Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Jul 24 09 02:56 GMT |

EURUSD Outlook The broadening formation I showed you in the last 2 days give us a good suggestion of a volatile market where price make new highs and new lows without a clear direction and keep me stay away from the market, which proved to be the best thing to do now. Some guys asked me about my CCI set up. They thought that my CCI set up is good and try to find some 'secret' in it. Of course, CCI is a great indicator, simple but powerful. However, it's not my 'secret' or a 'holy grail'. I don't use CCI to determine the trend, because I believe that is not the function of the CCI (or any indicators). I use it to find potential momentum, breakout/breakdown, rebounds etc. I depend on chart patterns to determine the trend, bullish, bearish or trendless. So I only trust my CCI when it support or confirm my chart patterns. If not, I don't trust it. The current situation is one good example when I don't trust my CCI. On daily chart below we can see that CCI is just crossed the 100 line down. The interpretation is that the pair has a big probability to make a bearish momentum to the downside. But, the broadening formation suggests that we have no clear direction yet and the facts in the last 7 weeks support that conclusion. So, right now I don't trust my CCI. Of course, I am not saying that the pair won't go south, but when my indicator conflicting with my chart patterns, I prefer to do nothing. Keep stay out from the market and good luck. GBPUSD Outlook Similar to EURUSD, the GBPUSD had volatile market without a clear direction. The pair attempted to push higher, topped at 1.6584 but further upside pressure was rejected as the pair closed lower at 1.6485. I don't know how long you guys can stay with no trade condition, but I will keep stay out from the market as long as it shows no clear direction and still trapped in 1.6660 - 1.6000 area. I don't care if it takes weeks or even months. This is not about predicting the direction, but the mindset of how I stay discipline with my system and protect my capital, which much more important than any 'prediction'. Remember, market will always reward patient traders. Good luck . USDJPY Outlook The USDJPY had a significant bullish momentum yesterday, topped at 95.28 and closed at 95.01. For me, this fact is a violation of my bearish medium term. The bias is bullish in nearest term. However we seem to have good resistance around 95.30 area. In my opinion, only a clear break above that area should trigger further bullish momentum and give us a buy signal targeting 96.05. CCI in overbought area and heading down so watch out for a potential downside rebound testing 94.60. Break below that area should lead us into no trading zone. USDCHF Outlook The USDCHF had a bullish momentum yesterday, topped at 1.0771 but closed below 1.0750. On daily chart below we can see that it seems like the trendline support is doing a good job preventing further bearish attack. The bias is bullish in nearest term but we need a consistent move above 1.0750 - 1.0800 area to have potential further upside momentum testing 1.0950. Failure to do so might lead us back towards 1.0620 area. EURJPY Outlook The EURJPY had a moderate bullish momentum yesterday. The pair topped at 135.60 but closed lower at 134.46. On h4 chart below we can see that this was a case of a false breakout from trendline resistance. I think we are still in no trading zone and do not rush jump into the market since we have no confirmation on bullish scenario yet. Immediate support at 134.20 - 133.80 area. Break below that area should trigger further bearish momentum. Initial resistance at 135.60 (yesterday's high). Consistent movement above that area should be seen as bullish confirmation at least towards 136.70 area. CCI about to cross the 100 line down on h4 chart suggesting potential downside rebound. GBPJPY Outlook The GBPJPY had a significant bullish momentum yesterday. On daily chart below we can see that we have a breakout on trendline resistance suggesting potential bullish outlook. The bias is bullish in nearest term targeting 158.50. However CCI in overbought area and heading down on h4 chart so watch out for potential downside correction testing 155.20 support area. Break below that area should cancel the bullish scenario. The market has been very tricky lately so use only tight money management at this phase. AUSUSD Outlook The broadening formation I showed you yesterday gave us a good signal to stay out of of the market. We had a volatile market without clear direction where price whipsawed to the downside, hit the bottom (0.8105) after hit the top (0.8221). Until we have more significant movement, let this formation be our guide for now to keep out of the market. Good luck FX Instructor LLC www.fxinstructor.com The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

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DPJ Labor Policies May Send Japan Jobs Overseas, Analysts Say

By Jason Clenfield and Toru Fujioka

July 24 (Bloomberg) -- The Democratic Party of Japan, which is leading in polls for next month’s general election, has plans to help workers that may unintentionally send jobs overseas, economists said.

The DPJ’s policy platform released yesterday includes pledges to raise Japan’s minimum wage and ensure equal compensation for temporary workers, a growing group of employees who are paid about 40 percent less than full-timers. So-called non-regular employees make up more than a third of the workforce and were the first to be fired during the current recession.

Japanese companies have hired more temporary workers to cut costs and stay competitive. Even with those cost savings, the nation’s deepest postwar slump is driving more manufacturing offshore. Hoya Corp. last month closed its last domestic digital camera factory and cut 400 jobs. The company now makes all its Pentax cameras in the Philippines and Vietnam.

“Cost and flexibility are the main issues,” said Kiichi Murashima, chief economist at Nikko Citigroup in Tokyo, said in an interview. “The recession has companies thinking about where they should base their operations in the future. Tightening the rules could push them to make the final decision to move on to foreign countries.”

Opinion surveys show the DPJ, which has made protecting consumers a campaign issue, leading the ruling Liberal Democratic Party ahead of the Aug. 30 lower house election. The opposition has an approval rating of 40 percent compared with 30 percent for the LDP, according to a Nikkei newspaper survey published yesterday.

The DPJ wants to discourage hiring through agencies or employment contracts that stipulate time limits, according to yesterday’s release. Temporary and full-time workers should get equal pay and access to training, the document says.

‘Expensive, Regular Workers’

“Why do companies want to hire non-regular workers? One of the reasons is cost,” Randall Jones, head of the Japan desk at the Organization for Economic Cooperation and Development in Paris said yesterday. “Companies have to be competitive with China and Korea and other countries. So they’re not going take on more expensive regular workers that are going to be there for the next 30 years.”

The government should reduce safeguards for regular workers as well as bolster social insurance for temps and part-timers, the Paris-based OECD said in a report last year.

Japanese companies have replaced retirees with temporary workers as they break away from the nation’s tradition of lifetime employment. The LDP made it easier to hire flexible labor with deregulation in 2004 that allowed firms to use dispatched workers in factories.

The move created a two-tiered labor market, with non- regular, mostly younger workers enjoying less job security and fewer benefits.

‘Get Trapped’

“It’s a social issue,” said Tetsuji Nakamura, the 38 year-old legislator who is the opposition’s deputy labor spokesman. “A lot of people who get trapped in these non- regular jobs lose the will to live and achieve. It’s the biggest problem facing our young people.”

Nakamura, an upper house lawmaker representing Nara, a rural prefecture bordering Osaka, said the DPJ wants to stop companies from hiring temporary workers at factories, undoing regulation put in place by former Prime Minister Junichiro Koizumi.

“Lifetime employment should be the basic model,” Nakamura said, adding that difficulty finding work after college in the early 1990s helped him to understand what Japan’s young people are going through. “We have to build a system in which people can count on stable income.”

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toru Fujioka in Tokyo at Tfujioka1@bloomberg.net

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Singapore’s Production Falls as Electronics, Chemicals Slide

By Shamim Adam

July 24 (Bloomberg) -- Singapore’s industrial production fell for the first time in three months in June as electronics and chemicals output dropped and a surge in pharmaceuticals manufacturing eased.

Manufacturing, which accounts for about a quarter of Singapore’s economy, declined 9.3 percent from a year earlier following a revised 2.1 percent gain in May, the Economic Development Board said today. The median forecast in a Bloomberg survey of nine economists was for a 6.4 percent drop.

The government said this week the recent improvement in drugs and electronics output may falter, preventing a quick recovery from the country’s deepest recession since independence 44 years ago. Singapore raised its 2009 economic forecast July 14, after the manufacturing industry posted its best performance in five quarters in the three months to June.

“The decline in June manufacturing activity reflects the lingering concern of sustainable recovery of demand for the overall manufacturing sector,” said Alvin Liew, an economist at Standard Chartered Bank in Singapore. “Pharmaceuticals output is still a key support for manufacturing as electronics remain weak.”

Singapore’s manufacturing slid 2.4 percent in the second quarter, more than the 1.5 percent decline estimated by the government last week, today’s report showed.

Industrial production fell a seasonally adjusted 9.2 percent in June from the previous month, when it slid a revised 1.8 percent.

Gradual Recovery

Demand for goods from the world’s biggest economies in the U.S., Europe and Japan is still weak, and any pick-up in trade will be “bumpy,” Trade Minister Lim Hng Kiang said this week.

“We have to wait for a more general demand recovery, especially in the developed countries, for Singapore’s economy to be on a sustained growth path,” Lim said. “We should not expect a V-shaped sharp recovery. We’re looking at a more gradual recovery.”

Electronics production plunged 20.4 percent from a year earlier last month, following a revised 22.9 percent decline in May. Electronics make up about 26 percent of total manufacturing output, and shipments of such products have dropped every month for more than two years.

Pharmaceutical production, which accounts for about 20 percent of manufacturing, climbed 14 percent after surging a revised 139 percent in the previous month. Excluding biomedical manufacturing, production contracted 14.6 percent in June, after shrinking a revised 17.6 percent in May.

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

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South Korean Economy Grows Most in Almost Six Years

By Seyoon Kim

July 24 (Bloomberg) -- South Korea’s economy expanded at the fastest pace in almost six years last quarter as exports and household spending jumped.

Gross domestic product rose 2.3 percent from the first quarter, when the nation skirted a recession by growing 0.1 percent, the Bank of Korea said today in Seoul. That was better than the 2.2 percent growth estimated by economists.

Samsung Electronics Co. today joined exporters Hyundai Motor Co. and LG Electronics Inc. in reporting profit surged last quarter, helped by a weaker currency and demand fed by $2.2 trillion in stimulus worldwide. Consumer spending climbed 3.3 percent from the first quarter, the most in seven years, fueled by interest rates at a record-low 2 percent.

“Exports have improved more than expected while domestic demand got a big boost from the fiscal and monetary policy steps,” said Lee Sang Jae, economist at Hyundai Securities Co. in Seoul. “I expect Korea to remain on a recovery path” even after the boost from the stimulus measures wanes, he said.

The Kospi stock index rose 0.5 percent at 12:20 p.m. in Seoul, taking the year’s gains to 34 percent after a 41 percent drop in 2008. The won rose 0.2 percent to 1,246.45 per dollar.

Last quarter’s expansion was the fastest since the economy grew 2.6 percent in the last three months of 2003. Exports gained 14.7 percent, also the biggest advance in almost six years. From a year earlier, GDP shrank 2.5 percent.

China, Singapore

South Korea joins China and Singapore in leading a regional rebound, marking a turnaround for an economy whose currency tumbled 26 percent last year on concern companies would be unable to repay foreign debt.

President Lee Myung Bak’s approval rating plunged by more than half in the wake of the financial turmoil. To counter the crisis, in January he sacked his finance minister and created an economic war room in an underground bunker.

He also pumped money into the banking system, boosted fiscal spending by 67 trillion won ($54 billion) and set up funds to replenish banks’ capital. The central bank formed a dollar-swap agreement with the U.S. and cut interest rates.

“The economy got help from various stimulus measures and the second-quarter numbers show the steps worked,” said Kim Seung Hyun, head of research at Taurus Investment Securities Co. in Seoul. “A weaker currency helped the nation’s exporters gain competitiveness.”

Samsung’s Profit

Samsung Electronics, which alone accounts for 15 percent of the country’s exports, today reported net income rose 5.2 percent to 2.25 trillion won in the three months ended June, the biggest quarterly profit in more than two years.

Hyundai Motor, South Korea’s largest automaker, yesterday said net income climbed to an unprecedented 811.9 billion won. LG, the world’s third-largest maker of liquid-crystal-display televisions, also reported record quarterly profit this week.

The revival of demand is prompting companies to spend more. Corporate investment in factories and equipment climbed 8.4 percent, today’s report showed. Government spending gained 1 percent and construction investment advanced 0.4 percent.

The central bank pared the benchmark interest rate by 3.25 percentage points between October and February, the most aggressive easing in a decade.

The rate reductions helped to fuel a real-estate boom that Bank of Korea Governor Lee Seong Tae said this month he’s monitoring. The government will act to quell property-market speculation within “two to three weeks,” Land Minister Chung Jong Hwan said on July 22.

Ailing Job Market

“Growth in the second quarter was helped much by policy measures” including a sales-tax cut on auto purchases, Kim Myung Kee, director general of the central bank’s statistics department, told reporters in Seoul. “Domestic demand probably won’t be able to rise as fast as the second quarter in coming months unless the job market improves quickly.”

Not all indicators point to a solid recovery. The jobless rate rose to an eight-year high of 4 percent in June, and the impetus from the government’s stimulus will eventually fade.

“Second-quarter growth got a temporary boost from stimulus measures, but it’s hard to say whether that will continue to push growth,” said Chun Chong Woo, an economist at Samsung Securities Co. in Seoul. “The key to sustained economic growth in the second half will be whether consumers and companies increase spending.”

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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Euro, Yen Bolstered by Emerging Nation Currency Sales, BBH Says

By Patricia Lui

July 24 (Bloomberg) -- Central banks of emerging nations are boosting demand for U.S. Treasuries, the euro and the yen as they sell their own currencies to stem appreciation, according to Brown Brothers Harriman & Co.

Some $341 billion was added in the past four months to the foreign reserves of Brazil, Russia, India and China, the so- called BRIC nations, along with South Korea, Taiwan and Singapore, as central banks intervened in their currency markets to protect exporters, Brown Brothers said in a note today. The purchases increased demand for U.S. debt and currencies including the euro, sterling and yen benefited from attempts to diversify away from dollar assets, according to the report.

“Emerging market policy makers do not want a stronger currency at this stage of their business cycles”, wrote Win Thin, a currency strategist at Brown Brothers in New York. “We fully expect currency intervention to surge this month.”

Twenty-four of the 26 emerging currencies tracked by Bloomberg gained this week on investors’ increased appetite for risk as improved corporate earnings added to signs that the worst of global recession has passed.

Eight of Asia’s 10 most-active currencies outside of Japan strengthened against the dollar in the past four months, led by a 15 percent surge for Indonesia’s rupiah and an 11 percent advance for Korea’s won.

China, which has the world’s largest currency reserves, added $186 billion this year to take its holdings to $2.1 trillion. Korea’s reserves climbed $31 billion this year to $232 billion as of June 30. India’s reserves swelled $7 billion to $253 billion as of July 10.

Where the Dollars Went

“What happened to all those accumulated dollars?” Thin wrote. “For one thing, they went into U.S. Treasuries. Emerging central banks are one part of the answer to who’s going to buy increased U.S. Treasuries issuance.”

Foreign holdings of U.S. Treasuries jumped $216 billion to $3.3 trillion in the first five months of the year, according to data from the U.S. government. China’s holdings climbed $74 billion during that period.

All 10 major world currencies gained against the dollar in the past three months, according to data compiled by Bloomberg. The euro climbed 7 percent, the sterling strengthened 13 percent and the yen rose 2 percent.

“Diversification of incoming reserves is probably near the top of the concerns for these emerging market reserve managers who are left sitting on a pile of dollars that it wants to move into euros, sterling and yen,” Thin wrote. “This helps explain constant market chatter of emerging market central banks on the bid in the euro in the last several months.”

The euro traded at $1.4163 against the dollar as of 12:26 p.m. in Singapore. The currency has gained 9.2 percent in the past six months.

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

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Sentance Says BOE Staff See ‘Small’ Drop in Second-Quarter GDP

By Jennifer Ryan, Svenja O’Donnell and Elliott Gotkine

July 24 (Bloomberg) -- Bank of England policy maker Andrew Sentance said the bank’s economists anticipate data today to show a “small” drop in U.K. second-quarter gross domestic product as the recession nears its end.

The contraction will be “much less than we saw in the first quarter” and will precede “evidence of positive growth in the second half of the year,” Sentance said in an interview yesterday in London.

GDP figures due at 9:30 a.m. in London will probably show a 0.3 percent decline from the first three months of 2009, the least in a year, the median forecast of 32 economists in a Bloomberg News survey shows. Former policy maker David Blanchflower told Bloomberg Television the drop may be as big as 0.4 percent and may be revised to show a bigger contraction.

Signs that the slump is easing have prompted economists at Barclays Capital and Credit Suisse AG to predict the bank will pause its 125 billion-pound ($206 billion) asset-purchase program. Bank of England Deputy Governor Charles Bean said this week that the economy, which contracted 2.4 percent in the first quarter, may now have stopped shrinking.

Sentance said yesterday that policy makers may shift the bond-buying plan to a “watching” stance if new quarterly growth and inflation forecasts published next month show a recovery may be in train.

“Even if we decided not to do any more in August, there’s still the option of returning to this policy instrument in the future,” Sentance said in an interview. The question at the Aug. 6 meeting will be “whether we’re now going to move into a phase where we’re watching and observing what happens in the economy.”

Recovery Evidence

Evidence is mounting that the global economy is recovering from recession. Canada’s central bank said yesterday that the nation’s slump is ending this quarter, while Federal Reserve Chairman Ben S. Bernanke said this week that the worst housing slump eight decades appears to be moderating.

Sentance said it is difficult to predict exactly when the economy will start growing again.

“There are negative drags, in particular problems in the banking sector,” he said.

Blanchflower, in an interview recorded yesterday, said any economic recovery will be “pretty anemic, pretty slow for a year or two.” He said the bank must keep expanding its asset- purchase program, and should consider spending as much as 300 billion pounds in newly printed money. That’s twice as much as the current total authorized by the government.

‘Early Days’

“It’s very early days to say that you know the endgame is even in sight,” Blanchflower said, speaking from Dartmouth College in Hanover, New Hampshire, where he is professor of economics. “My worry is that the tightening comes too soon and people kill off any recovery that’s coming.”

Withdrawing stimulus prematurely, either by unwinding the bond-purchase program or by raising the key interest rate from the current record low of 0.5 percent, risks pushing unemployment higher, Blanchflower said. The International Labour Organization measure of joblessness may rise by a further 1 million people to reach 3.4 million, he said.

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Svenja O’Donnell in London at sodonnell@bloomberg.net; Elliott Gotkine in London at egotkine@bloomberg.net.

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Swiss Franc Trades Little Changed Against U.S. Dollar, Euro

By Justin Carrigan

July 24 (Bloomberg) -- The Swiss franc was little changed, trading at 1.074 per dollar and 1.521 per euro as of 7:23 a.m. in Zurich.

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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Gold May Climb as Dollar Weakness Spurs Demand, Survey Shows

By Nicholas Larkin

July 24 (Bloomberg) -- Gold may advance as investors seek an alternative to a weakening dollar, a survey showed.

Fourteen of 24 traders, investors and analysts surveyed by Bloomberg News, or 58 percent, said bullion would rise next week. Six forecast lower prices and four were neutral. Gold futures for delivery in August were up 2 percent this week, to $956.50 an ounce, by noon yesterday in New York.

The U.S. Dollar Index, a six-currency gauge of the greenback’s value, touched a seven-week low on July 22 and is down 1.8 percent this month. Gold, which tends to rise when the dollar weakens, climbed to the highest in almost six weeks yesterday and has added 3 percent this month.

“The U.S. dollar is under pressure and gold seems to be tightly correlated to the U.S. dollar weakness,” MKS Finance SA Senior Vice President Frederic Panizzutti wrote in an e-mail. “We don’t see any substantial buying interest, but rather currency-related buying.”

The weekly gold survey has forecast prices accurately in 157 of 271 weeks, or 58 percent of the time.

This week’s survey results: Bullish: 14 Bearish: 6 Neutral: 4

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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Hang Seng Tops 20,000 for First Time Since Lehman’s Collapse

By Hanny Wan and Darren Boey

July 24 (Bloomberg) -- Hong Kong’s benchmark Hang Seng Index climbed above 20,000 today for the first time since the collapse of Lehman Brothers Holdings Inc., as a rebound in property prices helped push the index up 75 percent since March.

Developers such as Sun Hung Kai Properties Ltd., the world’s largest by market value, helped spur the advance. Aluminum Corp. of China Ltd. and Bank of China Ltd. climbed as China became the first of the major economies to recover from the global recession. Citic Pacific Ltd. surged after the biggest currency derivative losses by any Chinese company prompted a government bailout.

For Lehman, “people have pretty much put it behind” them, said Tat Auyeung, a fund manager at Apex Capital Management in Hong Kong, which oversees more than $400 million. “If we start seeing earnings upgrades, that will push the market even higher. That’s fundamentally the most important driver.”

Rallying stocks in Hong Kong reflect speculation global efforts to repair credit markets and revive economic growth will boost profits. The Hang Seng slumped 64 percent from its October 2007 record to its low this year in March. It fell as much as 43 percent following Lehman’s failure on Sept. 15. China’s pledge to spend 4 trillion yuan ($586 billion) to spur growth helped drive the advance.

Hong Kong has allocated HK$87.6 billion ($11.3 billion), or about 5.2 percent of gross domestic product, to stimulus and relief spending since 2008. The city, battling its worst recession in a decade, probably returned to growth in the second quarter of this year as the declines in exports moderated, Financial Secretary John Tsang said on July 6.

Rising Valuations

The rally drove the average valuation of companies in the Hang Seng to 17.5 times estimated earnings as of yesterday, up from 10.6 at the beginning of this year. The gauge’s 14-day relative strength index, which measures how rapidly prices have risen or fallen in that period, closed at 68.5 yesterday, just below the 70 threshold some traders use as a signal to sell.

“This is a liquidity driven market,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. “If liquidity continues to stay at this level, it still has a chance to go even higher. But still we may see some profit taking after 20,000. The market may want a breather.”

After breaking through the 20,000 level, the Hang Seng Index then fell as much as 0.5 percent. It traded 0.3 percent higher at 19,844.06 as of 10:56 a.m. local time.

Best Performers

Sino Land Co. and New World Development Co. are the Hang Seng Index’s best performers in the rally since March through yesterday, as confidence in the city’s real-estate industry returned. Sino Land, controlled by the family of billionaire Ng Teng Fong, surged 164 percent in that time. Billionaire Cheng Yu-tung’s New World soared 162 percent.

The value of residential units sold in June increased 26 percent from the previous month to the highest value in a year, figures from the Land Registry show.

Citic Pacific gained 161 percent in the March rally through yesterday for the Hang Seng’s third-biggest advance. The stock fell to a record low on Oct. 27 as bets on the Australian dollar incurred about $2 billion of losses, forcing former Chairman Larry Yung to seek a bailout from parent Citic Group, controlled by China’s cabinet.

Citic Pacific shares are up 420 percent from its low as the bailout, the resignation of Yung and former Managing Director Henry Fan resigned in April, and a review of the company’s assets by new Chairman Chang Zhenming lured investors back.

“Some investors have been chasing the laggards this year,” said Steven Leung, Hong Kong-based director of institutional sales at UOB-Kay Hian Ltd. “Sentiment remains strong at this level.”

Chinese Growth

China-related companies have increased on optimism growth in the country’s economy, the world’s third largest, will boost company earnings. The Hang Seng China Enterprises Index, which tracks the so called H shares of 43 mainland companies, has jumped 80 percent from its low this year on March 2.

The Chinese economy grew 7.9 percent in the second quarter from a year earlier after expanding at the slowest pace in almost a decade in the previous three months, the statistics bureau said July 16.

“At the beginning of the year, no one believed that China could deliver 8 percent GDP,” said Apex’s Auyeung. “Now that’s what we see. Next year it’s going to be even stronger.”

Chalco, as Aluminum Corp., is known, climbed 121 percent since the market’s March trough. Bank of China, which reported better-than-expected first-quarter profit on April 28, climbed 75 percent.

The Hong Kong stock market may get a boost after the city’s banks yesterday agreed with monetary authorities to buy back notes linked to the failed Lehman Brothers Holdings Inc. The repurchase of the notes “should remove a major overhang” for lenders, JPMorgan Chase & Co. analysts wrote in a July 23 note.

“In the long term, say six to nine months, given all the liquidity, earnings, and GDP, the underlying factors should continue to push the market higher,” Apex Capital’s Auyeung said.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net.

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Euro Gains on Speculation Contraction in Manufacturing Slowed

By Yasuhiko Seki

July 24 (Bloomberg) -- The euro rose for the first time in four days against the dollar on speculation a European report today will show the contraction in the region’s manufacturing and services slowed.

The euro climbed to $1.4176 as of 6:44 a.m. in London from $1.4143 yesterday in New York. The 16-nation currency traded at 134.43 yen from 134.30 yen. The yen was at 94.80 versus the dollar from 94.92.

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

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Euro Gains on Speculation Contraction in Manufacturing Slowed

By Yasuhiko Seki

July 24 (Bloomberg) -- The euro rose for the first time in four days against the dollar on speculation a European report today will show the contraction in the region’s manufacturing and services slowed.

The euro climbed to $1.4176 as of 6:44 a.m. in London from $1.4143 yesterday in New York. The 16-nation currency traded at 134.43 yen from 134.30 yen. The yen was at 94.80 versus the dollar from 94.92.

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

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Rubber Reaches 8-Month High on Supply Reduction, Demand Outlook

By Aya Takada

July 24 (Bloomberg) -- Rubber climbed to an eight-month high as producers reduce supply and positive economic data fueled speculation demand for raw materials will rise.

Futures in Tokyo advanced as much as 2.8 percent and are headed for the third weekly gain. Indonesia, the world’s second- biggest rubber producer, cut its output target for this year to 2.2 million metric tons from 2.5 million. Asian stocks rose for a ninth day as sales of existing U.S. homes climbed and South Korea’s economy grew at the fastest pace in almost six years.

“Futures drew support from supply restrictions by rubber producers and an optimistic mood in the financial markets,” Hisaaki Tasaka, an analyst at Tokyo-based commodity broker ACE Koeki Co., said today in a telephone interview.

Natural rubber for December, the most-active contract, gained as much as 4.9 yen to 180.1 yen a kilogram ($1,901 a ton) on the Tokyo Commodity Exchange at 12:32 p.m. local time, the highest since Nov. 12.

Indonesia reduced its output target as low prices discouraged farmers from tapping, Asril SutanAmir, the newly appointed chairman of the Indonesian Rubber Association, said yesterday in Bali. “Besides that, we also see that demand is still low,” he said.

Indonesia’s rubber production in the first half of this year “was slightly below one million tons,” said Amir, elected chairman for a three-year term at a meeting yesterday.

Price Gains

The most-active rubber contract has gained 32 percent this year, after plunging 56 percent in 2008 as the global recession curbed demand, prompting producers to reduce shipments.

Thailand, Indonesia and Malaysia will cut shipments by as much as 48,000 tons a month in the second half, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said on July 15. The trio reduced exports by 540,000 tons in the first five months of the year, more than the 414,000 ton reduction planned for the first half, he said.

Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, added 0.9 percent to 17,660 yuan ($2,585) a ton at 11:30 a.m. local break.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

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Asian Stocks Rise on South Korean Growth, Brokerage Upgrades

By Shani Raja and Jonathan Burgos

July 24 (Bloomberg) -- Asian stocks rose for a ninth day, giving the MSCI Asia Pacific Index its longest winning streak since 2004, as South Korea’s economic growth accelerated and brokerages upgraded Panasonic Corp. and Quanta Computer Inc.

Murchison Metals Ltd. surged 19 percent after saying Chinese groups were interested in helping develop an iron-ore project. Panasonic, the world’s largest manufacturer of plasma televisions, climbed 6.2 percent in Tokyo. Notebook computer maker Quanta added 5.2 percent in Taipei. Samsung Electro- Mechanics Co., which makes electronic parts, rose 1.5 percent in Seoul as a brokerage raised its share-price estimate.

The MSCI Asia Pacific Index added 0.7 percent to 107.72 as of 1:18 p.m. in Tokyo, set for its best week in two months. The gauge has gained 10 percent in the past nine days, the longest winning streak since August 2004, amid growing speculation the global economy is recovering.

“The rally has gone on longer than expected,” said Pearlyn Wong, an investment analyst at Bank Julius Baer & Co. in Singapore, which manages $350 billion. “We’ve probably seen the worst in terms of earnings but we’re still quite cautious. Valuations have priced in a recovery.”

Hong Kong’s benchmark Hang Seng Index added 0.5 percent, having earlier climbed above the 20,000 level for the first time since the September collapse of Lehman Brothers Holdings Inc. Japan’s Nikkei 225 Stock Average rose for an eighth day, gaining 1 percent. South Korea’s Kospi Index advanced 0.3 percent.

Consumer Stocks

Australia’s S&P/ASX 200 Index gained 0.9 percent. Nufarm Ltd., the country’s biggest supplier of farm chemicals, climbed 9.2 percent and New Zealand Refining Co. jumped 3.5 percent in Wellington on takeover speculation.

Consumer-staple shares were the only industry group of the MSCI Asia Pacific Index’s ten to fall amid speculation a possible tobacco tax will hurt profit at Japan Tobacco Inc. and as JPMorgan Chase & Co. downgraded Australia’s Woolworths Ltd.

Futures on the Standard & Poor’s 500 Index lost 0.5 percent. The gauge climbed 2.3 percent yesterday, as EBay Inc. and Ford Motor Co. posted better-than-estimated results. Sales of existing U.S. homes advanced 3.6 percent last month from May, surpassing the 1.5 percent gain estimated by economists.

The increased sales fanned speculation demand for resources will recover, lifting prices for metals and oil. A gauge of six metals in London rose for a ninth day yesterday, the longest winning streak since December 2005. Crude oil in New York jumped 2.7 percent yesterday to a level not seen in three weeks.

Improving Sentiment

“Global market sentiment continues to rise,” said Ben Potter, an analyst at IG Markets in Melbourne. “The collapse of the housing market started this whole crisis and its recovery is certainly needed for any sustained economic improvement.”

Murchison Metals surged 19 percent to A$1.825. Murchison’s joint venture with Mitsubishi Corp., Oakajee Port & Rail Pty, has held meetings with Chinese groups and Western Australia’s Premier Colin Barnett in China, the Perth-based company said in a statement.

Rio Tinto Group, the world’s third-biggest mining company, gained 1.2 percent to A$58.18 in Sydney, while BHP Billiton Ltd., the biggest, rose 1.5 percent to A$37.64.

The U.S. home sales and South Korean growth reports are the latest signs of a possible global economic recovery that has driven the MSCI Asia Pacific Index up by 53 percent from a more than five-year low on March 9.

South Korea’s gross domestic product rose 2.3 percent from the first quarter, when the nation skirted a recession by growing 0.1 percent, the central bank said today in Seoul. That compared with the median estimate of 2.2 percent in a Bloomberg survey and was the fastest since a 2.6 percent expansion in the last quarter of 2003.

Signs Of Stabilization

The International Monetary Fund saw signs of stabilization, Deputy Managing Director Takatoshi Kato said last month in a speech made public yesterday. Japan’s Finance Ministry yesterday said the nation’s exports decreased in June at the slowest pace of decline since December.

“We’re seeing brighter prospects for company earnings thanks to growing demand in China and government stimulus measures globally,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $3.7 billion.

Panasonic climbed 6.2 percent to 1,363 yen as JPMorgan raised its rating on Japan’s largest maker of refrigerators to “overweight” from “neutral.” Quanta rose 5.2 percent to NT$67.30 after Credit Suisse upgraded its rating on the company to “outperform,” citing increasing orders for laptops.

Beating Estimates

Samsung Electro-Mechanics gained 1.5 percent to 66,800 won. Samsung Securities Co. raised its share-price estimate by 16 percent to 85,000 won, saying second-quarter profit beat its estimate. The brokerage maintained its “buy” recommendation.

SSP Co. rose 5.4 percent to 523 yen in Tokyo after the drugmaker said first-half profit beat its forecast as more efficient promotions contributed to sales.

Nufarm jumped 9.2 percent to A$10.74. The company said it was approached by China’s Sinochem Corp. about a possible takeover. Incitec Pivot Ltd., Australia’s largest fertilizer maker, rallied 8.7 percent to A$2.63.

In Wellington, New Zealand Refining advanced 3.5 percent to NZ$7.40 after two people familiar with the matter said Valero Energy Corp., the largest U.S. refiner, was considering a bid to reduce its reliance on its home market.

Japan Tobacco, the No. 3 cigarette maker globally, fell 3.4 percent to 251,200 yen. The opposition Democratic Party of Japan, which is favored in opinion polls to win next month’s election, plans to set a tobacco tax that discourages people from smoking, according to a policy document released yesterday.

Woolworths, Australia’s biggest retailer sank 1.8 percent to A$26.08. after being cut to “neutral” from “overweight” at JPMorgan.

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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Amazon.com, Deckers, Microsoft, SunPower: U.S. Equity Preview

By Lu Wang

July 24 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Deckers Outdoor Corp. (DECK US): The maker of Ugg boots said full-year sales will increase 10 percent at most. Analysts predicted growth of 11 percent, based on the average estimate in a Bloomberg survey.

Amazon.com Inc. (AMZN US): The world’s largest Internet retailer reported a decline in second-quarter profit and sales that missed estimates after discounts failed to spur as much growth as predicted.

American Express Co. (AXP US): The biggest credit card company by purchases said profit declined in the second quarter as the recession made it harder for cardholders to keep up with payments.

Microsoft Corp. (MSFT US): The world’s biggest software maker reported a 29 percent drop in profit and revenue that missed analysts’ estimates, a sign that expense reductions weren’t enough to make up for declining sales of personal- computer software.

Riverbed Technology Inc. (RVBD US): The maker of computer backup and networking equipment reported second-quarter revenue of $91 million, missing the average analyst estimate by 2.6 percent, according to Bloomberg data.

SunPower Corp. (SPWRA US): The second-biggest U.S. solar- cell maker posted second-quarter profit excluding some items of 24 cents a share, exceeding the average analyst estimate by 67 percent.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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U.S. Stock Futures Fall on Microsoft, American Express, Amazon

By Matt Townsend

July 24 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor’s 500 Index will slump after climbing to an eight-month high, as Microsoft Corp., American Express Co. and Amazon.com Inc. posted disappointing quarterly results.

Microsoft retreated 6.9 percent on lower profit and sales than analysts estimated. American Express slipped 5 percent after saying earnings decreased as the recession made it harder for cardholders to keep up with payments. Amazon.com lost 6.6 percent following price cuts that caused the online retailer’s revenue to miss projections.

S&P 500 futures expiring in September declined 0.5 percent to 963.80 at 2:49 p.m. in Tokyo. Dow Jones Industrial Average futures dropped 29 points, or 0.3 percent, to 8,962. U.S. stocks surged yesterday, sending the Dow above 9,000 for the first time since January, as EBay Inc., Ford Motor Co. and AT&T Inc. beat estimates and home resales increased more than forecast.

“At these levels in the market, there’s not a lot of room for error,” said Mark Freeman, who helps manage $7.5 billion at Westwood Management Corp. in Dallas. “Anything that deviates brings about a reevaluation by the market.”

Yesterday, the S&P 500 climbed to the highest level since President Barack Obama was elected on Nov. 4, advancing 2.3 percent to 976.29. The Dow gained 188.03 points, or 2.1 percent, to 9,069.29, the highest since one session after Election Day. The Nasdaq Composite Index surged 2.5 percent to 1,973.60 for a 12th straight gain, its longest winning streak since 1992.

Record Pace

Microsoft, American Express and Amazon.com’s worse-than- estimated results followed two weeks of earnings reports that exceeded projections. Among S&P 500 companies that have posted second-quarter results, 74.1 percent beat the average analyst forecast, according to data compiled by Bloomberg. That would be the highest full-quarter figure on record, Bloomberg data going back to 1993 show. Three-hundred and three S&P 500 companies have yet to report for the period.

Microsoft fell 6.9 percent to $23.80 in late trading in New York. The biggest software maker reported a 29 percent drop in fiscal fourth-quarter earnings and posted sales that missed analysts’ estimates, a sign that demand for Windows and Office software is still declining. Per-share profit excluding some items was 36 cents, missing the average forecast by 2.4 percent.

American Express retreated 5 percent to $27.99. The credit- card issuer reported second-quarter sales of $6.09 billion, or 1.4 percent less than analysts projected. Net income from continuing operations decreased 48 percent to $342 million.

Free Shipping

Amazon.com lost 6.6 percent to $87.66. The world’s largest Internet retailer has sought to ward off competitors by cutting prices and adding products, such as low-cost laptops and outdoor equipment. Its low prices and free-shipping offers have started to eat into profit, said Aaron Kessler, an analyst at Kaufman Brothers LP. Sales of $4.65 billion were 1 percent less than analysts estimated on average.

EBay rallied 11 percent yesterday as its earnings signaled consumers’ appetite for online commerce is starting to recover. Ford jumped 9.4 percent after topping analyst estimates by paring expenses and adding market share. AT&T added 2.6 percent as new customers of Apple Inc.’s iPhone bolstered profit. D.R. Horton Inc. led all 13 stocks in an index of homebuilders higher as sales of existing homes increased for a third straight month. Before yesterday, the Dow last exceeded 9,000 on Jan. 6.

“With the round number of 9,000 not being there for a significant amount of time, it’s encouraging,” Michael Koskuba, who helps oversee $44 billion at Victory Capital Management Inc. in New York, said of yesterday’s rally. “It’s really a result of companies reporting better-than-expected news. That’s encouraging given that we are in a difficult economic environment.”

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net.

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S&P 500 Erases Half Its Loss Since Lehman’s Failure on Profits

By Elizabeth Stanton and Jeff Kearns

July 24 (Bloomberg) -- The Standard & Poor’s 500 Index recovered 50 percent of the losses suffered after the September collapse of Lehman Brothers Holdings Inc., as a record number of U.S. companies beat analysts’ earnings estimates.

The benchmark gauge for American equities added 2.3 percent to 976.29 yesterday, the highest close since Election Day, after EBay Inc. and AT&T Inc. exceeded profit forecasts. The index has advanced 300 points since it reached a 12-year low March 9. Lehman’s bankruptcy on Sept. 15 sparked a 575-point retreat that erased $6.8 trillion from U.S. stock markets.

Investors are pouring money into shares on speculation the fastest rally since the Great Depression will reverse losses from last year, when the S&P 500 fell 38 percent. U.S. mutual funds received $1.5 billion of net inflows this week, the most since May 13, according to AMG Data Services in Arcata, California. Futures on the S&P 500 slid 0.5 percent as of 12:09 a.m. in New York after Microsoft Corp., Amazon.com Inc. and American Express Co. said earnings trailed analyst estimates.

“We were supposed to have the summer doldrums, but instead we’re getting some fireworks,” said Bernie Schaeffer, president of Schaeffer’s Investment Research in Cincinnati. “People just gave up on the idea of a rally and then all of a sudden, boom.”

The Dow Jones Industrial Average climbed 188.03 points, or 2.1 percent, to 9,069.29 yesterday, the first close above 9,000 since Jan. 6. The Nasdaq Composite Index surged 2.5 percent to 1,973.60 for a 12th straight increase, its longest streak since 1992 and highest level since October.

Bouncing Back

The S&P 500 advanced 22.22 points yesterday, bringing its four-month gain to 299.76. That’s more than one-third of the decline from its October 2007 record to the March 9 low. The rebound took 95 trading days, making it the third-steepest increase from a bear-market bottom since 1933, according to data compiled by Birinyi Associates Inc., the Westport, Connecticut- based money-management and research firm.

U.S. companies are beating analysts’ projections at the highest rate ever this month. Among S&P 500 companies that have posted second-quarter results, 74.1 percent beat the average analyst forecast, according to data compiled by Bloomberg. That would be the highest full-quarter figure on record, Bloomberg data going back to 1993 show. Three-hundred three S&P 500 companies have yet to report for the period.

Technical analysts, who argue that the past performance of a stock or index holds clues to its direction, consider the 50 percent “retracement” since New York-based Lehman failed significant because an increasing number of investors who bought after the collapse are showing profits.

Piling In

“There’s a buying panic,” said John Wilson, chief technical strategist at Morgan Keegan & Co., which manages $120 billion in Memphis, Tennessee. “Nobody should be on the ledge right now, unless they’ve been short.”

Investors may struggle for gains today, if history is any guide. Since credit markets froze in August 2007, the S&P 500 has fallen an average of 0.3 percent on days following advances of 2.3 percent or more, according to data compiled by Bloomberg.

Yesterday’s increase began after EBay, owner of the most- visited U.S. auction Web site, said earnings excluding certain costs were 37 cents a share, 1 cent better than analysts forecast. The San Jose, California-based company climbed 11 percent to $21.52 in Nasdaq Stock Market composite trading.

AT&T, the largest U.S. phone company, rose the most in two months after reporting second-quarter earnings, excluding some items, of 59 cents a share, beating the average analyst estimate by 15 percent. The Dallas-based company added 2.6 percent to $25.48 in trading on the New York Stock Exchange.

Futures on the S&P 500 declined after the close of U.S. trading. Redmond, Washington-based Microsoft reported lower sales than analysts expected. The world’s biggest software maker said revenue slipped 17 percent to $13.1 billion, trailing the $14.5 billion predicted in a Bloomberg survey.

Missing Estimates

Amazon.com Inc., based in Seattle, retreated after the world’s largest Internet retailer reported a decline in second- quarter profit and sales that missed estimates after discounts failed to spur as much growth as predicted.

American Express, based in New York, said net income from continuing operations decreased 48 percent as the recession made it harder for cardholders to keep up with payments. The credit- card issuer also reported second-quarter sales of $6.09 billion, or 1.4 percent less than analysts projected.

“Are we on the cusp of a big, new directional move up? We would say no,” said Carter Braxton Worth, chief technical strategist at Oppenheimer & Co. in New York.

Investors who bought U.S. stocks in January or near the March lows may sell to preserve their gains, Worth said. He was one of two runners-up in Institutional Investor magazine’s latest ranking of the top technical analysts.

Yesterday’s advance pushed the S&P 500 to within 3.5 percent of the average year-end forecast of 1,010 from 10 Wall Street equity strategists tracked by Bloomberg. The index trades for 16.2 times annual profits, compared with an average since 2000 of 19.3, data compiled by Bloomberg show.

“You need that upward momentum in a bull market,” said John Murphy, chief technical analyst at Redmond, Washington- based StockCharts.com. “This is clearly not a bear market rally.”

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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