Dollar Flexes again: Rivals Look for Support

Daily Forex Technicals | Written by DailyFX | Jan 23 09 15:05 GMT |

euro / dollar slips below 1.28 GBPUSD Tests 1.35 USDCHF resistance at 1.18 EUR/USD I wrote yesterday that “strength in late New York trading may have signaled the turn that I have been expecting.” So much for that thought as the EURUSD has fallen through 1.28. I still maintain that the decline from 1.4723 is corrective in nature - either the second leg (a b wave) of a triangle or flat. At this point, wave b can not be considered complete until price exceeds 1.3090. There is downside potential until 1.2477, which is where the two zigzags would be equal. A note from a trading perspective; it sometimes takes a number of attempts in order to catch 'the' turn. As long as these losses are manageable, then you'll be around when 'the' turn does occur. USD/JPY 5 waves down from 94.67 followed by 3 waves up to 91.33 favors 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 yesterday's chart). GBP/USD The GBPUSD continues to slump, having nearly touched 1.35 this morning. There are a number of valid counts from the current juncture (the decline from 1.5728 could be wave b of an expanded flat). The above count treats the decline from 1.5728 as wave 5 of the decline from 2.1160 (2007 high). This decline is nearing its end as it is finishing up wave iii. A 4th wave correction (resistance near 1.40) may lead to one more leg down prior to a significant low is in place. A rally above 1.4347 would begin to make the picture more immediately bullish. 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 month), 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. 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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Commodity Bloc Setting Up Breakouts For Next Week's Open

Daily Forex Technicals | Written by DailyFX | Jan 23 09 14:59 GMT |

High volatility has charged the entire currency market this past week and added enough momentum to many pairs to push right to the edge of major technical boundaries. For the commodity bloc, the potential for breakouts is tangible. The New Zealand and Australian dollars have been driven down by a wave of risk aversion while the Canadian dollar has started to perk up after a round of disappointing round of data. With the weekend fast approaching, breakouts before the liquidity drain are losing their potential; but these technical setups will still hold over the markets come Monday and a new round of data and sentiment will bring us closer to the significant moves that are building up. Read on to see what each of our analysts expects from the com bloc and what their picks are among the crosses. Chief Strategist - Antonio Sousa My picks: Short AUD/JPY Expertise: Economics and Behavioral Finance Average Time Frame of Trades: 1 month I think high yielding commodity currencies could be particularly vulnerable going forward since a toxic mix of economic slowdown, risk aversion and de-leveraging in the financial is not likely to go away anytime soon. In fact, I have been short AUD/JPY since the beginning of October, when the currency pair exchange rate was trading at 70 and I expect the Australian dollar to fall an extra 6000 pips against the mighty Japanese yen. Senior Currency Strategist - Jamie Saettele My picks: Long AUDCAD, against .8078, target .83 Expertise: Technical Average Time Frame of Trades: it depends This is a short term range trade idea. The AUDCAD has settled into a range between roughly .81 and .85. With the pair at the bottom of the range now, it is worth taking a stab at the long side with a stop below .8078. Target the center of the range at .83. Open / former trades: stopped out of long EURUSD long GBPAUD: against 2.02, target 2.30 Currency Strategist - Terri Belkas My picks: Long EUR/CAD (pick from Tuesday) Expertise: Fundamentals combined with technicals Average Time Frame of Trades: 1 - 3 days Sticking with my pick from Tuesday, EUR/CAD is still holding above a rising trendline that has supported the pairs rally from the November lows, and from a historical perspective there is hefty support in the 1.6100 - 1.6200 region where we tend to see quite a bit of congestion. As a result, I think it may be worth staying long the pair, with a stop below 1.6000 and target of 1.6646/1.6700. Currency Analyst - Ilya Spivak My picks: Stay Short AUDUSD Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months I orignally suggested selling AUDUSD at 0.7079 as the pair showed a Hanging Man with bearish confirmation. Prices have extended considerably lower and are now close to our soft target near 0.64. With no substantive changes to positioning to threaten the downward bias, remain short and maintain a stop-loss at 0.7380 above the 10/07/2008 wick high. A daily close below 0.6397 opens the door for a challenge of November's swing low at 0.6072. Currency Analyst - John Rivera My picks:Long NZD/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My long Kiwi pick last week started on a strong note as the pair reached as high as 0.5548 but short of my first target at 0.5612- the 50-Day SMA. Banking troubles in the U.K. sapped risk appetite globally and would lead to the Kiwi dropping back below 0.5200. The trend for the pair is clearly to the downside but 0.5200 has held as support and it appears susceptible to a retrace. Therefore, I am targeting 0.5500 for a long Kiwi trade. However, sticking with the trend has served me well, and going against that wisdom may come back to bite me. Currency Analyst - David Song My picks: Exit Short NZD/USD Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days After slipping to a low of 0.5205 in December, the NZDUSD bounced back to reach a high of 0.6086 on 12/18, but slipped below support this week to reach an intraday low of 0.5173, which has certainly exceeded my expectations. As volatility remains high throughout the markets, I will take my profits before we see a corrective retracement, and will wait for a major break below the 01/21 low of 0.5166 to consider another short trade for the pair. Meanwhile, I expect the kiwi-dollar to hold its bearish trend over the near-term, and we may see the New Zealand dollar face increased selling pressure over the following week as the Reserve Bank of New Zealand is widely expected to lower the benchmark interest rate by 100bp to 4.00%. 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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British GDP Contraction in Q4 Worst Since 1975

Daily Forex Fundamentals | Written by Wachovia Corporation | Jan 23 09 15:15 GMT |

Real GDP data confirm what essentially every investor already knew: the British economy is in a deeper recession. And it probably will continue for the next few quarters. Concerns about the state of the British banking system and the weaker-than-expected GDP data have caused sterling to drop to a 24-year low against the dollar. British Economy in Deep Recession Data released this morning confirmed what essentially every investor already knew: the British economy is in a deep recession. As show in the top graph, real GDP contracted at an annualized rate of 5.8 percent in the fourth quarter relative to the previous quarter, the sharpest contraction since the second quarter of 1975. A breakdown of the real GDP data into its underlying demand components will not be available until next month, so we can only surmise the sources of the obvious economic weakness. With the ongoing collapse in the housing market, it seems certain that residential construction (or lack thereof) helped to pull down real GDP again. Overall investment spending plunged at an annualized rate of 11 percent in the third quarter and, given the freeze up in credit markets lately, another sharp decline in the fourth quarter likely occurred. Curiously, monthly data indicate that the volume of retail sales rose 2 percent in the fourth quarter. Either the monthly data are flawed or an unprecedented plunge in inventories occurred in the fourth quarter. In any event, it is questionable how long consumer spending can remain supported with the labor market deteriorating quickly (see middle chart). Looking forward, we project that the British economy will continue to contract over the next few quarters. On a peak-to-trough basis, we believe that real GDP will decline about three percent, worse than the 2.5 percent contraction that occurred in the early 1990-91. Could the current downturn match the six percent plunge in real GDP that transpired between 1979 and 1981? Probably not, but with the British banking system in turmoil at present our forecast may not be downbeat enough. Sterling Plunges to 24-Year Low Sterling has fallen significantly against the U.S. dollar since last summer when investors began to anticipate the onset of the current British recession (see bottom chart). It dropped even lower this week - falling to a 24-year low - due to concerns about the viability of the British banking system and the weaker-than-expected GDP data. The pound has dropped a significant amount in a relatively short period of time, so some retracement is inevitable sooner or later. That said, it is hard to envision a sustained appreciation in sterling as long as there is no end in sight to the troubles in the U.K. economy. Indeed, we believe that the Bank of England will cut its policy rate, which currently stands at 1.50 percent, by at least another 100 bps over the next few months. Therefore, sterling will probably continue to trend lower against the dollar over the next few quarters, although probably not at the same rate as it has since last summer. 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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Canada: Inflation Falls to 1.2% in December

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jan 23 09 14:55 GMT |

Al items inflation plummets to 1.2% from 2.0% in November on falling gasoline prices Core price steady at 2.4% Canadian consumer price inflation continued to mellow in December on the back of falling gasoline prices, dropping to 1.2% from 2.0% in November. Core consumer price inflation remained steady at 2.4%. The perseverance in the core rate is more reflective of the strong downward pressure on core prices one year ago, rather than any signal of renewed price pressures today. Still, it is stunning just how quickly things can change on the inflation front and a far cry from the situation in mid-2008 when rising food and energy prices were pushing headline inflation away from core in a major way. It is always a good idea to look at the sources of the price pressure in forming expectations of future price growth. Earlier in the year, our belief that energy prices had gotten ahead of underlying fundamentals formed our belief that the rise in headline inflation would likely be relatively short lived. Similarly, in the current environment core inflation has been pushed up by the elimination of price incentives on motor-vehicles in late 2008 (which, once again, calls to mind the impact of the Canadian dollar at parity with the U.S. in late 2007). But this is a short lived phenomenon. Motor vehicle sales plummeted in Canada at the end of 2008 as demand waned and if anything a return to incentive pricing can be expected. Regionally, consumer prices trended down across the country, no more so than in the Atlantic region. Year-over-year inflation actually turned negative in New Brunswick (-0.6%) and Nova Scotia (-0.2%), while in PEI the rate stood at an even 0.0%. But even Alberta, at 1.9%, has seen the core rate come below 2.0%. Only Saskatchewan, at 2.6% remains above the 2.0% level and even here prices are clearly on a downward trend. As yesterday's Monetary Policy Report Update from the Bank of Canada (BoC) noted, the hefty build up of slack as the Canadian economy enters recession will continue to put downward pressure on inflation in Canada over the next year. In fact, it is only with a very strong and relatively quick rebound in economic growth in 2010 that inflation returns to the banks target rate of 2.0% in 2011 (the BoC expects economic growth of 3.8% compared to TD's forecast of 2.4%). What is equally important in determining the actual path of inflation, is inflation expectations and recent signs, such as the spread on inflation adjusted bonds, show that if anything getting back to target may take longer than the central bank anticipates. Given the stresses on the Canadian economy from falling household wealth and more moderate personal income growth, and the external pressure on exporters during the global economic recession, inflation is likely to come in below the Bank of Canada's expectations, prompting one more half percentage point rate cut in March. 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.

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U.K. Economy Shrinks Most Since 1980, in Recession

By Jennifer Ryan

Jan. 23 (Bloomberg) -- The U.K. economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980 as the financial crisis crippled the banking industry and mired Britain deeper in the recession.

Gross domestic product fell 1.5 percent from the previous quarter, the Office for National Statistics said in London today. Economists had predicted a 1.2 percent drop, according to a Bloomberg News survey. The economy has now shrunk in two quarters, the conventional definition of a recession.

The pound dropped against the dollar and U.K. stocks fell after the report. Prime Minister Gordon Brown said that the government is using “every weapon at our disposal” to fight the crisis. Bank of England Governor Mervyn King says officials may start buying up securities soon as interest rates lose their potency to aid the economy.

“This is undeniably grim,” said Stewart Robertson, an economist at Aviva Investors in London, which manages about $230 billion in assets. “Two or three quarters more like this and you’re talking about depression, not recession. This should hasten activity to address the credit and money market issues.”

Service industries shrank by 1 percent on the quarter, manufacturing dropped 4.6 percent and construction fell 1.1 percent, the statistics office said. Business services and finance, accounting for 30 percent of the economy, contracted 0.5 percent and also slipped into a recession.

‘Not for Turning’

The last time the economy shrank so fast in a three-month period was in 1980. That October, Prime Minister Margaret Thatcher responded to criticisms of a U-turn on the economy and her handling of labor unions by declaring that “the lady’s not for turning.” The next month, Ronald Reagan defeated Jimmy Carter in a landslide U.S. presidential election.

“We are building the foundation stones of a recovery plan,” Brown said on BBC Radio 4 today. “You need coordinated international action to deal with the global banking problems.”

Six polls published this year show Brown’s Labour Party trailing further behind David Cameron’s Conservatives. Brown pledged Jan. 19 to extend the bank rescue announced last year and boost the government’s stake in Royal Bank of Scotland Group Plc to 70 percent. RBS may post an annual loss of 28 billion pounds ($39 billion), the biggest in British corporate history.

Conservative View

“What is completely lacking is public confidence in policy and international confidence,” George Osborne, a Conservative lawmaker who speaks on finance, told Sky News. “They are not commanding confidence and sadly that is what is lacking.”

The FTSE 100 index dropped below 4,000 to a two-month low. The pound fell as low as $1.3506 and traded at $1.3605 as of 1:02 p.m. in London. The currency’s slide to a 23-year low against the dollar this week signals investors are betting Britain will lose its AAA credit rating, Merrill Lynch & Co. strategists wrote in a report yesterday.

“The pound sterling is going to be under pressure,” Jim Rogers, chairman of Singapore-based Rogers Holdings, said in an interview on Bloomberg Television. “The U.K. hasn’t got much to sell to the world anymore.”

The European Commission forecasts the British economy may contract 2.8 percent this year, the most since 1946 when the country was in the grip of mass demobilization after World War II. U.K. GDP rose 0.7 percent in 2008, the least since 1992, officials said today.

Darling’s Forecast

Chancellor of the Exchequer Alistair Darling today told broadcasters that the GDP reading was “undoubtedly sharper than many people expected” and suggested it may force him to scale back predictions of a recovery in 2009. In November he forecast the economy would shrink as much as 1.25 percent this year.

“A pronounced contraction in spending and output is under way,” King said on Jan. 20. “In the first half of this year, the rate of contraction is likely to continue to be marked.”

U.K. manufacturing confidence fell to the lowest since 1980 in the past quarter, a survey by the Confederation of British Industry showed yesterday. TT Electronics Plc, the U.K. maker of car sensors for Bayerische Motoren Werke AG, said Jan. 21 it will cut 700 jobs to weather the automobile industry slump.

“At the moment, I would expect things to continue getting worse rather than better,” British Airways Plc Chief Executive Office Willie Walsh said in a speech today in India.

Rate Cuts

King, who has overseen cuts in the benchmark interest rate to 1.5 percent, the lowest since the bank was founded in 1694, is also planning alternative means to stimulate the economy. He said this week that officials may start buying corporate bonds and commercial paper within weeks to help the economy.

“The slowdown is much sharper than expected,” Lena Komileva, head of G-7 market economics at Tullett Prebon in London, said on Bloomberg Television. “The risk is that the right policy is not being administered quickly enough. The economy is falling off a cliff.”

Retail sales increased 1.6 percent on the month on a seasonally adjusted basis, the statistics office said. Officials said that the data should be treated with caution as they reassess their method of accounting for seasonal swings. They advised people to focus on the unadjusted data, which showed a 1.8 percent increase in December from a year earlier.

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

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RWE Says German Electricity Demand May Drop Up to 5%

By Lars Paulsson

Jan. 23 (Bloomberg) -- RWE AG, Germany’s second-biggest utility, expects domestic power demand to decline by as much as 5 percent this year as industrial companies curb output due to the contraction in Europe’s biggest economy.

“Power demand will decrease, but less than industrial production,” the Essen-based company said in a report published yesterday.

The company said German industrial output was expected to fall by 5 percent this year, citing Rheinisch-Westfaelisches Institut fuer Wirtschaftsforschung, a research and policy group.

Energy demand is declining as manufacturers of products from steel and chemicals to autos curb production as the global crisis reduces orders for products. Germany’s economy may contract by as much as 2.25 percent this year, only showing the first signs of recovery in the second half of the year, according to a report published yesterday by the Economy ministry.

To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net

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OPEC-11 to Cut January Supply 5%, PetroLogistics Says

By Grant Smith

Jan. 23 (Bloomberg) -- OPEC will cut supplies by about 5 percent this month as the group implements production constraints announced in December, according to preliminary estimates from consultant PetroLogistics Ltd.

Oil supply from 11 members of the Organization of Petroleum Exporting Countries subject to quotas will average 26.15 million barrels a day in January, down from 27.65 million barrels a day, Conrad Gerber, the founder of PetroLogistics, said today by telephone from Geneva. From this month, members have a production quota of 24.845 million barrels a day. Iraq has no quota.

Saudi Arabia, the group’s largest member, led the cuts, lowering supply to 8.05 million barrels a day in January from 8.6 million a day last month, Gerber said. The kingdom’s new total is in line with its Jan. 1 quota.

“The latest OPEC supply data gives me confidence we’ll see a drawdown in inventories globally,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd. in London. “The amount of OPEC supply reduction far exceeds the drop in demand.”

OPEC, responsible for about 41 percent of the world’s oil, agreed a record supply reduction at its last meeting on Dec. 17 as demand and prices collapsed. Crude futures traded around $43 a barrel in New York today, having lost more than $100 a barrel from an all-time high reached in July.

Iran, Nigeria

Iran reduced supplies to 3.83 million barrels a day this month from 3.85 million a day in December. Nigeria cut to 1.76 million barrels a day from 2.02 million. Venezuela lowered output to 1.97 million barrels a day from 2.22 million, and Angola trimmed to 1.84 million a day from 1.88 million, according to PetroLogistics.

Iraq, exempt from the quota system while its oil industry recovers from two wars, increased production to 2.45 million barrels a day from 2.43 million, the tanker tracker said.

Saudi Arabia will cut production by 300,000 barrels a day below the quota agreed on with OPEC to prop up prices, Algerian Oil Minister Chakib Khelil told state-run newspaper El Moudjahid earlier this week. OPEC is next due to meet on March 15 in Vienna.

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

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Schlumberger Net Income Falls; Job Cuts Affect 5,000

By David Wethe

Jan. 23 (Bloomberg) -- Schlumberger Ltd., the world’s largest oilfield-services provider, said fourth-quarter profit fell 17 percent as a collapse in petroleum prices slowed exploration spending by customers. The company said job cuts “concern” 5,000 people worldwide.

Net income dropped to $1.15 billion, or 95 cents a share, from $1.38 billion, or $1.12, a year earlier, Schlumberger said today in a statement. Excluding costs associated with job cuts and a write-off related to a customer with “liquidity issues,” profit was 1 cent below the average estimate of 24 analysts surveyed by Bloomberg.

Commodity prices have plummeted as recessions in some of world’s largest economies sapped demand. Oil futures in New York fell 35 percent in the fourth quarter from a year earlier to average $59.08 a barrel, while gas dropped 13 percent. Chief Executive Officer Andrew Gould said exploration will weaken further in 2009 as lower prices are unable to sustain development.

“It is a good sign that they’re coming front and center and acknowledging things have gotten a lot worse,” Mark Brown, an analyst at Pritchard Capital Partners in New York who rates the shares a “buy” and doesn’t own any, said in a telephone interview. “We had to get this negative news out there.”

Gould said on a conference call with analysts that a November decision on job cuts “concerns” 5,000 people worldwide, without elaborating. Schlumberger said Jan. 7 that it cut 1,000 jobs in North America.

Spending to Drop

Spending by companies around the world on oil and natural- gas exploration is expected to drop 12 percent in 2009 to $400 billion, according to a Dec. 19 report by analysts James Crandell and James West of Barclays Capital Research.

Capital spending this year will be about $3 billion, Chief Financial Officer Simon Ayat said on the call. Of that, $2.2 billion will be spent on oilfield services and $800 million will be spent on the seismic business.

“At current prices, most of the new categories of hydrocarbon resources are not economic to develop,” Gould said in the statement. “We expect 2009 activity to weaken across the board with the most significant declines occurring in North American gas drilling, Russian oil production enhancement and in mature offshore basins.”

Sales Rise

Sales advanced 9.9 percent to $6.87 billion in the fourth quarter. Revenue from Schlumberger’s core oilfield-services business gained 15 percent from a year earlier to $6.26 billion. Revenue at WesternGeco, the company’s seismic-mapping business, fell 25 percent to $599 million. Sales jumped 18 percent in Latin America.

The cut in exploration and production spending by Russia, one of Schlumberger’s biggest markets, is one of the things that hurt the service provider in the fourth quarter, Byron Pope, an analyst at Tudor, Pickering, Holt & Co. in Houston, said in a telephone interview. Pope has a “hold” rating on the shares and doesn’t own any.

Russia is part of Schlumberger’s largest regional market, which includes Europe and Africa. While that group reported fourth-quarter revenue of $2.05 billion, up 16 percent from a year earlier, sales slipped 5 percent from the third quarter.

That market will be down in 2009, Gould said on the call while the Latin American market will be flat.

Schlumberger rose $1.15, or 3.1 percent, to $38.42 as of 9:39 a.m. in New York Stock Exchange composite trading. The shares, which have 16 buy, eight hold and one sell rating from analysts, dropped 46 percent during the fourth quarter.

Halliburton Co., the world’s second-largest oilfield- services provider, is scheduled to report earnings Jan. 26. Baker Hughes Inc., the third-biggest oilfield contractor, plans to report its fourth-quarter results Jan. 28.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net.

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Natural Gas Futures Fall on Lower Demand as Recession Builds

By Reg Curren

Jan. 23 (Bloomberg) -- Natural gas fell for the seventh time in eight days in New York on slumping demand for the industrial fuel as the recession deepens.

Supplies are above the five-year average as diminished use by factories and manufacturers blunted withdrawals from storage as during the peak-demand heating season. Industrial users account for about 29 percent of U.S. gas demand and homeowners consume 20 percent, according to Energy Department data.

“All eyes are on the economy right now,” said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. “There seems to be plenty of gas and not plenty of demand.”

Natural gas for February delivery fell 6.6 cents, or 1.4 percent, to $4.615 per million British thermal units at 9:20 a.m. on the New York Mercantile Exchange. Prices have declined 18 percent this year.

Gas inventories stood at 2.736 trillion cubic feet in the week ended Jan. 9, the Energy Department said last week. The excess to the five-year average was 3.1 percent. The next update is scheduled for 10:30 a.m. today.

Supplies probably declined 175 billion cubic feet, according to the median of 19 analyst estimates compiled by Bloomberg. The average change for the week over the past five years is a decline of 126 billion cubic feet, Energy Department data show.

JPMorgan Chase & Co. cut its 2009 price outlook for natural gas futures by 5.2 percent as the recession in the U.S., Europe and Asia slashes demand.

Gas will average $5.69 per million Btu on the New York Mercantile Exchange this year, down from a forecast of $6 on Dec. 17, according to a report from Scott Speaker, JPMorgan’s natural gas strategist in New York.

“It has become clearer in the past month that severe manufacturing weakness will have an impact on natural gas demand that goes beyond a brief hiccup or temporary condition simply needing some producer-driven tightening,” Speaker said in the report.

The number of Americans filing their first unemployment- benefit claims matched a 26-year high, the government said yesterday.

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, the Labor Department said today in Washington.

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

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Canada’s Dollar Falls as U.S. Greenback Gains on Risk Aversion

By Chris Fournier

Jan. 23 (Bloomberg) -- Canada’s dollar fell for the first time in three days and headed for a weekly decline as its U.S. counterpart gained versus most of the major currencies, buoyed by investors seeking a haven from falling asset prices.

“The U.S. dollar is back up again overnight on the global equity sell-off and risk-aversion trade,” said Steven Butler, director of foreign-exchange trading in Toronto at Scotia Capital, a unit of Canada’s third-largest bank.

The Canadian dollar weakened 0.3 percent to C$1.2580 per U.S. dollar at 8 a.m. in Toronto, from C$1.2547 yesterday. The currency dropped 1.2 percent this week. One Canadian dollar buys 79.48 U.S. cents.

Canada’s currency will strengthen to C$1.25 against the U.S. dollar by the end of the first quarter, according to the median forecast in a Bloomberg News survey of 39 economists. Scotia Capital predicts the loonie, as Canada’s dollar is known, will advance to C$1.22 in that period.

The MSCI World Index, a benchmark index for 23 developed markets, fell 1.2 percent. The index is one of the Canadian dollar’s three most closely correlated indicators, along with crude oil and base metals, according to RBC Capital Markets.

Canadian consumer prices fell 0.7 percent in December, the third consecutive monthly drop, as energy prices plunged, Statistics Canada said today in Ottawa.

The effect of the report on the currency was “minimal,” said Butler. “Most data is having a limited effect at the moment,” he said.

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

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Yen Rises to Record as Economic Concern Spurs Demand for Haven

By Ye Xie and Bo Nielsen

Jan. 23 (Bloomberg) -- The yen strengthened to a record against the pound and near a seven-year high versus the euro as concern the global economic slowdown will deepen spurred investors to take refuge in Japan’s currency.

Sterling fell to a 23-year low versus the dollar after a report showed the U.K. economy shrank the most in the fourth quarter since 1980. The euro was poised for a fourth weekly loss against the dollar after Europe’s manufacturing and service industries contracted in January. The yen headed for the biggest weekly gain against the dollar in more than a month.

“The trend for a stronger yen won’t reverse until there’s a material change in global economic outlook,” said Adam Fazio, a currency strategist in New York at CIBC World Markets Inc., Canada’s fifth-biggest lender. “I am very bearish on the global economy, and I don’t see anything there to stop the dollar-yen from getting down to 80.” That level would be near the lowest since World War II.

The yen gained 1.5 percent to 121.62 versus the pound at 9:22 a.m. in New York, from 123.38 yesterday, after touching the record of 118.85. Japan’s currency advanced 1.3 percent to 114.07 per euro from 115.59 after reaching a seven-year high of 112.12 on Jan. 21. The yen traded at 88.85 per dollar after reaching 87.13 two days ago, the strongest since July 1995.

The pound weakened as much as 2.7 percent to $1.3503, the lowest level since 1985. The euro rose 0.2 percent to 93.85 pence. The 16-nation currency declined as much as 1.8 percent to a six-week low of $1.2765 before trading at $1.2791.

Yen Versus Pound

The yen was headed for a 9.9 percent weekly gain versus the pound. Japan’s currency advanced 5.5 percent versus the euro and 2.2 percent versus the dollar this week.

Russia’s ruble weakened 1.2 percent to 33.0891 per dollar today as the central bank widened its trading band in a move toward a free float. Investors and Russian citizens withdrew at least $278 billion from Russia since August, according to BNP Paribas SA data.

The yuan was little changed at 6.8380 per dollar after earlier slumping as much as 0.3 percent, according to the China Foreign Exchange Trade System. Timothy Geithner, President Barack Obama’s nominee for Treasury secretary, said yesterday China is curbing appreciation of the currency. The yuan has strengthened 21 percent since a dollar peg was scrapped in 2005.

U.K. Bailout

Sterling lost 8.1 percent versus the dollar and 5 percent per euro this week as the U.K. government’s plan for a second bank bailout in three months raised concern the nation’s budget deficit will keep widening.

“The pound looks set to weaken further as risks surrounding the U.K. continue to ratchet higher,” Ned Rumpeltin, a London-based currency strategist at Morgan Stanley, wrote in a research note yesterday. “Concerns center on whether the country can attract the capital from external investors to finance its burgeoning fiscal deficit.”

Sterling will weaken to $1.30 and reach parity with the euro by the end of June, Morgan Stanley forecasts.

Britain’s gross domestic product fell 1.5 percent from the previous three months, the Office for National Statistics said today in London. Economists predicted a contraction of 1.2 percent, according to the median of 33 estimates in a Bloomberg survey. The economy has now shrunk for two consecutive quarters, the definition of a recession.

European Manufacturing

The euro fell versus the yen as Europe’s manufacturing and service industries contracted in January for an eighth month as the global recession curbed demand for exports and damped spending. A composite index of both industries based on a survey of purchasing managers by Markit Economics was at 38.5, compared with 38.2 in December, which was the lowest reading since the survey began in 1998. A reading below 50 indicates contraction.

“Selling pressure on the euro and the pound versus the yen is likely to persist,” said Masafumi Yamamoto, head of foreign- exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader.

The yen advanced against all of the major currencies this week, rising 7.5 percent to 46.16 against New Zealand’s dollar and 7 percent to 57.10 versus Australia’s dollar. Investors tend to purchase the yen in times of market turmoil because Japan has a current-account surplus. Japan’s benchmark interest rate of 0.1 percent compares with 4.25 percent in Australia and 5 percent in New Zealand.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the franc and Sweden’s krona, rose 1.3 percent today, after reaching 86.81, the highest level since Dec. 8.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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Cocoa Heads for Biggest Weekly Gain in 7 Years on Pound’s Drop

By M. Shankar

Jan. 23 (Bloomberg) -- Cocoa headed for its biggest weekly gain in more than seven years in London as the U.K. pound slumped and on speculation a supply deficit will push up prices.

Sterling sank to a 23-year low versus the dollar and headed for its biggest weekly drop since at least 1992 after a report showed the U.K. economy shrank more than forecast in the fourth quarter. Declines by the pound reduce the cost of buying London- traded cocoa for holders of other currencies. The United Nations said yesterday an infestation of caterpillars in northern Liberia may spread to Ivory Coast, the world’s biggest cocoa grower.

“The currency is affecting the London market,” Laurent Pipitone, a senior statistician at the International Cocoa Organization in the U.K. capital, said today. “The past two years we have had a supply deficit, and it is clear we will have a deficit this year.”

Cocoa for March delivery rose 35 pounds, or 1.8 percent, to 2,004 pounds ($2,746) a metric ton on the Liffe exchange by 2:32 p.m. in London. The beans have climbed 13.5 percent this week and will post the biggest gain since November 2001 should they close at that level today. Cocoa is the only commodity on the UBS Bloomberg CMCI index to have risen in the past 12 months.

Exports from Ivory Coast in December fell 14 percent from a year earlier, data from the ports of Abidjan and San Pedro show.

Output in Ivory Coast, the source of about 40 percent of global supply, has been hurt by bad weather, low prices that spurred farmers to hoard beans, and a lack of credit to fund trade, according to Brussels-based Fortis.

Deficit Forecast

Global production of the chocolate ingredient will fall short of demand by 45,000 tons in the 2008-09 season, Fortis said last month, switching from its forecast for a surplus.

Cocoa for March delivery rose $41, or 1.6 percent, to $2,621 a ton on ICE Futures U.S. in New York. Robusta coffee for March delivery fell $1, or 0.1 percent, to $1,707 a ton on Liffe, and white sugar gained $7.20, or 2.1 percent, to $352.50 a ton.

India, the biggest consumer of sugar, may cut tax on raw- sugar imports to bolster local supplies and prevent domestic prices rising, a government official who didn’t want to be identified told reporters in New Delhi today.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net

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Crude Oil Falls as Recession Causes U.S. Supplies to Increase

By Mark Shenk

Jan. 23 (Bloomberg) -- Crude oil fell after U.S. stockpiles increased and data signaled the recession in the major energy- consuming countries is deepening.

Crude-oil supplies rose four times more than forecast to the highest since August 2007 as refineries cut operating rates, the Energy Department said yesterday. The U.K. economy shrank more than forecast during the fourth quarter, posting the biggest contraction since 1980.

“Yesterday’s inventory report is still hanging over the market,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “There’s more negative economic news today, which is putting additional pressure on the market.”

Crude oil for March delivery fell $1.74, or 4 percent, to $41.93 a barrel at 10:03 a.m. on the New York Mercantile Exchange. Prices are down 6 percent this year and are 52 percent lower than a year ago.

The Organization of Petroleum Exporting Countries will reduce supplies by 5.4 percent this month to 26.15 million barrels a day, according to preliminary estimates from consultant PetroLogistics Ltd., following the group’s announcement last month of a record production cut in response to tumbling prices.

“On the bullish side, OPEC members appear to be getting closer to making the cuts they promised,” Bentz said. “They still have a ways to go, but these are substantial cuts.”

Starting this month, the members with production targets, all except Iraq, have a combined quota of 24.845 million barrels a day.

U.K. Economy

U.K. gross domestic product fell 1.5 percent from the previous quarter, the Office for National Statistics said today in London. Economists predicted 1.2 percent, according to the median of 33 estimates in a Bloomberg News survey. The economy has now shrunk in two quarters, the conventional definition of a recession.

Fuel demand in the U.S., the world’s biggest oil-consuming country, averaged 19.4 million barrels a day during the four weeks ended Jan. 16, down 4.7 percent from a year earlier, yesterday’s Energy Department report showed.

U.S. supplies of crude oil rose 6.1 million barrels to 332.7 million last week, the department said. Stockpiles were forecast to climb by 1.4 million barrels, according to the median of analyst responses in a Bloomberg News survey.

Brent crude oil for March settlement declined $1.21, or 2.7 percent, to $44.18 a barrel on London’s ICE Futures Europe exchange.

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

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Gold Futures Climb on Demand for Haven After Equities Slide

By Halia Pavliva

Jan. 23 (Bloomberg) -- Gold prices rose to a two-week high on demand for a haven as global equities tumbled amid the recession and a slump in corporate earnings. Silver was little changed.

Europe’s Dow Jones Stoxx 600 Index today dropped to the lowest since April 2003. This week, the MSCI World Index of shares has declined almost 6 percent, while gold has rallied 4.3 percent.

“There is a lot of fear,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, “Things are bad here, but they are worse” in Europe, he said.

Gold futures for February delivery climbed $17, or 2 percent, to $875.80 an ounce at 10:05 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $884, the highest since Jan. 5.

Gold rose 5.5 percent last year, the eighth straight gain, as the Standard & Poor’s 500 Index fell 38 percent.

“We are back to the same situation where money has nowhere to go and gold remains the safe haven of choice,” Miguel Perez- Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in an e-mail.

The rally may stall around $900, Perez-Santalla said. “The industry that consumes the metal cannot support that price.”

Silver futures for March delivery were little changed at $11.37 an ounce. The price has climbed more than 1 percent this week.

Platinum, Palladium

Platinum futures for April delivery rose $3.20, or 0.3 percent, to $938.10 an ounce on the Nymex. The metal is down 1.6 percent this week.

Palladium futures for March delivery gained $1.20, or 0.7 percent, to $186 an ounce. The price is little changed this week.

Platinum and palladium are used mostly for pollution- control devices in cars.

“Actual consumption is close to nil, and until the economy starts to turn around, this will be the trend, so I wouldn’t bank on any rally” in platinum and palladium, Perez-Santalla said.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

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European Stocks Fall; Stoxx 600 Slumps to Lowest Since 2003

By Adam Haigh

Jan. 23 (Bloomberg) -- European stocks fell, sending the Dow Jones Stoxx 600 Index to the lowest in more than five years, as concern deepened the global economic slump will erode earnings.

Prudential Plc, Britain’s second-largest life-insurance company, retreated 11 percent amid speculation insurers may run short of funds. Infineon Technologies AG, Europe’s second-biggest semiconductor maker, sank 7.7 percent as its Qimonda unit filed for insolvency. Ubisoft Entertainment SA slumped 19 percent after revising its sales forecast.

The Stoxx 600 dropped 1.7 percent to 179.69 as of 2:50 p.m. in London, on course for the lowest close since April 2003. Disappointing earnings from Nokia Oyj to Microsoft Corp. and concern banks may need to raise more capital to shore up their balance sheets has sent the measure to its second week of losses.

“Doom and gloom is everywhere,” said Andy Brough, a London-based fund manager at Schroder Investment Management, which has about $12.7 billion under management. “It’s far harder for companies to come out saying they have actually noticed something improving,” he told Bloomberg Television.

The U.K. economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980. Gross domestic product fell 1.5 percent from the previous quarter.

National benchmark indexes decreased in all 18 western European markets except Belgium and Ireland. Germany’s DAX dropped 2.4 percent. France’s CAC 40 retreated 2.3 percent as Axa SA declined. The U.K.’s FTSE 100 slipped 1.4 percent, led lower by Legal & General Group Plc.

Cutting Dividends

Dividends in Europe may fall 10 percent in 2008 and 3 percent this year, UBS AG equity strategists led by Nick Nelson wrote in note today. U.S. companies are reducing dividends at the fastest rate in half a century, squeezing investors who depend on the payouts more than ever to boost returns, according to data compiled by Bloomberg.

The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001, according to data compiled by Bloomberg.

Analysts have cut estimates for company earnings worldwide by $1 trillion since October, suggesting profits may tumble as much as 45 percent this year amid the global recession, Societe Generale SA’s Andrew Lapthorne wrote in a note today.

Earnings at companies in the Stoxx 600 will fall 1.4 percent on average this year following a 17 percent slump in 2008, estimates compiled by Bloomberg show.

Credit Losses

The benchmark for European equities has slumped 51 percent since the beginning of last year as credit-related losses and writedowns topped $1 trillion and the U.S., Japan and Europe entered the first simultaneous recessions since World War II.

Prudential sank 11 percent to 272.25 pence. Legal & General, Britain’s third-biggest life-insurance company, retreated 8.8 percent to 53.6 pence.

“There are concerns over liquidity,” said Kevin Ryan, a London-based analyst at ING Groep NV. “There is just general panic. The business outlook is clearly muted by the economic situation.”

Officials at Prudential and Legal & General declined to comment.

Axa, France’s largest insurer, dropped 8.3 percent to 11.20 euros. Swiss Reinsurance Co. sank 16 percent to 28.08 francs.

Infineon retreated 7.7 percent to 66 cents. The company’s Qimonda unit filed to open insolvency proceedings this morning after failing to secure sufficient financing following a slide in memory-chip prices this year. Infineon said it will increase its provisions in the first quarter.

Ubisoft, Mining Companies

Ubisoft sank 19 percent to 10.55 euros as Europe’s largest maker of video games revised its full-year sales forecast.

BHP Billiton Ltd., the world’s biggest mining company, lost 2.1 percent to 1,138 pence. Anglo American Plc retreated 2.6 percent to 1,236 pence. Nomura Holdings Inc. cut its recommendation for both companies to “neutral” from “buy.”

Copper and aluminum were on course for a second consecutive weekly decline in London on concern that economic slowdowns in the U.S. and China are set to deepen, sapping demand for industrial metals.

Atlas Copco AB slid 7 percent to 53.25 kronor after the largest maker of air compressors had its recommendation lowered to “equal-weight” from “overweight” by Morgan Stanley, saying “we want to sell stocks whose earnings have seen the greatest surge from the commodity boom, where pricing is deteriorating and there is limited benefit from decreasing operating costs.”

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

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Companies Slash Dividends at Fastest Rate in 53 Years

By Courtney Dentch and Jeff Kearns

Jan. 23 (Bloomberg) -- U.S. companies are reducing dividends at the fastest rate in half a century, squeezing investors who depend on the payouts more than ever to boost returns.

Five companies in the Standard & Poor’s 500 Index slashed $7.5 billion in outlays this month, more than all the cuts from 2003 to 2007, S&P said. Today, General Electric Co. backed the dividend it has paid since 1899 despite concern that four quarters of declining profits will sap available cash.

The worst financial crisis since the Great Depression is forcing companies to hoard cash after earnings before one-time costs dropped 38 percent last year, the most since 2001, according to data compiled by Bloomberg. Stock losses pushed dividends as a percentage of the S&P 500’s price above 4 percent in 2008, the highest since Bloomberg data began in 1993.

“A lot of people rely on those dividends for income,” said Tim Ghriskey, who helps oversee $2 billion as chief investment officer for Solaris Asset Management LLC in Bedford Hills, New York. “If the economy continues to deteriorate, we’re going to see more cuts, and it’s going to hurt them even more.”

An investor owning the S&P 500 who pocketed the average dividend paid by its companies in 2008 would have lost 36 percent last year, compared with a 38.5 percent decline for the index itself. That’s the biggest difference in at least 16 years, according to data compiled by Bloomberg.

The number of S&P 500 companies reducing shareholder payments climbed for five straight months to 53 in November, the last period for which data is available, S&P said. That’s the most since records began in 1956.

Lagging Indicator

Investors may have to wait before payouts rebound. Dividends are a lagging indicator of financial health and can take a year to recover once the economy stops shrinking, said Dirk van Dijk, research director at Zacks Investment Research in Chicago.

“If you’re a trucking company, your first priority isn’t to raise the dividend,” van Dijk said. “It’s to replace the truck that’s leaking oil.”

Companies in the S&P 500 cut $40.6 billion in payouts last year after a five-quarter profit slump lowered cash reserves, according to S&P data. More than 90 percent of the reductions were by financial companies. The percentage of profits returned to shareholders rose to a seven-year high of 63 percent at the end of 2008, leaving 23 companies paying more than they earned in the last year, according to data compiled by Bloomberg.

AAA Rating

Jeffrey Immelt, GE’s chief executive officer, today reiterated the company’s commitment to paying its $1.24 a share dividend this year. The Fairfield, Connecticut-based company also said fourth-quarter profit from continuing operations fell 43 percent, the fourth straight decline.

UBS AG analysts said Jan. 20 that GE may cut its dividend and divert the money to its industrial businesses. Keeping the dividend “may impair its ability to invest in its core industrial businesses as the same pace as its competitors,” the UBS analysts wrote then.

Pfizer Inc., the world’s largest drugmaker, froze its payout last month after 41 years of increases. The company said Dec. 15 it would keep its quarterly dividend at 32 cents a share because of the pending loss of patent protection for Lipitor, which accounts for a quarter of its revenue.

The New York-based drugmaker paid $8.6 billion in dividends last year and ended the third quarter with about $26 billion in cash and short-term investments, according to spokeswoman Joan Campion. She didn’t return a call seeking comment on the dividend’s freeze.

Declining Profits

Earnings among S&P 500 companies are expected to fall 28 percent in the fourth quarter, with declines across each of the 10 industry segments, according to analyst estimates compiled by Bloomberg. For 2008, S&P 500 companies probably earned a combined $44.91 a share before one-time items, a profit measure that gauges the ability to pay a dividend, according to data and estimates compiled by Bloomberg. That’s down from $73.01 in 2007.

Charlotte, North Carolina-based Bank of America Corp., the largest U.S. lender by assets, lowered its dividend to 1 cent from 32 cents this month after posting its first quarterly loss since 1991. New York-based CIT Group Inc., the commercial lender that converted to a bank holding company; Atlanta-based SunTrust Banks Inc.; and Marshall & Ilsley Corp., Wisconsin’s largest bank, also reduced their payouts in January.

“There’s acute pressure on dividends and the longer the economy remains in recession the more acute it becomes,” said John Skjervem, who helps manage $130 billion as chief investment officer at Northern Trust Personal Financial Services in Chicago. “It’s going to get worse until collective confidence in the business cycle is restored.”

To contact the reporters on this story: Courtney Dentch in New York at cdentch1@bloomberg.net; Jeff Kearns in New York at Jkearns3@bloomberg.net.

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Canadian Stocks Fall, Led by Royal Bank, Canadian Natural

By John Kipphoff

Jan. 23 (Bloomberg) -- Canadian stocks fell, sending the main index toward its third-straight weekly drop, as financial companies and energy producers retreated on concern that a deepening recession will hurt earnings.

Royal Bank of Canada paced a 2 percent drop among banks and insurers. Canadian Natural Resources Ltd. led oil and gas shares lower as crude-oil prices declined more than 4 percent. Mining companies were the only one of the Standard & Poor’s/TSX Composite Index 10 industry groups to climb, as bullion producers including Barrick Gold Corp. surged after prices for the precious metal climbed to a three-week high.

The S&P/TSX fell 0.3 percent to 8,465.60 at 9:55 a.m. in Toronto. It is poised for a 5.2 percent weekly drop.

Royal Bank, the nation’s largest lender, fell 3.5 percent to C$29.03. Toronto-Dominion Bank, the second-biggest, slid 1.7 percent to C$39.01. A measure of financial stocks dropped 2 percent, extending a five-year low.

Canadian Natural, owner of the Horizon oilsands project, dropped 2 percent to C$41.95.

Barrick Gold, the world’s biggest producer, rose 4.6 percent to C$46.75.

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

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Capital One, Caterpillar, Crucell, Xerox: U.S. Equity Movers

By Lu Wang

Jan. 23 (Bloomberg) -- Shares of the following companies are having unusual fluctuations in U.S. trading. Stock symbols are in parentheses, and prices are as of 9:50 a.m. in New York.

Advanced Micro Devices Inc. (AMD US) slipped 4.5 percent to $1.93. The second-largest maker of personal-computer processors reported its ninth consecutive loss after plummeting PC demand forced customers to slash orders.

Barclays Plc American depositary receipts (BCS US) fell 18 percent to $2.79. The U.K. bank is trading at a price suggesting investors give it a 70 percent chance of being nationalized, according to analysts at Sanford C. Bernstein & Co.

Capital One Financial Corp. (COF US) tumbled 15 percent to $18.73. The Virginia-based credit-card lender posted a $1.42 billion fourth-quarter loss on goodwill charges tied to its auto lender and a $1 billion boost to reserves for soured loans.

American Express Co. (AXP US), the biggest U.S. credit-card company by purchases, fell 5.7 percent to $15.14.

MasterCard Inc. (MA US) lost 4.9 percent to $122.52. The world’s second-biggest credit-card network was rated “sell” in new coverage at Citigroup Inc., citing slower global spending.

Caterpillar Inc. (CAT US) fell 5.1 percent to $35.35. The world’s largest maker of construction equipment after Komatsu Ltd. (6301 JP), the world’s second-biggest maker of earthmoving equipment, cut its profit forecast by 42 percent, citing slowing demand from emerging markets.

Forestar Group Inc. (FOR US) jumped 22 percent to $11.25. The manager of land with oil and gas interests received a takeover offer from Holland M. Ware, who currently owns 7.4 percent of the company’s stock, for $15 a share.

General Electric Co. (GE US) fell 4.6 percent to $12.86. The world’s biggest maker of power-plant turbines, jet engines, locomotives and medical imaging equipment forecast $10 billion in credit losses this year, $1 billion more than its prior estimate.

Geron Corp. (GERN US) rallied 21 percent to $6.31. The company won approval from U.S. regulators to begin the first human test of embryonic stem cells, treating people who have spinal cord injuries.

Harley-Davidson Inc. (HOG US) had the second-biggest decline in the Standard & Poor’s 500 Index, losing 17 percent to $10.26. The biggest U.S. motorcycle maker reported 8.5 percent less fourth-quarter profit than analysts estimated as the recession reduced demand.

Wyeth (WYE US) rose the most in the S&P 500, climbing 8.2 percent to $42. Pfizer Inc. (PFE US), the world’s biggest drugmaker, is in talks to buy Wyeth in an effort to replace revenue it expects to lose to generic competition in three years, according to three people familiar with the discussions.

ADRs of Crucell NV (CRXL US), the largest Dutch biotechnology company that’s in negotiations to be bought by Wyeth, lot 8.8 percent to $20.41.

Xerox Corp. (XRX US) fell the most in the S&P 500, sliding 20 percent to $6.10. The world’s largest maker of high-speed color printers posted earnings and gave a forecast that fell short of analysts’ estimates as customers spent less on its machines amid the recession.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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U.S. Stocks Fall on Earnings; AMD, Xerox, Capital One Decline

By Elizabeth Stanton

Jan. 23 (Bloomberg) -- U.S. stocks slid, extending a global slump that sent Europe’s benchmark index to a five-year low, as disappointing earnings at companies from Xerox Corp. to Advanced Micro Devices Inc. spurred concern the profit slump is worsening.

Xerox fell 18 percent and AMD lost 7.9 percent on results that trailed analysts’ estimates as the recession sapped demand for computer chips and copiers. Capital One Financial Corp. tumbled 13 percent after the credit-card company posted a $1.42 billion fourth-quarter loss. Samsung Electronics Co. slid 4.1 percent in South Korea following its first quarterly loss, while Infineon Technologies AG, Europe’s second-biggest chipmaker, sank 4.2 percent as its Qimonda unit filed for insolvency.

“As companies come in, I would say 90 percent of the earnings estimates are coming down, so people are having a tough time, struggling as to what the real multiples of stocks are,” Scot Black, who oversees $1.4 billion as president of Delphi Management Inc. in Boston, said on Bloomberg Television.

The Standard & Poor’s 500 Index dropped 1.4 percent to 815.89 at 10:03 a.m. in New York. The Dow Jones Industrial Average lost 142.25, or 1.8 percent, to 7,980.55. The Russell 2000 Index slid 1.9 percent. Europe’s Dow Jones Stoxx 600 Index lost 1.5 percent, while the MSCI Asia Pacific Index tumbled 2.7 percent.

U.S. stocks fell on three of the four trading days this week, taking this week’s drop in the S&P 500 to 3.8 percent, after economic data and corporate profit reports signaled the recession is deepening. The benchmark has lost 9.7 percent this year. European shares have dropped on 12 of the last 13 days.

Earnings Slump

Profits have decreased 60 percent for the 69 companies in the S&P 500 that have released fourth-quarter results so far. Analysts now estimate a 28 percent drop in profits for the entire index, which would mark the fifth straight quarter earnings slumped. In March 2008, analysts projected that income would rise as much as 55 percent, according to Bloomberg data.

U.S. companies are reducing dividends at the fastest rate in half a century, according to S&P data, squeezing investors who depend on the payouts more than ever to boost returns. Companies in the S&P 500 cut $40.6 billion in payouts last year after a five-quarter profit slump lowered cash reserves.

AMD, Xerox

AMD, the world’s second-largest maker of personal-computer processors, slumped as much as 16 cents to $1.86 after reporting its ninth consecutive loss because of plummeting PC demand. The fourth-quarter net loss was $1.42 billion, compared with a loss of $1.77 billion a year earlier. Sales, excluding some items, fell to $1.16 billion, a bigger drop than the company predicted last month.

Xerox slid $1.37 to $6.22. The world’s largest maker of high-speed color printers said fourth-quarter profit dropped on job-cut costs and slowing demand for its machines. Sales fell 10 percent to $4.37 billion, missing the $4.72 billion average estimate of analysts surveyed by Bloomberg.

Stocks will retreat around the world because of shrinking demand from China as growth in the third-biggest economy slows, said Nouriel Roubini, the New York University professor who predicted last year’s financial crisis.

Global equities will fall 20 percent from current levels as China, which contributed 19.5 percent to total growth in 2007, contends with its slowest expansion in seven years, he said. Wall Street strategists predict the S&P 500 will rise 29 percent this year from the closing level yesterday.

Capital One sank 13 percent to $19.12. The Mclean, Virginia-based credit-card company had a $1.42 billion loss in the fourth quarter on impaired-goodwill charges from its auto lender and a $1 billion boost to reserves for soured loans.

Harley, Pfizer

Harley-Davidson Inc. tumbled 16 percent to $10.47. The largest U.S. motorcycle maker said it will cut about 1,100 jobs after fourth-quarter profit slumped on reduced demand for its premium cruiser models.

Pfizer Inc., the world’s biggest drugmaker, declined 2.8 percent to $16.73 after people familiar with the discussions said the company is in talks to buy Wyeth. Wyeth jumped 8.8 percent to $42.26.

A combination would create a drugmaker with annual sales of more than $70 billion and best-selling medicines including the cholesterol pill Lipitor and the Prevnar vaccine against pneumonia. The purchase price would be as much as $60 billion, the Wall Street Journal said, citing a person familiar with the talks.

“The buyer will be penalized because these acquisitions bring around integration costs, debt assumption and in many cases equity dilution,” said Carlos Sanchez, a trader at Interdin Holdings SA in Madrid.

U.K. Contraction

London’s FTSE 100 Index slipped 0.9 percent after the U.K. economy shrank more than economists forecast during the fourth quarter in the biggest contraction since 1980 as the financial crisis crippled the banking industry and mired Britain deeper in the recession. Gross domestic product fell 1.5 percent from the previous quarter, compared with economists’ projection of a 1.2 percent drop, according to a Bloomberg News survey.

Google Inc. climbed 2.8 percent to $315.04. The owner of the most popular Internet search engine beat fourth-quarter profit estimates yesterday after the company famous for boundless growth took a harder line on managing expenses. Google slashed capital spending by 46 percent last quarter and added just 100 employees, compared with about 500 in the third quarter.

-- With reporting by Fabienne Lissak in Paris. Editors: Michael Regan, Chris Nagi

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

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