British Pound Has Surged This Morning - Will the Rally Continue?

Daily Forex Technicals | Written by DailyFX | Jan 29 09 15:00 GMT |

The British pound has enjoyed three consecutive sessions of strong rallies that have brought many of the sterling crosses to significant levels of technical resistance. While short-term momentum is still in the single currency's favor, it cannot be ignored that the pound is just off of recent record lows. Our DailyFX Analysts offer their outlooks for the pound and what they think is the best set up among the crosses. Currency Strategist - Terri Belkas My picks: Long GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 Day - 1 Week GBP/USD has broken above trendline resistance from the January 9 high, leaving potential open for further gains toward the confluence of the 61.8% fib of 1.5350-1.3503 and the 78.6% fib of 1.4982-1.3503 at 1.4643/62. However, an additional region of immediate resistance at 1.4413/26 has prevented the rally from continuing and has pushed GBP/USD back into a trading range of approximately 1.41-1.44. At this point, I think it may be more prudent to set a buy order near 1.4110 with a stop below 1.3979 and an initial target of 1.4371 (top of the range) and secondary target of 1.4473/1.4500 (January 13, 15 lows). Currency Analyst - David Rodriguez My picks: Flat the GBP/USD Expertise: System Trading Average Time Frame of Trades: 2-10 weeks Last week I moved to tighten risk on my previous GBP/USD short position, and that saved me from substantial losses. Indeed, I'm currently flat the GBP/USD after having moved my stop on my short above 1.4000. My bias is now bullish the GBP/USD based on a substantial shift in sentiment, but risk/reward is currently not there to support a GBP/USD long. I'll stay flat the Sterling until I see better opportunities. Currency Analyst - Ilya Spivak My picks: Short GBPUSD (pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Last week, GBPUSD dropped below support at the bottom of a Falling Wedge formation that contained prices since late October but risk-reward looked far from favorable. Sterling would find initial support in the 1.3680-1.4050 congestion area that has held up sterling since 1985 and bounce higher, rising for another test of support-turned-resistance at the Wedge bottom. Positioning now looks to be showing the makings of an Advance Block formation, with confirmation pending on a bearish close for the current candle. If this materializes, look to go short GBPUSD eyeing the continuation of the broader down trend. Currency Analyst - John Rivera My picks:Long GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My short GBP/USD call last week proved to be profitable as the pair would go and set a fresh 23 year low with a drop to 1.3503. However, since then it has rallied over 800 pips as traders viewed the selloff as overdone. Therefore, we could see the pair look to trade back into the 1.4500 - 1.5500 range that we saw from November through January. However, before, I go long I would like to see the 20-Day SMA cleared at 1.4484. If resistance holds it may change my bias with a BoE rate decision looming next week, so look for any pre-decision rhetoric from committee members as to future direction. Economists are forecasting a 50 bps cut and as we get closer we may see the Sterling weaken. Currency Analyst - David Song My picks: Remain 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 broke below major support levels throughout December, and the lack of momentum to retrace the selloff in the previous month continues to favor a bearish forecast for the pair. I have been short the pound-franc since price action broke below the 50.0% Fib on 12/17, and I will continue to hold a bearish outlook for the pair as the Swiss franc continues to benefit from safe haven flows. I will continue to hold my target at the January low of 1.5364, but we may see the pair remain range-bound over the remainder of the week before it continues to move lower. Currency Analyst - Joel S. Kruger My picks: Buy GBP/USD @1.4385, for 1.5000; stop at 1.4040 Expertise: Technical Analysis Average Time Frame of Trades: 1-3 Days Price action thus far today has been quite interesting with the pair initially trading lower to take out the previous daily low, ending a sequence of 4 consecutive daily higher lows, before reversing sharply to trade back towards daily opening levels. While the overall trend is indeed grossly bearish, our outlook for the pair remains constructive with inter-day studies still showing plenty of room for corrective upside before bear trend continuation. Recently, much of the broad based USD busying has come in the European session before a US session, which over the past week, has been selling USDs more aggressively. While the pullback to 1.4070 is concerning, we will wait to see if that level is tested again in the US session. Our contention is that the 1.4070 level will hold and the market will eventually trade back above 1.4375 (28Jan high) to keep the recovery structure intact. Fundamental Catalyst - The UK currency has been decimated over the past several months on the back of a global financial crisis and an ongoing deterioration within the local data. Sterling has been the currency of choice to play long USD positions through, bearing the brunt off the global macro slowdown. Much of the depreciation in the currency has also been exacerbated by a divergence in monetary policy between the Bank of England and the ECB in which the UK central bank has been vastly more accommodative. Eurozone data had not been showing the kind of weakness as was seen in the UK which translated into a more balanced ECB policy. However, we are starting to see a shift in the fundamentals, with the Eurozone deterioration starting to gain more traction. This should ultimately take some pressure off of Cable as traders begin to liquidate long EUR/GBP positions. Cable has also been very sensitive to risk aversion and therefore any sense of stability within the financial markets is sure to benefit the beleaguered currency. 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. Capital Expenditure Falters as Economy Worsens

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jan 29 09 15:53 GMT |

U.S. durable goods orders continue to weaken dramatically. Core capital goods orders dropped a big 2.8% M/M. Overall, the report highlights the worsening level of capital expenditure in the U.S. U.S. durable goods orders posted a worse than expected 2.6% M/M in December, following the downwardly revised 3.7% M/M drop in November. The decline was worse than the 2.0% M/M drop expected by the markets, and was the fifth consecutive month in which orders have either fallen or remained flat. Excluding transportation, orders were down by a more dramatic 3.6% M/M, again slightly worse than the -2.7% M/M expected by the markets. Core capital goods orders, which exclude defense and aircraft orders, were also very weak, falling by 2.8% M/M, undoing the modest 1.7% M/M gain the month before. On an annual basis, total orders are down a massive 19.7% Y/Y, while orders ex-transportation and core capital goods orders are also down by double-digits, falling 15.0% Y/Y and 12.5% Y/Y, respectively. On a 3-month annualised basis, core capital goods orders are down a whopping 32.5%. And with shipments down 0.7% M/M, the inventory to shipments ratio spiked to 1.80 in December from 1.78 in November, and is now at its highest level since the early 1990s. To put it mildly, capital expenditure by U.S. businesses is well off its normal pace as new orders have now fallen out of bed, and there is little to suggest that things will improve in a meaningful way any time soon. In fact, we expect orders to decline even further as the worsening economic conditions continue to dampen the investment and production decisions of U.S. businesses, in the face of plunging demand for their products. The report also speaks to the risk of a Q4 GDP figure that could flirt with -6.0% Q/Q ann. 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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New Home Sales Fell to a Record Low in December

Daily Forex Fundamentals | Written by Wachovia Corporation | Jan 29 09 15:49 GMT |

New home sales set a new all-time low with sales running at just a 331,000 unit pace. A net revision for the last three months took 40,000 units out of the pace of sales as well. With consumers stressed on many fronts it is not surprising that we are seeing a pullback in home sales, but this pace of decline is unprecedented. Sales Dropped Sharply Sales of new homes fell 14.7 percent in December, and are nearly 45 percent off of their year-ago pace. A weak economy coupled with the problems we have had for several years may continue to put downward pressure on sales. However, lower interest rates and talk of further help from Washington may mean a bottom comes sooner rather than later. Inventory & Prices Dropped Further The inventory of homes for sale dropped by 40,000 in December, however the November level was revised higher and what had been a major drop was all but erased. Inventories are definitely improving but we have some question about just how quickly. Prices will likely continue to fall through this year. 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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Fears are Not Leaving the Market...

Daily Forex Fundamentals | Written by Crown Forex | Jan 29 09 15:37 GMT |

The portrait so far of the currencies market is a little alike to the one that was drown in the previous session as fears are still spread due to the global overall economic outlook that is endlessly darkening. For that reason, a slight unwinding of carry trades is still present and the dollar is currently seeing its value deteriorated due to the further drop of Durable Goods and the rise of the Unemployment Claims as it was reported lately in the U.S. Still, the euro-dollar pair is slightly falling despite the fact that the green currency has weakened, as the appeal of the Union currency remains eroded by the presence of this slight unwinding of carry trades. Therefore, the euro is now traded at 1.3087 recording a high of 1.3179 and a low of 1.3026 with a resistance detected at 1.3135 and a support at 1.3048. Moreover, the pair shows a strong tendency to slip further to the downside as the momentum indicators show that the pair is declining at different time scales. As for the pound-dollar pair, it continues on inclining a little due to a considerable upside recovery movement, having the pound so far traded at 1.4262 recording a high of 1.4410 and a low of 1.4070 along with a resistance level witnessed at 1.4350 and a support at 1.4205. Additionally, the pair is forecasted to decline as it is noticeable that the pair is falling strongly through the overall momentum indicators. Now, the dollar-yen pair is continuing its collapse as on one hand the appeal of the yen as a the lowest-yielding asset pushes traders to get rid of the dollar in front of the yen. On the other hand, the dollar lost significant power after that the government reports showed a fall of U.S durable goods along with an inclined unemployment claims. Consequently, the yen is traded at 89.84 recording a high of 90.65 and a low of 89.61. Also, a resistance level could be noticed at 90.39 and a support at 89.44 which are actually levels in which the pair is trading among as some mixed signs could be detected at different time scales through the momentum indicators. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Mid-Day Report: Dollar Mixed after Poor Durables, New Home Sales and Jobless Claims

Market Overview | Written by ActionForex.com | Jan 29 09 15:28 GMT |

Dollar is rather mixed after another round of poor US data are released today. Though, yen is mildly higher as US stocks opens lower. Durable goods orders fell the third consecutive months by -2.6% in Dec, worse than expectation of -1.8%. Ex auto orders also dropped much more than expected by -3.6% while ex-defense orders dropped by -4.9%. More surprising was the downward revisions in Nov's numbers with headline orders down from -1.5% to -3.7%, ex-auto orders down from +0.6% to -1.7% and ex-defense orders down from -1.5% to -3.9%. The report raises some concern that tomorrow's Q4 GDP report will show deeper contraction that expected -5.4% qoq. On the other hand, new home sales dived sharply by -14.7% in Dec to another record low of 0.33m annualized rate. Initial jobless claims remains elevated at 588k while continuing claims jumped further to all time high of 4.776m. From Europe, ECB Trichet said that the central bank is not excluding the possibility of cutting rates to below 2%, nor does it rule out the use of "non-standard action". Germany's unemployment rose by 56 K in January, almost doubled market expectation of 30K and revised 33K in December. Unemployment rate climbed highly to 7.8% from 7.7% in the previous month as business activities slowed down and companies cut positions. In the coming few months, we will likely see further rise in unemployment rate. Eurozone's M3 money supply growth slowed to 7.3% yoy, the lowest level in 5 years, in December following a 7.7% gain in the previous month. Though less severe than market anticipation, business climate in the Eurozone plunged to -3.16 in January compared with revised -3.09 in December while economic sentiment fell to 68.9 from revised 70.4. Consumer confidence came in inline with consensus at -31, from -30 in December. UK Nationwide House price drop further by -16.6% yoy in Jan. In Japan, retail sales in December plunged -2% mom in December, more than market expectation of -0.8% drop and -0.1% drop November. On annual basis, it fell -.7%, the biggest decline since 2005 as consumers reduced spending on unemployment concerns. New Zealand's trade deficit came in at NZD -347M in December, worse than consensus of NZD -100M, after a revised deficit of NZD -588M with exports rose 4.8% from a year ago to NZD 3.85B and import dropped for the second month to NZD 4.2B. EUR/USD Mid-Day Outlook Daily Pivots: (S1) 1.3069; (P) 1.3198; (R1) 1.3294; More Despite the brief recovery, there is no change in EUR/USD's outlook. Recovery from 1.2764 has likely completed at 1.3329, below mentioned 1.3385 resistance. Intraday bias is still mildly on the downside for 1.2764 first. Break will confirm decline from 1.4719 has resumed for a retest of 1.2329 low. While some consolidation might still be seen above 1.2764, we'd still expect upside to be limited by 1.3385 resistance. However, break of 1.3385 will indicate that fall from 1.4719 has completed. This will also argue that such decline is merely part of the consolidation that started at 1.2329, which is indeed still in progress. In such case, stronger rebound could be seen, targeting 1.4719 high. In the bigger picture, a medium term bottom in place at 1.2329 and fall from 1.6038 should have completed. Whether such fall is impulsive or corrective in nature is debatable. But after all, in either case, as long as 1.4867 resistance holds, such decline is still in favor to resume and should target 1.1639 medium term support next. Though, some larger scale consolidation could be seen first. However, above 1.4867 will dampen the bearish view and argue that stronger rally would be seen to retest 1.6038 record high.

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Petro-Canada Reports Quarterly Loss on Currency, Oil

By David Wethe

Jan. 29 (Bloomberg) -- Petro-Canada, the country’s fourth- largest oil company, reported a quarterly loss on foreign currency translations, project delays and lower commodity prices.

The fourth-quarter net loss was C$691 million ($565.8 million), or C$1.43 a share, compared with net income of C$522 million, or C$1.07, a year earlier, the Calgary-based company said today in a statement. Sales dropped 3 percent to C$5.27 billion in the fourth quarter.

U.S. oil futures tumbled 56 percent in the quarter, ending the period more than $100 a barrel below the record set in July, as recessions around the world eroded fuel demand. Natural-gas futures on the New York Mercantile Exchange ended the year 59 percent below their July high.

The results were “well below expectations,” Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, wrote in a research note dated today. “Higher operating costs and weak results from the downstream operations accounted for a large portion of the variance in earnings.”

He said backing out what he considered unusual items, the company had a net loss of 6 cents per share. That compares to his estimate of a 99-cent profit.

Petro-Canada booked charges from the deferral of its Fort Hills mining project in Alberta. The company said it’s revising costs for the venture “to take advantage of the current market environment.”

The company will wait on Fort Hills until prices rise, Chief Executive Officer Ronald Brenneman said on a conference call with analysts.

Currency, Costs

The earnings results also reflect “losses on foreign currency translation of long-term debt” and “the negative impact from declining crude oil feedstock costs,” Petro-Canada said in the statement.

The company said it plans to reduce 2009 capital spending from C$3.96 billion, which was announced Dec. 11, to a level that matches operating cash flow because of “persistently low commodity prices.”

Petro-Canada lowered its production forecast for this year to between 345,000 and 385,000 barrels of oil equivalent a day, citing cutbacks to planned capital spending and output constraints imposed by the Organization of Petroleum Exporting Countries. That compares with a December estimate of 360,000 to 395,000 barrels a day.

‘Grim 2009 Results’

“Fourth-quarter results are likely only going to be the first step toward even more grim 2009 results, with further weakening oil and natural-gas prices,” Chris Feltin, an analyst at Tristone Capital Inc. in Calgary, said in a telephone interview before the earnings were released. Feltin rates the shares “market perform” and doesn’t own any.

Production in the fourth quarter averaged 409,000 barrels a day net to Petro-Canada, little changed from the 410,000 barrels reported a year earlier. Output was “at the high-end of our guidance range,” Brenneman said in the statement.

The performance of Petro-Canada, the country’s second- largest refiner, was affected in part by the temporary shutdown of its Edmonton refinery in Alberta, Tristone’s Feltin said. The 125,000-barrel-a-day plant, which was expected to run at normal rates sometime this quarter, closed for an upgrade to process only synthetic crude derived from oil sands.

An explosion and fire yesterday at the plant halted a processing unit, spokeswoman Sneh Seetal said. The fire, in a hydrotreating unit, isn’t expected to affect any products and the company is assessing damage, Brenneman said on the call.

Petro-Canada fell C$1.08, or 3.8 percent, to C$27.62 as of 10:18 a.m. in trading on the Toronto Stock Exchange. The shares, which have eight “buy,” 11 “hold” and two “sell” ratings from analysts, fell 25 percent during the fourth quarter.

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

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OPEC Says Won’t Hesitate to Reduce Production Further

By Maher Chmaytelli and Juan-Pablo Spinetto

Jan. 29 (Bloomberg) -- OPEC, supplier of 41 percent of the world’s crude oil, won’t hesitate to cut output further to keep prices from falling, the group’s secretary general said.

“If we still have some downward problems, OPEC will not hesitate to take some quantity out of the market,” Abdalla el- Badri said today at the World Economic Forum, in Davos, Switzerland. Prices below $50 a barrel are “too low” as they don’t allow producers to invest in expanding capacity, he said.

The Organization of Petroleum Exporting Countries cut production three times since September to check a plunge in prices from a record $147.27 a barrel in July. Crude oil for March delivery traded at $40.69 a barrel on the New York Mercantile Exchange as of 2:20 p.m. London time.

The group next meets in Vienna on March 15 to discuss output. El-Badri yesterday said producers wanted crude at $75 a barrel to $100 a barrel.

BP Plc Chief Executive Officer Tony Hayward, speaking today in Davos, said prices between $60 and $80 a barrel are “appropriate” to sustain investments.

“We increase when the market needs oil and we decrease when the market is in overproduction,” el-Badri told reporters today. “There is a lower demand in 2009 by about 200,000 barrels a day, maybe more. There’s a slowdown everywhere.”

Hayward said the global economic recession may cause oil demand to drop five times more than OPEC estimates.

Pessimistic View

“If you take the more pessimistic view, which says there will be effectively no growth at all in the world in 2009, I think that demand loss of perhaps up to 1 million barrels per day is more likely,” he said. “So it depends entirely on the success the world has in getting the economy moving again.”

OPEC has set a production ceiling of 24.845 million barrels a day as of Jan. 1 for its 11 members with quotas, 4.2 million barrels a day lower than its output in September. Iraq is allowed to produce at will.

Badri said that that the reduction will be fully implemented by the end of this month.

Oil shipping consultants PetroLogistics Ltd. estimates that OPEC members will supply about 1.3 million barrels a day more than their new collective target this month. Oil supply from the 11 members with quotas will average 26.15 million barrels a day, down from 27.65 million barrels a day in December, Conrad Gerber, the consultant’s founder, said on Jan. 23.

To contact the reporter on this story: Maher Chmaytelli in Davos, Switzerland, at mchmaytelli@bloomberg.net; Juan Pablo Spinetto in Davos, Switzerland at jspinetto@bloomberg.net

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Occidental Profit Falls to 5-Year Low as Oil Plunges

By Joe Carroll

Jan. 29 (Bloomberg) -- Occidental Petroleum Corp., the biggest oil producer in Texas, said fourth-quarter profit fell to a five-year low after slumping fuel demand dragged down petroleum prices.

Net income dropped to $443 million, or 55 cents a share, from $1.45 billion, or $1.74, a year earlier, the Los Angeles- based company said today in a statement. Excluding such one-time items as costs recorded to reflect a drop in the value of some oil fields, per-share profit was 23 cents higher than the average of 17 analyst estimates compiled by Bloomberg.

Chief Executive Officer Ray Irani slashed capital spending for this year by 26 percent to $3.5 billion in response to tumbling crude prices and the collapse of global credit markets. Irani, 74, is focusing investment on fields in West Texas, the Persian Gulf, Libya and South America where production costs are below average.

“They posted a really, really strong number despite taking some writedowns, which means their operating costs must have been stellar,” said Cory Garcia, an analyst at Raymond James & Associates in Houston who rates Occidental shares a “strong buy” and doesn’t own any.

Occidental fell 24 cents to $59.14 at 9:35 a.m. in New York Stock Exchange composite trading. The stock dropped 22 percent last year, its biggest decline in a decade, as recessions in the U.S. and Europe sapped demand for gasoline, diesel and jet fuel.

Production Rises

Fourth-quarter oil and natural-gas output rose 6 percent to the equivalent of 623,000 barrels of crude a day, led by gains in the U.S., Argentina, Colombia, Oman and Abu Dhabi, Occidental said. U.S. fields account for 60 percent of the company’s production.

Sales tumbled 27 percent to $4.02 billion. Occidental said it was paid an average of $53.52 per barrel of oil, down 33 percent from a year earlier, and its average U.S. gas price dropped 31 percent to $4.67 per thousand cubic feet.

“Pricing was worse than we thought it would be,” Garcia said. “Their oil realization was $10 less than we were anticipating.”

Occidental recorded $599 million in pretax costs after declines in oil and gas prices reduced asset values. The company had a $58 million expense stemming from termination of rig contracts, and its chemicals business had $90 million in costs related to a plant closing and asset writedowns.

Project Won

Occidental shares trade at about $15 per barrel of proved reserves, a 27 percent discount to the average of the company’s peer group, according to data compiled by Bloomberg.

Occidental beat Exxon Mobil Corp., a company 17 times its size by sales, this month to win a contract to expand oil production in Bahrain. In October, Occidental signed a $500 million deal to develop fields in Abu Dhabi that will boost the company’s global output by more than 3 percent.

“They’re signing agreements that typically a company of that size wouldn’t be involved in,” said Philip Weiss, an analyst at Argus Research Corp. in New York who has a “hold” rating on Occidental shares and doesn’t own any. “Irani’s cultivated very good relations in those countries, and that’s part of the reason they’ve been able to compete with much larger oil companies for those contracts.”

(Occidental is scheduled to hold an earnings conference call for investors and analysts at 11:30 a.m. New York time. To listen, access a broadcast at http://www.oxy.com.)

To contact the reporter on this story: Joe Carroll in Houston at jcarroll8@bloomberg.net.

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Shell Reports First Quarterly Loss in 10 Years on Oil Plunge

By Fred Pals

Jan. 29 (Bloomberg) -- Royal Dutch Shell Plc, Europe’s largest oil company, posted its first quarterly loss in 10 years following a record plunge in oil prices, and warned that industry conditions “remain challenging.”

The fourth-quarter net loss was $2.81 billion, or $0.44 a share, compared with a profit of $8.47 billion, or $1.36, a year earlier, The Hague-based Shell said today in a statement. Revenue fell 24 percent to $81.07 billion.

Chief Executive Officer Jeroen van der Veer boosted the dividend by 11 percent, and said Shell would continue with “competitive and progressive” payouts even as the global recession hurts demand. The company will maintain project investment in a range between $31 billion and $32 billion this year after cutting spending plans last year.

“We were slightly disappointed by the lower than expected exploration and production profitability,” Alexandre Weinberg, a Brussels-based analyst at Petercam SA, said. “This might lead us to foresee a lower free cash flow if hydrocarbon prices were to remain at their current levels.” Weinberg cut his recommendation on the stock to “add” from “buy”.

Excluding gains or losses from inventories and one-time items, earnings were $3.89 billion. The median estimate of 12 analysts surveyed by Bloomberg was for profit of $4.13 billion on this basis. Shell also had a currency loss of $351 million.

Shell’s Class A shares rose 0.3 percent to 1,782 pence as of 1:09 p.m. in London. The stock lost 15 percent last year.

CCS Basis

Fourth-quarter profit on a current cost of supplies basis fell to $4.8 billion from $6.7 billion, while full-year profit on the same basis rose to $31.4 billion from $27.6 billion. Net profit fell 16 percent to $26.3 billion in 2008.

Shell expects to raise its dividend for the first quarter by 5 percent to $0.42.

Increased dividend payments “reinforce our confidence in Shell’s ability to weather the current period of high capex and weak economic conditions,” Gordon Gray, a London-based analyst at Collins Stewart, said. He has a “buy” rating on the stock.

A record 56 percent slump in New York-traded crude futures during the quarter eroded the value of inventories and hit earnings from exploration and production.

Oil prices fell to a four-year low of $32.40 a barrel on the New York Mercantile Exchange on Dec. 19, after peaking at $147.27 on July 11. Crude oil for March delivery fell 2 percent to $41.30 today.

Earnings at Shell’s refining division fell to $582 million on a current cost of supplies basis, from $876 million a year earlier and from $2.3 billion in the third quarter. Profit from exploration & production dropped 24 percent to $3.71 billion.

Refining Prospects

Shell expects its refining business to have a “difficult” first quarter, Chief Financial Officer Peter Voser said on a conference call. Some of the company’s refineries are being run at reduced rates, he added, declining to identify which ones.

Swiss-born Voser will take from van der Veer as CEO in July. It’s the first time in Shell’s 102-year history that the top job has gone to a national from outside the U.K. or the Netherlands.

Shell’s so-called organic spending will be higher than the $30 billion invested in 2008. The oil major bought assets worth $9 billion last year and disposed of $7 billion, putting net capital investment at $32 billion, “lower than previously planned, as divestment proceeds for the year exceeded prior expectations.”

Capital Spending

The company had indicated in October it planned to spend as much as $36 billion on projects and acquisitions last year.

Total oil and gas production may drop for a seventh consecutive year in 2009 before rebounding in 2010, Shell said.

Oil and gas production will experience a “slight decline” in the short term, van der Veer said in a Bloomberg television interview, adding that “very soon our big projects will kick in.”

Production has been hampered by militant attacks in Nigeria, asset sales and a reduction in crude received under production-sharing contracts.

Shell’s annual average output slipped 2 percent to about 3.25 million barrels of oil equivalent a day last year, from 3.32 million barrels in 2007. Fourth-quarter production was little changed at 3.42 million barrels equivalent a day compared with the year-earlier period.

Shell plans to counter lost production in Nigeria and Russia by mining Canadian oil sands and developing a Qatari gas- to-liquids venture. The cost of producing Canadian oil sales, including fuel costs, is about $38 a barrel, van der Veer said.

Project Delays

The company postponed investment decisions on upgrading its deepwater Mars platform in the Gulf of Mexico and developing the Pierce field in the U.K.’s North Sea as it waits for industry costs to decline. In October, it delayed a decision on the second-phase expansion of its Athabasca oil-sands project in Canada.

Shell plans to add as much as 250,000 barrels of oil a day in new production by the end of this year and will add a “significant amount” of new output from 2010 and 2011, Voser said. That’s part of the 1 million barrels a day of additional output it has so far committed in projects.

BP’s Global Indicator Margin, a broad measure of refining profitability, fell to $5.20 a barrel in the fourth quarter from $8.03 a barrel in the third quarter, according to BP Plc’s Web site.

Of the 39 analysts tracked by Bloomberg who cover Shell, 25 recommend buying the stock and 8 say to hold it. Another six advise investors to sell the shares.

Shell will give a strategy update March 17. Exxon Mobil Corp, the world’s largest oil company, and Chevron Corp, are due to report earnings tomorrow. BP, Europe’s second-largest oil company, will report Feb. 3.

ConocoPhillips, the third-biggest U.S. oil producer, yesterday posted a $31.8 billion fourth-quarter loss, its biggest on record, as the collapse in energy prices dragged down the value of acquired assets.

To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

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Citigroup Advises Investors Buy U.K. Pound Against Swiss Franc

By Daniel Tilles

Jan. 29 (Bloomberg) -- Investors should buy the pound against the Swiss franc, targeting 1.70, Citigroup Inc. said.

The franc “is likely to suffer on the basis of verbal or outright Swiss National Bank intervention,” a team of Citigroup strategists including Todd Elmer in New York wrote in a report dated today. Investors should exit the trade if the pound weakens to 1.6150 francs, the analysts said.

The British currency rose 0.2 percent against the franc to 1.6432 as of 2:26 p.m. in London.

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

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Colombia’s Peso Falls to Three-month Low; Chile’s Peso Slides

By Drew Benson

Jan. 29 (Bloomberg) -- Colombia’s peso declined for a third day to a three-month low as stocks in Europe and U.S. equity- index futures dropped, sapping investor appetite for higher- yielding, emerging-market assets.

The currency slid the most since November, dropping 1.7 percent to 2,391 per dollar at 8:49 a.m. New York time, from 2,352 yesterday, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX.

The yield on Colombia’s 11 percent bonds due in July 2020 rose 11 basis points, or 0.11 percentage point, to 9.87 percent, according to Colombia’s stock exchange. The price fell 0.782 centavo to 107.434 centavos per peso.

Chile’s peso slid 0.1 percent to 612.61 per U.S. dollar, from 612.25 yesterday. The yield for a basket of five-year peso bonds in inflation-linked currency units, known as unidades de fomento, dropped seven basis points to 2.8 percent, its lowest since July, according to Bloomberg composite prices.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net

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Canada’s Currency Drops as U.S. Dollar Rallies, Crude Oil Falls

By Chris Fournier

Jan. 29 (Bloomberg) -- Canada’s dollar weakened as its U.S. counterpart gained against most major currencies after the Federal Reserve yesterday warned of a prolonged global slowdown, reviving aversion to higher-yielding assets.

“Price action was largely U.S. dollar-friendly and contributed to a better bid in dollar-Canada,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “Softer equity and commodity valuations” will likely continue to weigh on Canada’s dollar, he said.

The Canadian dollar depreciated 0.4 percent to C$1.2161 per U.S. dollar at 7:51 a.m. in Toronto, from C$1.2109 yesterday. One Canadian dollar buys 82.23 U.S. cents.

The Fed’s statement yesterday indicated concern the worldwide economy is weakening “significantly.”

Crude oil for March delivery dropped 2.2 percent to $41.22 a barrel. Crude accounts for about a tenth of Canada’s export revenue.

The Canadian currency will weaken to C$1.26 against the U.S. dollar by the end of this quarter before rebounding to C$1.20 by the end of 2009, according to the median forecast in a Bloomberg News survey of 41 economists.

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

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Dollar Falls as Durable Goods Drop, Unemployment Claims Rise

By Ye Xie

Jan. 29 (Bloomberg) -- The dollar declined against the yen as government reports showed orders for U.S. durable goods dropped in December and the number of Americans receiving unemployment benefits soared to a record.

The yen gained versus the Australian dollar and the Mexican peso as investors sought refuge in Japan’s currency from economic turmoil. Russia’s ruble had its biggest two-day drop in a decade against the dollar less than a week after Prime Minister Vladimir Putin defended the policy of devaluing the currency “gradually and carefully.”

“The conditions are very weak in the U.S.,” said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. “Japanese investors will send money back home.”

The U.S. currency fell 0.5 percent to 89.92 yen at 9:12 a.m. in New York, from 90.26 yesterday. The dollar traded at $1.3158 per euro, compared with $1.3166. The yen strengthened 0.6 percent to 118.19 per euro from 118.88.

The ruble declined as much as 3.1 percent to 34.7990 per dollar, bringing its loss over the past two days to 5.6 percent, the most since March 1999, after the central bank said foreign- exchange reserves fell $9.7 billion last week to $386.5 billion. The currency is approaching the 36 per dollar level that the central bank pledged to defend.

Putin said in an interview on Bloomberg Television this week that Russia set itself apart from other countries by using reserves so as not to “crush the national currency overnight,” avoiding a repeat of the 1998 crisis when the currency fell as much as 29 percent in a day.

New Zealand’s Cut

New Zealand’s dollar dropped as much as 2.2 percent to 51.28 U.S. cents, the lowest level since December 2002, after the Reserve Bank cut its official cash rate by 1.5 percentage points to a record low of 3.5 percent.

Continuing claims for U.S. unemployment benefits rose to 4.776 million in the week ended Jan. 17, the highest since record keeping started in 1967, the Labor Department said today in Washington. First-time filings increased to 588,000 in the week ended Jan. 24.

Durable goods declined 2.6 percent last month, following a 3.7 percent drop in November, the Commerce Department said. The median forecast of 75 economists surveyed by Bloomberg News was for a 2 percent decline.

The Federal Reserve held its target lending rate in a range of zero to 0.25 percent yesterday and said it’s prepared to purchase Treasury securities to resuscitate lending.

Fed on Treasuries

The central bank is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement after meeting in Washington.

The Fed last cut its target lending rate on Dec. 16 and shifted its focus to the amount and type of debt it buys. It’s seeking to revive credit markets after financial institutions worldwide posted $1 trillion in losses on mortgage-related securities since the start of 2007.

The central bank began a $500 billion program this month to buy Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities, pushing down the yields on mortgage bonds relative to Treasuries.

The euro earlier traded lower versus the dollar after the European Commission said its index of executive and consumer sentiment declined to a record low in January. The index fell to 68.9, the lowest level since it was started in 1985, from a revised 70.4 in December.

Trichet on Rates

European Central Bank President Jean-Claude Trichet said yesterday in an interview on Bloomberg Television at the World Economic Forum in Davos, Switzerland, before the Fed’s decision that “very, very low” interest rates “have some inconveniences.”

Trichet reiterated that the ECB’s next important meeting is in March, signaling policy makers won’t cut interest rates next week. The central bank lowered its benchmark rate on Jan. 15 by a half-percentage point to 2 percent, matching a record low.

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

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Corn, Soybeans Drop as Rain May Relieve Crops in South America

By Jae Hur

Jan. 29 (Bloomberg) -- Corn and soybeans fell on speculation that forecast rain in South America may relieve crops affected by drought in the past month. Wheat also declined.

Corn and soybean futures fell for a second day this week, reversing yesterday’s gains. Brazil and Argentina are the biggest exporters of corn and soybeans after the U.S.

“The market was under pressure from easing dry weather concern for crops in Argentina and Brazil,” Toshimitsu Kawanabe, an analyst at Central Shoji Co. in Tokyo, said today. “With few fresh fundamental developments, people are watching demand for soybeans after the Chinese New Year holiday.” Markets in China are closed this week for the vacation.

Corn for March delivery fell 1.6 percent to $3.7825 a bushel in electronic trading on the Chicago Board of Trade. The contract gained 1.9 percent yesterday on speculation President Barack Obama’s stimulus plan will stoke economic growth and demand for grain. Soybeans for March delivery fell 0.7 percent, to $9.7575 a bushel.

About 10 percent of Argentina’s growing region will receive up to 2 inches (5.3 centimeters) of rain in the next seven days, providing limited drought relief, Allen Motew, director of meteorology for QT Information Systems in Chicago, said yesterday. Reduced humidity and wind currents led to lower rain forecasts for the next two weeks, Motew said in a note to clients.

The U.S. House of Representatives passed Obama’s proposed $819 billion economic stimulus package yesterday. The plan is aimed at lifting the economy out of a recession through tax cuts and $604 billion in spending.

Tax Cuts

The 244-188 vote sends the measure to the Senate where Republicans, who want more tax cuts and less spending, will have more power to demand changes. Senate Democrats also are calling for alterations to the plan.

The MSCI Asia Pacific Index rose 1.5 percent to 84.77, gaining for a third day. The dollar slipped 0.2 percent against the euro to $1.3134.

Meantime, South Korea’s Nonghyup Feed Inc. bought 110,000 metric tons of corn for feed production yesterday, according to two industry executives who participated in the tender. Cargill Inc. sold the grain at $197.70 a ton on a cost and freight basis for April arrival, said the executives, who asked not to be identified because the results are confidential.

Wheat for March delivery dropped 1.1 percent to $5.89 a bushel, after rising 1.8 percent yesterday. Milling wheat futures trading on Euronext in Paris dropped 1.25 euros, or 0.8 percent, to 150.25 euros at 2:12 p.m. local time.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Copper Drops on Signs Slumping Global Growth Is Eroding Demand

By Millie Munshi

Jan. 29 (Bloomberg) -- Copper fell to the lowest price in almost a week on signs the global recession is slashing demand for the metal used in homes, cars and appliances.

Inventories monitored by the London Metal Exchange soared 5 percent, the biggest gain since Sept. 5, to 477,675 metric tons today, the highest total since November 2003. World economic growth will be 0.5 percent this year, the weakest postwar pace, the International Monetary Fund said yesterday. Before today, copper had plunged 63 percent since June 30 as the cooling global economy reduced demand and supplies increased.

“The market is currently engulfed in bearish sentiment, manifested on a daily basis in economic data that underscore the severity of the current economic malaise,” Gayle Berry, an analyst at Barclays Capital in London, said in a report today. “With consumption in many key markets now in decline, the build in LME stocks has been relentless.”

Copper futures for March delivery fell 5.05 cents, or 3.4 percent, to $1.4455 a pound at 9:04 a.m. on the Comex division of the New York Mercantile Exchange. Earlier, the price touched $1.421, the lowest for a most-active contract since Jan. 23.

On the London Metal Exchange, copper for delivery in three months rose $130, or 3.9 percent, to $3,200 a metric ton ($1.45 a pound). The price reached a record $8,940 on July 2.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net

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Gold Falls for Third Day in London Trade on Lower Haven Demand

By Nicholas Larkin

Jan. 29 (Bloomberg) -- Gold fell for a third day in London as U.S. measures to ease the financial crisis eroded demand for the metal as a haven from market turmoil.

The Federal Reserve said yesterday it was prepared to buy Treasury securities to improve credit markets, while the U.S. House passed President Barack Obama’s $819 billion stimulus package, which now moves to the Senate. Bullion reached a three- month high of $916.30 on Jan. 26.

“Whoever bought gold as a safe haven a few days ago is now selling back,” Liran Kapeluto, a senior dealer at trading-system operator Finotec Trading U.K. Ltd., said by phone from London. The metal may fall to $850 by next week, he said.

Bullion for immediate delivery slipped as much as $12.75, or 1.4 percent, to $874.80 an ounce and traded at $880.73 by 12:55 p.m. in London. April futures dropped $8.30, or 0.9 percent, to $881.70 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal fell to $878.50 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $895.25 at yesterday’s afternoon fixing. Spot prices are now down 0.2 percent for the year after gaining as much as 3.6 percent.

“The dollar is a little bit stronger,” helping pull gold prices down, said Alex MacKinnon, a trader at ODL Securities Ltd., by phone from London today.

The dollar rose as much as 1.1 percent against the euro and was last up 0.3 percent. Bullion typically moves in the opposite direction to the U.S. currency.

Toxic Assets

Gold dropped the most in two weeks yesterday after stocks gained globally as Obama’s administration prepared a plan to set up a so-called bad bank to buy toxic financial assets. The Fed left the target range for the main interest rate unchanged at close to zero and warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation.

Gold may still rise above $1,000 an ounce because of strong demand, said Nick Holland, chief executive officer of Gold Fields Ltd., the world’s fourth-largest producer of the metal, in a Bloomberg television interview. Bullion in exchange-traded funds surged to records the past week as investors concerned about global recession sought a haven.

Some investors buy gold as a hedge against inflation. Crude oil fell as much as 3.2 percent to $40.82 a barrel in New York after U.S. crude inventories gained more than expected last week and refiners reduced output as demand declined.

“Inventory data should keep oil prices under pressure, at least in the near term,” Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a report. “This could weigh down precious metals.”

Among other metals for immediate delivery in London, silver declined 1.8 percent to $11.79 an ounce. Platinum lost $6.75, or 0.7 percent, to $949.75 an ounce, and palladium was unchanged at $190.50 an ounce.

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

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Oil Falls on U.S. Supply Gain, Signs That Recession to Deepen

By Mark Shenk

Jan. 29 (Bloomberg) -- Crude oil fell after U.S. crude stockpiles increased more than forecast and government reports signaled that the U.S. recession will deepen, curbing demand.

Inventories climbed 1.9 percent to 338.8 million barrels last week, the highest since August 2007, an Energy Department report showed yesterday. Orders for U.S. durable goods fell in December for a fifth consecutive month and the number of Americans receiving unemployment benefits soared to a record, figures from the Labor and Commerce Departments showed.

“The negative numbers in yesterday’s inventory report are leading prices lower,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “We had more bad jobless numbers today and orders for durable goods were down 2.6 percent, which put more weight on the economy and the oil market.”

Crude oil for March delivery fell $1.79, or 4.3 percent, to $40.37 a barrel at 9:11 a.m. on the New York Mercantile Exchange. Prices are down 9.5 percent this year and are 56 percent lower than a year ago.

Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation. U.S. gross domestic product will contract 1.6 percent, Japan’s will shrink 2.6 percent and the euro area will decline 2 percent in 2009, the International Monetary Fund said yesterday.

The Organization of Petroleum Exporting Countries won’t hesitate to cut output further if prices keep falling, the group’s secretary general, Abdalla el-Badri, said at the World Economic Forum today in Davos, Switzerland. Current prices below $50 a barrel are “too low” because they don’t allow producers to invest in expanding capacity, he said.

Cushing Stockpiles

Crude oil supplies at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 0.9 percent to 33.5 million barrels last week, the highest since at least April 2004, when the department began keeping records, yesterday’s report showed.

Refineries operated at 82.5 percent of capacity last week, down from 83.3 percent. Output fell as companies announced shutdowns for maintenance to switch their production from heating oil to gasoline ahead of the peak motor fuel demand period starting May.

ConocoPhillips, the second-largest U.S. refiner, expects refinery operating rates near 80 percent during the first quarter due to planned turnarounds and hydro-skimming economics.

Brent crude oil for March settlement declined 58 cents, or 1.3 percent, to $44.32 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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European Stocks, U.S. Futures Decline; Xstrata, Qualcomm Drop

By Adria Cimino

Jan. 29 (Bloomberg) -- European stocks declined for the first time in four days and U.S. index futures fell on concern the deepening global economic slump will erode profits. Shares in Asia advanced.

Xstrata Plc and Cookson Group Plc tumbled at least 6 percent after the companies said they will raise capital. BHP Billiton Ltd. dropped 2.7 percent on lower metal prices. AstraZeneca Plc sank 4.2 percent as the drugmaker predicted no sales growth this year. Qualcomm Inc. lost 5.7 percent in German trading after cutting its annual revenue forecast and saying first-quarter profit slid 56 percent.

Europe’s Dow Jones Stoxx 600 Index retreated 1.6 percent to 191.21 at 1:35 p.m. in London, bringing the decline in January to 3.6 percent. Futures on the Standard & Poor’s 500 Index fell 1.2 percent as reports showed a bigger-than-estimated drop in durable goods orders and more jobless claims. Federal Reserve officials yesterday warned of a prolonged global economic slowdown.

“We’re realizing that a recession that is close to a depression is driving earnings lower,” said Romain Boscher, head of equities at Groupama Asset Management in Paris, which oversees about $17 billion in stocks. “Stocks will have trouble rebounding with the headwind of bad news.”

The Stoxx 600 sank 46 percent last year as financial firms racked up more than $1 trillion in credit-related losses and writedowns and the U.S., Japan and Europe entered the first simultaneous recessions since World War II.

Earnings Estimates

Analysts have cut their earnings estimates, now projecting a 2.2 percent average drop for companies in the Stoxx 600 and a 5.4 percent slide in the S&P 500 in 2009, Bloomberg data show.

The MSCI Asia Pacific Index rose 1.5 percent today as Westpac Banking Corp. rallied on lower interest rates in New Zealand. The yen climbed from a one-week low against the dollar.

For the first time during the credit crisis, the Federal Open Market Committee’s statement yesterday indicated concern about the worldwide economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates. The Fed signaled it’s moving closer to buying long-term Treasuries and expanding its $600 billion program to buy home-finance debt.

Treasuries declined, heading for a monthly loss, as the U.S. prepared a second record note sale this week and the U.S. House passed President Barack Obama’s economic plan.

Orders for U.S. durable goods dropped 2.6 percent in December, more than economists forecast. Weekly initial jobless claims also exceeded estimates.

European Central Bank

National benchmark indexes decreased in all of the 18 western European markets except Luxemburg and Portugal. The U.K.’s FTSE 100 slid 2.1 percent as Rio Tinto Group and London Stock Exchange Group Plc fell. France’s CAC 40 retreated 1.4 percent. Germany’s DAX slipped 1.3 percent as unemployment in the country rose almost twice as much as forecast in January.

European Central Bank President Jean-Claude Trichet said in a Bloomberg Television interview in Davos, Switzerland that the bank’s next “important” meeting will be in March, suggesting policy makers will avoid the interest-rate cut some investors expect next week.

Xstrata sank 6.8 percent to 580.5 pence. The mining company plans to raise 4.1 billion pounds ($5.8 billion) in a two-for-one rights offer to pay down debt and buy Colombian coal assets from Glencore International AG, its largest shareholder.

Commodity producers also declined as copper, nickel and tin fell in London. BHP, the world’s biggest mining company, lost 2.7 percent to 1,286 pence. Rio Tinto, the third-largest, slid 4.8 percent to 1,538 pence.

Cookson, AstraZeneca

Copper may slump by more than half this year as the global recession cuts demand, according to MF Global Ltd., one of 12 companies that trade on the floor of the London Metal Exchange.

Cookson retreated 13 percent to 74.25 pence. The biggest maker of ceramic linings for metal smelters plans to raise about 240 million pounds in a share sale to reduce debt and remain within banking terms.

AstraZeneca sank 4.2 percent to 2,740 pence as the U.K.’s second-largest drugmaker said profit fell 1.4 percent in the fourth quarter to $1.25 billion.

Qualcomm slid 5.7 percent to $34.73 in Germany. The world’s biggest maker of mobile-phone chips reduced its annual sales forecast as the recession curbed growth and hurt its investments. Net income dropped to $341 million from $767 million a year earlier, the company said yesterday.

London Stock Exchange dropped 5.1 percent to 484.25 pence. Europe’s third-largest securities bourse was downgraded to “sell” from “hold” at Citigroup Inc., citing a weak trading volume outlook for the start of the year.

Deutsche Boerse, Thomson

Deutsche Boerse AG retreated 3.1 percent to 40.54 euros as the operator of the Frankfurt bourse had its share-price estimate cut 37 percent to 54 euros by the brokerage.

Thomson SA tumbled 19 percent to 1.06 euros. The unprofitable French maker of television set-top boxes will sell assets and plans discussions with creditors and potential investors as part of a reorganization to reduce its debt.

Nobel Biocare Holding AG slipped 3.8 percent to 18.31 Swiss francs after Goldman Sachs Group Inc. downgraded the shares to “sell” from “neutral,” saying the market is underestimating the earnings impact of a slowdown in sales growth.

Swatch Group AG dropped 3.1 percent to 131.2 francs. The world’s largest watchmaker said second-half revenue fell 6.3 percent to 2.85 billion francs ($2.5 billion), missing the 3.03 billion-francs average of 16 analysts’ estimates, as customers cut spending on mid-range brands such as Tissot and Certina.

New Zealand’s Westpac Banking jumped 6.3 percent to NZ$20.30. Commonwealth Bank of Australia, which gets 14 percent of its sales from New Zealand, gained 2.2 percent to A$26.90.

The Reserve Bank of New Zealand today lowered the benchmark interest rate by 1.5 percentage points to 3.5 percent and said there’s room for further reductions.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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Bombardier, Celestica, Magna: Canadian Equity Market

By Eric Martin

Jan. 29 (Bloomberg) -- Shares of the following companies may have unusual fluctuations in Canadian trading. Stock symbols are in parentheses and prices are from the previous close.

The Standard & Poor’s/TSX Composite Index added 1.7 percent to 8,906.23 in Toronto.

Bombardier Inc. (BBD/B CN): The world’s third-largest maker of commercial aircraft was rated “market perform” in new coverage at Raymond James & Associates. Investors should not buy the stock until the prospects of the “troubled aerospace sector” become clearer, analysts led by Steve Hansen in Vancouver said in note to clients. The shares rose 1.9 percent to C$4.73.

Celestica Inc. (CLS CN): The maker of electronics for other companies reported fourth-quarter adjusted profit, excluding a tax benefit, of 19 cents a share, more than the 17-cent average estimate of analysts surveyed by Bloomberg. The shares rose 0.4 percent to C$5.31.

Magna International Inc. (MG/A CN): North America’s largest auto-parts maker expects to win more orders while competitors fail as U.S. sales of cars and trucks keep falling after sinking to a 16-year low in 2008, Chairman Frank Stronach said. Magna is open to assembling vehicles for U.S. automakers, something it already does for General Motors Corp.’s Saab division in Europe, Stronach said in Bochum, Germany. The shares added 2.5 percent to C$36.88.

Open Text Corp. (OTC CN): The maker of networking software reported 13 percent more fiscal second-quarter profit than analysts estimated, according to Bloomberg data. The shares rose 3 percent to C$40, the highest since July 2004.

TMX Group Inc. (X CN): The owner of the Toronto Stock Exchange was downgraded to “sell” from “neutral” by Dundee Securities analyst John Aiken in Toronto, who said in an e-mailed note that a 61 percent increase in fourth-quarter profit to C$49 million probably marked the “near-term earnings high” for the company. The shares fell 2.3 percent to C$31.36.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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Brazilian Stocks Decline on Banks Outlook, Earnings Concern

By Paulo Winterstein

Jan. 29 (Bloomberg) -- Brazilian stocks fell for the first time in five days on concern earnings at the nation’s biggest banks and commodity producers will decline as the global economic slowdown deepens.

Banco do Brasil SA led a retreat among banks after Goldman Sachs Group Inc. cut estimates on bank earnings for a second time this month. Cia. Vale do Rio Doce and Petroleo Brasileiro SA, Brazil’s biggest companies, declined after Ford Motor Co. reported the worst annual performance in its 105-year history.

“Ford earnings were worse than expected, and that’s hurting the market today,” said Januario Hostin Jr., chief equity portfolio manager at Leme Investimentos in Florianopolis, Brazil, which oversees about $35 million. “The profitability of our banks has been falling, and with interest rates falling, it’ll decline more.”

The Bovespa retreated 0.6 percent to 39,978.87 at 8:47 a.m New York time. Chile’s Ipsa dropped 0.5 percent. The MSCI Emerging Markets index added 0.4 percent.

Ford posted a full-year loss of $14.6 billion and a quarterly net loss of $5.9 billion. The only U.S. automaker shunning federal loans said it would tap its credit line, making available $10.1 billion in cash in the first quarter.

Petrobras, as the state-controlled oil company is known, dropped 1.1 percent to 24.93 reais. Crude oil fell in New York after U.S. inventories gained more than expected last week and refiners reduced output as demand declined.

Vale, the world’s biggest iron-ore producer, fell 1.7 percent as metal prices declined in London.

Banco do Brasil fell 1.4 percent to 14.50 after trading as low as 14.38 reais.

“As economic conditions continue to deteriorate and the Brazilian central bank lowers rates, conditions for 2009 become incrementally less favorable for Brazilian banks,” Goldman analyst Jason Mollin wrote. “Greater consumer exposure makes them more pro-cyclical than ever, an unfavorable characteristic going into an economic downturn.”

Banco Itau Holding Financeira SA, Latin America’s biggest bank, fell 1 percent to 24.23 reais.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

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Allstate, Kodak, Royal Caribbean, Textron: U.S. Equity

By Eric Martin

Jan. 29 (Bloomberg) -- Shares of the following companies may have unusual fluctuations in U.S. trading. Stock symbols are in parentheses, and share prices are as of 8:45 a.m. in New York.

Allstate Corp. (ALL US) dropped 19 percent to $24. The largest publicly traded U.S. home and auto insurer said it will cut 1,000 jobs after the falling value of investments caused the company’s first annual loss as a public firm.

Black & Decker Corp. (BDK US) dropped 12 percent to $34. The largest U.S. power-tool maker forecast first-quarter profit of as little as 5 cents a share, less than the 79-cent average estimate of analysts surveyed by Bloomberg.

Citrix Systems Inc. (CTXS US) lost 9 percent to $22. The maker of computer-networking software reported revenue of $415.7 million in the fourth quarter, missing the average analyst estimate by 3.9 percent, according to Bloomberg data. Citrix said it will cut 10 percent of its workforce as the recession hurts demand.

DryShips Inc. (DRYS US) plunged 25 percent to $9.20. The commodities transporter said it has violated some financial requirements of its loans and announced plans to sell $500 million in stock, which may dilute the value of existing shares.

Eastman Kodak Co. (EK US) fell 9.5 percent to $6.40. The 129-year-old photography company reshaping itself as demand for traditional film wanes said it will eliminate 3,500 to 4,500 jobs, or as much as 18 percent of its workforce, and restructure its operations.

Flextronics International Ltd. (FLEX US) fell 9.9 percent to $2.46. The maker of Microsoft Corp.’s (MSFT US) Xbox 360 game console said that, excluding some items, it expects to earn no more than 7 cents a share in the fiscal fourth quarter. That trailed the 15-cent average estimate of analysts in a Bloomberg survey.

Fortune Brands Inc. (FO US) dropped 10 percent to $34.10. The maker of Jim Beam bourbon forecast 2009 profit of $2 to $2.50 a share, less than the $3.54 average per-share estimate of analysts surveyed by Bloomberg.

International Paper Co. (IP US): The world’s largest pulp and paper company posted a fourth-quarter net loss of $452 million as the slowing global economy reduced demand.

Qualcomm Inc. (QCOM US) declined 7.5 percent to $34.06. The world’s biggest maker of mobile-phone chips reported a 56 percent drop in first-quarter profit and cut its annual sales forecast after the recession curbed growth and hurt its investments.

Royal Caribbean Cruises Ltd. (RCL US) gained 2.1 percent to $9.25. The world’s second-largest cruise operator said fourth- quarter profit fell 98 percent after it slashed ticket prices to fill ships because of the global economic recession.

Sepracor Inc. (SEPR US) increased 11 percent to $15.15. The maker of the Lunesta sleeping pill forecast earnings excluding some items of at least $2.10 a share this year. That beat the average estimate of $1.41 by analysts in a Bloomberg survey.

Starwood Hotels & Resorts Worldwide (HOT US) fell 2.3 percent to $17. The third-largest U.S. lodging company said fourth-quarter profit fell 46 percent as the global recession and a deepening financial crisis decimated already weakened demand for travel.

Textron Inc. (TXT US) dropped 8.6 percent to $12.15. The maker of Cessna aircraft and Bell helicopters said 2009 profit will trail analysts’ estimates and posted a fourth-quarter loss as the global credit crunch hurt sales of business jets.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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