US GDP Will Direct Markets Today

Daily Forex Fundamentals | Written by Saxo Bank | Jul 31 09 06:46 GMT |

The importance of US GDP today for markets should not be underestimated. A better than expected earnings season so far, but long term earnings growth depends on long term GDP growth Calendar Economic Data Releases Country Name Time (GMT) Expectation Prior Comment EC 09:00 Unemployment Rate 9.7% 9.5% US 12:30 GDP QoQ Annualized (2Q) -1.5% -5.5% US 12:30 Personal Consumption (2Q) -0.5% 1.4% Earnings Data Releases Country Name Time (GMT) Expectation Prior Comment BE - Belgacom 0.5580 1.4350 UK - Anglo American 1.3280 - US - Chevron 0.9240 3.1800 What's going on? Today is going to be all about the advance US GDP growth for the second quarter. The expectation is for -1.5% QoQ growth annualized from -5.5% in 1Q, but we worry that this is too optimistic given the lack of improvement in real economic indicators in the last three months (not sentiment based). In addition, GDP could also be hit by inventory reductions as companies prepare themselves for lower sales. The Treasury's auction of 7-year notes yesterday turned out to be quite successful contrary to the auctions of 2- and 5-year notes midweek. The market actually bought the notes expensively by 3bps, meaning that they paid more than the price prevailing at the time of the auction. This could, however, be due a short covering. Stocks are seen higher intraday today on optimism surrounding the US GDP out at 12:30 GMT, and positive Euro-Zone numbers will only add fuel to that fire. Brace yourselves for retreating stocks if GDP growth fails to live up to expectations. FX FX Daily stance Comment EURUSD 0/- Look into sell rally up to 1.4175 for sub-1.41, but square ahead of US GDP EURJPY 0 Expect to see a 134.0-135.0 range ahead of data. USDJPY 0/+ Buy dips down to 95.25 for a rebound to 95.85-00 resistance, stop below 94.90 GBPUSD 0/- While holding below 1.6550 risk we retrace to 1.6450. Abv sees 1.6625 AUDUSD 0 Res at 0.8300 expected to hold for a 0.8225-0.8300 trading range Equities Equities Daily stance Comment DAX 0/+ Buy at the break of 5350 targeting 5430. S/L below 5300. FTSE 0/+ Buy at break of 4625 targeting 4685. S/L below 4595. S&P500 0/+ Buy at the break of 980 targeting 994. S/L below 975. Nasdaq 0/+ Buy at the break of 1602 targeting 1622. S/L below 1590. Dow Jones 0/+ Futures Commodities Daily Stance Comment Gold 0 Buy break of 941.0 for 955.0 else trade the 930-940 range Silver 0 Rebound may stall at 13.68-70 lvl. Trade a 13.45-13.70 range Oil 0/- Rally expected to stall around 68.0 lvl. Sell there for re-test of 65.0, stop abv 69.50 FX Options FX-Options Comment EURUSD Front end vols were sold off heavily on Thursday with 1m now trading at its lowest since September and should expect spot to move in smaller ranges. 1.40-1.4150 seems to be the levels for now but a break below 1.40 should lend support the the short dates. USDJPY Vols opened offered in Asia with only back end holding up. Spot has been weaker all day be still within established ranges so do not expect gamma to be bid anytime soon. 9300 level is key and firm break will send gamma much higher. Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.

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Forex Market Update: Sentiment In A Sharp U-Turn Overnight, Stocks Recover Losses From The Last Few Days

Daily Forex Fundamentals | Written by Saxo Bank | Jul 31 09 06:22 GMT |

US GDP data tonight will likely keep markets cautious at month-end HEADLINES - PREVIOUS SESSION US Weekly Initial Jobless Claims out at 584k vs. 575k expected and 559 k prior US Weekly Continuing Claims out at 6197k vs. 6300k expected and 6251k prior UK Gfk Consumer Confidence out at -25 vs. -23 expected and -25 prior JP Jul. Nomura/JMMA Manufacturing PMI out at 50.4 vs. 48.2 prior JP Jun. Jobless Rate out at 5.4% vs. 5.3% expected and 5.2% prior JP Jun. Tokyo CPI out at -1.8% y/y vs. -1.7% expected and -1.5% prior JP Jun. National CPI out at -1.8% y/y, as expected, vs. -1.1% prior AU Jul. TD Securities Inflation out at +0.9% m/m, +1.9% y/y vs. +0.4%/+1.4% prior resp. AU Jun. Private Sector Credit out at +0.1% m/m, +3.4% y/y, both as expected, vs. -0.1%/+3.8% prior resp. SI Q2 Unemployment out at 3.3% vs. 3.7% expected and 3.3% prior JP Jun Housing Starts out at -32.4% y/y vs. -30.6% expected and -30.8% prior THEMES TO WATCH - UPCOMING SESSION EU Euro-zone CPI (0900) EU Euro-zone Unemployment (0900) Swiss KOF Leading Indicator (0930) CA GDP (May) (1230) US GDP (Q2) (1230) US Personal Consumption (1230) US Employment Cost index (1230) US Chicago PMI (1345) US NAPM – Milwaukee (1400) Market Comments We saw another flip in risk sentiment overnight as a fresh string of above-expectation Q2 earnings results negated all the losses from the last couple of days. Wall St powered higher with the Dow closing at its highest since November last year and the S&P crawled towards the psychological 1,000 mark. Other inputs also favoured a return of risk with the weekly initial claims count broadly in line with expectations and the continuing claims declining for the third straight week. In a surprise turnaround, the 7-year US bond auction was well received, countering the doubters around following the dismal 2- and 5-year auctions earlier this week. One notable laggard in the dollar's retreat was the EUR, seemingly pressured by comments from the IMF suggesting the EU-bloc currency was overvalued by as much as 15% when compared to fundamentals. In addition, the IMF advised the ECB not to consider current interest rate levels as a floor and to keep interest rates at low levels for some time. EUR struggled to make it back above 1.41 despite EU economic sentiment coming in on the firmer side of forecasts. Australian data this morning would appear to suggest inflationary pressures are on the rise again, with July's TD-MI monthly inflation gauge showing prices rising more rapidly for the 2nd month in a row, by a record high 0.9% pace after a 0.4% gain previously. The annualised figure held just under RBA's target 2-3% band at 1.9% after gaining from 1.4% prior, to be at its highest annual pace in 3mths. The data confirms RBA's Stevens' more hawkish comments earlier this week and may set the stage for a shift to a neutral bias by the RBA at its policy meeting next week. Japan data was a mixed bag. CPI showed that prices fell a record 1.8% y/y (-1.7% on core readings) with soft consumer demand the major factor influencing. This was the fourth straight month of declines but matched market expectations. Unemployment rose to its highest level in over five years, hitting 5.4% the same as June 2003, and job availability sank to a new record low. Despite the plethora of data, Asia chose to sit mostly in the doldrums on the last trading day of the month. Early chatter and concerns about erratic month-end demand at fixing time and heavy Toshin issuances failed to materialize and most currency pairs were engaged in a slow grind higher, mostly favouring the traditional 'risk' currencies. All eyes will be on the US Q2 GDP release later (-1.5% q/q expected following Q1's dismal -5.5%) but we may remain range-bound ahead of that. Into Europe we will see Euro-zone CPI and unemployment. Also on the slate are Canada GDP, US personal consumption, employment cost index and Chicago PMI. Analysis Disclosure & Disclaimer SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated. SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations. The recommendations may expire promptly due tmarket volatility and in general, SaxBank does not anticipate its recommendations tbe valid more than one month. An analysis will be updated if and only if a market development or other issues relevant tthe analysis render a new analysis on the same topic relevant. SaxBanks analysis does not cover any specific financial product over time but only products which SaxBanks strategy team finds it important tcover at any given point in time. In order tprevent conflicts of interest, SaxBank has established appropriate business procedures, incl. procedures applicable tresearch and analysis tensure objective research reports. SaxBanks research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. SaxBank is under supervision by the Danish Financial Supervisory Authority. SaxBank does not engage in corporate finance activities and accordingly, SaxBanks employees, incl. the persons responsible for an analysis, dnot receive remuneration associated with investment banking transactions.

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Technical Analysis for Crosses

Daily Forex Technicals | Written by ecPulse.com | Jul 31 09 06:25 GMT |

GBP/JPY The sterling versus Japanese yen has been capable of reaching 157.90 zones which represent 23.6% Fibonacci level while negative divergence has been caught on RSI 14, which we see that it may confirm the completion of the previous discussed Elliott cycle. Therefore we keep our overview to the downside on the intraday basis, particularly if the pair succeeded to make a four-hour closing below 157.05 as the mentioned divergence will be activated strongly and then, a new downside sequence is to start. Trading range for today is among key support at 152.80 and key resistance at 16150. The general trend is to the downside as far as 167.45 remains intact with target at 116.00. Support: 157.30, 156.70, 155.85, 155.00, 154.60 Resistance: 158.00, 158.70, 159.35, 160.00, 160.50 Recommendation: Based on the charts and explanations above our opinion is, selling the pair from 157.90 targeting 155.85 and stop loss above 159.60 might be appropriate. EUR/JPY The pair is facing a cluster resistance around 61.8% Fibonacci level of the last short term decline which started at 136.08 and was bottomed out at 132.73 as seen on the above four-hour chart while forming a series of harmonic patterns. Hence the intraday basis is to be kept to the downside with an expected reversal zone between 134.80 and 135.30 which will offer the [D1] of the bearish harmonic structure. Trading range for today is among key support at 131.55 and key resistance now at 137.400. The general trend is to the downside as far as 141.44 remains intact with targets at 100.00 followed by 88.97 levels. Support: 134.15, 133.60, 133.10, 132.50, 131.60 Resistance: 135.00, 135.50, 136.10, 136.65, 137.30 Recommendation: Based on the charts and explanations above our opinion is, selling the pair from 134.80 targeting 133.10 and stop loss above 136.20 might be appropriate. EUR/GBP The royal pair is moving typically according to our mid-day report yesterday, as we could capture a positive divergence on the hourly chart as shown on the above chart on Zero lag MACD indicator that pushed it upwards. Now a slight correction is needed before resuming the intraday bullishness towards the technical target of the pattern around 0.8610. We think that this positive action is to start from around the solid support of 0.8515 zones Trading range is among the key support at 0.8390 and key resistance now at 0.8680. The general trend is to the upside as far as 0.8020 area remains intact with targets at 1.0000 followed by 1.0400 levels. Support: 0.8515, 0.8485, 0.8440, 0.8420, 0.8400 Resistance: 0.8560, 0.8605, 0.8645, 0.8700, 0.8720 Recommendation: Based on the charts and explanations above our opinion is, buying the pair from 0.8515 targeting 0.8605 and stop loss below 0.8445 might be appropriate 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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FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Jul 31 09 06:41 GMT |

EURUSD Comment: Terribly slow work but trying to base ahead of the top of the Ichimoku 'cloud'. Moving averages are still bullish and the combination will hopefully help form an interim low which will eventually push the Euro to new highs for this year. Strategy: Attempt longs at 1.4125. adding to 1.4075; stop well below 1.4000. Short term target 1.4200, then 1.4300. Direction of Trade: → ↗ Chart Levels: Support Resistance 1.4064 " 1.4137 1.4 1.4165 1.395 1.42 1.39 1.4305 1.383 1.4339* 1.4365* GBPUSD Comment: A weekly close clearly above 1.6500 should add some much-needed bullish momentum. Hopefully the large, rising Ichimoku 'cloud' will lead to a decisive break above the upper edge of the 'triangle' consolidation pattern, where the measured target is 1.7100 then 1.7500. Strategy: Attempt longs at 1.6565 but only if prepared to add to 1.6400; stop below 1.6300. First target 1.6600 and then this year's high at 1.6745 Direction of Trade: →↗ Chart Levels: Support Resistance 1.6488 " 1.6587 1.6382 1.66 1.6338 1.6625 1.6266 1.6664 1.6187 1.6745* USDJPY Comment: Very messy as prices break above and close over the 50% Fibonacci resistance. Moving averages have just turned bullish yet we remain below the Ichimoku 'cloud'. Stand aside if possible. Strategy: Possibly attempt tiny shorts at 95.30; stop above 96.25. Short term target 94.15 Direction of Trade: → Chart Levels: Support Resistance 95.25 " 95.62 95 95.89* 94.85 96 94.4 96.25* 94.00* 96.55 EURJPY Comment: Hovering just above the Ichimoku 'cloud' and, in what is a rather messy Technical picture, we expect topping activity today against the 135.00 area. Strategy: Possibly attempt small shorts at 134.50; stop well above 135.25. Add to shorts on a sustained break below 133.80 for 132.00/131.85 and more longer term Direction of Trade: → Chart Levels: Support Resistance 134.32 " 134.84 133.85 134.90* 133.23 135.17 132.8 135.65 131.85 136.11 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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Singapore Employers Fire Fewer Workers Amid Signs of Recovery

By Shamim Adam

July 31 (Bloomberg) -- Singapore employers fired fewer workers last quarter as the economy emerged from its deepest recession since independence in 1965.

Employers cut 5,500 jobs in the three months ended June, compared with 12,760 in the first quarter, the Ministry of Manpower said today. The Southeast Asian nation’s seasonally adjusted unemployment rate was 3.3 percent, unchanged from the previous quarter. That’s better than the 3.7 percent median forecast in a Bloomberg News survey of economists.

Prime Minister Lee Hsien Loong’s efforts to prevent job losses included handing out cash to companies to lower wage costs. The island’s economy expanded an annualized 20.4 percent last quarter from the previous three months, the first growth in a year, prompting the government to raise its 2009 forecast for gross domestic product.

“The pace of retrenchments will continue to ease in the second half but as more people enter the labor market and have difficulty getting jobs, the unemployment rate will keep on rising,” said Tetsuji Sano, a Singapore-based economist at Nomura Holdings Inc. “Consumer sentiment will remain weak.”

Employers retrenched 4,800 workers, and another 700 were released from their contracts early between April and June. The jobless rate is the highest in almost four years.

Total employment in the economy shrank 12,400 in the second quarter, double the losses in the first quarter, the ministry said. “In the difficult job market, more people are deferring job searches and pursuing courses,” it said.

Uncertain Outlook

Companies in Singapore continued to hire through the recession, Manpower Minister Gan Kim Yong said in parliament last week. It remains “uncertain” whether companies can sustain hiring, he added.

Singapore’s services industries have shrunk for three straight quarters, weakening an economy that is forecast to contract as much as 6 percent this year. Visitor arrivals to the island have slumped as the global slowdown curbs business and holiday travel.

“We’re not out of the woods and will continue to monitor the second half of the year,” Trade Minister Lim Hng Kiang said July 20.

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

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Mexico’s GDP Probably Shrank Most in Three Decades Last Quarter

By Jens Erik Gould

July 31 (Bloomberg) -- Mexico’s economy probably shrank the most in three decades last quarter as the global recession and the outbreak of swine flu curbed industrial output and fueled job losses, the finance ministry said.

Gross domestic product may have contracted 10.4 percent in the second quarter from a year earlier after declining 8.2 percent in the previous three months, the ministry said in an e- mailed report yesterday. The government is due to release last quarter’s GDP figures on Aug. 20.

“In the second quarter of 2009, the external environment continued to be adverse,” the ministry said. “The flu outbreak temporarily affected activity in several sectors and regions, particularly in those related to tourism and leisure.”

Mexican job losses have accelerated this year as the recession in the U.S., which buys about 80 percent of the nation’s exports, saps demand for products. The central bank said this week the economy will shrink in 2009 at almost double the pace it previously forecast, predicting a contraction of 6.5 percent to 7.5 percent.

A contraction of 10.4 percent in the three months to June 30 would be the biggest decline in GDP since at least 1980, according to Bloomberg quarterly data that starts from the first three months of 1981.

Industrial production plunged 12.1 percent in April and May from a year earlier, while formal jobs declined 4.1 percent in June compared with the same month in 2008, according to the ministry’s report. Mexico had a budget deficit of 94.6 billion pesos ($7.1 billion) in the first half of the year, it said.

Public revenue fell 7.8 percent in the first half of the year compared with the same period last year as oil and tax revenue dropped, the ministry’s report said.

To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net.

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Japan’s Jobless Rate at Six-Year High, Prices Drop

By Toru Fujioka and Mayumi Otsuma

July 31 (Bloomberg) -- Japan’s unemployment rate rose to a six-year high in June and consumer prices fell at a record pace, adding to evidence the domestic economy is struggling to recover even as exports start to improve.

The jobless rate advanced to 5.4 percent from 5.2 percent in May, the statistics bureau said today in Tokyo, higher than the 5.3 percent median forecast of economists surveyed. Consumer prices excluding fresh food, the central bank’s preferred gauge, fell a record 1.7 percent in June, a separate report showed.

Economists expect the jobless rate to rise to a record 5.8 percent as companies cut costs. Deflation may erode profits even as factory output rebounds, further hampering Japan’s recovery from its deepest postwar recession.

“Worsening job prospects will continue to weigh on Japan’s recovery,” said Yasuhiro Onakado, chief economist in Tokyo at Daiwa SB Investments Ltd. in Tokyo. “The export recovery is helping production but capacity utilization is still low and companies are still saddled with excess capacity and employment.”

The yen traded at 95.30 per dollar at 12:04 p.m. in Tokyo from 95.46 before the report was published. The Nikkei 225 Stock Average rose 1.4 percent to 10,304.90, heading for its highest close since Oct 6, after Sony Corp. posted a smaller than expected quarterly loss.

Given Japan’s current production levels, companies have 6 million extra workers, the highest ever, the Cabinet Office said last week. A report yesterday showed that while output increased 2.4 percent in June from the previous month, it fell 23.4 percent from a year ago.

Record Low

The number of positions available to each job applicant rose stood at 0.43, a record low, the Labor Ministry said. Economists regard the ratio as a leading indicator for the unemployment rate.

Consumers have received temporary relief from the downturn from Prime Minister Taro Aso’s 25 trillion yen ($262 billion) in stimulus spending that included measures ranging from cash handouts to tax breaks on fuel-efficient vehicles. The packages helped bolster consumer confidence to an 18-month high in June.

Household spending rose 0.2 percent, a second monthly gain, a separate report showed today. Economists expected outlays to increase 0.5 percent. Retail sales fell 3 percent in June, the government said earlier this week.

“Consumer spending will clearly start weaken once the impact of the stimulus packages fades,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

Nintendo Co. and Sony, the largest makers of game consoles, are facing mounting pressure to cut prices after reports yesterday showed sales of the motion-sensing Wii fell for the first time and PlayStation 3 shipments tumbled to a two-year low.

The U.S. unemployment rate rose to a quarter-century high of 9.5 percent in June and in the euro zone it reached a decade high of 9.5 percent in May.

Saving More

At home, consumers are starting to save more, prompting retailers to offer cheaper products to lure consumers. Department store operator Millenium Retailing Inc. will start selling cheaper, generic products in September, according to Nagatoshi Nii, spokesman at the retailer. Aeon Co., Japan’s second-largest retailer, started selling house-brand beer that’s 20 percent cheaper than equivalent products at major breweries.

The drop in consumer prices will probably accelerate through the third quarter and exceed 2 percent in reaction to last year’s record increases in oil, Bank of Japan board member Tadao Noda said yesterday. Declines will moderate after that as the economy improves, he added.

Summer bonuses at Japan’s largest companies will slide a record 18.3 percent this year, according to a survey published last month by the Keidanren, the country’s biggest business lobby. The average budget for this summer vacation for each individual dropped 18 percent to 88,000 yen ($925) from last year, the lowest in four years, Dentsu Research Inc. reported this week.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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Europe Day Ahead: Asian Stocks Rise; Oil Gains; Dollar Falls

By Mark Sweetman

July 31 (Bloomberg) -- Asian stocks advance; crude oil gains; dollar falls.

EUROPEAN MARKETS

The FTSE 100 Index will probably falls 5 points, the DAX may drop 4 points, the CAC may open unchanged points and the ISEQ may decline 9 points, according to Cantor Index.

TOP STORIES and MOST READ

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Japan’s Jobless Rate at Six-Year High, Prices Drop (Update1)

Oil Rises as Asian Stock Gains Increase Fuel-Demand Optimism

MAIN COMPANIES

Air France, Reed Elsevier, Santander: Europe Equity Preview

ANALYST CHANGES

CAP GEMINI RAISED TO ‘BUY’ VS ‘UNDERPERFORM’ AT MERRILL LYNCH LOGICA RAISED TO ‘BUY’ FROM ‘UNDERPERFORM’ AT MERRILL LYNCH INDRA CUT TO ‘UNDERPERFORM’ FROM ‘BUY’ AT MERRILL LYNCH INCHCAPE RAISED TO ‘BUY’ FROM ‘REDUCE’ AT NOMURA HUGO BOSS PREFS. CUT TO ‘NEUTRAL’ FROM ‘BUY’ AT UBS MAN GROUP CUT TO ‘SELL’ FROM ‘NEUTRAL’ AT UBS VONTOBEL RAISED TO ‘BUY’ FROM ‘SELL’ AT UBS REXAM RAISED TO ‘BUY’ FROM ‘NEUTRAL’ AT UBS BANK SARASIN CUT TO ‘NEUTRAL’ FROM ‘BUY’ AT UBS CAP GEMINI RAISED TO ‘OVERWEIGHT’ AT MORGAN STANLEY LOGICA RAISED TO ‘OVERWEIGHT’ AT MORGAN STANLEY DEUTSCHE BANK CUT TO ‘EQUAL-WEIGHT’ AT MORGAN STANLEY RANDSTAD CUT TO ‘SELL’ FROM ‘NEUTRAL’ AT GOLDMAN SACHS CSR RAISED TO ‘OVERWEIGHT’ FROM ‘NEUTRAL’ AT JPMORGAN REED ELSEVIER CUT TO ‘HOLD’ FROM ‘BUY’ AT DEUTSCHE BANK KBC RAISED TO ‘HOLD’ FROM ‘SELL’ AT DEUTSCHE BANK

MARKETS

U.S. Stocks Rally, S&P 500 Nears Nine-Month High, on Earnings

Treasuries Fall, Head for 4th Monthly Loss as Recession Eases

Dollar Falls a 2nd Day Versus Euro on Optimism GDP Drop Slowed

NEWSPAPER HIGHLIGHTS

German Company Bans Employees From Iran Protests, WSJ Reports

Russian Energy Minister to Visit Iraq in August, Interfax Says

IMF Finds EU Recovery From Recession is ‘Uncertain,’ WSJ Says

Stanchart May Buy RBS Small Business Units in India, Times Says

For Related News and Information: For event listings: EVTS For stock market performance: WEIS For currency market performance: WCRS

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U.K. Pound Climbs Against Dollar, Heads for Fifth Monthly Gain

By Daniel Tilles

July 31 (Bloomberg) -- The pound advanced against the dollar, set for its fifth monthly gain, the longest run since February 2004.

The British currency climbed 0.3 percent to $1.6546 as of 6:27 a.m. in London.

Against the euro, the pound was little changed at 85.39 pence, from 85.31 pence yesterday, poised to snap a five-week decline.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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Euro May Fall to 8-Month Low Against Pound: Technical Analysis

By Ron Harui

July 31 (Bloomberg) -- The euro may weaken to an eight- month low of 82.36 British pence should the 16-nation currency close below so-called support at 85.09 pence, RBC Capital Markets said, citing trading patterns.

The level of 85.09 pence represents support on an ascending trend line that connects the euro’s lows of Oct. 20 and June 22, according to RBC’s chart. Europe’s single currency yesterday closed below initial support at 85.71 pence, which signals a “bearish” short-term reversal, George Davis, chief technical analyst at RBC, wrote yesterday in a note to clients. Support refers to a level where buy orders may be clustered.

“This has set the stage for a test of the key intermediate trend line at 85.09 that dates back to October,” Toronto-based Davis wrote. “A daily close below 85.09 would be an extremely bearish development as it would indicate that the intermediate downtrend is set to resume in earnest.”

The euro traded at 85.34 pence as of 9:58 a.m. in Tokyo from 85.31 pence in New York yesterday, when it declined to 85.04 pence, the lowest level since June 30. The European currency has fallen 1.3 percent versus the pound since July 24, heading for its first weekly loss since June 19.

Should the euro post a daily close below 85.09 pence, it is likely to extend losses to the June low of 84 pence, and then move toward 83.31 pence and the Nov. 28 low of 82.36 pence, Davis said.

Daily momentum indicators such as the stochastic oscillator chart also signal the euro will fall against the pound as they are “tracing out a bearish divergence that began from overbought levels in mid-July,” Davis wrote.

A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Brazil and Colombia: Latin American Bond and Currency Preview

By Andrea Jaramillo

July 31 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day’s session.

Brazil: Policy makers said yesterday in minutes of their July 21-22 meeting that the benchmark interest rate is at a level that will spur economic growth without sparking inflation, signaling they are prepared to keep borrowing costs unchanged through the end of the year. The central bank this month lowered the key rate by a half-percentage point to a record 8.75 percent.

The real rose 0.9 percent to 1.8766 per dollar.

The yield on the zero-coupon, real-denominated bond due in January 2010 rose four basis points, or 0.04 percentage point, to 8.72 percent, according to Bloomberg prices.

Colombia: The unemployment rate rose to 12.7 percent in June from 12.4 percent a month earlier, according to the median estimate of seven economists in a Bloomberg survey. The national statistics agency is slated to release the report after noon New York time.

The peso rose 1.5 percent to 2,044.52 per dollar.

The yield on Colombia’s benchmark 11 percent bonds due July 2020 fell nine basis points to 8.91 percent, according to Colombia’s stock exchange.

Other prices in Latin American markets:

Argentina: The peso fell 0.3 percent to 3.8290 per dollar.

The yield on the country’s inflation-linked peso bonds due in December 2033 fell three basis points to 12.86 percent, according to Citigroup Inc.’s local unit.

Chile: The peso rose 0.7 percent to 541.60 per dollar.

The yield for a basket of Chile’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, rose one basis point to 2.89 percent, according to Bloomberg composite prices.

Mexico: The peso rose 0.1 percent to 13.2373 per dollar.

The yield on Mexico’s 10 percent bond due December 2024 was little changed at 8.41 percent, according to Banco Santander SA.

Peru: The sol rose 0.1 percent to 2.9830 per dollar.

The yield on Peru’s 8.6 percent bond maturing August 2017 fell one basis point to 5.33 percent, according to Citigroup Inc.’s local unit.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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Dollar Falls a 2nd Day Versus Euro on Optimism GDP Drop Slowed

By Yasuhiko Seki and Ron Harui

July 31 (Bloomberg) -- The dollar fell for a second day versus the euro before a U.S. government report forecast to show the contraction in the world’s largest economy slowed, sapping demand for safer assets.

The U.S. currency also headed for a fifth month of losses against the pound, its longest stretch in five years, after a U.K. report showed consumer confidence held at the highest level since April 2008, adding to signs Britain is emerging from recession. The yen was poised for a third weekly decline against Australia’s dollar as global stocks rose, spurring investors to buy higher-yielding assets.

“Sentiment is spreading that the world is coming out of its slump,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Risk appetite is improving, so the bias is for the dollar and the yen to be sold.”

The greenback fell to $1.4135 per euro as of 6:20 a.m. in London from $1.4075 yesterday, and was at 95.33 yen from 95.56 yen. The dollar traded at C$1.0789 from C$1.0834 in New York yesterday. It reached C$1.0750 on July 28, the lowest level since Oct. 3. The U.S. currency was at $1.6547 per pound from $1.6493. It was $1.6586 on July 23, the weakest since June 30.

The yen traded at 134.74 per euro from 134.49 in New York yesterday. Japan’s currency fetched 79.09 against Australia’s dollar from 78.90. A benchmark interest rate of 0.1 percent in Japan compares with 3 percent in Australia, making the South Pacific nation’s assets attractive to investors.

Corporate Earnings

Japan’s currency fell versus 15 of 16 major counterparts this week as better-than-estimated results from companies including Sony Corp. and Motorola Inc. helped drive U.S. and Japanese stock gauges to the highest this year. The Nikkei 225 Stock Average rose as much as 1.9 percent to the highest since Oct. 7. The Standard & Poor’s 500 Index added 1.2 percent in New York to the highest close since Nov. 4.

About three of every four S&P 500 companies that released results since June 17 exceeded analysts’ profit estimates, according to data compiled by Bloomberg.

“Positive economic data, rising stocks and better-than- expected earnings improve risk appetite,” said Takao Yahata, senior manager of foreign exchange and financial-products trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest banking group. “The improved risk appetite means that the safe-haven currencies will weaken.”

Motorola rallied the most since November as job cuts helped the biggest U.S. mobile-phone maker report a smaller loss than analysts projected. Sony, the maker of Vaio computers and PlayStation 3 game consoles, jumped as much as 6.6 percent after cost cuts helped it post a smaller-than-expected loss.

U.K. Consumer Sentiment

U.S. gross domestic product contracted at a 1.5 percent annual rate in the second quarter, following a 5.5 percent drop in the first three months of 2009, according to a Bloomberg News survey of economists. The Commerce Department report is due at 8:30 a.m. in Washington.

The dollar traded near a one-week low against the pound after GfK NOP said in an e-mailed statement today that an index of consumer sentiment in the U.K. was unchanged in July at minus 25. The reading is up from minus 39 a year earlier.

The report adds to signs that the U.K.’s worst slump in a generation is easing after Nationwide Building Society said house prices rose for a third month while mortgage approvals increased. Bank of England policy maker Andrew Sentance said last week the bank may pause its plan to stoke growth by buying bonds if forecasts next month point to an improvement.

Gains in the euro were tempered before reports that economists said will show deflation deepened in the 16-nation area and job losses there increased.

Today’s release of unemployment data may be “potentially serving to keep the euro-dollar subdued,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a research note today.

Unemployment, Prices

Unemployment in the euro region probably increased to 9.7 percent in June from 9.5 percent in May, according to a Bloomberg News survey of economists before the European Union statistics office releases the data today in Luxembourg.

Prices in the euro area probably dropped 0.4 percent in July from a year earlier following a decline of 0.1 percent in June, according to a separate Bloomberg News survey of economists before the data release today.

Overseas Accounts

The Federal Reserve’s custodial holdings of Treasuries for overseas accounts including foreign central banks reached $2 trillion for the first time.

The holdings rose by $5.38 billion, or 0.27 percent, to $2.001 trillion in the week ended July 29, according to data released by the Federal Reserve Bank of New York. Custodial holdings have climbed 18 percent this year, after surging 39 percent in 2008, the data shows.

“The report came as a relief for the dollar for now, but a record debt sale may increase the risk of auction failure in coming months,” said Masahiro Ito, senior manager of foreign exchange sales and marketing at Central Tanshi FX Co., a unit of Japan’s largest money broker Central Tanshi Co.

“If this happens, the market may start to question the sustainability of debt financing in the U.S., thereby keeping a lid on the dollar,” he said.

Treasuries fell, heading for a fourth monthly loss, the longest stretch since 1996, fueled by record U.S. debt sales as President Barack Obama borrows unprecedented amounts to fund his stimulus programs. Treasury issuance will increase to $446 billion this quarter, up 30 percent from the prior three months, according to a survey by the Securities Industry and Financial Markets Association.

The yield on the 10-year note rose two basis points to 3.63 percent in Tokyo, according to BGCantor Market Data.

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

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Gold Gains in Asia, Set for Monthly Rise, as Dollar Declines

By Kim Kyoungwha

July 31 (Bloomberg) -- Gold rose for a second day, set for a monthly gain, as the dollar declined against major currencies, boosting the metal’s appeal as an alternative investment.

Bullion has advanced this month as the dollar has dropped against the euro as better-than-estimated results from companies including Sony Corp. and Motorola Inc. helped drive U.S. and Japanese stock gauges to the highest this year. Gold tends to rise as the dollar weakens.

“Gold’s moves are pretty much driven by the dollar,” said Hwang Il Doo, a trader with KEB Futures Co. in Seoul. “A pull back from $950 is also triggering some buying of the metal.”

Gold for immediate delivery rose 0.3 percent to $937.10 an ounce at 10:45 a.m. in Singapore. The metal is up 1 percent this month, taking this year’s gain to 6.2 percent. Gold touched a two-week low of $925.90 on July 29.

The dollar fell 0.3 percent against a basket of six major currencies and was trading at $1.4128 against the euro compared with $1.4075 yesterday.

Gold may decline next week, heading for the “summer doldrum lows” in the Northern Hemisphere, after investors sold more metal, a survey showed. Thirteen of 22 traders, investors and analysts surveyed by Bloomberg News, or 59 percent, said bullion would fall next week. Six forecast higher prices and three were neutral.

Redemptions of gold exchange-traded products in July are set to be the second largest since inception of the first physical gold product in 2003, according to a report from Barclays Capital. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, stood at 1,072.87 metric tons as of July 30, according to figures on the company’s Web site.

Among other precious metals for immediate delivery, silver was up 0.9 percent at $13.60 an ounce, platinum added 0.5 percent to $1,192.50 an ounce and palladium was little changed at $259.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Oil Rises as Asian Stock Gains Increase Fuel-Demand Optimism

By Christian Schmollinger

July 31 (Bloomberg) -- Crude oil rose for a second day in New York as gains in Asian stock markets increased optimism the global economy will rebound, spurring demand for fuels.

Oil reversed earlier losses after the MSCI Asia-Pacific Index climbed 1.3 percent to the highest since April 29. The Standard & Poor’s 500 Index approached a nine-month high on better-than-expected earnings. Oil futures and the S&P 500 have a correlation of 0.6 in the past two months, according to data compiled by Bloomberg.

“The equity markets and the crude markets are both speculating on the economy recovering,” said Daniel Liu, an energy strategist at MF Global in Singapore. “The expectations have driven the two markets together.”

Crude oil for September delivery climbed as much as 72 cents, or 1.1 percent, to $67.66 a barrel in electronic trading on the New York Mercantile Exchange and traded at $67.52 at 12:35 p.m. Singapore time. The contract earlier fell 0.7 percent to $66.49 a barrel.

Yesterday, oil rose $3.59, or 5.7 percent, to settle at $66.94, the biggest gain since April 9.

“The market is very resilient and that there are more bulls than bears,” said MF Global’s Liu.

The MSCI Asia-Pacific Index has risen 3.1 percent this week and 7.9 percent for the month. It has posted gains in every month since March, the longest winning streak since July 2007. The S&P 500 yesterday added 1.2 percent and the Dow Jones Industrial Average climbed 0.9 percent.

“Last night’s movements in oil prices was mainly macro-economic factors more than oil market fundamentals, ” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney.

U.S. Inventories

Prices are down 2.2 percent this week, heading for the first weekly decline since July 10.

U.S. oil inventories gained 5.15 million barrels to 347.8 million in the week ended July 24, the Energy Department said in its weekly report. Stockpiles of distillate fuel, a category that includes diesel and heating oil, rose 2.1 million barrels to 162.6 million, the highest since January 1985.

U.S. refinery use last week fell 1.3 percentage points to 84.6 percent, its second consecutive drop and 2.6 points below the same year-ago period, the Energy Department said July 29.

Refinery Use

The drop in refinery runs pushed the so-called crack spread, the price difference between gasoline and crude oil, to $15.02 a barrel today from $9.17 a barrel on July 14. This is improving processing margins.

“The middle distillate storage is too big so it’s requiring refiners to cut runs,” said MF Global’s Liu. “The unintentional casualty is gasoline production. The reduction has done something to save the middle distillate crack but in another way it can also push the gasoline crack higher.”

The price difference between middle distillate heating oil and crude oil has climbed to $8.04 a barrel today from $3.46 a barrel on July 13.

Crude oil may decline next week on speculation that U.S. inventories will extend gains as demand lags behind because of the recession, a survey of analysts showed.

Twenty-four of 35 analysts surveyed by Bloomberg News, or 69 percent, said futures will fall through Aug. 7. It’s the most bearish response since March 2008. Six respondents, or 17 percent, forecast that prices will be little changed and five expected an increase. Last week, 46 percent of analysts said oil would drop.

Brent crude oil for September settlement rose as much as 55 cents, or 0.8 percent, to $70.66 a barrel on London’s ICE Futures Europe exchange. It was at $70.58 a barrel at 12:43 p.m. Singapore time. It earlier fell as much as 44 cents, or 0.6 percent, to $69.67 a barrel.

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

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Soybeans Gain for Second Day as Dollar Lifts U.S. Crop Demand

By Jae Hur

July 31 (Bloomberg) -- Soybeans extended gains as the dollar’s decline increased demand prospects for supplies from the U.S., the top supplier.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, declined for a second day before a government report forecast to show the U.S. economic contraction slowed in the second quarter. A weaker dollar makes U.S. crops more attractive to buyers with other currencies.

“The dollar’s weakness may boost demand from overseas for U.S. crops that jumped in the past weeks,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today. The grain and oilseed market was also supported by rising global stock prices that increased optimism of an economic recovery, spurring demand for commodities, he said.

November-delivery soybeans climbed 0.4 percent to $9.745 a bushel on the Chicago Board of Trade at 12:05 p.m. Singapore time after jumping 6 percent yesterday, the most since Oct. 29. Even so, the oilseed is headed for a second monthly drop.

December-delivery corn fell 0.1 percent to $3.42 a bushel after rising 4.3 percent yesterday. Before today, the grain rose 4.6 percent this week, the first such gain in eight weeks.

Soybeans and corn jumped yesterday after the Department of Agriculture said U.S. exporters sold 1.92 million metric tons of soybeans to China, with 1.8 million tons set for delivery in the marketing year that begins Sept. 1

In a separate report yesterday, the USDA said soybean exports jumped 36 percent to 954,543 metric tons in the week ended July 23. Corn sales in the past four weeks have increased 55 percent from a year earlier, the USDA said.

Dollar Index

The Dollar Index slipped 0.3 percent to 79.04 after losing as much as 0.6 percent yesterday. The Reuters/Jefferies CRB Index of 19 commodities jumped 3.9 percent yesterday, the biggest gain since March 19.

The MSCI Asia Pacific Index climbed 1.5 percent to 111.59 as of 12:05 p.m. in Singapore. The benchmark has risen 8 percent for the month. The index has posted gains every month since March, the longest winning streak since July 2007.

Wheat for September delivery added 0.5 percent to $5.1875 a bushel after gaining 0.9 percent yesterday. Before today, the contract has dropped 4.5 percent this month on speculation favorable weather would boost U.S. production, touching touched $5.05 on July 29, the lowest price since March 4.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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China Steel Mills Say Suppliers Encourage Speculation

By Bloomberg News

July 31 (Bloomberg) -- China’s steelmakers, stalled in iron ore price talks with Rio Tinto Group and BHP Billiton Ltd., said suppliers are encouraging speculative trading in the spot market through cash auctions.

Iron-ore producers fed “speculative actions” by increasing sales on the spot market rather than through contracts, leading to huge stockpiles, the China Iron & Steel Association said in a statement issued in Beijing today. The group called on the government to limit resale profits made by traders and stop the sale of ore to obsolete mills.

“We object to speculative and manipulative actions,” Luo Bingsheng, vice chairman of the association, said a press conference.

China’s iron ore imports surged 29 percent in the first half, hurting the steel group’s attempt to negotiate a price cut bigger than the 33 percent offered by BHP, Rio and Vale SA. Police in Shanghai arrested four Rio executives on spying charges this month in a probe that Australia said is related to iron-ore price talks.

Talks between the steel association and iron ore producers to agree to contract prices are still ongoing, and China is seeking a “win-win” agreement, Luo said.

New Trading System

Under an import system proposed by the steel group, traders would buy ore at contract prices agreed to between steelmakers and iron ore producers, Luo said. These traders would take a 3 percent to 5 percent fee. The association would record the amount of ore purchased by mills and the price paid, he said.

Luo is making the comments as cash market prices in China surged above contract prices offered by Rio Tinto, BHP and Vale, the world’s three largest suppliers. Steel output in China jumped to a record in the first half as the government spends 4 trillion yuan ($586 billion) to revive economic growth.

“China’s steel capacity has almost exploded,” said Peter Arden, a mining analyst at Ord Minnett Ltd. in Melbourne. “The only way the smaller, mid-sized mills can get access (to iron ore) is in the spot market.”

Spot iron ore prices, which include freight charges, have jumped 31 percent this year to $94 a metric ton, according to the Steel Index. The benchmark Rio Tinto product from Australia is sold at $61 a ton to Japanese and Korean customers. It costs about $14.327 a ton to ship ore from Australia to China.

There are 152 importers of iron ore in China this year, exceeding the 112 licenses handed out, the steel group said. Iron ore sold in cash market accounted for 83 percent of imports this year, the steel association said.

--Xiao Yu, Jesse Riseborough. Editors: Tan Hwee Ann, Teo Chian Wei

To contact the Bloomberg News staff on this story: Xiao Yu in Beijing on yxiao@bloomberg.net;

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Coffee Poised to Climb on El Nino, Brazil Buying: Chart of Day

By Lee J. Miller

July 31 (Bloomberg) -- Coffee prices are set to rise as El Nino-linked weather may reduce crops in Vietnam and Indonesia and on stockpiling by Brazil, according to Commerzbank AG.

The CHART OF THE DAY shows coffee inventories and arabica and robusta prices, based on data compiled by Bloomberg and IntercontinentalExchange Inc. Robusta has gained about 15 percent since falling to the lowest close in at least 18 months on June 26, and arabica has increased about nine percent from a three-month closing low July 10 as stockpiles dropped.

“ICE inventories have declined to the lowest level in nearly three years and indicate an ongoing shortage,” Eugen Weinberg, senior commodity analyst at Commerzbank in Frankfurt, said in an e-mail. “Supply in Vietnam and Indonesia, which account for more than 50 percent of the global robusta coffee production, could potentially be threatened by the weather phenomenon El Nino,” a periodic warming of the ocean surface off the western coast of South America.

Stockpiling by Brazil, the top producer, with its crop of mainly arabica beans, will also boost prices, he said. The government bought about 3 million 60-kilogram bags from domestic growers this month “to achieve higher prices,” he said.

Even with recent gains, “we still view coffee prices as too low and expect, in view of the tight market situation, significantly higher prices in the medium- to long-term,” he said. “Previously speculators’ bets on large coffee crops have put prices under strong pressure,”

Prices will probably rise based on crop forecasts and stockpiling by governments of leading producers, Luong Van Tu, chairman of the Vietnam Cocoa and Coffee Association, said in a telephone interview this week.

(To save a copy of the chart, click here.)

With assistance from Nguyen Dieu Tu Uyen in Ho Chi Minh City. Editors: Wendy Pugh, James Poole

To contact the reporters for this story: Lee J. Miller in Bangkok at lmiller@bloomberg.net

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Japan’s Topix Heads for Longest Win Streak Since 1990 on Sony

By Masaki Kondo

July 31 (Bloomberg) -- Japanese stocks rose, lifting the Topix index toward its longest winning streak in two decades, as earnings results at Sony Corp. and Mitsui Fudosan Co. boosted investor confidence in the prospects for corporate profits.

Sony, maker of the PlayStation 3 game machine, climbed 5.4 percent. Mitsui Fudosan, Japan’s largest property developer, gained 5.6 percent after reporting first-quarter profit more than doubled. Nintendo Co., maker of the Wii game console, sank 5.4 percent in Osaka trading after sales fell more than expected. Investors shrugged off government reports that showed rising unemployment and a record drop in consumer prices.

“An earnings and economic recovery in the second half was rather like a wishful thought,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $90 billion. “That’s getting more likely now and increasing investors’ appetite for risk assets.”

The Nikkei 225 Stock Average climbed 180.93, or 1.8 percent, to 10,346.14 as of 12:57 p.m. in Tokyo, en route for its highest close since Oct. 6. The broader Topix rose 12.51, or 1.3 percent, to 949.45, set for an 11th day of gains, the longest stretch since May 1990.

The Nikkei and Topix are set for fifth monthly gains, the longest streak since January 2006, as better-than-anticipated results from Japanese and U.S. companies boosted investor confidence. For the week, the Nikkei is poised for a 4 percent climb, and the Topix is set to add 3.1 percent.

Sony’s Loss

Sony, which plans to cut 16,000 jobs by March 31, rose 5.4 percent to 2,640 yen. The company reported a first-quarter net loss that was less than half analysts’ estimates. Cost reductions helped narrow the loss at Sony’s television business and the recovery in Japan’s stock market lifted operating profit at the manufacturer’s financial unit.

Nomura raised Sony to “buy” from “neutral,” citing higher earnings prospects.

Mitsui Fudosan climbed 5.6 percent to 1,749 yen. Net income more than doubled to 16.1 billion yen ($169 million) in the three months to June 30 as housing sales and revenue from new shopping malls increased, the company said.

Sumitomo Realty & Development Co., which is scheduled to announce earnings next week, soared 6.9 percent to 1,958 yen. Real-estate companies as a group were the biggest winners among the 33 industry groups tracked on the Topix.

“Those earnings reports are reflecting a gap among companies in the degree of their efforts to ride out the recession by cutting costs and cultivating customers,” Daiwa Asset’s Nagano said. “If many businesses try to eke out profits by cutting costs, it may deepen an economic slump.”

Unemployment, Deflation

The nation’s jobless rate jumped to 5.4 percent in June, a level not seen since June 2003, a statistics bureau report showed today. Prices excluding fresh food declined 1.7 percent from a year earlier last month, the sharpest since the survey began in 1971, according to a separate report from the bureau.

Nintendo tumbled 5.4 percent to 25,370 yen in Osaka trading. The game maker said first-quarter net income plunged 61 percent. Sales fell 40 percent to 253.5 billion yen, a fifth lower than analysts’ estimates.

Mazda Motor Corp., the world’s only mass producer of rotary engines, sank 4.2 percent to 253 yen. The automaker had a third consecutive quarterly loss, with sales falling 45 percent.

Nikkei futures expiring in September added 1.5 percent to 10,350 in Osaka and gained 1.4 percent to 10,350 in Singapore.

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

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Air France, Reed Elsevier, Santander: Europe Equity Preview

By Nadja Brandt

July 31 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 added 2.2 percent to 225.25. The Dow Jones Stoxx 50 Index climbed 2.2 percent to 2,306.65. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, advanced 2.1 percent to 2,654.74.

Air France-KLM Group (AF FP): Europe’s biggest airline posted a first-quarter loss of 431 million euros ($606 million) as the recession cut demand for air travel and cargo transport. Analysts expected a loss of 194 million euros, according to the median of five estimates compiled by Bloomberg. The shares advanced 24.7 cents, or 2.8 percent, to 9.21 euros.

Areva SA (CEI FP): The world’s biggest builder of nuclear reactors said sales rose 6 percent to 6.5 billion euros in the first half. The shares fell 4.50 euros, or 1.1 percent, to 402.50 euros.

Assicurazioni Generali SpA (G IM): The Italian insurer releases first-half earnings. The shares rose 38 cents, or 2.4 percent, to 16.26 euros.

Banco Santander SA (SAN SM): Spain’s largest lender and its rival Banco Bilbao Vizcaya Argentaria SA (BBVA SM) got their credit ratings cut by Moody’s Investors Service citing a deterioration of their largest markets including Spain. Santander rose 0.14 euros, or 1.47 percent, to 10.01 euros. BBVA stock rose 0.39 euros, or 3.57 percent, to 11.32 euros.

Colruyt NV (COLR BB): Belgium’s biggest discount food retailer said first-quarter revenue rose 6.6 percent to 1.67 billion euros, matching analyst estimates. Colruyt rose 2.50 euros, or 1.6 percent, to 156.65 euros.

Continental AG (CON GY): Chief Executive Officer Karl- Thomas Neumann has resigned after failing to push through a capital increase, the Sueddeutsche Zeitung said in an article on its Web site. The newspaper did not say where it obtained the information, and said a spokeswoman had declined to confirm the report. A spokeswoman said she couldn’t confirm or deny a Sueddeutsche Zeitung report when contacted by Bloomberg News. The shares added 5.5 percent to 27.11 euros.

L’Oreal SA (OR FP): The world’s largest cosmetics maker said second-quarter sales rose 2.6 percent to 4.4 billion euros as increased demand in Asia and Latin America offset inventory cuts by European distributors. Analysts expected sales of 4.38 billion euros, according to the median of seven estimates compiled by Bloomberg. The shares climbed 97 cents, or 1.7 percent, to 58.25 euros.

Reed Elsevier NV (REN NA): The publisher of Variety and New Scientist said total gross proceeds from two share sales were about 824 million pounds ($1.36 billion). Reed Elsevier tumbled 1.05 euros, or 13 percent, to 7.30 euros.

Volkswagen AG (VOW GY): The carmaker’s Audi unit is scheduled to report second-quarter results. Volkswagen shares increased 5.7 percent to 255.43 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

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Asian Stocks Rise on Profits; MSCI Set for Fifth Monthly Gain

By Patrick Rial and Masaki Kondo

July 31 (Bloomberg) -- Asian stocks rose, sending the MSCI Asia Pacific Index to a fifth monthly gain, as earnings from Sony Corp. and Datang International Power Generation Co. and a commodities rally spurred confidence the economy is recovering.

Sony, the maker of Vaio computers and PlayStation 3 game consoles, jumped 5.4 percent in Tokyo after cost cuts led to a smaller-than-expected loss. Datang, China’s No. 2 electricity producer, jumped 6.6 percent in Hong Kong after saying first half profit likely rose more than 50 percent. Rio Tinto Group, the world’s third-largest mining company, rallied 3.3 percent in Sydney following a jump in prices of copper, nickel and oil.

The MSCI Asia Pacific climbed 1.7 percent to 111.68 as of 12:43 p.m. in Tokyo, the highest Sept. 26. The benchmark has risen 7.9 percent this month, capping a 58 percent rally from the lowest in more than five years in March.

“An earnings and economic recovery in the second half was rather like a wishful thought,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $90 billion. “That’s getting more likely now and increasing investors’ appetite for risk assets.”

Japan’s Nikkei 225 Stock Average rose 1.4 percent to 10,304.90. Benchmarks open for trading throughout Asia climbed.

Still, reports today showed Japan’s jobless rate rose to a six year high, and consumer prices posted a record decline in June, raising concern any economic recovery will be muted. Nintendo Co. tumbled 5.1 percent after falling console sales pushed profits lower, while Mazda Motor Corp. slumped 5.7 percent after posting a third straight quarterly loss.

‘Unexpected Profits’

Futures on the Standard & Poor’s 500 Index rose 0.3 percent in trading today. Earnings reports from Motorola Inc. and MasterCard Inc. propelled the S&P 500 to a 1.2 percent gain yesterday to 986.75, the highest level in almost nine months.

Sony added 5.4 percent to 2,640 yen. The company reported a first-quarter net loss that was less than half analysts’ estimates. Nomura Holdings Inc. lifted its rating on the stock to “buy” from “neutral” on better-than-forecast performance at the company’s financial unit and cost reductions.

“Losses are shrinking, and some companies are unexpectedly turning profits, painting a bright picture,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo. “Investors will have to start paying attention not only to the fruits of cost cuts, but also the outlook for a sales rebound that’s coming.”

Datang International rose 6.6 percent to HK$5.15. The power producer said in a preliminary earnings statement that profit rose more than 50 percent in the six months through June on rising revenues and tariff changes.

Yamato Holdings

Yamato Holdings Co., Japan’s largest parcel-delivery company,　jumped 8.6 percent to 1,415 yen, set for the highest close in a year, and the steepest increase in the Nikkei 225. The company lifted its full-year net income forecast by 6.8 percent. Rival Nippon Express Co., which reports earnings today, climbed 5.9 percent to 432 yen.

Taiwan Semiconductor Manufacturing Co., the world’s largest custom-chip maker, rose 5.4 percent to NT$59 in Taipei, the most in two months. Revenue this quarter will be NT$88 billion ($2.7 billion) to NT$90 billion, while gross margin will be 46.5 percent to 48.5 percent, the company said yesterday, beating analyst estimates.

Outpacing U.S., Europe

Kikkoman Corp. surged 6.2 percent to 1,098 yen, headed for the highest since Oct. 22. First-quarter net income at Japan’s biggest soy-sauce maker rose 20 percent from a year earlier, the company said yesterday.

Industrial Bank of Korea, South Korea’s largest lender to small- and medium-sized companies, gained 3.7 percent to 14,000 won after second-quarter profit exceeded analyst estimates.

The MSCI Asia Pacific has surged 58 percent since March 9, outpacing gains of 46 percent by the S&P 500 and 43 percent by Europe’s Stoxx 600 Index. Accelerating growth in China, rising industrial production in Japan, and a rally in commodities prices have helped boost shares throughout the region.

Stocks in the MSCI Asia Pacific are currently valued at 24.5 times estimated earnings, compared with 18 times at the start of the year.

Rio Tinto rose 3.3 percent to A$59.99 in Sydney. BHP Billiton Ltd., the world’s largest mining company, advanced 1.7 percent to A$37.77. Woodside Petroleum Ltd., Australia’s second- largest oil producer, gained 2.2 percent to A$45.49.

Crude oil soared 5.7 percent in New York yesterday, the biggest gain since April 9. The Reuters/Jefferies CRB Index jumped 3.9 percent, the steepest advance since March 19.

Nintendo, the world’s biggest maker of handheld game players, slumped 5.3 percent to 25,380 yen after falling Wii and DS console sales caused net income to slide by more than half last quarter. UBS AG initiated a “short-term sell” recommendation on the company.

Mazda, Japan’s second-largest car exporter, sank 4.9 percent to 251 yen. The company had a loss of 21.5 billion yen ($264 million) last quarter as sales fell 45 percent.

Cycle & Carriage Bintang Bhd., a Malaysian distributor of Mercedes-Benz vehicles, jumped 29 percent to the highest in almost three years after declaring a special dividend.

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

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