain traction,” wrote the strategists, led by Gary Baker. “We then see markets in a trading range for the remainder of the year as we slowly get to grips with accumulated imbalances.”

Merrill’s estimate is less bullish than other brokerages such as Credit Suisse Group AG and Deutsche Bank AG, and implies that investors next year will only recover 12 percent of their 2008 losses. The Stoxx 600 tumbled 44 percent this year amid the worst global financial crisis since the Great Depression.

Value Traps

Buying shares because they are cheap may not work because valuations are “almost meaningless” and the traditional “reversion to mean” trend “stopped working a long time ago,” the note said. The Stoxx 600 is valued at 9.3 times its companies’ reported earnings, compared with 12.7 at the start of 2008, data compiled by Bloomberg show.

The global economic recession will likely bring earnings in Europe down by 40 percent from their peak, the note said. A “severe recession” scenario would wipe out all the profit- margin improvements of the last two decades and cause earnings to plummet 58 percent from peak to trough, they wrote.

“The seizure suffered by the global economy in the fourth quarter will lead to one of the weakest quarters of growth in the post-war period,” the team wrote. “But the speed of collapse has been echoed in the performance of bonds and equities year-to-date.”

Credit Suisse and Deutsche Bank strategists yesterday predicted the Stoxx 600 may end 2009 at 250, a 22 percent gain from yesterday’s close. Stocks will post “higher double-digit returns” in 2009, UBS AG’s global strategist said Dec. 1. Morgan Stanley has been among the most bearish, saying on Dec. 1 that shares in Europe may rise about 2 percent in twelve months.

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

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German Stocks Pare Losses, Led by Hypo Real Estate, E.ON Shares

By Stefanie Haxel

Dec. 10 (Bloomberg) -- Germany’s DAX Index rebounded as Hypo Real Estate Holding AG and E.ON AG gained. Linde Group led falling shares after U.S. competitor Praxair Inc. lowered its profit forecast.

The benchmark DAX added 5.25, or 0.1 percent, to 4,784.36 as of 12:16 p.m. in Frankfurt after falling as much as 0.8 percent earlier. The broader HDAX Index percent rose also 0.1 percent.

Hypo Real Estate climbed 10 cents, or 3.4 percent, to 3.07 euros. The German government boosted loan guarantees to the property lender bailed out in October by an additional 10 billion ($13 billion). E.ON, the country’s biggest utility, rose 49 cents, or 1.9 percent, to 26.56 euros.

Linde Group, Germany’s largest industrial gas maker, plunged 4.8 percent to 55.58 euros. Praxair Inc. lowered its forecast for fourth-quarter earnings per share and will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand.

To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.

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U.K. Stocks Decline, Led by Retailers; Marks & Spencer Retreats

By Adam Haigh

Dec. 10 (Bloomberg) -- U.K. stocks fell, led by retailers, after Morgan Stanley said sales during Christmas could be the “worst in many years’ and a government-funded institute warned the economy may shrink at the fastest pace since 1990 this quarter.

Marks & Spencer Group Plc and Kesa Electricals Plc slumped more than 4 percent after Morgan Stanley said the two retailers are “most likely to disappoint” this Christmas as earnings come under pressure from lower sales and increased discounting.

Rio Tinto Group limited losses on the FTSE 100 after the world’s third-largest mining company said it will eliminate 14,000 jobs, cut capital spending by more than half and sell “significant assets” as demand for metals sinks in the global recession.

The benchmark FTSE 100 Index slid 9.65, or 0.2 percent, to 4,371.61 at 12:47 p.m. in London, snapping two days of gains. The gauge is down 32 percent this year as losses at global financial firms approached $1 trillion and the economic slowdown erodes profit. The FTSE All-Share Index was little changed today and Ireland’s ISEQ Index slipped 1.6 percent.

“We will stay with our bearish and cautious stance,” on equities, said Leo Schrutt, a senior managing director at Stanford Group (Suisse) AG, which is part of the Stanford Financial Group of companies that manage about $50 billion in assets worldwide.” “Markets and market participants are a little bit fed up and tired of the bad news. 2009 will also be a very bad year,” he told Bloomberg Television.

Gross domestic product fell 1 percent in the three months through November and will probably plunge more than that in the last three months of the year, the National Institute for Economic and Social Research said.

Marks & Spencer Retreats

Marks & Spencer, the U.K.’s largest clothing retailer, retreated 4.8 percent to 231.75 pence. Kesa the owner of France’s Darty electronics stores and Britain’s Comet chain, dropped 8.3 percent to 96.25 pence.

“Christmas is shaping up to be the worst in many years,” Morgan Stanley analysts led by Fred Bjelland wrote in a note today. “Worryingly, we believe that many retailers have entered the crucial Christmas selling period with too much stock.”

Rio Tinto rallied 17 percent to 1,467 pence as it said it was cutting 14,000 jobs and plans to reduce spending by $5 billion.

William Morrison Supermarkets Plc, the smallest of the four main U.K. food retailers, gained 4.8 percent to 278.25 as JPMorgan Chase & Co. raised the shares to “overweight,” citing an improvement in like-for-like sales growth.

Carillion Gains

Carillion Plc added 12 percent to 245 pence. Britain’s second-biggest builder forecast full-year earnings growth of 15 percent, ahead of an earlier prediction, on growth in the Middle East.

Fresnillo Plc, Lonmin Plc and Petrofac Plc may be removed from the FTSE 100 this month after FTSE Group announces its quarterly changes to the index today, according to John Meyer, head of resources analysis at Fairfax IS Plc in London.

Randgold Resources Ltd. may be added to the gauge, he wrote in a note to clients today.

FTSE Group will announce the changes after the close of the U.K. market today and was unable to confirm companies leaving or being added to the measure before this.

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

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European Stocks Gyrate; Asian Shares, U.S. Index Futures Climb

By Sarah Jones

Dec. 10 (Bloomberg) -- European stocks swung between gains and losses as lower earnings forecasts from Electronic Arts Inc. and Praxair Inc. weighed on media and chemical companies, offsetting gains in commodity producers.

Vivendi SA, which owns more than half of Activision Blizzard Inc., dropped 2.5 percent after rival Electronic Arts reduced its revenue and profit outlook. Air Liquide SA lost 4.1 percent as Praxair, the largest producer of industrial gases in the Americas, trimmed its earnings forecast. Rio Tinto Group jumped 16 percent on plans to cut jobs and slash spending next year. General Motors Corp. rose 4.7 percent in early New York trading, lifting U.S. futures on speculation lawmakers will approve a $15 billion government bailout of the automobile industry.

Europe’s Dow Jones Stoxx 600 Index slipped less than 0.1 percent to 205.35 at 1:41 p.m. in London after earlier climbing as much as 0.5 percent and dropping as much as 1.1 percent.

“Stocks are more concentrated on the bad news, such as profit warnings,” Clemence Bounaix, who helps oversee about $5.2 billion as fund manager at KBL Richelieu Gestion, said in a Bloomberg Television interview. “The situation remains very difficult.”

The Stoxx 600 has slumped 44 percent this year as policy makers and governments worldwide introduce measures to cushion economies from the worst financial crisis since the Great Depression. More than $31 trillion has been erased from the value of global equities and credit losses and writedowns at banks and insurers are approaching $1 trillion.

Asia, U.S.

The MSCI Asia Pacific Index climbed 3.3 percent, led by a rally in carmakers including Honda Motor Co. and Hyundai Motor Co., while futures on the Standard & Poor’s 500 Index expiring this month added 1.2 percent.

The U.K. economy may contract at the fastest pace since 1990 in the current quarter as the recession intensifies, the National Institute for Economic and Social Research said today.

Analysts expect full-year earnings at companies in the Stoxx 600 to fall 13 percent this year, compared with 11 percent growth predicted in January, according to Bloomberg data. Profits in the S&P 500 may drop 9.5 percent on average in 2008.

Vivendi dropped 2.5 percent to 22.33 euros. France’s biggest media company owns 54 percent of Activision Blizzard, the world’s largest video-game publisher. Game Group Plc, the U.K.’s biggest video-games retailer, fell 5.9 percent to 124.75 pence.

Electronic Arts, the second-largest maker of video games, said yesterday after U.S. markets closed that 2009 revenue and profit will be less than forecast because of slow holiday sales in North America and Europe. The stock dropped as much as 8.1 percent to $17.79 in German trading.

Chemical Makers

Air Liquide, the largest maker of industrial gases, sank 4.1 percent to 62.63 euros. Linde AG, the second-biggest, retreated 4.3 percent to 55.89 euros.

Praxair trimmed its fourth-quarter earnings forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. Profit in the quarter will be 95 cents to $1 a share, excluding one-time costs. That compares to an earlier forecast of $1.03 to $1.08 a share.

GM, the biggest U.S. automaker, climbed 4.7 percent to $4.92 in early New York trading as Congress prepares to vote on the plan Democrats reached with the Bush administration to rescue General Motors Corp. and Chrysler LLC.

The tentative agreement calls for the appointment of a so- called car czar who could force General Motors and Chrysler into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.

Honda Motor, Japan’s second-biggest automaker, rallied 10 percent to 2,035 yen. Hyundai Motor, South Korea’s largest carmaker, gained 9.2 percent to 47,050 won.

Basic Resources

Rio Tinto surged 16 percent to 1,458 pence after the world’s third-biggest mining company said it will eliminate 14,000 jobs and slash spending to reduce debt as the global recession curbs demand for metals. The company plans to reduce net debt by $10 billion by the end of 2009 from $38.9 billion and said it will sell “significant assets.” Rio Tinto also plans to hold its 2008 dividend at the 2007 level of $1.36 a share.

Copper, lead, nickel and tin all advanced on the London Metal Exchange on expectations that declines in the dollar may boost demand for industrial metals.

BHP Billiton Ltd., the world’s biggest mining company, increased 5.5 percent to 1,220 pence. Xstrata Plc, the fourth- largest copper producer, added 5.9 percent to 689.5 pence.

Marks & Spencer Group Plc let U.K. retailers lower after Morgan Stanley said sales during Christmas could be the “worst in many years.” The U.K.’s largest clothing retailer fell 5 percent to 231.25 pence, while Kesa Electricals Plc declined 4.8 percent to 100 pence.

Morgan Stanley said the two companies are “most likely to disappoint” this Christmas as earnings come under pressure from lower sales and increased discounting.

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

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U.S. Stock Futures Gain; General Motors, Ford Climb in Europe

By Adria Cimino and Whitney Kisling

Dec. 10 (Bloomberg) -- U.S. stock futures rose on speculation lawmakers will approve a $15 billion bailout to keep automakers afloat in the government’s latest effort to boost the economy. Asian shares climbed, while Europe’s Dow Jones Stoxx 600 Index was little changed.

General Motors Corp., the biggest U.S. carmaker, and Ford Motor Co. gained more than 3 percent. Newmont Mining Corp. and Marathon Oil Corp. climbed more than 3.6 percent as copper, gold and oil prices increased. Eastman Kodak Co., the 128-year-old photography company, slid 24 percent as the deepening recession forced it to cut sales and profit forecasts.

“Strong and radical measures by the government lead us to believe that the economy won’t be as difficult as we thought,” Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion, said in a Bloomberg Television interview. “It gives the market hope.”

S&P 500 futures expiring in December added 1.2 percent to 900.4 at 8:41 a.m. in New York. Dow Jones Industrial Average futures rose 99 points, or 1.1 percent, to 8,819. Nasdaq-100 Index futures increased 1 percent to 1,228.75.

The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public-works spending since the 1950s. The index has lost 43 percent from its 2007 record as the collapse of subprime mortgages curbed earnings for five straight quarters.

Rallies by Honda Motor Co. and Hyundai Motor Co. helped send the MSCI Asia Pacific Index up 3.3 percent. Europe’s Stoxx 600 drifted between gains and losses as Rio Tinto Group surged on plans to eliminate 14,000 jobs and cut capital spending by more than half.

GM, Ford

GM jumped 6.4 percent to $5. Ford advanced 3.7 percent to $3.35. Congress will vote as early as today on the plan.

Democrats reached a tentative agreement with the Bush administration that calls for the appointment of a so-called car czar who could force GM and Chrysler LLC into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31, according to a senior Bush administration official who requested anonymity.

A report scheduled for 10 a.m. Washington time may show wholesale inventories in October fell 0.2 percent, according to a Bloomberg survey of economists. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan fell 7.1 percent from the prior weeks’ eight- month high, as household wealth declines and the credit crunch deepens.

Electronic Arts, Praxair

Electronic Arts Inc. lost 10 percent to $17.35. The world’s second-largest maker of video games predicted fiscal 2009 revenue and profit will be lower than previously forecast because of slow holiday sales in North America and Europe. The company said it will reduce costs by making fewer games and increasing job cuts.

Eastman Kodak slumped 24 percent to $5.50. The company cut its second-half and full-year sales and profit forecasts on the deepening global recession and changes in the value of the U.S. dollar.

Praxair Inc., the largest producer of industrial gases in the Americas, reduced its fourth-quarter profit forecast and said it will cut 1,600 jobs because the recession is causing an “unprecedented” drop in demand. The shares didn’t trade in Europe or in pre-market U.S. trading.

Nike Inc., the world’s largest athletic-shoe maker, slipped 60 cents to $52.34 after it was downgraded to “neutral” from “buy” at Bank of America Corp., which cited a slowdown in demand.

Earnings Slump

Companies in the S&P 500 that reported third-quarter results saw an average 18 percent decline in profits, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one-third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.

The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News.

Household spending will drop 1 percent in 2009, the biggest decline since after the attack on Pearl Harbor, according to the median estimate of 51 economists surveyed Dec. 4 through Dec. 9. By the middle of next year, the economy will have shrunk for a record four consecutive quarters, the survey showed.

To contact the reporters on this story: Adria Cimino in Paris at acimino1@bloomberg.net; Whitney Kisling in New York at wkisling@bloomberg.net.

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China hopes propel HK shares to 2-mnth high

* HSI closes at 2-month high; up 15 pct in a week

* China shares soar on government support hopes

* Air China surges on likely cancellation of plane orders

(Updates to close)

By Parvathy Ullatil

HONG KONG, Dec 10 (Reuters) - Hong Kong shares soared 5.6 percent on Wednesday to finish at a nearly two-month high as investors, pinning their hopes on massive stimulus measures from Beijing, snapped up China stocks.

Local shares have surged nearly 15 percent in a week on talk that China will announce a slew of measures to boost private consumption and prop up the stock markets as a three-day meeting of top Chinese leaders concludes Wednesday.

Hong Kong shares in China's flag carrier, Air China (0753.HK: Quote, Profile, Research, Stock Buzz), shot up more than 22 percent after the aviation regulator encouraged airlines to cancel or postpone plane deliveries due in 2009 amid slackening demand for air travel.

The benchmark Hang Seng Index .HSI ended 824.52 points higher at 15,577.74, its highest close since Oct.15.

"People are basically buying into the China stimulus story. And talk about the 'through train' scheme also keeps popping up every now and then," said Howard Gorges, vice chairman at South China Securities.

The 'through train' scheme, which is a direct investment scheme for Chinese individual investors to buy Hong Kong equities, was first proposed by mainland authorities in August 2007 but was stalled amid concerns over Hong Kong's volatile markets. But the territory's financial secretary John Tsang said earlier this week the scheme was still on track.

Mainboard turnover rose to HK$61.9 billion from HK$56.9 billion on Tuesday.

"Essentially there has been a change in sentiment, confidence has improved and volumes have picked up quite decently. Long term fund seem to have done most of their selling in the last two months and are slowly getting back to buying," said Gorges.

CHINA STOCKS LEAD

The China Enterprises Index of top locally listed mainland Chinese firms .HSCE rose 6.3 percent to 8,507.49.

Chinese banking counters surged, with top lender ICBC (1398.HK: Quote, Profile, Research, Stock Buzz) jumping 5.9 percent while No. 3 lender China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) added 5.6 percent.

Commodity stocks also defied the overnight drop in crude oil prices to extend Tuesday's rally on hopes that bold stimulus measures from governments across the world would help turn around the global economic outlook and boost demand for raw materials.

Asia's largest oil and gas producer, PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz), rallied 6 percent, while offshore oil specialist CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) added 12.7 percent.

Coal miner China Coal Energy (1898.HK: Quote, Profile, Research, Stock Buzz) gained 14.6 percent while gold miner Zijin Mining (2899.HK: Quote, Profile, Research, Stock Buzz) jumped 17.7 percent.

Chinese carmakers joined regional rivals in cheering a tentative agreement on the rescue plan for the battered U.S. auto industry.

Dongfeng Group (0489.HK: Quote, Profile, Research, Stock Buzz) vaulted 19.9 percent while Denway Motors (0203.HK: Quote, Profile, Research, Stock Buzz) bulked up 13.4 percent. Brilliance China (1114.HK: Quote, Profile, Research, Stock Buzz) jumped up 14.3 percent.

(Reporting by Parvathy Ullatil; Editing by Jonathan Hopfner)

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