Canada: Wholesale Sales Fall in Line with Expectations

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jan 21 09 15:39 GMT |

Canadian wholesale trade slips 1.6% M/M in November. The rise in inventories push the I/S ratio to its highest level since early 2001. The slowdown in sales was broad based, as was the expansion in inventories. Canadian wholesale trade fell 1.6% M/M in November, which was basically in line with expectations. This is not only the first back-to-back drop since 2006 but also the third decline in four months, and sets up a weak backdrop for Canada’s November GDP. In real terms, wholesale trade fell 3.0%. Wholesale sales excluding autos were down 1.5% M/M in November. The cross section of industries that posted losses was broad, as four of seven industries declining. Evidence of weakening global demand was seen everywhere. But particularly large declines were recorded in the “other products” category, which fell 6.0%, automotives which fell 2.2% M/M and machinery and equipment which fell 1.6% M/M. Not only was the cross sector of industries broadly depressed, but the pace of sales using a provincial cross section was also down, as nine provinces posted declines. Inventory levels also rose in November with a 1.0% M/M gain, following the 0.9% M/M gain in October. Inventories were higher in 10 of 15 sectors which suggests that wholesalers now have to contend with a growing inventory overhang at a time when sales are slowing. In November, the inventory to sales ratio was at its highest since February 2001 at 1.32. On balance this reports adds to the growing body of evidence that points to a weak November GDP number, which will subsequently translated into a weak fourth quarter GDP report. Moreover, this report corroborates the view that the Bank of Canada presented recently that the Canadian economy is in recession. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

Read more...

Obama Aftermath Fails to Raise Confidence...

Daily Forex Fundamentals | Written by Lena Manousarides | Jan 21 09 15:13 GMT |

What a week this is turning out to be, with markets still dropping in the aftermath of Obama's inauguration. The prospect of a new era starting in US after 8 years of Bush administration, together with new hope that Obama will tackle the current economic deterioration left traders unfazed, as more bad news hit the wires yesterday about several US bank's earnings! The dollar was and still is the clear winner of this week and together with the yen are showing that traders are exiting all other currencies, especially the euro and pound. EUR/USD is trading heavily since the beginning of the week, and the break of psychological 1.30 was done and dusted in a matter of minutes! As long as the pair trades below the later level, it may be open for further loses towards 1.2750. The next level to watch is 1.2830 ahead of 1.2780, which may work as support in the short term, however if the move is aggressive and stops get hit, further downside may be in store! On the upside, 1.30 should work as resistance, however if 1.3030 breaks, the pair may try further higher. The pound has plunged since Monday after a short term rally pushed GBP/USD towards 1.48. However, the move was abruptly stopped when Darling announced the bank's plan towards the current economic crisis. Investors in the UK as well as the US have lost their faith in their policies, something made clear in the case of the pound! The UK government's controversial plans suggest solving the liquidity crisis by throwing billions into the system, a desperate plan necessitating the borrowing of more money giving investors the chills and making them lose even more confidence! Jim Rogers said yesterday he will not buy the pound from now on and that “...the UK is finished”. His predictions are usually spot on and in this environment it looks like the pound may continue to deteriorate. As long as GBP/USD trades below 1.40 we could see another wave of selling towards the next psychological level of 1.35! The economic calendar has no important releases from the US today, however we has some important data out of the UK. The unemployment figures were a top headline today; as they reached new highs, and also the BOE minutes which saw everyone voting for a 50bps apart from well-known dovish Blanchflower who asked for a whole 100 bps cut! The pound continues to fall on the back of the data and further words by Mr. King that the bank is ready to tackle the recession left traders cold! Let's see how the New York opening finds the markets and if futures will have another negative day after yesterday! The Obama euphoria didn't seem to last long in the markets as right now investors are focusing on the bigger picture: the FED's monetary policies and deflation prospect plus millions and billions for the stimulus package which in order for Bernanke to find he will have to either print new money or raise the taxes. Both scenarios are as catastrophic as they come! One thing is for sure, volatility in the markets seems to pick up and the best way to go right now is for us traders to either stay aside or sell on rallies... Lena Manousarides Independent Market Analyst and Professional Trader Email: manousarides@yahoo.comThis email address is being protected from spam bots, you need Javascript enabled to view it Lena Manousarides is a professional Trader and an independent Market Analyst, who pioneers in Fx trading in Athens, Greece. After several years of professional trading in the Forex Market, Lena formerly worked with FXGreece as a Market Analyst, writing articles on a daily basis, using fundamental and technical analysis. She also writes for several major financial newspapers in Greece and is in the process of becoming professional Commodity Trading Advisor.

Read more...

Geithner Faces Senate on Taxes, Economy Rescue Plans

By Robert Schmidt and Rebecca Christie

Jan. 21 (Bloomberg) -- Timothy Geithner faces a grilling in Congress over why, after underpaying his taxes, lawmakers should trust him with a $700 billion rescue fund as Treasury secretary in the worst economy since the Great Depression.

The Senate Finance Committee today is likely to demand answers on issues ranging from Geithner’s tax troubles to his solutions for broken U.S. financial markets. While few lawmakers question Geithner’s ability given he is president of the Federal Reserve Bank of New York, the missteps with the Internal Revenue Service give him an extra hurdle to clear before an expected Senate vote this week to confirm his nomination.

Market turmoil and the recession so far are outweighing senators’ concerns about the tax returns of the man nominated to rebuild the U.S. economy. In remarks prepared for delivery at the hearing and obtained by Bloomberg News, Geithner makes no mention of his taxes and calls for “reform” of the Troubled Asset Relief Program and quick action to revive the economy.

“There’s no doubt about his qualifications,” said Charles Grassley of Iowa, the senior Republican on the Finance Committee, who says he remains troubled about Geithner’s late payment of almost $50,000 in federal taxes and penalties. “There’s no doubt in a time of recession like we’re in now, where the secretary of the Treasury plays such an important role, that he fits in.”

Urgency

Adding urgency to Geithner’s confirmation is a renewed slide in bank shares. The Standard & Poor’s 500 Financials Index, down about 36 percent since the beginning of the year, yesterday reached the lowest since March 1995. Among the worst recent performers have been Citigroup Inc., which dropped to a 17-year low yesterday, and State Street Corp., which fell 59 percent.

“The ultimate costs of this crisis will be greater if we do not act with sufficient strength now,” Geithner said in the copy of his remarks. “In a crisis of this magnitude, the most prudent course is the most forceful course.”

Geithner said the financial system needs to recover from a “catastrophic loss of trust and confidence.”

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, has scheduled a committee vote on the nomination for tomorrow. Senior committee members including Baucus have said they’ll vote to approve the nomination. Republicans on the committee expressing support include Nevada’s John Ensign and Utah’s Orrin Hatch. Grassley said he is still undecided.

While no one has yet been named to replace Geithner at the New York Fed, William Dudley, the bank’s top markets official, is a leading candidate.

Obama’s Plan

For Geithner, 47, the hearing will serve as his first opportunity to begin outlining the Obama administration’s plan for the devastated financial industry, while providing support for average Americans who have lost homes or jobs. Lawmakers say they want to hear a comprehensive plan detailing how Geithner will deploy the remaining $350 billion of the TARP.

When questioned, Geithner is likely to be pressed on issues ranging from the $825 billion economic stimulus legislation to the need for tighter regulation of Wall Street to U.S. policy on the dollar to relations with China.

Working in Geithner’s favor is a need for continuity: He has been the Fed’s point person on the rescues of insurer American International Group Inc. and investment bank Bear Stearns Cos. He also was a part of the Fed and Treasury team that decided to let Lehman Brothers Holdings Inc. collapse.

The big U.S. banks, whose executives have worked closely with Geithner throughout the turmoil, back his nomination.

Bankers’ Support

“This is not a time for on-the-job training,” said Steve Bartlett, president of the Financial Services Roundtable, a trade association representing the 100 biggest financial services companies. “The industry is very supportive” of Geithner’s nomination.

Bartlett, a former Republican member of Congress, also said the Senate needs to consider the consequences for the economy if Geithner’s nomination is stalled or defeated.

“It’s not like we have the luxury of saying, ‘Let’s play games,’” he said. “The economy is in the tank.”

Still, Geithner’s experience spearheading the government’s Wall Street bailout may also be viewed as a liability by some lawmakers. The nominee is expected to be quizzed by Grassley and others on whether the programs backed by the first half of TARP were effective.

Lawmakers of both parties have expressed concern that the Bush administration’s handling of the rescue plan has favored the financial industry at the expense of American taxpayers who have also been harmed by the credit crunch. Former Treasury Secretary Henry Paulson’s strategy of injecting capital into banks hasn’t worked to ensure their solvency and lenders’ share prices continue to fall to new lows.

TARP ‘Failed’

“My fear is only that he was very invested in TARP and that he’s very much tied to the New York financial system,” said Lynn Tilton, chief executive officer of $6 billion private- equity firm Patriarch Partners in New York. Geithner “needs to recognize” that the effort thus far has “failed,” she added.

Geithner is also likely to be pressed about his job regulating Wall Street and whether he is too close to the financial industry executives he has been charged with overseeing.

The Fed had oversight responsibility for some of the main contributors to the subprime mortgage crisis, including Citigroup, which has now been bailed out twice by the government.

“It’s the job of the Treasury secretary to really come down on the financial industry; we really have to discipline them, downsize them, put them in order,” said Dean Baker, co- director of the Center for Economic and Policy Research.

IMF Job

On his personal finances, Geithner must explain how he failed to pay self-employment taxes on his 2001-2004 returns while working at the International Monetary Fund. While the Obama team has said it was an honest mistake, Geithner has acknowledged receiving written instructions from the IMF on how to pay the taxes, according to documents released by the Finance Committee.

Geithner paid some of the taxes after being audited by the IRS and didn’t pay the rest until it was clear he would be nominated for the Treasury post, the panel said. He also made other errors such as claiming dependent-care deductions for sending a child to sleep-away camp; only the cost of day camps is deductible.

As Treasury secretary, Geithner would be in charge of the IRS, a point that hasn’t been lost on the average taxpayer, said Lynn Turner, a former chief accountant at the Securities and Exchange Commission.

“The average American sees this, as there is one set of rules that applies to the Treasury secretary and another set of rules that applies to the rest of them,” Turner said.

To contact the reporters on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net

Read more...

U.K. Jobless Claims Rise 77,900 as Recession Deepens

By Jennifer Ryan

Jan. 21 (Bloomberg) -- U.K. unemployment rose at the second-fastest pace since 1991 in December as the worsening recession prompted retailers and automakers to cut jobs.

The number of people receiving jobless benefits rose 77,900 to 1.16 million, the highest level since January 2000, the government’s statistics office said today in London. Economists had expected an increase of 81,000.

“These numbers are as bad as we expected and are sadly going to get worse,” said Richard Lambert, a former Bank of England policymaker now leading the Confederation of British Industry. “The combination of falling demand and global credit constraints is pushing unemployment sharply higher.”

Prime Minister Gordon Brown’s government has slipped further behind the Conservative opposition in polls in recent weeks as concern mounted about the severity of the recession. Nissan Motor Co. and Marks & Spencer Group Plc have fired staff in the past month, reducing the impact of Brown’s pledge to create 100,000 jobs through public works.

“Every job loss, every redundancy is a matter of regret and sadness for us all,” Brown told Parliament after the report. “That is why we will do everything in our power to help people back into work.”

Interest Rates

The losses pile pressure on the Bank of England to cut the key interest rate from the current 1.5 percent, and Governor Mervyn King said yesterday that the bank may need to start buying assets within weeks to dig Britain out of its first recession since 1991.

Bonds rose and the pound fell after the report. The yield on two-year government notes fell 12 basis points to 1.412 percent. The pound fell 2.265 cents against the dollar to $1.3734 at 12:50 p.m. in London.

“Job losses are going to continue through the year and possibly into 2010,” said Jeavon Lolay, an economist at Lloyds TSB Bank Plc in London. “Interest rates will be cut next month.”

Policy makers defeated a call from David Blanchflower for a full-point reduction in interest rates this month, minutes of the Jan. 8 decision published today showed. Leaving the rate unchanged, or cutting by more than the half-point expected by investors, may have unsettled markets, the majority of the panel argued. The bank’s next rate decision is on Feb. 5.

Jobs Lost

Retailers, automakers, banks and builders axed thousands of jobs as the credit crisis intensified. Nissan said Jan. 8 it will eliminate about 1,200 jobs at its car plant in Sunderland, northeast England, Britain’s biggest. Marks & Spencer plans to cut 1,230 jobs after sales fell. More than 1,000 jobs are at risk at Land of Leather Holdings Plc after the sofa retailer went into administration.

TT Electronics Plc, the U.K. maker of car sensors for Bayerische Motoren Werke AG, today said it will cut 700 jobs this year in order to minimize the impact of a slump in the automobile industry.

“The acceleration in the pace of job cuts across manufacturing comes on the back of a sharp downturn in production and growing uncertainty about the prospects for global demand,” said Lee Hopley, head of economic policy at the EEF, a manufacturing lobby group.

International Comparisons

The jobless total based on International Labor Organization methods rose 131,000 in the quarter through November to 1.92 million, the highest since September 1997. The rate climbed to 6.1 percent from 5.7 percent in the previous period.

The rate compares with 7.2 percent in the euro region, 3.9 percent in Japan and 7.2 percent in the U.S. Employment fell 26,000 to 29.4 million.

Concern about the economy has robbed Brown of the popularity bounce from his handling of the banking crisis, with all six polls published this year showing his ruling Labour Party falling further behind David Cameron’s Conservatives. An Ipsos-Mori poll yesterday gave the Conservatives a lead of 14 points compared with 4 points a month ago.

“The British economy faces dark days indeed,” Cameron said. “The recession is getting worse. He’s making a great mess of the economy. Market and indeed public reaction suggest there is no real confidence that government policies are working.”

Brown faces the prospect of fighting the next general election, due by June 2010 at the latest, with unemployment at around 3 million, a level last seen in the aftermath of the early 1990s recession.

Prince’s Concern

Prince Charles’s charity that helps find work for youth from poor families said 45 percent of those who lost their jobs in the past quarter were under 25. At least 1.3 million, or a fifth of all young people, are not in education or jobs.

“Youth unemployment costs our economy around 10 million pounds a day in lost productivity,” said Martina Milburn, chief executive of The Prince’s Trust. “Only by helping young people into work can we tap into this lost potential.”

Even lawmakers in Brown’s own Labour Party are concerned about the jobless figures and uneasy about action taken by the government to date.

“This is a depression, not just a recession,” said John McDonnell, a Labour member of Parliament who in 2007 attempted to challenge Brown for the party’s leadership. “The government’s measures have failed to protect people and preserve their jobs. A lack of planning and radical action makes it almost inevitable that unemployment will hit 3 million.”

Bank Bailout

Brown this week pledged to guarantee hundreds of billions of pounds of securities in an effort to spur bank lending as the European Commission forecast the U.K. economy may contract 2.8 percent this year, the most since 1946 when Britain was in the grip of mass demobilization after World War II.

Claimant unemployment rose for an 11th month in December, and the increase in November was revised to 83,100 from 75,700. The unemployment rate rose to 3.6 percent from 3.3 percent in November.

“These figures do not take into account the redundancies announced over the past eight weeks at companies like Woolworths, Santander, Barclays, Denby, Land Rover, JCB, Burberry, Zavvi, Grattan and Empire Direct,” said Brendan Barber, head of the Trades Union Congress. He said there’s a “very strong chance it will pass 2.5 million by June.”

Wage pressures eased, with pay including bonuses rising an annual 3.1 percent in the three months through November, down from a 3.3 percent pace in the period through October. Excluding bonuses, wage growth was unchanged at 3.6 percent.

“Businesses are being increasingly forced against their will to let good staff go,” said David Frost, director general of the British Chambers of Commerce. “Even with some staff accepting pay freezes and working fewer hours, it’s clear that employers are facing serious financial pressures.”

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

Read more...

Trichet Says Divergences Don’t Put Euro Monetary Union at Risk

By Meera Louis

Jan. 21 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said credit-rating downgrades and worsening public finances in some euro-region countries are not threatening to break up the decade-old monetary union.

“In a very vast continental economy, it is not abnormal to have diversity,” Trichet told the European Parliament in Brussels today. “I would not say at all that it is something that puts into question the euro area.”

Standard & Poor’s this month downgraded the sovereign credit ratings of Spain and Greece and said the ratings of Ireland and Portugal are under threat. Bond yield spreads between the strongest and weakest euro-region economies have ballooned as the global financial crisis pressures budgets, making the ECB’s one- size-fits-all monetary policy less effective.

“Negative ratings actions on Greece, Ireland, Portugal, and Spain reflect their economies’ higher susceptibility to a tightening external credit channel,” S&P said on Jan. 15. These countries “have, in our view, lost competitiveness relative to their European peers, leading to a rise in their imbalances.”

Trichet said all 16 countries using the euro are experiencing difficulties and renewed his call for governments to pursue “sustainable” fiscal policies.

“I’m confident that the pressures of the circumstances and the reality will do their job,” Trichet said. In any case, “there is no bailing out” of the euro area.

To contact the reporter on this story: Meera Louis in Brussels at mlouis1@bloomberg.net.

Read more...

Obama Team Pushes to Complete Financial Rescue Plan

By Rich Miller and Robert Schmidt

Jan. 21 (Bloomberg) -- President Barack Obama’s economic team is pushing to complete a bank-rescue plan that can be twinned with the $825 billion stimulus package being negotiated with Congress to alleviate the rapidly deepening financial crisis.

While full details of the rescue haven’t been settled yet, people familiar with the deliberations said the package is likely to include a $50 billion-plus program to stem foreclosures, fresh injections of capital into the banks and steps to deal with toxic assets clogging lenders’ balance sheets.

Officials “feel like they need to move quickly to provide some sense of calmness and assurance to the market that the government isn’t going to let this problem get out of hand,” said John Douglas, a partner at the Paul, Hastings, Janofsky & Walker law firm and a former general counsel at the Federal Deposit Insurance Corp.

In his inaugural address yesterday, Obama called for “bold and swift” action to resolve the crisis that’s cost the economy almost 2.6 million jobs last year, the most since 1945. Bank stocks sank yesterday, driving the Dow Jones Industrial Average to its worst-ever inauguration-day decline.

The president meets with his economic advisers today. One option that may be gaining ground: coupling the establishment of a so-called bad bank to buy some toxic assets with government guarantees to limit losses on those that remain on banks’ balance sheets.

Market Meltdown

State Street Corp., the largest money manager for institutions, tumbled 59 percent yesterday after unrealized bond losses almost doubled. The Standard & Poor’s 500 Financials Index plunged 17 percent yesterday, partly on concern some firms are in such bad shape they may have to be nationalized. The index rose 6.4 percent at 9:51 a.m. in New York.

The U.K. unveiled a 100 billion pound ($140 billion) bailout on Jan. 19 that included guaranteeing banks on losses from toxic assets. While Prime Minister Gordon Brown’s plan didn’t specifically call for a bad bank, it gave the Bank of England unprecedented power to buy securities in an effort to encourage lending.

In the U.S., the Federal Reserve and Federal Deposit Insurance Corp. are advocating a government-backed bad or “aggregator bank” to acquire hundreds of billions of dollars of troubled securities now held by lenders.

Contributing Money

FDIC Chairman Sheila Bair has said that cash from the Troubled Asset Relief Program may help capitalize the bad bank and that commercial banks may kick in some money of their own. One possibility that’s been discussed is issuing lenders some kind of stock in the new organization in return for their impaired assets.

American banks are reluctant or unable to lend after suffering more than $700 billion in writedowns and credit losses since the collapse of the market for subprime U.S. mortgages 18 months ago. The slump in lending, even after the government has pumped billions into the nation’s banks, is exacerbating the worst recession since the 1980s.

U.S. financial losses may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” New York University Professor Nouriel Roubini, told a conference in Dubai on Jan. 20. Obama will have to use as much as $1 trillion of public funds to bolster the capitalization of the industry, he estimates.

Top advisers to Obama have signaled they will emphasize getting credit to consumers and businesses rather than helping banks in deploying the remaining TARP cash.

Fundamental Reform

“We have to fundamentally reform this program to ensure that there is enough credit available to support recovery,” Treasury Secretary-nominee Timothy Geithner said in prepared testimony for a Senate Finance Committee hearing scheduled for today that was obtained by Bloomberg News.

So far, the U.S. has poured more than $200 billion into banks through the TARP, a $700 billion fund approved by Congress in October. Obama’s aides were forced to pledge changes to the program before Congress released the second $350 billion tranche of that money.

In any new rescue efforts, the Treasury is likely to continue to require banks to hand over ownership stakes to the government as a condition of receiving aid, though it will want to avoid outright nationalization. Programs so far have sought preferred shares and warrants, which can be converted into common stock and cashed out on the government’s request.

Taxpayer Benefits

Under now departed Secretary Henry Paulson, Treasury went out of its way to avoid taking a controlling interest in the banks it has supported, preferring instead to use the warrants as a way to make sure taxpayers reap benefits of any stock-price recovery. However, regulators have taken stronger measures on occasion, such as the 79.9 percent stakes demanded last year of American International Group Inc. and mortgage companies Fannie Mae and Freddie Mac.

Parts of the discussion taking place within the government revolve around ways to leverage the remaining money in the TARP. The Fed already plans to use $20 billion from the TARP to set up a $200 billion program to support consumer and small business loans. Adoption of a similar strategy for financing any bad bank would involve larger amounts and the Fed taking on riskier assets.

“Very quickly, we are going to be moving to some kind of” solution to clear the toxic assets and get credit flowing again, Laura Tyson, a professor at the University of California, Berkeley, said in a Bloomberg Television interview on Jan. 19.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Rich Miller in Washington rmiller28@bloomberg.net

Read more...

OPEC Won’t Meet Before March 15, Algerian Minister Khelil Says

By Ahmed Rouaba

Jan. 21 (Bloomberg) -- The Organization of Petroleum Exporting Countries won’t meet before its next scheduled summit on March 15, Algerian Oil Minister Chakib Khelil said.

“There is no plan to meet until March 15 to discuss the market situation,” Khelil told reporters today in Algiers.

Khelil, who held OPEC’s rotating presidency last year, said oil prices would likely be stable until the third quarter when crude is expected to rebound. OPEC may announce an additional cut in March if prices slump further, he said.

To contact the reporter on this story: Ahmed Rouaba in Algiers, through the London newsroom at arouaba@bloomberg.net

Read more...

Suncor Says Reduced Water Has No Impact on Oil Sands Output

By Aaron Clark and Robert Tuttle

Jan. 21 (Bloomberg) -- Suncor Energy Inc. said production from its Fort McMurray, Alberta, oil sands operation won’t be affected by a reduction in water from the Athabasca River.

“We withdraw 0.3 percent of Athabasca River’s annual flow so we don’t expect this to have impact on our production,” Shawn Davis, a Suncor spokeswoman, said in a telephone interview.

Alberta Environment has ordered industry to trim water withdrawals from the river because of low water flows.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net; Robert Tuttle in New York at rtuttle@bloomberg.net

Read more...

Spain Chemical Makers Cut Greenhouse Gases 24 Percent

By Todd White

Jan. 21 (Bloomberg) -- Spanish chemical manufacturers say they’ve reduced greenhouse-gas emissions blamed for global warming more than most industries in the nation after buying new technology to filter and recycle waste gases.

Companies making a majority of the nation’s fertilizer, chlorine and other chemicals cut emissions 24 percent in the eight years through 2007, Jesus Soriano, environmental director for the Feique industry group, said today in an interview. Pollution- control investments exceeded those in the food, metals or energy industries in 2006, the most recent year for government data.

The gains contrast with Spain’s overall failure in curbing gases that create the heat-trapping greenhouse effect. Emissions have surged by one-half since 1990, the largest increase among the world’s industrialized countries in that period, the United Nations said in November, citing 2006 data.

“The chemicals industry is technology-intensive and has taken on better practices and more qualified personnel than many low-tech industries,” Soriano said. He supervises a UN-recognized pollution-control program in Spain that has been adopted by 53 countries.

A spokeswoman at the environmental organization Greenpeace Spain said she had no immediate comment on the data.

The industry’s investments have been concentrated in systems that filter and recycle gases and waste water. Environmental spending totaled 411 million euros ($531 million) in 2006.

Spain’s 3,600 chemical companies as a group are headed to release about 24 percent less emissions in 2012, Feique estimated in a statement yesterday.

Breaking Pledge

In contrast, the nation may miss its pledge to keep the growth of greenhouse gases to 15 percent through 2012 under the Kyoto Protocol treaty to stem global warming. Both measurements use 1990 as a base year.

The Madrid-based trade group counts among its members the non- energy chemicals units of Repsol YPF SA and Compania Espanola de Petroleos SA, the nation’s largest oil companies, Fertiberia SA and Maxam, Spain’s biggest fertilizer and explosives makers.

The most polluting industry is power generation, contributing 27 percent of greenhouse gases, followed by transportation, at 25 percent, according to environment ministry data. Manufacturers of chemicals and other products are lumped together with the construction industry, which as a group contributed 16 percent of the total 433 million tons of gases released in 2006.

To contact the reporter responsible for this story: Todd White at twhite2@bloomberg.net.

Read more...

Kenya to Arrest Oil Company Director After Shipment Disappears

By Eric Ombok

Jan. 21 (Bloomberg) -- Kenya issued an arrest warrant for Yagnesh Devani, founder of Triton Petroleum Co., which owes banks and oil companies 7.6 billion shillings ($95.3 million), acting Finance Minister John Michuki said.

The government is also seeking properties owned by Devani to settle the debt, Michuki told reporters yesterday in the capital, Nairobi. Devani left the country last month after Triton failed to pay for a shipment of crude oil, he said.

“We are trying to find out what he owns because it can help to pay that debt,” Michuki said, adding that Kenyan police have been instructed to determine Devani’s whereabouts.

Triton won a tender in October to supply domestic oil companies with petroleum in December. The crude shipment, partly financed by Kenya Commercial Bank Ltd. and stored by the state- run Kenya Pipeline Co., disappeared before payment was received. On Jan. 9, the presidency fired Kenya Pipeline Managing Director George Okungu.

Kenya Commercial is the east African nation’s biggest bank by number of branches. Central Bank of Kenya Governor Njuguna Ndung’u said on Jan. 12 Kenyan banks financed about 2.5 billion shillings of the payment for the oil shipment.

Calls to Triton’s office in Nairobi were answered by a voice prompt saying the number has been switched off. Nairobi- based Business Daily newspaper reported today that Devani is in Kenya and will appear in court this week to plead to charges of theft. The report cited James Ochieng’ Oduol, whom the newspaper said was Devani’s lawyer. When contacted today by Bloomberg News, Ochieng’ Oduol said he doesn’t represent Triton.

Kenya Commercial’s Corporate Communications Manager Judith Sidi-Odhiambo said today in a phone interview from Nairobi that Kepha Bosire, the bank’s corporate affairs director, would only be available for comment tomorrow.

To contact the reporter on this story: Eric Ombok in Nairobi via Johannesburg at pmrichardson@bloomberg.net.

Read more...

EDF Says 2008 Profit Was Hurt by Tartam Provision

By Tara Patel

Jan. 21 (Bloomberg) -- Electricite de France SA, the world’s biggest operator of nuclear reactors, said its 2008 net income was hurt by the cost of a regulated power-rate system known as Tartam that was extended by French lawmakers last year.

The Paris-based utility, Europe’s largest power producer, said in a document on its Web site, that excluding non-recurring items, its profit for the year didn’t exceed that of 2007.

“The outlook is in line with our pessimistic outlook for the sector,” said Peter Wirtz, an analyst at WestLB in Dusseldorf. “There are additional risks that EDF’s tariffs won’t be raised this year.”

EDF tumbled as much as 4.3 percent and fell 1.50 euros, or 3.9 percent, to 36.92 euros at 12:02 p.m. in Paris, giving it a market value of 68.3 billion euros. The Tartam tariff system allowed businesses that opted for free-market power rates until the end of June 2007 to come back to lower state-regulated prices for two years.

The impact of the Tartam, which the French parliament voted to extend to mid-2010, was estimated at around 1 billion euros ($1.3 billion), the company said. This figure will be revised “on the basis of more recent assumptions” when full-year earnings are reported Feb. 12, the document stated.

The document was released by the company as part of a plan to study a possible private placement of long-term debt to institutional investors in the U.S. to help fund some of its acquisitions, EDF said in an e-mailed statement today.

Raising Funds

EDF is raising funds to pay for acquisitions including the 12.5 billion-pound ($17.7 billion) purchase of U.K. nuclear utility British Energy and the planned buying of nuclear assets of Constellation Energy Group Inc. for $4.5 billion. The French utility will also invest in its domestic fleet of 58 nuclear reactors to prolong their lives and fix technical problems that have crimped output, it said.

Earnings before interest, taxes, depreciation and amortization in 2008 “is expected to increase approximately 3 percent,” the utility reiterated. Estimates for ebidta and net income excluding non-recurring items don’t take into account the extension of the Tartam, the document said.

French lawmakers last July extended for one year the state- regulated rates for business to June 30, 2010. The system is aimed at shielding companies from rising energy costs.

EDF made provisions of 470 million euros for the system in 2006 and 248 million euros in 2007, according to its annual report.

Internal Growth

In 2009, EDF “will focus on organic growth and the strengthening of its business operations,” the document said. The utility plans to improve its operations “specifically the performance of its French nuclear fleet.”

The availability rate of the utility’s reactors last year “should be close” to the 80.2 percent achieved in 2007 compared with 83.6 percent in 2006. The utility is aiming to raise the rate to 85 percent by 2011, the document said.

A “clogging phenomenon” at some units and generator “anomalies” have affected performance, EDF said.

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

Read more...

Tullow Raises $553 Million in Share Sale, Seeks Debt

By Eduard Gismatullin

Jan. 21 (Bloomberg) -- Tullow Oil Plc, the U.K. explorer seeking funds for projects in Ghana and Uganda, raised 402 million pounds ($553 million) by selling new shares and is in talks on increasing a debt facility to $2 billion.

Tullow today sold 66.9 million new shares at 600 pence apiece, equal to 9.1 percent of previous ordinary share capital, the company said in a statement. It’s in talks with banks on adding about $600 million to an existing $1.4 billion loan, using its stake in a Ghana offshore venture as collateral, Chief Executive Officer Aidan Heavey said today.

“We were blown away by support” from banks and shareholders, Heavey said on a conference call. It will pay about 3.75 percentage points more than the London interbank offered rate on the debt, Tullow said.

Tullow rose as much as 21 pence, or 3.5 percent, to 621.5 pence in London trading. The stock was at 617 pence as of 1:33 p.m. local time, valuing the company at 4.52 billion pounds.

“We note that over the past week the stock has given up most of the gains from four drilling successes in the past month, perhaps partly in anticipation of an equity issue,” Mark Bloomfield, a London-based analyst at Citigroup Inc., said today in an e-mailed report. Tullow fell 9.3 percent last week.

Jubilee

The London-based company plans to invest about $3.1 billion to develop the Jubilee field off Ghana and start pumping oil there in 2010. Tullow is targeting about 4 billion barrels of oil and gas resources in the Gulf of Guinea off Ghana and Ivory Coast, where it’s had “outstanding exploration success,” Heavey said.

Kosmos Energy LLC, Ghana National Petroleum Corp. and Anadarko Petroleum Corp. also hold stakes in the Ghana project.

Appraisal of the Jubilee field confirms “major resource potential” of as much as 1.8 billion barrels, Tullow said.

The company has also been exploring at Uganda’s Lake Albert, where it may sell part of its fully owned Block 2, Heavey said. It may invite a partner to share costs and build a pipeline to export oil from Uganda to Kenya’s port of Mombasa.

“We’ve exceeded reserves to make the Uganda project commercial” following exploration, the CEO said. “We’ve had lots of approaches” from potential partners, he said, adding that “we’ve decided not to talk about this for now.”

Raised Reserve

Tullow plans to invest 600 million pounds in projects this year, he said. The company replaced more than 500 percent of its reserves last year after producing on average 66,600 barrels of oil equivalent a day. It expects to cut output to 60,000 barrels a day this year.

The company increased its reserves estimate to about 800 million barrels of oil and gas as of the end of last year, up from a forecast of 551 million barrels, Tullow said.

“High-impact exploration wells -- Tweneboa and Teak in Ghana and Ngassa in Uganda -- are targeting over 1.5 billion barrels of gross upside potential and will commence drilling in the first quarter of 2009,” the company said.

Tullow canceled the sale of 11 percent of the M’Boundi oil field in Congo for $435 million to Korea National Oil Corp. because of opposition from the African state, Heavey said.

“It wasn’t a major item in our financing” plan, he said. “It was a small interest in a major field and non-material” and “we are quite happy to keep it.”

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

Read more...

Germany, EU Receive Gas After Gazprom Turns on Taps

By Amanda Jordan

Jan. 21 (Bloomberg) -- Germany, Europe’s biggest energy market, was among European Union states to report full deliveries of Russian natural-gas via Ukraine after exporter OAO Gazprom resumed shipments yesterday.

E.ON Ruhrgas AG, the gas unit of Germany’s largest utility, is getting complete volumes of gas, the company said today in an e-mailed statement. The central European country, the biggest foreign customer of Russian gas, had drawn fuel from stockpiles the past two weeks to meet demand.

States further east began to receive Russian gas via Ukraine yesterday as Gazprom turned on the taps after a 12-day halt. More than 20 nations were affected by the cutoff as the two former Soviet neighbors refused to compromise in a spat over pricing, transit fees and outstanding debt. A truce reached over the weekend paved the way for a resumption in shipments.

Slovakia was the first nation to receive gas, followed by Hungary, Czech Republic, Austria, Poland, Romania, Bulgaria, Serbia and Slovenia. Countries that had tapped reserves, sourced alternative imports and restricted gas use during the crisis announced an end to emergency measures. Russia supplies a quarter of Europe’s gas, about 80 percent of which passes through Ukraine.

Slovakia, Czech Republic

Russian gas entered Slovakia yesterday morning, Economy Minister Lubomir Jahnatek said at a press conference. Slovakia had curbed gas consumption for industrial users during the crisis, leading to output cuts at companies including carmakers. Czech gas trader RWE Transgas AS received Russian deliveries last night, RWE AG spokeswoman Annett Urbaczka said today from Essen, Germany.

Gas reached the Austrian border yesterday, Economy Minister Reinhold Mitterlehner said in Vienna. Austria gets 51 percent of its gas from Russia, according to OMV AG, the country’s biggest oil and gas company. Hungary registered the arrival of supplies at 1:20 p.m. local time yesterday, Edina Lakatos, a spokeswoman for gas-network operator FGSZ Zrt., said in an e-mail.

Gazprom and Ukrainian state utility NAK Naftogaz Ukrainy signed a 10-year gas contract on Jan. 19, a deal welcomed by European Commission President Jose Barroso, who also called for new energy routes and sources to protect the EU in the event of future supply disruptions.

“This painful episode is a sharp reminder that the EU needs to take energy security seriously,” Barroso said yesterday at the commission’s Brussels headquarters. Russia and Ukraine hurt their credibility by failing to respect earlier pledges to reopen pipelines, he said.

Nabucco Boost

Barroso’s comments may boost efforts to bring the OMV-led Nabucco pipeline project to fruition. The planned 3,300-kilometer (2,050-mile) link would carry Caspian gas via a route from Turkey through Bulgaria, Romania and Hungary to western Europe from 2013.

Hungary’s ambassador for the 7.9 billion-euro ($10.6 billion) project, Mihaly Bayer, said the gas crisis had increased the chances of realizing Nabucco, according to Nepszabadsag. The dispute has raised the willingness of EU countries to back the plan, Bayer said in an interview with the newspaper.

Austria’s Mitterlehner said yesterday that the country would “work on diversifying our gas supplies, for instance with Nabucco.”

Turkey this week urged a speedy agreement on the Nabucco link and presented draft accords for the pipeline prior to a meeting of the project’s partners in Budapest on Jan. 27.

“The latest natural-gas crisis has demonstrated that Turkey’s insistence on wrapping up Nabucco is very well- founded,” Energy Minister Hilmi Guler said in an interview.

Slovenia, Poland

Slovenia started receiving gas from Russia at 5 p.m. local time yesterday, Alojz Stana, director of state-owned distributor Geoplin d.o.o, said today in a statement. The country, which imports 60 percent of its gas from Russia, has been able to ensure stable flows to companies and households by using alternative supplies during the shutdown, he said.

Gaz-System SA, Poland’s gas-pipeline operator, started to receive Russian gas at the Drozdowicze entry point, spokeswoman Malgorzata Polkowska said today. Poland, which relies on Russia for about 45 percent of its gas, tapped storage and increased shipments via Belarus during the shortage.

Romania, which usually gets about 7.2 million cubic meters of gas a day, or 12 percent of its needs, from Russia, also got deliveries today, Economy Minister Adriean Videanu said.

“We’re importing 3 million cubic meters of gas as of this morning through two stations,” Videanu told reporters in Bucharest. “This is all we need now as consumption dropped because of milder weather.”

Serbia, Bulgaria

Neighboring Serbia announced the delivery of imports from Russia this morning.

Utility Srbijagas is getting the full 10 million cubic meters of gas contracted, General Manager Dusan Bajatovic said by phone from Belgrade. “We are expecting normalization of supplies to all our customers by the end of the day,” he said.

Bulgaria also said Russian gas deliveries had been fully restored. Following the resumption in supply, the country has lifted all restrictions on consumption, Prime Minister Sergei Stanishev said today at a press briefing in Sofia.

The agreement reached during the weekend in Moscow requires the transit of as much as 120 billion cubic meters of Russian gas to Europe this year through Ukraine, which will buy 40 billion cubic meters for its own market.

The price of gas for Ukraine will be $360 per 1,000 cubic meters in the first quarter and adjusted quarterly until next year, when the country moves to a “European market price,” Gazprom said in a statement.

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

Read more...

Russia May ‘Dirty Float’ Ruble as Central Bank Weakens Defense

By Emma O’Brien

Jan. 21 (Bloomberg) -- Russia may abandon the ruble’s dollar-euro trading band to protect foreign-currency holdings after draining almost 30 percent of its reserves since August, according to MDM Bank and BNP Paribas SA.

The central bank, which has controlled the ruble against a target exchange rate based on a basket dollars and euros since 2005 to protect exporters from currency swings, may move away from daily management of the ruble, said Nikolai Kashcheev, head of economic research at Moscow-based MDM. Instead the currency would trade freely, with the central bank intervening as necessary to avert any significant economic shock through a so- called “dirty float” mechanism, he said.

“A dirty float would look like it was free market but the central bank would still have a measure of control,” said Kashcheev, who forecast the ruble may fall 5.9 percent against the dollar if the central bank moved to a dirty float this week. “It would be a preferable outcome to the devaluation because what they’re doing at the moment is costing too much in reserves.”

The ruble lost 29 percent against the dollar since August as plunging oil prices and the war in Georgia exacerbated the country’s worst financial crisis since 1998, when the currency dropped 71 percent. Prime Minister Vladimir Putin pledged last month to use the nation’s foreign-exchange reserves, the third largest worldwide, to avoid “sharp” currency swings.

The central bank sold a record $11 billion on Jan. 19, as the ruble weakened against the dollar, according to Moscow’s Trust Investment Bank.

Widening Band

Bank Rossii today widened the range the ruble can move within a dollar-euro target basket for the 19th time since Nov. 11. The currency is now allowed to weaken about 24 percent against the target, compared with 3.6 percent on Nov. 11, according to Stanislav Ponomarenko, chief economist in Moscow at ING Groep NV.

The ruble was little changed at 32.9673 per dollar by 3:52 p.m. in Moscow today, after weakening 11 percent this year. It was little changed at 42.5978 per euro, having gained 0.1 percent in 2009 trading. The ruble basket comprises of about 55 percent dollars and the rest euros. The currency was percent stronger at 37.2931 against the basket.

The ruble didn’t slump today to around 39, the weakest end of the basket trading band, because banks and companies sought to convert foreign currency built up over the past 2 1/2 months to pay corporate taxes and minerals extraction fees due in the next week, said Stanislav Ponomarenko, chief economist in Moscow for ING Groep NV. “There is a ruble liquidity squeeze,” he said.

Buying Dollars

Bank Rossii bought dollars yesterday and today from lenders and companies because it doesn’t want the ruble to strengthen too far, said Alexei Moisseev, head of fixed-income research at Moscow investment bank Renaissance Capital.

Investors withdrew $245 billion from Russia since August, according to BNP Paribas, as the price of Urals crude oil, the nation’s main export earner, declined 66 percent to $41.65 a barrel, below the $70 a barrel needed to balance the budget this year.

Bank Rossii allowed the ruble to weaken an average 2 percent a day on the eight trading days it devalued the ruble this year. That’s an acceleration from depreciations of about 1 percent in November and December when the trading band was widened twice a week on average.

The step-by-step devaluation is too predictable, encouraging investors to bet on further depreciations, increasing the cost for the central bank to stem declines, said Shahin Vallee, an emerging markets currency strategist in London for BNP Paribas SA, France’s largest bank.

‘Line in the Sand’

It “sets a line in the sand against the basket that speculators know they will get dollars at,” Vallee said. “The basket setup also means they have to always sell euros when they’re selling dollars to balance it out.”

Bank Rossii may allow the ruble to strengthen “temporarily” to deter speculators from placing so-called short positions on the ruble, Elina Ribakova, Citigroup Inc.’s chief economist in Moscow, wrote in a research note yesterday. Citigroup forecasts a further 13 percent depreciation in the ruble against the dollar-euro basket this quarter, she said. A short is a wager a currency will decline.

The currency may slide to around 35 per dollar if a dirty float was introduced this week, said Kascheev at MDM. Bank Rossii would withdraw from daily intervention in the market and would probably make an announcement should policy makers move to a dirty float, Kashcheev said.

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

Read more...

Goldman Sachs Says ‘Stick to Guns,’ Bet Pound to Rise

By Bo Nielsen

Jan. 21 (Bloomberg) -- Investors should keep betting the British pound and gilts will rise, according to Goldman Sachs Group Inc.

“We remain bullish on sterling,” Thomas Stolper, a Goldman Sachs economist in London, wrote in an e-mailed report today. “U.K. fundamentals are much better than many believe.”

The U.K. currency fell to the weakest since 2001 versus the dollar and dropped a fourth day against the euro after Bank of England Governor Mervyn King said he’s not opposed to sterling’s weakness as the lowest interest rates since 1694 fail to prevent the economy from shrinking. King also said officials may start buying assets to revive the recession-mired economy.

The pound dropped 1.1 percent to 93.65 pence per euro as of 1:55 p.m. in London. It fell 0.8 percent to $1.3798.

“The likelihood of a near-term improvement in business activity suggests sterling could bounce back quite quickly,” Stolper said. “We therefore stick to our guns and remain long sterling. U.K. gilts should rally to 3.2 percent by the end of this quarter.”

The yield on the 10-year gilt was at 3.44 percent.

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

Read more...

Canada’s Dollar Rises From Six-Week Low as Crude Oil Advances

By Chris Fournier

Jan. 21 (Bloomberg) -- Canada’s dollar rose from a six-week low against its U.S. counterpart as an advance in crude oil prices increased the currency’s appeal.

“Crude oil in particular has had a very good bounce, and that’s supporting the Canadian dollar,” said Adam Cole, global head of currency strategy at Royal Bank of Canada in London.

Canada’s currency traded at C$1.2668 per U.S. dollar at 8:11 a.m. in Toronto, compared with C$1.2670 yesterday. It touched C$1.2726, the weakest level since Dec. 9. One Canadian dollar buys 78.99 U.S. cents.

Crude oil for March delivery advanced as much as 2.7 percent to $41.93 a barrel in electronic trading on the New York Mercantile Exchange. Crude generates about a tenth of Canada’s export revenue and is the largest component of the Bank of Canada’s Commodity Price Index, accounting for 21 percent.

Canada’s dollar will weaken to C$1.31 against the U.S. dollar by the end of June, RBC predicts. That’s at odds with the median forecast of 36 economists surveyed by Bloomberg News, which has the loonie strengthening to C$1.25.

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

Read more...

Pound Falls to Record on Bets BOE to Cut Interest Rates Further

By Ye Xie and Lukanyo Mnyanda

Jan. 21 (Bloomberg) -- The pound fell to a record low against the yen for a second day and the weakest level since 2001 versus the dollar on speculation the Bank of England will make further cuts in borrowing costs.

Sterling also dropped for a fourth day against the euro after BOE Governor Mervyn King said in a speech yesterday that the central bank may start buying assets within weeks after cutting the main rate to the lowest level since 1694. The Canadian dollar rose from a six-week low and Norway’s krone advanced as crude oil gained.

King’s “speech hurt the currency as it was more explicit than we expected,” said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. “The central bank is turning on the printing presses.”

The pound fell 0.8 percent to 123.96 yen at 9:03 a.m. in New York from 125.01 yen yesterday. It reached an all-time low of 122.99 yen. Sterling dropped 1.1 percent to $1.3774, from $1.3928, and touched $1.3716, the lowest level since June 2001. Against the euro, the pound depreciated 1.1 percent to 93.68 pence, from 92.62, after breaching 94 pence for the first time since Jan. 5. The euro was at $1.2905, compared with $1.2904.

Japan’s yen weakened 0.3 percent to 90.01 versus the dollar from 89.76 and dropped 0.4 percent to 116.30 from 115.85.

Canada’s currency gained 0.1 percent to C$1.2668 per U.S. dollar as crude oil for March delivery advanced as much as 2.8 percent to $41.99 a barrel in New York. The currency earlier touched C$1.2726, the weakest level since Dec. 9. Crude generates about a tenth of Canada’s export revenue.

Norway’s Krone

Norway’s krone rose 1.7 percent to 9.0371 per euro as crude oil, the country’s biggest export, gained. Sweden’s krona increased for the first time in three days versus the euro, rising 1.5 percent to 10.7284.

Goldman Sachs Group Inc. last month named the two currencies as its top picks for 2009, saying the Nordic economies will avoid the worst of the global recession. The krone has gained 7 percent versus the euro this month after losing 18 percent last year. The krona advanced 2.6 percent, following a 14 percent drop in 2008.

The BOE’s Monetary Policy Committee voted 8-1 to trim the main rate by a half-percentage point to 1.5 percent, minutes of the Jan. 8 decision published in London today show.

Since the middle of last year, “the exchange rate has fallen by almost 20 percent, and oil prices have fallen by around two-thirds, both of which will boost demand,” King said yesterday in Nottingham, England.

Pound Versus Dollar

Britain’s currency may extend losses versus the dollar as signs the global economic slowdown is deepening prompt investors to buy safer assets, Yu said, without giving a specific forecast. The pound may fall to $1.30 “sooner rather than later,” Bank of Tokyo-Mitsubishi UFJ Ltd. said in a note today.

“We expect the pound to weaken further against the dollar,” said Derek Halpenny, European head of global currency research in London at Bank of Tokyo. “Governor King afforded the collapse of the pound one line in his speech last night, and it was highlighting the positive aspect of pound weakness.”

The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, according to a Bloomberg News survey of economists.

The yen advanced for a third day against the pound as a U.K. report showed unemployment climbed in December at the second-fastest pace since 1991.

Japan’s currency fell for the first time in three days versus the euro on speculation the European currency’s 9.1 percent advance this month was too big to sustain.

The euro’s 14-day stochastic oscillator versus the yen was 8.4, according to data compiled by Bloomberg. A level below 20 suggests a currency may have weakened too quickly and is poised to rebound.

“The yen looks overbought,” said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. “There’s a bit of unwinding in long positions,” he said. A long is a bet on a rise in an asset price.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

Read more...

De Beers May Cut Offers to Its Customers by 50% Until April

By Antony Sguazzin

Jan. 21 (Bloomberg) -- De Beers may cut the amount of diamonds it offers to its customers by 50 percent until April, Varda Shine, the head of the company’s marketing unit, said in a copy of a speech made to customers.

Retail diamond sales in the U.S. fell by 15 percent to 20 percent over Christmas and sales for the year in that country fell by “high single digits,” she said in an e-mailed copy of the speech today.

Read more...

Copper Falls in London as U.S. Housing Slowdown Leaves Surplus

By Claudia Carpenter

Jan. 21 (Bloomberg) -- Copper dropped for a second day in London on speculation the U.S. housing slowdown will exacerbate an oversupply of the metal used in wires and pipes.

Demand for copper dropped 10 percent in the U.S., the world’s second-largest buyer, in January through October compared with a year earlier, the International Copper Study Group said yesterday. Supplies of refined metal will exceed consumption by 478,000 metric tons this year, triple last year’s surplus, according to Morgan Stanley.

“We’re absolutely sure the current situation on the demand side will continue to worsen,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. “We haven’t seen dramatic cuts in production. That’s why we have ample inventories.”

Copper for delivery in three months on the London Metal Exchange dropped $96, or 2.9 percent, to $3,245 a ton as of 12:52 p.m. local time. Prices fell 2.6 percent yesterday.

Nickel declined $400 to $11,150 a ton as inventories climbed to 79,932 tons, the most since July 1995. BHP Billiton Ltd., the world’s largest mining company, will suspend operations at its Ravensthorpe nickel mine in Australia.

U.S. President Barack Obama’s $850 billion government spending program to revive the economy is necessary to keep copper from extending declines, Weinberg said. Without government stimulus programs, prices would fall to $2,500 a ton in the second half, he said.

“We’re talking about hundreds of billions being invested in new infrastructure, electricity infrastructure and roads, and it has a lot to do with copper,” Weinberg said. “It’s one of the reasons copper is not as weak as it should have been given very bleak demand.”

Copper Consumption

China, the world’s largest copper user, used almost 13 percent more metal in the first 10 months last year, the Lisbon- based copper study group said. Demand dropped 2.8 percent in 15 European Union countries and 1.9 percent in Japan, it added.

The number of U.S. housing starts and permits to begin building probably dropped to record lows last month, economists said in Bloomberg News surveys before the Commerce Department report tomorrow.

Inventories of copper in warehouses monitored by the LME gained 8,375 tons, or 2.1 percent, to 417,475 tons, the exchange said today. The supplies have increased 23 percent this year to the highest since January 2004.

Morgan Stanley analyst Hussein Allidina lowered his 2009 average copper-price forecast by 31 percent to $1.35 a pound ($2,976 a ton). Prices will average $1.70 a pound next year.

Aluminum fell $35 to $1,365 a ton. LME aluminum stockpiles jumped 88,975 tons to 2.6 million tons, the most since June 1994.

Lead declined $40 to $1,125 a ton and zinc fell $65 to $1,185 a ton. Zinc inventories climbed 4.3 percent to the highest since March 2006. Tin decreased $45 to $11,255 a ton.

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

Read more...