Economic Calendar

Wednesday, January 14, 2009

U.S. Retail Sales Drops For Sixth Straight Month

Daily Forex Fundamentals | Written by DailyFX | Jan 14 09 13:57 GMT |

U.S. retail sales fell 2.7% in December which was more than double forecasts of 1.2%. It was the sixth straight monthly decline which is the longest string on record. Looking at the breakdown we see that a 15.9% drop in gasoline receipts led the drop followed by a 2.5% fall in apparel sales. Consumers have continued to retrench as the economy lost over 1 million jobs over the last two months of 2008. Although, the majority of the decline was on the back of the impact of falling oil prices on gasoline prices there were across the board declines, which was evident by a 3.1% drop in the less volatile ex-autos reading. The weakening labor market has dimmed hopes for a rebound in spending which has led President-Elect Obama to add more tax breaks to the proposed fiscal stimulus plan in hopes of reviving demand.

DailyFX

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Jan 14 09 12:33 GMT |

USD-CHF @ 1.1172/75...Ranged

R: 1.1175-82 / 1.1353-60 / 1.1404-37
S: 1.1096 / 1.0979 / 1.0958-29

As expected Swiss moved sideways during the day ranged between 1.1121-1.1217 and also in line with our broad view of sideways consolidation with an upward bias till the triangle resolution. Sharply rising trendline Support (for today this Support is near 1.1075-1.1100) could carry the pair up towards the resolution of the triangle over the next few days. To see the chart click on: http://www.kshitij.com/graphgallery/chfcandle.shtml#candle

There's still good potential for an S-H-S formation on the daily charts which could be confirmed if the red trendline (also a possible Neckline) on the daily chart breaks.

Cable GBP-USD @ 1.4544/48...Bearish Medium-Long Term

R: 1.4562 / 1.4668 / 1.4715-26
S: 1.4481 / 1.4436 / 1.4365

Cable rose sharply during the day and past our expectations of 1.4650 to record a high of 1.4710 and then fell sharply below the 1.45 mark. For the US session, the broad range for the pair could be 1.4300-1.4740 which can be seen from the daily candle chart. To see the chart of Cable, click on: http://www.kshitij.com/graphgallery/gbpcandle.shtml#candle

Monthly chart suggests that in the longer term, the pair could be headed towards 1.40 having broken a trendline Support at 1.53. To see the monthly chart, click on: http://www.kshitij.com/graphgallery/gbpmth.shtml#mth

Aussie AUD-USD @ 0.6726/31...Ranged

Aussie seems to be entangled in the moving averages as can be seen on the 3-day charts. Let's see whether the pair continues being bound by these MAs or it manages to break out. To see the 3-day line chart of Aussie, click on: http://www.kshitij.com/graphgallery/audma.shtml#ma

Kshitij Consultancy Service
http://www.fxthoughts.com

Legal disclaimer and risk disclosure

These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.




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Daily Technical Strategist

Daily Forex Technicals | Written by FXTechstrategy | Jan 14 09 12:31 GMT |

Today's Focus: EURUSD & GBPUSD

  • EURUSD: EUR Flirts With The 13298 Level...
  • GBPUSD: Builds Up To Retarget The 1.4352 Level.

EURUSD

Although a break and close below the 1.3298 level, its Dec 11'08 high/former range top was seen on Tuesday, early morning trading today saw the pair testing above that level. A continued hold below the 1.3298 level is required to drive prices further lower towards its Nov 25'08 high at 1.3081 accompanied by the 1.2551 level, its Dec 04'08 low and then its YTD low at 1.2330.The falling channel now in place on the daily chart also supports the pair's downside view. The daily stochastics remains bearish to oversold. Upside objectives are located at its Jan 06'09 low/Oct 30'08 high at 1.3313/1.3298 and the 1.3531 level, its Oct 20'08 high before the 1.3785 level, its Oct 09'08 high. On the whole, with the falling channel now in place and the decline from the 1.4719 level remaining in force, EUR is susceptible to the downside.

Support Comments
1.3081 Nov 25'08 high
1.2551 Dec 04'08 low
1.2330 YTD low


Resistance Comments
1.3298 Dec 11'08 high/former range top
1.3531 Oct 20'08 high
1.3785 Oct 09'08 high

GBPUSD

A third-day of consecutive downside losses following the pair's failure at the 1.5374 high has now opened up downside risk towards its YTD low at 1.4352.With the pair still maintaining its medium and long term bearish bias, a sustained break of the latter should push GBP further lower towards the 1.4045 level, its Jan'02 low. Unless a return back above the 1.5374 level occurs, our downside view remains valid. Its daily studies which are trending lower are supportive of this scenario. Resistance comes in at the 1.4831 level, its Jan 01'09 high at first and then the 1.5000 level followed by the 1.5374 level printed on Jan 08'08.All in all,GBP is now looking to recapture the 1.4352 level and beyond.

Support Comments
1.4558 Nov 13'08 low
1.4470 Dec 04'08 low
1.4352 YTD low


Resistance Comments
1.4831 Jan 01'09 high
1.5000 Psycho level
1.5250/65 Nov 19'08 high/Oct 24'08 low

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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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jan 14 09 13:35 GMT |

The news in London was pretty well all EUR negative as economic data continued to deteriorate and rumors swirled that Ireland may need emergency funding from the IMF. Eurozone industrial production slowed to a dismal -7.7% annual rate in November, and the biggest drop since December 1990. Meanwhile, news out of Ireland that the country may need to seek funds from the IMF if the economy does not improve spooked EUR longs. EUR/USD slipped more than -80 pips in the session and was sitting near 1.3220/30 just ahead of NY trading. Yesterday’s 1.3140 low now looks like the next crucial short-term support here.

The yen crosses headed lower as well on a fresh dose of risk aversion on the back of some negative news out of the financial space. European stock marts were about -2% lower. USD/JPY lost about -35 pips towards 89.40/50 while EUR/JPY shed more than -120 points into the 118.30/40 area. Below 89 and 118, respectively, should see losses accelerate a touch here. USD/CAD added about 70 pips to just above the 1.22 level after grinding as low as 1.2120/30 earlier. The dip in oil to back below $39/bbl led the decline here.

Upcoming Economic Data Releases (NY Session) prev est

  • 1/14 13:30 GMT US Import Price Index (MoM) DEC -6.70% -5.30%
  • 1/14 13:30 GMT US Import Price Index (YoY) DEC -4.40% -9.50%
  • 1/14 13:30 GMT US Advance Retail Sales DEC -1.80% -1.20%
  • 1/14 13:30 GMT US Retail Sales Less Autos DEC -1.60% -1.40%
  • 1/14 13:30 GMT US Fed's Plosser Gives Economic Outlook
  • 1/14 15:00 GMT US Business Inventories NOV -0.60% -0.50%
  • 1/14 15:30 GMT US DOE U.S. Crude Oil Inventories 6682K 2750K
  • 1/14 15:30 GMT US DOE U.S. Gasoline Inventories 3334K 2000K
  • 1/14 18:00 GMT US Fed's Stern Speaks on Policy Prospects
  • 1/14 19:00 GMT US Fed Releases Beige Book Report

Forex.com
http://www.forex.com

DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.






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U.S. Dec. Advance Retail Sales: Statistical Summary (Table)

By Kristy Scheuble

Jan. 14 (Bloomberg) -- Following is the summary of the U.S. retail sales report for Dec. from the Commerce Department.


===============================================================================
Dec. Nov. Oct. Sept. Aug. July Dec.
2008 2008 2008 2008 2008 2008 YOY
===============================================================================
--------------------MOM%--------------------
Retail & food service -2.7% -2.1% -3.4% -1.6% -0.7% -0.6% -7.9%
Ex-autos -3.1% -2.5% -2.9% -0.7% -1.1% 0.1% -5.6%
Ex-gas -1.4% -0.2% -2.1% -1.8% -0.4% -0.7% -5.2%
Ex-autos & build mat. -3.1% -2.5% -3.0% -0.7% -1.0% 0.1% -5.6%
Ex-autos & gas -1.5% -0.2% -1.2% -0.7% -0.8% 0.1% -2.0%
Ex-food service -2.7% -2.5% -3.7% -1.8% -0.8% -0.7% -8.5%
Ex-build mat., auto dlrs -3.0% -2.4% -2.9% -0.6% -1.0% 0.1% -5.4%
Ex-gas, bldg mat, dlrs(*) -1.4% 0.1% -1.1% -0.7% -0.6% 0.1% -1.6%
-----------3-mo. Average Annualized----------
Retail & food service -24.6% -19.0% -12.3% -5.1% 0.0% 3.7% n/a
Ex-autos -22.8% -15.3% -8.5% 0.1% 6.3% 10.9% n/a
===============================================================================
Dec. Nov. Oct. Sept. Aug. July Dec.
2008 2008 2008 2008 2008 2008 YOY
===============================================================================
Ex-gas -15.0% -14.0% -10.8% -6.3% -2.3% 0.8% n/a
Ex-autos & build mat. -22.8% -15.2% -8.1% 0.4% 6.4% 10.6% n/a
Ex-autos & gas -10.0% -8.1% -5.9% -0.6% 4.2% 8.1% n/a
Ex-food service -26.9% -21.0% -13.7% -6.0% -0.5% 3.3% n/a
Ex-build mat. & auto dlrs-22.3% -14.8% -8.0% 0.4% 6.3% 10.6% n/a
Ex-gas, build mat & dlrs -8.2% -6.9% -5.0% -0.3% 4.1% 7.4% n/a
--------------------MOM%--------------------
Motor vehicles, parts -0.7% -0.3% -5.9% -5.8% 1.4% -4.2% -19.7%
Furniture -1.8% -0.8% -1.7% -2.0% -2.9% -0.7% -11.9%
Electronics -1.0% 1.5% -2.5% -0.9% -2.7% -0.5% -3.2%
Building materials -2.9% -2.8% -2.2% -0.7% -2.0% 0.4% -5.5%
Food, beverages -1.4% -0.1% -0.5% -0.3% 0.6% 0.2% 0.7%
Health, personal care 0.4% 0.5% 0.1% 0.6% 0.1% 0.1% 7.6%
Gasoline stations -15.9% -18.3% -13.1% -0.1% -3.0% 0.0% -35.1%
Clothing -2.5% 0.1% -2.5% -4.1% -0.7% 0.4% -9.4%
Sporting goods -0.4% 2.1% -3.0% -2.3% -0.1% -0.5% 0.7%
General merchandise -1.3% 0.8% -0.9% -0.7% -0.7% 0.0% -2.5%
===============================================================================
Dec. Nov. Oct. Sept. Aug. July Dec.
2008 2008 2008 2008 2008 2008 YOY
===============================================================================
Department stores -2.3% 1.7% -1.4% -1.5% -2.1% -0.6% -7.8%
Miscellaneous 0.5% -2.9% -0.2% -0.2% -3.4% 2.1% 1.1%
Non-store retailers -1.9% -1.9% -2.3% -0.8% -2.2% -0.1% -1.0%
Eating, drinking -2.2% 1.0% -0.7% 0.2% 0.2% 0.1% -1.7%
===============================================================================
NOTE: Percent changes are monthly unless otherwise noted.
Three month annualized calculations are the latest three months
average compared to the previous three months average.
Monthly changes are seasonally adjusted, yearly changes are not adjusted.

(*) This calculation removes gas, building materials & auto and other
motor vehicle dealers (a component of motor vehicles & parts) from
total retail & food service sales.

The estimates above are based on a sample of about 5,000 retail and food
service firms whose sales are then weighted. Based upon this sample, the
Census Bureau is 90 percent confident that retail sales to the over 3
million retail establishments was between -3.2 and -2.2 percent last month.

SOURCE: U.S. Commerce Department http://www.census.gov/retail

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net





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Brown Guarantees U.K. Loans in New Effort to Counter Recession

By Mark Deen and Rob Hutton

Jan. 14 (Bloomberg) -- U.K. Prime Minister Gordon Brown pledged to guarantee 21.3 billion pounds ($31 billion) of loans to companies, as European leaders acknowledged the failure of bank bailouts and spending plans to contain the recession.

Brown’s plan, coming the day after German Chancellor Angela Merkel announced a similar 100 billion-euro ($133 billion) fund, underscores the urgency of reviving credit to limit unemployment and sustain consumer spending.

“What governments in Europe are learning is that you have to take action, because if you allow the market to take its course, the consequences could be quite dire,” said Peter Dixon, an economist at Commerzbank AG in London. “This is the mood we’re in at the moment, to absorb huge amounts of bad liabilities in the private sector onto the public-sector balance sheet.”

Spending and tax cuts alone won’t be enough to spur economies as bank writedowns worldwide approach $1 trillion, Federal Reserve Chairman Ben Bernanke said yesterday in London. With the U.K.’s benchmark interest rate at its lowest since the 1694 founding of the Bank of England, Brown may be forced to take a direct role in monetary policy, via so-called “quantitative easing,” where authorities pump money into the economy by bolstering bank reserves.

“Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system,” Bernanke said. “More capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets.”

Facing Elections

Both Brown and Merkel, who are scheduled to meet tomorrow in Berlin, face elections within 18 months and the health of their economies will help determine their fate. German federal elections are scheduled for September while Brown must call a vote by June 2010.

Britain’s economy will contract in 2009 for the first time in almost two decades, and the euro region is confronting the first recession in its 10-year history.

Brown has already introduced a 50 billion-pound bank recapitalization program and taken over Royal Bank of Scotland Plc, extended 250 billion pounds of credit lines to banks and offered voters a 20 billion-pound package of mostly tax cuts.

“There is a sense people have been putting faith in Gordon Brown’s ability to manage the economy through the crisis,” said Andrew Cooper, a pollster at Populus Ltd. in London. “If he can’t deliver, the position he has set up for himself with voters collapses.”

U.K. Guarantees

Under today’s U.K. plan, companies with sales of up to 500 million pounds qualify for the guarantees, while a second tranche of 1.3 billion pounds was set aside for firms with sales of 25 million pounds or less. U.K. Business Secretary Peter Mandelson told journalists the government will take on the risk for half the funds, with retail banks providing the rest.

“Companies are the lifeblood of the economy and it is crucial that government acts now to provide real help to support them through the downturn,” Mandelson said.

The government is also exploring a separate plan for larger companies that are able to issue their own bonds, Business Minister Shriti Vadera told reporters.

Companies including Woolworths Group Plc and MFI Retail Ltd. have tipped into bankruptcy as credit dried up, and business lobby groups have said Brown must act quickly to prevent the recession from deepening.

The government will also make available 75 million pounds, 50 million pounds of which it will provide directly, to take equity stakes in small companies that have too much debt.

‘Borrowed Time’

The Confederation of British Industry said today’s program will help some companies but do nothing for the biggest firms, which must refinance more than 100 billion pounds of credit facilities this year.

“The scale of the problem goes well beyond what the government has announced today,” said Richard Lambert, director of the CBI. “The sense of living on borrowed time is palpable.”

In Germany, Merkel and her coalition partners yesterday announced the 100 billion-euro “protective umbrella” for non- financial companies to guarantee loans along with a 50 billion euro stimulus package.

Merkel’s government in October pledged 400 billion euros in loan guarantees, provided as much as 80 billion euros to recapitalize banks and set aside 20 billion euros to cover potential losses from loans.

Yesterday’s package plus steps passed in November bring Germany’s fiscal stimulus to 80.3 billion euros over two years, the Finance Ministry said. At about 1.6 percent of gross domestic product, that’s the biggest stimulus program in Europe, underscoring Merkel’s election-year shift away from a focus on eliminating the budget deficit.

Merkel said sound companies hit by the credit squeeze may seek government guarantees for loans. The guarantees may be handed out by state-controlled lender KfW Group.

“We have to make sure the market is functioning again, we have to provide assistance, Merkel told lawmakers today. Companies “that would be able to get loans without problems in normal times” will be eligible.

To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net





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U.S. December Import Prices Fall 4.2%, Down 1.1% Excluding Oil

By Timothy R. Homan

Jan. 14 (Bloomberg) -- Prices of goods imported into the U.S. fell in December for a fifth consecutive month as commodity costs eased, a sign the recession is restraining inflation.

The import-price index decreased 4.2 percent, less than economists forecast, after a revised 7 percent drop in November, the Labor Department said today in Washington. Prices from a year earlier were down 9.3 percent, largest year-over-year decline since the index was first published in 1982. Prices excluding fuels dropped 1.1 percent.

Today's figures indicate American companies may keep prices low amid a global slowdown in demand. President-elect Barack Obama and Congress are under pressure to enact a fiscal stimulus package to help pull the world's largest economy out of a recession now in its second year.

``Inflation will sag further, even stripping out commodities,'' Richard Berner, co-head of global economics at Morgan Stanley in New York, said before the report. ``Slack overseas demand will put downward pressure on import prices, and the dollar has stopped declining.''

Import prices in December were forecast to fall 5.3 percent after an initially reported 6.7 percent drop the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News. Forecasts ranged from declines of 1.8 percent to 8.5 percent.

Record Year

Compared with a year earlier, prices of imported goods dropped a record 9.3 percent following a 5.4 percent year-over- year decrease in the prior month. Excluding all fuels, import expenses rose 0.9 percent in the 12 months to December.

The import-price index is the first of three monthly price gauges from the Labor Department. The index of wholesale prices is due tomorrow, and the consumer price gauge will be released on Jan. 16. Both are forecast to decline, according to the survey.

The price of imported petroleum and petroleum products decreased 21.4 percent after a 28.5 percent drop in the previous month. Prices were down 47 percent from a year earlier.

Crude oil futures, which peaked at $147 a barrel in July, traded at $36 yesterday on the New York Mercantile Exchange.

Food import prices were up 2.3 percent in December after a 4.7 percent decline the prior month. Imported food was 5.7 percent more expensive than a year earlier.

The U.S. trade deficit narrowed 29 percent in November, the most in 12 years, as Americans bought fewer goods and services from overseas, the Commerce Department said yesterday. The gap shrank more than forecast to $40.4 billion from a revised $56.7 billion in October, with imports falling to their lowest level in three years.

Capital Goods

Imported capital goods were down 0.3 percent in December and gained 0.3 percent from a year earlier, today's report showed.

U.S. exports prices fell 2.3 percent last month, the fifth straight monthly decline. Prices of farm exports decreased 6.5 percent, while those of non-farm exports declined 1.9 percent.

Prices of imported automobiles, parts and engines fell 0.2 percent, and costs for imported consumer goods excluding autos increased 0.1 percent.

Demand for both domestic and foreign automobiles remains weak. Toyota Motor Corp. and Honda Motor Co. said this month that December sales in the U.S. plummeted by more than a third, ending annual gains for Japan's two largest automakers dating back to the mid-1990s.

Prices of goods from China were down 0.4 percent, those from Latin America fell 6 percent and imports from the European Union cost 1.7 percent less.

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





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U.S. Retail Sales Decline for a Record Sixth Month

By Bob Willis

Jan. 14 (Bloomberg) -- Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the choking-off of credit led Americans to cut back on everything from eating out to car purchases.

The 2.7 percent decrease, the sixth consecutive drop, extended the longest string of declines in records going back to 1992, the Commerce Department said today in Washington. Purchases excluding automobiles slumped 3.1 percent.

The loss of 2.6 million jobs and declining home and stock values are squeezing all American households, hurting retailers from Wal-Mart Stores Inc. to Macy’s Inc. The figures will serve as a reminder to lawmakers of the urgency to enact President- elect Barack Obama’s stimulus proposals to combat the recession.

“Consumers are pulling back,” Michael Gregory, a senior economist at BMO Capital Markets in Toronto, said before the report. “The first half is going to be bleak in terms of consumer spending and economic activity.”

Stock-index futures extended their declines and Treasuries climbed after today’s report. Yields on benchmark 10-year notes fell to 2.22 percent at 8:40 a.m. in New York, from 2.29 percent late yesterday. Futures on the Standard & Poor’s 500 Stock Index slid 1.8 percent to 852.80.

Economists’ Forecasts

Retail sales were projected to fall 1.2 percent after an originally reported 1.8 percent drop the prior month, according to the median estimate of 78 economists in a Bloomberg News survey. Forecasts ranged from declines of 3.5 percent to 0.3 percent.

Sales fell 0.1 percent for all of 2008 compared with the prior year, the first decrease on record. November’s decline was revised to 2.1 percent from a previously estimated fall of 1.8 percent.

Today’s report showed declines in 11 of the 13 major categories tracked by the government, led by a 16 percent plunge at gasoline service stations that partly reflected the slump in fuel costs. The drop at grocery stores was the biggest since April 2002 and the decrease at restaurants was the largest since the terrorist attacks in September 2001.

Only health and beauty stores and a miscellaneous category saw increases last month.

Car Sales

Purchases of expensive goods are falling as banks restrict access to credit. Auto sales fell 36 percent in December from the same month last year, capping the industry’s worst year since 1992.

Same-store sales dropped 2.2 percent in the last two months of 2008, making it the worst holiday shopping season in almost four decades of record keeping, the International Council of Shopping Centers said last week.

The first half of this year will also be “extraordinarily challenging,” Wal-Mart Chief Executive Officer H. Lee Scott told a retailers’ convention this week in New York City. “Some people are giving up eating out; some people are giving up movies; some people are giving up other things like shopping,” Scott said. “Those are fundamental changes that will continue.”

Obama, who takes office Jan. 20, is proposing a two-year recovery plan that includes about $300 billion in tax cuts for individuals and businesses and infrastructure spending aimed at creating or saving 4 million jobs.

‘Not Too Late’

“It’s not too late to change course -- but only if we take immediate and dramatic action,” Obama said in his weekly radio address on Jan 10. “Our first job is to put people back to work and get our economy working again.”

Americans are scrimping as unemployment last month rose to 7.2 percent, the highest level in almost 16 years. Job losses are likely to continue for most of this year, economists said.

The plunge at filling station in part reflected a 43 cent- per-gallon drop in the average cost of gasoline last month. Excluding gas, retail sales fell 1.4 percent.

The U.S. economy shrank at a 0.5 percent annual pace from July through September as Americans reduced purchases at a 3.8 percent annual rate, the first decline in consumer spending since 1991 and the biggest in 28 years, the government said last month.

The economic slump probably worsened in the fourth quarter as declines in business investment and construction intensified and consumers continued to pull back.

Excluding autos, gasoline and building materials, the retail group the government uses to calculate gross domestic product figures for consumer spending, sales dropped 1.4 percent, after a 0.1 percent increase in the prior month. The government uses data from other sources to calculate the contribution from the three categories excluded.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net





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Eastern Europe Suffers Gas Shortage as Leaders Travel to Moscow

By Amanda Jordan

Jan. 14 (Bloomberg) -- Eastern European nations faced further natural-gas shortages today as leaders from Bulgaria, Slovakia and Moldova traveled to Moscow to discuss the eight-day supply disruption with Prime Minister Vladimir Putin.

Moldovan Prime Minister Zinaida Greceanii joined her Bulgarian and Slovak counterparts, Sergei Stanishev and Robert Fico, in a meeting with Putin today.

Russia and Ukraine have blamed each other for the failure to reopen pipelines and restore gas deliveries to the European Union. Exporter OAO Gazprom said NAK Naftogaz Ukrainy, Ukraine’s state-run energy company, is blocking transit shipments from Russia, while Naftogaz said the pipeline network lacks sufficient pressure to transport fuel without endangering domestic supplies.

Slovakia, which relies solely on gas via Ukraine, is using imports and backup generators to avoid a blackout following the supply cut and an unplanned halt at a coal-fed power station. Ukrainian Prime Minister Yulia Timoshenko today rejected Fico’s request to deliver gas to Slovakia from storage, saying Ukraine can hardly meet domestic demand.

Bulgaria, which lost its only source of gas when supplies through Ukraine halted, has slashed daily consumption by more than half, using gas from reserves to meet demand. The country has shut 72 factories and rationed gas for heating utilities and 150 other companies. Moldova has also imposed curbs on gas use.

Accusations

Russia stopped flows through Ukraine on Jan. 7 after negotiations over a supply deal broke down. Russia complained that its western neighbor was diverting gas bound for Europe and had closed down its pipelines, charges denied by Ukraine.

The cutoff has renewed calls for the EU to diversify its sources of energy away from Russia. Negotiations between Russia and Ukraine over the separate issue of gas prices and transit fees remain stalled.

Hungary, which borders Ukraine and relies on Russia for about 80 percent of its gas, has sufficient supplies to meet expected consumption today, according to Mol Nyrt.’s network operator, FGSZ Zrt.

The central European country expects to use as much as 62 million cubic meters today, FGSZ said in an e-mailed statement. Available supplies, including commercial reserves and imports via Austria, total 66 million cubic meters. Hungary is keeping a ban on gas use for companies using more than 2,500 cubic meters a day.

Neighboring Croatia gets about 40 percent of its gas from Russia. Croatian industry is suffering increasing losses because of the dispute, Jutarnji List reported today, citing Vladimir Kovacevic, an official at the country’s employers group.

Serbian Losses

Balkan neighbor Serbia has been relying on imports from Hungary, Austria and Germany during the gas crisis. Serbian companies have reported losses of as much as 1.5 billion dinars ($21.6 million) as a result of the shortage in supplies, the Serbian Association of Employers said yesterday on Radio Beograd.

Slovenia is managing to keep supplies to companies and households “stable” by using alternative sources, gas distributor Geoplin d.o.o. said today in an e-mailed statement.

To contact the reporter on this story: Amanda Jordan in London at ajordan11@bloomberg.net





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Oil Use to Fall for Second Year in 2009, Louis Capital Says

By Margot Habiby

Jan. 14 (Bloomberg) -- Oil demand will contract for a second year in 2009 amid weakening global economies, according to a Louis Capital Markets LP forecast today.

Consumption will probably be 85.08 million barrels a day this year, down 350,000 barrels a day from a 2008 estimate by the International Energy Agency, said analysts led by Edward L. Morse, LCM’s chief economist.

The decline “will almost certainly continue through 2009, and the most likely case for 2010 will be modest demand growth,” the analysts said in the report. “This is based on the view that the spreading global recession is likely to deepen, globally, through the first three quarters of 2009 and rebound only in the winter of 2009-2010.”

The forecast is based on an assumption that the International Monetary Fund will lower its world economic outlook, the Organization for Economic Cooperation and Development economies will contract by about 1 percent, and that world economic growth will be 2 percent “at best.”

The IEA, an adviser to 28 nations, trimmed its world demand forecast for 2009 by 260,000 barrels a day in its monthly oil market report on Dec. 11.

“We believe that the IEA will continue to shave its demand outlook as the year progresses,” the analysts said in the report, dated Jan. 12, and released today. The next monthly report from the IEA is scheduled to be released Jan. 16.

LCM forecasts 2009 OECD demand of 46.33 million barrels a day and non-OECD demand of 38.75 million barrels a day. That compares with IEA forecasts for 46.9 million barrels a day from OECD countries and 39.4 million barrels a day from outside the OECD.

Production Cuts

LCM also expects that OPEC production cuts will eventually bolster prices for crude, though “seasonal factors” will mitigate their effect until the end of the second quarter.

The OPEC cuts, along with lower demand and growth in output capability, may boost the organization’s spare capacity above 4 million barrels a day for the first time since 2002, the analysts said. The figure could top 5 million barrels a day.

“It is clear that until a substantial rebound takes place in global economic growth and spare capacity is again eroded, the new supply conditions should weigh heavily on prices,” the analysts said in the report.

The LCM analysts forecast that the spare production would put a “cap” of $65 to $75 a barrel on oil prices, which may continue through 2010. Once prices reach that level, OPEC members may be tempted to stop abiding by production limits, they said.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.





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Natural Gas Rises, Ruble Declines as Russian Supplies Disrupted

By Daryna Krasnolutska and Eduard Gismatullin

Jan. 14 (Bloomberg) -- Natural gas rose and the ruble declined as Russia’s shipments of gas to Europe were halted for an eighth day in its dispute with Ukraine over prices and transit fees.

Slovakia and Bulgaria, hit hardest by the dispute, sent their prime ministers to attempt to break the deadlock. Slovak leader Robert Fico said his nation, which relies solely on gas flowing through Ukraine, will run out of fuel in 12 days.

Gas prices in the U.K., the region’s largest market, rose for a second day after the collapse of a deal brokered by the European Union to resolve the dispute. OAO Gazprom, Russia’s gas exporter, declared force majeure on deliveries through Ukraine, allowing it to renege on supply contracts, after halting flows last week.

“Instead of just saying ‘we want our gas’, the Europeans need to do something to change the dynamics,” said Andrew Neff, senior energy analyst at Global Insight in Ankara.

NAK Naftogaz Ukrainy, the state energy company, said it was again unable to meet a Russian request to pump gas across its borders without jeopardizing domestic supplies.

U.K. gas for delivery next month increased 3 percent to 59.50 pence as of 11:12 a.m. London time, according to broker Spectron Group Ltd. Prices surged 24 percent last week after Gazprom turned off the taps. The ruble slid as low as 31.7560 per dollar today in Moscow, the lowest in almost six years, compared with 31.3087 yesterday.

Diverting Gas

Russia stopped flows through Ukraine on Jan. 7 after negotiations over a supply deal broke down. Russia complained that its western neighbor was diverting gas bound for Europe and had closed down its pipelines, charges denied by Ukraine.

The cutoff has renewed calls for the EU to diversify its sources of energy away from Russia. Negotiations between Russia and Ukraine over the separate issue of gas prices and transit fees are also stalled.

The actions of Russia and Ukraine suggest both are incapable of delivering on their commitments to EU nations, European Commission President Jose Barroso said.

“If the agreement is not honored, it means Russia and Ukraine can no longer be considered reliable partners for the EU in terms of energy supply,” he told the European Parliament today in Strasbourg, France.

Gazprom said Naftogaz once more refused to accept gas from Russia for transit to European consumers.

Naftogaz said it would have been forced to restrict local gas supplies if it had agreed to allow flows through an export route requested by Gazprom.

Local Supplies

“They want to pump gas diagonally across our territory,” interfering with domestic supplies, Naftogaz spokesman Valentyn Zemlyanskyi said in a phone interview.

The Russian company had proposed sending 98.8 million cubic meters of gas today through Ukraine, via the Sudzha pumping station. Naftogaz wanted Russian flows to be sent to the Valuyki and Pisarevka stations. To settle the issue, the Ukrainians are calling for a one-month technical protocol to define how gas transit should operate.

“Whatever the arguments bandied about by both sides, a quick resolution to the affair now looks to be beyond reach,” Ronald Smith, head of research at Russia’s OAO Alfa Bank, wrote today in an e-mailed report. “The damage to both sides’ reputations is getting worse, especially as Central and Eastern European nations suffer through a strong cold snap without enough fuel.”

Bulgarian Prime Minister Sergei Stanishev and Fico are due to hold talks with their Russian counterpart Vladimir Putin today in Moscow. They’re also meeting Ukrainian Prime Minister Yulia Timoshenko in Kiev.

IMF Loan

Slovakia is ready to help Ukraine secure a loan from the International Monetary Fund to pay for gas supplies from Russia, Fico said. He asked Timoshenko to provide supplies from Ukraine’s western storages to ease Slovakia’s shortage, though his opposite number said this wasn’t possible because Ukraine was barely able to meet domestic demand at present.

“We are not interested in relations between Ukraine and Russia,” Fico said. “But we have gas only for 12 days.”

Ukraine said it’s ready to transport gas to Europe as soon as Gazprom starts pumping the fuel. “Ukraine has never blocked gas from Russia,” Timoschenko said. “We are ready for transit.”

Gazprom’s overall deliveries to Europe fell by about 60 percent when it halted transit flows and supplies to Ukraine’s domestic market were suspended Jan. 1. Slovakia warned on Jan. 12 it was “on the brink of blackout,” prompting the government to consider restarting a nuclear power plant in violation of EU rules.

Price Increases

Alexander Medvedev, Gazprom’s deputy chief executive officer, said on Jan. 12 that Gazprom is “open to discussions” to agreeing a solution on supplies to its neighbor. Ukrainian President Viktor Yushchenko favors gradual price increases for the gas the country imports from Russia.

Gazprom offered a price of $450 per 1,000 cubic meters after it said Ukraine rejected an offer, subsequently withdrawn, of $250. Medvedev said $450 was for the first quarter.

Gazprom’s prices to European customers under long-term contracts typically lag behind prices for crude and oil products by about six to nine months. Crude has fallen by more than 70 percent since reaching a record in July. Ukraine paid Russia $179.50 per 1,000 cubic meters for gas last year under a separate arrangement.

In 2006, Russia turned off all gas exports to Ukraine for three days, causing volumes to fall in the EU, and also cut shipments by 50 percent last March during a debt spat.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.netEduard Gismatullin in London at egismatullin@bloomberg.net





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Ruble Devalued to Six-Year Low as Gas Dispute Deters Investors

By Emma O’Brien

Jan. 14 (Bloomberg) -- The ruble fell to lowest in six years against the dollar after the central bank devalued the currency for the third time in four days and the government’s dispute with Ukraine over gas shipments remained unresolved.

The currency fell to as low as 31.7560 per dollar today, the weakest since February 2003. The ruble has dropped 26 percent against the dollar since August. Bank Rossii, which manages the ruble against a target dollar-euro basket to protect exporters from fluctuations, expanded the trading range today, a bank official said, without providing details.

Russia’s natural-gas shipments through Ukraine were stopped for an eighth day as both sides blamed each other for the failure to reopen pipelines and restore supplies to the European Union. Investors withdrew a record $129.9 billion from Russia last year because of slumping oil prices and an internationally condemned war with neighboring Georgia, according to central bank data.

“We won’t see interest in Russian assets resume sooner because of this conflict,” said Stanislav Ponomarenko, chief economist in Moscow at ING Bank NV. “It may delay any improvements in capital inflows.”

The ruble has slumped 24 percent against the basket from a record high of 29.2843 on Aug. 4, four days before Russian tanks rolled over the border into Georgia. The currency has weakened 19 percent against the mechanism since Nov. 11, when the central bank began its current round of devaluations.

The country’s foreign-currency reserves, the world’s third- largest, have been reduced by more than a quarter since August as the central bank attempts to control the decline. Prime Minister Vladimir Putin pledged last month to prevent a “sharp” devaluation of the currency.

More Devaluations

The currency may be devalued by a further 4 percent against the basket this month as the gas dispute continues to deter foreign investors, Ponomarenko said.

OAO Gazprom, Russia’s gas exporter, said it would try again to ship gas through Ukrainian pipes today, after cutting off supplies Jan. 7 in a move that disrupted flows to at least 20 European countries. Russia claims its western neighbor closed down its pipes and was diverting gas meant for Europe. Ukraine denies the charges.

This is a “ridiculous situation that doesn’t help the investment case for Russia,” said James Fenkner, managing partner at Moscow’s Red Star Asset Management, whose $100 million Russian stock portfolio is down about 40 percent since the start of the financial crisis in August. “People don’t want to take risks into questionable emerging markets with political issues.”

The central bank has let the ruble weaken against the basket three times since official trading resumed Jan. 11 as Urals crude oil, Russia’s chief export blend, trades 36 percent below the $70 average price required to balance the country’s budget.

Stepping Up Pace

Bank Rossii allowed the ruble to fall about 1 percent five times from Nov. 11, upping the pace to as much as 1.5 percent per devaluation from Dec. 17, after which it allowed 10 declines.

“The devaluation is happening much faster than in the past month,” Ponomarenko said. “That’s possibly a signal that they don’t want this to be a long process. The central bank is adjusting the ruble to help decrease the amount of capital outflows.”

The ruble dropped 1.4 percent to 41.8516 per euro by 12:33 p.m. in Moscow, leaving it 1.3 percent weaker at 36.2634 against the basket, which is made up of about 55 percent dollars and the rest euros. It was 1.2 percent lower at 31.6843 per dollar.

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





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Brazil Real Gains as Rising Commodities Boost Investor Appetite

By Adriana Brasileiro

Jan. 14 (Bloomberg) -- Brazil’s real strengthened as rising commodity prices increased demand for assets in the largest exporting country in Latin America.

“The price of commodities is the main factor moving the real because our currency market is so dependent on trade flows,” said Francisco Carvalho, head of currency trading at Liquidez Corretora in Sao Paulo. Nearly two-thirds of Brazil’s exports are commodities such as iron ore, coffee and orange juice.

The Brazilian currency advanced for the first time this week, gaining 0.3 percent to 2.3108 per U.S. dollar at 7:56 a.m. New York time, from 2.3168 yesterday.

Crude oil, among Brazil’s top three exports, gained for a second day after OPEC members said they may impose more production cuts to boost prices. Soybeans, another Brazilian export, also increased.

The real nearly doubled from 2003 to 2007 as soaring commodity prices led Brazil to post consecutive trade surplus records.

The currency rose to a nine-year high of 1.5545 per dollar on Aug. 1 as the highest inflation-adjusted interest rate in the world flooded the currency market with dollars. The real slumped 33 percent from that high through the end of 2008 as the international credit crisis cut economic growth, pushing commodity prices lower and curbing investments in emerging markets.

The yield on the government’s zero-coupon local-currency bonds due January 2010 climbed four basis points, or 0.04 percentage point, to 11.60 percent. The yield on Brazil’s overnight futures contract for January 2010 added one basis point to 11.48 percent.

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





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Treasuries Poised to Fall, Dollar to Weaken as Debt Sales Soar

By Daniel Kruger

Jan. 14 (Bloomberg) -- Treasuries will fall over the next six months and the dollar will weaken as the U.S. sells a record amount of debt to finance a budget deficit poised to exceed $1 trillion, a monthly survey of Bloomberg users showed.

Participants turned the most bearish on 10-year U.S. notes since September, while continuing to forecast declining yields on government debt from Germany, U.K. and Japan, according to the Bloomberg Professional Global Confidence Index. The survey, which questioned 2,991 Bloomberg users last week, showed the outlook for the dollar is the lowest since July.

The Treasury’s plan to sell as much as $2 trillion in debt to help the government fund bailouts of financial companies and a stimulus package comes as the Federal Reserve floods the financial system with dollars to end the freeze in credit markets. The amount of assets held by the Fed more than doubled to $2.14 trillion as of Jan. 7 from $909 billion in August, according to the central bank.

“The combination of selling a lot of Treasuries and printing a bunch of dollars to expand the Fed’s balance sheet isn’t necessarily a very positive dynamic over any kind of medium or longer term horizon,” said Jason Brady, a managing director at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees $4 billion in fixed-income assets. Brady participated in the survey.

Rising Yields

Yields on 10- and 30-year securities rose from record lows last month. The benchmark 10-year note yield was 2.31 percent at 6:35 a.m. in New York, up from 2.0352 percent Dec. 18, the lowest level since the start of the Fed’s daily data in 1962. The 30-year yield was 3.03 percent, up from 2.509 percent, the lowest since regular sales of the security began in 1977.

The survey results suggest investors expect increased U.S. debt sales to restrain gains during the recession that began last year. The median estimate of 70 economists surveyed by Bloomberg News is for gross domestic product to shrink 1.3 percent in 2009.

Expectations for 10-year Treasury yields rose to 55.93 in January from 47.02 in December, according to the survey. The measure is a diffusion index, meaning a reading above 50 indicates participants expect bond prices to fall and yields to rise.

The index for the dollar fell for a fourth month, to 45.53, the lowest since July, from 50.22. The currency closed at $1.3182 per euro in New York trading yesterday, down from $1.2330 in October.

Expectations for foreign exchange appreciation were the highest in Mexico, Japan and Switzerland, the survey showed. The index for the peso rose to 64.73 from 61.96 last month. For Japan it was 64.54, compared with 67.16 in December, while the index for the franc increased to 62.67 from 60.48. In Germany, a proxy for the euro, the index slid to 58.21 from 63.67.

Dollar Bear

The dollar will continue to fall because of its “zero interest rates, no growth -- if not outright recession -- and a huge increase in the funding needs of the country at a time when it appears the capital flows that have traditionally supported U.S. borrowing needs are diminishing,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto.

Osborne, who participated in the survey, forecasts the dollar will weaken to $1.55 per euro by the end of the year.

The Fed reduced its target rate for overnight loans between banks to a range of zero to 0.25 percent on Dec. 16 from 1 percent. U.S. government bonds returned 14 percent in 2008, including reinvested interest, the most since 18.5 percent in 1995, according to Merrill Lynch & Co.’s U.S. Treasury Master Index.

Brazilian Bulls

Bloomberg survey respondents in Brazil, Mexico and Japan were the most bullish on their bonds. In Brazil, the index slid to 21.43 in January from 27.87, the lowest reading of any country. For users in Mexico, the index declined to 34.38 from 41.1. In Japan, the measure climbed to 34.4 from 30.88.

Brazil’s central bank signaled last month it may be ready to lower rates as soon as its next meeting Jan. 21 to bolster the slowing economy. Policy makers led by Central Bank of Brazil President Henrique Meirelles discussed lowering the benchmark Selic lending rate before voting unanimously to keep it at 13.75 percent on Dec. 10.

The European Central Bank slashed its benchmark rate by 175 basis points since October to 2.5 percent, the largest reduction in its 10-year history. The ECB may lower the rate to 2 percent tomorrow, according to the median estimate of 59 economists in a Bloomberg News survey.

The Bank of Japan reduced its overnight lending rate on Dec. 19 to 0.1 percent and offered to buy commercial paper and more government bonds to pump cash into the economy. The bank pledged to explore other measures to ease the credit shortage and counter the deepening global recession.

Government bonds, which tend to perform best when the economy and inflation are slowing, gained 5.6 percent worldwide in the fourth quarter on average after rallying 2.82 percent in the July-to-September period, according to Merrill Lynch’s Global Sovereign Broad Market Index. They have lost 0.41 percent this month.

To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net





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Dollar Erases Losses Versus Euro Before Retail Sales Report

By Ye Xie

Jan. 14 (Bloomberg) -- The dollar erased an earlier loss versus the euro before a report today that is forecast to show U.S. retail sales fell.

The dollar traded at $1.3179 per euro as of 8:14 a.m. in New York, from $1.3182 yesterday, when it touched $1.3141, the strongest since Dec. 11. The dollar bought 89.38 yen from 89.38 yen. The euro traded at 117.70 yen from 117.81 yen.

U.S. retail sales fell for a sixth month in December, extending the longest run of declines since records began in 1992, according to a Bloomberg News survey. The Commerce Department will release the data at 8:30 a.m. today in Washington.

Fed surveys tomorrow from the New York and Philadelphia regions will show manufacturing contracted this month, separate Bloomberg surveys show.

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net.





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Palm Oil Rises as Gains in Crude, Soybean Oils Improve Outlook

By Claire Leow

Jan. 14 (Bloomberg) -- Palm oil futures in Malaysia, the global benchmark, advanced as the demand outlook for its use improved following gains in crude oil and soybean oil.

Crude oil rose a second day in New York after OPEC leaders signaled their intention to make deeper supply cuts to bolster prices. Soybean oil, the main rival to palm oil, climbed 1.2 percent to 34.83 cents a pound in Chicago yesterday.

A drop in Malaysian palm oil inventories in December from a record in the previous month, and a surge in exports, aided the rally. Stockpiles declined 12 percent to 1.99 million tons, as exports rose 18 percent to 1.61 million tons, the nation’s palm oil board said Jan. 12.

“Crude palm oil will trade higher because strength is coming back to the industry,” Arhnue Tan, an analyst at ECM Libra Capital Sdn., said by phone. “Production is coming down.”

March-delivery palm oil gained 3 percent to 1,884 ringgit ($527). Yesterday, futures fell 8 percent, the most since Oct. 24.

Palm oil, used mainly in food, is more resilient to economic downturn than other commodities and “it is reasonable to see an average of 2,175 ringgit this year,” Tan said. The vegetable oil averaged 1,602 ringgit in the fourth quarter and 2,852 ringgit for 2008, according to Bloomberg data.

Malaysian stockpiles may drop to 1.7 million tons, from 2 million at the end of 2008, later in the year, she added.

Soybean oil traded in Chicago for March delivery gained 1.1 percent to 35.2 cents a pound at 5:44 p.m. Singapore time, making it 47 percent more expensive than palm oil. The premium typically narrows in the second half.

Crude oil traded in New York rose 3 percent to $38.92 a barrel at 6:03 p.m. Singapore time in after-hours trading, poised for the biggest gain in seven days.

Soybeans for September delivery on the Dalian Commodity Exchange rose 1.4 percent to 3,424 yuan ($501) a ton at the end of the morning trading session while soybean oil for May delivery was little changed at 6,296 yuan. Palm oil for May delivery dropped 0.7 percent to 5,336 yuan.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net;





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Zinc Falls as Chinese Buying Fails to End Global Supply Surplus

By Claudia Carpenter

Jan. 14 (Bloomberg) -- Zinc fell in London on speculation that China’s stockpiling of the metal won’t be enough to erode a global supply surplus. Copper, aluminum and nickel also dropped.

China’s State Reserve Bureau, the country’s stockpiling agency, will buy 59,000 metric tons of zinc from domestic smelters, two company executives said. London Metal Exchange- approved warehouses hold 268,900 tons of zinc, the most since April 2006, as demand from steelmakers falls short of output.

“The biggest impact of the China purchase is on the smelting community because it allows them to continue to operate and not fire people,” said Michael Widmer, a BNP Paribas SA analyst in London. “The only difference to the market is that the surplus will be in the warehouses of the Chinese government, not in LME warehouses.”

Zinc for delivery in three months declined $44, or 3.4 percent, to $1,265 a ton as of 12:45 p.m. on the LME. The rust- resistant metal used to coat steel may drop to $1,000 in the second quarter, Widmer said. Zinc output will exceed demand by 300,000 tons this year, compared with a surplus of 318,000 tons last year, he estimates.

U.S. steel mills operated at 44.5 percent of capacity in the week ended Jan. 10, down from 90.3 percent a year earlier, according to the American Iron and Steel Institute. Production was down almost 51 percent. Global steel demand may take three years to recover, Nippon Steel Corp. Chairman Akio Mimura said on Jan. 6.

Copper dropped $60, or 1.8 percent, to $3,312 a ton after jumping 3.9 percent yesterday. The credit-rating of Santiago- based Codelco, the world’s largest copper producer, was cut one step to A1 by Moody’s Investors Service, citing “weak copper prices and continued cost challenges.”

Copper Declines

Copper has dropped 55 percent in the past year as recessions in the U.S., Germany and Japan curbed demand from builders and manufacturers.

“The market’s looking like it will be depressed for a reasonable part of 2009,” said Shiv Madan, a metals trader at Dresdner Kleinwort in London.

Aluminum declined $21 to $1,494 a ton, the third consecutive drop. Nickel fell $575 to $10,700 a ton and lead dropped $29 to $1,150 a ton. Tin fell $180 to $11,420 a ton.

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





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Gold Gains in London as Rising Oil, Weaker Dollar Spur Demand

By Nicholas Larkin

Jan. 14 (Bloomberg) -- Gold rose in London as higher energy prices and a weaker dollar increased the metal’s appeal as a hedge against inflation and an alternative investment.

Oil gained for a second day after OPEC leaders said they may deepen output cuts. The dollar declined from a five-week high against the euro on speculation reports this week will show U.S. retail sales and manufacturing weakened as a recession spread through the world’s largest economy.

“There’s been a recovery in oil prices the last couple of days and that’s renewing the idea of potential inflation going forward,” Dan Smith, an analyst at Standard Chartered Plc in London, said by phone. “The weakness in the dollar is giving gold a little bit of a boost.”

Gold for immediate delivery climbed as much as $7.40, or 0.9 percent, to $829.40 an ounce and traded at $827.17 an ounce by 11:07 a.m. in London. February futures added $6.10, or 0.7 percent, to $826.80 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal rose to $827.25 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $826.50 at the afternoon fixing yesterday.

Bullion yesterday reached a one-month low of $814.66 an ounce in London as the dollar strengthened on speculation the European Central Bank will cut interest rates tomorrow. Gold is down 6.3 percent this year. The commodity climbed 5.8 percent last year, the smallest increase since 2004.

A report at 8:30 a.m. in Washington will probably show sales at U.S. retailers fell for a sixth consecutive month as rising unemployment caused consumers to retrench, according to a Bloomberg survey of economists. The ECB may lower borrowing costs tomorrow by at least 50 basis points to 2 percent, Eonia forward contracts indicate.

Gold Outlook

Gold will reach $1,000 an ounce by the end of this year and $2,000 by the end of 2010, Philip Manduca, London-based head of investments at ECU Group Plc, said in a Bloomberg television interview. Investors should take a long-term position on gold as central banks inject more cash into the banking system, he said.

“Gold isn’t just a hedge against inflation,” Manduca said. “There seems to be very little store of value going on in paper” currencies, he said.

Among other metals for immediate delivery in London, silver added 0.3 percent to $10.79 an ounce. Platinum gained $15.50, or 1.6 percent, to $959 an ounce and palladium was 0.6 percent higher at $185 an ounce.

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





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Coffee May Jump 26% as Output Slows, Brazil Association Says

By Carlos Caminada

Jan. 14 (Bloomberg) -- Coffee may jump as much as 26 percent this year as Brazil, the biggest producer and exporter, harvests less of the bean and boosts consumption, said Nathan Herszkowicz, head of the country’s roasters association.

Prices may reach $1.45 per pound in New York near year-end after Brazilian producers finish selling a smaller crop, up from $1.1475 per pound yesterday, Herszkowicz, president of the Brazilian Coffee Industry Association, said in a Jan. 13 interview in Sao Paulo. The commodity will likely trade between $1.25 and $1.35 per pound in coming months, he said.

A global credit crunch prompted Brazilian farmers to use less fertilizer after prices for the additive surged, worsening the outlook for a coffee crop already likely to be lower because of a slower growth cycle and dry weather. The decline will come just as Brazil runs out of stocks, while domestic demand grows to match sales in the U.S., the biggest consumer of the beverage, as early as next year, Herszkowicz said.

“The fundamentals are supportive of a rise,” Herszkowicz, 58, said. “The outlook for supply is worrisome.”

Output may drop as much as 20 percent this year as most trees enter the slower half of a two-year growth cycle and farmers use less fertilizer to cut costs, according to the government. Coffee growers will harvest between 36.9 million bags and 38.8 million bags, down from 46 million last year, the Agriculture Ministry agency, known as Conab, said on Jan. 8.

Brazil’s consumption of coffee will likely rise to 21 million bags in 2010, up from 19.2 million this year, matching little-changed demand in the U.S., Herszkowicz said.

The average price for a cup of coffee in Brazil has risen just 30 percent during the last 14 years, lagging inflation of 280 percent and making the beverage still cheap enough to ensure consumption growth even as the economy slows, he said.

Exports will drop 3.8 percent in 2009 from last year, the country’s Coffee Exporters Council said last week. Excluding instant coffee, Brazil will export 25.1 million bags of beans, compared with a record 26.1 million bags in 2008, the council, known as Cecafe, said.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net





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Oil Rises a Second Day as OPEC Says It May Deepen Output Cuts

By Grant Smith

Jan. 14 (Bloomberg) -- Crude oil rose for a second day after OPEC leaders said they may deepen production cuts announced last month to bolster prices.

Saudi Arabian Oil Minister Ali al-Naimi said February output will be “lower than the target” set at the group’s Dec. 17 meeting, while Venezuela expressed support for fresh reductions. The U.S. Energy Department will likely say today that crude oil stockpiles gained a third week, according a Bloomberg News survey.

“OPEC’s policy right now is to verbally intervene in order to influence the market,” said Bayram Dincer, a commodity analyst at Dresdner Bank AG in Zurich. “Today, prices are responding to their talk about production cuts.”

Crude oil for February delivery rose as much as $1.67, or 4.4 percent, to $39.45 a barrel and was at $38.97 at 11:55 a.m. London time on the New York Mercantile Exchange. Oil has tumbled 59 percent in the past year as fuel demand falls because of a global recession.

Brent crude oil for February settlement gained as much as $1.17, or 2.6 percent, to $46 a barrel on London’s ICE Futures Europe exchange. The contract expires tomorrow. Brent was $6.85 more expensive than New York crude, the widest gap since Dec. 19.

The more active March contract was at $48.13 a barrel, up 69 cents, at 11:54 a.m. London time.

Saudi Arabia is currently producing 8 million barrels a day, about level with its 8.051 million barrel-a-day allocation, al-Naimi said at a conference in New Delhi yesterday.

Qatari Oil Minister Abdullah bin Hamad al-Attiyah, also in New Delhi, said today that the right price for oil is $70 a barrel.

Last month the Organization of Petroleum Exporting Countries agreed in Algeria to cut supply by 9 percent to 24.845 million barrels a day starting Jan. 1.

Further Reduction

“We’re willing to cut 2 million more, 4 million more barrels to preserve the price of oil,” Venezuelan President Hugo Chavez said in a speech to the National Assembly in Caracas yesterday.

U.S. crude-oil stockpiles probably gained 2.75 million barrels in the week ended Jan. 9, according to the median of 14 responses by analysts in a Bloomberg News survey. The department will release its weekly petroleum supply report today.

Inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, also rose, according to the Bloomberg News survey.

The Energy Department reduced its forecast for crude prices this year by 15 percent to $43.25 a barrel as the economic slump in the U.S., Europe and Japan cuts global fuel demand. Global demand will shrink by 810,000 barrels a day in 2009 from last year to 85.1 million barrels a day, it said.

“The spreading global recession is likely to deepen, globally, through the first three quarters of 2009 and rebound only in the winter of 2009-2010,” analysts at Louis Capital Markets LP led by Edward L. Morse said today.

Contango Structure

The price of oil for delivery December 2009 is 55 percent more than for February, allowing traders to profit if they have the ability to store crude. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango.

Oil supplies at Cushing, Oklahoma, rose to 32.2 million barrels the week ended Jan. 2, up 81 percent from a year earlier and the highest in at least four years, Energy Department data show. The city is the delivery point for oil traded on Nymex.

“Storage at Cushing is near a historical high,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Tokyo. “No one can buy because there is no place to store. So the spread between the front month and the second month will expand more.”

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





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Stock Market Bears Worldwide Recede on Stimulus Plan, Rate Cuts

By Alexis Xydias and Lynn Thomasson

Jan. 14 (Bloomberg) -- Investors from New York to Sao Paulo grew less pessimistic about stocks over the next six months on speculation a U.S. stimulus plan and the lowest interest rates on record will revive the global economy, a survey of Bloomberg users showed.

Fewer respondents in the Bloomberg Professional Global Confidence Survey are predicting declines for the Standard & Poor’s 500 Index, Brazil’s Bovespa, the U.K.’s FTSE 100, the CAC 40 in France, Germany’s DAX and Spain’s IBEX 35, the poll of 2,390 users taken Jan. 5 to Jan. 9 showed. Only in Mexico did investors turn bullish and forecast gains, while pessimism increased in Japan, Switzerland and Italy.

The MSCI World Index advanced 15 percent since Nov. 20 as U.S. President-elect Barack Obama pledged to reduce taxes, create jobs and invest the most in infrastructure since the 1950s. The Federal Reserve has slashed borrowing costs to as low as zero percent, and the Bank of England last week cut interest rates to a level not seen since its founding in 1694.

“There’s light at the end of the tunnel as the massive monetary measures of central banks bring back confidence,” said Philipp Musil, who helps oversee about $13 billion at Constantia Privatbank in Vienna and participated in the survey. “We expect a nice rally in the medium term, probably starting in the second quarter or second half.”

Libor, TED Spread

Government efforts to reduce borrowing costs and lend unprecedented amounts of cash directly to banks have also helped boost sentiment toward stocks as credit markets thaw.

The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans in dollars slid to 1.09 percent yesterday, the lowest level since June 2003, according to British Bankers’ Association data. The difference between the rate the U.S. Treasury and banks pay for three-month loans, the so-called TED spread, dropped below 100 basis points for the first time in five months.

The MSCI World is still down 47 percent from its October 2007 record. The benchmark index for 23 developed countries has retreated for six straight days as companies from New York-based Alcoa Inc. to Bonn-based Deutsche Postbank AG spurred concern the profit outlook is worsening, while unemployment in the U.S. climbed to the highest in almost 16 years.

Indexes in all 10 nations have plunged more than 26 percent in the past year as $1 trillion in credit-market losses sent the U.S., Europe and Japan into the first simultaneous recessions since World War II.

‘All Available Tools’

Obama, who takes office on Jan. 20, has urged lawmakers to pass an economic recovery plan that may total about $775 billion and generate as many as 4 million jobs. The Fed cut its benchmark interest rate on Dec. 16 to a target range of between zero and 0.25 percent and said it will employ “all available tools” to revive growth.

The measures helped push the Bloomberg confidence index for U.S. stocks 1.6 percent higher to 38.8, the third straight monthly increase. A reading below 50 indicates investors expect equities to retreat in the next six months while a reading above 50 signifies a potential rally.

Investors grew more optimistic about Brazilian stocks, with the gauge climbing 5.4 percent to 47.9. The Germany measure added 9 percent to 42.5 and France’s reading surged 44 percent to 46.8. Respondents in Spain pushed their measure up 12 percent to 37.3, the survey showed.

The reading from Mexico-based participants climbed 6.6 percent to 51.3. The country’s Bolsa Index rebounded 25 percent since Oct. 27 as President Felipe Calderon proposed spending about 1 percent of gross domestic product to help Latin America’s second-biggest economy weather the financial crisis.

U.K. Economy

Investors were most bearish on U.K. stocks even after the country’s measure climbed 10 percent to 33.4. Reports yesterday from lobby groups showed the British economy slumped the most in at least two decades during the fourth quarter and home sales dropped to the lowest level since tracking began in 1978.

Respondents grew more convinced that the Swiss Market Index and Italy’s S&P/MIB will decline over the next six months. Switzerland’s reading slid 6.6 percent to 40, while the Italian confidence gauge fell 6.5 percent to 49.5.

Japan-based participants also became more bearish, with the index dropping 6.9 percent to 36.5. The yen’s climb to the highest against the dollar since 1995 last month dimmed the earnings outlook for exporters such as Tokyo-based Honda Motor Co., which gets more than half of its profit from North America. Toyota City, Japan-based Toyota Motor Corp. last month forecast its first operating loss in 71 years.

Earnings Estimates

U.S. and European companies will extend their profit slump, analysts’ estimates compiled by Bloomberg show. Earnings for companies in the S&P 500 will shrink 2.1 percent this year after contracting 11 percent in 2008, the forecasts indicate. Profits for companies in Europe’s Dow Jones Stoxx 600 Index will slide 1.2 percent in 2009, after a 16 percent tumble last year, the data show.

The MSCI World is valued at 10.9 times the earnings of its 1,687 companies, compared with an average ratio of 26.3 this decade. The U.K.’s FTSE All-Share Index pays 3.9 times more in dividends than the Bank of England’s benchmark rate, the highest in at least a decade, weekly data compiled by Bloomberg show.

“There will be some horrific economic data but you are being paid to take risk,” said Andrew Cole, a London-based fund manager at Baring Asset Management, whose team raised its equity allocation to 42 percent of total assets from as much as 12 percent in October. As “governments and central banks are making cash an unattractive proposition for investors, we will slowly move up the risk-asset ladder,” he said. Baring Asset oversees about $31 billion.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.





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