Stocks Decline Around World on Alcoa; Bank of Ireland Slumps

By Sarah Jones

April 8 (Bloomberg) -- Stocks fell, sending the MSCI World Index lower for a third day, after Alcoa Inc. opened the U.S. earnings season by reporting a second straight quarterly loss.

Alcoa, the first Dow Jones Industrial Average company to announce first-quarter results, retreated 3.2 percent in Europe. BHP Billiton Ltd. and Anglo American Plc dropped as metals and oil slid. Sharp Corp. slumped 6.1 percent after posting its first annual loss since listing on the Tokyo Stock Exchange in 1956. Bank of Ireland Plc sank 8.8 percent as Moody’s Investors Service cut the financial-strength ratings on 12 Irish banks on concern loan losses are increasing.

“The big focus is on the earnings season,” said Henk Potts, a London-based fund manager at Barclays Stockbrokers Ltd., which as about $45 billion under management. “There is no doubt that we are going to hear some pretty disappointing stories. The market will still remain reasonably cautious against a backdrop of falling profit expectations.”

The MSCI World Index slipped 0.5 percent at 12:01 p.m. in London. The gauge of 23 developed markets has advanced 20 percent since March 9 on optimism the Federal Reserve’s plan to buy Treasuries and bonds backed by mortgages to drive down interest rates and U.S. Treasury Secretary Timothy Geithner’s pledge to finance the purchase of toxic assets will pull the global economy out of a recession and revive corporate profits.

‘Terrible’ Earnings

Standard & Poor’s 500 Index futures retreated 0.5 percent, indicating the gauge may extend yesterday’s 2 percent drop. George Soros and Marc Faber predicted this week that the past month’s rebound in equities will falter, while Hugh Young, managing director of Aberdeen Asset Management Plc’s Asian unit, said in a Bloomberg Television interview today the rally was a “dead cat bounce,” as companies report “terrible” earnings.

Nouriel Roubini, the New York University professor who predicted the economic crisis, told Canada’s Business News Network yesterday he sees no reason to change his forecast that the U.S. economy will continue to contract through this year.

Europe’s Dow Jones Stoxx 600 Index slid 0.4 percent, a fourth day of declines. The British economy shrank 1.5 percent in the first quarter as the recession increasingly resembled the one that started in 1979 when Margaret Thatcher took power, the National Institute of Economic and Social Research said.

The MSCI Asia Pacific Index dropped 2.2 percent as Daiwa Securities Group Inc., Japan’s second-largest brokerage, said it will write down the value of securities holdings.

Alcoa Drops

Alcoa fell 3.2 percent to $7.54 in German trading. The largest U.S. aluminum producer reported a $497 million net loss as the recession reduced demand for the metal. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents.

The U.S. earnings decline that has lasted for six straight quarters will get worse before it gets better, with profits at S&P 500 companies decreasing for three more periods, Bloomberg data show. In Europe, profits for companies in the Dow Jones Stoxx 600 Index will climb 22 percent for the full year, estimates compiled by Bloomberg show.

BHP, the world’s largest mining company dropped 1.6 percent to 1,338 pence. Anglo American fell 2.8 percent to 1,260 pence. Xstrata Plc, the world’s fourth-largest copper producer, dropped 3.2 percent to 511 pence.

Copper slid in Asia as some investors deemed the recent climb to a five-month high as excessive amid renewed concern about the financial crisis. Crude oil decreased for a fourth day on speculation a government report today will show U.S. supplies increased as the recession curbed fuel demand.

Sharp, Daiwa

Sharp, Japan’s largest maker of liquid-crystal-display televisions, lost 6.1 percent to 813 yen after reporting a 130 billion-yen ($1.3 billion) loss because of additional restructuring costs. The net loss was larger than the 100 billion yen forecast on Feb. 6.

Daiwa sank 6 percent to 483 yen. The company said it will report an annual loss as it books a 17.4 billion yen decline in the value of securities holdings.

Bank of Ireland, the country’s largest lender by assets, sank 8.8 percent to 88 euro cents, after earlier slumping as much as 38 percent. Allied Irish Banks Plc slumped 12 percent to 1.13 euros.

Moody’s reduced its rating on 12 Irish lenders by at least one level, saying losses on property loans are likely to “significantly weaken” capital.

Ireland’s government said it will buy as much as 90 billion euros ($120 billion) of real-estate loans from the country’s biggest lenders in an effort to salvage the banking system.

Pernod Slides

Pernod Ricard SA lost 5.7 percent to 41.98 euros after the world’s second-largest liquor maker announced a 1 billion-euro rights offer and sold its Wild Turkey bourbon brand for $575 million to speed up debt reduction.

Cap Gemini SA dropped 2.2 percent to 25.60 euros after Europe’s largest computer-services company said it will sell as much as 575 million euros of convertible bonds.

Daimler AG led German automakers higher as Goldman Sachs Group Inc. recommended the shares and the government agreed to more than triple payments to buyers of new low-emission vehicles to spur car sales.

Daimler, which today forecast a “gradual improvement” in profit this year, rallied 5.7 percent to 23.89 euros. Goldman Sachs upgraded the second-largest maker of luxury cars to “buy” from “neutral,” citing restructuring measures and more clarity on the company’s operational and financial outlook.

Bayerische Motoren Werke AG rose 4.6 percent to 25.01 euros after Goldman Sachs added the world’s biggest luxury carmaker to its “conviction buy” list. Porsche SE, the maker of the 911 sports car, increased 4.4 percent to 44.55 euros.

Reuters reported the Porsche is seeking to increase its syndicated loan to 12.5 billion euros, citing unidentified “banking sources.”

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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‘I Want You,’ Uncle Sam Says to Unemployed Wall Street Analysts

By Josh Fineman

April 8 (Bloomberg) -- Uncle Sam to Wall Street: I want you.

Underscoring Washington’s appeal as the financial industry shrinks, about 400 finance professionals have signed up for a New York job fair this month featuring nine federal agencies ranging from the Federal Deposit Insurance Corp. to the FBI and the Securities and Exchange Commission. That’s double the tally at similar events last year, organizers say.

Attendees at the April 24 event will include Virginia Donner, 43, who called a friend at the Federal Reserve after losing her job at a hedge fund in Greenwich, Connecticut. “When you’re looking for work and your industry has kind of imploded, you have to look at what your skills are and then figure out who’s hiring,” she said.

The job-seekers are among 23,300 people who lost industry work in New York in the year through February as banks worldwide announced almost $870 billion in losses and writedowns. The credit crisis that claimed Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Bear Stearns Cos. may cost another 23,000 jobs over the next year, New York City estimates.

Unemployed Wall Streeters “are sick of the insecurity,” said William Drawbridge, director of marketing and development at the New York Society of Security Analysts, which is organizing the job fair. “Government jobs are stable jobs. This is a good out for them.”

‘Phenomenal Opportunity’

The SEC, criticized in recent months for having too many lawyers and not enough analysts as it failed to unearth Bernard Madoff’s Ponzi scheme, is in the market, according to Chairman Mary Schapiro.

“We have a phenomenal opportunity right now to bring in much more current and useful skill sets, with people who have lost jobs on Wall Street and are anxious to do something, and do something very constructive,” Schapiro told Congress during a March 11 hearing.

Granted, the government pays less than the banking industry, where associates with three years on the job can earn as much as $120,000 a year, according to Alvin Kressler, executive director of the analysts’ association. About 40 percent of the group’s members earn between $175,000 and $190,000 a year.

A government employee in New York can earn between $76,000 and $153,000, according to the U.S. Office of Personnel Management’s Web site. In Washington, government salaries range from $59,000 to $127,000.

Pay Cuts?

“Nothing pays as well as Wall Street,” said Laura Richardson, 45, who lost her job as an analyst at BB&T Capital Markets in McLean, Virginia, two months ago. At the same time, “there are no long-term guarantees on Wall Street.”

Richardson said she’s considering making the trek to New York for the job fair to seek a government role, seeking a job “to help fix the problem.” She added that she’s ready to do “Whatever I can do to help prevent this from happening again.”

Other local jobs are becoming scarce. New York City had a record month-to-month increase in its unemployment rate in February, climbing to 8.1 percent from 6.9 percent in January, the state Labor Department said last month. The city’s jobless rate was the highest since October 2003, and the financial industry shed 2,700 jobs last month.

New York City will probably have lost 46,000 financial jobs by the second quarter of 2010 from the beginning of 2007, according to the city’s Office of Management and Budget.

“The government does provide some good benefits, a good health program,” said John Palguta, vice president for policy at the Partnership for Public Service. “If anybody is worried that the government may simply not be able to afford them, either they were making well over $200,000 a year or they’re wrong.”

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net

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GMO’s Global Macro Hedge Fund Sees Further Declines in Stocks

By Malcolm Scott

April 8 (Bloomberg) -- Global Tactical Trust, a hedge fund run out of Australia by Boston-based Grantham Mayo Van Otterloo & Co., is betting the recent rally in stocks will end, and is avoiding high-risk investments.

The hedge fund that invests based on global economic trends returned 13 percent last year, when the industry posted average declines of 19 percent, by wagering against equities and backing bonds. Managed by Jason Halliwell, the fund is long the U.S. dollar, yen, U.S. Treasuries and gold, expecting them to rise, while remaining neutral on equities.

“We do think there’s a good chance of another leg down in the market,” Halliwell, whose team manages a total of A$1 billion ($708 million), said in an interview in Sydney yesterday. If profits in the U.S. reporting season disappoint, “there’s very strong chances that this bear market rally will turn around and we’ll see new lows.”

The Standard & Poor’s 500 Index rallied almost 20 percent from its lowest in a dozen years on March 9. It slid for a second day yesterday after investors including George Soros said more declines lie ahead.

GMO, started in 1977 by Jeremy Grantham, manages about $10 billion in hedge funds. Grantham, nicknamed a “perma-bear” by colleagues because of his grim view on stocks for more than a decade, urged investors in a March 4 commentary to start moving money from cash to stocks before “rigor mortis” sets in.

Global Tactical Fund uses mathematical and statistical models to make investment decisions, then bets on widely traded derivatives to profit from calls on global equities, bonds, currencies and commodities. The fund has A$82 million in assets, according to Bloomberg data.

Profits Fall

Profits at S&P 500 companies probably fell 37 percent on average in the first quarter, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. That would be the seventh straight quarter of declining earnings, the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.

“There’s good long-term returns for buying risk assets like equities at the moment, but they’re not great returns, and that’s balanced against some pretty substantial risks,” Halliwell added.

Hedge funds are investment pools that can bet on falling as well as rising asset prices. Their managers gain substantially from profits on money invested.

To contact the reporter on this story: Malcolm Scott in Sydney Mscott23@bloomberg.net

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Vale, Ecopetrol, Wal-Mart de Mexico: Latin Equity Preview

By Hugh Collins

April 8 (Bloomberg) -- The following companies may have unusual price changes today in Latin American trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index fell 1.4 percent to 2,357.32. In Brazil, preferred shares usually are the most-traded class of stock.

Brazil

Centrais Eletricas Brasileiras SA (ELET6 BS) and Cia. Energetica de Minas Gerais (CMIG4 BS): Madeira Energia SA, the group controlled by Eletrobras and Cemig that is building a hydroelectric dam on Madeira River, plans to issue 1.5 billion reais ($676.5 million) of bonds in a private placement to the government’s workers’ compensation fund. Eletrobras fell 1.4 percent to 26.48 reais. Cemig fell 3.2 percent to 34.55 reais.

Cia. Vale do Rio Doce (VALE5 BS): The nickel unit of the world’s biggest iron-ore producer halted work on an acid plant at its Goro nickel mine following an April 1 spill. Work will resume on an unspecified date. Vale fell 1.5 percent to 28.21 reais.

Colombia

Ecopetrol SA (ECOPETL CB): General Electric Co. has shown interest in investing in the Cartagena oil refinery, Colombia Energy and Mines Minister Hernan Martinez said in a New York speech. Ecopetrol, Colombia’s state oil company, may buy the 51 percent stake in the plant from partner Glencore International AG after the Swiss company said it couldn’t invest to boost output. Ecopetrol rose 0.5 percent to 2,185 pesos.

Mexico

Grupo Mexico SAB (GMEXICOB MM): Mexico’s largest mining company had its long-term corporate credit rating of BBB- placed on negative watch by Standard and Poor’s. Grupo Mexico rose 1.1 percent to 10.35 pesos.

Wal-Mart de Mexico SAB (WALMEXV MM): Latin America’s largest retailer said sales at stores open at least one year fell 1.1 percent in March. The company, known as Walmex, said revenue last month was 21 billion pesos ($1.56 billion). Walmex dropped 1.1 percent to 36.3 pesos.

Peru

Grana y Montero SA (GRAM/C PE): The Peruvian construction firm won a $148 million contract to rebuild state power company Egemsa’s 100-megawatt Machu Picchu hydroelectric plant, state financing agency Fonafe said. Grana y Montero rose 1.5 percent to 2.01 soles.

-- Editors: Theo Mullen, Greg Chang

To contact the reporter on this story: Hugh Collins in Mexico City at Hcollins8@bloomberg.net

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U.S. Stock Futures Drop; Alcoa, Mosaic, ConocoPhillips Retreat

By Adria Cimino

April 8 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may drop for a third day, after Alcoa Inc. reported a wider-than-estimated loss. Stocks in Europe and Asia also declined.

Alcoa sank 3.5 percent as the biggest U.S. aluminum producer capped its first back-to-back quarterly losses since the three months ended in March 1994. Mosaic Co. tumbled 6.8 percent on lower earnings. ConocoPhillips, the second-largest U.S. refiner, slipped 1.5 percent after UBS AG cut its recommendation on the shares and crude dropped for a fourth day.

Futures on the S&P 500 expiring in June decreased 0.6 percent to 809.40 at 11:46 a.m. in London. Dow Jones Industrial Average futures slid 0.7 percent to 7,706 and the Nasdaq-100 Index contract fell 0.2 percent to 1,278. Futures pared losses after Pulte Homes Inc. agreed to buy Centex Corp. in a stock deal valued at $1.3 billion.

“Alcoa’s results and discourse weren’t good, and the company is an advance indicator of the economy,” said Chicuong Dang, an analyst at KBL Richelieu Gestion in Paris, which oversees about $2.2 billion. “As we enter the earnings season, we’re coming back to reality. It’s best to remain cautious on stocks.”

U.S. stocks slid yesterday after investors from George Soros to Marc Faber predicted the rebound in equities will falter as the market braces for a seventh straight quarter of dropping earnings.

Alcoa Loss

Profits at S&P 500 companies probably fell 37 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of seven straight declines in earnings is the longest since at least the Great Depression, data compiled by S&P and Bloomberg show.

U.S. earnings may drop 31 percent in the second quarter and 18 percent in the next before gaining 76 percent in the last three months of the year, analysts predict. Banks are projected to account for all of the rebound in the final three months of the year. Without financial companies, the gain turns into a 4.5 percent decline, the data show.

Europe’s Dow Jones Stoxx 600 Index fell 0.7 percent as a report showed the U.K. economy shrank 1.5 percent in the first quarter. The MSCI Asia Pacific Index sank 2.2 percent.

Alcoa, the first company in the Dow average to announce results, slid 3.5 percent to $7.52 in New York. The company reported a $497 million net loss in the first quarter. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents.

Mosaic Earnings

Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, fell 0.7 percent to $41.03 in Germany. Peabody Energy Corp., the largest U.S. coal producer, lost 1.4 percent to $26.

Mosaic tumbled 6.8 percent to $40.05 in New York. North America’s second-biggest fertilizer maker posted an 89 percent decline in fiscal third-quarter profit as farmers delayed purchases of phosphate and potash crop nutrients.

The S&P 500 and the Dow average have surged at least 19 percent since reaching the lowest levels in a dozen years on March 9 as banks from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of the year and Treasury Secretary Timothy Geithner unveiled plans to rid financial firms of toxic assets.

The rally in global stocks over the past month is a “dead cat bounce,” as companies report “terrible” earnings this year and the recession persists, Aberdeen Asset Management Plc’s Hugh Young said in a Bloomberg Television interview.

Liquidating Problem Banks

Nouriel Roubini, the New York University professor who predicted the economic crisis, told Canada’s Business News Network yesterday he sees no reason to change his forecast that the U.S. economy will continue to contract through this year.

A congressional panel overseeing the U.S. financial rescue suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.

The Congressional Oversight Panel, in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings.

ConocoPhillips slipped 1.5 percent to $39.10 in German trading. The company is unlikely to increase oil and natural gas production over the next five years, according to UBS analysts, who downgraded the stock to “neutral” from “buy.”

Crude oil fell for a fourth day on speculation a government report today will show U.S. supplies increased as the recession curbed fuel demand.

Centex jumped 16 percent to $8.81 in New York, while Pulte shares were yet to trade. Based on the closing price of Pulte stock on April 7, 2009, the transaction has a value of $10.50 per Centex share, representing a premium of 32.6 percent to the 20-day volume weighted average trading price of Centex’s shares.

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

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Technical Analysis Daily

Daily Forex Technicals | Written by iFOREX.bg | Apr 08 09 10:25 GMT |

USD/JPY 99.95 - 8 April USD/JPY Open 100.70 High 100.82 Low 99.49 Close 100.40 Dollar/Yen also continued its downward movement yesterday. The currency couple reached a bottom at 99.87, and closed the day at 100.40. The impaired formation rising wedge implies potential descending reversal scenario of the main trend. Short term resistance is 100.90. Signals are descending with objectives towards the region of 98.90. The CCI indicator is in the overbought zone and downwards on the 4 hour chart, assuming potential downward pressure. Technical resistance levels: 100.85 102.10 103.40 Technical support levels: 98.90 98.00 96.85 Trading range: 100.05 - 99.45 Trend: Downward Sell at 99.95 SL 100.25 TP 99.55 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Daily Forex Outlook: GBP/USD

Daily Forex Technicals | Written by Karoll Financial House | Apr 08 09 10:14 GMT |

The chart shows my count for GBP/USD since the reached low 1.3503. I think that a flat correction is developing from this level with wave C of it currently under way. I suggest that this wave C will turn out to be a terminal impulse (ending diagonal) and if this is the case, we should see initial rise to 1.5000 followed by a sharp sell-off below 1.3500. From a short term point of view we should be currently in wave 4 of the said wave C. There is still no confirmation for the end of wave 4 of C but I entered long position (I should admit that it is too risky at the moment) Trading strategy: 05:53 EST; 10:53 GMT Long position from 1.4705, stop loss - 1.4580, target - 1.4960 Karoll Financial House

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The Dollar Gains against the Majors as Stock Losses Boost Demand for Safety

Daily Forex Fundamentals | Written by Finotec Group | Apr 08 09 10:22 GMT |

The yen and the dollar rose against higher-yielding currencies as Asian stocks extended a worldwide equity decline, boosting demand for shelter from the global financial turmoil. The yen strengthened versus all 16 of the most-active currencies as the MSCI Asia Pacific index of shares slid for a second day on renewed concern the recession will hurt corporate earnings. “We need to assess reality once again during the earnings season to see if the recent optimism can be justified,” said Shigeru Nakane, a foreign-exchange dealer in Tokyo at Resona Bank Ltd. “Caution ahead of the reporting may trigger selling” of stocks and boost demand for the dollar and the yen, he said. The USD/JPY is currently trading at 99.90 as of 10:00am, London time. Sterling fell on Tuesday, retreating from a two-month high versus the dollar after weak UK data and a fall in domestic shares signalled a dip in risk appetite, prompting selling in the currency. The pound slipped after figures showed that UK manufacturing output fell 0.9 percent on the month in February, marking the 12th consecutive month of declines. While the fall was less than expected, analysts said that the data underscored deep weakness in the economy. "What the UK data has served to do is undermine confidence further," Neil Mellor, currency strategist at the Bank of New York, said. He added: "This is about the general level of risk aversion in equity markets, which is all over the place." The GBP/USD is currently trading at $1.4660 as of 10:08am, London time. The Australian dollar will come under pressure in coming months amid speculation the central bank will lower interest rates further, according to Royal Bank of Scotland Group Plc. Australia’s key rate “will fall to 2 percent and the aussie will encounter significant yield advantage compression in the second half of this year,” currency strategists at RBS wrote in a note today. RBS said it is sticking to its near-term target of 74 U.S. cents for the aussie, “but equally we see this rally above 70 cents unsustainable on a medium-term forecast.” The AUD/USD is currently trading at 0.7078 as of 10:30am, London time. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Trading's Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Markets Ease For A Second Day

Daily Forex Fundamentals | Written by Easy Forex | Apr 08 09 00:47 GMT |

U.S. Dollar Trading (USD) the USD started to accelerate gains after Global stocks slipped again. Concerns over GM and Banks rekindled some risk aversion supporting the Dollar. February Consumer Credit forecast at -1Bn came in at -7.48Bn in a worrying development for Retail Sales. Crude Oil closed down $1.90 ending the New York session at $49.15 per barrel. In US share markets, the Nasdaq was down -45 points or -2.8% whilst the Dow Jones was down 186 points or -2.34%. Looking ahead, FOMC Minutes from the last meeting. Also released, Crude Oil Inventories forecast at 1.3 vs. 2.8 Mln. The Euro (EUR) fell sharply after failing to get above 1.3400 against the USD. Losses were widespread with most currencies gaining against the single currency. EUR/GBP tested 0.9000 as the GBP remained resilient. Weighing in Europe was the revision of Q4 GDP to -1.6% vs. -1.5% forecast. Overall the EUR/USD traded with a low of 1.3229 and a high of 1.3396 before closing at 1.3270. Looking ahead, German Trade Balance (Feb) forecast at 7.5Bn vs. 8.3Bn. The Japanese Yen (JPY) benefited from the return of risk aversion with the USD/JPY testing 100 Yen on the downside. The Key level proved solid and the market returned to more stable level. The BOJ meeting saw interest rates held at 0.1% but the scope of collateral accepted by the BOJ was expanded to help smaller banks receive lending. Overall the USDJPY traded with a low of 99.87 and a high of 100.86 before closing the day around 100.60 in the New York session. Looking ahead, BOJ Monthly Report released. The Sterling (GBP) dropped with the Euro in early Europe but was able to recover as Industrial Production beat expectations at -1.0% vs. -1.2$ forecast. EUR/GBP selling supported along with the rebound in GBP/JPY. Falling stocks are taking the shine off the Pound and this will need to reverse to make further gains possible. Overall the GBP/USD traded with a low of 1.4585 and a high of 1.4775 before closing the day at 1.4720 in the New York session. The Australian Dollar (AUD) fell briefly after the Reserve Bank of Australia cut rates by 0.25% but then quickly surged as shorts took profit. Most analysts had predicted a hold or 0.5% cut so the move came as a surprise. Later in Europe the Aussie fell in Sympathy with the Euro but held up well for the rest of the day. Overall the AUD/USD traded with a low of 0.7048 and a high of 0.7168 before closing the US session at 0.7110. Looking ahead, Consumer Confidence (Apr) previously at -0.2%. Gold (XAU) found support as risk aversion notched higher and helped to stall the downside momentum. Overall trading with a low of USD$872 and high of USD$885 before ending the New York session at USD$883 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Apr 08 09 03:18 GMT |

EUR/USD closed sharply lower due to profit taking on Tuesday as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends the week's rally, January's high crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. USD/JPY closed lower due to profit taking on Tuesday as it consolidated some of last week's rally and is trading below support marked by the 10-day moving average crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends the week's rally, January's high crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. GBP/USD closed lower due to profit taking on Tuesday as it consolidated some of last week's rally. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends the week's rally, January's high crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. USD/CHF closed lower due to profit taking on Tuesday as it continued Monday's decline. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends the week's rally, January's high crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. HY Markets http://www.hymarkets.com

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New Zealand May Abandon Income-Tax Cuts as Recession Deepens

By Tracy Withers

April 8 (Bloomberg) -- New Zealand may abandon income-tax cuts planned for next year because it faces a longer-than- expected recession, Prime Minister John Key signaled today.

The Treasury Department this week said the deepening global recession and feedback from companies added to signs the economy won’t expand until 2010. Business confidence has fallen to a 35- year low, according to a report released yesterday.

Key, who won a 2008 election pledging income-tax cuts over the next three years, is relying on the economy to emerge from its worst recession in at least three decades so he can narrow his budget deficit. The government is curbing spending and reviewing tax-cut plans, he said today.

“We recognize there is a difficult economic position in front of us,” Key told parliament. “The government needs to make sure it’s balanced in what it does, and it will take the actions that are necessary to do the best for New Zealanders.”

The government cut income taxes on April 1. No final decisions have been taken on the further reductions promised for 2010 or 2011, Key said. The government is preparing a budget for delivery on May 28.

The Treasury said on April 6 that the economy is weaker than a it outlined in December. That scenario “incorporated no quarterly growth in the year to March 31, 2010,” it said.

New Zealand’s economy began contracting in the first quarter of last year. It shrank 0.9 percent in the fourth quarter, the most in 16 years.

Global Recession

Economists have since lowered their forecasts for global growth and the economies of New Zealand’s trading partners are likely to contract 1.8 percent this year, Treasury said.

“We’re in a very unusual recession, arguably the worst since the 1930s depression, and there is a range of views of exactly when New Zealand will start growing again,” Key said today. “The business community is responding to what they are seeing internationally, which is a very weak position.”

Some forecasters expect the economy may grow in the current quarter, ending June 30, he said. An alternative scenario is that it continues to contract until the first quarter next year.

A net 65 percent of companies surveyed last quarter expect the economy will worsen over the next six months, the most since 1974, the New Zealand Institute of Economic Research said yesterday.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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U.K. GDP Drops 1.5% as Recession Resembles 1979, Niesr Says

By Brian Swint

April 8 (Bloomberg) -- The U.K. economy shrank 1.5 percent in the first quarter as the recession increasingly resembled the one that started in 1979 when Margaret Thatcher took power, the National Institute of Economic and Social Research said.

The drop in gross domestic product followed a 1.6 percent decline in the last three months of 2008, Niesr, whose clients include the U.K. Treasury, said in London today. Consumer confidence last month matched the lowest level in at least four years, Nationwide Building Society said in a separate report.

Unemployment is rising at the fastest pace in three decades, pushing Prime Minister Gordon Brown to redouble his efforts to revive economic growth before the next election. The Bank of England will probably keep the benchmark interest rate unchanged at a three-century low of 0.5 percent in its monthly decision tomorrow.

“The output fall so far is very similar to that of the recession that began in the summer of 1979,” Niesr said in a statement. “If the 1980s profile were followed, output would continue to decline for up to another year and it would take two further years before the level of output enjoyed at the start of 2008 would be reached again.”

Niesr still said that there’s no “obvious reason” why the recession will follow the course of the one in the early 1980s.

Thatcher succeeded James Callaghan as U.K. prime minister in May 1979 following the so-called Winter of Discontent, when car workers, truck drivers and trash collectors went on strike.

Job Cuts

Unemployment jumped the most since 1971 in February, the government’s statistics office reported March 18. Royal Bank of Scotland Group Plc said yesterday it will cut up to 4,500 back office jobs in Britain to save money.

“Feelings about the current labor market have weakened,” Nationwide Chief Economist Fionnuala Early said in a statement. “Further reports of job losses are likely to have affected consumers’ views of this.”

Nationwide’s index of consumer confidence slipped to 41 in March, matching January’s four-year low, from 43 the previous month. Two-thirds of Britons said there are few jobs available, the mortgage lender’s survey showed.

The number of permanent staff appointments by job consultants fell further in March, though at the slowest pace in six months, KPMG and the Recruitment and Employment Federation said in a separate report today.

“The availability of permanent and temporary jobs in the U.K. continues to decline, salaries are being reduced and the pool of available candidates is rising further,” Mike Stevens, a partner at KPMG, said in a statement. “Recovery might take longer and be more protracted than many hope.”

Chancellor of the Exchequer Alistair Darling presents his next budget on April 22. Brown, whose governing Labour Party trailed the opposition by 13 percentage points in an April 6 poll, must call an election by mid-2010.

Bank of England Governor Mervyn King last month took the unprecedented step of cutting interest rates close to zero and buying government bonds with newly created money to stimulate the economy. All except two of the 62 economists in a Bloomberg survey predict policy makers will keep the key rate unchanged at 0.5 percent tomorrow.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | Apr 08 09 00:49 GMT |

Euro 1.3280 Initial support at 1.3113 (Mar 30 low) followed by 1.3072 (Former resistance). Initial resistance is now located at 1.3592 (Mar 27 high) at followed by 1.3678 (Mar 24 high) Yen 100.70 Initial support is located at 99.35 (Apr 3 low) followed by 98.23 (Apr 1 low). Initial resistance is now at 101.44 (Apr 6 high) followed by 102.41 (Oct 20 high). Pound 1.4740 Initial support at 1.4450 (Apr 2 low) followed by 1.4241 (Mar 31 low). Initial resistance is now at 1.4986 (Feb 9 high) followed by 1.5154 (Jan 12 high). Australian Dollar 0.7115 Initial support at 0.7044 (Apr 7 low) followed by the 0.6976 (Apr 2 low). Initial resistance is now at 0.7229 (Apr 3 high) followed by 0.7268 (Jan 7 high). Gold 883 Initial support at 852 (Jan 23 low) followed by 843 (Jan 23 low). Initial resistance is now at 909 (Apr 1 high) followed by 945 (Mar 26 high). Currency Sup 2 Sup 1 Spot Res 1 Res 2 EUR/USD 1.3072 1.3113 1.3280 1.3592 1.3678 USD/JPY 98.23 99.35 100.70 101.44 102.41 GBP/USD 1.4241 1.4450 1.4740 1.4986 1.5154 AUD/USD 0.6976 0.7044 0.7115 0.7229 0.7268 XAU/USD 843.00 852.00 883.00 909.00 933.00 Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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Japan Current-Account Surplus Narrows on Export Slide

By Keiko Ujikane

April 8 (Bloomberg) -- Japan’s current-account surplus narrowed in February as the global recession caused exports to plunge an unprecedented 50.4 percent.

The surplus shrank 55.6 percent to 1.117 trillion yen ($11 billion) from a year earlier, the Ministry of Finance said in Tokyo today. Japan had a 172.8 billion yen deficit in January, its first in 13 years.

The return to a surplus was because of a record drop in imports, suggesting demand at home is also weakening as companies from Nissan Motor Corp. to Panasonic Corp. cut output and fire workers. Confidence at large manufacturers fell to a record low in March and executives signaled more spending and job cuts, the Bank of Japan’s Tankan survey showed last week.

“Exports are unlikely to recover largely anytime soon,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The large decline in imports shows the domestic economy is deteriorating.”

The year-on-year drop in exports was the biggest since comparable data were made available in January 1985, as was the 44.9 percent slide in imports.

The yen traded at 100.36 per dollar at 10:57 a.m. in Tokyo from 100.66 before the report was published. The currency has lost 9.7 percent of its value this year, providing some relief to exporters by making their products more competitive abroad.

Shrinking Economy

Bank of Japan Governor Masaaki Shirakawa said yesterday that the economy has worsened since January, when his policy board forecast a 2 percent contraction for the year that started April 1.

The world’s second-largest economy probably shrank an annual 10.9 percent pace in the first quarter, according to the median estimate of 13 economists surveyed by Bloomberg News. That would follow a 12.1 percent decline in the fourth quarter, the sharpest since 1974.

Dai-Ichi Life Research’s Shinke said the economy may have shrunk an annualized 14.2 percent last quarter, the most on record.

“The return to a surplus from a deficit doesn’t mean Japan’s economy is recovering,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “The declining trend for exports is still ongoing.”

Shipments to the U.S., the country’s biggest market, plunged an unprecedented 58.4 percent in February from a year earlier, and exports to Europe and Asia dropped, according to a separate trade report released last month. Today’s figures don’t include regional breakdowns.

Automakers’ Woes

Toyota Motor Corp. and Nissan led a 56 percent decline in Japan’s domestic vehicle production in February, the biggest drop since at least 1967, according to the Japan Automobile Manufacturers Association.

Panasonic, the world’s biggest consumer electronics maker, said in February that it plans to eliminate about 15,000 jobs and predicted its first loss in six years.

The income surplus, the difference between money earned abroad and payments made to foreign investors in Japan, narrowed 34.1 percent to 1.1 trillion yen from a year earlier, today’s report showed.

The seasonally adjusted current-account surplus widened to 673.4 billion yen in February from a month earlier, today’s report showed.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Uranium Price to Remain Below 2007, 2008 Averages, JBWere Says

By Angela Macdonald-Smith

April 8 (Bloomberg) -- Average uranium spot prices may remain lower than the past two years until at least 2014 because of increased mine production and sufficient supplies from decommissioned weapons, Goldman Sachs JBWere Pty said.

Prices may average $42.85 a pound this year, 31 percent lower than in 2008 and less than half the 2007 average, the Melbourne-based securities firm said in an April 7 report. Prices may climb 5 percent next year to $45, then to $50 in 2011.

The spot price for uranium oxide concentrate, used in nuclear-reactor fuel, fell 1.8 percent to $41.75 a pound last week, Denver-based pricing service TradeTech LLC said April 5. Prices have dropped from a record of $138 a pound in June 2007 as investors sell inventories and world economic growth slows.

“We believe the market will remain comfortably supplied in the medium term,” analysts led by Melbourne-based Malcolm Southwood said in the report. “We are increasingly of the view that the dramatic price surge in 2006 and 2007 was anomalous.”

Southwood didn’t give the firm’s previous forecasts for spot prices and couldn’t be reached by telephone today.

Global mined uranium production may increase by 7 percent a year on average between 2008 and 2013 because of new projects in Kazakhstan, Canada and elsewhere, even as some investments are slowed, the analysts said. Cameco Corp., the world’s biggest uranium producer, Paladin Energy Ltd. and Uranium One Inc. are among companies building or expanding mines.

Goldman Sachs JBWere’s price forecasts through 2010 are lower than downgraded estimates published by JPMorgan Chase & Co. in a separate April 7 report. Spot prices may average $47.20 a pound this year, 17 percent lower than earlier forecast, while 2010 prices may average $49.80, a 6 percent reduction, analysts led by Melbourne-based David George said.

The downgrades reflect “the drop in spot activity as a result of the liquidation of spot uranium positions, primarily by financial players” late last year, the JPMorgan analysts said. They maintained their long-term forecast for prices at $65 a pound, citing “emerging uranium supply constraints.”

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

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Rupee to Rise on ‘Bearish Signal’ in Dollar: Technical Analysis

By Patricia Lui

April 8 (Bloomberg) -- India’s rupee may strengthen against the dollar after the U.S. currency showed two “bearish signals,” said Winston Tang, a technical analyst at Forecast Pte in Singapore.

The dollar-rupee weakened below the 50-day moving average of 50.0558 on April 6 and also broke an uptrend line from Dec. 19, Tang said. The rupee will extend gains toward its first target at the 100-day moving average of 49.43, Tang said. A break there would see it advance to 48.50, a so-called “congestion level.”

“These to me are very bearish signals,” Tang said. “The uptrend from December has been broken and the bearish sign is further confirmed by the close below the 50-day moving average, another bearish signal.”

The rupee closed at 50.0550 to the dollar on April 6, according to data compiled by Bloomberg. Indian markets were closed yesterday for a public holiday.

India’s currency is down 2.9 percent so far this year after plunging 19 percent in 2008, making it the second-worst performer after the South Korean won.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net

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Taiwan Central Bank Warns Against Speculation, Times Reports

By Yu-huay Sun

April 8 (Bloomberg) -- Taiwan’s central bank warned against speculation on the island’s dollar after the currency’s recent gains, the Commercial Times said, citing unidentified traders.

The Central Bank of the Republic of China (Taiwan) told traders at local banks not to keep short positions of the U.S. dollar, the Taipei-based, Chinese-language newspaper said. A short position is a bet a currency will depreciate.

The monetary authority bought between $400 million and $500 million of U.S. dollars yesterday to help drive down the local currency, the newspaper said.

Taiwan’s dollar snapped a five-day gain to drop 1 percent to NT$33.569 versus the greenback yesterday, according to Taipei Forex Inc.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

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Australian Sentiment Index Jumps Most in Eight Months

By Jacob Greber

April 8 (Bloomberg) -- An index of Australian consumer confidence rose by the most in eight months as concerns about the global economy eased amid a surge in stock markets and the government began distributing cash to taxpayers.

The sentiment index gained 8.3 percent in April to 92.7 points from March, when it fell 0.2 percent, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between March 30 and April 5 and released today in Sydney. April was the 15th month that the index was below 100, indicating pessimists outnumber optimists.

Today’s report supports the central bank’s view that record declines in borrowing costs, as well as A$42 billion ($30 billion) in government handouts and infrastructure investment will spur consumer spending that accounts for more than half the economy. Governor Glenn Stevens cut the benchmark interest rate to a 49-year low of 3 percent yesterday.

“This is a surprisingly strong result,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney. “The stimulus package is likely to be buoying consumers.”

The Australian dollar traded at 70.95 U.S. cents at 10:34 a.m. in Sydney from 70.94 cents just before the report was released. The two-year government bond yield rose 2 basis points to 3.07 percent. A basis point is 0.01 percentage point.

Cash Handouts

Prime Minister Kevin Rudd is trying to boost an economy that unexpectedly shrank in the fourth quarter for the first time in eight years with cash handouts totaling A$12.2 billion, or as much as A$950 to individuals.

Consumers are also being buoyed by share markets, which have risen by around 20 percent in the U.S. and Australia in recent weeks, Evans said.

An index measuring consumers’ expectations for economic conditions over the next 12 months increased 16.9 percent, and opinions on whether now is a good time to buy a major household item gained 3.2 percent.

Still, “it would be premature to argue that the index has passed its lows in this cycle,” Evans added. “Given the disturbing signals from all the leading employment indicators, we are likely to see the index reaching new lows.”

Australian employers probably cut 25,000 jobs last month and the unemployment rate rose to 5.4 percent from 5.2 percent, the highest level in almost four years, according to the median estimate in a Bloomberg survey of economists. The jobs report will be released tomorrow.

Reserve Bank of Australia Governor Stevens reduced the benchmark interest rate by a quarter point to 3 percent yesterday, adding to four percentage points of cuts since September.

“The bank is now likely to remain on hold until around August, when rate cuts will be needed to deal with a more concerning global and domestic economic environment,” Westpac’s Evans said.

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

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Korean Won Retreats as Global Stocks Slide Curbs Risk Appetite

By Bob Chen

April 8 (Bloomberg) -- South Korea’s won fell for a second day as a retreat in global stocks prompted investors to favor safer bets than emerging-market assets.

U.S. stocks slid yesterday after investors including George Soros predicted equities would slump, after rallying in the last four weeks on optimism a global recession was abating. Foreigners today sold more Korean shares than they bought for a second day, exchange data shows. South Korea is today selling dollar-denominated bonds overseas for the first time since 2006 to support its currency, Asia’s worst performer this year.

“You’d certainly expect the won to ease off a bit in the face of renewed U.S. equity weakness and signs of risk aversion ticking a little higher globally,” said Sean Callow, a currency strategist in Sydney at Westpac Banking Corp., Australia’s biggest lender by market value. “In order to sustain optimism we’d need something more tangible in the real economy.”

The won fell 1 percent to 1,337.55 per dollar as of 9:47 a.m. local time, according to Seoul Money Brokerage Services Ltd. It surged 16 percent in the last four weeks and touched 1,306 on April 6, the strongest level since Jan. 8. The currency may weaken to 1,400 in the next few days, Westpac’s Callow said.

Korea’s Kospi index of shares slid 1.4 percent, its first decline this month, while the MSCI Asia-Pacific Index dropped 1.6 percent. The Standard & Poor’s 500 Index lost 3.2 percent in the last two days.

South Korea is the latest developing nation to tap international credit markets this year as the global economic slump throttles demand for their exports, eroding foreign- exchange reserves. Emerging-market countries including Mexico, Indonesia and Qatar have raised more than $23.5 billion in foreign debt in 2009, according to data compiled by Bloomberg.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net;

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Australian, N.Z. Dollars Fall as Stock Slide Damps Yield Demand

By Candice Zachariahs

April 8 (Bloomberg) -- The Australian dollar slid for a fourth day, heading for its longest losing streak since January, as regional stocks fell, fueling speculation investors will avoid higher-yielding assets. New Zealand’s currency weakened.

The Australian dollar stayed lower after home-loan approvals rose in February by less than the forecast of 20 economists surveyed by Bloomberg News. New Zealand’s dollar fell to a one-week low against the greenback as hedge-fund manager George Soros said the past month’s stock-market rally may falter.

“Equities have had a couple of bad sessions and the market is getting wary of how risk has been so positive for the last four weeks and ahead of U.S. corporate earnings season,” said Phil Burke, chief foreign-exchange dealer at JPMorgan Chase Bank in Sydney. The Australian dollar may test 70.50 U.S. cents while New Zealand’s currency may fall toward 57.20 U.S. cents, he said.

Australia’s currency fell 0.3 percent to 70.86 U.S. cents as of 11:53 a.m. in Sydney from late in New York yesterday. The currency declined 0.4 percent to 71.10 yen. New Zealand’s dollar was down 0.2 percent to 57.48 U.S. cents and traded as low as 57.32 cents, the weakest since April 2. It slid 0.3 percent to 57.67 yen.

The number of loans granted to build or buy homes and apartments climbed 0.4 percent from January, the statistics bureau said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 2 percent gain.

Rates, Jobless Data

The Reserve Bank of Australia yesterday reduced its benchmark rate to a 49-year low of 3 percent, extending cuts made since September to 4.25 percentage points as the nation faces its first recession since 1991. Traders are estimating New Zealand’s central bank will lower its 3 percent target rate by 25 basis points when it meets April 30, according to a Credit Suisse index based on swaps trading.

The Australian dollar also weakened before a report tomorrow that will show the unemployment rate advanced to a five-year high of 5.4 percent in March, according to economists surveyed by Bloomberg News.

“The events that will shape the Aussie dollar over the next week are the employment numbers and the U.S. reporting season,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. The Australian dollar will trade between 70.50 and 71.70 U.S. cents today, he said.

An index of Australian consumer confidence rose the most in eight months, climbing 8.3 percent in April to 92.7 points from March, according to a Westpac Banking Corp. and Melbourne Institute survey released today. April was the 15th month the index was below 100, indicating pessimists outnumber optimists.

Bond Sales

Australia today sold A$700 million ($495 million) of securities maturing May 2021 at a weighted average yield of 4.87 percent. The so-called bid-to-cover ratio at the auction was 3.4.

Australian government bonds declined. The yield on 10-year notes added two basis point, or 0.02 percentage point, to 4.63 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.17, or A$1.70 per A$1,000 face amount, to 104.88.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.96 percent from 3.92 yesterday.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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Yen, Dollar Advance as Stock Losses Increase Demand for Safety

By Yasuhiko Seki and Theresa Barraclough

April 8 (Bloomberg) -- The yen and the dollar rose against the euro as Asian stocks extended a worldwide decline, boosting demand for the two currencies as a refuge from the global financial turmoil.

The yen gained against 13 of the 16 most-active currencies as the MSCI Asia Pacific index of regional shares dropped for a second day on renewed concern the recession will depress corporate earnings. The Australian dollar fell for a fourth day versus the greenback and New Zealand’s currency weakened as the share declines damped demand for higher-yielding currencies.

“We need to assess reality once again during the earnings season to see if the recent optimism can be justified,” said Shigeru Nakane, a foreign-exchange dealer in Tokyo at Resona Bank Ltd., a unit of Japan’s fourth-largest banking group. “Caution ahead of the reporting may trigger selling” of stocks and boost demand for the dollar and the yen, he said.

The dollar rose to $1.3190 versus the euro as of 11:13 a.m. in Tokyo from $1.3272 in New York yesterday after touching $1.3183, the strongest level since April 1. The yen climbed to 132.06 per euro from 133.29. Japan’s currency traded at 100.12 per dollar from 100.42.

Australia’s dollar dropped to 70.67 U.S. cents from 71.09 cents yesterday and New Zealand’s dollar fell to 57.34 U.S. cents from 57.58 yesterday.

The MSCI Asia Pacific index declined 1.7 percent after the Standard & Poor’s 500 Index slid 2.4 percent yesterday. Profits at S&P 500 companies may have fallen 37 percent in the first quarter, according to estimates from more than 1,700 securities analysts compiled by Bloomberg. Alcoa Inc., the first Dow Jones Industrial Average company to post results for the March quarter, reported a wider-than-estimated loss.

Risk Aversion

“The risk associated with results of U.S. companies is causing a risk aversion bid into the yen,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. The yen may strengthen to below 100 per the dollar today, he said.

The Dollar Index, used by the ICE to track the greenback against the currencies of six major U.S. trading partners, climbed for a third day, climbing to 85.486 from 85.288.

“With the basis for the recent euphoria about the global economy and stock markets still looking to be fragile, I want to take profits on recent gains before a major economic event in the U.S. such as corporate profit announcement,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.

‘Bad Shape’

Gains in the yen may be tempered before a government report tomorrow that economists say will show machinery orders declined for a fifth month.

“Japan’s economy is in a bad shape,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “There is no reason to buy the yen right now.”

Machinery orders, an indicator of capital investment in the next three to six months, dropped 6.9 percent in February from the previous month, according to a Bloomberg News survey.

Japan’s current-account surplus narrowed in February as the recession eroded demand for the nation’s exports. The surplus shrank 55.6 percent to 1.117 trillion yen ($11 billion) from a year earlier, the Ministry of Finance said today. Japan had a 172.8 billion yen deficit in January, its first in 13 years.

The world’s second-largest economy will keep contracting through the third quarter of this year, a separate Bloomberg survey showed.

Bank of Japan Governor Masaaki Shirakawa said yesterday economic conditions have worsened since the central bank released its growth forecasts in January. The economy will contract 2 percent in the fiscal year started April 1, the central bank said in January.

German Exports

The euro fell for a third day against the dollar before a report that may show German exports dropped for a fifth straight month in February, pushing Europe’s largest economy deeper into a recession.

Sales abroad, adjusted for working days and seasonal changes, fell 4.4 percent from January, when they slipped 4.4 percent, according to a Bloomberg survey before the Federal Statistics Office releases the report today.

The European Union’s statistics office said yesterday gross domestic product in the region declined 1.6 percent in the fourth quarter, the most in at least 13 years. The March 5 estimate was for a 1.5 percent contraction.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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