New Zealand Consumers Less Pessimistic on Economy, Poll Shows

By Gavin Evans

April 6 (Bloomberg) -- New Zealand consumers are less pessimistic about the outlook for the economy amid falling interest rates and lower taxes, according to a poll.

Thirty-nine percent of 1,000 people polled last week said the economy will deteriorate in the next 12 months, according to a Colmar Brunton poll for Television New Zealand. The gauge reached 46 percent at the last poll in February, the highest since August.

New Zealand is mired in its worst recession in more than 30 years as export demand slows and home construction slumps. The economy contracted 0.9 percent in the fourth quarter, the most in more than 16 years.

Still, home sales in Auckland, the nation’s largest city, jumped to a 20-month high in March as declining home-loan rates and income-tax cuts spurred buyers, realtor Barfoot & Thompson said April 3. Government revenue from income taxes fell by more than NZ$1 billion ($600 million) from April 1 in the first of a three-year program of cuts.

The number of optimists in the poll climbed to 42 percent from 37 percent in February. The poll has a 3.1 percent sampling error and was conducted between March 28 and April 1. The results were e-mailed to Bloomberg News.

Separately, the poll showed support for New Zealand’s governing National Party rose to 57 percent, almost twice that of the main opposition Labour Party at 31 percent.

National Party leader John Key is preferred as prime minister by 51 percent of those polled, unchanged from the previous poll.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net.

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Deflation Dead at BlackRock; Inflation Debt Favored

By Dakin Campbell and Gavin Finch

April 6 (Bloomberg) -- Bond investors are earning more than ever with Treasury Inflation Protected Securities as central bankers around the world set the stage for a rise in consumer prices by deploying unprecedented amounts of money to battle the global recession.

In March, TIPS earned 6.1 percent, the best returns since the Treasury started selling the securities in 1997, according to Merrill Lynch & Co. index data. Worldwide, inflation- protected bonds had the second best month in at least a decade, rising 4.3 percent including reinvested interest, the data show.

At BlackRock Inc., Vanguard Group Inc., Pacific Investment Management Co. and Pictet & Cie Banquiers, concerns are growing that policy makers will struggle to control inflation once economies start to recover. The Federal Reserve, Bank of England and European Central Bank have increased money supply by an average 9.2 percent in the past year, or the equivalent of $2 trillion, to $24 trillion, according to the broadest measure each uses.

In the U.S., the consumer price index “could go back to 4 percent or even higher,” said Brian Weinstein, who oversees $9 billion in inflation bonds at New York-based BlackRock, the largest publicly traded U.S. fund manager. At the least, “the TIPS market is showing that we’re going back to trend inflation,” he said.

Prices in the U.S. rose 0.1 percent last year, the slowest pace since 1954. The CPI will fall 0.7 percent in 2009, according to the median forecast in a Bloomberg survey of 52 economists.

Global Contraction

The Organization for Economic Co-operation and Development predicts the top 30 industrialized nations’ economies will contract 4.3 percent this year, the most in more than a half century. The median of 55 predictions in a Bloomberg survey shows the U.S. shrinking 2.5 percent, after declining 6.3 percent in 2008, the worst performance since 1982.

Governments and central banks in 19 of the largest developed countries are spending 43 percent of their average gross domestic product to end the worst crisis since the Great Depression, adjusting for cost-of-living variances, the International Monetary Fund said March 6. Monetary authorities in the U.S., U.K. and Japan have cut interest rates to near zero to revive their economies.

Second Best

That’s why prices are an increasing concern for investors around the world. While indexed bonds fell 3.1 percent in the second half of 2008, the only month that was better than March globally was in December, according to data tracked by Bloomberg since 1998.

“Pumping money into the system is very inflationary,” said Kenneth Volpert, who oversees $180 billion in taxable bonds, including $14 billion in a TIPS fund, for Vanguard in Malvern, Pennsylvania. “TIPS will outperform.”

The Treasury Department will sell $6 billion of 10-year TIPS tomorrow, and the U.K. will auction 1.1 billion pounds ($1.6 billion) of inflation-indexed bonds maturing in November 2032 on April 8.

Expectations for inflation by TIPS investors -- reflected in how much less yield they demand than buyers of traditional government debt -- are below historical averages, central bank target rates and the median prediction in Bloomberg surveys of economists.

Breakeven Rate

That so-called breakeven rate, which measures how much prices would have to rise for both securities to have equal returns, for 10-year bonds shows investors expect average inflation of 1.41 percent over the next decade, 0.65 points lower than the past decade’s 2.06 percent average.

Most Fed policy makers said in January that they favor 2 percent inflation, according to minutes of that month’s policy meeting released Feb. 18, the first time they have made what Chairman Ben S. Bernanke called “longer-term” CPI projections public.

The median prediction of 29 forecasters surveyed by Bloomberg shows inflation rising to 2.4 percent by the end of 2011, compared with February’s 0.2 percent rate, the Labor Department said. That means there’s room for TIPS prices to increase, widening the yield gap to something closer to current inflation expectations or higher, investors said.

John Brynjolfsson, the chief investment officer at Armored Wolf LLC figures Fed officials may aim for inflation as high as 6 percent as early as 2012, he said March 25 on Bloomberg Television.

Fed Price Measure

The so-called five-year, five-year forward breakeven rate, a measure that the Fed uses to measure price expectations, shows inflation’s 2014-19 average hitting 2 percent.

If the recession and deflation persist, inflation-linked securities will suffer. For now, the global economy is showing few signs of improving.

The U.S. unemployment rate jumped in March to 8.5 percent, the highest since 1983, and the economy lost more than 650,000 jobs for the fourth straight month, the Labor Department said April 3. The median response of 55 economists in a Bloomberg survey predicts 9.4 percent jobless rate by Dec. 31.

“Inflation is driven historically by wages and clearly if you have the unemployment rate rising, it begs the question where will you get inflation from,” said Chris Lupoli, executive director for global inflation-linked strategy at UBS AG in London. “We’re projecting that there will be a global healing but that the recovery will be anemic.”

Shrinking Slice

Inflation-linked debt is a shrinking slice of the market for government bonds in the U.S., where it makes up less than 9 percent of the $6 trillion of Treasuries, down from 11 percent in July.

“Inflation worldwide is going to surge in the years to come,” said Mickael Benhaim, who manages about $32 billion as head of global bonds at Pictet in Geneva. “On the supply side, issuance of the securities as a ratio of overall government debt is sharply declining,” which “makes linkers look very attractive,” he said.

Benhaim says there’s a shortage of inflation-linked debt in the U.K. too. There are about 180 billion pounds ($266 billion) of index-linked gilts outstanding, or 23 percent of the total debt, down from 30 percent a year ago, U.K. Debt Management Office data show.

In the euro region, where the ECB targets an inflation rate of just under 2 percent, the market totals about 250 billion euros ($336 billion), or 7 percent of all outstanding debt, down from 7.2 percent a year ago.

TIPS Cheapest

BlackRock’s Weinstein said TIPS are the cheapest inflation- linked bonds. Notes maturing in one, two and three years have the smallest breakeven rates outside of Japan, where deflation expectations persist through 2010’s first quarter, according to the median response in a Bloomberg survey of 16 economists.

“On a relative value basis, the U.S. inflation market is the one I would rather own,” Weinstein said. “If I could sell U.K. breakevens and European breakevens and buy U.S. breakevens, I would.”

Breakeven rates in U.K. are the highest among the most actively traded inflation-indexed bonds -- 3.29 percent on the 30-year, 2.85 percent on the 20-year and 2.67 percent on the 15- year, according to Bloomberg data. The 10-year’s 2.05 rate is 0.78 points below U.K.’s 2.83 percent average for the past decade. The Bank of England targets 2 percent inflation.

Fed Plans

Investors flocked to TIPS after March 18, when the Fed announced its latest attempt to boost the U.S. economy, including plans to buy up to $300 billion in Treasuries and TIPS and $850 billion in mortgage-related debt.

That money increased the amount the U.S. has spent, lent or committed to address the economic crisis to as much as $12.8 trillion, 90 percent of last year’s GDP. The money includes President Barack Obama’s $787 billion stimulus plan, which he signed into law on Feb. 17.

TIPS had lost 0.33 percent from the start of the year to the day before the Fed announcement. Since March 17, they have returned 3.3 percent, the Merrill index shows.

Even before the latest Fed announcement, investors were predicting inflation. Warren Buffett, the billionaire chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc., said March 12 that stimulus efforts “will probably cause a lot more inflation.” Chris Caltagirone and Bob Greer of Newport Beach, California-based Pimco said in a March 10 report that “inflation will rise.”

Price measures are starting to rise as investors bet government efforts will gain traction.

Rising Commodities

The Standard & Poor’s GSCI Index of 24 commodities rose in the first quarter for the first time since June. Crude oil has increased 62 percent to $52.51 a barrel from its low of $32.40 on Dec. 19. The Reuters/University of Michigan consumer sentiment index projects an inflation rate of 2 percent over the next 12 months and 2.6 percent over the next five years, according to the survey, released March 27.

The Fed’s plan to buy bonds “lays the groundwork for a recovery laced with inflation,” said Jim Caron, the global head of U.S. interest-rate strategy at Morgan Stanley in New York, in an April 3 note. “That could be hard to control.”

To contact the reporters on this story: Dakin Campbell in New York at dcampbell27@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

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Australian Job Advertisements Fall Record 44% on Year

By Jacob Greber

April 6 (Bloomberg) -- Australian advertisements for job vacancies tumbled in March for an 11th month as employers scrapped hiring plans amid signs the economy has fallen into its first recession since 1991.

Jobs advertised in newspapers and on the Internet dropped 8.5 percent from February and a record 44.6 percent from a year earlier, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.

Today’s report suggests the unemployment rate will continue rising this year, after jumping to a four-year high of 5.2 percent in February. Companies including miner BHP Billiton Ltd. are firing workers as a global recession erodes demand for exports and threatens to push Australia’s economy into its first annual contraction in two decades.

“Sharply falling job ads are consistent with an extended period of labor market weakness that is likely to see the unemployment rate” exceed 8 percent next year, said Warren Hogan, head of economics at ANZ Bank in Sydney.

The Australian dollar traded at 72:02 U.S. cents at 11:34 a.m. in Sydney from 72:03 cents just before the report was released. The two-year government bond yield was unchanged at 2.94 percent.

Queensland and Western Australia, the states that were the biggest winners of a five-year surge in global demand for natural resources, are “experiencing the most extreme contraction in job advertising,” Hogan added.

Unemployment Rate

Newspaper job ads in Queensland have dropped 71 percent from a November 2007 peak, and Western Australia has declined 67 percent over the same period, today’s report showed.

National vacancies advertised in newspapers and on the Internet averaged 147,804 a week last month, the lowest number since April 2005.

Newspaper advertisements fell 6.6 percent to an average of 7,958 per week, after falling 25.2 percent in February. Internet notices slid 8.6 percent to 139,846, the ANZ Bank report said.

Employers probably cut 25,000 jobs last month and the unemployment rate rose to 5.4 percent from 5.2 percent, according to the median estimate in a Bloomberg survey of economists. Jobs figures will be released on April 9.

The Reserve Bank of Australia, which pared its overnight cash rate target by a record four percentage points between September and February, will leave the benchmark rate unchanged tomorrow at 3.25 percent, according to 14 of 23 economists surveyed by Bloomberg News last week.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Yen, Taiwan Dollar, China’s Yuan, Rupiah: Asia Currency Preview

By Carmen Ng

April 6 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.

Japanese yen: Chief Cabinet Secretary Takeo Kawamura will hold media briefings at 11 a.m. and 4 p.m. in Tokyo.

The Bank of Japan starts its two-day policy meeting and economists estimate the central bank will leave the benchmark interest rate unchanged at 0.1 percent.

The yen traded at 100.25 against the dollar at 7:21 a.m. in Sydney.

Taiwan dollar: Consumer prices dropped 0.6 percent from a year earlier in March after sliding 1.3 percent the previous month, the biggest decline in six years, according to a Bloomberg News survey of economists. The inflation data is due at 4 p.m. today.

The government will release a separate report on Taiwan’s wholesale prices for March at the same time.

The Taiwan dollar was at NT$33.38.

Chinese yuan: The People’s Bank of China may release as early as today details of foreign-exchange reserves for March. The holdings, the world’s biggest, stood at $1.95 trillion at the end of December.

The yuan was at 6.8348.

Indonesian rupiah: Bank Indonesia may release its wholesale prices index for February and consumer confidence index for March as early as today. Wholesale prices slumped 29 percent from a year earlier in January and consumer confidence was the highest since 2007 in February.

The rupiah was at 11,465.

Malaysian ringgit: A statistics department report on April 9 may show industrial production shrank 13.1 percent from a year earlier in February, according to a Bloomberg News survey of economists. That would follow a 20 percent drop in January and be the sixth straight decline.

The ringgit was at 3.5803.

To contact the reporters on this story: Carmen Ng in Hong Kong at cng98@bloomberg.net

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BOJ May Accept Municipal Bonds as Collateral, Nikkei Reports

By Fergus Maguire

April 6 (Bloomberg) -- The Bank of Japan may expand the range of collateral it accepts for supplying funds to financial institutions, Nikkei English News said, without citing anyone.

At its two-day policy meeting that begins today, the central bank will consider accepting privately-placed municipal bonds as collateral, the report said.

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Loonie Loses 3% as Traders See Carney Pushing Quantitative Ease

By Chris Fournier

April 6 (Bloomberg) -- Foreign-exchange traders are stepping up bets Bank of Canada Governor Mark Carney will join Japanese, Swiss, U.K. and U.S. central bankers and dilute the nation’s currency by embracing quantitative easing.

Among the world’s most traded currencies, only the yen, pound and U.S. dollar performed worse in March than Canada’s dollar as central bankers began printing money last month to buy debt assets after exhausting other monetary-policy tools. The New Zealand dollar, which like Canada’s tends to track fluctuations in prices of raw materials, had its best month in at least 20 years in March, according to data compiled by Bloomberg.

Strategists at BNP Paribas, Bank of America-Merrill Lynch and Morgan Stanley advise investors to sell the so-called loonie before the central bank’s policy report on April 23. Carney has pledged to lay out a plan that would flood banks with cash to halt the hoarding of capital and expand lending. The greenback, pound and Swiss franc plunged as much as 3.4 percent on the announcement of similar steps to ignite growth.

“The precedent is a haircut right off the currency,” said David Watt, senior currency strategist in Toronto at RBC Capital Markets, Canada’s largest foreign-exchange trader by volume. “As we get through this month, we’re leaning toward Canadian dollar short positions.” A short position is a bet a currency will depreciate.

Canada’s currency will fall 3.3 percent to C$1.27 to the U.S. dollar by July, from C$1.2298 on April 3, according to the median forecast in a Bloomberg News survey of 40 economists and analysts. The loonie, so called for the aquatic bird on the one- dollar coin, rose 1 percent last week to 81.31 U.S. cents.

Worst Performers

The franc plunged the most ever against the euro on March 12, tumbling 3.3 percent, when the Swiss National Bank began intervening to weaken the currency and outlined plans to buy corporate bonds. On March 4, the Bank of Japan offered to buy 150 billion yen ($1.5 billion) in company debt from lenders, its first ever such operation. The yen has since lagged behind all of the 16 most traded currencies.

The Bank of England cut its key rate on March 5 to 0.5 percent, the lowest level since the bank was founded in 1694, and said it will print money to buy as much as 150 billion pounds ($222.6 billion) in government and corporate bonds. The pound fell 4.6 percent against the euro last month, after losing 23 percent in 2008.

Federal Reserve officials on March 18 unveiled plans to buy $300 billion in government securities, sending the U.S. dollar 3.4 percent lower against the euro, a record one-day decline.

‘On The Table’

“Anytime quantitative easing is even entertained, markets react negatively to the currency,” said Sacha Tihanyi, a strategist in Toronto at Scotia Capital Inc., a unit of Canada’s third-largest bank. “The threat of QE as a policy option may keep the market a little less bullish on the Canadian dollar as long as it is still on the table.”

The Canadian currency plummeted a record 18 percent last year as the global financial crisis reduced demand for raw materials. Export revenue from energy products including crude oil, natural gas and coal plummeted in January by 30 percent to C$6.54 billion from the same month a year earlier, according to Statistics Canada. Energy exports comprise about a quarter of the total.

Oil has rebounded since reaching $32.40 a barrel in December, the lowest in almost five years, reaching $52.51 on April 3.

Kiwi Correlation

“I’m absolutely not concerned” about the effect of quantitative easing, said Francois Barriere, vice president business development for international markets at Laurentian Bank of Canada in Montreal. “It’s never going to be as much as they’re doing in the U.S. and it won’t be enough to justify a weaker Canadian dollar.” He predicts the loonie will strengthen to at least C$1.20 in three months.

The currency climbed 11 percent against the New Zealand currency from the September collapse of Lehman Brothers Holdings Inc. until the Bank of Canada cut its key overnight rate to a record low 0.5 percent on March 3. The central bank also said while cutting rates that it was considering using quantitative easing. The loonie has since given up its gains, falling 11 percent against the kiwi.

The correlation coefficient between the kiwi, as the New Zealand dollar is known, and the loonie has dropped to 0.88 when measured against the yen from 0.92 before the decision, according to Bloomberg data. A coefficient of one would indicate the currencies move in lock step. Both currencies track movements in commodity prices and equities, proxies for investors’ appetite for risk.

Oil Sands

Oil prices have dropped almost $100 a barrel since reaching a record $147.27 in July, prompting companies such as Royal Dutch Shell Plc, based in The Hague, and StatoilHydro ASA, Norway’s biggest oil producer, to defer or cancel at least 14 projects this year in Alberta’s oil sands.

Canada’s dollar reached parity with its U.S. counterpart for the first time in three decades in September 2007 following a 60 percent climb in the preceding five years that was fueled by rising prices for commodities, which account for 56 percent of Canada’s export revenue.

Canada has 179 billion barrels of oil reserves, the most in the world outside Saudi Arabia. All but six billion are locked in Alberta’s oil sands, a mixture of sand, water, clay and bitumen that’s too heavy to use without being heated. Oil must be at $65 a barrel for new oil sands projects to be viable, according to estimates by the Canadian Association of Petroleum Producers.

‘Biased Toward Weakness’

Hans-Guenter Redeker, the London-based global head of currency strategy BNP Paribas recommends selling the Canadian dollar against the Australian dollar, citing Canada’s exposure to the U.S. economy, the shrinking automobile industry and “pressure” on the price of gold.

“The Canadian currency for the time being is going to stay biased toward weakness,” said Ron Leven, an executive vice president and senior currency strategist at Morgan Stanley in New York. “The market is expecting quantitative easing. We’re thinking about going short the Canadian dollar.”

Bank of Canada’s Carney said in a March 14 interview in Horsham, England, where he attended a meeting of Group of 20 officials, that moves such as the purchase of assets from investors are an option for the central bank and may be part of a proposed framework to combat a deepening recession.

‘Not Preordained’

Although the bank is considering quantitative and credit easing policies, “their use is not preordained,” Carney said in an April 1 speech in Yellowknife, Northwest Territories.

Record job losses and trade deficits this year signal Canada’s recession is deepening. Exports to the U.S., destination of 76 percent of the total last year, are slumping as Americans cut home and car purchases. Canada’s economy shrank 0.7 percent in January, the sixth straight contraction.

Plummeting car sales at General Motors Corp. and Chrysler LLC and speculation the companies may file for bankruptcy may also weigh on the Canadian dollar.

Car and truck manufacturing provides 440,000 direct and indirect jobs in Canada, according to the Web site of the industry’s largest labor union. Revenue from Canada’s automotive exports, 13 percent of the total, dropped more than a fifth last year to C$61.1 billion, from C$77.3 billion in 2007, Statistics Canada said in its latest Annual Review.

“Car sales are a disaster,“ said Daniel Tenengauzer head of global foreign exchange strategy in New York at Bank of America-Merrill Lynch. “It’s a combination of commodities and cars. We recommend selling the Canadian dollar.”

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

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Yen Declines to 5-Month Low on Speculation Recession Bottoming

By Yasuhiko Seki and Ron Harui

April 6 (Bloomberg) -- The yen declined to a five-month low against the dollar and the euro after Japanese stocks extended a worldwide equity rally on speculation that the worst of the global financial crisis may be over soon.

The yen fell against all of the 16 most-actively traded currencies and slid against New Zealand’s dollar to the weakest since November after Federal Reserve Chairman Ben S. Bernanke said last week programs to unfreeze credit markets are working, damping demand for Japan’s currency as a refuge. The yen also dropped on expectations the Bank of Japan will keep interest rates near zero percent at the end of a policy meeting tomorrow.

“Expectations are emerging that a global recession and financial crisis may be coming closer to a turning point,” said Akio Yoshino, chief economist in Tokyo at Societe Generale (Japan) Co., a unit of the French asset management firm that supervises the equivalent of $338 billion.

The yen traded at 136.22 per euro at 9:49 a.m. in Tokyo, from 135.26 late on April 3 in New York. It earlier touched 136.44, the lowest since Oct. 20. Japan’s currency touched 100.74 against the U.S. dollar, the weakest since Oct. 21, from 100.31 last week. The euro advanced for a third day against the dollar, climbing to $1.3533 from $1.3486.

New Zealand’s dollar advanced to 59.74 yen, the highest since Nov. 10, from 58.76.

Demand for the yen also weakened after North Korea launched a rocket yesterday over the Sea of Japan.

Geopolitical Risk

“Geopolitical risk” may add to the yen’s decline, said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe General SA, France’s third-largest bank.

The North Korean rocket flew over Japan on a trajectory into the Pacific Ocean yesterday, according to a statement from the Japanese Prime Minister’s Office. U.S. President Barack Obama said yesterday the firing of the Taepodong 2 missile was “provocative” and a “clear violation” of a United Nations Security Council resolution.

Demand for the euro increased on speculation European Central Bank Executive Board Member Lorenzo Bini Smaghi may signal in a speech today that the bank will slow the pace of rate cuts after lowering them last week.

The yield advantage of two-year German bunds over Japanese government bonds increased to 1.10 percentage point on April 3, the most in two months, boosting the allure of assets in the 16- nation region. The ECB on April 2 cut its benchmark rate by a quarter-percentage point to 1.25 percent, compared with a half- point reduction expected in a Bloomberg survey.

ECB Rates

“Investors seem to be focusing on rate differentials, so the fact that the ECB lowered rates by only 25 basis points is positive for the euro,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second- largest lender. “Investors also are becoming more inclined to take on risk, which is leading to euro appreciation.”

The euro may strengthen to $1.3600 and 136.80 yen today, Muramatsu said. Benchmark rates are 0.1 percent in Japan, 0.5 percent in the U.K. and between zero and 0.25 percent in the U.S.

ECB President Jean-Claude Trichet said on April 3 that the central bank’s target lending rate “could in a very measured way go down” from the 1.25 percent level.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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SPDR Gold Trust Holdings Decline for First Time Since March 23

By Glenys Sim

April 6 (Bloomberg) -- Gold holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, dropped for the first time since March 23, according to figures on the company’s Web site.

The fund held 1,127.37 metric tons of bullion as of April 3, 0.07 tons lower than April 2. Asset levels had been unchanged at 1,127.44 tons for four days.

The precious metal rose to $905 an ounce in the London afternoon fixing April 3 from $897.75 an ounce on April 2. Gold for immediate delivery was down 0.3 percent at $890.54 an ounce at 7:43 a.m. today in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Oil Rises on Stimulus Efforts, OPEC Production Cut Compliance

By Gavin Evans

April 6 (Bloomberg) -- Crude oil rose in New York on speculation global economic stimulus efforts and production cuts by the Organization of Petroleum Exporting Countries may slow growth in world stockpiles of the fuel.

Oil climbed above $53 a barrel as Group of 20 plans to spend $1 trillion to shore up the world economy prompted the dollar to drop for a third day, boosting the appeal of commodities priced in the U.S. currency. OPEC quota cuts imposed in December are being complied with and have helped stabilize prices, Algerian Oil Minister Chakib Khelil said yesterday.

“It’s a reflection of a more positive economic outlook,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “If we do see a bit more risk appetite return to the market, we should see the dollar come off a bit more and that would be a constructive factor for oil.”

Crude oil for May delivery rose as much as 78 cents, or 1.5 percent, to $53.29 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $53.02 at 7:45 a.m. in Singapore.

The contract fell 13 cents, or 0.3 percent, to $52.51 a barrel on April 3, after a report showed the U.S. jobless rate jumped to a 25-year high in March. Prices surged 8.8 percent the day before when the G20 announced its stimulus plan.

The dollar fell to a one-week low against a basket of currencies of its major trading partners today. It was at $1.3523 to the euro, from $1.3491 in New York late last week.

Brent, Equities

Brent crude oil for May settlement rose 23 cents, or 0.4 percent, to $53.70 on London’s ICE Futures Europe exchange. It climbed 72 cents, or 1.4 percent, to $53.47 a barrel on April 3.

New York oil futures have posted seven straight weekly gains, after falling to a four-year low of $32.40 a barrel on Dec. 19.

Prices rose last week as the dollar weakened and as world equity markets rallied on speculation the worst of the global recession may be over soon.

While OPEC has contained output, the recession will limit price gains and oil is likely to trade between $50 and $55 a barrel, Khelil told reporters yesterday.

“If equities continue to rally, it’s going to be pretty hard for oil to get knocked back down,” Commodity Warrants’ Hassall said. “If we start to approach $60 you would have to be asking some questions” given weak demand and high global stockpiles, he said.

Crude oil inventories in the U.S., the world’s largest energy-consuming nation, rose to 359.4 million barrels on March 27, a 15-year high. The International Energy Agency will likely lower its global demand forecast this week, given slowing world growth, Executive Director Nobuo Tanaka said April 2.

“I think OPEC would be fairly happy with where oil prices are now,” Hassall said.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net

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Japan Venture Capital Funds Facing Mergers as IPOs Disappear

By Patrick Rial and Kotaro Tsunetomi

April 6 (Bloomberg) -- Japanese funds that buy stakes in start-up companies are struggling to survive amid the worst market for initial offerings in 17 years, Kazuhiko Tokita, chairman of the Japan Venture Capital Association, said.

Only 49 companies went public last year, the fewest since 1992, depriving venture firms of the source of 45 percent of revenue and 90 percent of profits, based on data from 2007. The investors are likely to pool their holdings to create bigger stakes so they can pressure companies to merge or buy back stock, Tokita said.

“The industry needs to gather its power during this ice age, and that means combining,” said Tokita, a former director of Mitsubishi UFJ Financial Group Inc.’s venture capital unit. He predicts funds will lose money this year and possibly next. “When this is finished, what’s left standing will be the real venture capitalists.”

The country’s three biggest firms saw two years of profits wiped out since April 2008 as Japan’s economy shrank at a 12.1 percent rate in the fourth quarter, according to data compiled by the Venture Enterprise Center and Bloomberg. Japanese funds, which together manage 1.04 trillion yen ($10.6 billion), get more than twice as much revenue from IPOs as U.S. and European firms, according to Venture Enterprise.

Tokita’s group will hold a meeting for more than 100 members this month to facilitate merger negotiations and collaboration on investment stakes, he said.

Frozen Capital

The inability to take companies public is reducing new investments, starving start-up businesses of capital. Smaller companies, which employ about 70 percent of Japan’s workforce, said financing is the hardest to get in at least 23 years, according to a survey published by Shoko Chukin Bank on Feb. 25.

Of the 936 companies that went public in Japan from 2002 to 2008, 62 percent were backed by venture funds, data from the JVCA shows.

“The drain on available funds is a real concern,” Venture Enterprise wrote in a report. “Venture firms are Japan’s drivers of industrial competitiveness and economic activity.”

The venture units of Shinko Securities Co., Dai-Ichi Mutual Life Insurance Co. and asset manager Diam Co. merged in February 2008. Meiji Capital was acquired by Yasuda Enterprise Development on April 1.

“Funds that can’t break even in this environment will be forced to exit,” said Shinichi Fuki, executive managing director of Jafco Co., the largest venture investor. “There’s been talk that some players will be pushed into mergers, and I’ve got a strong feeling that’s what’s going to happen.”

IPO Profits

IPOs slumped as the deepening global recession dragged the Nikkei 225 Stock Average to the lowest level in 26 years.

The 49 IPOs last year was less than a third of 2006’s level, according to data compiled by Bloomberg. This year, no companies listed in January or February for the first time since at least 1999.

Profitability of IPOs is also declining. The first four companies that sold stock this year priced shares at an average of 7.9 times annual earnings, compared with 15 times in 2008.

The IPO “business model is dead,” said Hiroshi Matsumura, director of the VEC. “Those who can’t successfully diversify their exit strategies won’t survive.”

Jafco, Daiwa SMBC Capital Co. and Japan Asia Investment Co., the country’s three largest venture firms, reported combined losses of 25.6 billion yen ($260 million) for the first nine months of the fiscal year ended March, compared with total profit of 22.9 billion yen for 2006 and 2007.

Mounting Losses

Jafco lost 851 million yen in the period. Daiwa SMBC reported a 5.1 billion yen loss in the same period, while Japan Asia Investment suffered a 19.6 billion yen decline. Their shares slumped more than 10 percent this year, trailing the Topix index’s 3.2 percent decline.

Besides IPOs, venture funds make money when companies they invest in merge, repurchase stock, or sell units to other funds or companies. Management buybacks, where executives repurchase shares from venture capital firms, and liquidations made up 37 percent of Japanese venture fund revenue in 2007, VEC data showed.

Mergers accounted for 16 percent of revenue and 1.9 percent of profit, with other strategies making up the remainder, according to the VEC.

Stakes owned by Japanese funds are too small to force acquisitions, the JVCA’s Tokita said. Pooling holdings would give them new ways to profit, he said.

“Our industry is in a race for survival on a global level; we’ve been hit by a giant tsunami,” Fuki said. “VC firms that aren’t able to raise funds and continue investing when prices are low aren’t going to make it. The need for fund consolidation is not something I can deny.”

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.

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Japanese Stocks Gain on Bernanke Comments, Yen; Panasonic Jumps

By Patrick Rial

April 6 (Bloomberg) -- Japanese stocks climbed for a fourth day after Federal Reserve Chairman Ben S. Bernanke said policy responses are helping to unfreeze credit markets, and the yen weakened to a five-month low.

Mizuho Financial Group Inc., Japan’s No. 2 listed bank, rose 3.9 percent. Nissan Motor Co. added 3 percent after Merrill Lynch & Co. lifted its price estimate on the carmaker and the weaker yen boosted the value of overseas sales. Panasonic Corp., the world’s biggest maker of consumer electronics, jumped 4.8 percent after Nomura Holdings Inc. raised the shares to “buy.”

“The comments by Fed officials are boosting confidence in the efficacy of the response to the financial crisis,” Tomochika Kitaoka, a strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.

The Nikkei 225 Stock Average rose 119.44, or 1.4 percent, to 8,869.28 as of 9:30 a.m. in Tokyo, a fourth-consecutive gain. The broader Topix index climbed 8.45, or 1 percent, to 839.81.

Mizuho rose 3.9 percent to 213 yen. T&D Holdings Inc., the nation’s largest publicly traded life insurer, advanced 4.4 percent to 2,820 yen. Nomura, Japan’s biggest brokerage, gained 2.5 percent to 605 yen.

“Relieving disruptions in credit markets and restoring the flow of credit to households and businesses are essential if we are to see, as I expect, the gradual resumption of sustainable economic growth,” Bernanke said on April 3. “So far the programs are having the intended effect.”

‘Fear Gauge’ Falls

Fed Vice-Chairman Donald Kohn said in a speech the same day the central bank remains focused on reviving employment and demand. The VIX index, a measure of market volatility known as Wall Street’s “fear gauge,” fell below 40 for the first time since January, indicating traders are becoming more confident about the market advance.

Nissan, Japan’s third-largest automaker, gained 3 percent to 478 yen. Koichi Sugimoto, an analyst at Merrill Lynch in Tokyo, lifted his target price on the shares to 350 yen from 250, citing the recent weakness of the yen versus the dollar.

The yen fell to a five-month low against the dollar and the euro, as last week’s worldwide equities rally added to speculation that the global financial crisis is easing. A weaker yen increases the value of overseas sales for Japanese companies.

Panasonic jumped 4.8 percent to 1,272 yen. The shares were raised to “buy” from“neutral” by Nomura analyst Eiichi Katayama, who cited the focus of Panasonic’s management on profitable business segments. Misumi Group Inc. rose 5.7 percent to 1,383 yen as Nomura also recommended investors buy the stock on improving conditions in the auto and machinery industries.

North Korea launched a Taepodong-2 rocket yesterday purportedly to orbit a communications satellite. The United Nation’s Security Council adjourned yesterday without agreeing to additional sanctions on North Korea called for by Japan and the U.S.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Asian Stocks Advance on Bernanke Comments; Mizuho, Nissan Gain

By Patrick Rial

April 6 (Bloomberg) -- Asian stocks rose for a fourth day, led by finance and mining companies, after U.S. Federal Reserve Chairman Ben S. Bernanke said policies to unfreeze credit markets are working.

Mizuho Financial Group Inc., Japan’s second-largest publicly traded lender, climbed 2.9 percent in Tokyo. Nissan Motor Co. added 2.4 percent as Merrill Lynch & Co. boosted its price estimate on the company and the yen weakened to a five-month low. Panasonic Corp., the world’s biggest maker of consumer electronics, jumped 4.3 percent after Nomura Holdings Inc. raised the shares to “buy.”

“The comments by Fed officials are boosting confidence in the efficacy of the response to the financial crisis,” Tomochika Kitaoka, a strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.

The MSCI Asia Pacific Index gained 0.6 percent to 87.29 as of 10:37 a.m. in Tokyo, paring its drop this year to 2.6 percent. The MSCI Asia Index has rallied 24 percent from a more than five-year low reached on March 9.

Japan’s Nikkei 225 Stock Average jumped 1.6 percent to 8,886.87. South Korea’s Kospi Index rose 0.9 percent even after North Korea launched a rocket yesterday that flew over Japan. The S&P/ASX 200 Index gained 0.1 percent in Australia, where clocks turned back on hour over the weekend for the end of daylight savings. All markets open for trading advanced.

Futures on the U.S. Standard & Poor’s 500 Index added 0.3 percent. The measure gained 1 percent on April 3, as the VIX index, an index of market volatility known as Wall Street’s “fear gauge,” fell below 40 for the first time since January, indicating traders are becoming more confident about the market advance.

Rising Valuations

“Relieving disruptions in credit markets and restoring the flow of credit to households and businesses are essential if we are to see, as I expect, the gradual resumption of sustainable economic growth,” Bernanke said the same day. “So far the programs are having the intended effect.”

The four-week stock rally has boosted the average valuation of companies on the MSCI Asia Pacific Index to 18 times reported profit, the highest since Nov. 30, 2007, according to data compiled by Bloomberg.

North Korea launched a Taepodong-2 rocket yesterday purportedly to orbit a communications satellite. The United Nation’s Security Council adjourned yesterday without agreeing to additional sanctions on North Korea called for by Japan and the U.S.

Japanese exporters climbed after the yen weakened to a five-month low against the dollar and the euro, as last week’s worldwide equities rally added to speculation that the global financial crisis is easing. A weaker yen boosts the value of overseas sales for Japanese companies.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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