China's Industrial Sector Continues To Grow For The Seventh Month In A Row

Daily Forex Fundamentals | Written by ecPulse.com | Oct 01 09 07:21 GMT |

The industrial sector in China continues to grow and expand for the seventh consecutive month, reaching in September to its highest in 17 months, confirming that the Chinese economy was able to get rid of the negative effects of the worst global crisis since the Great Depression. The manufacturing purchasing managers' index for the month of September rose to 54.3 higher than the previous reading of 54.0 but less than the expected 55.0. It is worth mentioning that any reading higher than 50 indicate growth and prosperity in the industrial sector in China and the vice versa. The outlook for China's industrial sector remains positive, as rising loans and investment operations as well as increased foreign exchange inflows into the country serve to increase demand in the industrial sector, and compensate the sharp decline in exports due to the weak global demand. After the European Union, the United States, Britain and Japan fell into recession, demand on China's exports was seriously damaged, as these countries are major markets for the Chinese products. But the Chinese government was quick to take one of the important steps that helped the rapid recovery of the Chinese economy, throughout the adoption of a massive stimulus plan, that compensated for the fall in exports. The stimulus plan totaled 4 trillion yuan (586 billion dollars), directed towards infrastructure projects in order to create new jobs and support households spending that should lead to a social stability in the largest country in terms of population. In addition to this, the government focused on supporting another important sector, the housing sector, by facilitating borrowing after the global financial system was hit hard by the credit crisis, as well as lowering interest rates and impose many facilities which led house prices to rise. The government also worked on supporting the household sector encouraging families to increase their spending, in order to be able to record an annual growth rate of 8.00%, were so far it managed to reach to 7.9% during the second quarter, while expectations indicate it to grow by 9.0% during the third quarter. Throughout the details of the manufacturing purchasing managers' index we find that the industrial output index rose to 58.0 during the month of September from 57.9 in August, while new orders rose to 56.8 compared with the previous reading of 56.3, as for orders on exports it rose to 53.3 from 52.1. The employment index has witnessed increased to 53.2, its highest level since April 2008, from the previous reading of 51.4 Despite the positive outlook of the Chinese economy, there are some fears that the cash pumped into the financial markets will create a sharp rise in asset prices and stock prices, which already do not reflect the real conditions within companies and investment. Others fear that as soon as the stimulus plans effects will start fading, the economy might start retreating again, yet the relief comes from hopes that until then, global demand might be starting to improve to levels able to support the economic growth in China. 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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US Dollar Trading Marginally Lower Ahead Of Key Data

Daily Forex Fundamentals | Written by KBC Bank | Oct 01 09 07:42 GMT |

Sunrise Market Commentary EMU curve flattens after 1-year ECB tender shows demand for liquidity is waning The ECB tender attracts less than expected demand for liquidity, which pushes the money market rates slightly higher further out the money market curve. Weak US eco data cannot push bonds through resistance, but the alert is still on. Today, interesting market calendar, but the shadow of the payrolls report may prevent big moves. FX: US dollar trading marginally lower ahead of key data Yesterday, the price action in USD/JPY and EUR/USD was capped in tight ranges, driven by technical trading. Orderdriven activity pushed sterling temporarily higher, but also these gains could not be sustained. Today might bring more wait-and-see behaviour ahead of tomorrow's payrolls The Sunrise Headlines US equities closed lower, but well off intra-day lows (S&P -0.33%), as industrial stocks fell on a disappointing Chicago PMI survey. Asian equities trade mixed this morning, as the Nikkei (-1.53%) cannot benefit from the improvement in the Tankan. The Japanese Tankan report showed that business confidence extended its rebound in the third quarter, but capital spending plans fell further to previous cycle lows. The manufacturing PMIs in Australia and China extended their rebound above the 50 level to respectively 52.0 (vs. 51.7) and 54.3 (vs. 54.0), while in South-Korea the PMI fell slightly from 53.6 to 52.7. IMF raises its growth forecasts for 2010 from 2.5% to 3.1%, as Asia leads recovery. The International Finance Corporation - the World Bank's private sector arm - plans to raise $4B to buy distressed assets from banks in emerging and developing markets. Two US funds raise capital to buy toxic assets with the help of the Fed, the first operations in the PPIP program. Commodities rebounded sharply, as oil surged after news of an unexpected drop in petrol supplies. France forecasts its budget gap to widen to 8.2% of GDP in 2009 up from 3.4% last year and to rise further to 8.5% in 2010. A budget deficit of 5% is still expected in 2013, which means that its debt to GDP ratio will rise from 77.1% this year to 91% in 2013. Today, the focus is on the manufacturing surveys and the weekly claims ahead of tomorrow's US Payrolls report EUR/USD On Wednesday, EUR/USD had a choppy trading session but at the end the changes were very limited. EUR/USD was well bid early in the session. Surprisingly, it was the eco news flow rather than the stock market performance that drove the price action. Better than expected German labour market data and, even more, low demand for liquidity in the ECB 12 month tender drove EUR/USD to intraday highs in the 1.4675 area. The move was reversed soon, but it indicates that the currency market keep an eye on the global monetary context which is the key driver for trading. A slightly disappointing ADP labour market report and an unexpected decline of the Chicago PMI triggered a profit taking move on the equity markets and this caused a moderate correction in EUR/USD too, with the pair temporary dipping below the 1.46 mark. However, once again there was no follow-through price action (both in stocks and in EUR/USD). EUR/USD closed the session at 1.4640, compared to 1.4587 on Tuesday evening EUR/USD: indecisive trading pattern. Support comes in at 1.46118 (Boll Midline), at 1.4565/48 (Reaction low hourly/daily envelope), at 1.4526/02 (Week low/Reaction low), at 1.4438/37 (MT break-up/Daily uptrend line). Resistance stands at 1.4675/80 (Reaction high/Broken MTMA + daily envelope + Reaction high), at 1.4712/21 (Weekly Boll top/Reaction high), at 1.4766 (Breakdown hourly), at 1.4803 (Reaction high), at 1.4845 (Reaction high/Equality C-wave), at 1.4867 (2008 Sept high). The pair is in neutral territory. USD/JPY Today, the eco calendar is well filled. In Europe, the final September PMI and the August unemployment figures are released, but probably not too important for the market. In the US the calendar is more inspiring with the personal income and spending data, the jobless claims, the ISM manufacturing and a few other less important data. Regarding the data, we take a close look at the ISM and at the weekly jobless claims. Recently, many economic data showed tentative signs that the pace of the economic rebound slowed in August/September. If this pattern would be confirmed, the consolidation/moderate correction on the stock markets and on EUR/USD might still go a bit further. However, tomorrow's payrolls report will be key in this debate. From next week, stock markets will gradually turn their focus to the upcoming earnings' season. Global context: recently, the swings in risk appetite/risk aversion were the obvious drivers on the currency markets. In this context, the decline of the dollar is considered as a signal of improving global investor sentiment. On top of that, in this low yield environment, the dollar has become the preferred currency to fund carry-trade deals. Lingering uncertainty on the huge US financing needs together with the Fed's intention to run an expansionary monetary policy for a prolonged period of time offer additional ammunition for carry traders to use the dollar rather than other currencies. This has put the dollar in a vulnerable position. We don't see many reasons to turn dollar positive before it becomes clear that the Fed will start tightening monetary policy. Last week's Fed decision indicates that this point hasn't been reached. From time to time, some individual Fed members have given some warnings that the Fed might act sooner than usual, but for now those warnings are largely ignored in the FX markets. Nevertheless, the difference in the amount of asset purchases by the Fed (+ 1 trillion) compared to the amount of asset purchased by the ECB (15 mld of covered bond) is a good illustration of the relative unwinding risks associated with the policy in both areas. Any correction on the stock markets might also leave its traces on EUR/USD. However, as we expect these corrections on the liquidity driven rally on the stock markets to be limited, we also see the downside in EUR/USD well protected. Looking at the (technical) charts, EUR/USD cleared the range top at 1.4438/48, improving the picture for EUR/USD. Recently, the pair extensively tested the key 1.4719 December high and even set a new minor high. However, there was no follow- through action on this 'break'. Longer term, we maintain a buy-on-dips approach. However, the ST picture for EUR/USD remains indecisive. Recently, we indicated that the 1.4438/50 break-up area would offer a good opportunity to step in again. We're not there yet, but it is still feasible. As soon as stocks resume their uptrend, the 1.5021 target (2nd target double bottom of 1.3739) might come in the picture. On Wednesday, the yen strengthened against the dollar early in Asian trading, probably supported by end of quarter hedging activity. Later in the session, USD/JPY settled in a tight sideways trading pattern roughly between 89.40 and 89.85. Trading was mainly technical in nature and the US data had no lasting impact on the price action. USD/JPY closed the session at 89.70, compared to 90.09 on Tuesday. In a broader perspective, recent warnings of the Japanese Finance Minister have eased the pressure on the yen. Nevertheless, the 'problem' is far from solved with USD/JPY still struggling to regain the 90.00 mark. This morning, all eyes were on the Tankan Business confidence report. The headline large manufacturing index rebounded from -48 to -33 (line with the market consensus). Most other sub-indices showed an improved, too. On the other hand, Japanese companies continue to cut capital spending plans. The market reaction to report was rather limed. The Nikkei lost 1.53 %. USD/JPY is marginally higher compared to yesterday's closing levels. In an interview, Japanese Fin Min Fuji said that he didn't intend to put the yen's recent rise on the agenda of this week's G7 meeting in Istanbul. We don't make too much out of this but it suggests that the current levels of yen strength are not yet considered exceptionally enough to warrant high profile action (interventions). Global context: USD/JPY reached a reaction high in the 97.80 area early August. Despite a positive global investor sentiment, the dollar could not hold on to its gains against the yen. This was a sign of underlying dollar weakness. The link between USD/JPY and global investor risk aversion/risk appetite became less tight and has now even reversed. The dollar (and not the yen) gradually has become the preferred funding currency for carry trades. So, the price action in USD/JPY more or less joined the global dollar trend (decline). The long-term trend obviously remains USD/JPY negative. However, recently, we turned more cautious on USD/JPY shorts on technical considerations (the 91.73/90.00 area was a high profile support level). On top of that, the change in talk from the Japanese authorities also caused profit taking on yen long positions short-term. We still look to sell USD/JPY in case of a more pronounced up-tick. The 92/93 area might be a good entry point if the correction would go that far. The start of a new quarter often sparks speculation of Japanese investment flows abroad. If so, this might temporary support USD/JPY. The 87.10 (year low) area remains the next high profile target on the downside for this pair USD/JPY: struggling to regain the 90 mark Support is seen at 89.35 (Reaction low), at 89.15/11 (Reaction low/Boll bottom), at 88.96 (Daily envelope), at 88.23/00 (Reaction low/Weekly envelope) and at 87.10 (Year low). Resistance comes in at 90.42 (ST high), at 90.70/76 (MTMA/Weekly STMA), 91.13/22 (Boll midline/ LTMA) and at 91.87 (38% retracement). The pair is in neutral conditions EUR/GBP On Wednesday, EUR/GBP was heavily sold at the start of the European session on market chatter of a big EUR/GBP selling order. EUR/GBP nosedived from the 0.9140 area to reach intraday lows in the 0.9080/85 area. However, later in the session, the storm calmed down. In technical trading, the pair even regained the earlier loses and closed the session at 0.9159, still rather close to the 0.9139 close on Tuesday evening. There were no important UK eco data. In Speech, BoE Miles said the BoE asset purchases are having an impact on the economy. He was also very relaxed on the reversibility of the QE. Today, the manufacturing PMI will be published. The figure is expected the return just above the 50-mark. The BoE releases its quarterly credit conditions survey. Global context: Since mid June, the EUR/GBP cross rate entered a consolidation pattern. Sterling had come off from distressed levels at the end of last year. This move was supported by growing evidence that the decline in economic activity in the UK had moderated. However, lingering uncertainty on the BoE's quantitative monetary policy capped the rebound of sterling. The August BoE decision to raise the asset purchase program to £175B and Governor King's call for an even greater effort indicated that the Bank intended to maintain a loose policy for a prolonged period of time. This triggered a new sterling selling wave. At the September meeting, the BoE took no additional policy steps. Nevertheless, the (monetary) picture stays sterling negative and more BOE talk on the positive effects of sterling weakness for the UK economy reinforced investors' feeling that the BOE was quite happy with the course of events. We have a long-standing sterling negative view and don't feel any need to change it. However, recently we advocated some caution on the recent steep EUR/GBP rise as a key technical level had been reached (0.9082). There is still no good reason to row against this sterling negative tide. Over the previous days, there was some unwinding of overextended sterling short positions. We still wait/hope for the current correction to go somewhat further (eg. towards the 0.9082/0.9000 area) before adding to EUR/GBP long exposure. (The 0.9082 was tested yesterday). EUR/GBP: sterling enters calmer waters Support comes 0.9132/22 (Reaction low/Break-up), at 0.9089 (Daily envelope), at 0.9078/70 (Reaction low /MTMA), at 0.9061 (Break-up daily), at 0.9040 (Break-up) and at 0.9010 (Break-up). Resistance is seen at 0.9175/84 (Broken STMA/ Breakdown), at 0.9210/17 (Reaction high/62% Retracement), at 0.9256 (Reaction high), at 0.9296/0.9304 (Boll Top/Reaction high). The pair is unwinding overbought conditions. News US: ADP employment report disappoints The ADP employment report showed that private firms shed a net 254 000 jobs in September, following a decline by 277 000 jobs (earlier reported at 298 000). The market was slightly more optimistic, counting on a 200 000 decline (Bloomberg) or 240 000 decline (Dow Jones). This means that the market should already count on a weaker payrolls number than the consensus of -180 000. Although slightly disappointing, the September loss is the smallest since July 2008. Job losses in the service sector amounted to 103 000, while 74 000 factory jobs were lost. The Chicago PMI disappointed profoundly, as its headline index declined unexpectedly to 46.1 from 50 previously. This suggests that the activity is again shrinking in the manufacturing sector in the Chicago area. It follows a number of other surveys like the Richmond and Philly Fed surveys that showed a decent headline figure but contained signs of underlying weakness. The details fully confirm the headline with new orders, order backlogs and production substantially lower. This is a bit disconcerting for those like us who count on a strong first phase of the recovery. While the Chicago PMI is quite volatile and sometimes unreliable as predictor of the ISM, recent evidence put the risks for the ISM for a decline from the 52.9 reading of August instead of a rise to 54 as suggested by the consensus estimate. EMU: German unemployment continues to surprise EMU inflation dropped in September to -0.3% Y/Y from -0.2% Y/Y previously, according to the flash estimate. The outcome was below the consensus estimate for stabilization at -0.2% Y/Y. However, the outcome wasn't unexpected anymore after the releases of the German, Belgian and Spanish reports. A similar message came from the Italian HICP, released today. Inflation rose by 0.6% M/M and 0.3% Y/Y, falling short of expectations for a 0.7% M/M and 0.4% Y/Y increase. For details of the EMU HICP we have to wait for the final report. German unemployment continued to surprise in September, as the state agency reported a 12 000 decline in September, following decreases by 5 000 and 7 000 in the previous months. The unemployment rate dropped to 8.2% from 8.3% previously and is barely up from the 7.6% low of the cycle. Have the labour market laws been repealed? Normally unemployment continues to rise well into the cycle, while the latter is now still in the bottoming out phase. The reason seems to be that firms used the subsidized system of short shift workers to avoid lay-offs. The figure for short shift workers lags the unemployment figures by three months. While in June the number of short shift workers dropped, it was the first monthly decline but at 1 433 000, the figure is still up almost 1 400 000 since October 2008. The number of vacancies has gradually decline from a peak of 665 000 in January 2007 to 468 000 currently, but in recent months the decline slowed sharply and the level is still close to the 2000 peak. Also the decline of employment slowed in recent months, notably to 4 000 in August, from 15 000 in July and 36 000 in June. Download entire Sunrise Market Commentary Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Oct 01 09 07:30 GMT |

EUR/USD closed higher on Wednesday as it consolidated yesterday's decline. The high-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain bullish signalling that sideways to higher prices are possible near-term. If it extends this month's rally, the 38% retracement level of this year's decline crossing is the next upside target. Closes below the 20-day moving average crossing would temper the near-term friendly outlook in the market. USD/JPY closed higher on Wednesday as it consolidated yesterday's decline. The mid-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain bullish signalling that sideways to higher prices are possible near-term. If it extends this month's rally, the 38% retracement level of this year's decline crossing is the next upside target. Closes below the 20-day moving average crossing would temper the near-term friendly outlook in the market. GBP/USD closed higher on Wednesday as it had its biggest gain in a week against the dollar. The mid-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain bullish signalling that sideways to higher prices are possible near-term. If it extends this month's rally, the 38% retracement level of this year's decline crossing is the next upside target. Closes below the 20-day moving average crossing would temper the near-term friendly outlook in the market. USD/CHF closed higher on Wednesday as it consolidated yesterday's decline. The mid-range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought but remain bullish signalling that sideways to higher prices are possible near-term. If it extends this month's rally, the 38% retracement level of this year's decline crossing is the next upside target. Closes below the 20-day moving average crossing would temper the near-term friendly outlook in the market. HY Markets http://www.hymarkets.com

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Forex Technical Update

Daily Forex Technicals | Written by India Forex | Oct 01 09 07:35 GMT |

Rupee : Rupee is holding little strong despite the dollar not making fresh lows internationally.Stocks are also holding strong too. We are looking at the important support of weekly trendline close to 47.80 levels.We expect rupee to be in the range of 47.80 to 48.30 in short term. It has major weekly trend support at 47.80-90 till which further weakness in rupee till 48.30 can be seen. ONCE we see the levels of 47.80 breaking the bias of rupee may change to bullishness.(USD/INR 47.84) Rangebound Euro : EUR/USD is having a strong trendline and a 55 EMA support in weekly chart near 1.4450 levels. Only and Only a decisive break of this trendline support level indicates a medium term bearishness in EUR/USD. Initiate Buying at this level keeping the stop loss below 1.4350 levels on Daily closing basis. (EUR/USD 1.4560).Bullish. Sterling : Sterling took a rebound to 1.6127 yesterday and subsequently fell to 1.59 levels. The retreat suggests that the correction from 1.5770 has possibly ended and downside bias is seen for fall towards yesterday's low at 1.5824 , however, we need a break of 1.58 to confirm and bring resumption of recent decline from 1.7044 top for retest of 1.5770 later this week. In view of this, we are looking to sell cable again on recovery. Only above 1.6127-34 resistance would abort and signal stronger correction of recent fall is taking place.(GBP/USD 1.5954) Bearish. Yen : The USDJPY is holding near 90 levels and only a hold above 90.20 would make the view consolidative otherwise bias for the yen still remains strong. Initial support at 88.22 (yesterday's low). Break below that area should continue the bearish scenario towards 87.10 area.(USD/JPY 89.99) Bullish Aud : Aud maintains bullish bias. Technically buying on dips close to important supports remains the best strategy in the current market scenario.Only a continuous move below 0.8400 would break the trendline and stand bearish for the pair. (AUD/USD - 0.8789) Bullish Gold : Gold dipped yesterday till $994 levels from where it rebounded strongly till $1009 levels. We recommend to buy on dips near the support of $985 levels for the target of $1032 levels.(GOLD : 1004.50) Bullish Dollar Index : The Dollar Index (basket against 6 currencies with EUR accounting for 57% of the basket) pull back from 77.33 argues that an intraday top is in place and some consolidations might be seen. Nevertheless, we're still favoring the case that the index has bottomed out at 75.83 already, after drawing support from 75.89. Above 77.33 will bring rally resumption to 78.93. Break there will confirm there whole rise five wave decline from 89.62 has completed and will bring rally to challenge 81 level nextneeds to break the levels of 78.70 to maintain strength again. It could bottom close to 75.50 levels. (Dollar Index - 77.03).Neutral India Forex http://www.indiaforex.in DISCLAIMER These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Thai Consumer-Price Decline Stabilizes as Slump Eases

By Suttinee Yuvejwattana

Oct. 1 (Bloomberg) -- The decline in Thailand’s consumer prices stabilized in September, supporting the central bank’s decision to stop cutting interest rates as the country’s recession eased.

An index of consumer prices fell 1 percent from a year earlier, the Commerce Ministry said today. The decline matched the drop in August and the median estimate of 15 economists in a Bloomberg News survey.

The central bank kept its benchmark interest rate unchanged at 1.25 percent for a third straight meeting in August after four cuts from December to April. Thailand’s economic contraction probably eased last quarter and gross domestic product may expand in the final three months of 2009, the government predicts.

“Inflation may turn positive late this year, but it’s still not a concern,” said Pornthep Jubandhu, an economist at Siam Commercial Bank Pcl in Bangkok. “The central bank doesn’t need to worry about it until late next year.”

Bank of Thailand Governor Tarisa Watanagase said last week inflation isn’t a threat amid a “gradual” recovery from the recession, indicating she may not raise interest rates anytime soon. Policy makers “can’t be complacent” even as there were “more signs” the economy is improving, she said.

The $261 billion economy shrank 4.9 percent in the second quarter from a year earlier, less than a 7.1 percent contraction the previous three months. The Finance Ministry expects consumer prices to climb by 2 percent to 3 percent next year, after declining 0.8 percent in 2009.

Thailand’s core inflation index, which excludes fresh food and fuel, fell 0.1 percent last month from a year earlier, the Commerce Ministry said.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

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Philippines May Hold Interest Rate on Slow Inflation

By Karl Lester M. Yap

Oct. 1 (Bloomberg) -- The Philippine central bank will likely keep borrowing costs unchanged this week as the nation’s strengthening economy hasn’t yet reignited inflation risks.

Bangko Sentral ng Pilipinas will hold its benchmark interest rate steady at a record low of 4 percent for a second straight meeting today, according to all 15 economists surveyed by Bloomberg News. The decision is due about 4 p.m. in Manila.

“Bangko Sentral, like many other central banks across the regions, will likely remain patient in the face of benign inflation,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. Policy makers will “hold interest rates steady though the end of this year and probably through the first half of next year.”

Asian policy makers have stopped cutting borrowing costs as the global slump eases and nations including Singapore and New Zealand emerge from recessions. The risk that last week’s deadly Tropical Storm Ketsana will hurt Philippine economic growth may add pressure for the central bank to keep interest rates low.

“During any emergency like in this case, where you have a natural disaster, you loosen monetary policy and provide fiscal support to the economy,” said Luz Lorenzo, an economist at ATR- Kim Eng Securities Inc. in Manila. “It gives the central bank more reason not to raise interest rates too quickly.”

Manila Flooded

The Philippines’ monetary policy is appropriate as “both the upside and downside risks to inflation are even,” giving the central bank room to support economic growth, Deputy Governor Diwa Guinigundo said this week.

Ketsana, which killed more than 200 people in the Philippines after it swept across the island of Luzon on Sept. 26 and flooded more than a quarter of Manila, may slow this year’s growth to a range of 0.7 percent to 1.7 percent, compared with the government’s targeted 0.8 percent-to-1.8 percent expansion, Economic Planning Secretary Augusto Santos said Sept. 29. The official target remains for now, he said.

Governor Amando Tetangco in August ended the Philippines’ longest series of interest-rate cuts since at least 2002 after economic growth accelerated. The Philippine economy expanded 1.5 percent in the second quarter from a year earlier, quickening from a decade-low 0.6 percent in the previous three months.

Easing inflation allowed the central bank to cut its key interest rate by 2 percentage points from mid-December to July to bolster the domestic economy as exports collapsed. Consumer- price gains slowed to 0.1 percent in August.

Fragile Recovery

The central bank’s “infusion of liquidity has contributed to sustained economic activity in the Philippines and the avoidance of an economic recession,” Guinigundo said in a Sept. 28 interview. “The global recovery will be gradual and is still fragile,” and policy makers around the world will be very careful not to withdraw fiscal and monetary stimuli too early and risk a W-shaped recovery, he said.

The peso advanced 0.4 percent to 47.165 per dollar as of 9:03 a.m. in Manila today, according to Tullett Prebon Plc, after gaining 1.6 percent last quarter.

Indonesia’s central bank last month refrained from cutting its benchmark interest rate for the first time since November, judging that faster inflation is now a bigger risk than slowing growth. Malaysia’s central bank kept borrowing costs unchanged at 2 percent for a fourth straight meeting in August.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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Japan’s Tankan Survey Shows Companies Plan Deeper Spending Cuts

By Jason Clenfield

Oct. 1 (Bloomberg) -- Japanese companies plan to deepen investment cuts as profits slump, inhibiting the recovery from the nation’s worst postwar recession, the central bank’s Tankan survey showed.

Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago, the central bank said in Tokyo today. Confidence at big manufacturers rose for a second quarter after plunging to a record low in March.

Stocks fell, heading for their lowest close in two months, on concern demand will weaken once governments worldwide exhaust more than $2 trillion in stimulus spending. The yen’s 8 percent gain in the past three months is another blow to exporters such as Toshiba Corp. and Toyota Motor Corp., whose cost cutting has squeezed incomes and driven the jobless rate to a record high.

“It’s going to take much longer for capex and consumer spending to rebound,” said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. “In a normal recovery, capital spending and private consumption come back after a time lag. What’s different this time is that the level of economic activity is just so low.”

The Nikkei 225 Stock Average fell 1.4 percent to 9,990.03 at the lunch break in Tokyo. The yen traded at 89.84 per dollar from 89.89 before the report. The yield on Japan’s 10-year bond fell one basis point to 1.285 percent.

Less Pessimistic

The index of sentiment among large makers of cars, electronics and other goods climbed to minus 33 from minus 48 in June and a record low of minus 58 in March, the Bank of Japan said. A negative number means pessimists outnumber optimists.

The improvement matched economists’ predictions and only brought the index on par with the level during the 2001 recession. Confidence among large service companies rose for a second straight quarter to minus 24 from minus 29.

“An improvement in sentiment is nice, but as long as it doesn’t lead to more investment, it’s not useful for saying anything about the economy,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo.

The capital spending plans are the worst for a September survey in at least 26 years. Large companies see profits falling 22 percent this fiscal year, the Tankan showed.

“The figures are showing some improvement but there’s no change to my view that the economy is still severe,” said Hirofumi Hirano, chief spokesman of the Democratic Party of Japan-led government that came into power last month pledging to support households.

Yen’s Gain

The yen rose to an eight-month high of 88.24 earlier this week, making exporters’ products more expensive abroad and eroding the value of their repatriated profits. The gains prompted Finance Minister Hirohisa Fujii to backtrack on remarks that indicated he supported a stronger Japanese currency.

The “current level around 90 yen is a bit painful,” Toyota Executive Vice President Yukitoshi Funo said on Sept. 25. “I think the yen should be a little weaker.”

Large manufacturers expect the yen to trade at 94.50 per dollar in the year ending March 31, today’s report showed.

Toyota, which has benefited from government programs to encourage spending on energy-efficient cars, yesterday said it will hire 1,600 temporary workers in Japan to meet increased demand for its Prius hybrid. Even after raising its production targets, Toyota estimates a third of its factory capacity will go unused this year. The company in August reiterated its plan to cut capital spending by 36 percent.

‘Still Worried’

“Companies are still worried whether demand overseas will reliably recover,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “Because of that uncertainty, the recent gains haven’t led to a boost in capital spending.”

The effects of cost cuts are ricocheting through the economy. Reduced investment by electronics makers is taking a toll on companies such as Ishii Hyoki Co., a Hiroshima-based producer of equipment used to make circuit boards. The company, which had forecast earnings of 579 million yen ($6.5 million), said last month it’s now expecting a 393 million yen loss.

Workers’ wages have fallen for 15 months, darkening the outlook for retailers including Seven & I Holdings Co. The Tokyo-based company may close about 30 of its Ito-Yokado Co. stores by February 2013, Nikkei English News said today.

Japan’s retail sales fell 1.8 percent in August from a year earlier, the 12th straight decline, the Trade Ministry said today. Analysts forecast a report tomorrow will show the unemployment rate climbed to a record 5.8 percent in August.

Companies are at least finding it easier to get access to funds. The Bank of Japan may decide as early as this month to let its emergency corporate-debt purchasing programs expire, according to people with direct knowledge of the discussions.

Today’s Tankan surveyed 10,235 companies between Aug. 26 and Sept. 30.

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

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Dollar May Weaken More Should Stocks Not Slide Too Far, RBS Says

By Daniel Tilles

Oct. 1 (Bloomberg) -- Declines by the dollar may be less dependent on gains in stock markets, according to Royal Bank of Scotland Group Plc.

“The dollar’s slide probably no longer relies heavily on the equity market reinforcing risk appetite,” Greg Gibbs a foreign-exchange strategist in Sydney, wrote today in a report. “Provided equities don’t slide too far, the dollar may remain on a weaker path. The dollar is the weakest link as the preferred funding currency.”

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

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Euro Falls on Speculation G7 Finance Officials to Discuss Gain

By Yoshiaki Nohara and Ron Harui

Oct. 1 (Bloomberg) -- The euro fell against the dollar on speculation finance ministers and central bankers will discuss the European currency’s strength at a Group of Seven meeting this week.

Europe’s single currency dropped versus 13 of its 16 major counterparts on prospects the euro region’s finance ministers and central bankers meeting today in Goteborg, Sweden will signal that currency gains are unwelcome. The yen fell against the dollar as economic reports from China and South Korea sparked demand for higher-yielding assets in emerging markets.

“The recent appreciation of the euro is beginning to bother policy makers in the eurozone, where deflationary pressure is strong,” said Takeshi Makita, a Tokyo-based economist at Japan Research Institute Ltd., a unit of Japan’s third-largest banking group Sumitomo Mitsui Financial Group Inc. “As the region’s economy will rely on exports to achieve a recovery, it’s natural for policymakers to start verbal intervention to stem a harmful rise of the euro.”

The euro declined to $1.4568 as of 8:01 a.m. in London from $1.4640 in New York yesterday. The 16-nation currency traded at 131.22 yen from 131.33 yen. The yen dropped to 90.07 per dollar from 89.70.

European Union Monetary Affairs Commissioner Joaquin Almunia said the Eurogroup will discuss the currency’s advance in preparation for Group of Seven meetings, Reuters reported. G- 7 finance chiefs are meeting in Istanbul this weekend.

The yen fell against 12 of its 16 major counterparts after a report today showed China’s Purchasing Managers’ Index gained to 54.3 in September from 54.0 in August. Markets in Hong Kong and China are closed for holidays.

China PMI

“The China PMI increase means that the global economy is set for a steady expansion,” said Tomoko Fujii, senior currency strategist at Bank of America Securities-Merrill Lynch in Tokyo.

South Korea’s government said overseas sales fell 6.6 percent from a year earlier in September, less than August’s 20.9 percent slide and the 10.5 percent decline forecast by economists in a Bloomberg survey. Confidence among local manufacturers is at a two-year high, according to a monthly survey published yesterday by the Bank of Korea.

“Solid data are brightening the economic outlook, improving risk appetite,” said Tetsuya Inoue, chief researcher for financial markets and technology studies at Nomura Research Institute. “As emerging-market currencies benefit, the yen is being sold somewhat.”

The dollar advanced against the yen after the Bank of Japan’s Tankan survey showed companies plan to deepen investment cuts, spurring a drop in Asian stocks and boosting demand for the relative safety of the U.S. currency.

Tankan Survey

Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago, the central bank said in Tokyo today. Confidence at big manufacturers rose for a second quarter after plunging to a record low in March.

“It’s an unusual situation for large companies to plan cuts in capital spending,” said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo. “They can’t be confident about the medium- to long-term outlook due to the big gap in supply versus demand.”

The Nikkei 225 Stock Average slid 1.5 percent and the MSCI Asia-Pacific Index of regional shares dropped 1.2 percent. The dollar benefits from risk aversion because it is the world’s main reserve currency.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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ICAP Sees Lower Profit as Derivatives Business Slows

By John Glover

Oct. 1 (Bloomberg) -- ICAP Plc, the world’s largest broker of transactions between banks, said first-half profit was “slightly” lower than a year earlier as its credit and equity derivatives businesses slowed.

Revenue in the period increased 6 percent, London-based ICAP said in a statement today. Pretax profit for the year to March 2010 will be in line with analysts’ expectations of between 309 million pounds ($493 million) and 354 million pounds, the company said.

“In electronic broking, markets have been quieter than the very active conditions a year ago,” Chief Executive Officer Michael Spencer said in the statement. “Cost reductions and other measures have helped to hold margins.”

The slump in credit markets last year spurred ICAP’s customers to increase trading, boosting the amount of business it handles. As markets calmed this year amid unprecedented government efforts, trading in some of ICAP’s markets slowed.

ICAP fell 4.5 pence, or 1 percent, to 418.2 pence at 8:05 a.m. in London after slumping as much 4.85 percent.

The broker has gained 44 percent this year, valuing the company at 2.7 billion pounds, compared with an increase of 16 percent on the U.K.’s benchmark FTSE 100 Index. The FTSE 350 Banks Index of U.K. financial companies has climbed 36 percent year-to-date.

Pretax profit before one-off items and impairments, ICAP’s preferred measure of performance, was 346 million pounds in the fiscal year to March 2009, it said in May.

“Many of the markets in which we operate are benefiting from the continuing low short-term interest rates, steep yield curves and substantial corporate and government bond issuance,” Spencer said in the statement. “Both credit and equity derivatives have experienced more difficult conditions.”

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

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British Pound Rises Against Euro, Climbs 0.2% to 91.37 Pence

By Daniel Tilles

Oct. 1 (Bloomberg) -- The pound rose against the euro, strengthening 0.2 percent to 91.37 pence as of 7 a.m. in London. The British currency fell 0.3 percent to $1.5931.

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

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Bernanke to Urge ‘Strong’ Consumer Protection in House Hearing

By Scott Lanman and Craig Torres

Oct. 1 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke will tell lawmakers that protecting consumers of financial services is “vitally important,” while omitting prior criticism of an Obama administration proposal to shift such powers from the Fed to a new agency.

“It is vitally important that consumers be protected from unfair and deceptive practices in their financial dealings,” Bernanke says in testimony obtained by Bloomberg News and prepared for a hearing today of the House Financial Services Committee. “Strong consumer protection” helps preserve savings and promote confidence in financial firms and markets, he said.

Bernanke doesn’t discuss the proposal for a separate agency in the testimony, after saying in July that there would be disadvantages to creating one. That may soften a clash with Representative Barney Frank, the panel’s chairman, who said at a hearing yesterday that the Consumer Financial Protection Agency must be created because the Fed and other bank regulators did little to police lending abuses.

The Federal Reserve had a “lackadaisical record” on consumer protections and will cede its oversight power and funding to the agency, Frank said.

Frank, a Massachusetts Democrat, released a “report card” on Sept. 23 that he said demonstrated the Fed’s “poor record” in “using the tools provided by Congress to protect consumers from abusive financial-industry practices.”

July Criticism

The hearing with Bernanke is scheduled for 9 a.m. in Washington.

The 55-year-old Fed chief previously testified on potential changes to financial regulation in July, when he said there would be disadvantages to creating a consumer financial- protection agency.

Rules created by the Fed in recent years “benefited from the supervisory and research capabilities” of the central bank, Bernanke said in July.

The Fed chairman comes to Capitol Hill as Congress is preparing the most extensive overhaul of financial regulations since the Great Depression.

In response to congressional criticism, Fed officials have stepped up their scrutiny of bank lending, are overhauling their approach to supervision and trying to strengthen their commitment to consumer protection.

The Fed announced on Sept. 15 that it would begin looking at consumer compliance in non-bank subsidiaries of bank holding companies. Inside the Fed, Bernanke has also emphasized an integral approach to supervision, drawing on expertise across the Fed’s divisions, including Consumer and Community Affairs.

Rate Cut

The Fed chairman didn’t comment on the economy or interest rates in his prepared remarks. Central bankers left the benchmark lending rate unchanged in a range of zero to 0.25 percent last week and committed to buy the full amount of their $1.25 trillion mortgage-backed securities purchase program.

Lawmakers have shunned an Obama administration proposal that would give the Fed authority over the capital, liquidity, and risk management practices at systemically important financial institutions.

Instead, Frank said on Sept. 14 legislators will vest that authority in a council of regulators.

Bernanke says in today’s prepared testimony that the central bank is “well suited to serve as the consolidated supervisor for those systemically important financial institutions” not already under the Fed’s umbrella.

Also in the prepared remarks, Bernanke reiterates his call for other changes to regulation, including finding a way to wind down big financial companies without harming the financial system and allowing the government to “impose losses on shareholders and creditors of the firms.”

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net.

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Greenspan Says U.S. Will Need to Tighten Credit, Raise Taxes

By Albert R. Hunt and Rich Miller

Oct. 1 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.S. will have to both tighten credit and raise taxes as the economy pulls out of the worst recession since the 1930s.

“The presumption that we’re going to be able to resolve this without significant increases in taxes is unrealistic,” Greenspan, 83, said in an interview with Bloomberg Television yesterday.

The budget deficit this year is forecast to widen to $1.6 trillion, boosted in part by President Barack Obama’s $787 billion stimulus package. Between 2010 and 2019, deficits will total $7.1 trillion, according to the Congressional Budget Office.

Greenspan also said the Fed will have to withdraw money from the financial system to avoid inflation. The central bank has doubled its balance sheet over the last year to $2.2 billion as it battled the recession that began in December 2007.

The economy will grow at a 3 percent to 4 percent annual pace in the next six months before slowing in 2010, Greenspan predicted. Growth will be aided by a surge in the stock market and inventory restocking by companies. Share prices are likely to “flatten out, even though earnings are doing very well.”

The Standard & Poor’s 500 Index has jumped 56 percent from its low for the year on March 9, an ascent that’s had a “very positive” impact on the economy, Greenspan added. The index fell 0.3 percent yesterday to 1,057.08.

Job Cuts

The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year. An unexpected decline in a gauge of business activity released yesterday, along with a private report showing employers cut more jobs than forecast, indicate a recovery may be slow to take hold.

Greenspan, who was appointed Fed chairman in 1987 by President Ronald Reagan and served until January 2006, praised the steps has taken by his successor, Ben S. Bernanke, to help pull the economy out of recession.

“The Fed has done a splendid job,” he said.

Still, the size of the Fed’s balance sheet is “not sustainable” and will eventually have to be reduced to “something just north of $1 trillion,” he said.

“My concern is that legislation or other actions on the part of Congress may prevent” the Fed from withdrawing the stimulus, Greenspan said. “Unless we sterilize or unwind the big monetary base we’ve built up, two, three years out inflation really begins to take hold.”

Representative Ron Paul of Texas, a Republican, is leading an effort in Congress to repeal the central bank’s immunity to audits of monetary policy.

Consumption Tax

Greenspan said that the odds are growing that the U.S. will have to enact some form of consumption tax to help reduce the federal budget deficit.

Obama has pledged to bring down the deficit without raising taxes on middle-income Americans. The CBO estimates that this year’s budget shortfall will equal 11.2 percent of the economy, the most since World War II.

Greenspan said he is “quite impressed” by Obama and called him “a very intelligent man.”

“But I don’t think he is sufficiently in control of a very serious budget problem,” the former Fed chief said.

Greenspan said that an overhaul of financial regulations is needed. Treasury Secretary Timothy Geithner has proposed the most sweeping changes to the rules governing Wall Street in seven decades, including giving the Fed authority to monitor risk across the financial system while stripping it of its consumer-protection role.

‘Broke Down’

“It’s very obvious that a lot of things which were in place in the regulatory area in the markets failed,” Greenspan said. “It broke down and it’s got to be fixed.”

Bernanke has opposed ceding the central bank’s power to regulate the safety of financial products to a new agency. Greenspan, for his part, called such power “peripheral” to the Fed’s main role.

He also cautioned against responding to the financial crisis with excessive regulation. While agreeing that the government should have a say on executive compensation in the institutions that are receiving government aid, Greenspan voiced wariness about extending that control to other banks.

“You have to be careful here because this should be a relationship between shareholders, directors and executives,” he said.

To contact the reporters on this story: Albert R. Hunt in Washington at ahunt1@bloomberg.net; Rich Miller in Washington rmiller28@bloomberg.net

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U.S. Factories Probably Expanded at Fastest Rate in Three Years

By Courtney Schlisserman

Oct. 1 (Bloomberg) -- U.S. manufacturing probably expanded last month at the fastest pace in more than three years and consumer spending in August grew the most since 2003 as the recession eased, economists said ahead of reports today.

The Institute for Supply Management’s factory gauge rose to 54 in September from 52.9 the month before, according to the median forecast in a Bloomberg News survey of economists. Fifty is the dividing line between expansion and contraction. Another report may show purchases rose 1.1 percent in August.

A record drawdown in inventories earlier this year and stimulus programs such as “cash for clunkers” set the stage for more production and a return to economic growth last quarter. While output and spending may slow in coming months as the government’s measures expire, economists say a recovery is under way.

“As long as manufacturing gauges continue to expand, it’s going to suggest that the recovery in the economy is more durable,” said Jonathan Basile, an economist at Credit Suisse in New York.

The Tempe, Arizona-based purchasing managers’ factory report is due at 10 a.m. New York time. Estimates in the Bloomberg survey of 80 economists ranged from 51.5 to 56. The projected reading would be the highest since April 2006.

A Commerce Department report due at 8:30 a.m. may show the August gain in consumer spending was accompanied by a 0.1 percent increase in personal incomes, according to the survey.

The National Association of Realtors, meanwhile, may say the number of contracts to buy previously owned homes rose in August at a slower pace than the prior month.

Clunker Effect

Ford Motor Co, General Motors Co. and Honda Motor Co. are among automakers that have cited the popularity of the Obama administration’s cash-for-clunkers plan as they announced production increases for the coming months.

The program, which ended Aug. 24, offered discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan produced almost 700,000 sales before it ended, the Transportation Department said Aug. 26.

Economists yesterday said the end of the incentive may have helped fuel a weaker-than-forecast September reading for the Institute for Supply Management-Chicago’s business survey, which found activity dropped. The Chicago group is not a chapter of the national Institute for Supply Management.

Other gauges released last month indicate the expansion in manufacturing is accelerating. The Federal Reserve Bank of Philadelphia said its economic index rose to 14.1, the highest since June 2007, while a similar measure from the New York Fed increased to 18.9, the highest since November 2007.

Fed Assessment

The Federal Open Market Committee last week left the target rate for overnight loans between banks at a record low of between zero and 0.25 percent, while policy makers said for the first time since August 2008 that the economy is growing.

“Economic activity has picked up following its severe downturn,” Fed policy makers said Sept. 23 in a statement. “Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.”

GM said last week that it will add a third shift at three U.S. plants taking on additional production from factories slated to close or be idled. The facilities getting the new shifts are in Fairfax, Kansas; Fort Wayne, Indiana; and Delta Township, Michigan, GM said in a statement. The changes will restore 2,400 jobs, the Detroit-based company said.

An additional 600 jobs will be restored at stamping and powertrain facilities, Tim Lee, the company’s vice president of global manufacturing, said on a conference call.

Inventory Cuts

Leaner inventories are helping factories return to work as companies restock shelves. Stockpiles dropped at a record $160.2 billion annual rate in the second quarter, the Commerce Department said yesterday, after shrinking at a $113.9 billion pace in the first three months of the year.

Even so, an unexpected drop in durable-goods orders in August was a reminder that companies remain cautious.

“As we look at the economic data, it’s certainly encouraging,” DuPont Co. Chairman Charles O. Holliday said in an interview on Sept. 23. Nonetheless, he said, the third- largest U.S. chemical maker must not “get ahead of ourselves to build inventory too fast or assume we’re going to come out in a rapid-fire order, because I assume we’ll come out at a much different pattern than before.”

                      Bloomberg Survey

=============================================================== =

Pers Pers ISM Pending

Inc Spend Manu Homes

MOM% MOM% Index MOM% =============================================================== =

Date of Release 10/01 10/01 10/01 10/01 Observation Period Aug. Aug. Sept. Aug. - -------------------------------------------------------------- - Median 0.1% 1.1% 54.0 1.0% Average 0.1% 1.1% 53.9 1.0% High Forecast 0.5% 1.6% 56.0 3.0% Low Forecast -0.1% 0.1% 51.5 -2.5% Number of Participants 76 80 80 35 Previous 0.0% 0.2% 52.9 3.2% - -------------------------------------------------------------- - 4CAST Ltd. 0.2% 1.1% 53.5 -0.5% Action Economics 0.2% 1.0% 53.0 0.4% AIG Investments 0.0% 1.0% 54.0 0.5% Aletti Gestielle SGR 0.2% 1.4% 53.0 --- Ameriprise Financial Inc 0.2% 0.9% 54.0 0.4% Argus Research Corp. 0.1% 0.1% 53.0 --- Banesto 0.2% 1.0% 53.5 1.5% Bank of Tokyo- Mitsubishi 0.1% 1.3% 53.3 --- Bantleon Bank AG 0.1% 1.2% 53.8 --- Barclays Capital 0.1% 1.2% 56.0 --- Bayerische Landesbank 0.1% 1.2% 53.5 --- BBVA -0.1% 0.7% 55.7 0.5% BMO Capital Markets 0.2% 1.4% 53.5 2.0% BNP Paribas 0.2% 1.1% 54.0 --- BofA Merrill Lynch Resear 0.1% 1.1% 55.0 --- Briefing.com 0.0% 1.2% 55.7 1.0% Calyon 0.2% 0.9% 51.5 --- Capital Economics 0.3% 1.3% 55.0 1.5% CIBC World Markets 0.1% 1.5% 56.0 --- Citi 0.1% 0.9% 54.0 --- ClearView Economics 0.2% 1.2% 53.5 2.0% Commerzbank AG 0.2% 1.2% 55.0 1.0% Credit Suisse 0.1% 1.1% 54.5 --- Daiwa Securities America 0.1% 0.6% 54.0 --- Danske Bank 0.2% 1.3% 55.0 --- DekaBank 0.2% 0.9% 53.5 --- Desjardins Group 0.2% 1.2% 53.5 --- Deutsche Bank Securities 0.1% 1.4% 53.0 2.7% Deutsche Postbank AG --- 1.0% 53.5 --- DZ Bank 0.1% 1.2% 54.8 1.4% First Trust Advisors 0.0% 1.6% 54.0 --- Fortis --- 0.9% 53.5 --- FTN Financial 0.1% 1.5% 55.0 --- Goldman, Sachs & Co. 0.0% 1.1% 55.0 --- Helaba 0.1% 1.2% 53.0 --- Herrmann Forecasting 0.1% 1.0% 54.6 -1.8% High Frequency Economics 0.0% 0.9% 52.9 2.0% HSBC Markets 0.1% 1.0% 55.0 1.5% Ibersecurities 0.3% 1.2% 52.0 0.8% IDEAglobal 0.1% 0.8% 55.0 --- IHS Global Insight 0.1% 0.8% 53.5 --- Informa Global Markets 0.2% 1.2% 53.5 1.5% ING Financial Markets 0.1% 1.5% --- 1.5% Insight Economics 0.0% 1.5% 54.0 2.0% Intesa-SanPaulo 0.2% 1.0% 54.0 --- J.P. Morgan Chase -0.1% 0.8% 53.5 0.0% Janney Montgomery Scott L 0.2% 1.2% 53.5 1.5% Jefferies & Co. 0.2% 1.0% 54.0 --- Johnson Illington Advisor 0.4% 0.4% 53.0 --- Landesbank Berlin -0.1% 1.3% 54.5 --- Maria Fiorini Ramirez Inc 0.1% 1.2% 53.5 --- MFC Global Investment Man 0.0% 1.2% 55.0 --- Mizuho Securities 0.0% 1.3% 52.0 0.5% Moody’s Economy.com 0.0% 1.1% 54.7 -1.0% Morgan Keegan & Co. 0.1% 0.6% --- --- Morgan Stanley & Co. 0.1% 1.1% 53.0 --- National Bank Financial --- --- 56.0 --- Natixis 0.0% 1.0% 54.2 0.9% Newedge 0.1% 1.2% 53.5 --- Nomura Securities Intl. 0.4% 1.0% 52.1 --- Nord/LB 0.0% 1.0% 53.5 --- PNC Bank 0.1% 1.0% 53.3 --- Raymond James 0.1% 1.1% 54.5 --- RBC Capital Markets 0.1% 1.3% 55.0 --- RBS Securities Inc. 0.1% 1.0% 54.5 --- Ried, Thunberg & Co. --- 1.2% 54.0 1.0% Schneider Foreign Exchang 0.2% 1.4% 52.0 0.6% Scotia Capital 0.2% 1.0% 55.0 --- Standard Chartered 0.1% 1.0% 55.0 3.0% Stone & McCarthy Research 0.2% 1.5% 52.0 --- TD Securities 0.1% 1.1% 54.5 1.0% Thomson Reuters/IFR 0.2% 0.9% 53.0 1.9% Tullett Prebon 0.1% 0.9% 54.3 --- UBS 0.1% 1.0% 53.5 1.4% UniCredit Research --- --- 54.0 --- Union Investment 0.1% 1.1% 54.5 --- University of Maryland 0.2% 0.9% 53.5 1.0% Wells Fargo & Co. 0.5% 0.8% 54.5 --- WestLB AG 0.1% 1.0% 54.0 --- Westpac Banking Co. 0.2% 1.3% 53.5 2.0% Woodley Park Research 0.3% 1.1% 53.5 -2.5% Wrightson Associates --- 1.2% 54.0 1.0% =============================================================== =

To contact the reporter on this story:
Courtney Schlisserman in Washington at
cschlisserma@bloomberg.net.

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IMF Says Rising Joblessness to Weigh on U.S. Growth Next Year

By Timothy R. Homan

Oct. 1 (Bloomberg) -- Rising unemployment and the waning effects of President Barack Obama’s $787 billion stimulus program will restrain a U.S. economic recovery next year, the International Monetary Fund predicted.

The world’s largest economy is forecast to expand 1.5 percent next year, after contracting 2.7 percent in 2009, the IMF said today in a semiannual report. In July, the Washington- based lender projected 0.8 percent expansion for 2010.

“The U.S. economy is showing increasing signs of stabilization,” the IMF said in its World Economic Outlook. At the same time, “combined with the impact of rising unemployment, the temporary nature of the fiscal stimulus, and subdued growth in trading partner economies, growth will remain sluggish,” the fund said.

Government stimulus plans such as an auto-rebate program and first-time homebuyer tax credits gave manufacturing and housing -- main contributors to a U.S. recession that started in December 2007 -- a boost from July through September. Federal Reserve policy makers are among those concerned that gains in consumer spending will not be sustained as unemployment climbs and incomes stagnate.

The U.S. economy contracted at a 0.7 percent pace from April through June, the Commerce Department said yesterday in Washington. The jobless rate in the U.S. is likely to peak above 10 percent in the second half of next year, helping to keep core inflation below 1 percent through most of 2010, according to today’s IMF report.

Markets ‘Stressed’

“Although financial conditions have improved significantly in recent months, markets remain stressed, and this will weigh on investment and consumption,” the fund said. It added that recapitalizing banks and repairing their balance sheets are an “indispensable condition for sustained growth.”

Bank losses on bad assets are projected to increase from July 2009 through next year by $420 billion in the U.S., the IMF said yesterday in a separate report. American banks have already written down $610 billion, and capital-raising efforts will not be enough to offset future losses, according to that report.

Today the IMF warned that the “massive increase in bank reserves” must not result in “excessive credit growth and lead to inflation.” The Fed will have difficulty reducing the quantity of longer-term assets on its balance sheet, exposing the central bank to “significant interest-rate risk,” according to the report.

Unemployment

Fed Chairman Ben S. Bernanke is trying to revive lending and cut the 9.7 percent unemployment rate while preventing a surge in inflation from the $1 trillion expansion of the Fed’s balance sheet.

The IMF added its views to debates in the U.S. Congress, saying the Obama administration’s plan for overhauling financial regulations is “sensible” and should be done in a “comprehensive fashion, rather than in piecemeal.” The IMF also said expanding health-care coverage should be budget neutral, and measures are needed to bring down costs in order to maintain debt sustainability.

The legacy of the crisis, the IMF said, is “a high and rising debt trajectory that could become unsustainable without significant medium-term measures.” Similarly, potential growth during that period is likely to register below 2 percent “for a considerable time.”

To contact the reporter on this story: Timothy R. Homan in Istanbul at thoman1@bloomberg.net

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Rubber Advances After Japan Manufacturers’ Confidence Improves

By Aya Takada

Oct. 1 (Bloomberg) -- Rubber advanced after a report showed confidence among Japan’s largest manufacturers rose for a second quarter, boosting optimism that demand may increase for the raw material used to make tires.

Futures in Tokyo rose as much as 4.2 percent to 205 yen a kilogram ($2,284 a metric ton), matching the one-week high reached on Sept. 24. The Tankan index of sentiment among makers of cars, electronics and other goods climbed to minus 33 from minus 48 in June, the Bank of Japan said today. Confidence rose as global government stimulus spending rekindled exports.

“The good data gave support to industrial commodities including rubber,” Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said today by phone.

March-delivery rubber gained 2.6 percent to 201.8 yen a kilogram on the Tokyo Commodity Exchange at 11:20 a.m. local time. Prices extended a 21 percent increase the past three months, the largest quarterly gain since the period ended March 31, 2006.

Futures also increased as manufacturing in China, the world’s largest rubber consumer, expanded for a seventh month in September on stimulus spending and record growth in new loans.

The official Purchasing Managers’ Index increased to a seasonally adjusted 54.3 from 54.0 in August, the Federation of Logistics and Purchasing said today in Beijing.

The Shanghai Futures Exchange is closed for a holiday as the nation celebrates its 60th anniversary today. The January- delivery contract surged as much as 7 percent to the highest level since Sept. 17 yesterday.

Prices climbed amid speculation China may buy surplus rubber from the local market as demand may weaken after the U.S. imposed tariffs on tire imports from the country, Takaki Shigemoto, a commodity analyst at research and investment company TOS, said yesterday.

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

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Crude Oil Falls on Concern U.S. Economic Recovery May Stall

By Yee Kai Pin and Ben Sharples

Oct. 1 (Bloomberg) -- Crude oil in New York fell as traders booked profits from yesterday’s rally on concern the pace of fuel demand recovery in the U.S., the biggest energy-consuming nation, may stall.

Oil slipped below $70 a barrel after an unexpected drop in U.S. business activity and as companies cut more jobs than estimated. Prices rallied 5.9 percent yesterday, the most since April 2, after the Energy Department posted a surprise drawdown in gasoline stockpiles.

“Yesterday seemed like a rather disproportionate rise,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “There’s a lot of data out in the next couple of days in the U.S. that would really affect perceptions of the outlook and have a bearing on the movement in oil prices.”

Crude oil for November delivery fell as much as 78 cents, or 1.1 percent, to $69.83 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $70.07 a barrel at 2:56 p.m. in Singapore. Futures have gained 57 percent this year.

The Institute for Supply Management-Chicago Inc.’s business barometer slid to 46.1, trailing the most pessimistic estimate from economists. Companies in the U.S. cut September payrolls by a larger-than-forecast 254,000 jobs, a report from ADP Employer Services showed, indicating the labor market may be slow to recover.

“The poor economic news suggests oil should not go too much higher in price because the U.S. economy is not improving as quickly as hoped,” Mike Sander, an investment adviser at Sander Capital in Seattle, said in an e-mail. “The economy is still in dire shape.”

Gasoline Drawdown

U.S. gasoline inventories fell 1.7 million barrels to 211.5 million in the week to Sept. 25, the Energy Department said yesterday. Stockpiles were forecast to rise 1 million barrels, based on the median of estimates in a Bloomberg News survey of analysts.

Crude oil supplies climbed 2.8 million barrels to 338.4 million, the report showed. Distillate stockpiles, which include heating oil and diesel, rose 323,000 barrels to 171.1 million. That’s a sixth weekly increase even as refinery output and imports dropped.

“While gasoline demand looks fine, distillate demand remains very weak, with an 11.6 percent year-on-year decline for September-to-date,” analysts at Barclays Capital, led by Paul Horsnell, said in an overnight report.

The investment bank maintained its forecast for oil in New York to average $76 a barrel in the fourth quarter. Prices rose 1 percent in the three months to yesterday, a third quarterly increase.

‘Sharp Reaction’

“We had a very sharp reaction given data that had both positive and negative aspects,” said Commonwealth Bank of Australia’s Moore. “We’re essentially still in a range of $65 to $75.”

U.S. stock markets fell following the Chicago business activity report. The Standard & Poor’s 500 Index lost 0.3 percent to 1,057.08 in New York, while the Dow Jones Industrial Average also slipped 0.3 percent to 9,712.28.

Asian shares mirrored the decline on concern the region’s economic recovery may falter. The MSCI Asia Pacific Index lost 1.2 percent to 116.55 at 3:33 p.m. in Tokyo. European stock- index futures were little changed.

China’s manufacturing expanded in September at the fastest pace in 17 months on stimulus spending and this year’s record growth in new loans. The country, Asia’s largest oil consumer, marks 60 years of Communist Party rule today.

Reduced Profits

South Korea, Asia’s third-biggest oil importer, bought less crude oil in September as refiners cut output in response to reduced profits. Imports fell to 67.4 million barrels, 2.5 percent less than the same month last year, according to the Ministry of Knowledge Economy.

Brent crude oil for November settlement fell as much as 73 cents, or 1.1 percent, to $68.34 a barrel on the London-based ICE Futures Europe exchange. The contract traded at $68.58 a barrel at 2:55 p.m. Singapore time. Yesterday, it rose 5.5 percent, the steepest increase since Sept. 16, to settle at $69.07 a barrel.

Yesterday’s rally “had a lot to do with some end-of- quarter window-dressing,” Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said in a note to clients. “Today we wipe the slate clean as we begin a new quarter. Let’s see if the bulls can keep the pressure on.”

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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