The Downtrodden Pound Sits On The Edge Of Another Prolific Decline

Daily Forex Technicals | Written by DailyFX | Jan 22 09 15:09 GMT |

The British pound has been driven to multi-decade and record lows against some of its most liquid pairings over the past few months. However, some year-end stabilization behind this currency and broader risk sentiment, there was the possibility for reversals to establish themselves. Such potential has clearly been deferred with GBPJPY breaking to new lows and GBPUSD on the cusp of breaking a massive 23-year range low. Will these pairs trigger the next leg of a mature bear wave behind the sterling? Our DailyFX Analysts weigh in with their outlook and pick below. Chief Strategist - Antonio Sousa My picks: Short EUR/GBP Expertise: Economics and Behavioral Finance Average Time Frame of Trades: 1 month I have been short EUR/GBP for some time and I expect the Sterling to rise further against the euro. To some extent, I expect the euro zone economy to deteriorate significantly in 2009, which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar and keep the EUR/GBP under pressure over the next few months. Also, it seems the European Central Bank continues to underestimate the size of the financial crisis by keeping interest rates too high for too long. Senior Currency Strategist - Jamie Saettele My picks: long GBPAUD at market, against 2.02, target 2.30 Expertise: Technical Average Time Frame of Trades: 1 month From the very beginning of the year, the GBPAUD has built a base from which to launch higher. The rally from 2.0225 (which is the lowest price seen since 1997) is promising structurally fro bulls (the advance is in 5 waves). The decline from 2.2322 may have just completed a 3 wave setback as well. A bullish bias is warranted and a break above 2.2322 is expected. Resistance is not until 2.3062. Open/Former trades: Long EURJPY: stopped out yesterday at 115 Long EURUSD: against 1.28, target near 1.47 Currency Strategist - Terri Belkas My picks: Long EUR/GBP Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 day - 1 week EUR/GBP has run into resistance at the 61.8% fib of 0.9805-0.8838 and January 2 low of 0.9431/33, but with Friday's event risk having signficant bearish potential on the British pound, I think it may be worth sticking with long EUR/GBP positions (if you are already in), and short-term long positions are possible as well, though risk will need to be kept tight. Support comes into play at the confluence of the January 20 highs and a rising intraday trendline at 0.9322/30. Potential targets include the early January highs near 0.9630, as well as the record high of 0.9805. Currency Analyst - David Rodriguez My picks: Stay short the GBP/USD, tighten risk Expertise: System Trading Average Time Frame of Trades: 2-10 weeks Exactly one week ago I went short the GBP/USD on a break below noteworthy support, and needless to say the trade has done well. I have seen no real signs of potential reversal, and as such I'd like to remain in the trade. That said, there's no need to risk all of my profits on a reversal. I'd like to place max risk above the psychologically significant 1.4000 mark. A break above said level would tell me that price is likely to consolidate and correct through the near term, but my overall bias remains bearish the GBP/USD. Currency Analyst - Ilya Spivak My picks: Short GBPUSD (Pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Yesterday I wrote that the British Pound has broken down out of a Falling Wedge formation that contained prices since late October to test multi-year triple bottom support in the 1.3680-1.4050 congestion area that has held up sterling since 1985. The pair has now put in a bullish hammer candlestick, hinting at the possibility of an upwsing. Look for a corrective rally to re-test support-turned-resistance at the falling wedge bottom (currently at 1.4250) and look for signs of a reversal to enter short, initially targeting the bottom of the price congesion area below 1.37. For detailed analysis of the other major currency pairs, please see my latest technical outlook report. Currency Analyst - John Rivera My picks:Short GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My long GBP/USD call last week hit my initial target of the 50-Day SMA at 1.4944 but banking troubles in the U.K. would send the Sterling in a free fall preventing further gains. Despite, the pair bouncing from support at the 1985 lows, 1.400 has proved as formidable resistance which leads me to believe that there is still more downside risks. Today’s dismal CBI industrial trends reading printing at a 28-year low underlines the trouble of the economy and with GDP and retail sales ahead and expected to show further weakness, the pound should remain under pressure. Currency Analyst - David Song My picks: Short GBP/CHF Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days After reaching a high of 1.8706 in December, the GBPCHF slipped to a low of 1.5124 on 12/29, and the lack of momentum to bounce back to the upside continues to favor a bearish forecast for the pair. As a result, I expect the pair to hold its bearish trend over the near-term as the Swiss franc continues to benefit from safe haven flows, and the British pound should continue to move lower against its currency counterparts as the advanced GDP reading for the U.K. is expected to show a 1.3% contraction in the fourth quarter. The Sterling is likely to face increased selling pressure over the next 24 hours of trading, and we may see the pair work its way towards the January low of 1.5364 over the stated timeframe. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Dollar Forecast is Mixed against Major Currencies

Daily Forex Technicals | Written by DailyFX | Jan 22 09 15:00 GMT |

euro / dollar and GBPUSD patterns near term bullish USDJPY correcting sharp drop AUDUSD and NZDUSD headed lower? EUR/USD Yesterday's strength in late New York trading may have signaled the turn that I have been expecting. It is not confirmed that 1.2822 is the low, but the structure of the rally from that level is in 5 waves, which is promising for bulls. For academic purposes, the decline from 1.4723 (wave (b)) is a double zigzag, which serves to correct the advance from 1.2327 (wave (a)). The bullish objective is above 1.38 and possible 1.4723 (wave (c)). Bigger picture, price action since the 1.2327 low is unfolding as a flat or triangle (a flat would see price exceed 1.4723 while a triangle would see price probably test at least 1.40…this move should take at least a few weeks…if not longer). USD/JPY 5 waves down from 94.67 followed by 3 waves up to 91.33 favor USDJPY bears. I want to reiterate that the ultimate objective remains below 80 (all-time low). While the USDJPY corrective advance is likely complete at 91.33, do not be surprised to see additional consolidation / correction of the drop to 87. That sharp ‘panic' decline is the kind of action that tends to mark at least short term lows in the USDJPY (as illustrated by 1 period ATR on the chart above). GBP/USD Over the past few weeks, I have written that “the rally from 1.0367 is the B and likely tests resistance from Fibonacci 1.15.” The 61.8% of 1.2303-1.0367 is at 1.1524 and the USDCHF has managed to push through there. The next level of measured resistance is where wave c of B would equal wave a of B; at 1.1822. A wave B top is expected to form soon. Those willing to take the risk can establish shorts against 1.2303, targeting a drop below 1.0367 over the next few months. USD/CHF Over the past few weeks, I have written that “the rally from 1.0367 is the B and likely tests resistance from Fibonacci 1.15.” The 61.8% of 1.2303-1.0367 is at 1.1524 and the USDCHF has managed to push through there. The next level of measured resistance is where wave c of B would equal wave a of B; at 1.1822. A wave B top is expected to form soon. Those willing to take the risk can establish shorts against 1.2303, targeting a drop below 1.0367 over the next few months. USD/CAD I have written at length in recent weeks about the triangle in the USDCAD. Triangles unfold in 5 waves (a-b-c-d-e) and wave d is nearing completion. The rally to 1.27 may have completed wave d, therefore a decline in wave e is expected. The best strategy is to wait for wave e to end before attempting a long position (may be late this week), although high risk takers may wish to try the short side against 1.3012, targeting a drop in wave e towards 1.20. AUD/USD 5 waves down from .7275 and 3 waves up from .6534 confirms that the larger trend remains down. Near term, a corrective advance of one smaller degree may be complete at .6664. A complex correction could end above .6664 but the bearish line in the sand is .6846. The trend is bearish against that level, targeting a drop below .60. NZD/USD There are 5 waves down from .6041 and 3 waves up from .5274. This price action confirms that the larger NZDUSD trend is down. Shorter term, the decline from .5551 appears impulsive and the correction of that decline may be complete at .5370. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Jobless Claims and Housing Starts Highlight Seismic Challenges Facing U.S. Economy

Daily Forex Fundamentals | Written by GFT | Jan 22 09 14:50 GMT |

The rebound in the foreign exchange market on Wednesday was short lived as another wave of risk aversion hits currencies. US economic data was very weak with jobless claims rising to the highest level since 1982 and housing starts dropping 15.5 percent to the worst level ever. Starting with the labor market, continuing claims, which measure the number of people remaining on unemployment rolls rose to 4.607 million. So far we have seen 12 consecutive months of negative non-farm payrolls and as long as claims remain above 500k, we will continue to see net job losses in the US economy. If a bellwether like Microsoft can announce that they are planning to cut 5000 workers, more companies will follow suit especially smaller ones who may not have rainy day funds to weather the storm. In past recessions job cuts have lasted for a minimum of 15 months which means that non-farm payrolls may not turn positive until the second half of the year. The housing market is crippled by the falling consumer wealth and tight credit markets. Even potential homeowners who actually have the money to by are having a very difficult time obtaining financing. Good credit ratings don't really matter any more. with so much inventory still on the market, housing starts and building permits should continue to drop. The labor and housing market data highlight the seismic challenges that the US economy faces but the dollar continues to benefit from safe haven flows. In times of economic uncertainty, investors flock into the lowest yielding currencies. US Treasury Secretary Nominee Geithner Backs Strong Dollar Policy In his confirmation hearing with the Senate Finance Committee, Treasury Secretary Nominee Tim Geithner said that a "strong dollar is in America's National Interest." As potential Treasury Secretary, we expected Geithner to adopt the stance of his predecessors, which is to pay lip service to the strong dollar policy. Over the past few years, the consequences of the US government’s fiscal and monetary actions is a weak and not strong dollar. For any country that is slowing or in recession, a weaker currency is more helpful than a strong one. So there is no real meat to Geithner's comments especially as the Federal Reserve embarks on their "credit easing" policies. It would also have been a mistake for Geithner to say anything otherwise about the dollar at his hearing because rocking the boat could risk his confirmation. Kathy Lien http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.

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Housing Starts Continued to Free Fall in December

Daily Forex Fundamentals | Written by Wachovia Corporation | Jan 22 09 14:30 GMT |

Starts of new homes dropped another 101K units in December, after falling a revised 126K in November. Single- and multi-family starts both saw large declines on the month. No corner of the market seems safe in this relentless downturn. Further declines may be possible through the winter. Starts Plunge Starts dropped another 15 percent in December after a similar drop the month before. Builders continued to pull back on activity at a torrid pace as the economy entered a second year of recession. With an unusually cold January, especially in the South, we are not looking for a bounce in next month's release. Permits Do Not Lend Much Hope for Coming Months Permits saw another 10 percent plus drop in December and were off a full fifty percent from the year before. In a separate release yesterday, the NAHB/Wells-Fargo home builders' sentiment index fell to another all-time low. We do not expect any significant improvement before spring as builders see little reason to start new homes in the current environment. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jan 22 09 13:28 GMT |

The risk appetite witnessed in the latter half of the NY session yesterday continued to wane in London overnight. Overseas marts rallied modestly and up about +1% in a dismal follow-through to the more than +4% gains in US shares. Risk trades in FX were commensurately punished and the yen crosses headed lower. USD/JPY lost about -40 points in the session towards 88.80/90 while EUR/JPY witnessed a more pronounced -60 pip decline into the 115.50/60 zone. EUR/USD was practically unchanged near the 1.30 pivot as most of the price action was expressed via higher yen. Poor economic data out of the UK weighed heavily on the pound. Manufacturing sentiment collapsed to -64 from -60 in the worst print since 1980. Meanwhile, the Confederation of British Industry’s monthly report showed total orders in January at -48, down from -35 the prior month and the weakest result since 1992 to boot. GBP/USD was crushed more than -170 pips as a result and sitting near the 1.3740/50 zone. Ostensibly there are bids into the 1.3700 level and as such we would expect good support on dips into that area. Upcoming Economic Data Releases (NY Session) prev est 1/22 13:30 GMT CA Leading Indicators MoM DEC -0.70% -0.6% 1/22 13:30 GMT CA Retail Sales MoM NOV -0.90% -2.0% 1/22 13:30 GMT CA Retail Sales Less Autos MoM NOV -1.10% -1.50% 1/22 13:30 GMT US Housing Starts DEC 625K 605K 1/22 13:30 GMT US Building Permits DEC 615K 600K 1/22 13:30 GMT US Initial Jobless Claims 17-Jan 524K 543K 1/22 13:30 GMT EC ECB's Tumpel-Gugerell Speaks in Brussels 22-Jan 1/22 15:00 GMT US House Price Index MoM NOV -1.10% -1.20% 1/22 15:30 GMT CA Bank of Canada Monetary Policy Report 22-Jan 1/22 16:00 GMT US DOE U.S. Crude Oil Inventories 16-Jan 1144K 1400K 1/22 16:00 GMT US DOE U.S. Gasoline Inventories 16-Jan 2068K 1800K 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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Mid-Day Report: Dollar Responds Positively to Negative Data Again

Market Overview | Written by ActionForex.com | Jan 22 09 14:13 GMT |

Dollar once again responds positively to negative data in early US session. Housing starts dropped -15.5% to new record low at 5.5m in Dec. Building permits also sank to new record low of 5.5m. Initial jobless claims surged to 16 year high of 589k, seven straight weeks above 500k mark. Dollar and yen recovers yesterday's loss on risk aversion as US stocks are set to have a lower open after yesterday's 3.5% rebound. After all, the direction in the currency markets will be heavily influenced by developments in the equity markets. Also released in US session, Canadian retail sales had their sharpest decline since 1998, dropped by -2.4% in Nov mainly due to falling gasoline prices. Ex-auto sales dropped -2.3%. Leading indicators fell -0.6% in Dec. USD/CAD was supported above 1.2529 minor intraday support and strengthens. Short term outlook in the pair remains bullish. Released earlier, UK's CBI industrial trend came in at record low of -43 in January, much lower than consensus of -39 and -35 in the previous month, indicating manufacturers anticipate severe decline in output in the coming 3 months. Eurozone's industrial orders plunged 4.5% mom in November, better than consensus of -4.8% and the revised -5.7% in October. In Switzerland, ZEW economic expectation surprisingly improved to -66.7 in January from -76.2 in the previous month, showing some effect from SNB's aggressive rate cuts over the past few months. The Bank of Japan decided to keep interest rate unchanged at 0.1% but announced it will consider buying corporate bonds with maturity up to 1 year. Moreover, the central bank revised downward economic and inflation outlook. For the year ending Mar 31 2009, GDP will contract 2% while CPI will drop 1.1%. For 2010, economic growth is expected to rise 1.5% with inflation will fall 0.4%. USD/CAD Daily Outlook Daily Pivots: (S1) 1.2474; (P) 1.2619; (R1) 1.2695; More. No change in USD/CAD's outlook. Intraday bias remains on the upside as long as 1.2529 minor support holds. Rise from 1.1761 is still expected to extend further to retest 1.3005/15 resistance zone. Though, consider mildly bearish divergence condition in 4 hours MACD and RSI, below 1.2529 will indicate that a short term top is in place and bring pull back to 1.2316 support for consolidation. In the bigger picture, there is no confirmation of completion of medium term up trend from 0.9056 yet. Such rise is expected to be developing into a five wave sequence (1.0378, 0.9823, 1.3015, ......). Consolidation from 1.3015 is treated as the fourth wave consolidation and might have completed at 1.1761 already. Decisive break of 1.3005/15 will confirm medium term up trend resumption and should then target 61.8% retracement of 1.6196 to 0.9056 at 1.3469. On the downside, below 1.2316 support will argue that consolidation from 1.3015 is extending further for another test of 1.1464 support before completion.

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Cable & Dollar/Yen Big Losers

Daily Forex Fundamentals | Written by DailyFX | Jan 22 09 13:47 GMT |

Funds - Once again the preferred trade in the overnight session was the flight to safety buying with the USD and Yen as the prime beneficiaries. Price action in EUR/USD and USD/CHF was less interesting with the latter pairs seemingly content on trading in a more consolidative fashion. However, any favorable price action in Cable or USD/JPY seen late Wednesday, was negated with the market content on using rallies as formidable sell opportunities to build on existing short positions. The overnight release of the much weaker than expected CBI Industrial Trends survey (-48 versus -39 forecast) did not help the Sterling cause with the data series putting in the lowest reading since July 1992. Attempts by Japanese Vice FinMin Sugitomo to curb the appreciation in the Yen by warning that the government was closely watching the currency markets and that “abrupt and excessive currency moves were undesirable” unsurprisingly failed to influence traders with the pair poised to retest and take out the key trend lows by 87.15 from December which were matched on Wednesday. Looking ahead, key event risk for the North American session comes in the form of US housing/building permits (605k and 610k expected) and initial jobless claims data (540k expected) at 13:30GMT along with the concurrent release of Canadian retail sales (-1.5% expected) and leading indicators (-0.6% expected). Later in the morning, we get the release of the Bank of Canada Monetary Policy Report at 15:30GMT. Techs - EUR/USD has been locked in consolidation mode following yesterday’s late session rebound and the market is confined to inside day price action thus far. Given oversold nature and ability to hold above key 78.6% fib retrace off the major 1.2330-1.4720 move, we retain a mildly bullish bias for Thursday. Key levels to watch above and below now come in at 1.2945 and 1.3080. USD/JPY has showed zero follow through off of yesterday’s bullish candle close and the pair looks set to retest the key matched trend lows at 87.15. Key levels to watch come in at 89.55 and 87.15. GBP/USD price action is quite bearish with the bullish dragonfly/hammeresque close on Wednesday nearly being fully negated today. Inability to break back above 1.4025 keeps downside pressures intact, and a retest of the recent trend lows at 1.3620 Is now favored. USD/CHF is trading marginally higher and the price action is bullish as the pair looks to put in yet another daily higher high and higher low. Next key topside resistance comes in at 1.1735 (12Dec low) . Only back under 1.1380 delays. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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U.S. December Housing Starts and Permits: Summary (Table)

By Kristy Scheuble

Jan. 22 (Bloomberg) -- Following is a summary of the Dec. housing starts report from the Commerce Department.

===========================================================================
                   Dec.   Nov.   Oct.  Sept.   Aug.   July   June    May
                   2008   2008   2008   2008   2008   2008   2008   2008
===========================================================================
Housing starts     0.550  0.651  0.767  0.824  0.854  0.949  1.089  0.982
3-mo. average      0.656  0.747  0.815  0.876  0.964  1.007  1.025  0.991
Single family     0.398  0.460  0.536  0.551  0.615  0.644  0.663  0.682
Multi-family      0.152  0.191  0.231  0.273  0.239  0.305  0.426  0.300
--------------------------------------------------------------------------
Housing permits    0.549  0.615  0.730  0.805  0.857  0.937  1.138  0.978
3-mo. average      0.631  0.717  0.797  0.866  0.977  1.018  1.033  0.964
Single family     0.363  0.414  0.470  0.538  0.553  0.584  0.616  0.635
Multi-family      0.186  0.201  0.260  0.267  0.304  0.353  0.522  0.343
--------------------------------------------------------------------------
Under construction 0.823  0.851  0.877  0.905  0.939  0.955  0.977  0.989
3-mo. average      0.850  0.878  0.907  0.933  0.957  0.974  0.991  1.003
===========================================================================
                   Dec.   Nov.   Oct.  Sept.   Aug.   July   June    May
                   2008   2008   2008   2008   2008   2008   2008   2008
===========================================================================
Single family     0.401  0.417  0.438  0.456  0.479  0.489  0.511  0.530
Multi-family      0.422  0.434  0.439  0.449  0.460  0.466  0.466  0.459
--------------------------------------------------------------------------
Housing completed  1.015  1.071  1.054  1.155  1.012  1.086  1.131  1.144
3-mo. average      1.047  1.093  1.074  1.084  1.076  1.120  1.103  1.123
Single family     0.668  0.769  0.752  0.820  0.708  0.830  0.844  0.877
Multi-family      0.347  0.302  0.302  0.335  0.304  0.256  0.287  0.267
                       ----------------------MOM%----------------- -YOY%-
Housing starts    -15.5% -15.1%  -6.9%  -3.5% -10.0% -12.9%  10.9% -45.0%
Single family    -13.5% -14.2%  -2.7% -10.4%  -4.5%  -2.9%  -2.8% -48.9%
Multi-family     -20.4% -17.3% -15.4%  14.2% -21.6% -28.4%  42.0% -31.2%
--------------------------------------------------------------------------
Housing permits   -10.7% -15.8%  -9.3%  -6.1%  -8.5% -17.7%  16.4% -50.6%
Single family    -12.3% -11.9% -12.6%  -2.7%  -5.3%  -5.2%  -3.0% -49.2%
Multi-family      -7.5% -22.7%  -2.6% -12.2% -13.9% -32.4%  52.2% -53.1%
--------------------------------------------------------------------------
Under construction -3.3%  -3.0%  -3.1%  -3.6%  -1.7%  -2.3%  -1.2% -22.0%
===========================================================================
                   Dec.   Nov.   Oct.  Sept.   Aug.   July   June   Dec.
                   2008   2008   2008   2008   2008   2008   2008  YOY%
===========================================================================
Single family     -3.8%  -4.8%  -3.9%  -4.8%  -2.0%  -4.3%  -3.6% -34.0%
Multi-family      -2.8%  -1.1%  -2.2%  -2.4%  -1.3%   0.0%   1.5%  -5.6%
--------------------------------------------------------------------------
Housing completed  -5.2%   1.6%  -8.7%  14.1%  -6.8%  -4.0%  -1.1% -23.6%
Single family    -13.1%   2.3%  -8.3%  15.8% -14.7%  -1.7%  -3.8% -34.9%
Multi-family      14.9%   0.0%  -9.9%  10.2%  18.8% -10.8%   7.5%  14.5%
--------------------------------------------------------------------------
Ratio M/S Starts   38.2%  41.5%  43.1%  49.5%  38.9%  47.4%  64.3%  44.0%
Ratio M/S Permits  51.2%  48.6%  55.3%  49.6%  55.0%  60.4%  84.7%  54.0%
===========================================================================
NOTE:  All figures in millions of units and seasonally
adjusted at an annual rate. Percent changes are seasonally
adjusted.

SOURCE: U.S. Commerce Department.

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

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Roubini Sees China Recession Despite ‘Massaged’ GDP

By Michael Patterson

Jan. 22 (Bloomberg) -- China is in a recession despite government statistics today showing the world’s third-largest economy expanded in the fourth quarter from a year earlier, according to Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

“China is in a recession regardless of what the highly massaged official numbers claim,” Roubini, a professor at NYU’s Stern School of Business and the chairman of consulting firm Roubini Global Economics, wrote in a note today on his Web site. “When growth is slowing down sharply the Chinese way to measure GDP is highly misleading.”

Unlike the U.S. and western Europe, China’s figures on gross domestic product measure growth from the same quarter a year ago rather than the previous three months. The year-on-year figures fail to capture the economy’s slowdown at the end of 2008 because growth was so high in the preceding quarters, Roubini wrote.

The government’s statistics bureau said fourth-quarter GDP grew 6.8 percent from a year earlier, after gains of at least 9 percent in the previous three quarters.

China’s stocks rose to a one-month high after the GDP figure matched the median estimate of economists surveyed by Bloomberg News. Health-care stocks including North China Pharmaceutical Co. climbed after the government said it will spend 850 billion yuan ($124 billion) to help expand medical care. The CSI 300 Index rose 1.1 percent to 2,044.55, the highest close since Dec. 19.

Falling Exports

Investors should buy China’s agriculture, water treatment, power generation and infrastructure stocks because the companies won’t be hurt by the nation’s slowing economy, investor Jim Rogers said in an interview today.

“There is a lot happening in China and there will be those that will hold up well,” said Rogers, who correctly predicted the start of the commodities rally in 1999 and wrote books on investing including “A Bull in China: Investing Profitably in the World’s Greatest Market.”

Declining power output and shrinking manufacturing suggest the economy is contracting, Roubini wrote.

China’s electricity production declined more than 7 percent from a year earlier in November and fell about 3 percent in October, the first declines since February 2002, according to China Economic Information Net data compiled by Bloomberg. China’s exports fell 2.8 percent in December, the most in almost a decade, as the deepening global recession cut demand for the nation’s toys, clothes and electronics.

Roubini said at a conference in Dubai this week that U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent.” He also predicted oil prices will trade between $30 and $40 a barrel all year.

Roubini wasn’t immediately available to comment on the report, his spokesman said.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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China’s GDP Growth Slowed to 6.8% in Fourth Quarter

By Kevin Hamlin and Li Yanping

Jan. 22 (Bloomberg) -- China’s economy expanded at the slowest pace in seven years as the global recession dragged down exports, increasing pressure for more government spending and lower interest rates to buoy growth.

Gross domestic product grew 6.8 percent in the fourth quarter from a year earlier, after a 9 percent gain in the previous three months, the statistics bureau said in Beijing today. The figure matched the median estimate of 12 economists surveyed by Bloomberg News.

Plummeting Chinese demand for parts and materials for exports is reverberating across Asia and the Pacific, driving Taiwan, South Korea and Australia closer to recessions and worsening Japan’s slump. Premier Wen Jiabao said this week that the government must work urgently this quarter to reverse the slowdown and maintain social stability amid a “very grim” outlook for jobs.

“It’s an astonishingly steep slowdown,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “We haven’t yet seen all of the pain.”

The yuan traded at 6.8360 against the dollar as of 4:47 p.m. in Shanghai from 6.8378 yesterday. The CSI 300 Index of stocks climbed 1.1 percent.

The central bank may cut the key one-year lending rate by as much as 81 basis points to 4.5 percent by the middle of the year, after 2.16 percentage points of reductions since September, Cavey said. Bank reserve requirements will also decline, he said.

Economic ‘Implosion’

The economy’s “implosion” poses a threat to the Communist Party’s rule and increases the likelihood that the government will devalue the yuan, prompting a trade war, according to Albert Edwards, a London-based global strategist for Societe Generale SA.

Industrial output grew 5.7 percent in December from a year earlier, today’s data showed, close to the weakest pace in almost a decade. Inflation cooled to 1.2 percent, the slowest in two years, giving more room for interest-rate cuts. Producer prices fell 1.1 percent.

Urban fixed-asset investment rose 26.1 percent last year, the data showed, compared with a 26.8 percent increase in the first 11 months.

The economic slowdown is hurting China Shipping Container Lines Co., which said profit fell more than 50 percent last year, and Aluminum Corp. of China, where executives and workers will take pay cuts to preserve jobs. About 600,000 migrant workers flooded out of the manufacturing hub of Guangdong as work dried up last year, the local government estimates.

Economists Cut Estimates

China’s economy grew 9 percent for all of 2008 after a 13 percent expansion in 2007 that pushed it past Germany to become the world’s third-biggest.

“China is in a recession regardless of what the highly massaged official numbers claim,” Nouriel Roubini, a professor at New York University, wrote today on his Web site www.rgemonitor.com. He said China’s year-on-year growth figures are “highly misleading” because they fail to capture a sharp slowdown in output last quarter. Declining electricity output and declining manufacturing suggest an overall contraction, he wrote.

Daiwa Institute of Research, JPMorgan Chase & Co. and Citigroup Inc. reduced today their estimates for China’s growth in 2009. Daiwa cut to 6.3 percent from 7.5 percent; JPMorgan to 7.2 percent from 7.8 percent; and Citigroup to 7.6 percent from 8.2 percent.

‘Negative Impact’

“The international financial crisis is deepening and spreading with a continuing negative impact on the domestic economy,” said Ma Jiantang, head of the statistics bureau.

China’s leaders “will do anything” to maintain an economic expansion of about 8 percent, the government’s target for creating jobs, said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

China has pressured state-owned banks to increase lending, unveiled a 4 trillion yuan ($585 billion) stimulus package, reduced export taxes and is adding support for 10 key industries, including tax cuts and subsidies for steel and autos.

China’s growth will weaken to 3 percent to 4 percent this quarter, the slowest since at least 1994, before stimulus measures kick in and exports start to revive, said Wang Qing, Hong Kong-based chief China economist at Morgan Stanley.

Exports will decline 6 percent this year, down from a 17.2 percent gain in 2008, according to Fitch Ratings. China has stalled gains by the yuan against the dollar to aid exporters.

Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said yesterday that China’s currency manipulation was a “significant issue.”

“It’s important for the United States and for the global economy that our major trading partners operate with a flexible exchange rate system and that market forces determine the level of those exchange rates,” Geithner said.

South Korea’s Slump

Besides trimming China’s contribution to global growth, estimated by the International Monetary Fund at 19.5 percent in 2007, the slowdown is hurting Asia, where South Korea reported today a bigger-than-forecast economic contraction.

Japan said today that its shipments to China plummeted 35.5 percent in December. China’s own exports declined by the most since 1999, triggering factory closures and job cuts.

“Localized unrest” may rise sharply this year, said Wang Tao, China economist at UBS AG in Beijing, adding that as many as 10 million people may lose their jobs in export industries, along with another 5 million in construction.

Property Downturn

A sagging property market makes a quick rebound less likely. House prices across 70 cities dropped for the first time on record in December and construction will contract 30 percent this year, according to Macquarie Securities.

Economic growth may weaken to 2 percent in 2009, the slowest pace in at least 30 years, according to Ryan Atkinson, chief market analyst at New York-based hedge-fund manager Balestra Capital Ltd.

“There’s an extraordinary amount of excess capacity and there’s no way the world can absorb the amount of goods they are set up to produce,” said Atkinson.

Still, the government saw “positive” changes in the economy in December and can achieve its 8 percent target, the statistics bureau’s Ma said today.

Money supply and bank lending surged in December, investors’ confidence improved and retail-sales growth excluding inflation accelerated, according to the official.

A planned 850 billion yuan of spending on the health-care system over three years, approved yesterday, will help to spur consumption, Ma added.

Industrial-production growth was higher than economists’ estimates in December and topped November’s increase, offering “a ray of light,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

It may be “the twilight before the dawn,” said Ma.

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

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Singapore Cuts Company Tax, Taps Reserves Amid Slump

By Shamim Adam, Andrea Tan and Chen Shiyin

Jan. 22 (Bloomberg) -- Singapore cut corporate taxes for the second time in three years and said it will tap its reserves to fund record spending amid efforts to drag the island’s economy out of its deepest recession since independence.

The government will reduce the maximum tax rate payable by companies to 17 percent from 18 percent this year, Finance Minister Tharman Shanmugaratnam said in a budget address today. It will spend S$20.5 billion ($13.7 billion) on property and personal tax rebates and cash handouts to help businesses and workers, using S$4.9 billion of its national reserves.

The tax cut will narrow Singapore’s gap with Hong Kong as Prime Minister Lee Hsien Loong’s government aims to attract investment in services and manufacturing industries. Singapore said yesterday its economy may contract a record 5 percent this year as the global recession hurts exports and companies including Creative Technology Ltd. fire workers.

“A lot of help is extended to companies to keep jobs and the tax cut makes Singapore more competitive in this difficult period,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “It’s a budget to help cope with the recession, not exit it.”

Stimulus Measures

Asia’s export-dependent economies have pledged more than $680 billion in extra public spending over the next five years as demand for their products diminishes amid recessions in the U.S., Japan and Europe. Exports account for about 32 percent of Asia’s gross domestic product, according to the World Bank.

China’s Premier Wen Jiabao promised this month to increase a 4-trillion yuan ($585 billion) stimulus package to create employment and support industries. Malaysia is planning a second economic stimulus package after unveiling a 7 billion-ringgit ($1.9 billion) plan in November, Deputy Prime Minister Najib Razak said this week.

Singapore’s spending plans will lead to a budget deficit of S$8.7 billion in the year starting April 1, equivalent to 3.5 percent of gross domestic product, Shanmugaratnam said. That compares with a shortfall of S$2.2 billion, or 0.8 percent of GDP, in the current fiscal year.

The Singapore dollar rose 0.1 percent to S$1.4960 as of 7:43 p.m. local time, while the benchmark Straits Times Index climbed 0.25 percent to 1,708.77 at the 5:05 p.m. close.

“The budget gave a bit of a boost to the Singapore dollar but it will only ease the pain of the recession, not reverse it,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “The market is not taking this very positively and any impact on the currency will be limited.”

Projects Canceled

The city state’s government expects fixed-asset investments to fall to as little as S$10 billion this year from a record S$18 billion in 2008 as demand weakens and companies face difficulty in securing funds for their projects.

About 20 percent of investments originally slated for 2009 have been canceled or postponed, and investment commitments next year may be affected if the global economy doesn’t improve, the Economic Development Board said Jan. 19.

With today’s announcement for a lower tax level, Singapore will have shaved nine percentage points off the corporate rate since 2000. The government reduced rates by 2 percentage points to 18 percent in 2007, while Hong Kong last year lowered its company tax rate by 1 percentage point to 16.5 percent.

“It is a signal of the government’s continued and future commitment to being the best hub for enterprises, small and large, from all over the world,” Shanmugaratnam said.

Job Losses

More than 10,000 people were retrenched last year and a worsening economy may result in job losses tripling in 2009, reaching numbers not seen since the Asian financial crisis a decade ago, the government said this week.

Singapore will give employers a combined S$4.5 billion in cash grants for retaining local workers, the finance minister said today. It will also distribute S$2.6 billion in cash, utility and tax rebates to citizens, the poor and unemployed.

The government plans as much as S$20 billion in public works in 2009, a third higher than the previous year, and will give S$800 million in tax rebates for industrial and commercial properties. It will also allow unprofitable companies to get a cash refund on taxes paid in previous years under an enhanced so-called current loss-back relief plan, Shanmugaratnam said.

Singapore will spend S$5.8 billion to split the risks of bank loans extended to businesses, Shanmugaratnam said. The government will bear 80 percent of the risks on loans of as much as S$5 million to help medium-sized companies.

“The budget stimulus measures will significantly reduce business costs,” said Robson Lee, a partner in Singapore-based law firm Shook Lin & Bok LLP. “The measures will also enhance the local enterprise refinancing. Banks will be more inclined to extend credit to the enterprises.”

To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net; Andrea Tan in Singapore at atan17@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net

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U.K. Home Repossessions Surge, Manufacturers’ Confidence Slumps

By Svenja O’Donnell and Caroline Binham

Jan. 22 (Bloomberg) -- U.K. home repossessions almost doubled in the third quarter and manufacturers’ confidence plummeted to the lowest since 1980 as the recession deepened.

Banks took possession of 13,161 properties, 92 percent more than a year earlier, the Financial Services Authority said today. A gauge of business optimism among manufacturers for the three months through January fell to the lowest since 1980, a survey by the Confederation of British Industry showed.

Data tomorrow will show the economy shrank the most since 1990 in the fourth quarter as unemployment soared and banks curbed loans, economists predict. The pound fell to a 23-year low against the dollar this week on speculation the financial crisis will force Prime Minister Gordon Brown to seize control of the nation’s financial institutions.

“We’re going to see a severe consumer retrenchment, as there are powerful forces in play hitting households’ ability to pay,’” said Nick Kounis, chief European economist at Fortis in Amsterdam. “We’re looking at a deepening recession. The fourth quarter is going to be disastrous.”

An index of business optimism for the quarter through January fell to minus 64, the lowest since Margaret Thatcher was prime minister almost three decades ago, the CBI, Britain’s biggest business lobby said today. A monthly index of factory orders was at minus 48, the lowest since 1992. The survey was conducted between Dec. 11 and Jan. 7 among 527 manufacturers.

Recession Forecast

The economy probably contracted 1.2 percent in the fourth quarter after shrinking 0.6 percent in the previous three months, according to the median forecast of 33 economists in a Bloomberg News survey. The Office for National Statistics will release the figures at 9:30 a.m. tomorrow in London.

Bank of England Governor Mervyn King said on Jan. 20 that the pace of economic contraction is “likely to continue to be marked” in the first half of this year. U.K. house prices will drop a further 22 percent in the next 1 1/2 years as the recession deepens, the Ernst & Young Item Club forecasts.

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 yesterday.

Falling house prices, rising unemployment and loan rationing are hurting people’s ability to pay back their debts. The number of repossessions was compounded by a 10 percent rise in the number of home-loan repayments that were late in the third quarter, the FSA said. Arrears for the period increased to 60,000 from 54,000.

The freeze in credit is also hurting companies. The index of firms with trouble finding finance is at highest since 1970s, during the secondary banking crisis, the CBI said. Both large and small companies are finding it more difficult to get credit, the lobby group said.

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Caroline Binham in London at cbinham@bloomberg.net

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U.S. Initial Jobless Claims Match Highest Since ’82

By Shobhana Chandra

Jan. 22 (Bloomberg) -- The number of Americans filing first- time claims for unemployment benefits matched the highest level in 26 years as firings forced more workers to seek government assistance in a deepening recession.

Initial jobless claims increased by 62,000 to 589,000, more than forecast, in the week ended Jan. 17, from a revised 527,000 the prior week, a Labor Department report showed today in Washington.

Employers who cut 2.6 million U.S. jobs last year may continue to shed workers, weighing on spending and prolonging the slump. President Barack Obama is pushing for quick passage of a stimulus plan that aims to revive the economy and save or create as many as 4 million jobs.

“Job losses will continue through the first part of the year and could extend all the way through 2009,” Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. “Consumer spending is out, frugality is in.”

The Commerce Department said separately that builders broke ground on the fewest homes since records began in 1959. Housing starts slumped 16 percent in December to an annual rate of 550,000, lower than economists had forecast. Building permits, an indicator of future projects, also reached an unprecedented low.

Stocks, Treasuries

Stock-index futures dropped, while Treasuries headed higher. Futures on the Standard & Poor’s 500 Stock Index fell 0.6 percent to 831.70 at 8:38 a.m. in New York. Yields on benchmark 10-year notes retreated to 2.52 percent from 2.55 percent.

Today’s report represents claims applications from the survey week for the monthly non-farm payrolls report and will be closely watched for signals on job losses in January.

Initial claims were estimated to rise to 543,000 from 524,000 initially reported for the prior week, according to the median projection of 40 economists in a Bloomberg News survey. Estimates ranged from 450,000 to 594,000.

Last week’s tally was the same as the total in the week of Dec. 20, which was the highest level since November 1982.

The four-week moving average of initial claims, a less volatile measure, held at 519,250.

The number of people on benefit rolls increased to 4.607 million in the week ended Jan. 10, from 4.510 million the prior week. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.4 percent. These data are reported with a one-week lag.

State Patterns

Forty-four states and territories reported an increase in new claims for the week ended Jan. 10, while nine reported a decrease.

Initial jobless claims reflect weekly firings and tend to rise as job growth -- measured by the monthly non-farm payrolls report -- slows.

Economists predict the job-shedding extended into this year. The payrolls report showed a 12th consecutive monthly drop December, bringing total job losses in 2008 to 2.6 million, more than in any year since 1945. The unemployment rate climbed to 7.2 percent, the highest level in almost 16 years.

Retailers are coming off the worst holiday sales season in at least four decades, manufacturers remain in a downturn, and other industries also are contributing to mounting job losses.

Clear Channel Communications Inc., the largest U.S. radio broadcaster, cut 1,850 jobs, or 9 percent of its workforce, amid an advertising slump. The company was taken private last year.

“We are facing an unprecedented time of distress in the general economy -- and the ripple effects have hit some of our largest customers hard,” Chief Executive Officer Mark Mays said in a memo to employees this week.

Companies accelerating firings include Eaton Corp., a Cleveland-based maker of car engine valves and aircraft fuel pumps. The Cleveland, Ohio-based manufacturer this week said it plans to slash 5,200 more jobs worldwide after already shedding 3,400 workers last year.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Housing Starts, Permits in U.S. Slump to Record Low

By Timothy R. Homan

Jan. 22 (Bloomberg) -- U.S. builders broke ground in December on the fewest houses since record-keeping began as sales and credit dried up, signaling the real-estate slump will keep hurting economic growth.

Housing starts fell 16 percent last month to an annual rate of 550,000 that was less than forecast and the lowest since the government started compiling statistics in 1959, the Commerce Department said today in Washington. Building permits, an indicator of future projects, were also at a record low.

Builders, whose shares have lost 76 percent of their value over the last three years, are slashing prices to compete with a record number of foreclosed homes coming onto the market. Barack Obama’s advisers say the president will use up to $100 billion in financial-rescue funds to ease the mortgage crisis.

“Homebuilders have no choice,” said Ryan Sweet, an economist at Moody’s Economy.com Inc. in West Chester, Pennsylvania. “The market is bloated with excess supply and demand is weak. The pace of housing starts will remain depressed until 2011.” Economy.com projected starts would drop to a 580,000 pace.

Another government report showed the number of Americans filing first-time claims for unemployment benefits rose last week, matching a 26-year high. Initial jobless claims increased by 62,000 to 589,000, more than forecast, in the week ended Jan. 17, according to a Labor Department report today in Washington.

Economists had forecast starts would drop to a 605,000 annual pace from a previously estimated November rate of 625,000, according to the median of 69 forecast in the Bloomberg survey. Estimates ranged from 500,000 to 688,000. November starts were revised up to 651,000 in today’s report.

Last Year’s Starts

For all of 2008, starts dropped 33 percent to 904,300, down from 1.335 million in 2007 and also the fewest since records began.

Building permits fell 11 percent in December to a 549,000 annual pace. They were forecast to drop to a 600,000 pace, according to the Bloomberg survey.

Construction of single-family homes dropped 14 percent to a 398,000 rate, today’s report showed. Work on multifamily homes, such as townhouses and apartment buildings, decreased 20 percent from the prior month to an annual rate of 152,000.

Housing starts declined in three of four regions of the country, led by a drop of 25 percent in the Midwest. Starts rose 13 percent in the Northeast.

Confidence Slumps

The National Association of Home Builders/Wells Fargo index of builder confidence slumped to a record low for January, the Washington-based association said yesterday.

U.S. foreclosure filings in December were 41 percent higher than a year earlier, pushing up the inventory of unsold homes, RealtyTrac Inc., a seller of default data, said this month.

Obama’s National Economic Council Director Lawrence Summers said last week the president intends to use between $50 billion and $100 billion of the remaining half of the $700 billion bank- bailout fund enacted last year to address the foreclosure crisis.

Falling borrowing costs have yet to reverse the downturn in sales. The average rate on a 30-year fixed mortgage fell to 4.96 percent earlier this month for the first time on record, Freddie Mac said in a report last week.

KB Home, the fourth-largest U.S. homebuilder that caters to first-time buyers, reported a $307.3 million net loss on Jan. 9 for the fourth quarter and said the housing market would remain difficult this year.

“The housing industry continues to confront unprecedented downward pressure,” Chief Executive Officer Jeffrey Mezger said in a conference call with analysts and investors. “These conditions persist nationally with no visible signs of lessening in the near term.”

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

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South Hook’s First Cargo Heralds Qatar as Key U.K. Gas Supplier

By Ben Farey

Jan. 22 (Bloomberg) -- South Hook LNG, an import terminal in South Wales, will import its first cargo next month, marking Qatar’s arrival as a key natural gas supplier to the U.K.

The Tembek has left the Middle East for the terminal, a venture between Qatar Petroleum, Exxon Mobil Corp. and Total SA, South Hook Terminal Co. said in a statement today. The ship will stop near the U.K. so its arrival coincides with final commissioning steps in the “next few weeks,” it said.

The U.K., Europe’s largest gas consumer, must import more gas as its North Sea fields decline. Qatar has become the world’s largest liquefied natural gas exporter and will be able to supply more than 10 percent of British demand through South Hook, where gas will be stored in five tanks bigger than the Royal Albert Hall.

“They won’t leave the terminal empty,” David Ledesma, an independent energy consultant, said in a phone interview today. The U.K. is a higher-priced market than the U.S. at present, making it more attractive for Qatari shipments, he said.

The Tembek is scheduled to arrive at the Suez canal on Jan. 23, according to ship-tracking data on Bloomberg. From Suez, an LNG carrier can reach south Wales in about a week. The ship, one of a new generation of so-called Q-Flex LNG tankers, has a capacity of 211,885 cubic meters of LNG.

Typically, one or more initial cargoes of LNG are used to cool down a new import facility’s pipes and storage tanks to the correct operating temperature. LNG is natural gas chilled to liquid form at minus 161 degrees Celsius (minus 258 Fahrenheit) to aid transportation and storage.

Qatar Plans

Qatar exported 38 billion cubic meters of gas in 2007, up 24 percent on 2006, according to BP’s Statistical Review of World Energy. The state plans to produce 77 million tons of the fuel by 2010. That’s equal to 106 billion cubic meters of gas, or about the same volume as the U.K. consumes in a year.

The port of Milford Haven in Wales is now home to two receiving terminals. BG Group Plc’s Dragon LNG terminal also awaits commissioning.

The larger South Hook terminal expects to receive as much as 7.5 million tons of LNG a year, or 10.5 billion cubic meters of natural gas, in its first phase. The terminal’s capacity will double by 2012.

Dragon and South Hook together will have a combined import capacity of 19.4 million tons of LNG a year, or 26.7 billion cubic meters of natural gas. That’s almost as much as the annual imports of Spain, currently Europe’s largest LNG importer.

Gas for delivery next month at Henry Hub in Louisiana, the U.S. benchmark price, traded for $4.74 a million British thermal units at 11:54 a.m. U.K. time on the New York Mercantile Exchange. That’s about $3 a million Btus less than February gas in the U.K.

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

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Nigeria Proposes Bill to End Discretionary Oil License Awards

By Dulue Mbachu

Jan. 22 (Bloomberg) -- Nigeria proposed to end discretionary awards of oil and gas exploration licenses in new legislation for the country’s hydrocarbon industry.

Licenses will be given through an “open, transparent and competitive” bidding process and “no discretionary awards shall be given under any circumstances whatsoever,” according to the draft bill obtained at parliament in Abuja.

Previous military and civilian governments awarded licenses both on a discretionary basis and through open bidding. President Umaru Yar’Adua, who took office in 2007, has pledged transparency and to end corruption in the oil and gas industry, the mainstay of the country’s economy.

Nigeria holds Africa’s biggest hydrocarbon reserves of more than 30 billion barrels of crude and 187 trillion cubic feet of natural gas. The government is seeking to establish a legal and regulatory framework to ensure it’s managed for the benefit of the Nigerian people, according to the bill.

Nigeria’s oil and gas industry is facing unrest in the southern Niger Delta, where nearly all of the country’s oil is produced. Attacks by armed groups, including the Movement for the Emancipation of the Niger Delta, or MEND, have cut more than 20 percent of exports since 2006.

The proposal also wants separate licenses awarded for the exploration of crude and gas. “Every petroleum prospecting license or petroleum mining lease shall be in respect of either crude oil or natural gas, but not both,” the document said.

New Oil Company

A new national oil company will also be created to prospect for oil worldwide and raise funds from global financial markets. The country will set up a Nigerian Petroleum Directorate to develop policies and strategies for fossil energy and a National Petroleum Inspectorate to enforce policies and regulate technical and commercial aspects.

A National Petroleum Assets Management Agency will monitor and approve costs in ventures in which Nigeria has interests. Five joint ventures with Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, in which Nigeria has an average 55 percent stake, currently account for most of the country’s oil and gas exports.

Rilwanu Lukman, a former OPEC head who headed the committee that drafted the bill, was in December appointed petroleum minister by Yar’Adua to see through the reform process.

To contact the reporter on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net

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Antarctic Warming Found by Scientists Dashes Argument

By Alex Morales

Jan. 22 (Bloomberg) -- Antarctica has warmed over the past half-century, scientists said, dashing a key argument by skeptics who say climate change is overstated.

Temperatures rose an average 0.12 degrees Celsius (0.22 Fahrenheit) per decade since 1957, researchers led by Eric Steig, a professor of glaciology at the University of Washington in Seattle, said in the journal Nature. Using new measurement methods, they discovered warming in the continent’s interior, which United Nations-sponsored scientists theorized was cooling.

The findings may help puncture arguments by global-warming skeptics such as the late author Michael Crichton who have pointed to cooling in parts of Antarctica as an indicator that climate change is exaggerated.

“This has put the last pieces of the jigsaw in place,” Gareth Marshall, a British Antarctic Survey climatologist in Cambridge who wasn’t involved in the research, said yesterday in a telephone interview. “If you consider Antarctica as a whole, it shows a significant warming.”

Temperatures in the frigid continent, bigger than the U.S. and Mexico combined, are important because its ice sheets contain enough water to raise sea levels by 57 meters (187 feet). The desolate mass of ice holds the record-low temperature, measured at minus 89 Celsius by the U.S. National Climatic Data Center.

Antarctica had represented the biggest gap in United Nations knowledge about the recent evolution of the Earth’s temperatures and extent of global warming, a phenomenon that has been widely detected in the Arctic at the earth’s other extreme.

Ice Shelves Breaking

The study indicates that the breakup of ice shelves already seen in the Antarctic Peninsula, a spit of land reaching toward South America, may “eventually” extend to other parts of the continent, Steig said in a telephone interview.

“The fact that the warming that is appearing on the peninsula extends way down into West Antarctica would suggest that eventually, if that trend continues, ice shelves in West Antarctica are also going to similarly be affected,” Steig said, pointing to a timeframe of “hundreds of years.”

Ice shelves are attached to land and rest on the oceans, so they don’t raise sea levels when they break up. Even so, their loss removes a barrier to the flow of melting land-based ice sheets toward the sea.

Most ground-based temperature measurements from Antarctica began in 1957, and the data is largely from coastal areas. Gauging the vast interior by satellite didn’t begin until 1979. Steig’s team used mathematical models to establish the relationship between the ground and satellite measurements between 1979 and 2006 and then used the correlation they found to calculate temperatures for the interior going back to 1957.

Cooling Controversy

The UN in 2007 produced its largest assessment of climate change, pointing to planet-wide warming while signaling “a cooling over most of interior Antarctica,” a phenomenon emphasized by Crichton, who died in November, in his novel “State of Fear” (HarperCollins, 2004.)

The book, one of many in the last decade that stirred popular debate over climate change, prompted rebuttals by scientists.

“Readers may understandably take away some misconceptions from his book,” the Cambridge, Massachusetts-based Union of Concerned Scientists wrote on its Web site about Crichton’s novel. Cooling trends in some parts of the world, are “fully compatible with the physics on which climate models are based.”

“Global warming is not causing any significant retreat of polar ice caps,” James M. Taylor, senior fellow for environmental policy at the Heartland Institute, wrote in a report. The Chicago- based research group is planning an international conference March 8-10 in New York City for scientists and analysts who “question the theory” of man-made climate change.

500 Billion Tons

The UN’s 2007 report included temperature-change maps that showed the bulk of Antarctica colored gray, an indication of insufficient data. “Significant warming” was taking place in the Antarctic Peninsula, it said.

The effects of warming in the Antarctic Peninsula have been dramatic. In 2002, the Larsen B ice shelf collapsed, with 500 billion tons of ice breaking up into icebergs in less than a month. The larger Wilkins ice sheet, which is further south, lost 1,000 square kilometers (386 square miles) in 1998 and began to break up further last February.

Over the past 50 years the Antarctic Peninsula warmed an average of 0.11 degrees Celsius a decade, West Antarctica gained 0.17 degrees every 10 years and temperatures in East Antarctica rose by 0.1 degrees, Steig’s team found. The data from the east had a margin of error of 0.07 degrees, meaning the actual warming may be close to zero.

Even so, East Antarctica has cooled by about 0.2 degrees Celsius a decade since the 1970s, the researcher said.

‘It’s Warming’

“The warming prior to that was even greater than the cooling since and therefore, on average, it’s warming,” Steig said. The recent cooling has been attributed to the hole in the ozone layer caused by pollutants that are now banned so the cooling is likely to reverse in coming years, he said.

“Normally when ozone is warmed up by the sun, it causes the stratosphere, which is part of the atmosphere, to warm,” the British Antarctic Survey’s Marshall said. “If the ozone is missing, then that part of the atmosphere will cool and therefore you get this colder air over Antarctica and this propagates downwards toward the surface.”

Because of the statistical uncertainty that still surrounds the data from East Antarctica, Steig said his team’s biggest advance was in establishing there’s a clear warming trend in West Antarctica.

“The magnitude of the trend is larger in West Antarctica so we’re more confident that it’s warming,” Steig said. “We’ve really filled in a huge gap.”

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.

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