Europe Closed for Easter; Can Strong Earnings from Financials and an Open U.S Market Bolster the Dollar?

Daily Forex Fundamentals | Written by AC-Markets | Apr 13 09 10:46 GMT |

Thin markets could see some erratic currency moves today as (with Asia now closed) the U.S will be the only financial center open for business on this Easter Monday. Q1 earnings are set to continue with Blackrock, Charles Schwab set to announce their results before market open today. Citi, Goldman and JPM & Chase will follow this week. The focus now is on whether good numbers will bolster the dollar as a preferred asset or boost risk taking which would see demand for the dollar wane slowly. The dollar dropped across the board (except against the Yen - as expected) during the asian session as stocks rose on encouraging news that the Chinese economy was at or had seen a bottom. Continued worries over the Nippon economy remains a dark spot in the region as risk of deflation now becomes apparent - wholesale prices dropped at their fastest rate since 2002. USDJPY breaks firmly above 100.00 and aims higher. Another interesting development that we mentioned last week is the carry trade opportunities against the AUD and NZD - we test new 6-month highs on these currencies. Higher yield currencies are now attractive havens as risk appetite returns. Not much in terms of news announcements today except for the aforementioned earnings releases. Lookout for a strong dollar as higher stocks and no Europe will play in favor of the greenback. Today Key Issues (time in GMT): 00:00 - The Risk today: EurUsd Despite weaker dollar the pair remains in broad downward trend. Crucial support at 1.3100 tested twice in the last month. Currently trading a 2-figure range between 1.3100 and 1.3300. 1.3300 being the upper extremity of current mini-trend which is a more pronounced dollar bull than the broader declining triangle we have outlined in the past. Initial support at 1.3168 while on the upside we are eying at 1.3224. GbpUsd Dollar decline brings the pair higher as the BoE keeping rates unchanged late last week bolster the Sterling. Today's move culminated at 1.4746. This said the U.S is open today while Europe and the U.K are closed for Easter - expect a retracement move pre-open. We are testing the 23.60% (1.4713) Fibonacci level at time of writing. Initial support stands at 1.4692. A break above 1.4730 will allow us to test 1.4746 (2 day high). UsdJpy Strong resistance at 100.74 as the Yen falls on carry trade demand. Further gains will eye 103.16 levels via 101.46 (recent high). Initial support stands at 100.21 (level tested twice in last 2 days). UsdChf Broad trend points to a renewed dollar bull as we have found a firm bottom at 1.1171. However as markets deal with earning's season and a hypothetical “bottom” to the crisis moves will be erratic. Initial resistance stands at 1.1607 with 1.1508 as strong support (base of triple top). Encouraging Q1 report for financials will benefit the dollar as Europe is closed. EURUSD GBPUSD USDJPY USDCHF 1.3506 1.4776 103.16 1.1967 1.3301 K 1.4746 101.46 1.1607 1.3224 1.473 101.1 1.1552 1.3191 1.4702 100.6 1.1526 1.3168 1.4692 100.21 1.1508 1.3128 1.4676 99.86 1.1429 1.3100 K 1.4656 99.33 1.1243 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot AC Markets http://www.ac-markets.com Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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European Market Update

Daily Forex Fundamentals | Written by Trade The News | Apr 13 09 10:04 GMT |

European market Update: Easter Monday holiday in Europe; Chinese PBoC advisor Fan: might take need additional 2-3 years to complete China's economic adjustment ECONOMIC DATA European Markets closed for Easter Monday Holiday (RU) Russia Mar Producer prices M/M: 4.1% v 1.5%e; Y/Y: -2.8% v -5.4%e SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM Equities: Sibir Energy [SBE.UK]City of Moscow does not plan to sell its 18% stake in co. to TNK-BP - Kommersant. Over the weekend, London's Sunday Times reported that TNK-BP was preparing a £2B to £3B offer for Sibir || Wellpint [WLP] Express Scripts to acquire WellPoint NextRx subsidiaries for $4.68B || Speakers: PBOC Adviser Fan Gang: China's economy is not likely to reach bottom soon. He noted that it might need additional 2-3 years to complete economic adjustment . he saw major Western economies in early stages of recession, with growing impact to result on pressure on China's exports || BoJ Dep Governor Yamaguchi commented that monetary policy alone cannot end the economic decline || India's' PM Singh commented that its 2009 GDP growth slightly below 7% and blamed the global recession for revised outlook. He noted that the RBI (Central bank) had considerable room on monetary policy if necessary || Former PBoC Advisor Li Yang says that China should purchase more short-term US debt. The Oriental Morning Post article quoted the former PBoC advisor that China should adjust the maturity structure, and keep asset and currency structures basically unchanged when investing its $1.95T foreign-exchange reserves. Li stated that China cannot use currency reserves to purchase gold because the metal was in oversupply. The price of the commodity might fall should the International Monetary Fund sell gold reserves to help the world's poorest countries || Russian Industrialists Union: Success of Russian anti-crisis package depends on stable Ruble currency and the Ruble within the 38 to 41 basket range was the 'best' range. Russia needs to keep radical fluctuations in its currency In Currencies: focus of Asian markets was stop-loss hunting on EUR/USD and USD/JPY pairs. EUR/USD probed above the 1.3200 level in listless trading while USD/JPY tested 100.70. In Energy: Iran OPEC Gov: Further oil output cuts are possible if demand continues to decline || Shell [RDSA.UK] Confirms incident and fire at Nigeria's Bomu pipeline (150K bpd); Flows reportedly shut down. Separately, Nembe facility (130K bpd) in Nigeria was reportedly attacked || Shell [RDSA.UK] Reportedly in advanced talks with China on possible jv develop the Kirkuk oil field in northern Iraq. Shell had offered CNPC a 15% stake, but reportedly CNPC sought a higher participation around 20% Additionally Shell sought to win CNPC''s approval for a production sharing contract for the Jinqiu gas field in China''s southwestern Sichuan province Credit Crisis: China exploring stimulus actions to spark growth in domestic demand - China Securities Journal ||China Commerce Chamber commented that it saw the US Steel antidumping suit against China as "protectionism". On Apr. 8th, US steel industry filed an antidumping suit against China, covering $2.7B in imports NOTES Data released over the weekend showing strong loan growth in China but cautious comments from PBoC advisor Fan deflated some momentum US Equity futures modestly lower after NY Times reported that GM was being told by US Treasury to prepare for "surgical" bankruptcy by June 1st Market participant finally will get a look into the finances of troubled US banks this week as earnings season gets under way, but recent accounting changes mean investors might not know what to make of them Looking Ahead: 10:00 (CA) Canada Q1 Business Outlook Future sales: No estimate versus -34.0 prior; BOC Senior loan Survey: No estimate versus 75.8 prior 11:00 (US) US to purchase back Notes and Bonds. Fed to purchase Treasuries due from March 2011 to April 2012 today (Note: Tuesday's operation would involve issues from September 2013 to February 2016) Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Apr 13 09 08:24 GMT |

EUR/USD closed lower on Thurs and below the 20-day moving average crossing. The low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. Closes below last Monday's low crossing are needed to confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. USD/JPY closed higher on Thursday as it consolidated some of this month's decline. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are oversold but are neutral to bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing would temper the near-term bearish outlook. If it extends this month's decline, the 75% retracement level of last fall's rally crossing is the next downside target. GBP/USD closed lower on Thursday as it extends last week's decline. The mid-range close sets the stage for a steady opening on Monday. Stochastics and the RSI are overbought and are neutral to bearish signalling that sideways to higher prices are possible near-term. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. If it extends the rally off March's low, January's high crossing is the next upside target. USD/CHF closed higher on Thursday and below the 20-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below last Monday's low crossing would confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. HY Markets http://www.hymarkets.com

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China Mulls New Stimulus to Boost Consumption, Bolster Recovery

By Paul Panckhurst

April 13 (Bloomberg) -- China’s government is considering additional stimulus measures to boost consumption and bolster growth just as the nation shows more signs of recovering.

The government will issue some “guideline” policies and continue to use fiscal and taxation measures to spur an expansion, the official China Securities Journal reported today, citing Gao Huiqing, a researcher at the State Information Center as saying on April 11. On the same day, Premier Wen Jiabao, said in an interview with state media that China will “closely” monitor changes in the domestic and world economy and “hammer out” new response plans when needed.

China has seen “better-than-expected” changes in the economy after the government rolled out its 4 trillion yuan ($585 billion) stimulus package, Wen said in the interview, citing stronger industrial production, expanding manufacturing index and rallying stock market. Still, Gao, affiliated with the National Development and Reform Commission, said such a recovery, which was spurred by a rebounding market and sales of property and cars, may be short-lived.

“While the stimulus is indeed having an effect on loan growth and some measures of economic activity, the trend decline in exports is unbroken,” said James McCormack, head of Asia sovereign ratings at Fitch Ratings in Hong Kong. “Chinese gross domestic product growth will remain below potential until the global economy recovers.”

China’s 2009 exports may shrink by as much 10 percent and risk the nation’s growth target of 8 percent, Zheng Xinli, the deputy policy research head of the ruling Chinese Communist Party, said at a conference on April 11. Growth probably slowed for the sixth quarter to 6.3 percent in the first quarter compared with a year earlier, according to a median estimate by 12 economists surveyed by Bloomberg News.

New Stimulus

China’s State Council will meet on April 15 to discuss a new stimulus package, the Oriental Morning Post reported on April 11, without citing anyone. The new package will be focused more on social welfare spending and on boosting consumer consumption, the Shanghai-based newspaper said, without elaborating.

China is projecting a record fiscal deficit this year to fund spending on airports, railways, power grids and welfare homes. Policy makers have also lowered interest rates and rolled out industry revival plans to prevent a slump just as the global economy falls deeper into a recession.

To spur domestic consumption to make up loss of overseas sales, China is subsidizing 20 billion yuan this year on rural purchases of televisions and refrigerators and plans to increase spending on welfare by 29 percent.

In the long term, an expanded social safety net may also boost demand. The State Council issued this month an 850 billion yuan health-care plan, including building at least one hospital in every county and expanding medical insurance coverage to 90 percent of the 1.3 billion population by 2011.

To contact the reporters on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

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Tokyo Electric Atomic Restart Delayed Further by Fire

By Megumi Yamanaka and Michio Nakayama

April 13 (Bloomberg) -- The restart of a Tokyo Electric Power Co. plant has been further delayed while it ensures safety after a fire, the ninth since the world’s biggest nuclear station was shut by an earthquake in 2007.

The trade ministry ordered Asia’s biggest utility to probe the cause of the blaze at a warehouse at the Kashiwazaki Kariwa station on April 11 and prevent a recurrence. The government of Kashiwazaki city in Japan’s northwest, where the plant is located, also ordered the company to review fire safety.

The directives come as Tokyo Electric awaits a decision from local governments on whether one of the plant’s seven reactors is safe to operate, paving the way for a restart. The governor of Niigata prefecture, Hirohiko Izumida, said today he may defer a local assembly meeting scheduled for April 21 to discuss the matter because of the blaze.

“A delay would shake the consensus among investors that a restart is going to happen soon,” said Hirofumi Kawachi, an energy analyst at Mizuho Investors Securities Co. in Tokyo. “I’m positive that Tokyo Electric can avoid going into the red this fiscal year, but profit would be lower than expected.”

The utility posted a loss for the first time in 28 years for the year ended March 2008 after the shutdown forced it to buy more oil, coal and natural gas at peak prices to fuel thermal plants. Analysts have projected a return to profit in the year started April, according to five estimates in a January Bloomberg survey.

Shares Fall

Shares in the utility fell 0.6 percent to 2,385 yen in Tokyo at 2:22 p.m. They have lost 10 percent in the past year, compared with a 32 percent drop in the benchmark Topix index.

The central government’s Nuclear and Industrial Safety Agency has approved structural strengthening work done to the No. 7 reactor, and local approval was the final requirement before a restart. The 1,356-megawatt unit is the first to have undergone repairs after the earthquake in July 2007 shook the station more than was assumed possible in its design.

The mayors of Kariwa village and Kashiwazaki city both said they were satisfied with safety at a meeting with Izumida on April 10. Izumida said he would postpone a decision pending a discussion by the assembly.

“The fire is adversely impacting the talks we are having now regarding the restart,” Takeshi Kumakura of Niigata’s nuclear safety division said by phone.

The local fire department ordered Tokyo Electric to improve safety at the plant last month after a fire broke out when workers were cleaning a pump at the No. 1 reactor building.

For Related News and Information: For the most-read energy news MNI NRG Top energy, power stories: ETOP and PTOP Most-read company stories: 9501 JT MCN 1Y Tokyo Electric’s energy assets: 9501 JT NRGA See shares and most-read news: 9501 JT GPMR

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Yen Falls Versus Australian, N.Z. Dollars as Crisis Seen Easing

By Kim-Mai Cutler and Ron Harui

April 13 (Bloomberg) -- The yen fell to a six-month low against Australia’s dollar on speculation the global financial crisis is easing, spurring investors to buy higher-yielding assets financed with the Japanese currency.

The yen also declined as Bank of Japan Deputy Governor Hirohide Yamaguchi said today monetary policy alone isn’t enough to end the economic slump. The Japanese currency slid against all of its 16 most-actively traded counterparts. Thailand’s baht fell to its weakest level this month after anti-government protesters fought police and Prime Minister Abhisit Vejjajiva declared a state of emergency.

“The risk-taking appetite may keep improving as first- quarter earnings at U.S. banks could prove to be good,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The bias would be for the yen to be sold.”

The yen dropped to 72.87 against Australia’s dollar as of 10:09 a.m. in London from 72.11 in New York on April 10. It touched 73.02, the weakest since Oct. 14. The yen fell to 58.93 per New Zealand dollar, from 58.44.

Japan’s currency declined to 100.64 versus the greenback from 100.24, and dropped to 132.92 per euro, from 132.18. The euro traded at $1.3208, from $1.3189 on April 10 when it reached $1.3090, the lowest level since March 18.

Yen Forecast

The yen may depreciate to 101 per dollar today, Saito said. Exchange-rate movements may be more volatile than normal today, he said, as the Easter Monday holiday in Asia and Europe reduces the volume of trading.

Yamaguchi said monetary policy alone would not end the economic slump in comments to the Japanese Diet today.

“The Bank of Japan is hinting that they want to look at other non-standard measures,” said Geoffrey Yu, a London-based foreign-exchange strategist for UBS AG, the world’s second- biggest currency trader. “The yen is weakening as they may be referring to additional fiscal policy measures or other alternatives.”

Asian stocks rose, with the MSCI Asia Pacific Index advancing 0.3 percent, a third day of gains.

“The yen as a funding currency for carry trades or investment opportunities is going to reassert itself,” Jesper Koll, Tokyo-based chief executive officer of hedge fund adviser TRJ Tantallon Research Japan, said in an interview with Bloomberg Television. “For all intents and purposes, the yen ought to be weakening, particularly against the Australian and New Zealand dollars.”

Carry Trades

In carry trades, investors get funds in a country with relatively low borrowing costs and invest in another with higher interest rates. The risk is market moves can erase those profits. The benchmark rate is 0.1 percent in Japan, compared with 3 percent in Australia and in New Zealand.

The Thai baht extended its loss in offshore trading this year to 2.5 percent as soldiers battled to restore order to Bangkok’s streets. Protesters are calling for the resignation of Abhisit, 44, who was forced to cancel a weekend summit of Asian leaders after 1,000 protesters stormed the seaside venue.

The currency fell to 35.67 against the dollar, from 35.43 on April 10.

Goldman Sachs Group Inc. will release its first-quarter results tomorrow and JPMorgan Chase & Co. will report its first- quarter earnings April 16. Wells Fargo & Co., the second-largest U.S. home lender, said on April 9 that first-quarter net income surged 50 percent because of “strong” revenue from Wachovia Corp., which it acquired last year.

ECB Comments

The euro may extend last week’s losses against the dollar on speculation European Central Bank policy makers will signal this week that they intend to cut rates for a fourth time this year next month.

ECB President Jean-Claude Trichet said last week the bank is studying unorthodox ways of bolstering the 16-nation region’s economy, while council member Nout Wellink said the central bank can make additional cuts to its 1.25 percent rate. Fellow members Axel Weber will speak in Hamburg on April 15 and Erkki Liikanen will deliver a speech in Helsinki the following day.

“ECB officials are now talking about the possibility of rates below 1 percent and unconventional monetary easing steps,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The euro is likely to weaken” to $1.3115 and 131.55 yen today, he said.

Rate Futures

Investors last week raised bets the ECB will reduce rates at its May 7 meeting. The yield on the three-month Euribor interest-rate futures contract for May delivery fell to 1.31 percent on April 9 from 1.39 percent on April 3, according to data compiled by Bloomberg.

Declines in the yen may be tempered by speculation a stimulus plan announced last week by Japanese Prime Minister Taro Aso will help the world’s second-largest economy emerge from its recession.

The 15.4 trillion yen ($153 billion) package, unveiled on April 10, includes 3 trillion yen to support corporate financing, 1.9 trillion yen to create jobs and 370 billion yen to subsidize new car purchases.

“The package should contribute around 1.5 to 2 percentage points to economic growth for fiscal 2009,” Ashley Davies, a Singapore-based currency strategist at UBS, wrote in a note today. “Fiscal stimulus packages are positive for a currency, but investors will likely be worried about Japan’s total government debt as a share of gross domestic product.”

The stimulus plan will add to Japan’s debt burden that the Organization for Economic Cooperation and Development already forecasts will rise to 197 percent of GDP next year.

‘Currency Crisis’

Demand for the dollar may weaken after Jim Rogers, Singapore-based chairman of Rogers Holdings, said a “currency crisis” may occur in the world’s largest economy.

“What we haven’t had yet is a big currency crisis,” Rogers said today in a Bloomberg Television interview. “I would expect that’s coming next because there are many currency imbalances, with the U.S. now the largest debtor nation in the world.”

The U.S. budget deficit climbed to $192.3 billion in March, compared with a shortfall of $48.2 billion a year earlier, according to government data. Spending increased to $321.2 billion, and revenue fell 28 percent to $129 billion.

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.3 percent today to 85.517.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Thai Baht Declines, Debt Rating at Risk Amid Protests

By Shanthy Nambiar and Chen Shiyin

April 13 (Bloomberg) -- Thailand’s baht fell the most in 10 months and ratings companies said the nation’s debt rating may be cut after anti-government protesters fought police and Prime Minister Abhisit Vejjajiva declared a state of emergency.

The currency extended its loss this year to 2.8 percent as soldiers battled to restore order to Bangkok’s streets. Protesters are calling for the resignation of Abhisit, 44, who was forced to cancel a summit of Asian leaders over the weekend after 1,000 protesters stormed the seaside venue of Pattaya.

“We have a negative outlook on the government ratings because of the continuing divide in Thai politics and the lack of obvious peaceful means of resolving it,” said Kim Eng Tan, a director at Standard & Poor’s in Singapore. “There is a significant chance of a ratings downgrade.”

Thai soldiers fired tear gas today to clear a key intersection of demonstrators, who blocked another road near the Foreign Ministry with public buses and burning tires. Continued unrest may worsen an economy facing its first annual contraction in 11 years.

Abhisit said 47 protesters and 23 soldiers were injured, with four soldiers suffering gunshot wounds. The prime minister said he’ll consider his political future once order is restored. Protesters say his four-month-old administration lacks legitimacy because he came to power after the courts dissolved the former ruling party for vote buying.

Military Coups

The turmoil raises the prospect that the military will seize control of the country, said Paul Quaglia, director of PSA Asia, a Bangkok-based security and risk assessment consulting firm. Thailand has had 10 coups since absolute monarchy was abolished in 1932.

“There really needs to be a government in control that can focus on its economic agenda,” said Thomas J. Byrne, a senior vice president at Moody’s Investors Service in Singapore. “If conditions continue to develop, then chances are we would take the next step” and lower Thailand’s Baa1 debt rating, he added.

S&P revised the outlook on Thailand’s BBB+ credit rating to negative from stable in December as political protests aimed at ousting the previous government led to a week-long shutdown of Bangkok’s international airport.

‘Widespread Violence’

Southeast Asia’s second-largest economy may shrink 2 percent this year, Tan said today. Moody’s expects a contraction of 3 percent or more, Byrne said. That would Thailand’s first annual shrinkage in gross domestic product since the 1997-98 Asian financial crisis.

“The biggest risk is widespread violence,” S&P’s Tan said. “Investors both foreign and local are more wary of planting investment in the country.”

The baht fell 0.8 percent to 35.68 in offshore trading as of 4:45 p.m. local time, according to data compiled by Bloomberg. That’s the biggest drop since June last year. Financial markets in Thailand are closed until April 16 for the Thai New Year holiday, known as Songkran.

“It is a pivotal moment, really,” said Jerry Yoshikoshi, senior economist with Sumitomo Mitsui Banking Corp. in Singapore. “Even if Abhisit resigns, I don’t think it will change the political climate in the longer term. We have been bearish on the country in the long-term. The baht will be an underperformer in coming months.”

Thai Finance Minister Korn Chatikavanij said April 3 the economy shrank “about 5 percent” in the first quarter, having last month warned gross domestic product may slide more than 3 percent unless government spending is increased. A report last week showed consumer confidence slumped to the lowest level in more than seven years in March.

Growing Unrest

“It is not good at all for the baht,” said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “They keep on having these problems every three to six months and there is no end to it. This puts a big question mark on everything that is happening in the country. The unrest is spreading.”

Investors should “take profit” on Thailand’s stocks as anti-government protesters intensify their rallies, Credit Suisse Group advised.

Gains in global markets in the past month offer investors a chance to sell their Thai holdings, including property stocks, said Credit Suisse analyst Dan Fineman, reiterating his “underweight” recommendation on the market. An election will be the best outcome for investors as this will give the government greater legitimacy, he added.

‘Dark Days’

Thailand’s SET Index gained 10 percent in the past month, tracking a rally in global markets.

Thai Beverage Pcl, the nation’s biggest brewer and whiskey maker, slumped in Singapore trading as anti-government protests mounted in Thailand.

Thai Beverage slipped 2.8 percent to 17.5 Singapore cents at 9:25 a.m. in Singapore after slumping as much as 5.6 percent at the opening. Total Access Communications Pcl, another Thai company listed in Singapore, added 1.4 percent to 74 US cents.

“A return to the dark days of the second half of 2008 is not inevitable but the risk of prolonged political tensions is high,” Fineman said. “We now suggest taking profit in key stocks and sectors we had previously liked.”

To contact the reporters on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net.

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Crude Oil Falls After IEA Cuts Demand Forecast to Five-Year Low

By Christian Schmollinger and Ayesha Daya

April 13 (Bloomberg) -- Crude oil fell in New York after the International Energy Agency said 2009 demand may slump to the lowest in five years as factories shut and car sales tumble amid a deepening global recession.

Oil consumption will fall 2.4 million barrels a day this year, about the same amount that Iraq produces, to 83.4 million barrels a day, the IEA said on April 10 as trading in New York and London was closed for the Good Friday holiday. U.S. crude supplies are at their highest since July 1993, the Energy Department said on April 8.

“Data such as the IEA’s downgrade of expected demand show the commodities rally we’ve seen recently may have short legs,” said Ronald Smith, chief strategist at Alfa Bank in Moscow. “The global economy is only showing the most tentative signs of having found a bottom, and those signs may yet prove false.”

Crude oil fell as much as $1.34, or 2.6 percent, to $50.90 a barrel in electronic trading on the New York Mercantile Exchange at 10:37 a.m. in London.

Oil futures fell 0.5 percent last week, snapping seven weeks of gains. Crude has risen 16 percent this year, after tumbling 54 percent in 2008. Other commodities also rose last week. The Reuters/Jefferies CRB Index of 19 commodities advanced 4.17 points, or 1.9 percent, to 227.88.

Oil vs Gold

Investor Jim Rogers said he prefers oil over gold as he believes the International Monetary Fund will sell its reserves following the recent rally in the precious metal.

“The IMF is trying to sell its gold,” Rogers, chairman of Singapore-based Rogers Holdings, said in an interview with Bloomberg Television. “The IMF is one of the largest holders of gold so you’ve got this huge supply overhang.”

Oil demand will shrink by 2.8 percent this year as worldwide gross domestic product declines by 1.4 percent, according to the IEA, the adviser to 28 consuming countries. The organization had until now assumed the global economy would expand in 2009.

“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the Paris-based agency said in its monthly report.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended April 7, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 12,493 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,947 contracts, or 91 percent, from a week earlier.

Brent Falls

Brent crude oil for May settlement fell as much as $1.01, or 1.9 percent, to $53.05 a barrel on London’s ICE Futures Europe exchange at 10:37 a.m. in London. Brent is trading at a premium of more than $2 a barrel to the West Texas Intermediate contract in New York, swinging from a discount of 43 cents on March 31.

“As long as the inventories in the U.S. remain very high then this premium will keep as it is,” said Ken Hasegawa, a commodity derivative sales manager at brokerage Newedge in Tokyo. “May WTI will be weak until expiry.”

The May contract will close on April 21.

U.S. crude-oil supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the report from the U.S. Energy Department showed.

Global oil demand falls to an annual low during the second quarter as refineries close to perform maintenance after winter in the Northern Hemisphere.

Analysts surveyed by Bloomberg News were split over whether prices will rise or fall this week as OPEC production cuts coincide with declining demand.

Twelve of 35 analysts surveyed, or 34 percent, said futures will increase through April 17. Another 12 respondents forecast that oil will be little changed. Eleven expected a decline.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net. Ayesha Daya in Dubai adaya1@bloomberg.net

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Asia Currencies Gain as Risk Appetite Builds; Rupiah, Peso Rise

By Kim Kyoungwha

April 13 (Bloomberg) -- Asian currencies gained, led by Indonesia’s rupiah and the Philippine peso, as a global stocks rally fanned demand for riskier assets.

Seven of Asia’s 10 most-used currencies excluding the yen strengthened versus the dollar today, after the MSCI World Index of shares climbed in each of the last five weeks. The rupiah was the region’s biggest gainer, climbing to a two-month high after elections strengthened President Susilo Bambang Yudhoyono’s hold on parliament.

“The firmer tone in the stock markets has supported Asian currencies,” said Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp. in Singapore.

The rupiah rose 1.8 percent to 11,110 per dollar as of 3:54 p.m. in Jakarta, according to data compiled by Bloomberg. It earlier touched 11,085, the strongest since January. The peso climbed 0.5 percent to 47.783. Taiwan’s dollar strengthened 0.3 percent to NT$33.6970 as overseas investors added to their holdings of the island’s shares for a third day.

The MSCI Asia Pacific Index of regional stocks rose 0.3 percent to 88.20, set for its highest close in three months, after Japan more than doubled an economic stimulus package and China reported a record jump in lending. The index has jumped 25 percent since reaching a five-year low on March 9.

The People’s Bank of China said yesterday that the country will ensure there’s sufficient liquidity after new loans surged. Japan’s Prime Minister Taro Aso last week announced his third spending plan, which will total 56.8 trillion yen ($566 billion).

Weaker Yen

The yen fell to a six-month low against Australia’s dollar as speculation a global recession is easing spurred demand for higher-yielding assets financed with the Japanese currency.

The yen dropped to 72.90 against Australia’s dollar in Tokyo from 72.10 at the end of last week. Japan’s benchmark interest rate is 0.1 percent, compared with 3 percent in Australia.

The Philippine peso gained against the U.S. dollar before a report this week that may show money sent home by overseas workers increased in February. A BusinessMirror report said there are more than 221,000 jobs available for Filipinos in the Middle East this year.

Remittances from Filipinos based abroad account for about a 10th of the Philippine economy and are the second-largest source of foreign exchange, after exports.

“If remittance growth continues to be up or at least flat, that is positive for the peso,” said Rafael Algarra, treasurer at Security Banking Corp. in Manila.

Foreign Investors

Extra spending by Asian governments to stimulate their economies and revive exports is helping boost investor sentiment in emerging markets.

Taiwan’s currency has risen 4.5 percent since touching a seven-year low on March 3 as the benchmark Taiex index of stocks rallied 32 percent. Foreign investors bought NT$30.5 billion ($905 million) more of the island’s shares than they sold in the past three trading sessions, stock exchange figures show.

“The Taiwan dollar is stronger due to the stock market, which has gained quite a bit,” said Henry Lin, a foreign- exchange trader at Shin Kong Commercial Bank in Taipei. “Investors are also taking their cues from U.S. stocks.”

Thailand’s baht fell the most in 10 months in offshore trading on concern violent anti-government protests will deter investment and force Prime Minister Abhisit Vejjajiva to step down.

The currency extended its loss this year to 2.8 percent as protesters calling for Abhisit’s resignation defied a state of emergency to stage rallies in Bangkok, prompting the government to send in troops to restore order. Continued unrest may worsen an economy facing its first annual contraction in 11 years.

‘Pivotal Moment’

Thailand’s credit rating may be lowered as the violence escalates, Standard & Poor’s said today. The ratings agency said it has a negative outlook, which “implies there is a significant chance of a ratings downgrade,” Kim Eng Tan, a director of sovereign ratings, said in an interview in Singapore.

“It is a pivotal moment, really,” said Sumitomo Mitsui’s Yoshikoshi. “Even if Abhisit resigns, I don’t think it will change the political climate in the longer term. We have been bearish on the country in the long-term. The baht will be an underperformer in coming months.”

The baht fell 0.8 percent to 35.67 per dollar in Singapore, according to data compiled by Bloomberg. Financial markets in Thailand are closed until April 16 for the Thai New Year holiday.

Elsewhere, the Korean won rose 0.2 percent to 1,329.50 per dollar and Singapore’s dollar rose 0.2 percent to S$1.5147. Malaysia’s ringgit fell 0.4 percent to 3.6291, while China’s yuan was unchanged at 6.8336.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

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Korean Won Gains as Global Funds Purchase Stocks; Bonds Advance

By Kim Kyoungwha

April 13 (Bloomberg) -- South Korea’s won strengthened, erasing an earlier loss, as overseas investors increased their holdings of local equities for the third day in a row. Government bonds gained.

The currency approached the highest level since Jan. 7, extending its gains in the past month to 12.5 percent, the best performance among the 10 most-traded Asian currencies outside Japan. The currency earlier slid as much as 0.7 percent on speculation demand for dollars rose as some investors repatriated dividends.

“Foreign investment in stocks propelled the won higher, providing a buffer to a market that was weighed down by dividends and import settlements,” said Jo Hyun Suk, a currency dealer with Korea Exchange Bank in Seoul. “The gains accelerated as banks also offloaded their dollar holdings.”

The won gained 0.2 percent to 1,329.50 per dollar at the 3 p.m. local close, according to data compiled by Bloomberg. The benchmark Kospi share index rose 0.2 percent, building on five weeks of gains.

The Bank of Korea forecast last week that the economy will shrink 2.4 percent this year, the first contraction since 1998, before expanding 3.5 percent in 2010. Governor Lee Seong Tae said the pace of the nation’s economic slowdown has “moderated significantly.”

Lowering Swaps

The central bank will lower the amount of 84-day swaps it offers to banks to $2 billion from the $3 billion that mature this week, according to an e-mailed statement in Seoul.

The amount on offer was reduced after the nation posted a record $4.6 billion trade surplus in March and it will post another “significant” one this month after crude oil imports fell, the bank said.

The central bank will offer $2 billion to lenders in the local-currency swap market tomorrow, it said today on its Web site. It has supplied dollars to banks through weekly auctions as a global financial crisis made it hard for them to raise foreign exchange.

Local currency bonds rose as demand at a government auction improved. The finance ministry today sold 2.83 trillion won ($2.1 billion) of five-year bonds at a yield of 4.55 percent. Investors offered to buy 4.87 trillion won of bonds, or 1.72 times the amount on offer, the ministry said on its Web site today. That compares with a so-called bid-to-cover ratio of 1.05 at the previous auction of similar-maturity debt on March 9.

“The outcome was favorable with participation by long term investors pretty high,” said Kim Do Sung, a futures analyst with PB Futures Co. in Seoul. “The high bid-to-cover ratio signaled some momentum in the market.”

The yield on 4.75 percent debt due in 2014 fell six basis points to 4.551 percent, according to Korea Exchange. The three- year yield declined two basis points to 3.88 percent.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net;

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Sime Falls as Maybank Sees Palm Oil Price Falling

By Chan Tien Hin

April 13 (Bloomberg) -- Sime Darby Bhd., Malaysia’s biggest palm oil producer, fell the most in two weeks, leading a drop among plantation stocks after Maybank Investment Bank Bhd. said prices of the edible oil are poised to slide in the second half.

Shares of Sime tumbled 2.3 percent to 6.35 ringgit at 2:32 p.m. local time in Kuala Lumpur, set for the steepest slide since March 30. The drop accounted for more than half of the benchmark Composite Index’s decline. Sime, the largest stock by market value, has jumped 22 percent this year. Kuala Lumpur Kepong Bhd. slid 1.7 percent to 11.30 ringgit.

“We remain wary of the unsustainable” palm oil price over the next two months, Ong Chee Ting, an analyst at Maybank Investment, said in a report today. The price is poised for a “correction” because of rising production and the global recession, he said. He kept his “underweight” rating on the palm oil industry.

Palm oil futures in Malaysia, the global benchmark, advanced for a third day, rising 2.6 percent to 2,359 ringgit, set for the highest level since Sept. 12, after stockpiles last month dropped faster than output rose. They have surged 39 percent this year.

Prices of the edible oil may average 1,600 ringgit a ton in the second half as the global recession saps demand and the discount between palm oil and rival soybean oil narrows, said Ong.

“We may see a rebound in inventory by May,” he said.

Shares of the biggest planters such as Sime and Kuala Lumpur Kepong “remain stretched” and face the risk of “potential de-rating as global market sentiment may only bottom” in the second half of the year, he said.

Sime’s 14-day relative strength index, which shows how rapidly prices have advanced or dropped, rose above 70 for the first time since January 2008, the level that some investors use as a trigger to sell.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

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Asian Markets Not ‘Out of the Woods,’ Barclays Says

By Jonathan Burgos

April 13 (Bloomberg) -- Asian equity markets are not yet clear of trouble although the recent rally suggests the worst is over, said Barclays Wealth Management.

“We aren’t completely out of the woods,” said Manpreet Gill, Asian Strategist at Barclays Wealth, which manages $213 billion, said in a telephone interview. “We are still seeing negative export growth data.”

The MSCI Asia Pacific Index has surged 25 percent from a more than five-year low on March 9 as governments and central banks expanded measures to stem the global recession.

“Conditions have definitely improved but the rally in itself has been quite sharp over a very short period of time so most probably we might see some correction,” Gill said.

Corporate earnings may continue to disappoint and are among key risks investors should watch out for, he said.

To hedge against such risks, Barclays is advising clients to invest in stocks of industrial, materials, consumer discretionary and technology companies as well as high-yield corporate bonds, Gill said.

The rally in global equities has been “powerful,” though problems in financial markets may cause indexes to revisit lows, investor Jim Rogers said.

“When you see a rally like this coming off the bottom, it lasts longer than anybody expects,” Rogers, chairman of Singapore-based Rogers Holdings, said in an interview with Bloomberg Television. “I would expect to see more problems, probably this fall.”

Chinese stocks should continue to outperform as economic conditions in China have “improved much more” than anywhere else, Gill said.

The Shanghai Composite Index has gained 38 percent this year, making it the second-best performer among 88 key stock gauges tracked by Bloomberg globally. Stocks rallied on optimism the government’s trillion yuan ($585 billion) stimulus package and record new lending will spur a recovery in the world’s third-largest economy amid the global recession. Interest rates were cut five times from September to December.

Gill is also bullish on prospects for stocks in India, Singapore and Hong Kong.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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Dana Gas Surges for Ninth Day, Leading Abu Dhabi Stocks Higher

By Claudia Maedler

April 13 (Bloomberg) -- Dana Gas PJSC surged for a ninth day, leading Abu Dhabi shares higher.

Dana soared 8.1 percent, bringing the jump in April to 62 percent. The Sharjah-based company said April 5 it started gas production from the Al Basant discovery in the West Manzala Concession in Egypt. Dana began natural-gas production in Iraq’s Kurdish region in October.

“The company’s Egyptian oil and gas exploration and production activity continues to announce deals,” said Ali Khan, head of cash-equity trading at Dubai-based Arqaam Capital Ltd. “It has cash, no exposure to sub-prime or housing, and pretty much bad news is priced in.”

Abu Dhabi’s benchmark index tumbled 46 percent in the past 12 months, while the measure in neighboring Dubai slumped 70 percent during the period as the region’s housing boom came to a halt. Property prices in Abu Dhabi, down 30 percent since their peak, are forecast to fall a further 10 to 15 percent, EFG- Hermes Holding SAE said in a report last month. Dubai property prices are down 34 percent from their peak last year, EFG said.

Dubai’s Index Drops

Abu Dhabi’s ADX General Index increased 0.3 percent to 2,605.56 at 1:27 p.m. in Dubai. The Dubai Financial Market General Index declined 0.4 percent and Kuwait’s measure lost less than 0.1 percent.

Dana climbed to 0.94 dirhams, heading for its highest close since Nov. 6. The shares have yet to close lower in April. Crude oil has gained 2.8 percent this month and traded at $51.05 a barrel in electronic trading on the New York Mercantile Exchange today, up 58 percent from a December low.

Oman’s Muscat Securities Market 30 Index rose 1.8 percent and the Bahrain All Share Index added 0.6 percent, while Qatar’s Doha Securities Market Index lost 1 percent. Saudi Arabia’s Tadawul All Share Index gained 0.4 percent.

Bank Albilad dropped for the first time this week, losing 2.8 percent to 24.6 riyals. The Riyadh-based bank said first- quarter profit declined 56 percent to 22.4 million riyals ($6 million).

To contact the reporter on this story: Claudia Maedler in Dubai on cmaedler@bloomberg.net

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‘Take Profit’ on Thailand Stocks, Credit Suisse Says

By Chen Shiyin

April 13 (Bloomberg) -- Investors should “take profit” on Thailand’s stocks as anti-government protesters intensify their rallies against Prime Minister Abhisit Vejjajiva, Credit Suisse Group advised.

Gains in global markets in the past month offer investors a chance to sell their Thai holdings, including property stocks, Credit Suisse analyst Dan Fineman said in a report today, reiterating his “underweight” recommendation on the market. An election will be the best outcome for investors as this will give the government greater legitimacy, he added.

“A return to the dark days of the second half of 2008 is not inevitable but the risk of prolonged political tensions is high,” Fineman wrote. “We now suggest taking profit in key stocks and sectors we had previously liked.”

Thailand’s SET Index gained 10 percent in the past month, tracking a rally in global markets. The market will be closed until April 16 for the Songkran Festival holidays even as anti- government protesters defy a state of emergency and step up rallies that have blockaded key intersections in the capital of Bangkok.

Clashes in Bangkok today left 70 people injured as soldiers battled to restore order. Further turmoil would widen a national rift between the rural poor and urban elite that has spawned four administrations in three years since former premier Thaksin Shinawatra was ousted in a coup.

‘Darkest Days’ Ahead

“The current situation can lead to more serious violence,” CLSA Asia-Pacific Markets said in a report today. “The darkest days in our history are, sadly, likely to be ahead of us, as we see no swift solution to ongoing divisiveness.”

Investor Jim Rogers is more positive, saying that investors should consider buying shares if prices slump and the protests don’t destabilize the nation’s monarchy.

“If Thailand’s going to survive and if things collapse, then it’s probably a time to buy Thailand,” Rogers said in a Bloomberg Television interview. “They’ve got natural resources, they’ve got a disciplined labor force and it’s in the middle of Asia, which is the place to be. There are plenty of advantages to Thailand if you get the right price.”

Credit Suisse is turning “less enthusiastic” on Kasikornbank Pcl, the nation’s third-largest lender by assets, Fineman said in today’s report. The brokerage had already cut its rating on Thai banks to “market weight” from “overweight” last month, it added.

Risks to property developers are also increasing and investors face the prospect of becoming “stuck” in these “fairly illiquid” stocks, the analyst said, without identifying any companies.

“Fundamentally, the stocks remain attractive as valuations are still cheap and demand is surprising in its resilience, but the downside risks are growing,” he wrote.

Funds that need to be invested in Thailand should hold shares of telecommunications, consumer, media and coal companies, Credit Suisse added.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.

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China’s Lending Surge ‘Cause for Worry,’ UBS Says

By Chua Kong Ho

April 13 (Bloomberg) -- The surge in China’s March bank loans and money supply is “cause for worry” as it means the increase in liquidity behind this year’s stock rally will likely weaken, according to UBS AG.

New loans rose to 1.89 trillion yuan ($277 billion) in March, the central bank said April 11. M2, the broadest measure of money supply, grew 25.5 percent, the most since Bloomberg began compiling data in 1998 and more than the 21.5 percent median estimate in a survey of 12 economists.

“The liquidity surge is already weakening and is cause for worry,” Chen Li, a Shanghai-based strategist at UBS, said in a phone interview. “Bank lending in the first quarter has almost reached last year’s full-year target.”

Chen estimates new loans will average 400 billion yuan to 500 billion yuan a month for the rest of 2009 based on the “most optimistic” projection of 8 trillion yuan of bank lending for the year. The benchmark Shanghai Composite Index gained 1 percent last week, the smallest rise in four weeks.

The measure added 2.8 percent to 2,513.70 at the close, extending this year’s rally to 38 percent, the second-best performer among 88 benchmark stock gauges Bloomberg tracks.

The People’s Bank of China “will implement moderately loose monetary policy and maintain the continuity and stability of policy,” the central bank said on its Web site yesterday. It pledged “ample liquidity” to “ensure money supply and loan growth meet economic development needs.”

The surge in bank lending means the improvement in the economy in the first quarter from the previous three months was “a certainty,” said Chen, who joined UBS from Shenyin & Wanguo Securities Co. last year. He was voted “best analyst” from 2005 to 2007 in an annual poll by “New Fortune” magazine.

China’s industrial production climbed 8.3 percent from a year earlier in March and consumer demand grew “relatively rapidly” in the first quarter, a sign the government’s 4 trillion yuan stimulus plan is taking effect, Wen was cited as saying by the official Xinhua News Agency on April 12.

To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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China Central Bank Pledges Sufficient Liquidity for Economy

By Kevin Hamlin and Dune Lawrence

April 13 (Bloomberg) -- China’s central bank said it will ensure sufficient liquidity to sustain economic growth, damping speculation regulators may seek to restrain credit after new loans jumped sixfold to a record in March.

The People’s Bank of China “will implement moderately loose monetary policy and maintain the continuity and stability of policy,” the central bank said on its Web site yesterday. It pledged “ample liquidity” to “ensure money supply and loan growth meet economic development needs.”

The statement indicated that reviving growth remains China’s priority amid concern that the credit boom will lead to bad debts and asset bubbles. The world’s third-largest economy, while showing better-than-expected performance in the first quarter, still faces “great difficulties,” Premier Wen Jiabao told reporters in Thailand on April 11.

“It’s likely that the authorities will not change their stimulative policy at least for another month,” said Stephen Green, head of China research at Standard Chartered Plc in Shanghai. “This means fast loan growth will continue. The longer this goes on, though, the bigger the risk of asset bubbles developing becomes.”

New loans rose to 1.89 trillion yuan ($277 billion) in March, the central bank said April 11. M2, the broadest measure of money supply, grew 25.5 percent, the most since Bloomberg began compiling data in 1998 and more than the 21.5 percent median estimate in a survey of 12 economists.

Stimulus Effect

China’s industrial production climbed 8.3 percent from a year earlier in March and consumer demand grew “relatively rapidly” in the first quarter, adding to signs the government’s 4 trillion yuan stimulus plan is taking effect, Wen was cited as saying by the official Xinhua News Agency.

The government has pushed banks to lend in support of the stimulus, implemented after the global recession led to a collapse in exports that dragged economic growth to the weakest pace in seven years. China’s lending boom contrasts with the struggle in the U.S. to rid banks of illiquid assets and efforts by central banks from Switzerland to Japan to unfreeze credit.

China’s banks, which are mostly state-owned, have already met the bulk of the government’s target of at least 5 trillion yuan of new loans this year. Lending may top that level by as much as 3 trillion yuan, according to JPMorgan Chase & Co.

“The biggest dangers to China’s economy and financial system come from within, not from outside,” Jiang Zhenghua, former vice chairman of China’s parliamentary standing committee, said at a conference in Beijing April 11. “The biggest of these hidden dangers is the degree of bad loans in China.”

Bad Loans

Commercial banks’ bad-loan ratio was 2.45 percent at the end of 2008, according to the regulator. The ratio was more than 20 percent in 2003, before the government completed a cleanup of the banking system that cost more $500 billion.

The China Banking Regulatory Commission asked all banks to raise bad debt provisions to 150 percent of outstanding non- performing loans to be “prudent,” Chairman Liu Mingkang said in Beijing last month.

In yesterday’s statement, the central bank pledged to prevent loans from going to high energy-consuming or polluting enterprises or to industries where there is overcapacity. It also reiterated support for loans to the agricultural sector, as well as to small- and medium-sized companies.

“The lending numbers are extraordinarily strong and there must be concerns about the impact on overall loan quality, the potential for new asset-price bubbles, and whether these funds can all be allocated to investment projects in an efficient manner,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong. “When you are throwing around so much money so quickly, some of it is bound to be wasted.”

Deepening Crisis

The Shanghai Composite Index has climbed 34 percent this year, the second-best performer of 88 benchmark gauges tracked by Bloomberg, fueling concern that some of the increase in lending has been used for speculation.

“Some of the money has gone to the property market, some to the stock market,” said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. “It is not what the central bank wants to see.”

Wen cited a month-on-month rebound in trade and gains in stocks and property transactions as evidence the stimulus is working, in an interview at the aborted Association of Southeast Asian Nations meeting, according to Xinhua. Signs of recovery also include a 26.5 percent jump in urban fixed-asset investment in the first two months.

Vigilance is still needed as the global financial crisis is continuing to deepen and spread, Xinhua cited Wen as saying.

China’s economic growth slowed to 6.8 percent in the fourth quarter. First-quarter data is due to be released April 16.

To contact the reporter on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net.

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Japan Producer Prices Fall at Fastest Pace Since 2002

By Mayumi Otsuma

April 13 (Bloomberg) -- Japan’s wholesale prices fell at the fastest pace in almost seven years as the global slump deepened.

Producer prices, the costs companies pay for energy and raw materials, sank 2.2 percent in March from a year earlier, the biggest slide since May 2002, the Bank of Japan said in Tokyo today. That compares with a median estimate of 27 economists surveyed by Bloomberg News for a 1.8 percent decline.

The Bank of Japan’s quarterly Tankan survey this month showed manufacturers expect the costs they pay for goods and materials to fall to the lowest level in seven years. Central bank Governor Masaaki Shirakawa said last week policy makers must carefully watch the risk that inflationary expectations by companies and consumers would weaken.

“The pace of declines in wholesale prices is expected to gather momentum toward the middle of this year,” said Taisuke Nakamoto, an economist at the Dai-Ichi Life Research Institute in Tokyo. “Makers of steel, food, electricity, gas and vehicles are highly likely to slash their prices in coming months.”

Prices tumbled a revised 1.6 percent in February compared with the same month a year earlier. They fell 0.2 percent in March from February, when they dropped a revised 0.5 percent, the central bank said.

The Bank of Japan’s overseas commodity index, which shows changes in costs including oil, steel, copper and wheat, slid 49.3 percent in March.

Lower Grain Prices

Japan’s agriculture ministry lowered prices of the grain sold to processors by 14.8 percent on average this month, the first drop in three years, after import costs fell on a higher yen and a slump in overseas markets. The country imports about 90 percent of its wheat needs.

Shikishima Baking Co., the country’s second-largest bakery, plans to cut bread prices in May to reflect a drop in wheat costs. Takashimaya Co., a department-store operator, reduced retail prices of bread this month.

Japan’s wholesale inflation rose to the fastest in almost three decades in August and has since slowed every month. Crude oil has lost more than two-thirds of its value since peaking at $147.27 in July. Soybeans, corn and wheat costs have dropped after climbing to records last year.

Price declines are spreading in the world’s second-largest economy. Corporate service prices, the costs businesses pay for services such as transportation and rent, fell at the steepest pace in February in seven years.

A deteriorating job market will probably cause consumers to spend less and prices to decline further, economists say. The jobless rate surged to a three-year high in February and wages slid for a ninth month.

Core consumer prices, which exclude fresh food, will fall in March, the first decline since September 2007, according to Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset & Management Co. in Tokyo.

“On top of energy cost declines, falling wheat costs will also lower prices,’ ‘ Muto said.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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Singapore GDP Probably Shrank a Fourth Quarter on Export Slump

By Shamim Adam

April 13 (Bloomberg) -- Singapore’s economy probably shrank for a fourth straight quarter as manufacturing and exports collapsed, adding pressure on the central bank to allow the currency to weaken to revive growth.

Gross domestic product fell an annualized 9.6 percent last quarter from the previous three months, after shrinking 16.4 percent between October and December, according to the median estimate of 13 economists surveyed. The trade ministry will release the data at 8 a.m. tomorrow, and the Monetary Authority of Singapore will give its semi-annual review of the currency.

The worst global economic slump since World War II has pushed trade-dependent Singapore into the deepest recession in its history. Government efforts to prevent job losses by handing out cash to companies haven’t stopped manufacturers such as Creative Technology Ltd. from firing workers, and economists expect the island to loosen monetary policy this week.

“Singapore’s economy is still in contraction mode and not out of the woods yet,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “With growth likely to be below potential until next year, the central bank will adjust its currency policy to be consistent with the economic conditions.”

The Monetary Authority of Singapore, which uses the currency to manage inflation, stopped favoring gains in the local dollar in October. The central bank may devalue the Singapore dollar and allow it to drop 4 percent against its U.S. counterpart by June 30 to aid exporters, economists surveyed by Bloomberg News last month said.

Currency Policy

Policy makers will shift the mid-point of the Singapore dollar trading band, in which the exchange rate is allowed to fluctuate against a basket of currencies, 15 of 17 economists surveyed said. The central bank will also maintain a neutral stance, in which it seeks neither gains nor losses, after the one-off depreciation, the survey showed.

Singapore in January cut corporate taxes for the second time in three years and unveiled S$20.5 billion ($13.5 billion) in tax rebates and cash handouts to help businesses and workers survive the slowdown.

Overseas shipments by Singapore, the world’s busiest container port, have dropped for 10 consecutive months. The country’s industrial production has fallen into the longest slump in eight years.

Tourist arrivals have declined, private home prices plunged by the most in at least 16 years last quarter and consumers are rolling over an unprecedented amount of credit-card debt.

Cutting Forecast

The government will have to cut its current estimate that the economy will contract in a range of 2 percent to 5 percent this year, the Straits Times cited Prime Minister Lee Hsien Loong as saying last week. Still, the decline is likely to be less than 10 percent, he said.

Singapore’s $161 billion economy declined 9.1 percent in the three months ended March from a year earlier, compared with a 4.2 percent drop in the fourth quarter of 2008, economists predicted.

The following table gives forecasts for the percentage change in gross domestic product from a year earlier and the annualized, seasonally adjusted change from the previous quarter.

=========================================================
                              GDP        GDP
Firm                           YoY%      QoQ%
=========================================================
Median                        -9.1%      -9.6%
Average                       -8.7%      -8.6%
High                          -6.1%      -0.4%
Low                          -10.5%     -15.0%
Number of Estimates             14         13
=========================================================
Action Economics              -9.2%     -10.0%
Barclays Capital              -8.1%      -3.9%
CIMB-GK Research             -10.5%     -15.0%
Citi                         -10.0%     -14.0%
DBS Bank                      -8.1%      -5.6%
HSBC Singapore                -9.1%      -9.6%
Ideaglobal                    -9.5%     -14.3%
JPMorgan Chase                -8.9%      -9.0%
Macquarie Securities          -9.2%     -10.0%
Moody’s Economy.com           -8.0%      -5.0%
Nomura Singapore              -9.2%     -10.0%
OCBC Bank                     -6.1%      -5.5%
Standard Chartered            -7.3%      -0.4%
UBS                           -9.0%         --
=========================================================

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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Crude Oil Falls on Demand Concerns After IEA Lowers Forecast

By Christian Schmollinger

April 13 (Bloomberg) -- Crude oil fell in New York after the International Energy Agency said demand in 2009 may slump to the lowest in five years as the global recession deepens.

Oil consumption will fall by 2.4 million barrels a day this year, about the same amount that Iraq produces, to 83.4 million barrels a day, the IEA said on April 10 as trading in New York and London was closed for the Good Friday holiday. U.S. crude supplies are at their highest since July 1993, the Energy Department said on April 8.

“Although a lot of people already understood that demand is not good, the IEA report is making speculators bearish,” said Ken Hasegawa, a commodity derivative sales manager at brokerage Newedge in Tokyo. “There is still no confidence to buy the market and take long positions.”

Crude oil fell as much as 77 cents, or 1.5 percent, to $51.47 a barrel in electronic trading on the New York Mercantile Exchange. It was at $51.56 a barrel at 8:26 a.m. Singapore time.

The contract closed 5.8 percent higher at $52.24 on April 9 as equities gained, signaling that some investors expect economies to stabilize, bolstering energy demand.

“Signs that the economic situation is getting better will be supportive for the market, so the downside is limited, but the market can’t go higher,” Newedge’s Hasegawa said. “We’ll be in a narrow range of $47 to $53 a barrel.”

IEA Report

Oil demand will shrink by 2.8 percent this year as worldwide gross domestic product declines by 1.4 percent, according to the IEA, the adviser to 28 consuming countries. The organization had until now assumed the global economy would expand in 2009. The decline outpaces supply from OPEC’s third- largest producer, Iraq, which last month pumped 2.27 million barrels a day.

“The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the Paris-based adviser said in its monthly report.

The outlook “implicitly discards” the agency’s earlier view that industrial activity, and demand for fuels, would recover in the second half of the year. Consumption during the first three months of the year was revised lower by 700,000 barrels a day.

“The IEA has a history of being too optimistic towards world oil demand,” said Deutsche Bank analysts led by Joel Crane in a report on April 9, before the IEA release. “On our estimates, global oil demand growth is equivalent to world GDP growth less 2 percent, which given our assumption that world growth will slump by 1.9 percent implies a potential contraction of global oil demand of over 3 million barrels a day.”

Net Longs Rise

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended April 7, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 12,493 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,947 contracts, or 91 percent, from a week earlier.

Brent crude oil for May settlement fell as much as 25 cents, or 0.5 percent, to $53.81 a barrel on London’s ICE Futures Europe exchange. It was at $53.87 a barrel at 7:49 a.m. Singapore time. The contract rose $2.47, or 4.8 percent, to end the session at $54.06 a barrel on April 9.

Brent is trading at a premium of more than $2 a barrel to the West Texas Intermediate contract in New York, swinging from a discount of 43 cents on March 31.

“As long as the inventories in the U.S. remain very high then this premium will keep as it is,” said Newedge’s Hasegawa. “I think May WTI will be weak until expiry.”

The May contract will close on April 21.

U.S. crude-oil supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the report from the U.S. Energy Department showed.

Global oil demand falls to an annual low during the second quarter as refineries close to perform maintenance after winter in the Northern Hemisphere.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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