U.S. Industrial Production Fell 0.6% in November, Led by Autos

By Courtney Schlisserman

Dec. 15 (Bloomberg) -- U.S. industrial production fell in November for the third time in four months, led by a slump at automakers as sales plummeted.

Output at factories, mines and utilities dropped 0.6 percent, less than forecast, after an increase of 1.5 percent in October that was more than previously reported, the Federal Reserve said today in Washington.

The weakest sales in 26 years have brought General Motors Corp. and Chrysler LLC to the brink of bankruptcy, prompting cutbacks in output that have deepened the year-long recession. The Bush administration said last week it was willing to tap the $700 billion bank bailout fund to keep the automakers alive until January after the Senate failed to approve emergency cash.

“Manufacturing is getting hit from every direction,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “Exports are starting to decline on top of domestic demand having blown up the last couple of months.”

Economists had forecast industrial production would fall 0.8 percent, according to the median projection in a Bloomberg News survey. Estimates ranged from a decline of 2 percent to a gain of 0.4 percent.

Capacity utilization, or the proportion of plants in use, fell to 75.4 percent from 76 percent in October. Economists had forecast that figure would fall to 75.6 percent, according to the Bloomberg survey.

New York Manufacturing

This report follows one today from the Federal Reserve Bank of New York showing manufacturing in that region contracted in December at the fastest pace since records began in 2001. The New York Fed’s general economic index fell to minus 25.8, the lowest level since records began in 2001, from minus 25.4 in November as measures of new orders and shipments remained weak.

Factory output, which accounts for about four-fifths of industrial production, decreased 1.4 percent, led by declines in output of metals, furniture and construction supplies as well as autos. Aircraft production was one of the only manufacturing categories showing gains during the month, as work resumed at Boeing Co. following a strike.

Utility production increased 1.6 percent after rising 0.7 percent a month earlier. Mining output, which includes oil drilling, rose 2.5 percent.

Motor vehicle and parts production declined 2.8 percent in November following a 3.6 percent decrease the prior month, the report said. Automakers assembled cars and light trucks at an annual rate of 7.31 million vehicles during the month.

Production of consumer durable goods, including automobiles, furniture and electronics, fell 3 percent.

Auto Industry Cutbacks

The auto industry is at the center of the manufacturing recession. GM spokesman Tony Sapienza said in an interview last week that the automaker is cutting 250,000 units of production from its plan for 2009’s first quarter, a 30 percent reduction.

Honda Motor Co. is cutting 119,000 vehicles from its North American production plan, tripling its reduction for the fiscal year that ends in March, the Tokyo-based company said last week.

The Bush administration last week dropped its opposition to using the bank-bailout money to save the automakers. GM needs $4 billion from the government by the end of the month to pay its bills. Autos sold at a 10.2 million annual pace last month, the fewest since 1982.

Other reports reinforce a bleak outlook for manufacturing. The Institute for Supply Management’s factory index for November dropped to the lowest level in 26 years, the Tempe, Arizona- based group said Dec. 1.

Declining Exports

Slowing international demand is adding to factories’ woes. U.S. exports dropped for a third straight month in October, reaching the lowest level in seven months, the Commerce Department said last week.

“While we were able to rely on this as an offset earlier, that has gone away,” Jonathan Basile, an economist at Credit Suisse Holdings in New York, said before the report.

Cummins Inc., the maker of more than a third of North America’s heavy-duty truck engines, said this month it will eliminate at least 500 jobs by the end of the year because of “continued deterioration” in the U.S. economy and other key markets. Cummins said in October that sales growth will be about 12 percent this year, lower than it previously forecast, as the U.S. and European economies weakened.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Read more...

Natural Gas Gains on Outlook for Colder Weather, Weaker Dollar

By Reg Curren

Dec. 15 (Bloomberg) -- Natural gas futures gained for the first day in three on a forecast for colder weather across most of the U.S., where more than half of all households rely on the fuel for heating.

Below-normal temperatures will persist from now until Dec. 24 in parts of the Midwest, including Minneapolis, where lows may dip to minus 15 Fahrenheit (minus 26 Celsius) by tomorrow, according to MDA Federal Inc.’s EarthSat Energy Weather. Gas also rose as a weaker dollar lifted commodity prices.

“The weather maps are starting to look more bullish,” said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. “And the weaker dollar means the fear factor is coming out of the market, which is bullish for commodities and natural gas.”

Gas for January delivery rose 25.7 cents, or 4.7 percent, to $5.745 per million British thermal units at 9:29 a.m. on the New York Mercantile Exchange. Gas futures are down 23 percent this year and have dropped 12 percent this month on mild weather and slow industrial demand.

The dollar declined to its lowest in eight weeks against the euro amid speculation the Federal Reserve will cut borrowing costs to an all-time low.

The weaker dollar makes commodities, including crude, gold and wheat more attractive to investors outside the U.S.

An expected production cut this week by the Organization of Petroleum Exporting Countries is also propping up crude prices.

Oil for January delivery rose $2.90, or 6.3 percent, to $49.18 a barrel on the New York exchange.

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

Read more...

Marseille Oil Port Workers End Strike at Fos, Lavera

By Tara Patel

Dec. 15 (Bloomberg) -- Workers at the Fos and Lavera oil terminals in the French port of Marseille ended a 12-day strike that had hampered operations at refineries in the region and boosted European gasoil prices.

Work will resume “within hours” after employees approved an agreement “to get out of the crisis” earlier today, the Port of Marseille said in a statement.

The backlog of 61 stranded vessels, including oil tankers and refined-product carriers, will take between 10 days and two weeks to clear, Claire Battedou, a spokeswoman for the port, said by telephone. She declined to provide details of the agreement.

Employees protesting the application of a new law on port operations started a strike on Dec. 4, after rotating walkouts roughly every other day. The legislation calls for workers such as crane operators who are employed by state port authorities to move to the private sector. The Marseille docks, which have a long history of labor strife, have been affected by stoppages in recent years as unions resisted efforts to move jobs to the privately owned companies.

Gasoil for immediate loading in the Amsterdam-Rotterdam- Antwerp area, Europe’s trading hub, climbed 9.5 percent to $492.75 a metric ton at 1:13 p.m. London time, the highest since Dec. 1, according to data compiled by Bloomberg.

The Union Francaise des Industries Petrolieres, which represents the French oil industry, has estimated the labor action cost $1.5 million to $2 million a day in reduced refinery operations and delayed vessels.

Refinery Output

Total SA, which operates six refineries in France, said earlier that oil-processing had become “more and more difficult” as the walkout continued. The company’s inventories will last more than a week “but they won’t last forever,” spokesman Michael Crochet-Vourey said by phone from Paris.

Exxon Mobil Corp. also said it had reduced operating rates “significantly” at its Fos refinery as the strike prevented oil deliveries to the plant.

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

Read more...

Oil Demand to Fall 500,000 Barrels a Day, CGES Says

By Anthony DiPaola

Dec. 15 (Bloomberg) -- World oil demand may fall by an average of 500,000 barrels a day next year because of high crude prices and slumping economies, the Centre for Global Energy Studies said.

The Organization of Petroleum Exporting Countries, set to cut oil production at their meeting this week to prop up prices, risks eroding demand further if it adds to consumer costs, the group said in its monthly oil report today.

“When OPEC meets in Oran, Algeria, the questions will not be whether to cut output quotas further, but how deep to make the cut,” CGES said. “A bigger output cut, in pursuit of much higher prices, risks undermining the already fragile economy.”

The 13 members of OPEC, supplier of more than 40 percent of the world’s oil, will meet Dec. 17 for the fourth time in as many months, to discuss further output cuts after crude prices plunged $100 from July’s all-time high of $147.27 a barrel.

OPEC should make a “sizeable” cut in oil production because there is excess inventory in the market, Secretary- General Abdalla el-Badri said today.

Iran and Venezuela, labeled “price hawks” in the report, may seek a 2 million-barrel-a-day reduction in the group’s production quota, while others such as Saudi Arabia may call for a 1 million-barrel-a-day cut, CGES said.

It will be “highly unlikely” that cuts will allow OPEC to reach its $75 a barrel target in the near future, according to the CGES report. Lower prices would help the world economy and avoid further destroying oil demand, according to the report.

Demand will average 85.3 million barrels a day next year, down 0.6 percent from 2008. Oil demand this year is set to decline 0.3 percent from last year, to 85.8 million barrels.

CGES forecasts the average oil price will fall to $41 next year from $97.30 this year.

To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net.

Read more...

Foreign Demand for U.S. Long-Term Assets Declines in October

By John Brinsley

Dec. 15 (Bloomberg) -- International demand for long-term U.S. financial assets weakened in October as foreign investors sold American stocks, corporate bonds and agency debt.

Total net purchases of long-term equities, notes and bonds fell to a net $1.5 billion in October from $65.4 billion the previous month, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $286.3 billion, compared with net buying of $142.6 billion the previous month.

U.S. equities fell the most in 21 years in October as concern about a widening global economic slowdown spurred demand for Treasuries. In October, foreign investors sold a record amount of debt issued by mortgage-finance companies Fannie Mae and Freddie Mac and other agencies.

“Interest in equities are weak and corporate demand is drying up,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, before the report. “More money is staying at home.”

Economists predicted international investors would buy a net $40 billion of long-term securities in September, based on the median of five estimates in a Bloomberg News survey.

The Standard & Poor’s 500 Index fell 17 percent in October, with the sell-off erasing more than $9.5 trillion in value of stocks worldwide. The Fed cut its benchmark rate to 1 percent on Oct. 29, its second reduction in three weeks, and said downside risks to growth remain.

Fannie, Freddie

The Treasury’s reporting on long-term securities captures international purchases of government notes and bonds, stocks, corporate debt and securities issued by U.S. agencies such as Fannie Mae and Freddie Mac, which buy mortgages.

Foreign purchases of Treasury notes and bonds increased by a net $34.6 billion, compared with purchases of $20.7 billion a month earlier. Net foreign official selling of Treasury bonds and notes totaled $1.1 billion, after net purchases of $4.9 billion the previous month.

Two-year securities returned 1.1 percent in October, according to Merrill Lynch & Co.’s Treasury Master Index, for their fifth straight monthly advance.

Foreign demand for U.S. agency debt from companies such as Fannie Mae and Freddie Mac fell from a month earlier. Sales of long-term agency debt totaled a net $50.2 billion, compared with net purchases of $6.2 billion in September.

The Treasury’s figures include both agency debt and mortgage-backed securities and aren’t restricted to Fannie Mae and Freddie Mac bonds. Mortgage-backed securities of Ginnie Mae and corporate debt of the Federal Home Loan Bank System are also included in the report.

U.S. Selling

U.S. residents sold a net $36.3 billion of long-term foreign securities in October, compared with net sales of $35.4 billion a month earlier, the report showed.

China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose by $65.9 billion to $652.9 billion. Japan, the second-largest holder, increased its holdings by $12.3 billion to $585.5 billion.

The U.K., which through London acts as a transit point for international investors, especially those in the Middle East, bought $21.9 billion of Treasuries, bringing holdings to $360.2 billion.

Caribbean banking centers, where many hedge funds are based, expanded holdings by $34.2 billion to $219.5 billion, the report showed.

Some economists say the difference between the trade deficit and securities purchased by foreigners is an indicator of how easily the U.S. can finance its external obligations.

The U.S. trade gap unexpectedly widened 1.1 percent in October to $57.2 billion as faltering global demand led to a third consecutive drop in exports, the Commerce Department said on Dec. 11.

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net

Read more...

Brazil’s Real Falls as Companies Seek Dollars to Repay Debt

By Francisco Marcelino

Dec. 15 (Bloomberg) -- Brazil’s real fell for a second day against the dollar as companies sought to buy dollars in the domestic market to pay external debt.

The currency declined 0.6 percent to 2.4075 per dollar at 7:57 a.m. New York time, from 2.3941 on Dec. 12.

Brazil’s central bank said on Dec. 11 it plans to lend companies as much as $10 billion from the nation’s international reserves as they struggle to repay their dollar debt.

“There are about $7 billion leaving the country by year end as companies must pay bonds and loans and there aren’t enough dollars in the market,” said Reginaldo Galhardo a currency- trading manager at Treviso Corretora de Cambio in Sao Paulo. “The currency market will be under pressure until the central bank starts to lend international reserves.”

The yield on Brazil’s overnight futures contract for January 2010 slipped four basis points, or 0.04 percentage point, to 12.77 percent.

To contact the reporter on this story: Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net.

Read more...

Dollar Falls to Eight-Week Low on Outlook for Fed Rate Cut

By Jamie McGee and Kim-Mai Cutler

Dec. 15 (Bloomberg) -- The dollar weakened to $1.36 per euro for the first time in eight weeks on speculation the Federal Reserve will cut borrowing costs to near zero.

The greenback approached a 13-year low against the Japanese currency as a Fed report showed New York state manufacturing contracted in December at the fastest pace on record. The pound weakened to a record 90 pence per euro after an industry report showed house prices in the U.K. extended declines in December.

“We will stay in a low-interest-rate environment for some time,” said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank Ltd. in New York. “That will take away interest-rate play, and the dollar will suffer.”

The dollar declined 1.7 percent to $1.3602 per euro at 9:58 a.m. in New York, from $1.3369 on Dec. 12, after touching $1.3607, the weakest level since Oct. 15. The dollar slid 0.8 percent to 90.44 yen from 91.21, after reaching 88.53 yen on Dec. 12, the weakest level since August 1995. The euro rose 1 percent to 123.05 yen from 121.83.

The pound slid 0.6 percent to 88.98 pence after Rightmove Plc, operator of a residential-property Web site, said the average house price in the U.K. advertised by sellers fell 2.3 percent in December. Sterling touched 90.21 pence, the weakest level since the 15-nation euro’s debut in 1999. Sterling gained 0.8 percent to $1.5069.

The cost of borrowing in dollars over three months, or the London interbank offered rate, fell for a fifth day in a sign that short-term funding pressures and dollar demand may be easing. The rate for three-month loans decreased to 1.87 percent, according to British Bankers’ Association data.

Confidence Is ‘Back’

“More and more confidence is seeping back,” said Martin McMahon, a Zurich-based foreign-exchange strategist at Credit Suisse Group AG. “This is more from policy measures and the frequency of them, rather than the economic data. Dollar strength had been a defensive play, and now that’s unwinding a bit.”

The dollar gained 8.2 percent against the euro this year as almost $990 billion of credit-market losses sparked a seizure in money markets, encouraging investors to buy the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

Futures on the Chicago Board of Trade showed a 70 percent chance the Fed will trim its 1 percent target rate for overnight lending between banks to 0.25 percent at its meeting tomorrow, compared with zero odds a month ago.

‘Under Pressure’

“The dollar is going to remain under pressure until we get the outcome of the Fed meeting,” said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “It’s no longer the safe haven that it was previously. The Japanese yen and now the euro are beneficiaries of that.”

International demand for long-term U.S. financial assets weakened in October as foreign investors sold American stocks, corporate bonds and agency debt.

Total net purchases of long-term equities, notes and bonds fell to a net $1.5 billion in October from $65.4 billion the previous month, the Treasury said today in Washington. Including short-term securities such as stock swaps, foreigners bought a net $286.3 billion, compared with net buying of $142.6 billion the previous month.

The New York Fed’s general economic index fell to minus 25.8 this month, the lowest level since records began in 2001, from minus 25.4 percent in November, the bank said. Readings below zero for the Empire State index signal that manufacturing is shrinking.

Bush on Automakers

President George W. Bush, traveling on Air Force One from Iraq to Afghanistan yesterday, said he “signaled” his administration is considering using money from the $700 billion Troubled Asset Relief Program to help General Motors Corp. and Chrysler LLC stay out of bankruptcy. Bush said he’s “not quite ready” to announce any rescue plan.

Citigroup Inc., Goldman Sachs Group Inc., BNP Paribas SA and Bank of America Corp. predict further weakness in the dollar after a four-month, 24 percent rally. Last week was the first time in almost a month that consensus estimates for the dollar against the euro through 2009 fell, according to a Bloomberg News survey.

The U.S. currency slid 5.9 percent measured by the trade- weighted Dollar Index from a two-year high on Nov. 21 after strengthening from July to November. Since peaking three weeks ago, the dollar fell against all 16 of the most widely traded currencies tracked by Bloomberg.

The yen advanced 62 percent against the Australian dollar and 83 percent versus the South African rand in 2008 on speculation the global recession will prompt investors to unwind carry trades, in which they get funds in a country with low borrowing costs and buy higher-yielding assets. Japan’s 0.3 percent target lending rate is the lowest among major economies.

To contact the reporters on this story: Jamie McGee in New York at jmcgee8@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net

Read more...

Canada’s Dollar Climbs as U.S. Dollar Tumbles, Stocks, Oil Gain

By Chris Fournier

Dec. 15 (Bloomberg) -- Canada’s currency appreciated as its U.S. counterpart declined against most major currencies and global stock markets and crude oil prices rose, increasing the currency’s appeal.

“The usual suspects are boosting the loonie,” said Firas Askari, head currency trader in Toronto at BMO Nesbitt Burns, a unit of Bank of Montreal, Canada’s fourth-largest bank. “The U.S. dollar is heavy across the board, European equities are up small and crude is up.”

The Canadian dollar strengthened 1.7 percent to C$1.2276 per U.S. dollar at 8:09 a.m. in Toronto, from C$1.2479 on Dec. 12. One Canadian dollar buys 81.46 U.S. cents.

Canada’s currency has declined 19 percent this year as a global recession reduces demand for commodities, which generate about half of Canada’s export revenue. The Bank of Canada’s index of 23 commodity prices fell to the lowest since July 2005 last week.

The U.S. dollar dropped against most of the 16 most actively traded currencies, excluding Mexico’s peso, Brazil’s real and the South African rand.

President George W. Bush said his administration’s deliberations on whether to keep General Motors Corp. and Chrysler LLC out of bankruptcy “won’t be a long process.” The statement accounted for the “paring back of risk aversion” across markets, Christian Lawrence, a currency strategist at RBC Capital Markets in London, wrote in a note.

Europe’s Dow Jones Stoxx 600 Index climbed 0.2 percent to 198.47. The MSCI World, a benchmark index for 23 developed markets, climbed 1 percent to 894.17. Crude for January delivery rose as much as 5.9 percent to $49 a barrel.

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

Read more...

Palm Oil Advances as Crude Oil Rally Improves Biofuel Prospects

By Glenys Sim

Dec. 15 (Bloomberg) -- Palm oil futures in Kuala Lumpur climbed after crude oil increased, raising the prospects for biofuels made from vegetable oils.

Crude advanced on speculation the Bush administration will rescue U.S. carmakers and the Organization of Petroleum Exporting Countries may make the biggest supply cut in a decade. Palm oil, used mainly in food, tracked crude prices much of this year as it is viable for use as a biofuel when oil trades above $80 a barrel.

“Although agriculture commodities have decoupled from crude oil’s downward move, a rise in crude oil price could still turn out to have positive effects on soybean and palm oil due to the rising biodiesel margin,” Alvin Tai, an analyst at OSK Research Sdn. in Kuala Lumpur, said in a report today.

Palm oil for January delivery rose as much as 3.1 percent to 1,630 ringgit ($449) a ton on the Malaysia Derivatives Exchange. Futures were at 1,604 ringgit at 11:45 a.m. local time.

Crude oil for January delivery rose as much as 2.6 percent to $47.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It last traded at $47.20 and reached a four-year low of $40.50 on Dec. 5.

Palm biodiesel at $610 a ton is profitable as an alternative fuel although crude oil prices have declined, said Tai. Crude palm oil prices could rise to 1,735 ringgit before the biodiesel margin turned negative and have room to move higher, he said.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Read more...

China December Soybean Imports May Double as Local Prices Gain

By William Bi

Dec. 15 (Bloomberg) -- China, the world’s largest buyer of soybeans, may double its imports this month from a year earlier, after higher prices of domestic beans prompted buyers to increase purchases overseas in the past few weeks.

Purchases may total 2.9 million metric tons, the Ministry of Commerce said in a twice-monthly forecast report dated Dec. 12. That compares with 1.4 million tons in December 2007, and 3.3 million tons last month, according to customs data.

China has asked state reserves to buy as many as 3 million tons of soybeans from farmers to boost prices and rural incomes. That’s made processing domestic soybeans unprofitable and forced buyers to boost buying of cheaper U.S. and South American beans, supporting prices of the commodity traded in Chicago.

“China’s purchases continue to support U.S. bean prices,” Cao Yanhui, research manager at Liaoning Cifco Futures Co., wrote in an emailed report today. “The market expects big shipments of beans in December.”

March-delivery soybeans on the Chicago Board of Trade gained as much as 1.5 percent to $8.695 a bushel at 4:12 p.m. in Beijing.

On the Dalian Commodity Exchange, soybeans for delivery in May gained 2.2 percent to 3,086 yuan a ton.

Chinese buyers probably ordered as many as 23 cargos, or about 1.4 million tons, of soybeans in the 10-day period ended Dec. 12 for delivery in January and February, Shanghai JC Intelligence Co. said in an email.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

Read more...

Oil Rises to $50 as OPEC’s El-Badri Says Sizable Cut Is Needed

By Mark Shenk

Dec. 15 (Bloomberg) -- Crude oil rose, touching $50 a barrel in New York, after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizable” output cut at this week’s meeting in Algeria.

The Organization of Petroleum Exporting Countries will probably lower production targets by at least 2 million barrels a day, or 7.3 percent, at a Dec. 17 meeting in Oran, according to 18 of 33 analysts surveyed by Bloomberg News. OPEC President Chakib Khelil said he was confident Russia will act to support the group’s reduction.

“It looks like OPEC will come out with a strong statement at this week’s meeting and make significant cuts, with the assistance of Russia,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “The prospect of the cuts is causing people to rethink the market balance for next year.”

Crude oil for January delivery rose $2.97, or 6.4 percent, to $49.25 a barrel at 9:27 a.m. on the New York Mercantile Exchange. Prices reached $50.05, the highest since Dec. 2.

“Stocks are very high, we need to take action at this time,” El-Badri told reporters when he arrived at his hotel in Oran today. The oil market has 100 million barrels in excess stockpiles, he said.

OPEC’s Request

OPEC is asking Russia, the largest producer outside the group, to reduce oil output by 200,000 to 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow today.

Oil also advanced because the dollar dropped to an eight- week low against the euro. A weaker U.S. currency increases demand for commodities as a hedge and makes raw materials cheaper for buyers with euros, yen or sterling. The dollar weakened 1.2 percent to $1.3536 per euro from $1.3369 Dec. 12.

Oil gained 13 percent in the five days ended Dec. 12, its biggest weekly increase in four years, on speculation the group’s output reductions will bolster prices.

“We are building on last week’s strong rally,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “The consensus is that OPEC will make a substantial cut of about 2 million barrels. We’ve also got a big selloff of the dollar, which is pulling crude higher.”

Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended Dec. 9, according to U.S. Commodity Futures Trading Commission data. Longs are bets that prices will rise.

Brent crude oil for January settlement increased $2.83, or 6.1 percent, to $49.24 a barrel on London’s ICE Futures Europe exchange.

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

Read more...

Copper Falls as U.S. Industrial Production Drops; Zinc Advances

By Claudia Carpenter

Dec. 15 (Bloomberg) -- Copper declined for a second trading session in London on speculation a contraction in U.S. industrial production will curb demand for metals in the world’s second- largest user.

U.S. industrial output fell 0.6 percent in November after a 1.5 percent gain the month before, the Federal Reserve said today. Copper has dropped 53 percent this year amid recessions in the U.S., Germany and Japan and slowing growth in China.

“The fear factor is still in the economy,” said James Roberts, a broker at Sucden Financial Ltd. in London. “We haven’t really got too much evidence to push aggressively to the upside.”

Copper for delivery in three months decreased $25, or 0.8 percent, to $3,150 a metric ton as of 2:23 p.m. on the London Metal Exchange.

The metal used in cars and homes had climbed as much as $105 a ton on renewed prospects a U.S. rescue of automakers would support demand for industrial metals.

President George W. Bush said his administration may use some of the $700 billion for U.S. banks to save the country’s automakers. Copper dropped 4.4 percent on Dec. 12 after the Senate rejected an automaker rescue, threatening to worsen a U.S. recession that caused slowdowns across the world.

China’s industrial production grew 5.4 percent in November compared with a year earlier, the statistics bureau said today. Economists forecast a 7.2 percent rise, according to a Bloomberg survey.

Copper inventories in warehouses monitored by the London Metal Exchange jumped 8,000 tons, or 2.6 percent, to 316,225 tons, the highest since Feb. 17, 2004. They’ve climbed 59 percent this year.

Aluminum fell $6 to $1,494 a ton and nickel declined $324 to $10,326 a ton. Lead rose $20 to $1,038 a ton and zinc increased $25 to $1,090 a ton.

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

Read more...

German Stocks Gain; Deutsche Bank, Commerzbank, Daimler Rise

By Stefanie Haxel

Dec. 15 (Bloomberg) -- German stocks gained for the first time in three days as European Union regulators approved the country’s revised bank-rescue plan and U.S. President George W. Bush signaled a swift decision on a carmaker bailout.

Deutsche Bank AG gained the most in a week after Germany’s largest bank was also granted a wholesale banking license in the United Arab Emirates. Commerzbank AG, the country’s second- largest lender, snapped a three-day decline. Daimler AG and Bayerische Motoren Werke AG, the world’s biggest luxury carmakers, rose for the first time in three days.

The benchmark DAX Index climbed 79.27, or 1.7 percent, to 4,742.64 as of 12:48 p.m. in Frankfurt. DAX futures expiring on Dec. 19 gained 1.6 percent. The broader HDAX Index added 1.7 percent to 2,349.3.

President Bush said deliberations on tapping the U.S. bank bailout fund to keep General Motors Corp. and Chrysler LLC afloat “won’t be a long process.”

“We are talking about really big companies of the U.S. economy and no one actually knows what consequences would follow if one of the Big Three goes bust uncontrolled,” Michael Scholz, an equity strategist at WestLB AG in Dusseldorf said on Bloomberg Television. “Therefore it’s very important that governments also look at the car industry. Bush’s announcement should give positive impulses in the short run.”

BMW, the world’s biggest luxury carmaker, increased 1.6 percent to 22.36 euros. Daimler rose 3.1 percent to 24.80 euros.

American Market

The U.S. is the No. 1 market for BMW and the second-biggest for Daimler’s Mercedes-Benz division. Both carmakers have factories there, and while they and other German brands control about 7 percent of the American market, they compete more with each other than with GM and Ford Motor Co.

European Union regulators approved changes to Germany’s bank-rescue plan and accepted recapitalization conditions for Commerzbank AG. The German fund has granted 90 billion euros ($120 billion) in guarantees, as well as 8.2 billion euros in capital for the country’s second-largest bank by assets.

Commerzbank climbed 2.1 percent to 6.80 euros. Deutsche Bank gained 5 percent to 27.84 euros, the steepest advance since Dec. 8. The U.A.E. central bank will formally announce licenses for Deutsche Bank as well as Mitsubishi UFJ Financial Group Inc. and Industrial & Commercial Bank of China Ltd. at a function in Abu Dhabi today, it said in an e-mailed statement.

Continental AG advanced 6 percent to 36.14 euros. Maria- Elisabeth Schaeffler, owner of Schaeffler Group, which is buying Europe’s second-largest car-parts maker, denied speculation the deal may collapse in an interview with Frankfurter Allgemeine Sonntagszeitung. The company will continue with the takeover and has enough money, she was quoted as saying by the newspaper.

Siemens AG climbed 2.6 percent to 48.59 euros, snapping a two-day slide. U.S. prosecutors proposed a fine of $800 million to settle bribery charges against Europe’s largest engineering company, smaller than analysts and investors had estimated.

E.ON AG rose 1.6 percent to 26.85 euros. Germany’s biggest utility is among the four companies that won rights to search for oil and natural gas in Algeria, potentially helping the European Union diversify its energy sources away from Russia.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Curanum AG (BHS GY) dropped 3.6 percent to 3.79 euros after WestLB AB lowered its recommendation on the nursing-home operator in which investor Guy Wyser-Pratte owns a stake to “hold” from “buy.”

Demag Cranes AG (D9C GY) gained 5.4 percent to 15.86 euros. The world’s largest maker of mobile harbor cranes said full-year profit rose 66 percent and forecast “sustained steady demand” in all divisions for the current fiscal year.

Draegerwerk AG (DRW3 GY) plunged 11 percent to 23.51 euros. The maker of the Infinity ACS patient-monitoring system cut its full-year earnings forecast because of lower revenue and profitability at the medical division.

Conergy AG (CGY GY) surged 9.3 percent to 94 cents. General Electric Co. joined with Germany’s second-largest solar company to form a renewable-energy trust to target as much a $250 million in investments in Asia.

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

Read more...

French Stocks: Atos, BNP Paribas, Iliad, Natixis, SocGen, Total

By Gareth Gore

Dec. 15 (Bloomberg) -- France’s CAC 40 Index rose for the first time in three days, adding 29.89, or 0.9 percent, to 3,243.49. The SBF 120 Index also gained 0.9 percent.

The following stocks rose or fell. Symbols are in parentheses after company names.

Atos Origin SA (ATO FP) declined 56 cents, or 3.2 percent, to 16.84 euros, the lowest in four days. France’s second- biggest computer-services provider denied a report in La Tribune saying the company is aiming for operating profit of 400 million euros ($538 million) in 2009.

BNP Paribas SA (BNP FP) retreated 3.45 euros, or 7.9 percent, to 40.35 euros, the steepest drop in four weeks. A Belgian court froze the sale of Fortis assets to French lender BNP Paribas because the deal didn’t have shareholder approval.

Separately, the bank said yesterday that it may lose as much as 350 million euros ($468 million) through indirect exposure to Bernard Madoff’s investment advisory business. Madoff allegedly ran a Ponzi scheme that cost investors $50 billion.

Cie. de Saint-Gobain SA (SGO FP) rose for the first time in three days, adding 84 cents, or 2.4 percent, to 35.95 euros. Europe’s biggest supplier of building materials may bid for the sanitary wholesale unit of Austria’s Frauenthal Holding AG, Trend magazine reported.

Derichebourg SA (DBG FP) dropped to the lowest in more than three weeks, falling 6 cents, or 3.1 percent, to 1.90 euros. The environmental- and airport-services company said profit for the year ended Sept. 30 declined 5.4 percent to 77.4 million euros.

EDF Energies Nouvelles SA (EEN FP) rallied 42.5 cents, or 1.7 percent, to 25.415 euros. Pacific Coastal Wave Energy Corp., a joint venture of the French renewable energy company, was granted an investigative permit by British Columbia, Canada, to conduct wave energy research off the coast of Vancouver Island.

Icade SA (ICAD FP) surged to the highest in more than two months, adding 2.72 euros, or 5.3 percent, to 54.33 euros. The French real-estate investment trust that’s controlled by state- owned Caisse des Depots et Consignations wants about 3 billion euros for the residential property unit it’s considering selling, Chief Executive Officer Serge Grzybowski said.

Iliad SA (ILD FP) climbed the most in more than two weeks, advancing 1.32 euros, or 2.3 percent, to 58.76 euros. Dexia SA raised its recommendation on France’s second-largest provider of broadband Internet to “buy” and increased its price estimate on the stock to 82 euros.

Natixis SA (KN FP) sank to a three-week low, sliding 7.1 cents, or 4.8 percent, to 1.409 euros. The French lender said it has as much as 450 million euros in client funds invested with Bernard Madoff.

Societe Generale SA (GLE FP) advanced 52.5 cents, or 1.5 percent, to 36.775 euros, ending a two-day drop. France’s third-largest lender said its exposure to Bernard Madoff investment funds is “negligible” and less than 10 million euros.

Total SA (FP FP) advanced for the first time in two days, climbing 1.195 euros, or 3 percent, to 40.99 euros. Europe’s third-biggest oil company said refineries in France are working normally again after a two-day strike disrupted operations. Separately, crude oil rallied more than 5 percent in New York.

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

Read more...

U.K. Stocks Advance, Led by BP and BG Group; Irish Banks Jump

By Alexis Xydias

Dec. 15 (Bloomberg) -- The U.K.’s FTSE 100 Index advanced, extending a 5.7 percent gain last week, as energy companies followed oil prices higher. BP Plc and BG Group Plc climbed.

Bank of Ireland Plc and Anglo Irish Bank Corp. lifted the ISEQ Overall Index after the Irish government said it may lead a 10 billion-euros ($13.4 billion) bailout of banks.

The FTSE 100 increased 21.18, or 0.5 percent, to 4,301.53 as of 12:35 p.m. in London. The FTSE All-Share Index added 0.5 percent. Ireland’s ISEQ gained 1.9 percent.

The benchmark FTSE 100 has crept up 14 percent since reaching its 2008 low on Nov. 21, as investors snapped shares trading at their lowest relative to earnings since at least 1999. The measure is still down 33 percent this year.

Stocks “discounted an extremely deep recession,” said Stephen Thornber, who helps manage $1 billion in global equities at Threadneedle Asset Management Ltd. in London. “While equities look attractive value, sentiment will wax and wane and we have a year-end effect that could turn negative in” 2009.

BP, Europe’s second-largest oil company, increased 1.9 percent to 526 pence. BG Group, the third-biggest U.K. oil and gas producer, gained 3.7 percent to 985.5 pence.

Crude oil for January delivery rose $2.29, or 5 percent, to $48.57 a barrel in electronic trading on the New York Mercantile Exchange after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizeable” production cut at this week’s meeting in Algeria.

Bank of Ireland Surges

Bank of Ireland, the country’s largest bank by assets, surged 14 percent to 1 euro. Anglo Irish, the country’s third- biggest lender, rose 14 percent to 43 cents.

Ireland’s government wants shareholders and private investors to support a recapitalization of banks and it will use money from the 18.7 billion-euro state pension fund to invest, the finance ministry in Dublin said late yesterday. The state may buy preference shares and ordinary shares or underwrite a share issue.

HSBC Holdings Plc fell 2.3 percent to 716.5. Europe’s largest bank may have about $1 billion at stake in the collapsed venture of Bernard Madoff, the Financial Times said, citing people close to the situation.

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

British Land Co. Plc (BLND LN) rose 30.5 pence, or 5.9 percent, to 551.5. Land Securities Plc (LAND LN) added 26 pence, or 2.8 percent, to 946.5. The two companies led U.K. commercial- property stocks higher after Jones Lang LaSalle Inc. said acquisition targets are the most attractive since the early 1990s.

Drax Group Plc (DRX LN), the U.K. owner of western Europe’s biggest coal-fired power plant, fell 35.5 pence, or 6.6 percent, to 505. The stock was cut to “underperform” from “buy” at Merrill Lynch & Co., which cited concern over the company’s profit margin.

Imperial Energy Plc. (IEC LN) fell 35 pence, or 3.4 percent, to 990. The Siberian oil producer listed in London dropped after the Economic Times of India reported that India’s Oil & Natural Gas Corp. may only buy a 51 percent stake in the company.

Inchcape Plc (INCH LN) plummeted 19 pence, or 27 percent, to 51.75, the worst performer in Europe’s Dow Jones Stoxx 600 Index. The operator of car dealerships said 2009 results are likely to be “significantly below our previous expectations.”

Premier Foods Plc (PFD LN) added 1 penny, or 3.8 percent, to 27.25 pence. The second-largest U.K. bread baker said it’s holding preliminary talks with “a number of investors and other parties” that may make an investment in the company.

Wichford Plc (WICH LN) plunged 5.75 pence, or 13 percent, to 39.25. The U.K. landlord that leases offices to the British and German governments said its full-year loss widened to 130.4 million pounds from 9.8 million pounds a year earlier.

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

Read more...

European, Asian Stocks Advance; Daimler, Toyota, BP Increase

By Adam Haigh

Dec. 15 (Bloomberg) -- Stocks in Europe and Asia gained after President George W. Bush signaled a decision on rescuing American carmakers would be swift, while a rally in oil prices lifted energy companies.

Daimler AG advanced 2.2 percent and Toyota Motor Corp. surged 9.8 percent as Bush said deliberations by his government on tapping the bank bailout fund to keep General Motors Corp. and Chrysler LLC out of bankruptcy “won’t be a long process.” BP Plc climbed 2.2 percent on higher crude prices. BNP Paribas SA sank 6.9 percent after a Belgian court froze the lender’s plans to buy Fortis and the bank said it has as much as 350 million euros ($474 million) at risk from Bernard Madoff’s investment- advisory business.

The Dow Jones Stoxx 600 Index added 0.5 percent to 199.12 at 1:50 p.m. in London as 14 of 19 industry groups increased. The MSCI Asia Pacific Index jumped 4.1 percent. Futures on the Standard & Poor’s 500 Index expiring in March fell 0.1 percent.

“In the medium term, the bailout would be a good thing,” said Thomas Haerter, chief strategist at Swisscanto Asset Management AG in Zurich, which manages about $60 billion. “There may be a bailout, but it cannot save the underlying problem,” he told Bloomberg Television.

The Stoxx 600 has rebounded 9.4 percent from a five-year low on Nov. 21 as governments and policy makers around the world announced packages to revive economic growth. U.S. President- elect Barack Obama said he is planning the most extensive public- works spending package since the 1950s.

The measure is still down 45 percent in 2008 as almost $1 trillion in bank losses and writedowns froze credit markets and the U.S., Europe and Japan entered the first simultaneous recessions since World War II.

Analysts’ Estimates

Analysts have slashed their earnings projections for companies in the Stoxx 600, estimating a 15 percent decline this year, compared with 11 percent growth forecast at the start of 2008. Profits in 2009 are expected to rise 0.9 percent.

Daimler, the world’s largest truckmaker, gained 2.2 percent to 24.59 euros. Toyota rallied 9.8 percent to 3,030 yen in Tokyo.

The Senate’s rejection of a $14 billion aid package for carmakers sparked a 2.7 percent decline in the Stoxx 600 on Dec. 12 and sent the dollar sliding against the euro.

Bush last night “signaled” his administration is considering using money from the $700 billion fund, saying he’s “not quite ready” to announce any rescue plan.

BP, Europe’s second-largest oil producer, advanced 2.2 percent to 527.5 pence. Total SA, the third-biggest, rose 2.4 percent to 40.74 euros.

Crude Oil

Crude oil increased after OPEC Secretary-General Abdalla El- Badri said the group needs to make a “sizeable” production cut at this week’s meeting in Algeria.

BNP sank 6.9 percent to 40.79 euros as a Belgian court froze the bank’s plans to buy Fortis for 14.5 billion euros.

Natixis SA, France’s worst-performing banking stock this year, said it has as much as 450 million euros of client funds invested with Madoff, who allegedly ran a “Ponzi scheme” that cost investors $50 billion. The shares retreated 4.3 percent to 1.42 euros.

HSBC Holdings Plc slipped 1.3 percent to 723.75 pence. Europe’s biggest bank said it has $1 billion at risk after providing financing to funds that invested with Madoff.

A report today may show U.S. industrial output dropped 0.8 percent in November after rising 1.3 percent in the previous month, according to the median estimate of 59 economists in a Bloomberg News survey.

Manufacturing

Separate figures showed manufacturing in New York contracted in December at the fastest pace on record as orders and shipments remained weak.

Since Oct. 7, quarterly earnings for the 334 companies in the Stoxx 600 that reported results fell 15 percent on average, trailing analysts’ estimates by 6.3 percent, Bloomberg data show. For the 474 companies in the S&P 500 that have reported results earnings sank 17 percent and missed projections by 4.2 percent, according to the data.

Companies in the S&P 500 are marking down assets at the fastest rate in six years, indicating it may be time to buy stocks. Operating profits are 46 percent higher than net income in the third quarter, a level last seen in 2003 when the previous bull market began.

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

World Gold Output to Rise First Time in 4 Years, Australia Says

By Jesse Riseborough

Dec. 15 (Bloomberg) -- Global gold production may rise for the first time in four years in 2009 as China and Indonesia increase output, Australia’s commodity forecaster said.

Mine production may increase to 2,476 metric tons in the 12 months ending Dec. 31, 2009, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in a report on its Web site. That compares with its forecast for a 3 percent decline for 2008 to 2,400 tons.

“This increase reflects the expectation of some recovery in the grades of ores mined, particularly in Indonesia, and an assumed reduction in unscheduled mine disruptions,” the report said. New mines in China including Sino Gold Mining Ltd.’s White Mountain, will boost production, it said.

The average price of the precious metal may drop 7 percent to $810 an ounce as weaker economic growth cuts demand for a hedge against inflation, the bureau said. Still, that may be offset by investor demand for a haven should there be extended global financial market instability, the bureau said.

Production in Australia, the third-largest gold producer, may fall 1 percent to 224 tons in the 12 months ended June 30, 2009, the bureau said.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

Read more...

S&P 500’s Worst Writedowns Signal Rally as Gap Widens

By Elizabeth Stanton

Dec. 15 (Bloomberg) -- Just when U.S. companies are about to report their biggest writedowns, the losses may be the strongest signal yet that it’s time to buy stocks.

Companies in the Standard & Poor’s 500 Index are marking down assets at the fastest rate in six years, leaving operating profits 46 percent higher than net income in the third quarter, a level last seen in 2003 when the previous bull market began. Starbucks Corp., Johnson Controls Inc. and Washington Post Co. reported profits before restructuring and layoff expenses for the period ended in September that were twice their bottom line.

Earnings at U.S. companies have dropped for five straight quarters, matching the longest streak on record, as the deepest financial crisis since the Great Depression turned 2008 into the worst year for the S&P 500 since 1931, according to data compiled by Bloomberg. The ballooning gap between net income and operating profit suggests companies are getting rid of their weakest businesses, setting the stage for a recovery in stocks next year.

“Trough earnings tend to coincide with a maximum level of writedowns,” said William Knapp, New York-based investment strategist at MainStay Investments, which manages $25 billion. “You will start to see profitability return once the economy turns, which will probably be in the second half of next year. The market is going to recognize that through price and activity six- plus months ahead of time.”

Frozen Credit

Frozen credit markets and concern Detroit-based General Motors Corp., the biggest U.S. automaker, will file for bankruptcy protection sent the S&P 500 down 1.8 percent this month. Shares may plunge another 20 percent before recovering late next year, New York University finance professor Nouriel Roubini, who predicted the global financial crisis, said on Bloomberg Television on Dec. 12.

The U.S. economy may shrink 0.8 percent next year, according to the average estimate of gross domestic product by economists surveyed by Bloomberg.

The S&P 500 tumbled 44 percent since its October 2007 record as almost $1 trillion of losses and writedowns at the biggest financial companies triggered a global recession and raised the possibility of deflation, when falling prices squeeze corporate earnings.

This decline is worse than in 2001 when the bursting of the technology bubble brought on the last recession, said Stephen Wood, New York-based senior portfolio strategist at Russell Investments, which manages $180 billion.

‘Systemic Implications’

Futures on the S&P 500 were little changed at 11:22 a.m. in London, as speculation that manufacturing reports will show further deterioration in the economy offset optimism the Bush administration will approve a bailout for automakers.

The last bear market “was large, but it didn’t have systemic implications,” Wood said. “We will be led out of this by credit. If credit doesn’t improve materially, then stock isn’t going to matter.”

Companies are paying an average 10.8 percent to borrow, up from 6.53 percent in January, according to Merrill Lynch & Co.’s Corporate & High Yield Master Index on Dec. 12. The premium investors demand for lending to companies instead of the government has risen to 8.85 percentage points, compared with 2.96 at the start of the year, the index shows.

The growing difference between operating income, which measures a company’s surviving businesses and strips out one-time costs, and net income, which includes all expenses, may mean the profit slump will end, says MainStay’s Knapp.

Setting the Stage

A widening gap heralded the end of the dot-com crash. S&P 500 operating earnings exceeded net profit by 67 percent in the final three months of 2002, a period when stocks dropped to the lowest level since 1997. The index then doubled through October of last year.

Texas Instruments Inc. reported operating profit of $67 million and a net loss of $589 million in the fourth quarter of 2002 after the second-largest U.S. chipmaker wrote down an investment in Micron Technology Inc. That set the stage for per- share profit growth from continuing operations of 186 percent in 2003 and a 96 percent rally in the Dallas-based company’s stock that year.

Companies report bigger differences between profit and operating income when profits are falling the fastest, “and that often happens near market lows,” said Robert Arnott, the founder of Pasadena, California-based Research Affiliates LLC, which manages $30 billion.

‘Significant Jump’

The gap will expand in the fourth quarter as companies write down acquisitions and take charges for job cuts and plant closures, said Chris Senyek, head of accounting and tax policy at ISI Group Inc., an economic and market-research firm in New York. The number of Americans filing claims for unemployment benefits has surged to the highest level since 1982, according to a government report last week.

“You’re going to see a significant jump in the fourth quarter and into next year,” Senyek said.

Steeper writedowns may be inevitable because falling stock prices diminish the value of completed takeovers. Thirty-eight companies in the S&P 500 have a lower market capitalization than the value of their goodwill, the balance-sheet asset left when companies pay a premium in an acquisition.

New York-based Time Warner Inc., the world’s largest media company, and Macy’s Inc., the department-store operator, as well as Los Angeles-based Northrop Grumman Corp., the third-biggest defense contractor, may be forced to write down acquisitions to match the decline in their shares after the S&P 500 dropped 40 percent this year, according to data compiled by Bloomberg.

‘Ultimately Improve’

The writedowns “will ultimately improve reported earnings when the economic downturn ends and we come out of it,” Senyek said. A rebound may take longer than it did in 2003 because the current economic contraction is more severe, he added.

Starbucks, Johnson Controls and Washington Post are among S&P 500 companies that are coping with the recession by getting rid of weaker units, which may help them rebound once the economy exits the yearlong recession.

While Starbucks reported operating income of $76.9 million for the quarter that ended in September, the Seattle-based coffee retailer’s net profit was $5.4 million because of charges taken to close 600 U.S. stores and cut 13,000 jobs.

The company this month doubled its forecast for 2009 expense reductions to $400 million. Chief Financial Officer Troy Alstead told analysts during a conference on Dec. 4 the savings will come mostly through firings and lower product costs.

Johnson Controls

Johnson Controls, the largest maker of automotive seats, reported net income for the September quarter of $16 million. Excluding a $495 million charge for job cuts, earnings at the Milwaukee-based company were $439 million.

In October, the company said it would pare production and workers as U.S. auto sales slumped. The retrenchment included the shutdown this month of a plant in Ohio and the mid-2009 closing of a Kentucky plant that makes metal parts for seats.

Washington Post, publisher of the newspaper in the nation’s capital, earned $10.3 million under generally accepted accounting principles. Operating income, excluding writedowns from cutting the value of its community newspapers, was $40.3 million.

Sales rose 10 percent last quarter thanks to gains in its education and cable-television units, helping the company maintain its $2.15-a-share quarterly dividend in November. The New York Times Co., publisher of the namesake newspaper, reduced its payout by 74 percent last month.

For S&P 500 companies, both net income and operating profits are likely to decline through the first half of next year, said Nicholas Sargen, chief investment officer at Fort Washington Investment Advisors, which manages $30 billion in Cincinnati.

At that point, he said, “I’m going to start to pay more attention to the operating profits because I think we’ve seen most of the write-offs and operating is going to be giving me a better gauge as to the true earnings power of these companies going forward, and we’re doing it from very depressed levels.”

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Read more...

Lululemon, Tanganyika Oil, Verenex Energy: Canada Stock Preview

By John Kipphoff

Dec. 15 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading. Stock symbols are in parentheses, and share prices are from the Dec. 12 close.

The Standard & Poor’s/TSX Composite Index rose 1.5 percent to 8,515.45.

Denison Mines Corp. (DML CN): The owner of uranium mines in Canada and the U.S. reduced the size of a stock offering to 7.28 million shares from 10.9 million. The shares fell 1.1 percent to 89 cents.

Labrador Iron Ore Royalty Income Fund (LIF-U CN): Iron Ore Co., the Rio Tinto Group business that Labrador owns a 15 percent stake of, will idle some production capacity next year and put an $800 million expansion on hold because of falling demand for the steelmaking ingredient. Labrador added 1 percent to C$19.75.

Lululemon Athletica Inc. (LLL CN): The yoga-wear retailer that cut its profit forecast last week was cut to “perform” from “outperform” at Oppenheimer & Co. The shares rose 5.3 percent to C$9.27.

Ritchie Bros. Auctioneers Inc. (RBA CN): The auctioneer of industrial equipment will be added to the S&P/TSX on Dec. 22, S&P said in a statement on its Web site.

Tanganyika Oil Co. (TYK CN): China Petrochemical Corp. received state approval for a takeover of the Vancouver-based company that pumps oil and gas in Syria and Egypt, Caijing reported. The shares added 2.6 percent to C$27.69.

Verenex Energy Inc. (VNX CN): China National Petroleum Corp. is bidding for Calgary-based Verenex, which owns oil and gas deposits in Libya, in a transaction valued at as much as $300 million, the South China Morning Post reported, citing people it didn’t identify. The shares gained 3.6 percent to C$6.32.

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

Read more...

Brazilian Stocks Gain on Rate Outlook; Petrobras Surges on Oil

By Alexander Ragir

Dec. 15 (Bloomberg) -- Brazilian stocks rose for a second day on the prospects that the central bank may accelerate interest-rate cuts next year and surging oil prices may bolster the earnings outlook for energy companies.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, gained for a fourth day as oil advanced more than 6 percent to $49 a barrel. Rossi Residencial SA led a rally in homebuilders after Brazilian economists cut their 2009 interest rate estimate to 13 percent.

The Bovespa Index climbed 0.3 percent to 39,492.19 at 8:28 a.m. New York time. The gauge surged 11 percent last week. Chile’s Ipsa was little changed.

Petrobras advanced 3.5 percent to 23.40 euros. Oil rose after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizeable” production cut at this week’s meeting in Algeria.

Rossi gained 4.5 percent to 3.75 reais. Brazil’s benchmark interest rate, known as Selic, will end 2009 at 13 percent, lower than a 13.25 percent forecast a week earlier, according to a central bank survey of about 100 economists.

Brazil’s central bank may signal this week it’s ready to cut rates from a two-year high, betting the slowing economy will help rein in consumer prices. Economists expect policy makers to use the minutes of their board meeting last week, to be disclosed Dec. 18, to explain why they voted unanimously to keep the benchmark rate at 13.75 percent after discussing “the possibility of lowering” it.

The BM&FBovespa Small Cap index rose 0.8 percent. The BM&FBovespa MidLarge Cap index gained 0.6 percent.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

Read more...

ASML, Ciena, Gaylord, Huntsman, Skyworks: U.S. Equity Preview

By Eric Martin

Dec. 15 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses and share prices are as of 8:45 a.m. in New York, unless otherwise specified.

ASML Holding NV (ASML US) gained 1.9 percent to $16.75. The Dutch maker of equipment for manufacturing semiconductors may double as the global economy recovers, Barron’s reported, without citing anyone. The company’s lithography scanners will be needed by chipmakers to produce the memory and processors in cellular phones and portable electronics, the newspaper said.

Exelon Corp. (EXC US): The largest U.S. utility owner by market value said it hasn’t made an offer to buy Reliant Energy Inc. (RRI US) and doesn’t plan to make one. Exelon’s statement today came after the Houston Business Journal reported on its Web site that Exelon made a bid to buy Reliant, citing a person inside Reliant.

Fidelity National Financial Inc. (FNF US): The second- largest U.S. title insurer will pay about $282 million in a revised deal for units from bankrupt competitor LandAmerica Financial Group Inc.

Gaylord Entertainment Co. (GET US) jumped 31 percent to $11.88. The owner of the Grand Ole Opry music hall may rise to $48 as its convention business grows and its price makes it a takeover target, Barron’s said, citing Gabelli & Co. analyst Ami Kapoor.

General Dynamics Corp. (GD US): The second-largest shipbuilder for the U.S. Navy won an order valued at $940.4 million to build two cargo ships.

General Motors Corp. (GM US) gained 4.6 percent to $4.12. President George W. Bush said deliberations by his administration on whether to tap a bank bailout fund to keep GM and Chrysler LLC out of bankruptcy “won’t be a long process” because of the “fragility” of the U.S. automakers.

Ford Motor Co. (F US) rose 4.6 percent to $3.18.

Google Inc. (GOOG US) fell 0.4 percent to $314.40. The company had its earnings estimates and share-price forecast cut at ThinkEquity LLC, which said the Internet-search market is slowing faster than anticipated.

Huntsman Corp. (HUN US) plunged 26 percent to $4.31. Apollo Management LP, the private-equity firm run by Leon Black, agreed to pay $700 million to Huntsman to terminate an acquisition of the chemical maker by its Hexion Specialty Chemicals Inc. unit.

International Paper Co. (IP US): The world’s largest maker of office paper and corrugated packaging plans to reduce its global workforce by as much as 2.3 percent by the end of 2009.

JPMorgan Chase & Co. (JPM US) lost 3.7 percent to $29.80. The biggest U.S. bank by assets was cut to “underperform” from “neutral” by Merrill Lynch & Co. analyst Guy Moszkowski, who said the firm may post a fourth-quarter loss and a $2.8 billion writedown.

Kroger Co. (KR US): The biggest U.S. grocery chain was downgraded to “neutral” at Credit Suisse Group AG, which said “2009 is shaping up to be a more challenging year.”

Tellabs Inc. (TLAB US) climbed 16 percent to $4.59. The maker of telephone equipment for AT&T Inc. was raised to “overweight” from “equal weight” by Barclays Plc. Tellabs was also recommended by CNBC “Mad Money” host Jim Cramer.

Ciena Corp. (CIEN US), which also sells to AT&T, increased 8.5 percent to $6.65. Skyworks Solutions Inc. (SWKS US) climbed 12 percent to $4.41. Cramer also recommended their stocks.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Read more...