U.S. Stock-Index Futures Fluctuate; Lazard Drops as EBay Rises

By Adam Haigh

Sept. 9 (Bloomberg) -- U.S. stock-index futures drifted between gains and losses after a six-month rally in the Standard & Poor’s 500 Index left the measure valued near the most expensive level in five years.

Lazard Ltd. dropped 3.3 percent after the investment bank led by Bruce Wasserstein said some shareholders agreed to sell 5.22 million shares in an underwritten public offering. EBay Inc. advanced 1 percent as Sanford C. Bernstein & Co. recommended buying the stock.

Futures on the S&P 500 expiring this month fell 0.1 percent to 1,024.20 as of 7:01 a.m. in New York. Dow Jones Industrial Average futures lost 0.1 percent to 9,486. Nasdaq-100 Index futures declined 0.2 percent to 1,652.

The S&P 500 has rebounded 52 percent from a 12-year low on March 9 as reports from consumer confidence to home sales signaled the recession is easing and companies from Johnson & Johnson to Goldman Sachs Group Inc. posted earnings that beat analysts’ estimates. The Federal Reserve will publish its Beige Book business survey today at 2 p.m. in Washington.

The rally has pushed valuations in the benchmark index for U.S. equities to about 18.9 times the reported earnings of its companies, near the highest level since June 2004, according to weekly data compiled by Bloomberg.

“Investors should be prepared for some additional near- term corrective action,” Robert Doll, the global chief investment officer at BlackRock Inc., wrote in an e-mail to journalists yesterday. “Stocks are no longer as cheap as they were several months ago. Conditions may be overbought and there is still a great deal of uncertainty over the outlook.”

Lazard, EBay

Lazard declined 3.3 percent to $37.73 in early New York trading. The company said it won’t receive any proceeds from the share sale.

EBay, owner of the most visited U.S. e-commerce Web site, climbed 1 percent to $22.05 after Bernstein raised its recommendation to “outperform” from “market perform” and lifted its share-price estimate 17 percent to $28.

Vivus Inc. soared 40 percent to $9.70. The developer of treatments for sexual dysfunction and obesity said its Qnexa drug helped patients lose enough weight in studies to allow the biotechnology company to seek U.S. approval to sell the treatment this year.

AeroVironment Inc. fell 1.5 percent to $29.96 in Germany. The maker of U.S. military spyplanes reported a loss of 17 cents a share in the fiscal first quarter. Analysts had expected the company to earn 12 cents, according to the average estimate in a Bloomberg survey.

Kraft Foods

Kraft Foods Inc., the world’s second-largest foodmaker, is in talks to arrange about $8 billion of financing for its bid to buy candy maker Cadbury Plc, according to two people with knowledge of the matter.

Separately, the company said it was targeting operating- income margins in the mid-teens on a percentage basis by 2011, up from 12.3 percent in 2008. The information was sent today in a regulatory filing. The shares added 0.5 percent to $26.59 in early New York trading.

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

Read more...

Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Sep 09 09 10:08 GMT |

EUR/USD Resistance: 1,4480/ 1,4500/ 1,4520/ 1,4550-55/ 1,4580/ 1,4600 Support: 1,4440/1,4400/ 1,4380/ 1,4340/ 1,4300/ 1,1270/ 1,1240 Comment: Euro rose yesterday towards 1.4530-40, forming new highs for this year. These levels were slightly higher from our targets, regarding the triangle formation scenario. Technically, euro has tested the ranges of the triangle formation as you can see in the daily chart, but the upper part of the short term rising channel is more clear in the 4 hour chart. A downward break of the consolidation and a move towards first support levels at 1,4440 area, would be a sign of weakness. Next target will be at 1,4380-00, and if it is also breached, the end of the upward move will be confirmed. If 1,4440 area is confirmed as support during retracements, and a rise to now tops is formed, next targets will be at 1,4580 and 1,4630 area. This will be a negative sign for our false break scenario and a move towards 1,4700 or 1,4850-00, would be possible. We remain cautious regarding a new rise until we have more signs. A classic reversal candle formation would be the ideal end for the rise… STRATEGY Sell orders from yesterday's move at Η 1,4500-20 remain open, with stops above 1,4560 and targets at1,4380-00. New sell orders could be tried at a break of the base at 1,4440… The above mentioned strategy refers to orders that we may follow for personal accounts, depending on the market analysis and the potential reach of resistance and support levels. We do not encourage buy or sell orders, as its effective use is based on correct risk management and the ability of position readjustment depending on current conditions FX Greece DISCLAIMER The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market. We assume no responsibility for any kind of losses ,profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action. We reserve the right to change the terms and the characteristics of the analysis. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights.

Read more...

German August Consumer Prices Fall for Second Month

By Cornelius Rahn

Sept. 9 (Bloomberg) -- German consumer prices declined from a year earlier for a second month in August, indicating inflation pressures remained subdued even as the economy began to recover from its deepest recession in more than 60 years.

Consumer prices, calculated using a harmonized European Union method, fell 0.1 percent from a year earlier after dropping 0.7 percent in July, the Federal Statistics Office in Wiesbaden said in a statement today. The decline compares with an initial estimate that prices were unchanged on the year. From the previous month, prices rose 0.3 percent.

Inflation may accelerate as the global economy recovers, pushing up demand for commodities such as oil. While the German economy unexpectedly returned to growth in the second quarter, the pace of consumer-price increases may be restrained as rising unemployment restricts consumer spending.

“We have certainly seen the trough of price changes in July,” said Joerg Lueschow, an analyst at West LB in Duesseldorf. “Towards the end of the year, we expect inflation to be between 0.75 percent and 1 percent.”

On a non-harmonized basis, prices were unchanged in August from a year earlier and increased 0.2 percent from July.

Excluding energy and fuel, non-harmonized consumer prices rose 1 percent in August from a year earlier, the statistics office said. While crude-oil prices have more than doubled since mid-February to around $70 a barrel, they are more than 50 percent below the July 2008 record.

Inflation Forecasts

Euro-area consumer prices fell 0.2 percent in August from a year earlier, less than economists had forecast, data published on Aug. 31 showed. The European Central Bank last week raised its inflation forecasts for the region, saying price growth will average 0.4 percent this year and 1.2 percent in 2010.

ECB council member Axel Weber said yesterday that inflation pressures will remain subdued and it will take some time before the economy is growing fast enough to push up prices. “All in all, inflation fears, understandable as they may be, are unfounded,” Weber said at a conference in Frankfurt.

Metro AG, Germany’s largest retailer, said in July that it will reduce prices on 5,000 items at its cash and carry wholesale unit to attract customers. Puma AG, Europe’s second- largest sporting-goods maker, last month reported a 16 percent drop in profit as a result of increased discounting.

“When we look at basic goods, we won’t have inflation pressure for the next one and a half years since sellers don’t have much space to raise prices,” said Jens-Oliver Niklasch, an economist at Landesbank Baden-Wuerttemberg in Stuttgart.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

Read more...

Central Banks Must Keep Stimulus to Support Growth, Gokarn Says

By Cherian Thomas

Sept. 9 (Bloomberg) -- Central banks must maintain low interest rates until consumer and company spending is “robust” enough to support economic growth, said Subir Gokarn, the Standard & Poor’s economist in the running for the deputy governor’s post at the Reserve Bank of India.

“The key transition is going to be in terms of private spending becoming more robust so policy makers can exit without completing disrupting the growth process,” Gokarn, Asia-Pacific chief economist at S&P, said in an interview yesterday in New Delhi. “There are signs that it is happening, but clearly not to the point of complete assurance.”

Gokarn’s comments came after officials from Group of 20 nations last week said they are “cautious” on the world growth outlook and agreed the need to coordinate when unwinding the emergency measures adopted to reverse the global recession. Weak growth accompanied by the risk of inflation is causing a “complex dilemma” for India’s central bank on setting rates, Governor Duvvuri Subbarao said Aug. 27.

The Reserve Bank of India on July 28 forecast the economy would grow 6 percent “with an upward bias” in the year to March 31, the weakest pace since 2003. It also raised its inflation forecast to 5 percent from 4 percent by the end of the financial year. The key wholesale price inflation index fell 0.21 percent in the week to Aug. 22 from a year earlier.

Subbarao said the Reserve Bank may have to reverse its easy monetary policy sooner than most other countries as inflationary pressures are mounting quickly, Dow Jones reported on the Financial Express Web site today.

Monetary Policy

Gokarn and Cornell University economist Eswar Prasad are frontrunners for the post of deputy governor at India’s central bank, the Economic Times reported Aug. 8 without saying where it got the information. The new deputy governor will be in charge of monetary policy and will fill the vacancy created when Rakesh Mohan stepped down in June. Gokarn said he hadn’t been contacted regarding his candidature.

India’s cabinet has reappointed Shyamala Gopinath as a deputy governor of the Reserve Bank of India for another two years, the Economic Times reported today without citing anyone.

“The inflation story is a little more complicated than it appears,” Gokarn said. “I don’t see we are in danger of demand-side inflation picking up. Where it is coming from is supply side -- oil, commodities and now in India’s case, food.”

He said whether central banks will respond to supply side inflation the way they did in 2008 is “still a debate.”

India’s central bank raised the key repurchase rate by 3 percentage points to 9 percent between October 2005 and July 2008 as inflation soared to 12.91 percent, a 16-year high. Subbarao, who was appointed governor in September 2008, has since slashed the central bank’s benchmark rate to 4.75 percent as the global recession deepened.

“In 2008, they did respond to supply side inflation quite aggressively because growth was also quite high at that point,” Gokarn said. “We are in a different situation. The nature of inflationary pressures is different.”

To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.

Read more...

Dubai ‘Not Worried’ About Maturing Debt, Ruler Says

By Riad Hamade and Arif Sharif

Sept. 9 (Bloomberg) -- Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum said he is “not worried” about the emirate’s ability to repay at least $4.52 billion of debt this year, boosting property developer Nakheel’s bonds to a year-high.

“I assure you we are alright, the U.A.E. is alright, and we are not worried,” Sheikh Mohammed told reporters late yesterday at his Zabeel palace in Dubai, when asked whether the emirate would be able to repay the loans. Sheikh Mohammed is also the prime minister of the United Arab Emirates, a union of seven states of which Dubai is the second-biggest after Abu Dhabi.

The Dubai government must repay a $1 billion Islamic bond maturing in November, while state-owned real-estate developer Nakheel PJSC has a $3.52 billion Islamic bond falling due in December. The emirate borrowed $80 billion to finance its transformation into an international logistics, tourism and finance hub, and the seizure of global credit markets sparked concern about its ability to repay the loans.

Nakheel’s 3.1725 percent bond surged 9.3 percent to 102.5 cents on a dollar at 12:34 p.m. in Dubai after the comments, according to prices provided by National Bank of Abu Dhabi PJSC to Bloomberg. The bond, which slumped to 63.5 cents on a dollar in February, is headed for its highest close since Sept. 2008.

Moving markets

“This is moving markets,” Abdul Kadir Hussain, chief executive officer of Mashreq Capital DIFC Ltd., said in a phone interview from Dubai today. “It gives a boost to confidence that the market was looking for, and this is obviously coming directly from the source, so that provides a lot of comfort.”

Dubai set up a $20 billion fund earlier this year to help state-related companies struggling to raise money amid the credit crisis. Home prices in Dubai have tumbled by about 50 percent from their peak and may drop another 20 percent this year, Deutsche Bank AG said in a report in June.

Dubai established the fund after the global financial turmoil hurt its key property, finance and tourism industries and hindered companies’ access to credit. The first $10 billion for the fund was raised by selling bonds to the U.A.E.’s Abu Dhabi-based central bank in February.

The emirate, which is building the world’s tallest tower and the biggest man-made islands in the shape of palm trees, would study the viability of projects more closely in the future after the credit crunch led to an economic slump in the Persian Gulf business hub, Sheikh Mohammed said.

More careful

“We’ll be more careful now,” he said. “The crisis came for everyone, not just Dubai. People had to fight.”

The sheikhdom shelved some of its most ambitious plans including a set of dancing towers, made up of 80 stories of rotating floors, and a Formula One theme park. Emaar Properties, the U.A.E.’s biggest developer, is in talks to merge with three developers owned by state-controlled Dubai Holding LLC.

“The strategy is nearly the same,” Sheikh Mohammed said. “The U.A.E. is strong, it is like a plane facing headwinds. Now the headwinds are slowing down, so the plane will reach its destination more quickly.”

To contact the reporter on this story: Riad Hamade in Dubai at rhamade@bloomberg.netArif Sharif in Dubai at asharif2@bloomberg.net

Read more...

Trichet Says Crisis Is Not Over, Exit Important

By Matthew Newman

Sept. 9 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said while the financial crisis is not yet over, it’s important for policy makers to consider how they will withdraw economic stimulus measures.

“It’s not time yet to say that the crisis is over,” Trichet told reporters in Brussels today after meeting European Parliament President Jerzy Buzek. “At the same time, it’s very important to be convincing on the path to a normal sustainable position.”

The Frankfurt-based ECB, which has cut interest rates to a record low, is loaning banks as much money as they want for up to 12 months to get credit flowing through the economy again. Governments are also spending billions on measures to kick-start economic growth. Germany and France emerged from their recessions in the second quarter, putting the euro-area economy on course to expand in the third.

Trichet also said the reform of the financial system should remain “as strong as possible, despite some quarters that say things are back to normal.”

He also said the ECB stands ready to contribute to the establishment of a European Systemic Risk Board of central bankers and financial regulators, which would share information and monitor hazards across borders and industries.

To contact the reporter on this story: Matthew Newman in Brussels at mnewman6@bloomberg.net

Read more...

U.S. MBA Mortgage Applications Index Soared 17% Last Week

By Jennifer Ryan

Sept. 9 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.K. economy will be slow to rebound from the worst contraction in a generation after the collapse of world trade battered exports.

“It’s going to take a long while for you to work your way through this,” Greenspan, who serves as an informal adviser to U.K. Prime Minister Gordon Brown, told the BBC in an interview published on its Web site. “Britain is more globally oriented as an economy.”

Greenspan’s warning comes a week after the Organization for Economic Cooperation and Development projected the U.K. would be the only member of the Group of Seven nations not to have any quarter of growth this year. U.K. exports have shrunk for five quarters as the credit crisis tipped the global economy into its deepest slump since World War II following last year’s bankruptcy of Lehman Brothers Holdings Inc.

“The dramatic decline in exports globally and trade generally following the collapse of Lehman Brothers had dramatic effects in the financial system of Britain,” said Greenspan, who received an honorary knighthood from Queen Elizabeth II in 2002.

Bank of England Governor Mervyn King said on Aug. 12 that the U.K. may be heading for a “relatively slow recovery,” although Chancellor of the Exchequer Alistair Darling predicts growth will resume around the end of this year. The National Institute of Economic and Social Research, whose clients include the central bank, said today that the economy probably grew 0.2 percent in the three months through August, compared with a decline of 0.3 percent in the three months through July.

Policy Makers

Bank of England policy makers meeting today and tomorrow will probably decide to continue a plan to buy 175 billion pounds ($289 billion) of bonds with newly created money in a bid to stoke growth.

The Paris-based OECD, which seeks to coordinate policy across its 30 member nations, said on Sept. 3 that it projected the U.K. economy will contract 1 percent in the current quarter before stagnating in the final three months of the year. It cut its forecast for the full year to show a slump of 4.7 percent compared with 4.3 percent estimated in June. That made it the only G-7 economy for which the OECD’s outlook deteriorated.

Once regarded by some observers as the greatest central banker, Greenspan has seen his legacy criticized since the U.S. subprime-mortgage market collapsed in 2007, triggering a global crisis that has led to $1.6 trillion of writedowns and credit losses for financial institutions.

Under-Pricing Risk

The current crisis stemmed from bankers under-pricing risk and betting they would know when the tide turned, Greenspan said. “I fear too many of them thought they would be able to spot the actual trigger point of the crisis in time to get out,” he told the BBC.

Even as the current turmoil ebbs, Greenspan repeated that the world economy would always face periods of turbulence and recommended capital requirements be increased at banks as a buffer. While the next crisis may be different, it will still originate from the “unquenchable ability” of people to believe prosperous times are endless, he said.

“The crisis will happen again, but it will be different,” Greenspan said in the interview.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

Read more...

OPEC Committee Recommends Keeping Quotas Unchanged

By Grant Smith and Maher Chmaytelli

Sept. 9 (Bloomberg) -- The Organization of Petroleum Exporting Countries should maintain existing output quotas and improve compliance when the 12-member group meets today, the group’s production-monitoring committee recommended.

“We need more compliance” with existing production targets, Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah told reporters in Vienna. “I don’t foresee any cut,” he said, when asked at what price level the group might consider a further supply reduction.

Saudi Arabian Oil Minister Ali al-Naimi, who represents OPEC’s biggest and most influential producer, said current oil prices are “good for everybody, consumers, producers,” adding to comments from other members of the group pointing to no change in output. All 26 analysts surveyed by Bloomberg News forecast OPEC will leave production quotas unchanged for a third time at today’s meeting.

Oil rallied from a low of $32.70 in January to peak this year at $75 a barrel on Aug. 25. Crude for October delivery was trading at $71.07 on the New York Mercantile Exchange at 10:49 a.m. in Singapore. Al-Sabah said current prices are “OK” and said a supply cutback is unlikely in the near future even though the market is “oversupplied.”

OPEC’s Ministerial Monitoring Committee met for an hour yesterday evening at the group’s Vienna headquarters to review data on OPEC oil supply and demand. The MMC, comprising officials from Iran, Nigeria and Kuwait, often recommends a course of action for the full meeting of OPEC ministers, which convenes at 9:30 p.m. local time, after dark because the summit falls in the Muslim holy month of Ramadan.

Compliance Percentage

The MMC also recommended no change in quotas when it met before OPEC’s May meeting. OPEC Secretary General Abdalla El- Badri and Iran’s incoming Oil Minister Masoud Mir-Kazemi both left the meeting without commenting.

The group agreed late last year to cut production targets by 4.2 million barrels a day after prices crashed more than $100 a barrel from a record of $147.27 in July 2008.

The 11 OPEC members bound by quotas are currently complying with about 68 percent of their promised cutbacks, Al-Sabah said, adding that “75 percent would be fine.”

Those members, all except Iraq, pumped 26.055 million barrels a day in August, according to estimates in a Bloomberg survey, which indicates quota compliance of about 71 percent. Only Saudi Arabia, Kuwait and Qatar pumped less than their target. Iran, Angola and Venezuela are the biggest quota busters.

Non-OPEC Criticized

Qatari Energy Minister Abdullah bin Hamad al-Attiyah, while backing no change to OPEC’s targets, criticized the lack of support from non-member producers such as Russia.

“We heard a lot of oral support, we would like to see physical support,” from non-OPEC suppliers, Al-Attiyah said as he arrived in Vienna yesterday.

Russia’s oil exports are surpassing those of Saudi Arabia for the first time since the Soviet Union’s collapse as Prime Minister Vladimer Putin exploits OPEC cuts to gain market share.

Exports of crude and refined products from Russia rose to about 7.4 million barrels a day in the second quarter, according to Energy Ministry data. Saudi shipments fell to about 7 million barrels a day, International Energy Agency estimates of output and domestic demand showed.

Investors had expected Russian supplies to decline this year after Putin’s deputy, Igor Sechin, told the Organization of Petroleum Exporting Countries in December that his government was ready to limit production to support prices. Instead, the country is providing tax breaks for new fields in Siberia. OAO Rosneft, OAO Lukoil and BP Plc’s Russian venture TNK-BP pumped more to take advantage of a 59 percent gain in prices so far this year.

The extra barrels may undermine OPEC efforts to reduce inventories and keep members from exceeding their quotas after the group meets in Vienna tomorrow. Oil will fall 4.7 percent from the average so far this quarter to $64.50 a barrel in the third, according to the median of 34 analyst estimates compiled by Bloomberg.

To contact the reporters on this story: Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net; Grant Smith in Vienna at gsmith52@bloomberg.net

Read more...

Record Plunge in U.S. Consumer Credit Signals Weakened Spending

By Bob Willis and Vincent Del Giudice

Sept. 9 (Bloomberg) -- A record $21.6 billion drop in borrowing by Americans added to evidence that consumer spending will be slow to recover as banks and credit-card companies tighten lending standards and households pay down debt.

Consumer credit fell by 10 percent at an annual rate in July to $2.5 trillion, according to a Federal Reserve report released yesterday in Washington. The drop was more than five times larger than economists forecast. Credit fell for a sixth month, the longest series of declines since 1991.

“The consumer is hunkered down in the process of repairing his finances,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Consumers remain very cautious and won’t be leading us out of this recession.”

Unemployment that’s projected to reach 10 percent by early next year and a decline in household wealth are casting doubt on the strength of the recovery from the worst economic slump since the 1930s. Federal Reserve policy makers, at their last meeting in August, expressed “uncertainty” about the projected pace of gains in spending by households.

The start of the government’s “cash for clunkers” program in late July wasn’t enough to keep credit that covers car loans from plummeting by a record amount, yesterday’s Fed report showed.

Non-revolving debt, including loans for automobiles and mobile homes, plunged by $15.4 billion in July. The Fed’s report doesn’t cover borrowing secured by real estate. Revolving debt, such as credit cards, fell by $6.1 billion.

‘Short-Term Benefit’

Non-revolving credit may have picked up last month as the auto rebate program boosted vehicle sales. The program, which ended in late August, pushed auto sales for the month to a 14.1 million annualized pace, the highest since May 2008.

“There were some car purchases and we will see some short-term benefit” from the program, said Guy LeBas, chief economist at Janney Montgomery Scott LLC in Philadelphia. “But one month is not enough to make the year.”

Economists had forecast consumer credit would drop $4 billion in July, according to the median of 31 estimates in a Bloomberg News survey. Projections ranged from declines of $12 billion to no change from the previous month.

Revolving credit may shrink by another 20 percent by the end of next year as banks pare credit lines further and more consumers turn to debit cards to pay their bills, said FBR Capital Markets Inc. analyst Scott Valentin.

U.S. banks tightened standards on all types of loans in the second quarter and said they expected to maintain strict criteria on lending until at least the second half of 2010, a Federal Reserve report showed on Aug. 17.

‘Uncertain’ Outlook

Most banks cited reduced risk tolerance and “a more uncertain economic outlook” as the main reasons for restricting credit to businesses, with 35.2 percent saying they “tightened somewhat,” the Fed said in its quarterly Senior Loan Officer survey.

The central bank lowered its main rate almost to zero in December and committed to purchasing as much as $1.75 trillion of Treasuries and housing debt to reduce borrowing costs.

Consumer spending growth will average almost 1.5 percent in the second half of this year, according to a Bloomberg News survey of economists conducted in the first week of August, after falling by an average 0.2 percent in the first half. They also forecast the jobless rate would average 10 percent in the first quarter of next year.

Economists in the survey didn’t see annual growth in consumer spending topping 2 percent until 2011, even as they forecast the economy to return to growth in the second half of this year.

Range of Views

Fed policy makers “expected the pace of recovery to pick up in 2010, but they expressed a range of views, and considerable uncertainty, about the likely strength of the upturn -- particularly about the pace of projected gains in consumer spending and the extent to which credit conditions would normalize,” according to minutes of their Aug. 11-12 meeting released last week.

Plunging home values and stock prices have fueled a record $13.9 trillion loss in household wealth in the U.S. since the middle of 2007.

A Labor Department report last week showed payrolls in August fell the least in a year. At the same time, the jobless rate rose to the highest in 26 years, a reminder that hiring will take longer to rebound, restraining consumer spending.

The economy has lost 6.9 million jobs since the recession began in December 2007, the biggest drop in any post-World War II economic downturn.

Consumer spending rose 0.2 percent in July, following a 0.6 percent increase in June, government data showed on Aug. 28. Excluding cars, purchases were little changed.

Incomes were unchanged in July after dropping 1.1 percent in the prior month. The decrease in income in June reflected the fading boost from government stimulus-related tax cuts and transfers. Wages and salaries posted the first gain of the year in July, increasing 0.1 percent after dropping 0.3 percent.

To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.netBob Willis in Washington bwillis@bloomberg.net

Read more...

BOE Opens Doors as Crisis-Hit Staff ‘Smell the Roses’

By Jennifer Ryan and Brian Swint

Sept. 9 (Bloomberg) -- The Bank of England is throwing open its doors to the public again in an annual event that was pared back a year ago following the collapse of Lehman Brothers Holdings Inc., a sign the financial crisis has now abated.

The central bank will allow visitors to see parts of its main building including the Court Room, where its governing board meets, as part of the Open House London weekend event on Sept. 19-20, according to the bank’s Web site. Last year the bank limited the tour to its museum as staff worked overtime on the Saturday and Sunday of Sept. 20-21 to save Britain’s financial system.

That was the weekend after Lehman filed for the biggest bankruptcy in history and the U.S. loaned $85 billion to bail out American International Group Inc. Bank of England staff then went to work on a plan to rescue the banking system, which Deputy Governor Paul Tucker said afterward came “preciously close” to collapse.

“People get pulled off teams and put into crisis groups where they’re often not allowed to talk to each other, and that happened when Lehman went under,” said Colin Ellis, who worked at the central bank until October and is now an economist at Daiwa Securities SMBC in London. “All those people who had been running to stand still are now able to go out and smell the roses more.”

Lehman filed for bankruptcy on Sept. 15, 2008, and the Federal Reserve rescued AIG the next day. Meanwhile, U.K. officials struggling to shore up HBOS Plc engineered the bank’s acquisition by rival Lloyds TSB Group Plc. That was announced on Sept. 18, the same day the Bank of England participated in a joint coordinated dollar swap with the Fed.

Economic Recovery

Bank of England Governor Mervyn King said Aug. 12 the U.K. may be heading for a “relatively slow recovery” as it emerges from the worst contraction in a generation, though the world financial system is in “a fragile condition.” To battle the crisis, the bank has cut the key interest rate to 0.5 percent, the lowest since it was founded in 1694, and is printing 175 billion pounds ($290 billion) of money to buy bonds. An official at the bank had no comment on this year’s tour.

Bank officials may have met and worked in rooms visitors would otherwise have seen on the tour of the historic chambers. Its headquarters take up a 3 1/2-acre block in the heart of London’s financial district, designed by Herbert Baker between 1925 and 1939 and incorporating elements of a previous building by Sir John Soane, the bank’s architect from 1788 until 1833.

Weather Vane

In the Court Room, a remnant of the original building close to where the bank’s Monetary Policy Committee meets to set interest rates each month, visitors will be able to see a dial linked to a weather vane and once used to set policy. Changes in wind speed and direction on the River Thames signaled that cargo ships may dock more quickly, and the heavier trading could boost demand for money and credit.

The Lehman collapse provoked a storm in financial markets. Bank officials started work “pretty much straight away” on a rescue plan which led to the government taking stakes in Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, former Deputy Governor John Gieve told the BBC last month.

“The pace at which things were moving in those two weeks after the Lehman’s bankruptcy is almost impossible to exaggerate,” Adair Turner, chairman of the U.K. Financial Services Authority, told lawmakers in November 2008.

Joint Action

The U.K. rescue plan was announced on Oct. 8, the same day the central bank made a surprise half-point interest rate cut in joint action coordinated with other central banks.

Alan Greenspan, former chairman of the U.S. Federal Reserve and an informal adviser to Prime Minister Gordon Brown, said today Britain will be slow to rebound from the slump after the global recession battered exports.

“It’s going to take a long while for you to work your way through this,” he told the BBC. “Britain is more globally oriented as an economy.”

“The prime minister’s view is that this is not a time for complacency,” Simon Lewis, Brown’s spokesman, told reporters today in London. “The prime minister feels strongly about the need to keep recovery going by maintaining the appropriate level of expenditure.”

The crisis created “exceptional levels of stress” in many parts of the bank, according to its annual report released in May. The Bank of England expanded its bonus pool and took on the most staff in more than two decades as events unfolded. The number of employees rose by about 6 percent and the bonus pot was widened to encompass 8.1 percent of salaries.

“It really struck me just how hard people were working,” said Daiwa’s Ellis. “The bank’s very lucky to have such a dedicated and able staff at its fingertips. Now the projects that had been put on hold can start up again.”

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.

Read more...

Polish Bonds, Zloty Fall After ‘Low’ Demand at 5-Year Bond Sale

By Piotr Skolimowski

Sept. 9 (Bloomberg) -- Polish bonds weakened and the zloty fell after the Finance Ministry sold near the lowest amount of five-year notes on offer today in the first auction since the government said the budget deficit will almost double next year.

The decline in bonds pushed the yield on the notes three basis points higher to 5.75 percent after the results were announced, according to PKO Bank Polski SA. Yields move inversely to prices. The zloty extended its losses, weakening 0.8 percent to 4.1200 per euro as of 1:40 p.m. in Warsaw.

Poland sold 1.11 billion zloty ($390 million) of 5.75 percent Treasury bonds maturing in April 2014, the Finance Ministry said today. The ministry offered between 1 billion and 2 billion zloty of debt.

Poland is struggling to curb its budget deficit even as it leads the European Union in growth, expanding 1.1 percent in the second quarter. The government yesterday approved a draft 2010 budget capping the central government deficit at 52.2 billion zloty, almost twice this year’s level.

“These are not good results,” said Warsaw-based Maciej Slomka, head of fixed-income trading at Bank Pekao SA, Poland’s biggest bank by market value. “The demand was low and it seems like the news about the budget was what scared people off.”

Investors offered to buy 2.16 billion zloty of five-year bonds. The minimum price was set at 999.60 zloty and the average yield was 5.736 percent. In the previous sale of the notes on Aug. 12, the ministry sold 3.5 billion zloty of debt at a yield of 5.55 percent and demand was 4.97 billion zloty.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

Read more...

Hockuba Sees Polish Economy Growing This Year, PAP Says

By Katya Andrusz

Sept. 9 (Bloomberg) -- The Polish economy will “very probably” post positive growth this year, while it may expand more slowly in the third quarter than in the second, PAP newswire cited central bank board member Zbigniew Hockuba as saying in an interview.

The country’s economy should grow faster in 2010 than this year, Hockuba said, according to PAP. The annual inflation rate will remain above the central bank’s target this year and slow to the target in mid-2010, he added.

Read more...

Barclays Sees ‘Limited’ Euro Upside After Climb to 9-Month High

By Candice Zachariahs

Sept. 9 (Bloomberg) -- Gains in the euro may be limited after it climbed to a nine-month high against the greenback as a weak euro-region recovery prevents the European Central Bank from “aggressively” raising interest rates, Barclays Capital said.

The bank advised investors to buy options betting demand for the single currency will abate as it rises toward $1.52. Investors may benefit by purchasing the right to buy the euro at $1.4150 in three months with a so-called reverse-knock-out at $1.52, said analysts led by David Woo, global head of foreign- exchange strategy at Barclays Capital in London.

“With the euro having hit $1.45, we see the remaining upside as limited,” the analysts wrote in a note to clients yesterday. “The headwinds are likely to be greater the further up the euro moves.”

The euro traded at $1.4514 at 10:08 a.m. in Tokyo from $1.4478 in New York yesterday, when it reached $1.4535, the highest level since Dec. 18. It has gained 2.2 percent over the past month.

A reverse knock-out clause would render the option worthless if the currency gained to more than $1.52. The median forecast of 45 financial institutions surveyed by Bloomberg News is for the euro to end the year at $1.42.

“While the U.S. dollar outlook remains negative, the euro is the beneficiary by default, rather than justice,” the analysts wrote. “Eurozone two-year note yields are trading close to their lows, suggesting that the pace of recovery is not sufficient for investors to expect the ECB to raise rates aggressively.”

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

Read more...

Gold May Reach Record This Year on Weaker Dollar, Survey Shows

By Nicholas Larkin and Halia Pavliva

Sept. 9 (Bloomberg) -- Gold, trading near an 18-month high in New York, may advance to a record before the end of the year as investors seek to hedge against a weaker dollar and possible inflation, a survey showed.

Bullion futures will surpass the $1,033.90 an ounce reached in March 2008, according to 10 of 12 traders, investors and analysts surveyed by Bloomberg. Gold for December delivery climbed as high as $1,009.70 an ounce on the Comex division of the New York Mercantile Exchange yesterday, after breaching $1,000 for the first time since Feb. 20.

Governments cut interest rates and the Group of 20 nations pledged about $12 trillion to combat the first global recession since World War II, International Monetary Fund data show. The U.S. Dollar Index, a six-currency gauge of the dollar’s strength, slid to more than an 11-month low yesterday.

“Extremely loose fiscal and monetary policies are likely to create an inflation headache down the road,” said Mark O’Byrne, managing director of broker GoldCore Ltd. in Dublin. “With the dollar’s global reserve status being increasingly questioned, the dollar is likely to fall further in the coming months and lead to further diversification into gold.”

Gold rose 0.5 percent to $1,003 an ounce at 3 a.m. in New York today. The metal may climb as high as $1,200 this year, O’Byrne said in an e-mail.

Gold Trust

The SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, reached a record 1,134.03 metric tons on June 1. The fund, which held 1,077.63 tons as of Sept. 8, overtook Switzerland as the world’s sixth-largest gold holding. Bullion held in ETF Securities Ltd.’s exchange-traded products reached a record 8 million ounces (248.8 tons).

The metal may fall as low as $950 before rebounding to $1,200 “toward the end of the year,” Ashraf Laidi, chief market strategist at CMC Markets in London, said in a Bloomberg Television interview yesterday.

President Barack Obama has increased U.S. marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.

“Markets believe that the Federal Reserve is not going to withdraw liquidity fast enough and there will be inflation,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

Inflation Forecasts

U.S. consumer prices will drop 1.6 percent this quarter compared with the same period last year before rising 1.4 percent in the fourth quarter and 2 percent in each of the subsequent two quarters, according to the median estimate of economists surveyed by Bloomberg News.

Gold futures dropped 14 percent in the six weeks after they last reached $1,000. Investors should avoid buying gold at that level because investment demand is weaker than it was earlier this year, John Reade, a London-based analyst at UBS AG, said in a note yesterday.

Demand in India, the world’s largest buyer of the metal, is about 5 percent to 10 percent of last year’s peak, partly because of drought in parts of the country, he said. The bank maintained its one-month and three-month forecasts for the metal at $950 and $1,000 an ounce respectively.

Gold may reach $1,050 in the “short term” before falling, Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in an e-mail.

“The market keeps talking inflation but the price of gold is already inflated,” Perez-Santalla said. “I won’t put my money into gold and I know many traders and their families that are rummaging their jewelry looking for scrap to sell to take advantage of these high prices.”

Scrap sales were a record 1,218 tons last year, increasing supply, according to London-based researcher GFMS Ltd. Second- quarter sales may have shrunk to 350 tons, more than 40 percent less than in the preceding three months, GFMS said July 31.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net

Read more...

Sakakibara Says Dollar Will Remain Reserve Currency

By Yoshiaki Nohara and Shigeki Nozawa

Sept. 9 (Bloomberg) -- Eisuke Sakakibara, formerly Japan’s top foreign-exchange official, said the dollar will stay the main reserve currency after a United Nations report this week said the greenback’s role in global trade should be reduced.

“The U.S. will remain as the world leader for at least a few more decades,” Sakakibara, the Democratic Party of Japan’s top choice in 2003 to lead the Finance Ministry, said today in an event hosted by the Japan National Press Club in Tokyo. “The dollar will stay the reserve currency for the next 20 years.”

The comment by Sakakibara, known as “Mr. Yen” from his 1997-1999 tenure at the Ministry of Finance, comes after a UN report published Sept. 7 said a new currency should be created to reduce the dollar’s role and protect emerging markets from the “confidence game” of financial speculation. China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis led to the worst global recession since World War II.

Prime Minister-designate Yukio Hatoyama’s Democratic Party of Japan has no plan to diversify the country’s foreign reserves away from the dollar, party Secretary-General Katsuya Okada said on July 24. Japan, the biggest international owner of U.S. government debt after China, raised its total holdings of Treasuries by $34.6 billion to $711.8 billion in June.

Sakakibara said the DPJ hasn’t approached him to take a role in Japan’s new government.

‘Plenty of Room’

Japan should sell an extra 10 trillion yen ($108.1 billion) in government bonds to pay for economic stimulus measures, Sakakibara said. Ten-year yields, now at 1.325 percent, will stay below 2 percent even if debt sales increase, he said.

“The market has plenty room to take in that amount of bonds,” Sakakibara said. More issuance is “the only choice the government has to fund new measures and deal with falling revenues,” he said.

Japan’s debt burden will probably spiral to 197 percent of gross domestic product next year, according to the Organization for Economic Cooperation and Development. The Finance Ministry in April said it will boost bond issuance by 15 percent to 130.2 trillion yen this fiscal year.

Sakakibara also said a single regional currency for Asia won’t become a reality until China deregulates its currency.

“China is unlikely to remove regulations on its currency for at least 10 years,” Sakakibara said. “The common Asian currency won’t be created until that happens.”

Japan should work with other Asian nations to create a single regional currency, the DPJ’s Hatoyama wrote in the New York Times last month.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at Snozawa1@bloomberg.net.

Read more...

Moody’s Says U.K., Spain to Retain Top Credit Ratings

By Shamim Adam

Sept. 9 (Bloomberg) -- The U.K. and Spain are unlikely to lose their top credit ratings even after being “severely hit” by the global economic crisis, Moody’s Investors Service said.

Germany and France, other Aaa-rated countries which had been more affected by the crisis than Moody’s expected, remain “resistant,” Pierre Cailleteau, managing director of sovereign risk at the ratings company, said in a statement today. The U.S. doesn’t face any “downward rating pressure” in the next few years even as its balance sheet expands, Moody’s said.

The global economy is emerging from the worst recession since the 1930s, supporting governments’ decisions to increase debt levels to finance spending. Officials from the Group of 20 nations this month expressed caution on the world economic outlook and judged it premature to start unwinding record-low interest rates and about $2 trillion in fiscal stimulus.

“Almost all Aaa-rated sovereigns have been hit more severely by the global downturn than we expected earlier this year,” Moody’s said. “Nevertheless, all Aaa countries now have stable outlooks, indicating that we do not expect rating downgrades over the near term.”

At least 17 economies are rated Aaa by Moody’s. In July, it lowered its top credit rating on Ireland by one step to Aa1, citing the country’s rising debt burden and a “sudden and brutal economic and financial adjustment.”

‘Irreversible Deterioration’

“Although highly unlikely, it is conceivable that a large and wealthy economy could lose its Aaa rating if it were to experience a material and irreversible deterioration in its debt conditions over the next five years or so, following the fate of Japan in the 1990s,” Cailleteau said.

Japan lost its Aaa credit rating in November 1998 as Moody’s said government efforts to spend its way out of recession had proven costly and ineffective. In May this year, the company unified the foreign- and local-currency debt rating for Asia’s largest economy at Aa2. Japan’s public debt is now nearing 200 percent of gross domestic product.

Standard & Poor’s this year cut its ratings for Ireland, Greece, Portugal and Spain following the economic slump.

Moody’s categorizes its Aaa-rated economies as resistant, resilient or vulnerable. Resistant countries are ones which started the crisis from a robust financial position and aren’t undergoing lasting changes to their economic models, it said, pointing to Canada as an example.

Resilient, Vulnerable

Resilient economies are those that “test the Aaa boundaries” because public finances are deteriorating considerably even as their balance sheet flexibility allows them to retain their ratings, Moody’s said. Those classified under vulnerable have public finances that “seem to be stretched to the point of no return in the Aaa category,” the report said, citing Ireland.

Spain’s rating is more resistant than vulnerable, Moody’s said. It is a “safe distance” from being downgraded because growth will be better than expected, the company said.

“Spain entered the global financial crisis with relatively low debt,” Moody’s said. “Even though it is running large budget deficits due to both explicit fiscal easing and automatic stabilizers, it is likely to exit the crisis with, at most, a middling debt level.”

The U.K. and the U.S. have “lost altitude” in their ratings even as they remain resilient, Moody’s said. S&P in May lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one-in-three chance of a ratings cut as debt approaches 100 percent of GDP.

Budget Deficit

In the U.S., the government and the Federal Reserve have spent, lent or committed more than $12 trillion in a bid to revive the economy and credit markets. The budget deficit is projected to reach $1.6 trillion this year and $1.4 trillion in 2010, according to the nonpartisan Congressional Budget Office.

“The U.K. and the U.S. are showing signs of recovery,” the Moody’s report said. “However, to retain their ‘resilient’ status, the U.K. and U.S. will need to severely adjust their fiscal policies, even in the unlikely event of a vigorous rebound in their economies.”

U.K. Chancellor of the Exchequer Alistair Darling predicts the budget deficit will reach 175 billion pounds ($290 billion), or 12.4 percent of GDP, in the year through March 2010, the biggest shortfall since World War II.

“We assume that the adjustment to the U.K.’s public finances that is likely to take place in the context of the forthcoming elections, probably through cuts in spending, will keep the debt trajectory within Aaa boundaries,” the Moody’s report said. “Broad acceptance among the public of the inevitability of cuts in government expenditure and tax increases suggests such consolidation is at least possible.”

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

Read more...

UBS Cuts Dollar Forecast on Risk Appetite, Stock Gain

By Ron Harui

Sept. 9 (Bloomberg) -- UBS AG, the world’s second-largest currency trader, lowered its forecasts for the dollar against currencies such as the euro and the pound, citing improving risk appetite and gains in stocks.

The dollar will weaken to $1.45 per euro in a month, compared with a previous forecast of $1.40, and it will fall to $1.63 per pound, versus an earlier prediction of $1.57, Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich, wrote in a research note today.

UBS predicts Australia’s dollar will rise to 88 U.S. cents in one month, compared with an earlier prediction of 80 cents, and New Zealand’s dollar to climb to 71 cents, from an earlier forecast of 65 cents. Canada’s dollar will strengthen to C$1.05 per U.S. dollar in one month, versus C$1.15 previously, UBS said.

“The combination of risk-seeking U.S. investors diversifying their portfolios and equities rallying further will keep the U.S. dollar weak near term,” Mohi-uddin wrote. “We lower our one- and three-month forecasts for the greenback.”

The dollar declined to $1.4497 per euro as of 11:31 a.m. in Tokyo from $1.4478 in New York yesterday, when it dropped to $1.4535, the lowest level since Dec. 18. The greenback fell to $1.6527 per pound from $1.6490, after reaching $1.6587 yesterday, the weakest since Aug. 21. The U.S. currency traded at C$1.0774 from C$1.0784.

The Australian dollar traded at 86.05 U.S. cents from 86.16 cents yesterday and the New Zealand dollar advanced to 69.67 cents from 69.61 cents.

Stock Gains

The MSCI World Index of stocks has gained 60 percent since falling to a 13-year low on March 9. It has risen 1 percent this month after a 3.9 percent increase in August and an 8.4 percent advance in July.

The dollar has fallen against all of the 16 major currencies this week after finance ministers and central bankers from the Group of 20 nations pledged on Sept. 5 to maintain efforts to pull the global economy out of recession.

“The greenback has weakened following the G-20 meeting as policy makers made it clear that they remain reluctant to tighten,” Mohi-uddin wrote.

UBS kept its one- and three-month forecasts for the dollar against the yen unchanged at 95, citing “rising risk seeking behavior” supporting the dollar-yen exchange rate.

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

Read more...

Brazil’s Real Gains for a Sixth Straight Day Versus the Dollar

By Glenn Kalinoski

Sept. 9 (Bloomberg) -- Brazil’s real gained for a sixth straight day, strengthening 0.3 percent to 1.8236 per U.S. dollar at 8:11 a.m. New York time, from 1.8296 yesterday.

Read more...

Mexico’s Peso Advances as Government Seeks to Cut Spending

By Jens Erik Gould and Andrea Jaramillo

Sept. 9 (Bloomberg) -- Mexico’s peso rose after President Felipe Calderon yesterday proposed spending cuts and increases in income, corporate and sales taxes in a bid to rein in a swelling budget deficit.

The peso strengthened 0.3 percent to 13.3235 per U.S. dollar at 8:24 a.m. New York time, from 13.3569 yesterday.

The government, which submitted its 2010 budget proposal to Congress last night, plans to cut spending by 218 billion pesos ($16.4 billion) as part of “unprecedented” steps to offset diminishing oil revenue and prevent a credit-rating reduction.

“They preferred to go with a less ambitious reform that has a higher probability of being approved,” said Gabriel Casillas, the chief economist for Mexico at UBS AG in Mexico City. “Even if it is approved as is, we see a low likelihood that it will avoid a downgrade because it’s not creating significant new sources of fiscal revenues.”

Mexico is seeking to bolster its fiscal position as the deepest economic slump since the 1930s reduces tax collection and output at the state oil monopoly declines. The proposed changes to tax laws would generate 176 billion pesos, the Finance Ministry said. Calderon’s economic package would also merge some government ministries, modify tax laws and change rules in a bid to boost competition in the energy, banking and telecommunications industries.

Oil Income

Credit rating agencies say Mexico needs to reduce its dependence on oil income, which finances 38 percent of the budget. Standard & Poor’s may cut Mexico’s BBB+ credit rating before the end of the year, depending on how Calderon and legislators address ways to boost tax collection, analyst Lisa Schineller has said.

On May 11, S&P lowered the outlook for the federal government’s foreign and domestic debt, which stood at $217.3 billion as of December, to negative from stable.

“The economic package considers the seriousness of the circumstances that we’re facing,” Calderon told reporters yesterday at the presidential residence in Mexico City. “The proposal I’m sending to Congress is a drastic and unprecedented adjustment in the exercise of public spending.”

Yields on Mexico’s 10 percent bond due December 2024 rose two basis points, or 0.02 percentage point, to 8.29 percent, according to Banco Santander SA.

To contact the reporters on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

Read more...

Yen Falls as Rebound in Equity Markets Blunts Demand for Safety

By Lukanyo Mnyanda

Sept. 9 (Bloomberg) -- The yen dropped against the euro and the dollar as a rebound in European equities reduced demand for Japan’s currency as a refuge.

The yen fell the most against the South Korean won and the British pound as Europe’s Dow Jones Stoxx 600 Index headed for a fifth day of gains. The pound advanced against 13 of the 16 most-traded currencies as a report showed U.K. consumer confidence rose to the highest level in more than a year. The Swedish krona snapped three days of gains against the euro after Moody’s Investors Service cut the long-term debt ratings of the nation’s lenders, including Nordea Bank AB.

“When risk appetite picks up Japanese investors will look for higher yields and that should pressure the yen in coming months,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “Carry trades are more attractive already.”

The yen slipped 0.3 percent to 134.07 per euro as of 6:36 a.m. in New York. It weakened 0.2 percent to 92.48 against the dollar. The pound rose 0.3 percent to 152.63 yen. The dollar slipped 0.1 percent to $1.4495 against the euro. It reached the weakest level since Dec. 18 yesterday.

The krona weakened to 10.2153 per euro, from 10.1999 yesterday. Sterling increased to $1.6510, from $1.6490.

Europe’s Stoxx 600 index climbed 0.3 percent, recovering from a decline of 0.5 percent. The regional gauge has surged 51 percent since March 9, when it touched the lowest level this year. Futures on the Standard & Poor’s 500 Index were little changed after slipping 0.6 percent.

Consumer Prices

The yen dropped even as consumer prices in Germany, calculated using a harmonized European Union method, fell 0.1 percent from a year earlier after dropping 0.7 percent in July, according to the Federal Statistics Office in Wiesbaden today. A recovery in France, the second-largest euro-area economy, remains fragile, European Central Bank governing council member Christian Noyer said today on Europe 1 radio.

The yen may rise against the dollar as it’s replaced as the favored currency for so-called carry trades, according to Royal Bank of Scotland Group Plc.

“Over the next few months we see the yen strengthening against the dollar and European currencies,” Greg Gibbs, a foreign-exchange strategist in Sydney, said today in a report. “We expect the yen to continue to be replaced by the dollar, and even possibly European currencies, as the preferred funding vehicle for higher-risk, higher-yielding assets and currencies.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

Read more...

Copper Snaps Four-Day Rally After U.S. Consumer Credit Plunge

By Anna Stablum

Sept. 9 (Bloomberg) -- Copper snapped a four-day rally in London after consumer credit in the U.S., copper’s second- largest user, plunged more than five times as much as forecast, casting doubt on the strength of the economic recovery.

Credit declined for a sixth month, the longest run of declines since 1991, as U.S. banks restrict lending and job losses make Americans reluctant to borrow. The MSCI World Index of shares also dropped for the first time in five days before the release of the Federal Reserve’s Beige Book business survey.

“The consumer is very cautious, traumatized both by imploding equity and housing prices, as well as legitimate fears about losing employment,” Edward Meir, a metals analyst at MF Global Ltd., wrote today in a report. On demand for metals, “we do expect a modest pullback over the September-October time.”

Copper for three-month delivery fell $35, or 0.5 percent, to $6,440 a metric ton on the London Metal Exchange by 10:21 a.m. in London. Futures for December delivery shed 1.7 percent to $2.939 a pound in electronic trading on the New York Mercantile Exchange’s Comex division.

Consumer credit in the U.S. fell a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released yesterday in Washington.

Copper prices more than doubled this year on record imports in the first half from China, the world’s largest consumer. The LME Index of six metals is up 73 percent.

“Upward momentum in prices will be difficult to maintain in the face of an expected fall off in Chinese metals import volumes,” Frederic Lasserre, head of commodities research at Societe Generale SA in Paris, wrote today in a report.

Copper prices may average $5,900 a ton next year, compared with $4,563 so far this year, on “steady” demand, Meir said.

Lead Smelters

Among other LME metals for three-month delivery, lead fell $1, or 0.1 percent, to $2,454 a ton. Yesterday, lead climbed as high as $2,517.25, the highest intraday price since May 7, 2008.

The metal, used mainly in batteries, has led gains this year on the LME, partly on concern about closings of smelters in China because of tighter environmental enforcement.

At least half a million tons of lead capacity is under investigation, according to Standard Chartered Plc. The country produces some 4 million tons of lead a year, almost half of total global supplies of 8.5 million tons, it said.

Tin fell 1.1 percent to $14,720 a ton. The so-called backwardation, with nearby delivery prices trading at a premium to three-month tin indicating scarce supplies, rose to $622 a ton yesterday, up 53 percent from the previous session. That’s the highest level since June 2004.

LME data show one long position, or bet on higher prices, exceeds 40 percent of tin contracts to expire in September. There are five short positions, or bets the price will fall, for the same month, according to data from Sept. 4.

Zinc shed 0.1 percent to $1,979.50 a ton, aluminum fell 0.5 percent to $1,904 and nickel rose 1.1 percent to $18,140 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

Read more...