Thursday, February 26, 2009

Technical Analysis for Major Currencies

Daily Forex Technicals | Written by Crown Forex | Feb 26 09 08:45 GMT |

EURO

Morning Report The pair once again declined towards the correction levels pointed out previously where it is still pressured to the downside where if reaches 1.2660 this may result in the formation of a bearish technical pattern with targets at 1.2420 and 1.2330 on the intraday if the neckline was successfully breached with a four hour close. The current support is at 1.2680 where if breached will open the way to retest the key support at 1.2660. High volatility may be witnessed near this level and our outlook can't be determined clearly and therefore we need to monitor 1.2680 – 1.2660 levels. The trading range for today is among the key support at 1.2420 and the key resistance at 1.3220 The general trend is to the downside as far as 1.4710 remains intact with targets at 1.2330 and 1.2100

Daily Forex Technicals | Written by Crown Forex | Feb 26 09 08:45 GMT |
Technical Analysis for Major Currencies
EURO

Morning Report The pair once again declined towards the correction levels pointed out previously where it is still pressured to the downside where if reaches 1.2660 this may result in the formation of a bearish technical pattern with targets at 1.2420 and 1.2330 on the intraday if the neckline was successfully breached with a four hour close. The current support is at 1.2680 where if breached will open the way to retest the key support at 1.2660. High volatility may be witnessed near this level and our outlook can't be determined clearly and therefore we need to monitor 1.2680 – 1.2660 levels. The trading range for today is among the key support at 1.2420 and the key resistance at 1.3220 The general trend is to the downside as far as 1.4710 remains intact with targets at 1.2330 and 1.2100

Support: 1.2680, 1.26660, 1.2615, 1.2555, 1.2525
Resistance: 1.2770, 1.2805, 1.2895, 1.2945, 1.2995

Recommendation: According to our analysis, we see that its good to sell the pair below 1.2660 with targets at 1.2525 and stop loss with a four hour close above 1.2720
GBP

Morning Report Yesterday's decline was sharp taking the pair near our downside targets at 1.4150. The downside intraday trend proved the significance of 1.4140 which has now become a pivot point on the short term showing possibilities that a bearish technical pattern may form with a neckline at the same support level and targets at 1.3500. This change in trend on the intraday and the expected decline on the short term will remain as far as 1.4295 remains intact. The trading range for today is among the key support at 1.3850 and the key resistance at 1.4640 The general trend is to the downside as far as 1.5270 remains intact with targets at 1.3500 and 1.2960

Support: 1.4170, 1.4140, 1.4095, 1.4040, 1.3995
Resistance: 1.4295, 1.4375, 1.4400, 1.4425, 1.4475

Recommendation: According to our analysis, we see that it's good to sell the pair below 1.4295 with targets at 1.4140 and stop loss with a four hour close above 1.4425
JPY

Morning Report Trading remains to the upside as the pair continues to breach resistance levels one after the other currently targeting 99.45 on the intraday and above 101.00 on the short term. We expect this incline to remain with a four hour close above 97.90 or with a downside correction to 97.10 in an attempt to adjust momentum before rebounding back to the upside The trading range for today is among the key support at 94.35 and the key resistance at 99.45 The general trend is to the downside as far as 102.10 remains intact with targets at 84.95 and 82.60

Support: 97.45, 97.10, 96.75, 96.55, 96.15
Resistance: 97.90, 98.30, 98.85, 99.45, 99.75

Recommendation: According to our analysis, we see that its good to buy the pair with a four hour close above 97.90 with targets at 99.45 and stop loss with a four hour close below 96.55
CHF

Morning Report After building a solid base above the key support of the ascending channel and with the support of positive signs on momentum indicators, the pair inclined to currently target the pivot point at 1.1715 which is the neckline for a possible bullish technical pattern with targets at 1.1920 and 1.1970. We expect the pair to target this level as far as 1.1620 – 1.1560 remains intact. The trading range for today is among the key support at 1.1390 and the key resistance at 1.1970 The general trend is to the upside as far as 1.0570 with targets at 1.1970 and 1.2055

Support: 1.1695, 1.1660, 1.1630, 1.1585, 1.1530
Resistance: 1.1740, 1.1785, 1.1825, 1.1885, 1.1920

Recommendation: According to our analysis, we see that its good to buy the pair with an hourly close above 1.1720 with targets at 1.1920 and stop loss with a four hour close below 1.1630
CAD

Morning Report The sharp incline witnessed yesterday helped the pair breach a critical resistance at 1.2530 to reach 1.2575 which is the 100% Fibonacci expansion. There is still a possibility for more appreciating during the intraday to 1.2685 – 1.2710 (the 161.8% and 176.4% Fibonacci levels respectively). The pair may face difficulties at 1.2575 which is the 100% expansion intersected with the key resistance for the minor descending channel. Confirmation of the intraday trend will be seen with a four hour close above 1.2575 yet failure of this will decline the pair to 1.2390 The trading range for today is among the key support at 1.2235 and the key resistance at 1.2710 The general trend is to the upside as far as 1.1780 remains intact with targets at 1.2935 and 1.3065

Support: 1.2530, 1.2505, 1.2470, 1.2435, 1.2380
Resistance: 1.2600, 1.2635, 1.2660, 1.2685, 1.2710

Recommendation: According to our analysis, we see that its good to buy the pair with an hourly close above 1.2575 with targets at 1.2685 and stop loss with a four hour close below 1.2505

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.

Support: 1.2680, 1.26660, 1.2615, 1.2555, 1.2525
Resistance: 1.2770, 1.2805, 1.2895, 1.2945, 1.2995

Recommendation: According to our analysis, we see that its good to sell the pair below 1.2660 with targets at 1.2525 and stop loss with a four hour close above 1.2720

GBP

Morning Report Yesterday's decline was sharp taking the pair near our downside targets at 1.4150. The downside intraday trend proved the significance of 1.4140 which has now become a pivot point on the short term showing possibilities that a bearish technical pattern may form with a neckline at the same support level and targets at 1.3500. This change in trend on the intraday and the expected decline on the short term will remain as far as 1.4295 remains intact. The trading range for today is among the key support at 1.3850 and the key resistance at 1.4640 The general trend is to the downside as far as 1.5270 remains intact with targets at 1.3500 and 1.2960

Support: 1.4170, 1.4140, 1.4095, 1.4040, 1.3995
Resistance: 1.4295, 1.4375, 1.4400, 1.4425, 1.4475

Recommendation: According to our analysis, we see that it's good to sell the pair below 1.4295 with targets at 1.4140 and stop loss with a four hour close above 1.4425

JPY

Morning Report Trading remains to the upside as the pair continues to breach resistance levels one after the other currently targeting 99.45 on the intraday and above 101.00 on the short term. We expect this incline to remain with a four hour close above 97.90 or with a downside correction to 97.10 in an attempt to adjust momentum before rebounding back to the upside The trading range for today is among the key support at 94.35 and the key resistance at 99.45 The general trend is to the downside as far as 102.10 remains intact with targets at 84.95 and 82.60

Support: 97.45, 97.10, 96.75, 96.55, 96.15
Resistance: 97.90, 98.30, 98.85, 99.45, 99.75

Recommendation: According to our analysis, we see that its good to buy the pair with a four hour close above 97.90 with targets at 99.45 and stop loss with a four hour close below 96.55

CHF

Morning Report After building a solid base above the key support of the ascending channel and with the support of positive signs on momentum indicators, the pair inclined to currently target the pivot point at 1.1715 which is the neckline for a possible bullish technical pattern with targets at 1.1920 and 1.1970. We expect the pair to target this level as far as 1.1620 – 1.1560 remains intact. The trading range for today is among the key support at 1.1390 and the key resistance at 1.1970 The general trend is to the upside as far as 1.0570 with targets at 1.1970 and 1.2055

Support: 1.1695, 1.1660, 1.1630, 1.1585, 1.1530
Resistance: 1.1740, 1.1785, 1.1825, 1.1885, 1.1920

Recommendation: According to our analysis, we see that its good to buy the pair with an hourly close above 1.1720 with targets at 1.1920 and stop loss with a four hour close below 1.1630

CAD

Morning Report The sharp incline witnessed yesterday helped the pair breach a critical resistance at 1.2530 to reach 1.2575 which is the 100% Fibonacci expansion. There is still a possibility for more appreciating during the intraday to 1.2685 – 1.2710 (the 161.8% and 176.4% Fibonacci levels respectively). The pair may face difficulties at 1.2575 which is the 100% expansion intersected with the key resistance for the minor descending channel. Confirmation of the intraday trend will be seen with a four hour close above 1.2575 yet failure of this will decline the pair to 1.2390 The trading range for today is among the key support at 1.2235 and the key resistance at 1.2710 The general trend is to the upside as far as 1.1780 remains intact with targets at 1.2935 and 1.3065

Support: 1.2530, 1.2505, 1.2470, 1.2435, 1.2380
Resistance: 1.2600, 1.2635, 1.2660, 1.2685, 1.2710

Recommendation: According to our analysis, we see that its good to buy the pair with an hourly close above 1.2575 with targets at 1.2685 and stop loss with a four hour close below 1.2505

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.

Technical Analysis for Crosses

Daily Forex Technicals | Written by Crown Forex | Feb 26 09 09:17 GMT |

EUR/JPY

The pair is still affected negatively by the harmonic bearish pattern formed on the 4h chart and it's still trying to breach 61.8% Fibonacci level of the medium term decline started at 131.02 confirming that the PRZ (potential reversal zone) of the last upside move started at 111.96 areas is still in progress between 61.8% at 123.80 and 76.4 % levels at 126.50, hence we will keep our today's outlook to the downside as far as 126.50 remains unbroken.

Note: Gator oscillator is still supporting the bearish overview and WILLIAM%R shows a clear overbought signal.

Trading range for today is among key support at 121.50 and key resistance now at 128.40.

The general trend is to the downside as far as 141.44 remains intact with targets at 100.00 followed by 88.97 levels.

Support: 123.80, 123.40, 122.90, 122.25, 121.50
Resistance: 124.50, 125.00, 125.60, 126.50, 127.30

Recommendation According to our analysis, we believe that it is good to sell the pair cautiously {because the potential reversal zone is still under construction between 123.80 and 126.50 areas } with a four hour close below 124.20 with targets at 122.50 and stop loss with a four hour close above 125.60.

GBP/JPY

The pair reached all our targets yesterday followed by a normal technical retrace and profit taking movements that pushed it upward above 139.00 areas but studying shorter time frames shows that the pair doesn't have enough momentum to incline further more influenced by lots of negative effects as shown on the hourly above chart so that we expect more downward move today targeting the lower line of pitchfork's channel as far as 143.75 remains unbroken.

Notes: 1- Settling below TEMA 20 value supports the bearish outlook

2- Despite RSI is neutral but STOCKSTICK is still affected by the bearish sign appearing on the chart.

Trading range for today is among key support at 134.90 and key resistance at 145.00.

The general trend is to the downside as far as 148.20 remains intact with target at 116.00 levels.

Support: 138.40, 137.70, 136.65, 135.50, 134.90
Resistance: 139.60, 140.50, 141.50, 142.30, 143.25

Recommendation: According to our analysis, we believe that it is good to sell the pair with a four hour close below 139.00 with targets at 137.30 and stop loss with a four hour close above 140.40.

EUR/GBP

The royal pair respected our yesterday's mid-day report bullish scenario influenced by the price action stability above 23.6% Fibonacci that helped it to reach 38.2% of the at 0.8980 areas represent (cluster resistance) which might be able to prevent the pair from preceding the upward recovery, therefore we expect downside move as far as 0.9070 remains unbroken, this bearish overview for intraday basis is based on bearish candle stick formation besides the clear bearish signal appears on the STOCKSTICK as shown on the above chart

Trading range is among the key support 0.8720 and key resistance now at 0.9180.

The general trend is to the upside as far as 0.8020 area remains intact with targets at 1.0000 followed by 1.0400 levels.

Support: 0.8902, 0.8850, 0.8800, 0.8765, 0.8720
Resistance: 0.8950, 0.8980, 0.9020, 0.9070, 0.9130

Recommendation: According to our analysis, we believe that it is good to sell the pair with a four hour close below 0.8930 with targets at 0.8820 and stop loss with a four hour close above 0.9040

Crown Forex

Major Market Movers: Fundamentals Day

Daily Forex Fundamentals | Written by Crown Forex | Feb 26 09 08:34 GMT |

Global equity markets continued to fall yesterday as pessimism remains the dominant theme among investors, as global economies seem to be falling deeper in recession amid the worst financial crisis since the Great Depression.

The euro zone economy continues to experience huge pressures from the ongoing financial crisis, as growth in its biggest economy Germany continues to contract, while other economies in the area including France, Italy, and Spain are also under stress from the financial crisis, as their economies continue to contract as well.

Germany released this morning their ILO unemployment for the month of January increased to 7.3 percent inline with median estimates and up from the prior rise of 7.2 percent. While the GFK consumer confidence index for the month of March rose unexpectedly to 2.6 from the prior revised estimate of 2.3 and well above median estimates of 2.0.

Germany is due to release their unemployment rate for the month of February, which is expected to rise to 7.9 percent from the prior rise of 7.8 percent, where the unemployment change is expected to rise to 60 thousand from the prior estimate of 56,000 reported back in January.

The euro zone confidence index for the month of February will be also released today, as the business climate indicator is expected to fall to -3.20 from -3.16, while consumer confidence is expected to remain steady at -31, while the economic confidence index is expected to rise to 68.5 from a revised estimate of 67.1, while the industrial confidence index is expected to remain steady at -34, and the services confidence is expected to remain steady as well at -22.

Germany will be also releasing their consumer price index preliminary estimate for the month of February, where CPI is expected to rise 0.3% after falling 0.5% the prior month, while CPI is expected to rise an annualized 0.8% after rising 0.9% previously, while the EU harmonized CPI is expected to rise 0.3% after falling 0.6% in the prior estimate, while harmonized CPI is expected to rise over an annualized rate of 0.7% down from 0.9% reported in the previous estimate.

Germany and other major economic forces in the euro zone continue to fall deeper in recession as the global financial crisis has been taking its toll on European economies and accordingly the area's growth continues to contract and will force the European Central Bank to cut interest rates further over the upcoming months.

The U.K. released earlier this morning their Nationwide house prices for the month of February, as prices fell 1.8% over the month after falling by 1.3% the prior estimate, while house prices dropped 17.6% compared with a year earlier and following the prior fall of 16.6%.

The U.K. will also release their GFK consumer confidence index for the month of February, which is expected to fall further to -39 from the prior estimate reported back in January of -37, as economic conditions worsened further and as the economy fell deeper in recession.

The Bank of England Governor King will testify before the House of Commons Treasury select committee and will be talking about the global financial crisis, the BoE is still expected to cut interest rates over the upcoming period down to near zero, as the financial crisis continues to suppress economic growth and threatens with deflation risks.

The U.S. will be also releasing a set of data today, as the durable goods orders are expected to have dropped 2.5% in January after dropping 3.0% according to December's revised estimate, while durables that exclude transportation are expected to fall 2.2% after falling a revised 3.9% back in December.

The U.S. will also release their weekly jobless claims, which are expected to remain elevated as rising unemployment continues to pressure the index to the upside, where analysts predict that initial jobless claims to have dropped last week by 2,000 to 625,000, while continuing claims are expected to rise to 5.025 million from the prior 4.987 million.

More data from the housing marker will be provided as the new home sale are expected to have dropped by 2.1 percent in January to 324,000 units from the prior estimate of 331,000.

Yesterday's existing home sales dropped beyond analysts estimates to signal that the housing market continues to undergo the worst slump since the Great Depression, and that the housing slump will continue to undermine economic growth in the world's largest economy.

Crown Forex

Yen Extends Losses

Daily Forex Fundamentals | Written by KBC Bank | Feb 26 09 08:05 GMT |

Sunrise Market Commentary

US Treasuries hit the skids
Treasuries hit the skids as very weak Existing Home Sales couldn't trigger a positive momentum. A strong 5-year Note auction brought little support either, as an intra-day rebound of equities and ongoing supply concerns weighed. Busy calendar today with several eco releases, the 7-year Note auction and Obama's budget proposals the eye-catchers.
Italian government bonds underperform ahead of today's auction
German bonds again couldn't really benefit from the weak eco data and the losses on the equity markets. The short end outperformed on the back of the comments of ECB's Weber, but the Bund still trades below the contract high at 126.53. We consider this as a rather disappointing performance, which supports our buy-on-dips approach towards last week lows at 124.37 and not to front-run on a break higher.
FX: yen extends losses
A clear signal on the technical charts and the ongoing negative news flow from the Japanese economy keep the yen in the defensive against the dollar. Sterling faced a set-back on negative comments from BoE members. EUR/USD is still locked in the established lackluster trading pattern.

The Sunrise Headlines

US equities lost about 1.1%, but ended well off intra-day lows, digesting Tuesday's gains amid still ongoing nervousness on the stress test of the banking sector and overall weak economy. Industrials were weakest sub-sector. Asian equities trade with slight negative bias overnight.
The US launched its 'stress test' program to judge banks' resistance to a deeper recession and to determine the level of capital its 20 biggest banks may need. Treasury Secretary Geithner stressed the government stands ready to support banks that need more capital, but won't run the banks or nationalize them.
Obama will send its first budget proposal to Congress later today, opening the yearly budget battle in Congress. It should once more stoke supply concerns.
Australian investment spending unexpectedly jumped 6% higher in Q4, suggesting the economy might have dodged a recession for now. The Aussi dollar barely reacted though. New Zealand business confidence deteriorated in February.
Britain is expected to unveil a plan to limit banks' losses on about £500 B of risky assets helping to prevent full nationalization. RBS is expected to unveil a record loss and unveil a far-reaching restructuring plan.
Following a downgrade of the Latvia rating, S&P now cut the Ukraine rating by 2 notches to CCC+, suggesting high chance on a default. S&P warned the IMF bailout package may be unraveling amid political bickering.
Busy calendar today with EMU M3 and confidence survey, German unemployment and Länder CPI and US durable orders & claims key eco releases. Also US, UK and Italian bond auctions and CB speeches are worth looking at

Currencies: Yen Extends Losses

EUR/USD

On Wednesday, EUR/USD more or less made the opposite move from the price action on Tuesday. EUR/USD was rather well bid early in the session mirroring the improved sentiment on global stock markets. At that time, the poor German export performance as revealed in the detailed Q4 GDP data had no lasting impact on trading. European stock market opened the session on a positive tone, and this helped the single currency to hold above the 1.28 mark during the morning session. However, underlying investor sentiment remained very fragile. S&P downgraded Ukraine's credit ratings and stock market indices gave up the early gains and so, EUR/USD came again under pressure. The poor US existing home sales were no help for the euro and EUR/USD declined to the 1.27 area late in the European session and the pair closed the day at 1.2723, compared to 1.2846 on Tuesday. However, in fact yesterday's decline was nothing more than a simple reversal of Tuesday's gains. So, from this point of view, the balance of uncertainties persists and prevents EUR/USD to clearly move in one way or another.

EUR/USD: indecisive trading pattern persists

Support comes in at 1.2662 (Week low), at 1.2637 (break-up hourly), at 1.2588 (daily envelop), at 1.5775/49 (Boll Bottom/weekly envelope) and at 1.2513 (18 Feb low).

Resistance is seen at 1.2761 (reaction high/MTMA), at 1.2805 (Boll Midline), at 1.2846 (Daily envelope), at 1.2908/33 (breakdown hourly/LTMA) and at 1.2991 (Current week high).

The pair is in neutral territory

USD/JPY

Today, the eco calendar is rather well filled. In the US, the durable orders; the jobless claims and the new home sales are on the agenda; in Europe markets watch out for German labour market data, the EU confidence indicators and the M3 money supply data. The data are interesting, but recently had most often no lasting impact on trading. Global market factors and especially the developments in the financial sector (both in the US and elsewhere) will continue to have a big impact on trading.

Since the start of the year, EUR/USD was on the defensive. The deterioration of the European government finances and the widening intra-government spreads fuelled a euro-negative sentiment. On top of that, the euro remained a gauge of global risk aversion. Negative headlines on the development of the global crisis often had a negative impact on the euro. The US eco story is also far from brilliant, but the dollar continued to take advantage from its safe haven status. Since mid January, the EUR/USD decline shifted into a lower gear but any attempts to change the trend immediately ran into resistance. The renewed flaring up of risk aversion and market fear that the deepening of the crisis in Central and Eastern Europe might cause a new adverse loop for the European economy and its financial sector caused EUR/USD to drop below the 1.27 support area last week. The price action in EUR/USD is very much driven by global market sentiment and with major stock market indices still close to key support levels (we especially look at the S&P 500), the outcome of this test remains a key factor for EUR/USD trading. At least for now, the news flow doesn't contain many positive headlines that might help sentiment to change in favour of the euro anytime soon.

From a technical point of view, the correction from mid December brought EUR/USD again in the previous sideways range (capped by the 1.3300 area). The pair tested several times the 1.2765/00 support area (previous low) and the break of this area deteriorated the picture for the single currency and brought the 1.2330 area again in the picture (2008 low). A break below the 1.2330 area would signal big trouble for the single currency. In a day-to-day perspective, yesterday's correction to Tuesday's rebound only confirms the picture that the topside in EUR/USD is capped. Range trading in the 1.25/1.31 range looks the most viable scenario for now.

On Wednesday, USD/JPY extended the gains from the previous sessions. It becomes ever more obvious that the Japanese currency is losing its safe haven status. Negative Japanese eco data (like yesterday's trade data) are becoming increasingly a reason to scale back yen long exposure. Negative news (even in case it comes from the US) most often tends to support the dollar, even against the yen. Tuesday's, swift break above the key 94.65 resistance spurred additional buying in this pair. USD/JPY close the session at 97.39, compared to 96.64 on Tuesday evening.

This morning, USD/JPY trades again a few ticks higher compared to yesterday's close. Weekly flow data this morning showed foreigners last week sold Japanese bonds and stocks and that Japanese investors bought foreign stocks and bonds. The link of this kind of data with the yen is not one-to-one, but it might fuel the yen negative sentiment. Most Asian stocks markets trade slightly lower. Chinese stocks this time underperform most of their Asian counterparts.

Looking at the charts, USD/JPY set a reaction low in the 87.15 area in December. Since then, the pair entered calmer waters. The long-term trend in the pair remains negative, but the downtrend ran out of steam below 0.9000 area (amongst others on fears Japanese officials will voice concerns on the ascent of the yen if USD/JPY comes closer to the 0.8710/15 reaction low). Recently, the pair even made a gradual rebound and this rebound accelerated last week and early this week. The underlying yen-momentum obviously has weakened. This time, the yen decline was not driven by improved market risk appetite, but by rising worries on the Japanese economy. Last week, we had a cautious buy-on-dip approach in this pair. On Friday, the pair came close our first short-term target (target 94.65, reaction high 94.38) and the nearing of this high profile resistance temporary slowed the up-move. However, Tuesday's break above 94.65 cleared an important hurdle making ST picture for USD/JPY positive. The next important resistance comes in the 100.55 (04 Nov high/102.20 2nd target double bottom off 94.65).

USD/JPY: double bottom pattern confirmed.

Support stands at 97.12 (daily envelope), at 96.34 (Reaction low), at 96.00/95 (Break-up/STMA), 94.94 (St break up) and at 94.24/12 (Reaction lows).

Resistance comes in at 97.97 (today high), at 98.45 (Starc top), at 98.88/00 (50% retracement/daily envelop), at 99.20 (1e target double bottom), at 100.55 (LT reaction high).

The pair is in overbought conditions

EUR/GBP

On Wednesday, EUR/GBP extended Tuesday's rebound. In this respect, EUR/GBP decoupled from the price action in EUR/USD. The details of the UK Q4 GDP brought no big surprises, but at least for now the decline of sterling was no big help for the export sector. Later in the session, a series of negative headlines from an article of BoE's Barker and a speech from BoE's Blachflower also added to the sterling negative sentiment. BoE's Barker expect that the weak sterling will prompt a shift away from imports. The uncertainty on the additional plans to be announced for the UK banking sector might have weighed on sterling, too. EUR/GBP closed the session at 0.8956, compared to 0.8871 on Tuesday.

This morning the Nationwide house prices came out (slightly) weaker than expected at -1.8% M/M and 17.6% Y/Y. Markets will look out for the details of a new UK bank ing plan. According, to market rumours, the plan could include a £ 500 bln guarantee for risky bank assets. We don't have a strong view on the implication of this plan for ST sterling trading. However, the ever growing involvement of the UK government in the banking sector illustrates a structural risk for the UK financial position over time.

At the start of 2009, EUR/GBP made a forceful correction after the spectacular gains mid-December. EUR/GBP tried to recapture the longstanding uptrend, but the rebound ran into resistance in the 0.95 area and another forceful correction even sent the pair (temporary) below the key 0.8840/00 neckline/support area. Last week, EUR/GBP tested the high profile support (0.8663 area previous high) but the test was rejected. The subsequent rebound called off the short-term alert in EUR/GBP and makes the picture neutral again. From a fundamental/LT point of view, we remain sterling cautious. Last week, we advocated that the 0.9085/0.9130 area could turn out to be a difficult hurdle short-term. In a day-to-day perspective, we remain neutral for EUR/GBP and wait for a technical signal. ST trading is confined in the 0.8638/0.9072 trading range. There are some tentative signs that the bottom in the pair becomes a bit better protected, but we don't want to font-run on this as long has we don't get a clear technical signal

EUR/GBP: sideways

Support stands at 0.8917/0.8898 (Reaction low/Break-up hourly), at 0.8889/71 (STMA + Boll Bottom/ Daily envelope), at 0.8814 (reaction low), at 0.8749 (Breakup hourly), at 0.89726 (Week low).

Resistance is seen at 0.8879/87 (Reaction high/MT reaction high), at 0.9005/20 (LTMA/daily envelope), 0.9060 (Boll top), at 0.9072/83 (MT Reaction highs).

The pair is in neutral territory

News

US: Existing home sales show unexpected decline

In January, existing home sales dropped by 5.3% M/M to 4.49M; while the consensus was looking for a modest increase. The previous figure was downwardly revised from 6.5% M/M to 4.4% M/M. Looking at the details, sales of condo's dropped by 10.2% M/M, while sales of single family homes fell by 4.7% M/M. Months supply rose from 9.4 in December to 9.6 in January. Both median and average prices came out lower. These data indicate that the worst is not over and the uptick in sales of existing homes in December was only temporary. In the coming months, it will be interesting to see whether the Obama housing plan will start having its impact.

Download entire Sunrise Market Commentary

Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

BOE May Buy 170 Billion Pounds of U.K. Gilts, JPMorgan Says

By Anchalee Worrachate

Feb. 26 (Bloomberg) -- The Bank of England may buy between 85 billion pounds ($121 billion) and 170 billion pounds of U.K. government bonds as part of its so-called quantitative-easing program, according to JPMorgan Chase & Co.

The central bank may start buying securities of all maturities as early as next month, said Francis Diamond, a fixed- income strategist in London at JPMorgan. Quantitative easing would entail the creation of money to be used for buying government and corporate debt, giving banks more cash to lend.

“We expect any gilt purchases to be done across the curve,” said Diamond, who based his estimate on similar action taken by the Bank of Japan starting in the late 1990s. “We don’t think they will favor one part of the market over another.”

Bank of England Governor Mervyn King said Feb. 11 the Monetary Policy Committee may pursue full quantitative easing if credit markets remain frozen. Policy maker David Blanchflower said yesterday that with interest rates already at the lowest in the bank’s history, there’s a risk non-conventional measures to revive the economy will be implemented too slowly.

The central bank cut its key interest rate to all-time low of 1 percent on Feb. 5, a reduction of 450 basis points since the start of 2008. The British economy shrank the most since 1980 in the final three months of last year as spending by consumers and companies shriveled, data showed yesterday.

The Bank of Japan held about 16.5 percent of the country’s government bonds by the time its quantitative-easing strategy ended in March 2006, Diamond said. About 515 billion pounds of U.K. government debt will be publicly traded by April 2010, JPMorgan forecast.

Buying 16.5 percent of the gilts in circulation by the end of the U.K.’s 2010 fiscal year would equate to about 85 billion pounds of securities, Diamond said.

“The lower bound of the range is based on the Japanese scenario and the upper bound is based on the fact that things could deteriorate significantly in the U.K.,” Diamond said.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Feb 26 09 08:33 GMT |

Overview & economic commentary

A heavy calendar for key speeches, events and data releases today. US President Obama publishes his first budget proposal, which is anticipated to prepare the way for a sharp drop in the fiscal deficit from around $1,300bn currently to $533bn by 2013 through a combination of upper-level income tax increases, revenues from the sale of emission permits and cuts in spending on the Iraq war. He is also likely to outline his plans for healthcare reform and tackling climate change. In addition, BoE Governor King and members Tucker, Haldane and Bailey testify at the Treasury Committee Hearing on the Banking Crisis. It is possible that these speakers will give more information on measures such as quantitative easing in advance of the MPC policy meeting next Thursday. Likewise, President Trichet's speech at 13:00 will also attract interest. Economic data include German unemployment figures and EU-16 consumer & industrial confidence figures this morning - both sets of data are likely to worsen. In the US this afternoon, initial jobless claims, durable goods and new home sales provide focus. Outcomes are likely to add to deepening concerns about US jobs, manufacturing and the depressed housing market. This week's announcement that S&P/Case-Shiller composite house price index fell by a record 18.55% in December has exacerbated fears that the US Treasury's treatment of toxic mortgage assets is not tackling the problem and that more has to be done. Also today, the UK DMO auctions £2.75bn of 4% gilts due 2022 and the US Treasury auctions $22bn of 7yr notes.

Currency commentary

Yen weakness carried o/n after weekly data from the Japanese MoF showed foreign investors sold Y2.1trn worth of securities. $/Y cleared 97.50 and now looks set to test 98.0, especially if equities can stabilise. S&P futures are currently up 4.0. £/Y settled back below 138.90. BoE governor King tops the agenda today and his comments to the TSC could move sterling and gilts as markets look for comments about QE, state guarantees for the banks, and clues ahead of next week's MPC meeting. £/$ slipped below 1.42 o/n and does not appear in a position to draw some strength from a bank led bounce in equities on the back of the RBS results. US weekly claims and durable goods orders are out later today and may impact the dollar. The US equity market could also bounce after the US treasury announced that stress test for the banks will be concluded by the end of March and banks will have 6 months to tap new private/public funds. EM currencies in Asia and E. Europe are under pressure despite the rally in stocks.

Major data and events today

UK Nationwide house prices (07:00)
Jan -1.3% Y-O-Y -16.6%
Feb (actual) -1.8% Y-O-Y -17.6%
German unemployment (sa, rate) (08.55)
Jan +56K Rate 7.8%
Feb (f'cast) +50K Rate 7.9%
Median +60K Rate +30K:+80K
EU-16 money supply, M3 (sa) (09:00)
Dec Y-O-Y +7.3%
Jan (f'cast) Y-O-Y +7.0%
Median +6.9% Range +6.0%:+7.3%
EU-16 consumer confidence (10:00)
Jan -31
Feb (f'cast) -33
Median -31 Range -33:-29
EU-16 industrial confidence (10:00)
Jan -34
Feb (f'cast) -36
Median -34 Range -36:-30
US Initial claims (w/e 21/2) (13:30)
Previous 627K
Forecast 620K
Median 630K Range 600K:670K
US Durable goods orders (13:30)
Dec -2.6% Y-O-Y -19.7%
Jan (f'cast) -4.0% Y-O-Y -20.8%
Median -2.5% Range -4.5%:+4.6%
US New home sales (15:00)
Dec 0.331mn
Jan f'cast) 0.350mn
Median 0.325mn Range 0.291m:0.362m
Japanese labour market, prices, industrial output, retail sales data (23:30/23:50)
UK DMO to auction £2.75bn of 4% gilts due 2022 (10:30)
BoE members King, Tucker, Haldane and Bailey testify to the Treasury Committee on the banking crisis (10:30)
ECB President Trichet speaks in Dublin (13:00)
ECB member Nowotny speaks in Vienna (17:00)
US Treasury to auction $22bn of 7yr notes (18:00)
US President Obama releases his first budget proposal

Chart of the day: Will EU-16 confidence indicators for February dip further below historic levels?

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Hong Kong Exports Fall by Most Since 1958 on Crisis

By Nipa Piboontanasawat

Feb. 26 (Bloomberg) -- Hong Kong’s exports plunged by the most in 50 years as the global financial crisis slashed demand for Chinese products shipped through the city.

Overseas sales dropped 21.8 percent in January from a year earlier, the government said today on its Web site, after shrinking 11.4 percent in December. Economists surveyed by Bloomberg News had estimated a 20.5 percent decline.

A slump in the U.S. housing market has dragged the world’s developed economies into recession and caused more than $1 trillion of losses at financial institutions globally. Hong Kong, a trade hub for China, is headed for its first full-year contraction since 1998 as exports and domestic demand fall.

“A slowdown in exports leads to a loss in incomes for businesses and households, stalling investment and consumption,” said Sean Yokota, an economist at UBS AG in Hong Kong. “We won’t see a recovery in Hong Kong’s economy until global demand and exports start to stabilize.”

The export decline was the biggest since March 1958.

Imports fell 27.1 percent in January from a year earlier, resulting in a trade surplus of HK$7.2 billion last month, the government said.

The declines were also due to the timing of the Chinese Lunar New Year holiday, which landed in January this year and February in 2008.

Hong Kong’s economy will probably shrink 2 percent to 3 percent in 2009, after a 2.5 percent expansion last year, Financial Secretary John Tsang said yesterday.

Gross domestic product contracted 2.5 percent in the fourth quarter of 2008 from a year earlier.

On a quarter-on-quarter basis, the city has been in a recession since the third quarter. GDP shrank a seasonally adjusted 2 percent in the fourth quarter from the previous three months.

Tsang yesterday announced salary-tax refunds, property- rates waivers and infrastructure spending to spur growth.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

European Retail Sales Drop for Ninth Month, Bloomberg PMI Shows

By Jurjen van de Pol

Feb. 26 (Bloomberg) -- European retail sales fell for a ninth month in February as households cut spending amid rising unemployment and tighter credit conditions, the Bloomberg purchasing managers index showed.

The gauge of sales in the euro region dropped to 42.3 from 44 in January. The index is based on a survey of more than 1,000 executives compiled for Bloomberg LP by Markit Economics and a reading below 50 indicates contraction. The index has been below that mark since June.

The euro-zone economy will shrink 1.9 percent this year as the global financial turmoil forces producers to scale back output and rising unemployment curbs household spending, the European Commission forecasts. European Central Bank officials have signaled they may cut interest rates to a record low next week and could consider other options to stimulate the economy.

“There’s a risk that if the rest of the world continues to decline, eventually the increase in unemployment will get the upper hand,” said Peter Vanden Houte, chief European economist at ING Groep NV in Brussels. “That’s the biggest danger” for consumer spending.

Retail sales dropped in the three largest economies in the euro region this month, led by a record decline in France. The slide in Italian sales accelerated, while the pace of contraction in Germany slowed.

This month’s figures are “in contrast to the easing seen over the previous two months” and indicate “a renewed weakening of consumer confidence and high street spending,” Markit said.

‘Lower Visibility’

PPR SA, owner of the Gucci luxury-goods brand and Conforama furniture stores, this month said fourth-quarter sales were almost unchanged and that it plans to cut as many as 1,200 jobs at Conforama and its Fnac unit. Arcandor AG, Germany’s largest department-store owner, on Feb. 12 said it couldn’t give a full- year forecast, citing “lower visibility” because of the financial turmoil.

The number of jobseekers in France rose by the most on record in January as companies braced for the biggest economic contraction since World War II. The European Commission expects the French economy, the euro region’s second-largest, to shrink 1.8 percent this year.

Unemployment in Germany, Europe’s largest economy, increased almost twice as much as forecast in January as the effects of the financial crisis spread. Joblessness across the euro region probably rose to 8.1 percent last month, the highest in more than two years, according to a Bloomberg News survey of economists.

Sales Targets

While retailers missed their sales targets to a greater extent this month, shops expect targets to be “broadly met” in March, helped by revenue from car sales, today’s report said.

European governments are using money-back programs to try to counter a contraction in the region’s auto market that accelerated last month. France’s discount can reach as much as 2,500 euros ($3,185) for buyers of less-polluting new vehicles who scrap older models, while the rebate in Italy is 1,500 euros.

Germany’s upper house of parliament approved a 2,500-euro rebate on Feb. 20 on trade-ins of cars at least nine years old. The February increase in the German retail purchasing managers index, which signaled the slowest rate of contraction since October, largely reflected an upturn in retail sales in the automobile industry, Markit said.

“We notice this seems to work, it is not the case that consumers have completely pulled back,” Vanden Houte said.

To contact the reporter on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.net

German Unemployment Rises for a Fourth Month as Slump Deepens

By Rainer Buergin

Feb. 26 (Bloomberg) -- German unemployment rose in February for a fourth straight month as falling exports and a deepening recession prompted companies to cut production and jobs.

The number of people out of work rose a seasonally adjusted 40,000 to 3.31 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast an increase of 60,000, according to the median of 31 estimates in a Bloomberg News survey. The adjusted jobless rate rose to 7.9 percent from 7.8 percent.

Heidelberger Druckmaschinen AG and ThyssenKrupp Steel AG are among companies cutting jobs as demand sags. The International Monetary Fund expects the German economy, Europe’s largest, to contract 2.5 percent this year and mounting concern that job losses will increase is turning voters from both parties in Chancellor Angela Merkel’s coalition before elections this year.

“The outlook for the labor market is quite alarming,” Stefan Bielmeier, an economist at Deutsche Bank AG, said Feb. 23 in an interview. “For now, shortened work time is distorting how bad things really are.”

Some companies are reducing working hours before cutting jobs after the government said it would cover companies’ social- insurance payments for workers put on short time. Nuremberg-based car parts-maker Leoni AG, which reduced its workforce by 3,000 in the fourth quarter, has cut weekly work time and introduced “other personnel measures” to pare costs. Home-improvement retailer Praktiker AG also plans to shorten work hours.

Job Cuts Planned

“Companies are hanging on to staff for now because they expect a recovery in the second half of the year,” said Bielmeier, who predicts the German economy will shrink as much as 3.5 percent in 2009. “For the first half of the year we expect a monthly increase in unemployment of 50,000, after that it’ll be 100,000” on average.

The share of German companies planning to cut jobs rose to 30 percent in January from 18 percent in October, according to a survey of 25,000 companies by the DIHK chambers of trade and industry. In unadjusted terms, the number of jobless increased by 63,121 in February, today’s report showed.

Plant and machinery makers plan to reduce output and cut as many as 25,000 jobs this year, the VDMA machine makers’ association has said. Heidelberger Druck, the world’s largest printing press maker, is cutting around 2,500 jobs.

Coalition Support Wanes

As the labor market outlook deteriorates, support for the parties in Merkel’s coalition of Christian Democrats, their Christian Social Union sister party and the Social Democrats is waning, surveys show.

Support for the CDU/CSU remained at 34 percent, below the 35.2 percent share of the vote the bloc won in the 2005 federal election, a weekly Forsa poll published Feb. 25 showed. The Social Democrats gained 1 percentage point to 23 percent compared with 34.2 percent in 2005.

The pro-business Free Democratic Party, which is calling for bigger tax cuts to spur growth, held at a record 18 percent for a third week. Germany will hold national elections on Sept. 27.

Concern among voters may grow as the economy slides deeper into a recession. Exports slumped 7.3 percent in the fourth quarter, the Federal Statistics Office said yesterday. Business confidence dropped to a 26-year low in February, a report showed earlier this week.

Sixty percent of respondents in an Infratest dimap poll published on Feb. 6 said the government plans won’t help solve the country’s economic woes, a 9 point increase from January. Lawmakers last week approved to more than double the fiscal stimulus to about 80 billion euros ($102 billion).

ECB Rates

The European Central Bank will probably cut its benchmark interest rate by 50 basis points to 1.5 percent next month, the lowest in the euro region’s 10-year history, a survey of economists shows. The central bank has reduced the rate from 4.25 percent since early October.

According to the latest comparable data from the Organization for Economic Cooperation and Development, Germany’s jobless rate rose to 7.2 percent in December, matching the rate in the U.S. for the first time since 1993. Unemployment in France rose to 8.1 percent from 8 percent.

In western Germany, the number of people out of work rose by a seasonally-adjusted 34,000 in February, while the number in eastern Germany increased by 6,000, today’s report showed.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

U.K. Nationwide House Prices Fell Most Since 1991 in February

By Jennifer Ryan

Feb. 26 (Bloomberg) -- U.K. home values fell the most in at least 18 years in February as the recession deepened and banks withheld mortgage finance, Nationwide Building Society said.

The average house price fell an annual 17.6 percent to 147,746 pounds ($211,000), the biggest drop since monthly data began in 1991, the mortgage lender said in a statement today. Home values fell 1.8 percent on the month.

Chancellor of the Exchequer Alistair Darling is preparing to underwrite banks’ toxic assets to spur lending. Bank of England policy maker David Blanchflower said yesterday officials may need to do more to avoid a “protracted recession” after the bank cut the key rate to a record low of 1 percent. The U.K. economy shrank the most since 1980 in the fourth quarter.

“It is too early to say that the market has reached its trough,” Fionnuala Earley, chief economist at Nationwide, said in the statement. “There is unlikely to be a swift turnaround in the housing market in 2009.”

Darling wrote in a letter to the Financial Times yesterday that banks must “clean up” balance sheets and restructure their operations. He and Prime Minister Gordon Brown are angry that firms are still rationing credit after the government provided 37 billion pounds of cash to support Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

The chancellor is due to reveal details of the asset protection program, which will underwrite potentially bad loans.

‘Protracted Recession’

“The risks of a protracted recession are clearly evident,” Blanchflower said in a speech at the University of Stirling in Scotland yesterday. “It is possible further action may be necessary to bolster confidence in our financial institutions.”

Mortgage approvals fell 43 percent from a year earlier in January, the British Bankers Association said earlier this week. Banks granted 23,376 loans for house purchase, the group said.

Central bank policy makers unanimously agreed this month to ask the government for permission to pump money directly into the economy now that interest rates are the lowest since the bank was founded in 1694.

A separate report today by property Web site findaproperty.com showed the number of rental properties listed rose 43 percent in the last six months, pushing average rents down an annual 4.8 percent.

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

UBS Forced to Lift Secrecy Skirt for Peek by IRS: Ann Woolner

Commentary by Ann Woolner

Feb. 26 (Bloomberg) -- UBS AG has only itself to blame for landing in a vise, squeezed by Swiss banking secrecy law on one side and the U.S. Internal Revenue Service on the other.

If it hadn’t been so hungry for American wealth and brazenly offered to hide it, the Swiss bank might have rocked along for years without ever getting pinched.

But, no. UBS bankers came to the U.S. by the dozens to pitch the Zurich-based bank as a haven from taxation, a former banker has admitted. Carrying encrypted laptops, they helped customers create sham structures, advised them on avoiding U.S. reporting requirements or referred them to people who would.

The feds figure almost $18 billion was hidden in offshore UBS accounts in recent years.

That’s what investigators uncovered in a case that began with a single American, Igor Olenicoff, hiding $200 million. He claims he was led into the crime by UBS bankers, and now it has turned into an historic clash between U.S. and Swiss law.

Threatening criminal prosecution of the bank, the U.S. won a $780 million settlement, an admission that UBS bankers conspired to violate the law and identifying information on some 200 to 300 American clients.

That crack in the secrecy wall created enough of a stir that UBS and the Swiss Bankers Association had to explain why it happened and why it won’t necessarily lead to further disclosures.

It’s like this: So far, the only clients exposed were suspected of tax fraud, which involves lying to the government and is illegal in both countries. Mere tax evasion, where you just don’t get around to reporting your assets or income, isn’t a crime in Switzerland. And under a bilateral agreement, only conduct that is criminal in both countries can prompt Swiss banks to turn over information on their customers.

Prying Information

Now the U.S. is trying to pry open the crack to look for evaders. In federal court in Miami, the IRS demands that the bank name the American holders of more than 52,000 secret accounts.

Neither side can afford to lose the fight.

If UBS complies, Switzerland can prosecute the bankers for violating Swiss law and lift UBS’s banking license.

That isn’t all. The release of thousands of names would crumble public confidence in legendary Swiss bank secrecy, shrinking Switzerland’s international banking business, a linchpin in the economy.

Swiss authorities can’t let that happen, any more than U.S. authorities can walk away from the fight.

“The IRS can’t allow UBS to help people break federal tax law,” says Bryan Skarlatos, a partner at Kostelanetz & Fink in New York.

Suspected Tax Evaders

Whether by settlement or court order, the pressure is bound to eventually force into the open hundreds, possibly thousands of names of suspected tax evaders.

“There really is no such thing as bank secrecy anymore,” says Cono Namorato, a tax expert in Washington at Caplin & Drysdale. He predicts UBS will wind up giving up more names.

“It’s just a question of how and when the final package is going to be put together,” says Namorato, who, like Skarlatos, has clients with offshore accounts.

Fortunately, court rules favor the IRS at this stage in the case. It doesn’t have to do much to persuade the court to order UBS to lift its skirt.

If the bank defies a court order, hefty daily fines would no doubt follow.

And while an appeal might delay collection of the fines, prospects in the Atlanta-based 11th U.S. Circuit Court of Appeals also favor the IRS, according to Wilmer “Buddy” Parker III, a former federal prosecutor and now a white-collar criminal defense lawyer in Atlanta with an expertise in financial crimes.

A Fair Exchange

“There has to be some sort of government-to-government resolution,” says Namorato.

He suggests the IRS invite UBS customers to come in and declare their hidden assets in exchange for a discount in penalties. Already, nervous depositors are coming in.

Namorato says the more “passive” depositors, such as those with accounts passed down from parents or grandparents, could get an especially steep discount.

Those who were actively moving assets through a series of shelters, trusts and phony loans to evade U.S. reporting requirements could be in more trouble.

If the IRS distinguishes, as Switzerland does, between passive evaders and active fraudsters, and if the passive evaders come in on their own (perhaps under threat of being considered a fraudster), the Swiss could still claim it was honoring the distinctions laid out in the law.

Cross-Border Work

As for Switzerland’s international banking business, UBS has already pledged to wind down its cross-border work. It’s losing that business, anyway.

Beyond UBS, “The banks in Switzerland would be very cautious about these depositors in the future,” says Namorato.

Traditional tax havens around the world are shedding secrecy, too, under pressure from European and other countries.

Swiss secrecy already lost a lot of its sheen when it turned out Swiss banks had simply kept assets deposited by Europeans fleeing the Nazis, making it almost impossible for the families of Holocaust victims to find and claim their inheritances.

Besides, in these days of anti-bank fever and rising populism, transparency’s the watchword.

Secrecy isn’t what it used to be, thanks, in part, to UBS.

To contact the writer of this column: Ann Woolner in Atlanta at awoolner@bloomberg.net

Chemoil's Bandy Sees New Markets Offset Demand Drop: NewsClip

Feb. 26 (Bloomberg) -- Clyde Michael Bandy, chief executive officer of Chemoil Energy Ltd., talks with Bloomberg Television about the contributions of new markets as demand for the company's services declines in existing ports.

Bandy, speaking from Singapore, also discusses the effect of falling energy prices on business. Chemoil is the world's largest independent supplier of marine fuels. (This is an excerpt of the full interview. Source: Bloomberg)

Running time 01:03

-0- Feb/26/2009 02:58 GMT

Turkey Wins Arbitration Case Against Iran Over Natural Gas

By Ali Berat Meric

Feb. 26 (Bloomberg) -- Turkish state-run pipeline company Botas won a case in international arbitration against the government of Iran over natural gas supply, Nazan Konuk, a spokeswoman for the company, said late yesterday.

The court in Switzerland said Iran should sell the natural gas that Turkey buys via a pipeline at a reduced price and said Iran should pay compensation to Botas if supplies are cut or gas quality falls, Konuk said without giving further details.

To contact the reporter on this story: Ali Meric in Ankara at americ@bloomberg.net

India May Import 6 Million Tons of Coal for Power Utilities

By Gaurav Singh

Feb. 26 (Bloomberg) -- Coal India Ltd., the state-owned monopoly, may import 6 million metric tons of coal for power utilities in the year starting April 1, the government said.

The company may produce 312 million tons of coal against an estimated demand of 318 million tons, Santosh Bagrodia, the junior coal minister, said in parliament in New Delhi today.

Coal India accounts for 85 percent of the country’s coal output, according to its Web site. It supplied 242.9 million tons of coal to power utilities in the 10 months to January, exceeding the quota of 239.9 million tons, the minister said.

To contact the reporter on this story: Gaurav Singh in New Delhi at gsingh31@bloomberg.net.

China’s 2008 Energy Consumption Rises at Slowest Pace

By Winnie Zhu

Feb. 26 (Bloomberg) -- China’s energy consumption grew the least last year since the country started releasing the data in 2003 as the global financial crisis curbed factory output and slashed exports.

Energy use increased 4 percent to the equivalent of 2.85 billion metric tons of standard coal, the National Bureau of Statistics said in a statement on its Web site today. That compares with the 7.8 percent gain in 2007 and the 9.3 percent growth in 2006.

China may have an energy surplus this year as the world’s third-biggest economy heads for the deepest slowdown in almost two decades. Domestic demand for gasoline and diesel may fall in the first half because of the global recession, the National Development and Reform Commission, the top economic planning agency, said yesterday.

Crude oil consumption gained 5.1 percent to 360 million tons in 2008, the least in three years, while gas use rose 10 percent to 80.7 billion cubic meters, the statistics bureau said.

Gross domestic product expanded 6.8 percent in the fourth quarter of 2008. China’s economic growth may reach 6.7 percent this year, according to the International Monetary Fund.

Coal use increased 3 percent in 2008 to 2.74 billion tons from a year earlier while electricity consumption rose 5.6 percent to 3.45 billion megawatt-hours.

Energy use for each unit of gross domestic product fell 4.59 percent last year, the statistics bureau said, revising an earlier estimate of 4.2 percent. China aims to cut energy consumption by 20 percent in the five years to 2010.

To contact the reporter on this story: Winnie Zhu in Shanghai at Wzhu4@bloomberg.net.

Origin Energy, Buoyed by Cash, Seeks Acquisitions

By Angela Macdonald-Smith

Feb. 26 (Bloomberg) -- Origin Energy Ltd., the Australian electricity and gas retailer that last year attracted a $5 billion investment from ConocoPhillips, said it’s seeking acquisitions that will yield higher returns than cash.

The company has A$6.4 billion ($4.2 billion) in cash and un-drawn debt and “could spend A$2 billion easily on the right sorts of opportunities,” Managing Director Grant King said today. Origin would be interested in Woodside Petroleum Ltd.’s Otway gas venture stake, in power assets to be sold by New South Wales state or in renewable energy or coal assets, he said.

Origin today terminated a A$1.3 billion share buyback program as it bolsters funds for acquisitions and a liquefied natural gas venture planned with Houston-based ConocoPhillips. The debt capital markets, which have seen an “enormous” deterioration, show no signs of improvement and demand the company acts “cautiously” on its funding, King said.

“There are clearly assets out there they want to buy, the challenge is they’re not quite sure how much money they need for the LNG,” said Stuart Baker, an energy analyst at Morgan Stanley in Melbourne.

Origin dropped 13 cents, or 1 percent, to A$13.20 in Sydney trading, after reducing its full-year earnings forecast. The decline compared with a 2.9 percent gain in the Australian Stock Exchange’s benchmark energy index.

Origin has A$4.1 billion of cash on deposit, earning about 4 percent, said Frank Calabria, general manager for finance. That leaves scope for acquisitions that would yield higher returns, King said.

‘Add to Growth’

“The company is in a position to add extraordinarily to growth,” King told reporters on a conference call. “Even if you bought assets yielding 10 percent you’d add A$300 million or so to profits.”

Origin would consider acquiring a coal-fired power plant, especially should it be successful in buying one of the power retailers due to be sold by New South Wales state, King said in an interview. It’s also in talks on a carbon disposal project in Queensland, he said.

Origin today cut its forecast gain in full-year profit, citing lower interest rates, a drop in crude-oil prices and lower earnings from a unit in New Zealand.

Profit before one-time items in the year ending June 30 is expected to climb by between 20 and 25 percent, down from an October estimate of as much as 40 percent, Sydney-based Origin said today in a statement. First-half profit rose 38 percent, while net income surged 20-fold to A$6.66 billion, buoyed by the sale of 50 percent of its coal-seam gas unit to ConocoPhillips.

Interest ‘Headwinds’

The Sydney-based company made a A$6.4 billion one-time gain in the first half on the asset sale.

Profit before one-time items rose to A$276.9 million in the six months ended Dec. 31, beating a A$248 million median estimate of five analysts surveyed by Bloomberg News.

Deutsche Bank AG predicted the reduced full-year earnings outlook in a Feb. 16 report, citing “headwinds from lower interest rates reducing interest income, Contact Energy’s profit downgrade and lower oil prices.” It estimated a 20 percent increase in profit.

ConocoPhillips and Origin have started a A$2.3 billion program to prepare for a final investment decision about their Australia Pacific LNG project in Queensland in late 2010, King said.

Rival Projects

The Origin/ConocoPhillips venture is one of five rival LNG projects planned for the Gladstone region on Queensland’s central coast. Plants proposed by BG Group Plc and by a venture between Santos Ltd. and Malaysia’s Petroliam Nasional Bhd. are scheduled to get the go-ahead and start production before Origin’s. The Australian company is “open” to consolidation in the industry, King said.

“Origin’s progress is being measured against rival projects from BG and Santos, both of which we believe are substantially more advanced on the downstream component,” Credit Suisse Group said yesterday in a report.

Origin’s oil and gas business recorded higher earnings in the first half, driven by the start-up of projects off Australia’s southeast coast and in New Zealand. Earnings also climbed at the retail unit, while profit fell from power generation and from Contact Energy.

Lower oil prices will reduce earnings in the second half, when exploration expenses will also be higher, Origin said.

Origin more than doubled its first-half dividend to 25 Australian cents a share and said the final dividend will at least match that.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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