European Market Update

Daily Forex Fundamentals | Written by Trade The News | Oct 30 09 10:17 GMT |

China's PBoC sees 2009 GDP exceeding the 8.0% target ECONOMIC DATA (GE) German Sept Real Wholesale M/M: -1.7%, Y/Y: -9.8% (GE) German Retail Sales M/M: -0.5% v 1.0%e; Y/Y: -3.9% v -2.2%e (UK) Nationwide Oct House Prices M/M: 0.4% v 0.6%e; Y/Y: 2.0% v 1.8%e; First annual increase in 19 months since Mar 2008 (FR) French Producer Prices M/M: -0.3% v -0.3%e; Y/Y: -8.1% v -8.1%e (HU) Hungarian Sept Producer Prices M/M: 0.1% v -0.5% prior; Y/Y: 3.4% v 3.7%e (HU) Hungarian Aug Final Trade Balance: €254.3M v €229.4M prior (CZ) Czech Sept Prelim Industrial Output: -11.9% v -12.8%e (SP) Spain Aug current account: -€3.2B v -€2B prior (IT) Italian Sept PPI M/M: -0.3% v -0.3%e; Y/Y: -7.9% v -7.9%e SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM In equities: European markets looked set to ignore the sharp US (and to a lesser extent Asian) equity rally on the back of weak tech earnings out of Alcatel Lucent [ALU.FR]. Equities flirted with the unchanged before trending lower through the 4:00EST hour. Indian equity markets added further negative sentiment following misses from [BHARTI.IN], [SAIL.IN] and [RIL.IN] in yesterday's session. Downside sentiment was shook off, led by out performance on the FTSE100 into 5:00EST. Earnings and commentary out of WPP [WPP.UK] regarding the ad market sent shares higher. Financials recovered from earlier losses with Lloyds [LLOY.UK] receiving two broker upgrades. Pharma earnings continued to beat with Sanofi-Aventis [SAN.FR] trading higher. Earnings out of Renault [RNO.FR], and Luxotica [LUX.IT] after the close yesterday, provided further equity lightness. Following a furious weak of earnings releases, equity markets have continued to trade on higher volume on the last trading day of October. *Reminder: US/Canadian clocks will move forward on Sunday morning, returning the difference between NYC and London to -5hrs, NYC to Frankfurt -6hrs In individual earnings: Alcatel Lucent [ALU.FR] Reports Q3 Net €182M v loss €93Me, Rev €3.7B v €3.9Be; Reiterates FY09 operating guidance. || Sanofi [SAN.FR] Reports Q3 Net Profit €2.3B v €2.2Be, Rev €7.4B v €7.5Be, raises full year earnings target by 11%. || Erste Bank [EBS.AS] Reports Q3 Net €228M v €172Me, Net interest income €1.4B v 1.3B q/q; States that CEE crisis not over, worst may be behind group. || WPP [WPP.UK] Reports Q3 Rev £2.0B v £2.0Be. || Renault [RNO.FR] Reports Q3 Rev €8.1B v €9.1B y/y; Q3 global unit sales +0.8% y/y. || Belgacom [BELG.BE] Reports Q3 Net €217M v €203Me, Rev €1.5B v €1.5Be; 9-month Rev +1% y/y. || Rio Tinto [RIO.UK] Provides investor statement: Guides FY09 and FY10 CAPEX at $10B. || Speakers: China's central bank (PBoC) commented that the Chinese economy would continue its positive direction and forecasted that the FY09 GDP to exceed the 8% target. PBoC reiterated that it must manage inflationary expectations. Q3 Seas Adj Annualized GDO +8.7% q/q and that Q4 GDP would continue to rebound. It noted that inflation expectations were strengthening and that CPI was expected to bottom out and rebound by year-end. PPI bottomed in Q3. Loans increased by CNY1.3T in Q3, to further guide bank lending, demand for loans remains strong. Must curb overcapacity in some industries ||BoJ Semiannual Economic Outlook Report: Forecasts FY11 Core Consumer Prices to decline 0.4% for third consecutive year of decline; downside risks to Japan economy remain. Japan GDP seen +1.2% in year to March 2010 vs July forecast of 1.0% In Currencies: The dollar saw its initial gains against the European currencies fade as the NY morning approached. The USD firmed ahead of the European equity open after German Sept retail sales unexpectedly declined. However, comments from the Chinese central bank that 2009 GDP growth would exceed the 8.0% official target aided the appetite for risk in the session as thin trading conditions due to month reigned supreme. The EUR/USD tested 1.4800 before drifting back to the mid 1.48 area. The BOJ kept rates steady as expected, but was staking steps to reduce its quantitative easing measures. Dealers noting that such exits from special measure could be 'contagious'. USD/JPY was lower by 50 pips from its Asian open just below the 91 handle. EUR/JPY lower by a big figure just below 135.00 The GBP was relatively steady against other European pairs after Nationwide house prices registered their annual rise since March 2008. In Energy\commodities: Chinese press noted that China could increase fuel prices in the first week of Nov with retail fuel prices potentially rising by CNY300 ($44) per ton, diesel by CNY0.25/liter and gasoline by CNY0.22/liter. || NOTES data will surely raise the odds for firmer Fed signals of an exit from prevailing ultra-loose policy settings BoJ unch, eyes exit from credit mkts. Sounds contagious. Looking Ahead: 6:30 (SZ) Swiss KOF Leading Indicator: 1.16e v 0.85 prior 8:00 (SA) South Africa Sept Trade Balance (ZAR): -1.0Be v -2.0B prior 8:30 (US) Sept Personal Income: 0.0%e v 0.2% prior, Personal Spending: -0.5%e v 1.3% prior 8:30 (US) Sept PCE Core M/M:0.2%e v 0.1% prior, Y/Y: 1.3%e v 1.3% prior, PCE Deflator Y/Y: -0.5%e v -0.5% prior 8:30 (US) Q3 Employment Cost Index: 0.4%e v 0.4% prior 8:30 (CA) Canadian Aug GDP M/M: 0.1%e v 0.0% prior 9:45 (US) Oct Chicago PM: 49.0e v 46.1 prior 10:00 (US) Oct Final U of Michigan: 70.0e v 69.4 prior 10:00 (US) Oct NAPM Milwaukee: 57.0e v 58.0 prior 10:00 (BE) Belgian Q3 Prelim GDP Q/Q: No estimates v -0.3%e prior, Y/Y: No estimates v -3.7% prior Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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EURUSD - Halts Declines, Targets The 1.4844 level

Daily Forex Technicals | Written by FXTechstrategy | Oct 30 09 10:28 GMT |

EURUSD - An early extension of the pair's corrective declines was rebuffed Thursday pushing it strongly higher and wiping out its Wednesday losses to close higher at 1.4837. Although its mentioned nearer term weakness has halted, EUR must build on its Thursday strength and break and hold above its strong resistance residing at the 1.4844 level, its Sept 21'09 high to signal further upside gains towards the 1.5000 level. A breach of the latter will expose its YTD high at 1.5062 with a loss of there triggering the resumption of its medium term uptrend. On the other hand, we remain suspicious of its current recovery if it continues to trade and hold below the 1.4844 level. In such a case, its intra day low at 1.4682 will be targeted if fails to head higher with a violation of there turning attention to its LT trendline at 1.4556. We envisage this level if seen should cap declines and push the pair back up. On the whole, having halted its corrective declines, risk now remains to the upside but EUR must break and hold above the 1.4844 level to prevent threats of returning to the 1.4682 level. Mohammed Isah Market Analyst www.fxtechstrategy.com This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are the author's own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which the author incur any responsibility. The does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Oct 30 09 10:11 GMT |

EUR/USD Current level-1.4818 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4134 and 1.3523. Unfortunately the pair broke through 1.4767 resistance without a final spike-low below 1.4678, thus stating that a bottom is already in place. Intraday bias is slightly negative with a potential for 1.4767, but the overall outlook is already neutral in the 1.4930-1.4760 range. Resistance Support intraday intraweek intraday intraweek 1.4860 1.5063 1.4767 1.4444 1.4930 1.6040 1.4678 1.4190 USD/JPY Current level - 90.99 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84. Yesterday's rebound peaked at 91.60 and currently the pair is capped at 91.30 and well supported at 90.83. Later during the day a break below 90.83 is to be expected and it should target 90.20 support area again Resistance Support intraday intraweek intraday intraweek 91.30 92.40 90.83 88.01 91.60 97.79 90.20 83.53 GBP/USD Current level- 1.6539 The pair is in a downtrend after peaking at 1.7042. Trading is situated between the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. With the recent break above 1.6490 resistance the focus is set back on 1.67+ highs. Intraday bias is negative with a potential for 1.6465, but keep in mind, that the structure of the slide is corrective in nature, so 1.6580 should be considered crucial on the upside. Resistance Support intraday intraweek intraday intraweek 1.6580 1.6699 1.6465 1.6130 1.6696 1.7042 1.6250 1.5352 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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The Dollar Tumbles Along With The Yen As Better Than Expected GDP Figures Spur Risk Demand

Daily Forex Fundamentals | Written by Finotec Group | Oct 30 09 09:09 GMT |

The greenback and Japanese Yen fell against the euro as a government report announced the U.S. economy grew more than expected in the third quarter, spurring demand for higher yielding assets. U.S. gross domestic product (GDP) grew at a 3.5 percent annual rate in the third quarter, after shrinking in the previous four periods to -0.7%. The Dollar Index which is used to track the greenback against a basket of major currencies including the Euro and the Sterling dropped for the first time in six days, decreasing 0.6 percent to 75.947. Investors remained skeptical that the Federal Reserve will increase borrowing costs in early2010 leading traders to believe that the dollar will continue to weaken over the next six months. 'A cheaper dollar is unquestionably positive for U.S. corporate earnings,' said Bankim Chadha, the New York-based chief U.S. equity strategist at Deutsche Bank AG. The EUR/USD is currently trading at $1.4845 as of 19:20PM, GMT with a bullish trend. The British pound rallied broadly on Thursday against the euro and the dollar after strong U.S. economic data bolstered confidence amongst investors of an improving global economy, spurring demand for higher risk currencies such as the Sterling and Australian dollar. Traders quickly put aside data showing weak growth in UK money supply this morning, although the figures kept speculation intact that the Bank of England may expand its program of Quantitative Easing (QE). Data today also showed UK mortgage approvals rose more than expected in September to an 18-month high, although consumers continued to cut back on unsecured borrowing for a third consecutive month. 'This data further cements the odds in favor of at least a 25 billion pound increase in the QE limit,' analysts at RBC said in a note. The GBP/USD is currently trading at $1.6544 as of 20:19PM, GMT with a bearish trend. Canada's dollar also known as the loonie climbed from a three week low against the greenback as commodities mainly crude oil surged after a report showed U.S GDP came in at 3.5% in contrast to last quarter's -0.7%. Canadian Bank officials reiterated warnings at their Oct. 20th policy meeting that the ascendancy of the nation's currency threatens its economy. Bank Governor Mark Carney amplified the comments in a parliamentary testimony this week. The Canadian dollar gained 0.2 percent this month against its U.S. counterpart. It rose to 1.0207 on Oct. 15th, approaching parity for the first time since July 22, 2008. The USD/CAD is currently trading at 1.0676 as of 21:11PM, GMT with a bearish trend. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Asia Growth to Be Hurt by Slower Exports, Walker Says

By Karl Lester M. Yap and Max Estayo

Oct. 30 (Bloomberg) -- Asian economies should focus on boosting domestic demand to spur growth amid weak global trade, said Jim Walker, managing director of Asianomics Ltd.

Asia’s growth rates in the next three years will be lower than the last decade, and demand from the U.S. and Europe is expected to still be weak, Walker told reporters after speaking at a conference in Manila today. The global economy “still has a lot of problems” and the recovery will not be as fast as some predict, he said.

The International Monetary Fund said yesterday Asia is “rebounding fast” from the global crisis, and governments must maintain fiscal support due to sluggish world export demand. The World Trade Organization predicts the volume of global trade in goods may contract by more than 10 percent this year.

“Asian governments should start moving more towards domestic demand to allow domestic industries to grow versus export industries,” Walker said.

Asian policy makers have pumped more than $950 billion into their economies by cutting taxes, distributing cash and boosting spending after the global credit crunch cut world demand for the region’s exports from cars to flat-panel televisions.

The rebound in shipments may be slow as consumer spending in the U.S. and Europe is “likely to remain weak for some time,” the IMF said. “Asia’s longer-term growth prospects may be determined by its ability to recalibrate the drivers of growth to allow domestic sources to play a more dynamic role.”

‘Flight to Safety’

The U.S. dollar may gain in the next 12 months amid a “flight to safety,” Walker said today. He recommended investors hedge against the euro over the next five years, predicting an “unraveling” of the currency.

The trade-weighted Dollar Index has fallen 6.7 percent this year, while the euro has gained about 6.3 percent against its U.S. counterpart in the same period.

People will shift to the dollar when they “realize economic growth is not going to be strong as expected,” Walker told reporters. “Countries and regions challenging the dollar must have dominant economies.”

The U.S. Federal Reserve has cut interest rates “too far” and other nations shouldn’t follow its policy, Walker said. The U.S. central bank has retained a commitment to keep rates near zero for an “extended period.”

Higher interest rates are “essential” for the global economy, he said.

“The quicker the policy is reversed, the better for the global economy,” Walker said.

To contact the reporters on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net; Max Estayo in Manila at mestayo@bloomberg.net

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China Will Sustain Growth Rebound, Central Bank Says

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By Bloomberg News

Oct. 30 (Bloomberg) -- China will sustain its economic rebound this quarter and growth is likely to top the government’s 8 percent target for 2009, the central bank said.

Policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth, the central bank said in a report on the third-quarter economy, posted on its Web site today.

China’s economic acceleration and faster-than-expected growth in the U.S. may help to extend this year’s global rally in stocks. Today’s comments contrast with the central bank’s July report, which described the world’s third-biggest economy as being in a “critical” phase and facing many uncertainties.

“The central bank is clearly more confident,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “China’s economic growth will continue to rebound in the coming quarters.”

A $586 billion stimulus package and record growth in new loans have countered an 11-month slump in exports, helping China to bounce back from the worst global recession since the Great Depression. Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. reported yesterday gains in third-quarter profit as the economy gathered pace.

The central bank report adds to upbeat comments from officials. Vice Premier Li Keqiang said in Sydney today that the economy had gained momentum each quarter and reiterated that the country could meet its growth target.

Inflation Expectations

China’s consumer prices are expected to bottom and rebound at the end of this year, the central bank said. Households’ inflation expectations continue to strengthen, the central bank said, citing an index which has climbed for three quarters. Consumer prices rose 0.4 percent in September from August.

The report didn’t mention exchange-rate policy.

The Chinese economy expanded 8.9 percent in the third quarter from a year earlier, the fastest pace in a year. The U.S. economy returned to growth in the third quarter, expanding faster than economists forecast, after a yearlong contraction, figures from the Commerce Department showed yesterday.

In China, demand for credit will be sustained after an unprecedented $1.27 trillion of new loans in the first nine months of this year, the report said, adding that projects already started need “a large amount of loan support” and property investment is accelerating.

China’s economy expanded by 8.7 percent in the third quarter from the second quarter on an annualized, seasonally adjusted basis, the central bank said, citing its own calculation. That compared with a 14.9 percent gain in the second quarter, according to a previous central bank statement.

To contact the reporter on this story: Yanping Li in Beijing at yli16@bloomberg.net

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Goodhart Says BOE May Pause Bond-Purchase Program

By Frances Robinson and Mark Barton

Oct. 30 (Bloomberg) -- Former Bank of England policy maker Charles Goodhart said the bank may scale back or pause its bond- purchase program next week as officials around the world start to pull back stimulus for their economies.

“The expansion of quantitative easing will be reduced in scale and possibly paused for a time,” Goodhart said in an interview with Bloomberg Television in Frankfurt today. The Bank of England will follow “slightly more cautiously,” he said.

Governor Mervyn King and other Bank of England officials will decide on Nov. 5 whether to expand their 175 billion-pound ($259 billion) plan after a report showed last week the U.K. economy unexpectedly contracted in the third quarter. That’s prolonging its longest slump since records started in 1955 even as the U.S., Japan and Germany emerge from their own recessions.

The economy contracted 0.4 percent in the three months through September, the U.K. statistics office said Oct. 23.

“We were always likely to be worse hit than most other countries because we had such a large proportion of our economy tied up in finance and housing,” Goodhart said. “I must confess that like many others, I have certain doubts about the third quarter GDP figure.”

While some economists say the first reading of gross domestic product tends to get revised up, data show that of the last 18 quarters, 10 were revised down, there were six upward revisions and two were left unchanged.

Bond Purchases

Most economists expect the Bank of England to extend its bond-purchase program to 225 billion pounds next week, according to the median of 35 replies to a Bloomberg News survey as of 8:29 a.m. in London.

Policy makers from the Group of Seven are starting to pull back stimulus measures as some smaller nations such as Australia and Norway tighten policy in response to a global recovery and surging asset prices. The Bank of Japan said today it will stop buying corporate debt at the end of the year and Germany’s Axel Weber signaled yesterday the European Central Bank may pull back its handouts of emergency liquidity next year.

Some Bank of England officials have indicated they may support more quantitative easing. Adam Posen said in his first speech since he became a Monetary Policy Committee member on Oct. 27 that the asset-purchase program is unlikely to spark inflation because its purpose is to prevent prices from falling. Posen said stimulus programs shouldn’t be withdrawn yet.

Goodhart said he remains to be convinced about the strength of the euro-region’s economy.

“I don’t think that the recovery in Europe is anything much to write home about,” he said, as the rising euro and expiry of the German government’s short-term working program and cash-for-clunkers subsidy endanger growth. “I’m less comparatively depressed about the U.K. falling behind everywhere else than a number of other people are.”

To contact the reporters on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net Mark Barton in London at mbarton1@bloomberg.net

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U.S. Consumer Spending Probably Fell as ‘Clunkers’ Plan Ended

By Timothy R. Homan

Oct. 30 (Bloomberg) -- Spending by U.S. consumers probably fell in September for the first time in five months as auto dealer showrooms emptied in the wake of the government’s auto- rebate program, economists said before a report today.

Purchases decreased 0.5 percent after a 1.3 percent jump in August that was the biggest in almost eight years, according to the median forecast of 75 economists surveyed by Bloomberg News. Other reports may show consumer sentiment dropped this month and business activity shrank at a slower pace.

Today’s spending report may also show Americans’ incomes were little changed last month as payrolls dropped and unemployment climbed. Stagnant wages and waning confidence raise the risk that consumers will retrench in coming months as government assistance programs such as the so-called cash-for- clunkers plan expire.

“Income growth will remain sluggish in the fourth quarter because of job losses,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “The fuel for consumer spending isn’t there.”

The Commerce Department report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from a decline of 0.9 percent to a gain of 0.5 percent.

An unchanged reading on incomes would follow gains of 0.2 percent in August and July.

At 10 a.m., Reuters/University of Michigan figures may show the index of consumer sentiment fell to 70 from 73.5 in September, according to the survey median. Estimates ranged from 68 to 74. A preliminary reading earlier this month came in at 69.4.

Monthly Breakdown

Today’s spending report will provide the monthly breakdown of the quarterly figures issued by the Commerce Department yesterday, which may influence the outlook for the next three months. Household purchases, which account for about 70 percent of the economy, rose at a 3.4 percent annual pace in the third quarter, the strongest performance in more than two years, the figures showed.

The world’s largest economy expanded at a 3.5 percent rate from July through September, exceeding the median estimate of economists surveyed.

The report on gross domestic product contributed to the biggest advance in benchmark stock indexes since July. The Standard & Poor’s 500 Index climbed 2.3 percent to close at 1,066.11.

Contract Less

The Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49 this month from 46.1 in September, according to the survey median. Readings below 50 signal contraction. The report is due at 9:45 a.m. Washington time.

Kellogg Co., the largest U.S. breakfast-cereal maker, yesterday reported third-quarter profit that exceeded analysts’ estimates as costs fell more than sales.

“Consumers remain nervous and are more value conscious than they were a couple of years ago,” Chief Executive Officer David Mackay said in a telephone interview. “We have to be pragmatic about consumers and the issues and pressures they face, and try to help them in any way we can.”

A report from the Labor Department scheduled for release at 8:30 a.m. may show employment expenses in the U.S. rose 0.4 percent in the third quarter, the same as in the previous three months, according to the median estimate of economists surveyed.

                        Bloomberg Survey

===============================================================
                             Pers     Pers   Chicago U of Mich
                              Inc    Spend       PM    Conf.
                             MOM%     MOM%    Index    Index
===============================================================
Date of Release              10/30    10/30    10/30    10/30
Observation Period           Sept.    Sept.     Oct.   Oct. F
---------------------------------------------------------------
Median                        0.0%    -0.5%     49.0     70.0
Average                       0.0%    -0.5%     49.1     70.0
High Forecast                 0.2%     0.5%     52.5     74.0
Low Forecast                 -0.2%    -0.9%     47.0     68.0
Number of Participants          73       75       58       60
Previous                      0.2%     1.3%     46.1     73.5
---------------------------------------------------------------
4CAST Ltd.                   -0.1%    -0.4%     52.0     71.0
Action Economics              0.0%    -0.5%     48.0     69.4
Aletti Gestielle SGR          0.0%    -0.5%     48.0     69.5
Ameriprise Financial Inc      0.1%    -0.5%     50.0     70.0
Argus Research Corp.          0.2%     0.1%     47.0     ---
Banesto                       0.0%    -0.5%     48.5     72.0
Bank of Tokyo- Mitsubishi     0.0%    -0.1%     49.8     69.6
Bantleon Bank AG              0.0%    -0.6%     50.0     70.5
Barclays Capital              0.0%    -0.6%     51.0     70.5
Bayerische Landesbank         0.1%     ---      47.5     ---
BBVA                          0.2%    -0.2%     50.0     73.5
BMO Capital Markets           0.1%    -0.6%     48.0     70.0
BNP Paribas                   0.1%    -0.5%     48.0     70.0
BofA Merrill Lynch Resear    -0.1%    -0.4%     48.5     70.0
Briefing.com                 -0.2%    -0.7%     51.0     70.3
C I T I C Securities          ---      ---      ---      70.0
Calyon                        0.0%    -0.3%     48.0     70.0
Capital Economics             0.0%    -0.4%     48.0     69.4
CIBC World Markets           -0.1%     0.5%     ---      68.0
Citi                          0.1%    -0.4%     49.0     69.0
ClearView Economics           0.1%    -0.4%     51.0     74.0
Commerzbank AG                0.1%    -0.5%     50.0     69.4
Credit Suisse                -0.1%    -0.5%     48.0     71.0
Daiwa Securities America     -0.1%    -0.3%     ---      ---
Danske Bank                  -0.1%    -0.9%     52.5     69.6
DekaBank                      0.0%    -0.4%     48.1     70.0
Desjardins Group              0.2%    -0.8%     52.0     69.4
Deutsche Bank Securities      0.2%    -0.2%     50.0     70.0
Deutsche Postbank AG          ---     -0.4%     ---      70.5
DZ Bank                       0.0%    -0.5%     47.0     ---
First Trust Advisors          0.0%    -0.5%     50.8     70.0
Fortis                        ---      ---      50.0     ---
FTN Financial                -0.2%    -0.3%     47.5     70.0
Goldman, Sachs & Co.         -0.2%    -0.3%     52.0     ---
Helaba                       -0.1%    -0.5%     49.0     ---
Herrmann Forecasting          0.1%    -0.4%     49.5     70.4
High Frequency Economics      0.1%    -0.4%     ---      ---
HSBC Markets                  0.0%    -0.5%     50.0     69.5
Ibersecurities                0.2%    -0.3%     47.0     70.0
IDEAglobal                    0.1%    -0.4%     49.0     71.0
IHS Global Insight           -0.2%    -0.4%     ---      69.0
Informa Global Markets        0.0%    -0.7%     49.5     69.8
ING Financial Markets         0.1%    -0.6%     48.0     71.0
Insight Economics            -0.1%    -0.8%     50.0     69.0
Intesa-SanPaulo              -0.1%    -0.4%     50.0     70.0
J.P. Morgan Chase            -0.2%    -0.7%     ---      70.0
Janney Montgomery Scott L     0.0%    -0.8%     ---      ---
Jefferies & Co.               0.2%    -0.4%     48.1     70.5
Landesbank Berlin            -0.2%    -0.2%     48.5     69.5
Landesbank BW                 0.2%    -0.7%     47.0     70.0
Maria Fiorini Ramirez Inc     0.1%    -0.5%     ---      ---
MFC Global Investment Man     0.0%    -0.8%     ---      ---
Mizuho Securities             0.0%    -0.8%     47.0     69.4
Moody’s Economy.com          -0.1%    -0.4%     48.5     70.5
Morgan Keegan & Co.          -0.1%    -0.7%     ---      ---
Morgan Stanley & Co.         -0.1%    -0.4%     ---      ---
National Bank Financial       ---      ---      ---      70.0
Natixis                       0.1%    -0.2%     ---      ---
Newedge                       0.1%    -0.4%     48.0     70.5
Nomura Securities Intl.       0.1%    -0.1%     48.5     ---
Nord/LB                       0.0%    -0.1%     49.5     69.0
PNC Bank                      0.1%    -0.7%     ---      ---
RBC Capital Markets           0.0%    -0.7%     ---      ---
RBS Securities Inc.           0.0%    -0.3%     ---      70.0
Ried, Thunberg & Co.          ---     -0.6%     ---      68.0
Schneider Foreign Exchang     0.0%    -0.2%     ---      70.0
Scotia Capital                0.1%    -0.6%     ---      ---
Societe Generale             -0.1%    -0.3%     50.0     70.0
Standard Chartered            0.0%    -0.6%     48.9     69.7
Stone & McCarthy Research     0.1%    -0.7%     47.1     68.9
TD Securities                -0.1%    -0.4%     50.0     70.0
Thomson Reuters/IFR          -0.1%    -0.2%     48.5     71.0
UBS                           0.0%    -0.5%     49.0     72.5
University of Maryland        0.1%    -0.6%     48.5     70.2
Wells Fargo & Co.             0.1%    -0.5%     ---      ---
WestLB AG                     0.1%    -0.6%     48.0     69.4
Westpac Banking Co.           0.0%    -0.8%     50.0     69.4
Woodley Park Research         0.1%    -0.5%     50.3     69.8
Wrightson Associates          ---     -0.6%     48.0     68.0
===============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.K. Nationwide House Prices Post First Annual Gain Since 2008

By Svenja O’Donnell

Oct. 30 (Bloomberg) -- U.K. home prices posted their first annual gain in 19 months in October as low interest rates and improved confidence encouraged buyers, Nationwide Building Society said.

The average cost of a home increased 0.4 percent to 162,038 pounds ($268,334), the sixth consecutive monthly increase, the mortgage lender said in a statement today. It rose 2 percent from a year earlier, the first annual gain since March 2008.

The report adds to evidence that the property market is recovering after house prices dropped as much as a fifth from their peak in 2007. Rising unemployment and an economy mired in recession may curb future price increases, economists say.

“The strong upward momentum in property values seen over the summer is showing some signs of moderating as we head into the autumn months,” Martin Gahbauer, Nationwide’s chief economist, said in the statement. Record low interest rates may “cushion the negative impact of labor market weakness on housing demand,” he said.

Economists are divided over whether the Bank of England will expand its 175 billion-pound bond-buying program next week after the economy unexpectedly shrank between July and September.

The slump extended the recession to six quarters, the longest since records began in 1955, and economists expect unemployment to keep rising well into 2010 as job losses mount.

“Given the poor labour market situation implied by the economy’s ongoing weakness, it is difficult to imagine the housing market returning to the buoyant levels of activity and price inflation that prevailed earlier in the decade,” Gahbauer said.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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German Retail Sales Unexpectedly Dropped in September (

By Frances Robinson

Oct. 30 (Bloomberg) -- Retail sales in Germany, Europe’s largest economy, unexpectedly fell for a second month in September after companies shortened working hours, leaving consumers with less money to spend.

Sales, adjusted for inflation and seasonal swings, slipped 0.5 percent from August, when they dropped 1.8 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected a gain of 1 percent, according to the median of 23 estimates in a Bloomberg News survey. From a year earlier, sales declined 3.9 percent.

Average wages in Germany fell 1.2 percent from a year earlier in the second quarter after companies reduced working hours to cut costs during the economic slump. The government is spending 85 billion euros ($126 billion) on measures to haul the country out of its worst recession since World War II.

“Although the extensive use of the short-time work scheme strongly helps to stabilize employment, employees have to accept lower incomes,” said Alexander Koch, an economist at UniCredit Group in Munich. “The German economy is growing again, but private households are still likely to face a consumer recession.”

Germany’s HDE retail industry association expects sales to decline 2 percent in nominal terms this year. Arcandor AG, the insolvent German retailer, said yesterday that its Quelle mail- order unit will hold a closing-down sale next month.

‘Recovery Signs’

Still, the government this month raised its economic forecasts, predicting growth of 1.2 percent in 2010 after a contraction of 5 percent this year.

“Recovery signs are now very clear all over Europe, especially in Germany, and this is a direct consequence of the government measures,” said Oscar Bernal, an economist at ING Groep NV in Brussels. “Prices are still under pressure, adding to the purchasing power of households, and we’re a bit more optimistic on the labor market.”

Consumer prices haven’t risen on an annual basis in Germany since April and unemployment unexpectedly dropped for a fourth month in October, aided by government programs that include incentives for companies to retain staff. Bundesbank President Axel Weber said on Oct. 3 that Germany’s economy probably expanded around 0.75 percent in the third quarter from the second, when it grew 0.3 percent.

“The labor market’s benefited from companies putting people on shorter working hours as opposed to firing them,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “But the labor market will get worse, and that should affect retail sales.”

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

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Obama Bridge to Lasting Economic Expansion Risks Going Nowhere

By Rich Miller

Oct. 30 (Bloomberg) -- President Barack Obama and Federal Reserve Chairman Ben S. Bernanke built a bridge they anticipate will lead to a lasting U.S. economic recovery. It may end up being a bridge to nowhere they want to be.

The economy grew in the third quarter for the first time in more than a year, propelled by emergency programs to boost buying of cars and homes, according to Commerce Department figures released yesterday. Policy makers are betting those temporary measures will pave the way to a self-sustaining expansion as companies hire and consumers increase spending.

The risk is that the biggest government intrusion into the economy since World War II will leave the U.S. saddled with trillions of dollars of debt and not much to show for it. The worst financial crisis since the Great Depression may have shaken companies and consumers so much that their spending won’t be enough to replace federal support.

Third-quarter growth “was boosted by the various fiscal stimulus policies,” Harvard University professor Martin Feldstein said in an e-mail. “The danger remains of a serious slowdown after this and a possible double dip” of the economy in 2010, he said.

Consumer spending on cars and homes helped power the 3.5 percent annual pace of growth. Sales at Dearborn, Michigan-based Ford Motor Co. and Detroit-based General Motors Co. were spurred by the government’s “cash for clunkers” plan, which expired in August. Builders including Miami-based Lennar Corp. benefited from a first-time home-buyers tax credit that may be extended beyond its Nov. 30 expiration date.

Excluding sales, production and inventories of vehicles, the economy grew 1.9 percent last quarter, the Commerce Department said.

‘Rickety Bridge’

“It is a very rickety bridge, but it is a bridge,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

Stock prices jumped after the stronger-than-anticipated GDP figures, with the Standard & Poor’s 500 Index finishing 2.3 percent higher yesterday at 1,066.11. The index is up 58 percent from its low for the year on March 9.

An improving U.S. and global economy helped companies from Amazon.com Inc. to Whirlpool Corp. exceed analysts’ earnings estimates last quarter. Profits at about 85 percent of the companies in the S&P 500 Index that have released results beat expectations, according to Bloomberg data. That marks the highest proportion in records going back to 1993.

Frankel Perspective

The U.S. economy probably hit its trough during the summer following four straight quarters of contraction, said Jeffrey Frankel, a Harvard University professor and member of the National Bureau of Economic Research’s Business Cycle Dating Committee.

The committee is responsible for deciding when recessions begin and end. Robert Hall, who heads the committee and is a professor at Stanford University in California, said in August it may take more than a year for the group to reach a decision.

Obama said yesterday the GDP report shows that “the steps we’ve taken have made a difference,” while acknowledging that the country has “a long way to go” before it recovers enough to bring down an unemployment rate at a 26-year high.

Most analysts anticipated that the government’s $787 billion stimulus program would have its biggest impact on growth in the second and third quarters of this year, Christina Romer, chair of Obama’s Council of Economic Advisers, told lawmakers last week.

“By mid-2010, fiscal stimulus will likely be contributing little to growth,” she added.

Rogoff Debt Warning

The $1.4 trillion budget deficit in the year ended on Sept. 30 -- which at 10 percent of GDP was the highest since World War II -- leaves the administration and Democratic lawmakers little room to add to what they’ve already done for the economy ahead of mid-term Congressional elections in November 2010.

“The debt is piling up,” Ken Rogoff, a Harvard University professor and former chief economist at the International Monetary Fund, said in a Bloomberg Radio interview two days ago. “We just don’t see” anything like it “outside wartime.”

While unemployment is likely to remain “severely elevated” for a while, any proposals for fresh government action to reduce it would need “rigorous evaluation” given the size of the budget deficit, Romer said.

Bernanke and his colleagues at the Fed have already begun to wind down some of their support for the economy. The central bank yesterday completed its purchases of $300 billion of Treasury securities under a program that was aimed at lowering borrowing costs.

FOMC Language

The Federal Open Market Committee may opt next week to soften its suggestion that short-term interest rates will stay at “exceptionally low levels” for an “extended period” in order to give it more flexibility to change policy in the future, Richard Berner, co-head of global economics for Morgan Stanley in New York, said in a report to clients on Oct. 26.

Policy makers, who have set a target of zero to 0.25 percent for their benchmark interest rate, will meet Nov. 3-4 to map monetary strategy.

As the central bank and the administration exit from their stimulus policies, it will be up to consumers and companies to fill the gap.

“The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government,” Kathleen Stephansen, chief economist at Aladdin Capital Holdings LLC in Stamford, Connecticut, said in an interview with Bloomberg Television.

End of ‘Clunkers’

Sales of cars and light trucks declined 23 percent in September after the “cash for clunkers” program ended, according to Autodata Corp. The seasonally adjusted annual sales rate for September was 9.22 million, compared with 12.6 million a year earlier.

The housing market has also shown signs of weakness amid uncertainty about whether the tax credit would be extended. Sales of new homes unexpectedly fell in September, dropping by 3.6 percent to a 402,000 annual pace. Senate Democrats have since reached an agreement to prolong the program.

Household spending is being held back as banks tighten lending standards after $1.7 trillion in writedowns and credit losses worldwide and as consumers seek to rebuild their finances.

Consumer credit fell in August for a seventh straight month, the longest series of declines since 1991.

“An ongoing balance-sheet adjustment in the household sector, combined with lingering labor market weakness, will weigh heavier on consumer spending than generally appreciated,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm, said in a note to clients yesterday.

More Job Losses

More than three-quarters of investors and analysts surveyed in a poll of Bloomberg subscribers across six continents late this month said they expect the U.S. unemployment rate to be 9.5 percent or higher a year from now. The rate in September was 9.8 percent.

Small businesses in the U.S. plan to keep reducing payrolls and inventories over the next three months on expectations sales will fall, according to a survey released on Oct. 13 by the Washington-based National Federation of Independent Business.

“The ‘job-generating machine’ is still in reverse,” William Dunkelberg, the group’s chief economist, said in a statement. “Sales are not picking up, so survival requires continuous attention to costs -- and labor costs loom large.”

The history of financial crises suggests that it will be a “long, slow haul” out of the recession, said Rogoff, author, along with Carmen Reinhart of the University of Maryland, of “This Time Is Different,” a study of such catastrophes.

“Things like unemployment, housing prices, they’re going to take a long time to come back,” Rogoff said. “We’ll probably have subpar growth” of around 2 percent “for a long time.”

To contact the reporter on this story: Rich Miller in Washington rmiller28@bloomberg.net

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BOJ Ends Debt Buying as Central Banks Phase Out Emergency Steps

By Mayumi Otsuma

Oct. 30 (Bloomberg) -- The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis.

Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year.

Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold.

“Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least.

The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent.

The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.”

Lingering Deflation

“It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.”

Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday.

Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5.

Inflation Expectations

China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth.

Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.

At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit.

“I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo.

The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today.

Return to Growth

The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012.

The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months.

Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed.

In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg.

‘Signs of Improvement’

“Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said.

Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics.

The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December.

“The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.”

To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Morgan Stanley Says BOE Exit From QE Is ‘Worrying’ Pound Bears

By Daniel Tilles

Oct. 30 (Bloomberg) -- The pound may get support from rules requiring U.K. financial institutions to boost their assets, which might spur gilt purchases from the Bank of England, according to Morgan Stanley.

“New Financial Services Authority regulations for U.K. banks might result in very large gilt purchases, possibly allowing the Bank of England an easy exit from its quantitative- easing program, something worrying pound bears,” strategist Stephen Hull in London wrote in a report dated yesterday.

The British currency may weaken in the “short term” because the central bank will probably extend its debt-buying program, according to Hull.

“The Bank of England looks likely to do more quantitative easing before it heads for the exit and that seems likely to hinder the pound in the short term,” he said.

Morgan Stanley recommended investors add to bets the pound will drop against the Norwegian krone.

Sterling rose 0.2 percent to 9.3678 kroner as of 7:24 a.m. in London.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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Lagarde Says Up to China to Decide on Stronger Yuan

By John Duce

Oct. 30 (Bloomberg) -- France’s Finance Minister Christine Lagarde said it’s up to China to decide whether to allow the yuan to strengthen and that the issue involves imbalances across exchange rates.

“China will decide for itself and it’s a matter of rebalancing several currencies to help create financial stability,” said Lagarde during a press briefing in Hong Kong today.

The comments came after she visited Beijing and Guangdong in southern China. She said that a delegation of 100 Chinese companies and Commerce Minister Chen Deming will visit Paris on Nov. 26 and Nov. 27 and she will meet them.

China and France signed a preliminary agreement to invest as much as 300 million euros ($443 million) in each other’s small and medium-sized companies during her trip. The funding will come from state-owned lenders Chinese Development Bank and Caisse des Depots et Consignations, Lagarde said. Lagarde met with Vice Premier Li Keqiang, the state-run Xinhua news agency reported.

She said today that countries should cooperate to avoid protectionism. France’s third-quarter gross domestic product will be as good if not better than that of the second quarter, she said.

To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net

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Oil Is Poised for Monthly Rise on Optimism Over U.S. Demand

By Yee Kai Pin and Ben Sharples

Oct. 30 (Bloomberg) -- Crude oil is poised for its biggest gain in five months after a report yesterday showed the U.S. economy grew in the third quarter, ending a year-long contraction and spurring optimism fuel demand will increase.

Oil rose 3.1 percent yesterday, the most in two weeks, after the Commerce Department said the world’s largest energy- consuming country expanded at a 3.5 percent annual pace between July to September. Gross domestic product was forecast to grow 3.2 percent, according to a Bloomberg News survey.

“It’s a very good number although it’s helped by stimulus from the government,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. “We have to watch carefully the fourth quarter and the first quarter.”

Crude oil for December delivery traded at $79.52 a barrel, down 35 cents in electronic trading on the New York Mercantile Exchange at 4:22 p.m. Singapore time. Yesterday, the contract rose $2.41 to $79.87 a barrel. Futures, up 78 percent so far this year, are set to gain 13 percent in October, the biggest monthly rise since a 30 percent rally in May.

The dollar was little changed after falling yesterday against the euro. It traded at $1.4823 at 2:08 p.m. in Tokyo, from $1.4822 in New York. A declining U.S. currency spurs demand for commodities, including gold, as an alternative investment.

“There was a whole string of positive economic news from Europe, Japan, to the U.S., and the dollar was down,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Last night was a strong night for commodities across the board.”

Equities Advance

Asian stocks advanced, paring the MSCI Asia Pacific Index’s first monthly decline since February, and European stock futures were little changed. Yesterday, U.S. equities rallied on the return of economic growth. The Standard & Poor’s 500 Index climbed 2.3 percent to 1,066.11 in New York and the Dow Jones Industrial Average increased 2.1 percent to 9,962.58.

The U.S. economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four quarterly decreases marked the longest stretch of declines since quarterly records began in 1947.

“The GDP numbers really came out of the gate,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Growth is there, four quarters of negative growth are well and truly out of our way.”

The number of Americans collecting unemployment insurance fell more than forecast to the lowest level in seven months, a government report yesterday showed. Continuing claims for jobless benefits were down 148,000 at 5.8 million in the week ended Oct. 17, the lowest level since March 21 and biggest weekly drop since July, according to the Labor Department.

Price Survey

Crude oil may fall next week on speculation the dollar will rebound against the euro and equities may pull back, according to a Bloomberg News survey.

Fifteen of 34 analysts and traders, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast prices will be little changed. Last week, 50 percent of survey respondents said oil would fall.

Brent crude for December settlement traded at $77.53 a barrel on the London-based ICE Futures Europe exchange, slipping 51 cents at 4:22 p.m. in Singapore. Yesterday, the contract settled at $78.04 a barrel, up $2.18, or 2.9 percent, the most since Oct. 21.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.

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Oil May Fall on Declining Equities, Rising Dollar, Survey Shows

By Blake Ellis

Oct. 30 (Bloomberg) -- Crude oil may fall next week on speculation that the dollar will rebound against the euro and equities will decline.

Fifteen of 34 analysts, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast that futures will be little changed. Last week, 50 percent of analysts said prices would fall.

“I’m looking for a continuation of the rally in the dollar and weakness in equities,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “It’s starting to look like we have a major correction in store for us next week.”

A rising U.S. currency curbs demand for raw materials as an inflation hedge. Declining equities can signal the economy will be slow to recover, reducing consumption.

The Standard & Poor’s 500 Index dropped 4.6 percent to 1,042.63 in the four trading days ended Oct. 28. The dollar touched $1.4683 per euro yesterday, the strongest intraday price in more than two weeks.

The U.S. currency weakened and stocks rebounded in later trading after the U.S. Commerce Department said gross domestic product grew at a 3.5 percent pace from July through September after shrinking for four straight quarters.

Crude oil for December delivery fell 63 cents, or 0.8 percent, to $79.87 a barrel so far this week on the New York Mercantile Exchange. Futures are up 79 percent this year.

The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    10         9         15

To contact the reporter on this story: Blake Ellis in New York at bellis9@bloomberg.net

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Exxon, Oil Majors Battle to Restore Earnings as Demand Plunges

By Joe Carroll and Edward Klump

Oct. 30 (Bloomberg) -- Exxon Mobil Corp., PetroChina Co. and Royal Dutch Shell Plc are battling slumping fuel demand as oil majors seek to rebuild profits battered by the global fallout from the worst U.S. downturn since the Great Depression.

Exxon Mobil’s U.S. refineries lost about $2.3 million a day last quarter as gasoline and diesel prices fell. Shell, whose refining earnings declined 47 percent, said the plunge in demand will keep profit margins narrow in “the short and medium term” and a quick recovery in energy usage and prices is unlikely.

Oil companies around the world are slashing costs, cutting jobs and holding back on some new investment to halt the slide in earnings, even as they seek to fund renewable energy projects. Exxon Mobil cut its capital-spending estimate for 2009 by 10 percent as third-quarter profits at the Irving, Texas- based explorer and Shell hit their lowest level in six years.

“Low oil prices and tight refining margins are going to continue to haunt the majors this quarter and into the next quarter,” said Gianna Bern, president of energy consultancy Brookshire Advisory & Research Inc. in Flossmoor, Illinois. Crude oil has averaged $59 a barrel in New York this year, compared with $99.75 in 2008.

While fuel consumption slowed, crude producers pumped 3.68 million barrels in excess of worldwide demand during the third quarter, equivalent to the combined daily production of Kuwait and Libya, according to the International Energy Agency in Paris. Oil futures in the period slid almost $50 a barrel from their year-earlier average and natural gas hit a seven-year low.

Global Demand

Exxon Mobil, the world’s biggest company by market value, reported a fourth straight drop in profit yesterday after demand slumped for fuels to run cars, factories and airplanes. Its third-quarter net income fell 68 percent from a year earlier to $4.73 billion.

Shell posted a 62 percent decline in net income to $3.25 billion and Chief Executive Officer Peter Voser said the outlook “remains very uncertain” given forecasts that demand for crude will fall the most this year since 1980. Shell is cutting 5,000 jobs, equivalent to about 5 percent of its workforce, and has reduced operating costs by about $1 billion.

“What we’re hearing from the oil chiefs is that the economy has hit bottom but the jury’s still out on how robust of a recovery we’ll see,” said Haag Sherman, who manages $7.5 billion as chief investment officer at Houston-based Salient Partners.

PetroChina, the world’s second-most valuable company, on Oct. 28 posted a 24 percent drop in third-quarter profit to 30.8 billion yuan ($4.5 billion), missing analysts’ estimates. Houston-based ConocoPhillips, the third-largest U.S. oil company, said the same day its profit plunged 71 percent to $1.5 billion.

Cost Cuts

Yesterday Italy’s Eni SpA said its earnings slumped 58 percent to 1.24 billion euros ($1.82 billion) and it will fall short of its full-year production forecast.

Even as profits slid in the third quarter, analysts pointed to some signs of improvement in the industry, at least for explorers. Crude oil on the New York Mercantile Exchange, which fell 42 percent to an average of $68.24 last quarter from a year earlier, has rallied 79 percent since the start of 2009 and hit a 12-month high of $82 on Oct. 21.

While London-based BP Plc said Oct. 27 that its net income fell 34 percent to $5.34 billion, it has beaten analyst estimates for the past three quarters. It posted third-quarter earnings excluding one-time items and inventory changes of $4.67 billion, boosted by exceeding its own cost-cut target by $1 billion. CEO Tony Hayward has also reversed two years of falling output after ramping up production in the Gulf of Mexico.

China Boost

PetroChina, the Beijing-based producer and refiner, may see its earnings rebound this quarter as China’s economy leads the world out of recession, boosting oil prices and demand for gasoline and diesel, analysts said.

“The fourth quarter will compare favorably,” said Gordon Kwan, the Hong Kong-based head of energy research at Mirae Asset Securities. Kwan forecasts PetroChina’s net income will climb 63 percent from a year earlier to 34 billion yuan in the three months ending Dec. 31.

In contrast China Petroleum & Chemical Corp.’s profit fell from a record in the second quarter and may decline further as government-set fuel prices lag behind a rebound in crude oil costs, analysts said. Asia’s biggest oil refiner yesterday reported a third-quarter net income of 16.55 billion yuan, missing estimates.

‘Off The Floor’

“If you look at the whole picture for all the Big Oils, the only thing that’s really helped them is that the oil price has come off the floor,” said John Parry, an analyst with IHS Herold in Norwalk, Connecticut. “You’re still a long way from catching up to where the industry was back in ‘07 and ‘08.”

While the U.S. economy grew in the third quarter for the first time in more than a year, expanding 3.5 percent, it was propelled by stimulus-driven gains in consumer spending and home building. Even as oil companies may reap benefits from state support for the economy, they could also face higher costs from government policy measures.

“The bleeding is over, but the industry still has a lot of worries, for instance the carbon tax and some of the other issues that are going to come into play with some of their operations,” Parry said. “We’re seeing much tougher concession terms on the part of the host governments.”

Carbon Capture

Alternative energy investment is also claiming resources from the industry. Shell over the last five years has spent about $1.7 billion on renewable energy sources and carbon capture and storage, or CCS, according to its 2008 sustainability report.

Shell said in May that it will boost spending on biofuels this year and next to create a “commercial-size” renewables business. The company said earlier this year it will focus on biofuels and CCS at the expense of solar and wind energy.

“Renewables will have long-term impact, they’re dependent on the high price of oil and many are dependent on subsidies,” said Manouchehr Takin, a petroleum analyst at the Centre for Global Energy Studies in London. “Renewables first have to be developed into real, profitable ventures and that takes time.”

For Related News and Information: Stories on Exxon Mobil earnings: XOM US CN Exxon Mobil production and reserves: XOM US CH7 Royal Dutch Shell earnings matrix: RDSA LN EM Top energy news: ETOP Stories on Alternative Energy: NI ALTNRG

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