Various Economic Data Indicate Asia Is On Its Way To Stabilize

Daily Forex Fundamentals | Written by ecPulse.com | Jun 09 09 08:02 GMT |

The economic agenda did not carry with it any important economic data from the Asian region today, however lately we were pleasantly surprised with some evident signs that the worst is behind us therefore stability is about to take control next indicating that recovery from the worst financial crisis since the great depression is close. However some data that have a mild affect on markets was released today starting with Australia in which business confidence for the month of May fell to -2 however better than the previous reading which indicated a wider fall reaching -14, meanwhile the business conditions also for the month of May also fell to -14 but this time it was worst than the previous -10. The improvement in Australia's business confidence could've been based on the government stimulus plan which reached to 22 billion Australian dollars and which was directed to building roads, railways, schools and other infrastructure projects that help to support growth and strengthened the country to be able to face the crisis that ruined exports around the world. The interest rates reductions performed by the Reserve Bank of Australia, driving it to the lowest level in 49 years at 3.0% helped to support domestic spending, direct investments to internal projects and support companies. The Central Bank held rates steady during its last meeting following some signs indicating that the country is stabilizing which were later confirmed by the GDP reading for the first quarter that proved to be positive preventing the economy from falling into recession. More data were today released from Australia as the Job Advertisements for the month of May fell by 0.2% however improving from the previous reading when it fell by 7.5%, its clear that the fiscal policy adopted by the Reserve Bank of Australia had improved the business sector and slowed down the layoffs, however unemployment remains high at 5.4% during the month of May because of the pressures faced by large companies in the past few months after exports fell sharply and domestic consumption declined. Moving to South Korea that witnessed the release if its yearly Producer Price Index for the month of May which dropped by 1.3% and for the first time since 2002 compared to the previous rise of 1.5%, obviously the decline is very much influenced by the fall in energy and row material prices that help decrease manufacturing prices but also by the decline in domestic consumption, however the Korean central bank benefited from the decline in inflation levels by lowering interest rates to 2.0% yet in its last meeting it held rates steady as a reaction to the stability signs that began to emerge from the US and the recovery signs started in China. Moving to the second largest economy in the world Japan which today released the preliminary reading for the leading index which reached in April to 76.5 from the previous revised reading of 75.5 however worst than the expected 77.2, meanwhile the preliminary reading for the coincident index reached to 85.8 in April from the previous revised reading of 84.8 yet worst than the expected 86.0, but the improvement in April from the previous month indicate that stability is finding its way into the economy, still the main focus remain on exports are they are the main supportive factor to growth in Japan. Japan holds today a meeting of the government's Council on Economic and Fiscal Policy where it is expected to announce the outline of monetary and fiscal policy in Japan, the Nikkei newspaper published today said that the government is expected for it to cut the deficit of the country by half until 2014 and start achieving surplus in the upcoming 10 years. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Jun 09 09 07:35 GMT |

Previous session overview The euro fell further against the dollar and the yen in Asia Tuesday as regional stocks declined, prompting hedge funds to keep taking profit on risky currencies including the European unit. The euro fell about half a cent to USD1.3853 overnight. It also lost more than one yen to JPY135.75 before recouping some losses. U.S. and European hedge funds, some of which are set to close their books at the end of the month, kept offloading their holdings of currencies that many consider to be relatively risky, such as the euro, sterling and the Australian currency, dealers said. The sellers took a cue from weakness in Asian shares, which often knocks those currencies lower by chilling demand for risk, they said. The Euro eased relentlessly to USD1.4000 support after the US jobs data changed the fortune of the dollar. EURJPY was very well supported though with the break higher on the USDJPY countering the major. A pullback after weeks of rallying is healthy for the uptrend with some looking for a break of USD1.3925 support. In European morning session, the British pound remained under pressure against the greenback as Prime Minster Gordon Brown confronted a fresh attempt to force him out, after support for his ruling Labour Party in European elections plunged to its lowest level in a century. The Australian dollar was weaker in late Asian trade Tuesday as the run up in shorter-dated U.S. Treasury yields that have increased speculation about possible U.S. central bank rate hikes prompted fears about the longevity of the so-called green shoots recovery Market expectation The euro faces the risk of falling to USD1.3500 in the near-term, although it may lose a sense of direction once the current rounds of position adjustments run their course, analysts added. Some dealers noted that Standard & Poor's move Monday to downgrade the sovereign credit rating of Ireland continued to weigh on the euro, while others brushed off the event as too old. The euro, Swiss franc and U.K. pound are tipped as buys against the dollar later on Tuesday, as the dollar's current run higher runs out of steam. Markets reported to have been thin overnight, with the downside pressure squeezing out some of the weaker spec longs. EURUSD recovered ahead of the European open, with demand able to lift rate toward USD1.3900. Failure to break above this level currently sees rate trading back around USD1.3875. Bids seen placed toward USD1.3850, more around USD1.3840 with stops below, which if triggered to bring Monday's lows at USD1.3806 back into focus. Bids noted between USD1.3810/00, more between USD1.3795/90 with stops below. Resistance seen placed between USD1.3895/05, more toward USD1.3920 ahead of overnight highs at USD1.3938. EUEGBP traders note that Monday's extended pullback found support at stg0.8646, the level corresponding to a 76.4% retracement of the rally from stg0.8578 to stg0.8866. Bids noted from this level to stg0.8640 with stops below, which iof triggered to open a deeper move toward stg0.8625/20 ahead of stg0.8605/00. Resistance noted at stg0.8670/75. Analysts say much of the political uncertainty in the U.K. has now been priced into the market, and the reasons that had previously sent the pound to 2009-highs still exist. Meanwhile, disturbing euro-zone developments, such as currency and banking fears in Eastern Europe and the Baltics, are mostly under the surface. Dukascopy Swiss FX Group Legal disclaimer and risk disclosure This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jun 09 09 06:45 GMT |

CHF The pre-planned break-out variant for buyers has been implemented with overlap of minimal anticipated target. OsMA trend indicator, having marked last trading day top by formation of topping bearish signal with further confirmative sales activity rise and gives grounds for the priority of buyers direction of trading operations planning for today. On the assumption of it we can assume probability of rate attainment of close 1,0860/80 supports where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for buying positions on condition of the formation of topping signals the targets will be 1,0920/40, 1,0980/1,1000 and (or) further break-out variant up to 1,1040/60, 1,1100/20, 1,1160/80. The alternative for sales will be below 1, 0790 with the targets of 1,0730/50, 1,0680/1,0700. GBP The pre-planned break-out variant for sales has been implemented but with loss of several points in the achievement of minimal anticipated targets. OsMA trend indicator, having marked confirmation of rate oversold by relative bullish activity rise but with rather minimal grounds for the preservation of bearish planning priorities for today. On the assumption of it as well as descending direction of indicator chart we can assume probability of rate return to close 1,5940/60 supports where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of formation of topping signals the targets will be 1,6020/40, 1,6080/1,6100 and (or) further break-out variant above 1,6140 with the targets of 1,6180/1,6200, 1,6240/60, 1,6300/20. The alternative for sales will be below 1,5780 with the targets of 1,5720/40, 1,5660/80, 1,5600/20. JPY The estimated test of key supports for the implementation of pre-planned long positions has not been confirmed and the result of previous working day with preservation of bullish activity priority gives grounds for the preservation of trading plans made before. We can assume probability of rate fall to channel line '1' at 97,60/80 levels where it is recommended to evaluate development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of formation of topping signals the targets will be 98,20/40, 98,80/99,00 and (or) further break-out variant up to 99,40/60, 100,00/20, 100,80/101,20. The alternative for sales will be below 97,00 with the targets of 96,40/60, 95,80/96,00, 95,20/40. EUR The pre-planned break-out variant for sales has been implemented with the overlap of minimal anticipated target. OsMA trend indicator, having marked last trading day low by formation of topping bullish signal with further relative bearish activity rise and gives grounds to suppose further correction period with preservation of sales priority of trading operations planning for today. On the assumption of we can assume rate achievement of channel line '2' at 1,3960/80 levels where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 1,3900/20, 1,3840/60, 1,3780/1,3800 and (or) further break-out variant up to 1,3720/40, 1,3660/80, 1,3600/20. The alternative for sales will be above 1,4060 with the targets of 1,4100/20, 1,4160/80, 1,4220/40. FOREX Ltd www.forexltd.co.uk

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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Jun 09 09 06:32 GMT |

EURUSD Comment: Trying to base against the 26-day moving average and retracement support. Yesterday's bounce was decent but not conclusive so allow for more of the same today. Strategy: Attempt longs at 1.3890; stop below 1.3800. Short term target 1.4020, then 1.4245 Direction of Trade: →↗ Chart Levels: Support Resistance 1.3853 " 1.3938 1.38 1.4023 1.3790/1.3775* 1.4050/1.4065* 1.3725 1.41 1.3600* 1.417 GBPUSD Comment: Bouncing smartly from retracement and trendline support, and the 26-day moving average which all cluster around 1.5800, despite an appalling political situation. Two-way price action should keep the bid tone to implied volatility. Strategy: Attempt small longs at 1.6035, adding to 1.5855; stop below 1.5800. First target 1.6100, then 1.6200 Direction of Trade: →↗ Chart Levels: Support Resistance 1.5985 " 1.6105* 1.5800* 1.6155 1.575 1.62 1.57 1.6245 1.5514* 1.6435 USDJPY Comment: Hovering above the top of the Ichimoku 'cloud', which gets very thin at the end of next week, the summer solstice. Expect more cautious random small swings today and probably all week. Strategy: Possibly attempt small shorts at 98.10, adding to 98.55; stop above 99.25. First target 97.65 then 96.00 Direction of Trade: → Chart Levels: Support Resistance 98.00 " 98.58 97.87 98.85/99.00* 97.57 99.49/99.60 97 99.69/99.80* 96 100 EURJPY Comment: Consolidating between 138.00 and the 9-day moving average at 135.50, and we favour more of the same today with a downside test likely late in the afternoon. Strategy: Attempt small shorts at 136.55, adding to 137.50; stop above 138.20 Short term target 135.50, maybe 134.00 Direction of Trade: → Chart Levels: Support Resistance 135.70 " 137.33 135.45 138.02 135.25 138.2 134.5 138.57 134 139.26* Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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China Investment Growth Likely Quickened on Government Spending

By Bloomberg News

June 9 (Bloomberg) -- China’s spending on roads, power grids and property probably accelerated for a fourth month as the government stepped up spending to revive the world’s third- largest economy.

Urban fixed-asset investment grew 31 percent in the five months through May from a year earlier, according to the median estimate of 16 economists surveyed by Bloomberg News. That compares with 30.5 percent in the first four months. Industrial output may rise 7.7 percent, up from 7.3 percent in April.

Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package has helped manufacturing expand, sparked record vehicle sales and increase property transactions. Still, the government said on May 27 that the drop in overseas sales is the biggest challenge facing the economy and that outlook for employment remains “grim.”

“China’s economic recovery is well on track as investment and consumption continue to gain momentum,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp.

Exports probably dropped for a seventh month, falling 23 percent in May compared with 22.6 percent in April. Imports likely slid 22 percent, leaving a trade surplus of $14.9 billion, according to 15 economists. The government will release trade and investment figures on June 11.

Since the stimulus was announced in November China has built 20,000 kilometers (12,430 miles) of rural roads, 445 kilometers of highway and 100,000 square meters (1.08 million square feet) of airport buildings, the National Development and Reform Commission said on May 21.

New Construction

More projects are breaking ground as the nation starts to build 5.2 million low-rent homes and offers housing subsidies to help accommodate 7.5 million poor urban families by 2011.

Chongqing Changan Automobile Co. started building a plant in Chongqing that will produce as many as 300,000 vehicles a year on completion in 2012, the carmaker said on June 2.

China’s State Council is also taking measures to help exporters. The finance ministry yesterday raised export rebates on some electronics, machinery, steel products and toys to boost shipments.

Growth of retail sales probably accelerated to 15 percent from 14.8 percent in April, according to the median estimate of 16 economists. China last month said it will boost trade-in subsidies for vehicle purchases by five times and add TVs, refrigerators and computers into the trade-in program to spur consumer spending and to offset losses overseas.

Stock-Market Gains

“The wealth effect from rising equity prices, rising inflation expectations and further government support could prompt a broad-based pickup in household consumption,” said Wang Qian, a Hong Kong-based economist at JPMorgan Chase & Co. China’s benchmark Shanghai Composite Index has gained more than 50 percent this year.

New loans may have stabilized after cooling from the record of 1.89 trillion yuan in March. Banks probably lent as much as 600 billion yuan last month, compared with 592 billion yuan in April, according to state media reports. M2, the broadest measure of money supply, may have expanded 25.9 percent, from 26 percent in April, according to the median estimate of 15 economists surveyed by Bloomberg News.

Economic growth slipped to 6.1 percent in the first quarter, the weakest pace in almost a decade. The government cautioned on June 3 that a recovery isn’t yet solid, saying the global crisis may still hurt the economy.

Producer prices probably fell a record 6.9 percent after a 6.6 percent drop in April, and the decline in consumer prices may ease to 1.3 percent from 1.5 percent.

The economy will expand 7.5 percent this year, according to the median estimate of 14 economists, up from 7.1 percent forecast in February.

“This is not a nation of 1.3 billion people who are just sitting around waiting for another order of toys to come in from Wal-Mart,” Carl Weinberg, chief economist of High Frequency Economics in New York, wrote in an e-mailed report yesterday. “China’s economy is broad-based, diverse and driven by domestic consumer demand and investment spending.”

--Li Yanping. Editors: David Tweed, Lily Nonomiya

To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net

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German April Exports Decline Due to ‘Lackluster’ Global Economy

By Frances Robinson

June 9 (Bloomberg) -- German exports fell more than economists forecast in April as the global crisis restrained demand, keeping Europe’s largest economy mired in a recession.

Sales abroad, adjusted for working days and seasonal changes, fell 4.8 percent from March, when they rose a revised 0.3 percent, the Federal Statistics Office in Wiesbaden said today. Economists expected a 0.1 percent decline in April, according to the median of 10 estimates in a Bloomberg News survey.

“The world is still adjusting to the burst of the credit boom and this kind of hangover won’t be gone in a couple of months,” said Thorsten Polleit, chief German economist at Barclays Capital in Frankfurt. “The global economy is still lackluster.”

German companies from chemical makers to car manufacturers have seen demand fall as the global economy contracts. While Bundesbank President Axel Weber said June 5 that central bank policy has helped to slow the pace of the economic slump, the outlook “remains uncertain.” Volkswagen AG’s Audi division said yesterday it may need to push back a 2015 sales target as customers withhold purchases of luxury vehicles.

German imports dropped 5.8 percent in April from the previous month, when they increased a revised 0.2 percent, the statistics office said. The trade surplus narrowed to 9.4 billion euros ($13.1 billion) from 11.3 billion euros.

The surplus in the current account, the measure of all trade including services, was 5.8 billion euros, down from a revised 11.0 billion euros.

The European Central Bank has cut its key interest rate to a record low of 1 percent and pledged to buy 60 billion euros of covered bonds starting next month in an effort to revive lending. President Jean-Claude Trichet said on June 4 that he expects the slump in the euro-area economy to ease in the current quarter after a “sharp fall in global demand and trade” affected the region in the first quarter.

To contact the reporter on this story: Frances Robinson in Frankfurt at frobinson6@bloomberg.net

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Fed Said to Retreat From Seeking Power to Sell Its Own Bills

By Scott Lanman

June 9 (Bloomberg) -- The Federal Reserve has backed off from seeking a new tool to forestall inflation, refraining from asking Congress for the power to issue its own debt, according to a person familiar with the matter.

Putting off the issue may avoid a political clash over whether the Fed should begin winding down its emergency lending programs while unemployment remains elevated. The central bank intends to rely instead on paying interest on banks’ reserve deposits to prevent a flood of cash into the economy.

After central bankers repeatedly said Fed bills would be a useful additional tool to mop up liquidity, Chairman Ben S. Bernanke omitted mention of the idea in congressional testimony last week. The person, who spoke on condition of anonymity, said the Fed hasn’t made a formal request to lawmakers.

“It’s important that we have all the tools in place” for the Fed to drain liquidity when it’s ready, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview. Still, “it would be a mistake to start dealing with that before you know when, how, how much, et cetera.”

House Budget Committee Chairman John Spratt, a South Carolina Democrat, said in an interview after Bernanke testified to his panel June 3 that “if it was something that the Fed needed, he wasn’t pushing it with this committee.” Wisconsin Representative Paul Ryan, the panel’s ranking Republican, said “I do not like that idea at all.”

‘Other Possibilities’

In testimony before the committee, Bernanke suggested the Fed hasn’t abandoned the idea of issuing its own debt. Beyond the Fed’s current set of tools, Bernanke said “there are still other possibilities that we’re looking at and that perhaps we can discuss with Congress at some point,” without mentioning the authority to issue debt.

“We suspect the omission from Bernanke’s litany was not a slip of the tongue,” Joseph Abate, a money-market strategist at Barclays Capital in New York, said in a research note June 4.

Abate said in an interview that lawmakers may be reluctant to allow the Fed to issue debt that’s not subject to the Treasury limit and competes with other government securities. In addition, were Fed officials to ask Congress for debt-issuing powers, they would be “opening themselves up to political interference,” he said.

Fed Assets Double

The Fed has replenished and added liquidity in credit markets over the past year through lending programs and purchases of securities, more than doubling assets on its balance sheet to $2.1 trillion.

Gaining authority to issue its own debt would allow the Fed to reduce reserves in the banking system and push up interest rates without having to shrink the balance sheet, San Francisco Fed President Janet Yellen said March 25.

In his congressional testimony last week, Bernanke instead highlighted the Fed’s authority to pay interest on banks’ reserve deposits as a tool that bears “very importantly” on the central bank’s ability to tighten credit.

“We can raise interest rates, and then we can tighten policy,” Bernanke said in response to a question from Representative Rick Larsen, a Washington Democrat.

Lacking the power to issue its own debt separates the Fed from central banks in Japan, China, the U.K. and other countries that do have such authority.

‘Nice to Have’

New York Fed President William Dudley said last week that under such a program, Fed debt would probably be restricted to maturities of less than 30 days. “We’d like Congress to consider it,” Dudley said, according to a transcript of an interview with the Economist. “It’s nice to have -- as opposed to critical.”

Yet seeking the power may lead to other legislation. The Senate in April passed a nonbinding resolution asking the Fed to identify borrowers, a move Bernanke has said would be “counterproductive” and result in “severe adverse consequences” for the economy. Another resolution called for an “evaluation of the appropriate number and the associated costs” of the Fed banks.

Bernanke gave Congress a similar opening last year when he sought, and received, immediate authority from Congress to pay banks interest on the reserves they kept at the Fed. The 27-word clause was part of the October law creating the $700 billion Troubled Asset Relief Program.

New Obligations

With that legislation, Congress placed several new obligations on the central bank. The Fed was required to devise a policy to ease terms on mortgages it had acquired, and to file reports with the legislature on emergency-lending programs and bailouts.

At the House Budget hearing, a lawmaker brought up the idea of making Fed district-bank presidents subject to Senate confirmation. Currently the presidents are nominated by the banks’ boards of directors and approved by the U.S.-appointed Fed governors in Washington.

Representative Marcy Kaptur, an Ohio Democrat, asked Bernanke during the hearing whether he supported the idea. “No,” the chairman replied.

“The last thing the Fed wants is for its independence of monetary policy to be challenged,” said David M. Jones, president of DMJ Advisors LLC in Denver and a former Fed economist. “It’s very unlikely this debt thing would be pursued.”

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

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U.K. Housing Market Shows Signs of ‘Stabilizing,’ RICS Says

By Svenja O’Donnell

June 9 (Bloomberg) -- The U.K. housing market showed signs of “stabilizing” in May as the smallest balance of real-estate agents and surveyors in 18 months reported price declines, the Royal Institution of Chartered Surveyors said.

The number of respondents in the monthly survey saying home values fell exceeded those reporting gains by 44.1 percentage points, the best reading since November 2007, RICS said in a report today in London. Property sales per agent rose to 11.8 in the three months through May, the highest since August 2008.

With Nationwide Building Society and Halifax saying that home values jumped in May, evidence is mounting that the property slump is past its worst. That may help buoy the economy as service industries pick up, pulling Britain out of its worst recession since World War II.

“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilizing,” RICS spokesman Ian Perry said in the statement. “However, it is important to remember that the lack of supply has been as important in underpinning prices as the rise in demand.”

The number of properties on agents’ books fell to 58.4 last month, a drop of 35 percent from a year earlier and the lowest since May 2004, RICS said.

The survey showed optimism about future prices is increasing. A net 11 percent of respondents predicted declines, the best result since July 2007, the month before the financial crisis began.

Buyer Confidence

“Buyer confidence is growing daily,” said Luke Pender- Cudlip, an estate agent at Knight Frank in London. “Many think we have hit the bottom of the market.”

Lloyds Banking Group Plc’s Halifax business says that house prices jumped 2.6 percent in May, the most since 2002. Nationwide says they matched the biggest gain since 2006.

Retail sales at stores open least 12 months still fell 0.8 percent in May from a year earlier, the British Retail Consortium said in a separate report today. The economy shrank 1.9 percent in the first quarter, the most since 1979.

The Bank of England kept the benchmark interest rate at 0.5 percent last week and reiterated its plan to spend 125 billion pounds ($200 billion) in newly printed money in U.K. debt markets to aid the economy. The bank said yesterday it may widen the range of assets it’s buying to include secured commercial paper.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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Nigeria Naira Depreciation Bets Cut by Citigroup

By Garth Theunissen

June 9 (Bloomberg) -- Citigroup Inc. has pared its outlook for a slump in Nigeria’s naira, saying that a rebound in oil prices means the currency of Africa’s biggest crude exporter faces a 4.4 percent drop instead of 14 percent.

The naira is likely to depreciate to 155 per dollar, rather than the bank’s previous prediction of 173, by year-end as higher crude prices boost foreign earnings, David Cowan, Citigroup’s Africa economist, said in a phone interview from London.

Declining crude output due to conflict in the oil- producing Niger Delta means the naira is still unlikely to strengthen from the 148.25 per-dollar level it traded at late yesterday, he said.

“The naira is facing pressure to weaken in coming months, just not as much as it did before,” said Cowan. “Oil prices above $60 a barrel give Nigeria some relief and provide the central bank with more ammunition to defend the naira.”

Crude oil has rallied to $69.22 per barrel in New York trading today from as low as $32.40 in December, boosting Nigeria’s supply of foreign exchange and helping policy makers preserve their $44.7 billion in reserves. The Central Bank of Nigeria let the naira drop about 21 percent since November to avoid having to use reserves to defend the currency as oil prices plunged from a record $147.27 a barrel in July.

Current oil prices exceed Nigeria’s budgeted estimate of $45 a barrel, providing Africa’s most populous nation with an estimated “$20 windfall” for each barrel of oil exported, Standard Chartered Plc said June 5.

Niger Production

Rebel attacks have cut oil production in Nigeria, the fifth-biggest source of U.S. imports of the fuel, by more than 20 percent since 2006.

“Oil production is Nigeria’s big problem at the moment, especially because of the ongoing conflict in the Niger Delta,” Cowan said. The interruption of supply means “oil revenue coming in is still insufficient to meet demand in the foreign exchange market, which keeps pressure on the naira to weaken,” he said.

Nigeria is officially required to trim production from its current 1.88 million barrels a day to its OPEC quota of 1.67 million, according to Bloomberg data.

Former Central Bank Governor Chukwuma Soludo defended the naira by limiting the supply of foreign currencies, banning interbank trading of the naira and setting controls on exchange bureaus. He lifted the ban on May 22, a week before he was replaced by Lamido Sanusi.

Breaking Ranks

Commercial banks now trade foreign currencies for five hours per day with a “gentlemen’s agreement” to halt the exchange should the naira’s value deviate from the official central bank’s rate by more than 3 percent, according to Standard Chartered.

Oil companies are permitted to sell foreign-currency earnings to commercial banks, compared with previous rules requiring them to deal directly with the central bank at its targeted naira rate, according to Citigroup and Renaissance Capital, a Moscow-based brokerage with offices in Africa.

“Sooner or later one of the banks is going break ranks and bid for that foreign exchange from the oil companies above the central-bank rate,” said Cowan. “Everyone knows the exchange rate needs to weaken. The only question is which bank will be the first to stick their head above the parapet and when.”

Even with the rebound in oil prices, the government is unlikely to meet domestic demand for foreign currencies without drawing on its reserves.

“At current production levels oil would have to rise to about $80 a barrel to meet all the demand for foreign exchange in Nigeria,” said Cowan. “Unless they can boost their oil production they’re still going to be facing a shortage of foreign currency.”

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net

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Yen Gains for a Second Day Versus Euro as Asian Stocks Decline

By Yasuhiko Seki

June 9 (Bloomberg) -- The yen advanced for a second day against the euro and strengthened versus the dollar as declines in Asian stocks increased demand for the relative safety of Japan’s currency.

The yen also rose against 14 of the 16 most-active currencies after the Wall Street Journal reported the Obama administration wants Europeans to put their banks through more rigorous stress tests, raising concern about the strength of the banking system in the 16-nation region. South Korea’s won lead declines in Asian currencies on concern heightened tension with North Korea will deter investors.

“A downturn in stock prices -- the key barometer of risk appetite -- triggered buying back of the yen,” said Takao Yahata, senior manager of foreign exchange and financial- products trading in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest publicly traded lender by assets. “Given that stock prices are looking top-heavy, we need to reassess the recent optimism about the global economy.”

The yen climbed to 136.54 per euro as of 7:44 a.m. in London from 136.89 in New York yesterday, when it gained 0.7 percent. It has still fallen 8.7 percent in the past three months. Japan’s currency rose to 98.13 per dollar from 98.49. The dollar fell $1.3915 per euro from $1.3900 yesterday when it advanced to $1.3806, the strongest level since May 28.

The MSCI Asia Pacific index of regional shares declined 0.7 percent after earlier rising as much as 0.4 percent. The Nikkei 225 Stock Average fell 0.8 percent.

European Banks

U.S. Treasury Secretary Timothy Geithner is likely to discuss stress tests for European banks at a meeting of finance ministers from the Group of Eight nations in Italy this week, the WSJ said. Standard & Poor’s yesterday cut Ireland’s credit rating for the second time this year, lowering it to AA from AA+, citing the nation’s rising bill for propping up its banks.

“The WSJ report came as an additional bad lead for the euro as it followed up renewed concerns about financial problems in neighboring countries, including the rating downgrade for Ireland,” said Yuichiro Harada, senior vice president of the foreign-exchange division in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest lender. “The currency may have to undergo some period of correction against the dollar, especially following the recent sharp run-up.”

The dollar earlier approached a one-week high against the euro as traders added to bets the Federal Reserve will increase its target lending rate this year as the world’s largest economy recovers. Nobel Prize-winning economist Paul Krugman said yesterday the U.S. economy will emerge from recession by September.

‘Stabilizing’

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” Krugman said in a lecture at the London School of Economics. “Things seem to be getting worse more slowly. There’s some reason to think that we’re stabilizing.”

Traders see a 62 percent chance the Fed will raise its target rate by its November meeting, based on futures on the Chicago Board of Trade. The odds were 26 percent a week ago before the Labor Department said June 5 that U.S. payrolls fell by 345,000 last month, the smallest decrease in eight months.

“As Krugman signaled, people are becoming more confident about the prospects for the U.S. economy and interest rates there,” said Shoichi Handa, a senior currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of financier SBI Holdings Inc. “These positive perceptions will support capital flow back into dollar-denominated assets.”

Retail Sales

Sales at U.S. retailers increased in May for the first time in three months as demand for cars picked up, according to a Bloomberg News survey before the government report on June 11. Retail sales climbed 0.5 percent, after falling 0.4 percent the prior month, according to the survey

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell to 80.669 from 80.909 yesterday when it reached the highest level since May 20. The index has risen 3 percent from this year’s low of 78.334 on June 2.

The Korean won dropped for a second day versus the dollar after the North handed out 12-year prison terms to two U.S. reporters accused of illegal entry. The two female journalists were detained near North Korea’s border with China in March while reporting for San Francisco-based Current TV, co-founded by former U.S. Vice President Al Gore.

‘Some Uneasiness’

There’s “some uneasiness linked to North Korea,” said Park Sang Bae, a currency dealer at Industrial Bank of Korea in Seoul. “The dollar will have a limited gain against the won for the day as exporters are willing to settle their positions on highs.”

The won declined 1 percent to 1,264.85 per dollar, extending its losses in the past month to 1.4 percent.

The dollar may rise to $1.30 per euro in the next three months as the U.S. economy shows signs of a recovery and concerns ease that overseas investors will reduce holdings of Treasuries, according to UBS AG.

Comments from Japanese, Indian and South Korean officials suggest that demand for Treasuries will remain strong, UBS said in the report yesterday. The dollar rose to a three-week high against the yen last week after the U.S. payrolls report.

“The sharp rally in the greenback after last week’s much better-than-expected payrolls numbers shows that dollar bears should be wary of selling the greenback at these historically low valuations,” UBS strategists including Mansoor Mohi-Uddin and Brian Kim said in the report.

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

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U.K. Currency Advances on Signs Housing Market is ‘Stabilizing’

By Matthew Brown and Gavin Finch

June 9 (Bloomberg) -- The pound rose against the dollar for the second day as signs the U.K. housing market is “stabilizing” stoked optimism the worst of the recession is over.

The U.K. currency also strengthened versus the euro on speculation Prime Minister Gordon Brown has fended off calls to step down following a series of ministerial resignations and a drubbing in local and European elections.

“The housing data and the improvement in Gordon Brown’s fortunes for the time being are providing support for the pound,” said Gavin Friend, a markets strategist in London at National Australia Bank. “There’s an appetite for risk out there today.”

The pound rose 0.6 percent to $1.6141 as of 7:55 a.m. in London, and advanced 0.4 percent against the euro to trade at 86.25 pence.

The number of respondents in a monthly survey saying home values fell exceeded those reporting gains by 44.1 percentage points, the best reading since November 2007, the Royal Institution of Chartered Surveyors said today. Property sales per agent rose to 11.8 in the three months through May, the highest since August 2008.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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Copper, Little Changed in Asia, May Drop After Dollar Advances

By Bloomberg News

June 9 (Bloomberg) -- Copper, little changed in Asian trading, may decline as a gain in the dollar eased inflation concerns and equities declined.

The U.S. currency traded near a one-week high versus the euro after investors raised bets the Federal Reserve will increase the target lending rate by the end of the year as the world’s largest economy recovers. The MSCI Asia Pacific Index fell as much as 0.9 percent to 101.44 amid concerns a three- month rally had overvalued earnings prospects.

“Copper remains highly correlated with the dollar and equities,” Zhao Kai, an analyst at Jinrui Futures Co., wrote in an e-mailed report today.

The metal for three-month delivery on the London Metal Exchange traded at $4,983 a metric ton at 12:33 p.m. Singapore time after gaining as much as 1.4 percent to $5,050 a ton.

September-delivery copper on the Shanghai Futures Exchange rose as much as 2.1 percent to 41,340 yuan ($6,047) a ton before declining 0.3 percent to 40,370 yuan at the 11:30 a.m. local time break. July-delivery copper on the Comex division of the New York Mercantile Exchange gained 0.7 percent to $2.268 a pound.

A report later this week will probably show China’s spending on roads, power grids and property accelerated for a fourth month in May as the government stepped up spending to revive the world’s third-largest economy.

Urban fixed-asset investment probably grew 31 percent in the five months through May from a year ago, according to the median estimate of 16 economists surveyed by Bloomberg News.

China is the world’s largest copper consumer.

China Aluminum

Aluminum declined from a six-month closing high in London, losing as much as 1.4 percent to $1,596.75 a ton and last traded at $1,601. China, the world’s largest producer, raised tax breaks on exports of foil in an effort to help companies weather a slump in overseas shipments and sustain growth.

Rebates were raised to 15 percent, the finance ministry said, without providing previous levels. The new rates took effect from June 1. The country restored tax breaks on aluminum plates and strips in November.

Among other LME-traded metals, lead slid 0.8 percent to $1,656 a ton, and tin fell 0.4 percent to $14,840 a ton. Zinc gained 1 percent to $1,560 a ton and nickel was little changed at $14,301 a ton at 11:37 a.m. in Singapore.

--Li Xiaowei, John Liu. Editors: Wendy Pugh, Ravil Shirodkar

To contact Bloomberg News staff on this story: Li Xiaowei in Shanghai at +86-21-6104-7023 or Xli12@bloomberg.net

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China Raises Export Tax Rebates on Aluminum Foil to 15 Percent

By Bloomberg News

June 9 (Bloomberg) -- China, the world’s largest producer of aluminum, increased tax rebates on exports of metal foil in a wider effort to help companies weather a slump in overseas shipments and sustain growth.

Rebates on some foil products were raised to 15 percent, the Ministry of Finance said in a statement on its Web site, without providing previous levels. The higher rates took effect from June 1. The country restored rebates on aluminum plates and strips in November.

Export tax rebates were also raised on some steel products, machinery, electronics and toys, according to a statement posted on the ministry’s Web site yesterday.

The government has raised rebates, increased state reserve purchases of metals and agricultural commodities and announced aid for industries including steel and textiles to meet its 8 percent growth target as the deepest recession since World War II weakens global demand.

--Li Xiaowei, John Liu. Editors: Matthew Oakley, Gavin Evans.

To contact Bloomberg News staff on this story: Li Xiaowei in Shanghai at +86-21-6104-7023 or Xli12@bloomberg.net

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Gold Falls as Dollar Extends Gains, Eroding Investment Demand

By Jae Hur and Jason Scott

June 9 (Bloomberg) -- Gold declined close to its lowest in two weeks as the dollar advanced for a third day, reducing the appeal of precious metals as an alternative investment. Silver also fell.

The Dollar Index, a six-currency measure of the dollar’s value, climbed as much as 0.2 percent after jumping 2 percent in the previous two days. Gold, which often moves in the opposite direction to the currency, slid as much as 0.4 percent today after losing 2.9 percent in the previous two sessions.

“The dollar changed its direction to the plus side against the euro, putting pressure on gold,” said Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co..

Immediate-delivery gold fell 0.2 percent to $949.64 an ounce at 1:14 p.m. Singapore time after trading between $947.59 and $955.35. Bullion, which some investors buy to hedge against inflation, touched $943.80 yesterday, the lowest since May 26.

Gold for August delivery, the most-active contract on the Comex division of the New York Mercantile Exchange, was 0.2 percent lower at $950.30 an ounce.

The dollar gained for a third day versus the euro as traders added to bets the Federal Reserve will raise interest rates this year. The dollar gained as much as 0.3 percent $1.3853 per euro before trading at $1.3884 by 1:31 p.m. Singapore time.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,132.15 tons yesterday, according to data on the company’s Web site. The holdings dropped from a record 1,134.93 tons as of June 1.

Gold was also under pressure from the drop in ETF holdings and speculation the U.S. may support the partial sales of the International Monetary Fund’s reserves, Saito said.

IMF Gold

The U.S. Congress may decide within days whether to support the partial sale of the IMF’s gold reserves, Managing Director Dominique Strauss-Kahn said on May 27.

The IMF’s board last year approved plans to sell 403.3 tons of bullion. A decision to sell gold requires the backing of 85 percent of the IMF’s board, and the board representative from the U.S. needs the approval of Congress to vote in favor of any sales, according to the IMF Web site.

Silver for immediate delivery fell 0.4 percent to $14.885 an ounce at 1:24 p.m. Singapore time after trading as high as $15.0637. The metal lost 5.9 percent in the previous two days.

Still, silver has outpaced gold this year. An ounce of gold now buys about 63.9 ounces of silver, according to data compiled by Bloomberg. That’s down from a high of 84.4 on Oct. 10, which was the most since March 1995.

Among other precious metals for immediate delivery, platinum slid 1.4 percent to $1,229 an ounce, extending yesterday’s 1.6 percent drop. Palladium fell 1.4 percent to $247 an ounce.

To contact the reporters on this story: Jae Hur in Singapore at jhur1@bloomberg.net; Jason Scott in Perth at Jscott14@bloomberg.net

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Asian Stocks Fall on Valuation Concern; BHP, Hutchison Decline

By Masaki Kondo and Patrick Rial

June 9 (Bloomberg) -- Asian stocks fell for a second day as Fitch Ratings forecast a deeper recession for Hong Kong, fueling concerns a three-month equity-market rally had overvalued earnings prospects.

BHP Billiton Ltd., the world’s largest mining company, declined 4.4 percent from a more than eight-month high in Sydney. Cnooc Ltd. lost 3.5 percent in Hong Kong, pacing declines by energy companies, Asia’s best performers in the past month. Billionaire Li Ka-shing’s Hutchison Whampoa Ltd., which operates ports, telecommunications and property businesses in Hong Kong, retreated 2.9 percent.

“It’s no surprise to see people cash out to some degree after the huge run we’ve had in the last couple of weeks,” said Michiya Tomita, who helps manage $51 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong.

The MSCI Asia Pacific Index dropped 0.9 percent to 101.44 as of 3:19 p.m. in Tokyo, with about three stocks declining for each one that advanced. The gauge has risen 44 percent from a five-year low on March 9 on optimism government stimulus measures worldwide are succeeding in reviving growth.

Hong Kong’s Hang Seng Index sank 1.3 percent, while Australia’s S&P/ASX 200 Index, which resumed trading today after a one-day holiday, fell 0.9 percent. Japan’s Nikkei 225 Stock Average declined 0.8 percent as Nipponkoa Insurance Co. slumped 4.6 percent on a newspaper report that former executives opposed a merger with a rival.

Limiting declines in Tokyo, Softbank Corp. jumped 2.2 percent after saying it will sell Apple Inc.’s new iPhone. CSL Ltd., a maker of blood plasma products, climbed 5.2 percent in Sydney on a plan to buy back shares after dropping a $3.1 billion acquisition.

Summer Recovery?

Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge dipped 0.1 percent yesterday as a drop in commodities shares countered gains among financial companies. Paul Krugman, a Princeton University economist, said he wouldn’t be surprised “if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer.”

BHP lost 4.4 percent to A$36.50, following an 8.7 percent surge on June 5 that took the stock to its highest close since Sept. 22. Those gains came after the company said it will pay Rio Tinto Group $5.8 billion to create an iron-ore venture.

Materials producers and energy stocks are the best performing of the MSCI Asia Pacific Index’s 10 industry groups in the past month on speculation a pick-up in global growth will boost demand for oil and metals. The rally has taken the average valuation of companies in the materials sub-index to 23 times reported profit, the highest since March 2004.

Cashing Out

Cnooc, China’s largest offshore oil producer, slumped 3.5 percent to HK$10.44. Sumitomo Metal Mining Co., Japan’s biggest copper smelter, lost 3.2 percent to 1,431 yen, its third day of declines since closing at an 11-month high. China Steel Corp. sank 4.2 percent to NT$27.10 in Taipei, paring its advance in the past three months to 29 percent.

“There are concerns the market has risen too fast and will have a big drop, so investors don’t want to hold any stocks for a long time,” said Naoki Fujiwara, who oversees about $6.1 billion at Shinkin Asset Management Co. in Tokyo.

Signs of a global recovery have increased in recent weeks, fueling the stock rally since March. Australia unexpectedly reported growth in its economy last week, while economists had forecast a contraction. Japan’s government two weeks ago raised its assessment of the economy for the first time in three years.

Japanese Insurers

Those signals point to a slower pace of decline rather than recovery, Andrew Balls, a managing director for Pacific Investment Management Co., which runs the world’s biggest bond fund, wrote in a report. The outlook over the next three to five years is for “weaker global growth and especially weaker growth in the developed countries,” he wrote.

Hong Kong’s economy will probably shrink 9.1 percent in 2009, Fitch Ratings said, wider than the 6.4 percent contraction the ratings agency previously estimated. Hutchison lost 2.9 percent to HK$56.30. Sun Hung Kai Properties Ltd., Hong Kong’s largest developer by market value, sank 2.4 percent to HK$93.15.

Nipponkoa lost 4.6 percent to 561 yen, leading Japanese insurers to the biggest slump among the Topix’s 33 industry groups. Former executives wrote in a letter to the company that a planned merger would benefit Sompo Japan Insurance Co. at the expense of Nipponkoa, the Asahi newspaper reported today.

The insurers said in March they planned to merge next year. Sompo slipped 3.1 percent to 699 yen.

Softbank, Japan’s No. 3 mobile-phone carrier, rose 2.2 percent to 1,838 yen. The company said today it will start offering the new model of the iPhone on June 26, which Apple said can run applications twice as fast as the current version.

Melbourne-based CSL climbed 5.5 percent to A$30.58 after saying it will repurchase up to 9 percent of its shares, costing about A$1.59 billion ($1.3 billion). The company dropped its proposed acquisition of Talecris Biotherapeutics Holdings Corp. after the plan was blocked by the U.S. Federal Trade Commission.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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U.K. Stocks Advance, Led by Energy Producers; Barclays Climbs

By Adam Haigh

June 9 (Bloomberg) -- U.K. stocks advanced as a rise in crude oil boosted energy producers and higher metals prices pushed mining shares higher.

BP Plc, Europe’s second-largest oil producer, added 1.3 percent after Nobel Prize-winning economist Paul Krugman said the U.S. recession may end later this year, pushing crude higher. Anglo American Plc gained 1.5 percent as copper climbed. Barclays Plc increased 1.5 percent after a person with knowledge of the negotiations said BlackRock Inc. may buy the bank’s fund business for as much as $13 billion in cash and stock.

The benchmark FTSE 100 Index increased 36.03, or 0.8 percent, to 4,441.25 at 8:29 a.m. in London. The gauge has rallied 26 percent from this year’s low on March 3 amid optimism that government action will help end the first global recession since World War II. The FTSE All-Share Index advanced 0.8 percent today and Ireland’s ISEQ Index rose 0.2 percent.

BP added 1.3 percent to 532 pence. Crude oil for July delivery gained as much as 1.9 percent to $69.37 on the New York Mercantile Exchange.

Anglo American climbed 1.5 percent to 1,797 pence as copper increased 1.5 percent on the London Metals Exchange.

Barclays added 1.5 percent to 288 pence. BlackRock would pay half the purchase price in cash and the rest in stock, leaving London-based Barclays with a 20 percent stake in the combined company, said the person, who asked not to be identified because the information is private.

Alistair Smith, a spokesman for Barclays in London, didn’t immediately return a phone call to his office yesterday after business hours. Bobbie Collins, a spokeswoman for BlackRock, declined to comment.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.

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European Stocks Rise; Nokia Gains on Texas Instruments Forecast

By Sarah Jones

June 9 (Bloomberg) -- European stocks advanced after Texas Instruments Inc. increased its second-quarter forecasts and Nobel Prize-winning economist Paul Krugman predicted the U.S. recession will end by September.

ARM Holdings Plc and Nokia Oyj rose more than 3 percent as Texas Instruments, whose earnings are a barometer of demand for a wide variety of electronics, projected revenue and profit that beat analysts’ estimates. Texas Instruments increased 4.3 percent in Germany. Barclays Plc added 1.4 percent after a person with knowledge of the negotiations said BlackRock Inc. may buy the bank’s fund business for as much as $13 billion. Porsche SE climbed 2 percent as the carmaker confirmed it’s in talks with Qatar on an investment.

Europe’s Dow Jones Stoxx 600 Index added 1.1 percent at 8:12 a.m. in London. The gauge has rebounded 34 percent since March 9 on speculation that the worst of the first global recession since World War II is over. The measure is valued at 24.9 times the earnings of its companies, the most expensive level since 2004, weekly data compiled by Bloomberg show.

“Though it was widely expected that Texas Instruments will raise its guidance, we are positively surprised by new guidance” for the second quarter of 2009, London-based Credit Suisse analyst Adrien Bommelaer wrote in a note. “Therefore, we expect other companies to also beat their initial guidance when they report.”

‘We’re Stabilizing’

U.S. stocks staged a late day rally to end little changed yesterday after Krugman said in a speech to the London School of Economics that “there’s some reason to think that we’re stabilizing.”

“I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer,” he said in the lecture. “Things seem to be getting worse more slowly.”

Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The U.S. Treasury is preparing to announce it will let 10 banks including JPMorgan Chase & Co. buy back government shares, according to people familiar with the matter.

In Asia, the MSCI Asia Pacific Index fell 0.6 percent on concern share prices have outstripped the prospects for corporate earnings after a three-month rally.

Texas Instruments

ARM Holdings, the U.K. chip designer whose products are used in video-game consoles, cameras, home appliances and Apple Inc.’s iPhones, added 3 percent to 111 pence. Nokia, the world’s biggest maker of mobile phones, gained 3.7 percent to 11.28 euros. Texas Instruments climbed 4.3 percent to $20.62.

Texas Instruments’ profit will be 14 cents to 22 cents a share on sales of $2.3 billion to $2.5 billion. Analysts projected profit of 10 cents a share on sales of $2.21 billion, according to a Bloomberg survey.

Barclays added 1.4 percent to 287.75 pence after a person with knowledge of the negotiations said BlackRock may buy the Barclays Global Investors unit for $12 billion to $13 billion in cash and stock.

BlackRock, which may announce the deal as soon as tomorrow, would pay half the purchase price in cash and the rest in stock leaving the London-based lender with a 20 percent stake in the combined company.

Porsche gained 2 percent to 47.95 euros. The company is in negotiations with Qatar about a potential investment in the sports-car maker, Porsche spokesman Albrecht Bamler said in a telephone interview. Bamler declined to say when a deal might be reached. He said the atmosphere of the talks is “good.”

Heidelberger Druckmaschinen AG retreated 1.8 percent to 4.98 euros as the world’s largest maker of printing presses said it expects a drop in sales and earnings for the first quarter of 2010. The company also said it expects to get state aid to help survive a slump in equipment orders and losses this year.

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

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Petrobras, Vale, Banco de Chile, Banorte: Latin Equity Preview

By Hugh Collins

June 9 (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 0.7 percent to 3,048.34. In Brazil, preferred shares usually are the most-traded class of stock.

Brazil

Petroleo Brasileiro SA (PETR4 BS): Brazil’s state- controlled oil company said it will cut diesel prices by 15 percent starting today, according to an e-mailed release sent to Brazil’s securities regulator. Petrobras fell 0.3 percent to 33.88 reais.

Gerdau SA (GGBR4 BS): Latin America’s largest steelmaker said it will suspend production of steel at its Sayreville, New Jersey plant and close its Perth Amboy facility in the state because of lower demand. Gerdau fell 1.6 percent to 22.04 pesos.

Vale SA (VALE5 BS): The world’s largest iron ore producer will benefit from China’s desire to have the Brazilian iron ore miner serve as an alternative supplier to the joint venture between BHP Billiton and Rio Tinto Plc, Citigroup Inc. analysts said. “Vale is the only viable high-volume alternative for now, which may provide leverage and assurances on new project volumes,” analyst Alexander Hacking wrote in a note to clients.

Chile

Lan Airlines SA (LAN CC): Chile’s biggest air carrier said passenger traffic increased 11 percent last month, according to preliminary data released by the airline. Lan’s cargo traffic declined 17 percent in May, it wrote yesterday in an e-mailed statement. Lan slid 1.2 percent to 6,595 pesos.

Banco de Chile (CHILE CC): The country’s second largest lender had a planned issue of inflation-adjusted and peso- denominated bonds rated AAA at Fitch Ratings. The issue, in the process of being registered, is for as much as 8 million UF, Chile’s inflation-adjusted accounting unit, or $299 million, and 84 billion pesos ($150 million), Fitch wrote. Banco de Chile slid 0.1 percent to 38.09 pesos.

Mexico

Banco Compartamos SA (COMPARTO MM): The bank, Mexico’s second-best performing stock in the past six months, expects past-due loans to rise to the highest in its 19-year history as the recession sparks layoffs and curbs migrant-worker remittances, Chief Executive Officer Carlos Labarthe said. Non-performing loans at the Mexico City-based bank, which targets the nation’s poorest borrowers, will climb to about 2.5 percent of its portfolio by year-end from 1.9 percent in March, he said. The stock rose 8.8 percent to 40.77 pesos.

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

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