Currencies Waiting For A Breakout From Recent Ranges

Daily Forex Fundamentals | Written by AC-Markets | Nov 19 09 11:02 GMT |

News and Events: It seems that neither economic releases nor unexpected Fed remarks about interest rate policy has been able to coerce major currency pairs out of their entrenched ranges this week. Despite comments from Bernanke on Monday, San Francisco Fed President Yellen on Tuesday, and St Louis Fed President Bullard yesterday, the USD seems unable to force a break out from the well-trodden consolidation zones. EURUSD has been locked between 1.4800 and 1.4990; with transient waves of risk appetite and aversion sending the pair from end to end without any sustainable momentum. Rumours of a sizeable 1.4800-1.5100 option structure expiring tomorrow has been suggested as a possible explanation for the stubborn resilience of key technical support and resistance; which if true would mean we may finally get a USD breakout and some fresh volatility injected into FX markets. This morning's main data release has been the UK Retail Sales that posted at 0.4% MoM gain in October and a revision upwards to last month's reading from 0.0% to 0.4%. M4 Money Supply data released at the same time showed an increase of 1.8% MoM (vs. 1.0% expected), and again there were slight revisions higher to the September numbers. GBPUSD withdrew from the brink of downside support levels (having touched a low of 1.6643 earlier in the morning), to recover to 1.6690 at the time of writing; well within its own 1.6650-1.6840 channel. With the European data calendar wrapped up, the US session ahead is light – but there is a raft of speakers from both sides of the Atlantic that will be making speeches this afternoon. Given the pattern of the week so far with official rhetoric providing the most pertinent driver of FX markets, we hope that Geithner, Fisher or Trichet can give markets some additional catalysts to play with. Today Key Issues: 13:30 USD Initial jobless claims, thous 14-Nov exp: 504 prev: 502 13:30 USD Continuing claims, thous 7-Nov exp: 5598 prev: 5631 13:30 CAD Wholesale sales, % m/m Sep exp: 1.0 prev: -1.4 13:30 CAD Leading indicators, % m/m Oct exp: 0.7 prev:1.1% 15:00 USD Philadelphia Fed manufacturing index Nov exp: 12.2 exp: 11.5 15:00 USD Leading indicators, % m/m Oct exp: 0.4 prev: 1.0 The Risk Today: EurUsd Yesterday we mentioned the prior day's bearish engulfing candle and that the following day can see a retracement back into that candle before fresh selling kicks in. Since then the pair has done exactly that, trading right up to the 10 day downtrend at 1.4990 before going back to the 12 month uptrend. We also said that such a move would be encouraging for the medium term bears as it means that the medium term uptrend is once again under attack whilst the breakout level of 1.5050 to the upside is not getting any visits. Whilst the risk reward ratio clearly lies with the long side, the clues for chances of success do not look good. Most of the action so far looks to be from intraday to short term traders as the pair is printing two hammer candles back to back off of the 1.4842 support, signalling some short covering and profit booking. But to reiterate, if the 10 day downtrend holds firm and we revisit these support levels over and over throughout the next 24 hours then the bears will be out of hibernation and the USD carry traders will be in for a serious surprise this side of Monday. Only an hourly close above 1.4994 negates this scenario. GbpUsd As with the other pairs, the USD is flexing some muscle this morning and cable is now flirting with the 1.6663 support and rising wedge uptrend. One could argue that this is a sensible place to get long but since most rising wedges break to the downside rather than the upside I will sit out of this one and take more clues from the rest of the marketin the coming hours. If the wedge does break to the downside there will be no shortage of opportunity to get short in the coming days and if I miss a long opportunity then so be it. There is very little technical data to encourage a play for the upside so…..if in doubt, stay out. UsdJpy An opportunity has arisen this morning for those looking to get long USD JPY intraday and potentially even those looking to scale into a more medium term long. The pair has been printing bullish candles on a 15 minute chart from the 88.84 level and although there is a downtrend bearing over head, the risk reward here for longs looks impressive with stops just below at 88.65. Scalpers will no doubt be looking to get out of the pair as early as 89.17 but there is scope here for a move to 89.30 intraday and all eyes on 89.75 for a sign of increasing USD strength. UsdChf The pair picked up the short term vibratory channel yesterday off the Nov 16th lows and has made an immediate visit back to the resistance zone between 1.0186 and 1.0205 where it has printed a hanging man on the hourly chart and is slightly overbought (pretty much the inverse picture of EUR USD). Intraday shorts are having a whale of a time with this resistance - played correctly, some traders must have taken well over 200 pips just in the month of November by shorting a simple resistance level. Clearance of 1.0205 is still needed to pull the USD bulls into the pair and for the bears the support at 1.0110 will now meet the 3 day uptrend so expect a bounce on the first visit and use it as the sensible place to cover. EURUSD GBPUSD USDJPY USDCHF 1.5100 1.7041 93.50 1.0360 1.5062 1.6900 91.50 1.0290 1.5046 1.6840 90.05 1.0200 1.4867 1.6690 88.95 1.0180 1.4810 1.6650 88.80 1.0034 1.4700 1.6515 88.00 1.0000 1.4626 1.6460 87.15 0.9890 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Nov 19 09 11:09 GMT |

A difficult session for Japan's Nikkei 225 overnight wiped away risk appetite at the start of the European session. EUR/USD dropped back to 1.4847 early in the session, the EUR finding support from the strength of the EUR/JPY 132.00 technical barrier. Sterling found encouragement on positive news from the Oct retail sales data. The better tone of the USD has helped knock gold off its highs. The OECD has doubled its forecast for growth in 2010 to 1.9%. It expects growth of 2.5% in 2010. Neither of these figures is exceptional which underpins the delicate nature of the present economic recovery. That said, the upward revision in forecasts by the OECD does reflect rising confidence that developed countries will be able to avoid a double dip recession in the coming year. The OECD's projections on Japan were less favourable. Japan is forecast to shrink by 5.3% in 2009 only a little better than its previous -5.6% projection. This dampened the enthusiasm about Japanese growth which had spread following Japan's recent better than expected Q3 GDP release and sparked fears that the Japan may significantly lag the upswing in evidence elsewhere in the Asian region. The OCED drew attention to Japan's abysmal public debt burden which it judged to be a constraint on fiscal spending. While the reversal of the risk trade has benefitted the JPY today comments from Japanese Finance Minister Fujii that he would not seek to strengthen the yen led to some paring of these gains. When considered in light of the upward revision to the Sep data, the UK Oct retail sales report brought some encouraging news. Retail sales is now running at a rate of 3.4% y/y which reflects the better anecdotal evidence from retailers recently and perhaps the recent less bad labour market report. The rise in M4 to 11.0% y/y also suggests that the BoE's easy monetary policy may finally be having more clout on raising money supply. Taken together these data further the view that the UK economy is in the recovery stage. That said the coincident release of worse than expected PSNCR data serves as a reminder of the hefty fiscal retrenchment that faces the UK economy in the coming years. EUR/GBP moved towards the key 0.8910 technical support following the data releases but has subsequently bounced back to 0.8935. Cable failed to hold on to the USD1.6700 level and has pushed back to 1.6660. AUD/NZD trended higher overnight as the OECD recommended that the RBNZ should keep rates on a record low in contrast to the policy of the RBA. Profit-taking set in at AUD/NZD1.2570. This afternoon ECB President Trichet and also the Fed's Fisher are scheduled to speak. US initial claims, leading indicators and Philly Fed will be of note. Canadian leading indicators are also due. In Europe the EU is expected to appoint its first ever President. Though overtime this could be linked with increased coherence in the EMU, today's appointment should not impact the EUR Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Nov 19 09 10:16 GMT |

Good morning to our Thursday's Daily FX Comment of this week. Bad rated banks inside the UK may be the main reason for the weak GBP in the past few trading days. We wish you a nice and relaxed trading day and successful trades. Markets review The JPY and the USD climbed against the EUR on speculation that European banks will disclose more credit losses. This would increase demand for the relative safety of the JPY and USD. Both countries', the U.S. and Japan, have their interest rates near zero. The JPY climbed versus all the 16 major crosses after Asian stocks slipped. The Nikkei 225 Fell 1 percent while the MSCI Asia-Pacific Index dropped 0.6 percent. Yesterday, the Mitsubishi UFJ Financial Group Inc. said that it plans to sell as much as 1 trillion JPY ($11.2 billion) in stock. The USD/JPY dropped to 89.12 after touching a low of 89.07. It still trades in a middle-term downward trend phase. The EUR fell also against the JPY as it reached the low at 132.80. The GBP dipped for a third day against the USD after the Daily Telegraph reported that according to the world's biggest credit-checking company, U.K. banks are in a worse state than lenders anywhere else. The GBP/USD fell to 1.6700 after it reached a low at 1.6686 while opening the day at 1.6749. The U.K currency also fell against the JPY. It reached a low at 148.65, which was the lowest level since November 12th. Technical analysis CHF/JPY Since November 10th the CHF/JPY has been moving in a downward phase. As you can see, the CHF/JPY has crossed the middle Bollinger band and is trading around the first weekly pivot support level at around 87.82. If the market breaks the second support, it may fall further towards the lower Bollinger band (same as the lowest price from the 17th, which is at 87.60) and the second support level of around 87.10 CAD/CHF During the last five trading days, the CAD/CHF has been moving inside a bearish trend channel. After touching the resistance line of 0.9660 for the last time yesterday, the market dipped to the support line of around 0.9550 and the lower line of the channel. This might be a sign for a short-term oversold market. The pair may rebound towards the upper line of the channel. Pivot Points - Daily FX Support and Resistance Levels Daily Calendar & Key FX Events Varengold Bank IMPORTANT NOTIFICATION TO BE READ IN CONJUNCTION WITH THE CONTENTS OF THIS DOCUMENT This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational urposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Nov 19 09 09:42 GMT |

EUR/USD Current level-1.4857 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4793 and 1.3523. Yesterday's test of the dynamic resistance at 1.4990 failed and the pair is in a negative mode again, towards 1.4796 major support. We favor a reversal above 1.4796, that will target 1.5050-63 highs again. Intraday bias is negative with an initial resistance at 1.4902 and crucial level at 1.4927. Resistance Support intraday intraweek intraday intraweek 1.4903 1.5290 1.4796 1.4623 1.5015 1.6040 --- 1.4444 USD/JPY Current level - 89.05 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84. Still in the consolidation pattern above 88.71 and the pair is capped at 89.60. Further depreciation is to be expected, towards 88.21 before a reversal, that will set the focus back on 91.58 resistance Resistance Support intraday intraweek intraday intraweek 89.53 92.40 88.73 88.01 90.75 97.79 88.21 83.53 GBP/USD Current level- 1.6654 The pair is in a downtrend after peaking at 1.7042. Trading is situated above the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. The drowning from 1.6840 is deeper than expected, but while the pair holds above 1.6627 support there is a chance for reversal, that should set the beginning of the final leg upwards, to 1.6953. Only a break below 1.6515 will confirm, that important top is already in place, at 1.6877. Intraday bias is negative with a resistance at 1.6684 and crucial level at 1.6724. Resistance Support intraday intraweek intraday intraweek 1.6684 1.7042 1.6684 1.7042 1.6840 1.7442 1.6840 1.7442 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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House Committee to Vote on Fed Audits in Test of Bernanke Clout

By Scott Lanman

Nov. 19 (Bloomberg) -- The House Financial Services Committee will consider today how much to expand audits of the U.S. central bank in a test of Federal Reserve Chairman Ben S. Bernanke’s clout among lawmakers.

Panel members will vote on a Democratic proposal to retain a ban on audits of Fed interest-rate decisions. Approval would deal a blow to Representative Ron Paul, the Texas Republican who introduced a bill with 300 cosponsors that would allow audits of interest-rate decisions, a step Bernanke opposes.

Advancing the Democratic measure would be a victory for Bernanke as the Fed faces the biggest threats to its authority and independence in five decades. Lawmakers are seeking greater transparency for the Fed and limits on its powers, saying lax regulation by the central bank helped trigger the financial crisis.

“Congress created an independent Federal Reserve with a group of board members and bank presidents who have very long terms and a whole culture of independence from politics,” Alice Rivlin, a former Fed vice chairman, said in a Bloomberg Radio interview yesterday. “It’s very important, I believe, to preserve that.”

Representative Barney Frank, the Massachusetts Democrat who heads the committee, said the panel would take up Fed audit proposals today during debate on legislation to create a council of regulators to monitor risks to the financial system. Today’s session in the panel begins at 9 a.m. in Washington.

‘Substantial Increase’

Frank told reporters yesterday that he has “no interest in guessing” whether the more limited audit amendment backed by Representative Mel Watt of North Carolina has the votes to be approved. “There will be a substantial increase in auditing,” Frank said. “Exactly how much will be voted on.”

Should an audit measure be attached to the legislation, the main bill would face a vote by the committee. It then must be approved by the House and Senate and signed by President Barack Obama to become law.

The amendment to be offered by Watt, who chairs a subcommittee on U.S. monetary policy, would limit Government Accountability Office audits of Fed emergency-loan programs to their operations, excluding decisions and internal talks about the facilities. Identities of borrowers may be released a year after the programs end.

Watt’s plan has more limits than a proposal unveiled last week by Senate Banking Committee Chairman Christopher Dodd.

Paul and Representative Alan Grayson, a Florida Democrat, have drafted a competing measure for broader Fed audits, which would exclude only any unreleased transcripts or minutes of Fed policy meetings. It also says the legislation shouldn’t be construed as interfering in monetary policy.

Monetary Policy

Bernanke said in July that the Paul audit bill could result in lawmakers issuing subpoenas over potential decisions to raise interest rates. “I don’t think the American people want Congress running monetary policy,” he said.

The central bank chairman said independence from political interference in setting interest rates produces “much better results” for the economy. “We are very, very sensitive to this issue,” Bernanke said at the televised forum in July.

Congress is considering legislation stripping the Fed of some powers, including its consumer protection authority, and giving it to a Consumer Financial Protection Agency.

The House panel also will consider a measure from Paul and Grayson requiring the Treasury secretary to sign off on Fed decisions to swap currency with other central banks. Grayson said yesterday there’s a need for “some accountability” in the actions.

Dollar Swaps

The Fed’s dollar swaps, begun in 2007 to ease banks’ funding difficulties outside the U.S. during the financial crisis, reached a high of $583.1 billion in December 2008 and have since shrunk to $29.1 billion.

In addition to Treasury approval, the Grayson-Paul measure would require separate sign-off from at least five Fed governors. Currently, such swaps are subject to approval from the Federal Open Market Committee, which includes governors and regional Fed presidents.

Paul, who wrote a best-selling book this year called “End the Fed,” said last month that his audit bill had been “gutted” by Watt while moving toward a vote in the Democratic- controlled House. Watt responded that “we don’t want to have politicians second-guessing the Fed on monetary policy” and said Paul was “exaggerating.”

Watt’s draft measure allows for audits of Fed operations including supervision of banks, bailouts of individual companies and check-clearing functions.

Avoiding Fraud

For Fed emergency programs accessible to a group of companies, such as the commercial-paper facility, the GAO’s audits would be limited to ensuring that the programs are operating according to Fed procedures and avoid risk and fraud.

The GAO would be barred from auditing, reviewing or making recommendations on the Fed’s decisions to create or terminate a facility, its terms and conditions and any “deliberations, discussions or communications among or between” Fed officials and employees, Watt’s proposal says. It also doesn’t permit GAO audits of monetary policy.

Watt said in a letter to colleagues that his plan will “provide transparency of the Fed’s financial operations that will be completely unprecedented” without interfering with monetary policy.

Frank said this week the full House will consider his regulatory overhaul legislation in December. Dodd, a Connecticut Democrat, plans to hold a committee meeting today to discuss financial-overhaul legislation.

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

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SNB Says Swiss Banks Need Tighter Rules Than Others

By Klaus Wille

Nov. 19 (Bloomberg) -- Swiss National Bank Chairman- designate Philipp Hildebrand said the country may need tighter financial rules than the rest of the world to tackle a domestic industry dominated by UBS AG and Credit Suisse Group AG.

“Given the particular situation in Switzerland, higher- than-average regulatory standards are warranted,” he said in a speech in Geneva yesterday. The “exceptional” size of the two biggest Swiss banks means “prudent decision-making” is needed on the regulatory framework.

Hildebrand, who takes over from Jean-Pierre Roth in January, helped start a push earlier this year for officials to debate whether some banks are “too big to fail” and should be broken up to prevent a repeat of the crisis worsened by Lehman Brothers Holdings Inc.’s collapse. The Swiss banking industry is 8.2 times the country’s gross domestic product, compared with 4.3 times in the U.K. and 0.9 times in the U.S., SNB statistics show.

Hildebrand, who is currently SNB Vice Chairman, said that while regulatory reform should be “internationally coordinated,” a global agreed level of regulation might not be sufficient for Switzerland.

“Not all countries are confronted with the same urgency for reform as we are,” he said.

Shares in the country’s two biggest banks were little changed. UBS stock was at 16.86 Swiss francs at 9:36 a.m. in Zurich and Credit Suisse slipped 0.1 percent to 55.45 francs.

‘Most Important’

Hildebrand said in June that there can be “no more taboos” when rewriting financial rules and indicated that officials should be prepared to break up some banks if necessary. He said yesterday that banks’ size is the “most important question” for Switzerland.

The debate on how to tackle banks deemed “too big to fail” gathered momentum last month when Bank of England Governor Mervyn King said that such banks could be split to separate riskier activities from more stable businesses such as taking deposits.

Hildebrand demanded contingency plans for some institutions in case of financial distress, echoing similar calls from the leaders of the Group of 20 nations after a summit in September.

“At the forefront of our efforts to mitigate the ‘too big to fail’ problem must be an internationally agreed and orderly process to allow for the wind down of large, systemically important institutions in the event of a severe crisis,” Hildebrand said.

The SNB governing board member reiterated that the amount and quality of banks’ capital needs to be increased and that higher liquidity ratios are needed. He also urged policy makers today to strengthen their efforts.

“What has been missing is a bold and international political commitment to put in place a framework for the orderly resolution of large cross-border financial institutions,” he said.

To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net.

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OECD Doubles 2010 Growth Forecast, Recovery to Widen

By Mark Deen and Simon Kennedy

Nov. 19 (Bloomberg) -- The Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year and predicted a further acceleration in 2011 as China and other emerging countries power a global recovery.

The combined economy of the group’s 30 member countries will expand 1.9 percent next year and 2.5 percent in 2011, the Paris-based organization said in a report today. Output will contract 3.5 percent this year. The OECD, which advises members on economic policy, forecast 2010 growth of 0.7 percent in June.

The MSCI World Index has surged 69 percent in the past eight months as the world economy emerges from its worst recession in more than half a century. While the U.S. and the euro region will return to growth next year, mounting debt burdens will keep the expansion in check, the OECD said.

“We now have numbers that support a recovery in motion,” Jorgen Elmeskov, the OECD’s acting chief economist, said in an interview. “It’s still a slow recovery because of considerable headwinds from the need to adjust the balance sheets of households, enterprises and financial sectors.”

The MSCI index, down 0.6 percent today, was little changed after the OECD report was published. The yield on the benchmark German 10-year government bond stayed at 3.292 percent.

Output in the OECD economies will only return to the level achieved in the first three months of 2008 in the third quarter of 2011, underlining the damage done by the banking crisis.

Meltdowns

The U.S. economy will grow 2.5 percent in 2010 instead of the 0.9 percent predicted in June and the euro region will advance 0.9 percent instead of a projection it would stagnate, the OECD said. Japan will post growth of 1.8 percent instead of 0.7 percent. The forecast for China was raised to 10.2 percent.

“Outside of the OECD, things are more buoyant, especially in Asia,” Elmeskov said. “The non-OECD countries weren’t affected by asset-price meltdowns as much and up to the downturn ran sensible economic policies.”

The OECD gave 2011 growth forecasts for the first time. The U.S. will grow 2.8 percent, the euro area 1.7 percent and Japan 2 percent. The Chinese economy will expand 9.3 percent, it said.

The relative weakness of the U.S. and euro region’s recoveries is prompting policy makers to put China under pressure to allow the yuan to appreciate more. President Barack Obama told Chinese leaders this week the U.S. expects to see progress by next year on making the exchange rate “more flexible,” Ambassador Jon Huntsman said.

Tighter Policy

Sluggish growth in the OECD means most of their central banks should be careful in tightening monetary policy as their economies recover, the organization said. Unemployment in the OECD region will increase by 21 million by the end of 2010 from 2007, taking the rate to 9 percent from 5.6 percent.

While non-conventional measures may need to be withdrawn in the months ahead to counter a “large overhang of liquidity,” interest rates shouldn’t start to move up until inflationary pressures begin to be felt, the report said.

“The recovery is weak and there is a lot of spare capacity,” Elmeskov said.

The OECD’s forecasts assume the U.S. Federal Reserve and the European Central Bank hold off on rate increases until almost the end of 2010 and the Bank of Japan maintains its benchmark rate at 0.1 percent through 2011, he added.

The ECB’s main rate, currently at 1 percent, will probably climb to 2 percent by the end of 2011 and the Fed’s benchmark will rise to 2.25 percent in that time from close to zero at present.

Bubbles

While unprecedented liquidity injections have raised concern about new asset bubbles that policy makers need to be aware of, they have yet to materialize, the OECD says.

“We are talking about a risk here, not something that is happening,” Elmeskov said. “One can say that given where we are there’s little alternative to very low rates but we need to be aware that they could imply the risk of bubbles forming.”

Even so, central banks and governments around the world must take care not to unsettle markets when they communicate how they will unwind stimulus measures, the OECD said.

For now, financial markets are buoyant and the return to growth is boosting corporate earnings. The Dow Jones Industrial Average and the S&P 500 Index have gained 19 percent and 23 percent this year and the price of crude oil has risen 77 percent. Gold has jumped 55 percent in the past 12 months.

In the U.K., William Morrison Supermarkets Plc said today that same-store sales rose 4.3 percent in the three months through Nov. 1. A.P. Moeller-Maersk A/S, the owner of the world’s largest container shipping line, said yesterday that the market will return to growth next year and that freight rates may rise.

“Unprecedented policy efforts appear to have succeeded in limiting the severity of the downturn and fostering a recovery to a degree that was largely unexpected even six months ago,” Elmeskov said in the report. “It is now time to plan the exit strategy form the crisis policies.”

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.netSimon Kennedy in Paris at skennedy4@bloomberg.net

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Ukraine Seeks Russia Gas Fine Waiver, Warns on Supply

By Kateryna Choursina

Nov. 19 (Bloomberg) -- Ukraine is seeking an amendment to its gas contracts with Russia to waive fines for buying less gas than contracted this year, Ukrainian President Viktor Yushchenko said in a letter on his Web site addressed to his Russian counterpart Dmitry Medvedev.

Unless existing gas contracts between Ukraine and Russia are changed, state-run NAK Naftogaz Ukrainy may be unable to prepare for the heating season starting at the end of next year, which could lead to “potential threats to the reliability of gas shipments to Ukraine and transit to other European states,” Yushchenko said in the letter.

The president wants to reduce volumes of natural gas that Ukraine imports under the contract to no more than 30 billion cubic meters a year, the letter reads. Yushchenko also wants the contracts to include the minimum amount of transit volumes on the “pump or pay” principle and “symmetrical responsibility of both parties for risks and symmetrical economically justified fines.”

The prime ministers of Russia and Ukraine in January signed a 10-year gas supply and transit contract after a spat which cut gas shipments to about 20 European nations for almost three weeks. Ukraine’s Prime Minister Yulia Timoshenko said yesterday that the gas contract was not in the agenda of her meeting with Russian counterpart Vladimir Putin at the Commonwealth of Independent States heads of state meeting in Yalta today.

To contact the reporter on this story: Kateryna Choursina in Moscow at kchoursina@bloomberg.net

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U.K. Royal Mint Quadruples Production of Gold Coins

By Thomas Biesheuvel and Nicholas Larkin

Nov. 19 (Bloomberg) -- The U.K.’s Royal Mint, established in the 13th century, more than quadrupled production of gold coins in the third quarter after demand for the metal increased as investors sought to hedge against a weakening dollar.

Output rose to 32,735.8 ounces from 7,500.2 ounces a year before, according to data obtained by Bloomberg News under a Freedom of Information Act request. Production in the first nine months more than tripled to 100,391.3 ounces, the data show.

Gold is set for a ninth annual gain as countries have cut interest rates to near zero percent and spent $2 trillion to pull the global economy out of the worst recession since World War II. The metal reached a record in London yesterday and has gained about 30 percent this year, while the dollar has dropped 7.8 percent against a basket of six currencies.

“There’s still a total lack of confidence in the financial system,” David Russell, a director at Dublin-based brokerage and bullion dealer GoldCore Ltd., said in an interview. “Investors are seeing the benefits of diversifying into gold. Smaller investors are clued into the fact that inflation possibilities are a worry for the future.”

Sales of American Eagle gold coins by the U.S. Mint more than doubled in the first nine months to 954,000 ounces, its Web site showed. Harrods Ltd., the London department store, began selling gold bars and coins for the first time in October.

Tangible Asset

Muenze Oesterreich AG, the Austrian mint that’s the world’s largest marketer of pure gold coins, sold 1.9 million ounces of gold so far in 2009, its President Kurt Meyer said last month. That was 23 percent more last year’s total sales, he said.

“It’s a tangible asset, and its value can be quickly and easily realized,” Russell said. “We’re seeing very good demand in the coin market. Many investors are aware that they’ve been poorly diversified over the past few years.”

Bullion holdings in some exchange-traded funds have risen to records in recent months. India last month bought 200 metric tons, followed by a smaller purchase by Mauritius. Analysts at Bank of America Merrill Lynch, Societe Generale SA and Barclays Capital have forecast further purchases by central banks.

Gold fell for the first time in five days in London. Bullion for immediate delivery declined $10.38, or 0.9 percent, to $1,135.13 an ounce by 9:26 a.m. local time.

The U.K. mint moved to Llantrisant in Wales from London’s Tower Hill in 1968, three years before Britain switched to a decimal currency system. It makes coins including the 22-carat 2010 Gold Proof Sovereign, weighing 7.99 grams (0.26 ounce) and costing 299 pounds ($500), the state agency’s Web site shows.

The mint’s use of silver rose 56 percent from a year earlier to 94,343.3 ounces in the third quarter, the figures show. Production in the first nine months increased 31 percent to 270,382.6 ounces.

To contact the reporters on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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Pound Drops for Third Day Versus Dollar on Bank Lending Concern

By Paul Dobson

Nov. 19 (Bloomberg) -- The pound fell for a third day against the dollar on speculation the country’s banks will disclose more credit losses.

The U.K. currency had its biggest decline in more than a week against the yen as demand increased for the relative safety of the Japanese and U.S. currencies. The Daily Telegraph said in a report today that U.K. lenders were in a worse state than those elsewhere, citing Experian Plc, the world’s largest credit-checking company. The FTSE 350 Banks index fell 0.2 percent.

“There are ongoing concerns about the state of the banking sector in the U.K. that is weighing on sterling,” Jeremy Stretch, a senior currency strategist at Rabobank International in London, said in a Bloomberg Television interview.

The pound fell 0.6 percent to $1.6654 as of 8:14 a.m. in London, and weakened 1 percent to 148.11 yen, the biggest intraday drop against the Japanese currency since Nov. 11. Sterling rose 0.1 percent to 89.22 pence per euro.

“The most troubling part is that I’m not convinced defaults have yet peaked,” the Telegraph cited Experian Plc’s Chief Executive Officer Don Robert as saying.

U.K. government bonds were little changed with the yield on the 10-year gilt at 3.68 percent and the yield on the two-year security 1 basis point lower at 1.24 percent.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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Obama Aims to Allay Auto Lobby Concern on Korea Trade

By Edwin Chen and Julianna Goldman

Nov. 19 (Bloomberg) -- President Barack Obama said he is committed to pushing through a free trade agreement with South Korea that has been stalled by the U.S. auto lobby and unions, who argue it doesn’t do enough to open up Korean markets.

Obama’s joint press conference in Seoul today with South Korean counterpart Lee Myung Bak was a last chance on his four- nation Asia trip to show he opposes protectionism. The accord has been held up in Congress, where lawmakers are demanding wider access for Chrysler Group LLC, Ford Motor Co. and General Motors Co. Lee said today he is willing to reopen talks on the auto industry.

The U.S. Chamber of Commerce estimates that failure to enact the accord means the loss of $35 billion in exports and 345,000 jobs. South Korea signed a rival agreement with the European Union last month that calls for 99 percent of commerce to be duty-free within five years.

“Team Obama talked the talk, now we’ll see if they walk the walk,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington. “Possibly in Seoul the president will achieve another breakthrough” with a commitment to seek ratification of the U.S.-South Korea pact.

U.S. automakers sold 6,980 vehicles in South Korea last year, or 0.72 percent of the passenger car market, according to the Korea Automobile Importers & Distributors Association. Those figures exclude GM’s local Daewoo unit, which captured 7 percent of the market in the first nine months of this year.

Hyundai Motor Co., Korea’s biggest carmaker, accounted for almost half of all sales at home. Through October this year, Hyundai raised its U.S. sales 4.1 percent to 373,222 vehicles.The U.S. market share for Hyundai and its Kia Motors Corp. affiliate was 7.3 percent in October. Hyundai says about a quarter of the cars the group sells in the U.S. are made there.

Trade Imbalances

Obama said he would work to address the issues in the U.S. that were holding up the free trade agreement.

“There is obviously also a concern within the United States around the incredible trade imbalances that have grown over the last several decades,” Obama said. While that imbalance was not so marked with South Korea, “there has been a tendency I think to lump all of Asia together when Congress votes on trade agreements.”

While in Asia, Obama has been called on by regional leaders, including Malaysian Prime Minister Najib Razak and Chinese President Hu Jintao, to demonstrate the U.S. will work to reduce trade barriers. At the Asia-Pacific Economic Cooperation summit in Singapore, Obama expressed interest in joining and expanding a regional free-trade group that so far includes Chile, New Zealand, Singapore and Brunei.

Forging an agreement that would ensure passage of the Korea trade accord will be “politically tough back in the U.S.,” Hufbauer said.

Tax Hurdle

Democrats, who have majorities in the House and Senate, are holding up a vote on the agreement. Representative Sander Levin, a Michigan Democrat and chairman of the House Ways and Means Committee’s trade panel, said South Korea first must remove tax and regulatory obstacles to sales of U.S. autos, refrigerators and other manufactured goods.

Lee’s comments appear to mark an about-face. Yesterday, Ahn Ho Young, South Korea’s deputy minister for trade, said there would be “no re-negotiation.”

South Korea is the seventh-biggest U.S. trading partner. Last year, two-way trade totaled $82.9 billion, according to the Commerce Department.

China, the second-biggest U.S. trading partner after Canada, has been subjected to a series of trade sanctions by the Obama administration on tires and steel pipe in the months leading up to the president’s Asia trip. China called the pipe tariffs “discriminatory” and said it would start its own anti-dumping probe of American cars.

Keeping Quiet

Obama didn’t mention trade during a joint appearance with Hu Nov. 17 at Beijing’s Great Hall of the People. Hu urged Obama to “oppose and reject protectionism in all its manifestations in an even stronger stand.”

Still, U.S. companies used the president’s visit to help cement business ties in China. Tempe, Arizona-based First Solar Inc. advanced its plan to build the world’s biggest plant directly converting sunlight to electricity in Inner Mongolia, signing an agreement in Beijing Nov. 17 with U.S. Energy Secretary Steven Chu and Chinese Vice Premier Li Keqiang in attendance.

China is the third-biggest export market for the U.S., with outbound shipments last year amounting to $71.5 billion, an increase of 9.5 percent from 2007. The U.S. imported $337.8 billion from China last year, more than from any other country, according to the Commerce Department.

North Korea

Obama and Lee reiterated their commitment to bringing North Korea back to multilateral talks on ending its nuclear weapons program. China is host to six-party negotiations that include the two Koreas, Japan, Russia and the U.S. The talks were broken off after North Korea launched a rocket in April in violation of a United Nations resolution.

Obama said he and Lee “both agree on the need to break a pattern that has existed in the past in which North Korea behaves in a provocative fashion; it then is willing to return to talks; it talks for a while, and then it leaves the talks seeking further exceptions and is never actually making progress on the core issues.”

--Julianna Goldman, Edwin Chen, Michael Forsythe. With assistance from Seyoon Kim, Bomi Lim and Seonjin Cha in Seoul, Mark Drajem in Washington and Belinda Cao in Beijing. Editors: Joe Sobczyk, Ben Richardson.

To contact Bloomberg News staff on this story: Julianna Goldman in Seoul at +1-202-654-4304 or jgoldman6@bloomberg.net; Michael Forsythe in Beijing at +8610-6649-7580 or mforsythe@bloomberg.net; Edwin Chen in Beijing at + 1-202-624-1844 or echen32@bloomberg.net

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Swiss Franc Weakens Against Euro, Extends Drop Versus Dollar

By Daniel Tilles

Nov. 19 (Bloomberg) -- The Swiss franc weakened against the euro and extended its decline versus the dollar.

The Swiss currency slipped 0.1 percent to 1.5126 per euro as of 9:07 a.m. in Zurich, and depreciated 0.7 percent to 1.0172 against the dollar.

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

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Crude Oil Declines for First Time in Four Days as Dollar Gains

By Rachel Graham

Nov. 19 (Bloomberg) -- Crude oil fell for the first time in four days as the dollar gained against the euro, dulling the appeal of commodities as a currency hedge.

Oil fell from a one-week high reached yesterday after the U.S. Department of Energy said crude stockpiles fell unexpectedly last week. The dollar traded as high as $1.4847 against the euro on speculation European lenders will disclose more credit losses.

“We have a stronger dollar today,” Sintje Diek, an analyst with HSH Nordbank, said by phone from Hamburg. “If the dollar goes to $1.50 or above, we might see some more movement on oil.”

Crude oil for December delivery dropped as much as 58 cents, or 0.7 percent, to $79 a barrel in electronic trading on the New York Mercantile Exchange and traded at $79.22 a barrel at 8:54 a.m. London time.

The crude contract nearest delivery traded above $80 a barrel yesterday for the first time since Nov. 11 after the release of the Department of Energy data. The December contract expires tomorrow. The more actively traded January contract was at $79.73 at 8:46 a.m. London time today.

The Energy Department data showed crude inventories declined 887,000 barrels to 336.8 million last week. Stockpiles were forecast to increase 300,000 barrels, according to a Bloomberg News survey of analysts.

Brent crude oil for January settlement dropped as much as 52 cents, or 0.7 percent, to $78.95 a barrel on the London-based ICE Futures Europe exchange and traded at $79.22 as of 8:53 a.m. local time.

To contact the reporter on this story: Rachel Graham in London rgraham13@bloomberg.net

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Yen, Dollar Advance as Falling Stocks Boost Demand for Safety

By Matthew Brown and Yoshiaki Nohara

Nov. 19 (Bloomberg) -- The yen and the dollar strengthened against the euro as stock markets fell, boosting demand for the perceived safety of the Japanese and U.S. currencies.

The yen rose against all 16 of its major counterparts as the MSCI World Index of shares dropped 0.5 percent. The New Zealand dollar slid the most this month against the greenback as the nation’s main opposition party said it will no longer accept the central bank’s primary policy of targeting inflation.

“It’s a risk off day,” said Daragh Maher, deputy head of global foreign-exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “Equity markets are down and in that kind of environment the dollar and the yen get bid.”

The yen appreciated to 132.34 per euro as of 8:38 a.m. in London, the strongest level since Nov. 3, from 133.64 yesterday in New York. The Japanese currency rose to 89.07 against the dollar, from 89.32. The dollar climbed to $1.4869 against the euro, from $1.4963.

The New Zealand dollar declined 1.8 percent to 73.30 U.S. cents, its biggest drop since Oct. 30 based on closing prices, and slid 2 percent to 65.29 yen.

The pound fell for a third day versus the dollar after the Daily Telegraph cited Experian Plc, the world’s largest credit- checking company, as saying that U.K. banks are in a worse state than those elsewhere.

Sterling dropped 0.5 percent to $1.6671. The pound rose 0.2 percent to 89.16 pence per euro.

To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Copper Falls From 14-Month High on Stronger Dollar: LME Preview

By Anna Stablum

Nov. 19 (Bloomberg) -- Copper slipped from a 14-month high in London as the dollar strengthened, making dollar-priced metals more expensive for holders of other monies.

Market News:

Metals News:

Metals Prices:

-- Copper declined 0.9 percent to $6,821 a metric ton on the
London Metal Exchange at 8:19 a.m. It reached $6,992 yesterday,
the highest intraday price since Sept. 24 last year. Relative
Strength Index 63.
-- Aluminum slid 0.7 percent to $2,051.5 a ton. RSI 65.
-- Zinc eased 0.3 percent to $2,240.5 a ton. RSI 58.
-- Lead fell 2 percent to $2,358 a ton. RSI 55.
-- Nickel was 1.5 percent lower at $16,890 a ton. RSI 43.
-- Tin fell 1 percent to $15,050 a ton. RSI 56.

Other markets:      Last           % Change  % YTD
Dollar Index        74.997           0.6       -7.1
Crude oil           $79.10          -0.6       77
Gold                $1,138.88       -0.6       29
MSCI World Index    1,165.45        -0.5       27

Economic Events:
                               Forecast       Prior     Time
                                                      (London)
U.S. Initial Jobless Claims        504K         502K     13:30
U.S. Leading Indicators            0.4%         1.0%     15:00
U.S. Philadelphia Fed.             12.2         11.5     15:00

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

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Gold Falls From Record in London as Stronger Dollar Spurs Sales

By Nicholas Larkin and Glenys Sim

Nov. 19 (Bloomberg) -- Gold fell for the first time in five days in London as a stronger dollar curbed the metal’s appeal as an alternative investment, spurring sales of bullion after its rally to a record.

The dollar gained as much as 0.8 percent against the euro today. Gold, which typically moves inversely to the greenback, reached an all-time high of $1,152.85 an ounce yesterday. The metal has climbed 29 percent this year as the U.S. currency has dropped 5.9 percent against the euro.

“We’re down on the back of the stronger dollar,” Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva, said today by phone. “We’ve seen a little profit- taking. The market got a bit too bullish, too early.”

Gold for immediate delivery slid $8.97, or 0.8 percent, to $1,136.53 an ounce by 9:47 a.m. local time. Gold futures for December delivery on the New York Mercantile Exchange’s Comex division lost 0.4 percent to $1,136.50 an ounce.

The “long-term trend of gold is on the upside,” Bob Takai, general manager of financial services at Japanese trading company Sumitomo Corp., said in a Bloomberg Television interview today. “I worry a little bit about the speed of the price rise for the past two, three months, so I think there is going to be a quick pullback in the near future.”

Stronger Demand

The rally has pushed spot gold’s 14-day relative strength index, a gauge of whether a commodity or security is overbought or oversold, above the level of 70 viewed by some investors and analysts who follow technical charts as signaling a decline. Today’s reading for immediate-delivery gold was 70.67.

Gold demand climbed 10 percent in the third quarter from the previous three months after investors bought the metal as a currency hedge and jewelry purchases picked up, the World Gold Council said today.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 3.66 metric tons to 1,117.49 tons yesterday, the first gain since Nov. 9. Investments in ETFs backed by gold surged 68 percent this year through September as the financial crisis wracked the global economy and the sliding dollar ignited inflation concern, the council said yesterday.

“There are plenty of cheap dollars around,” Takai said. “Gold is now chosen by investors as a target investment” as a result of this “excessive liquidity,” he said.

Among other precious metals for immediate delivery in London, silver slid 1.8 percent to $18.23 an ounce. Platinum fell 0.8 percent to $1,431 an ounce, while palladium was 1.7 percent lower at $364.25 an ounce.

Platinum held in ETF Securities Ltd.’s exchange-traded products rose 0.7 percent to a record 422,527 ounces yesterday, according to the company’s Web site. Palladium holdings increased 0.7 percent to a record 595,258 ounce.

To contact the reporters on this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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HSBC Must Pay Madoff Investors Only If Luxembourg Court Says So

By Stephanie Bodoni

Nov. 19 (Bloomberg) -- HSBC Holdings Plc’s Luxembourg unit must compensate investors only if a local court finds the bank breached its custodial duties over a dissolved fund that placed assets with conman Bernard Madoff, the country’s financial regulator said.

The Commission de Surveillance du Secteur Financier, in a statement posted yesterday on its Web site, ordered HSBC Securities Services (Luxembourg) SA “to review and complete the necessary internal rules and relevant forms in order to fulfill all the tasks relating to its function” as custodian bank of local mutual funds “within a period of three months.”

Europe-based custodian banks face increased scrutiny by the European Commission following the Madoff scandal. Madoff, 71, pleaded guilty in March in federal court in Manhattan and was sentenced on June 29 to 150 years in prison for using money from new clients to pay earlier investors. He directed a multibillion-dollar Ponzi scheme from his now-defunct New York money management firm.

HSBC’s Luxembourg unit was custodian for Herald (Lux) US Absolute Return Fund, which was managed by Bank Medici. Investors in France, Ireland and Luxembourg, the world’s second- largest mutual fund market after the U.S., are suing custodians, seeking the repayment of billions of dollars.

The decision whether HSBC’s unit “committed a civil tort which would oblige it to contribute, together with all other persons held liable” to pay damages “falls exclusively to the courts and tribunals,” the regulator said.

Bank Comment

“HSBC believes that it has complied with all its obligations as the depositary bank of the Herald Lux SICAV and agrees with the commission that it is exclusively up to the civil courts to determine the outcome of this matter,” the London-based bank said in an e-mailed statement yesterday. “HSBC continues to believe that it has good defenses to any claims brought against it and will vigorously defend itself against any such claims.”

Luxembourg Finance Minister Luc Frieden, in an interview in June, said custodian banks for Luxembourg-based mutual funds, such as HSBC’s unit, had “clear” obligations to compensate investors for Madoff-related losses. Yesterday is the first time the regulator, an independent body that is part of the government administration, expressed itself on HSBC’s liabilities. The CSSF said it concluded its HSBC review Nov. 17.

HSBC, Europe’s largest bank by market value, is facing investor complaints in Ireland for allegedly failing in its duties as custodian handling money in the Irish Thema International Fund Plc. The European funds at issue are known as Undertakings for Collective Investment in Transferable Securities, or UCITS. Custodians manage cash inflows and payments to investors.

UBS Cases

UBS AG is also being sued in Luxembourg over its role as custodian for two local funds, including Access International Advisors LLC’s LuxAlpha Sicav-American Selection fund, which once had assets of $1.4 billion, and invested 95 percent with Bernard L. Madoff Investment Securities LLC.

The CSSF in a May 27 finding after its review into UBS’s liabilities said the Swiss bank’s local unit had to indemnify mutual fund investors “according to its obligations as a Luxembourg depositary bank, subject to valid and opposable contractual clauses to the contrary.”

In its three-page statement yesterday, the regulator clarified its position further, saying that the final decision concerning contractual liabilities between private parties “can only be taken conclusively by a competent Luxembourg court.”

Madoff Links

The regulator also reacted to a lawsuit and press reports saying it knew before Madoff’s December 2008 arrest of links between him and three local funds that went into liquidation this year.

“The documents submitted to the CSSF” for the registration of the three funds “included no reference neither to the identity of BMIS nor, more importantly, to the multiplicity of functions carried on de facto by one entity,” the regulator said, referring to Madoff’s firm.

Between the funds’ creation and Madoff’s arrest “the CSSF was never informed in a transparent manner, by the professionals involved, of the structure actually set in place nor of the role played in practice by BMIS.”

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

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Asian Stocks Fall on Japan Share-Sale Plans; Singapore Climbs

By Masaki Kondo and Shani Raja

Nov. 19 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index down for a third day, as share-sale plans at Japanese companies raised concern the value of existing holdings will be reduced.

Mitsubishi UFJ Financial Group Inc. sank 3.7 percent and Nomura Real Estate Residential Fund Inc. slumped 8.6 percent after filing to sell stock. Industrial & Commercial Bank of China Ltd. lost 2.4 percent on concern China Minsheng Banking Corp.’s share sale will lure investors away from pricier stocks. Singapore Technologies Engineering Ltd. rose 2.6 percent on its home exchange, where the Straits Times Index climbed 0.5 percent after the city-state forecast increased economic growth.

“What you’re seeing is very much Japan related,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Everywhere else in Asia you have a very strong growth profile, but Japan has a lot of long- term structural issues that still need to be tackled.”

The MSCI Asia Pacific Index lost 0.9 percent to 117.55 as of 7:22 p.m. in Tokyo. The gauge has fallen 3 percent from a 13- month high on Oct. 20 amid speculation governments will start withdrawing stimulus measures that have helped revive the global economy. Singapore’s trade ministry said today the city-state plans to scale back its support programs.

Japan’s Nikkei 225 Stock Average retreated 1.3 percent and the Topix sank 1.5 percent, the biggest declines in the region. Hong Kong’s Hang Seng Index dropped 0.9 percent.

Trading Debuts

The Kospi Index advanced 1 percent in Seoul. Korea Line Corp. rose 2 percent after commodity-shipping fees climbed for a 15th day. Grand Korea Leisure Co., a casino operator, soared 32 percent on its first day of trading. Maxis Bhd., Malaysia’s biggest mobile-phone operator, climbed 8.4 percent on its debut.

Futures on the Standard & Poor’s 500 Index lost 0.6 percent. The gauge fell 0.1 percent yesterday, amid disappointing profit forecasts from Autodesk Inc. and Salesforce.com.

Mitsubishi UFJ declined 3.7 percent to 466 yen after registering to raise as much as 1 trillion yen ($11.2 billion) in its second share sale since January as regulators demand banks bolster capital to prevent another financial crisis.

A sale of that size would be Japan’s biggest public sale of additional common shares, according to data compiled by Bloomberg.

Nomura Real Estate sank 8.6 percent to 352,000 yen. It plans to raise as much as 11.5 billion yen ($129 million) from a sale of new shares, according to a filing with Japan’s Finance Ministry.

Risk Aversion

“Risk aversion is taking hold somewhat, bringing down Japan’s stocks, as serious concerns remain about the financial sector,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co., a unit of Japan’s No. 2 lender.

In Hong Kong, ICBC, China’s No. 1 bank by market value, lost 2.4 percent to HK$6.85. Bank of China, the third largest, slid 2.3 percent to HK$4.72. ICBC shares are valued at 3.3 times book value, while Bank of China is at 2.3 times.

China Minsheng Banking’s HK$30.1 billion ($3.9 billion) share sale was priced at 1.77 times estimated 2010 book value, people familiar with the matter said. The Hang Seng Index has risen 100 percent from its March 9 low, bringing the average price of its constituents to 2.2 times book value. That’s twice the level stocks were valued at during this year’s low.

“For the short term, valuations seem quite high already,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd., which oversees about $400 million. “I think they’re close to the cycle peak in the short term.”

Rising Valuations

The MSCI Asia Pacific Index has climbed 67 percent from a more than five-year low on March 9 on speculation of a global recovery. Companies on the gauge are priced at an average 1.5 times book value, up from 1 at the March low. Stocks on the S&P 500 trade at 2.2 times, while those on Europe’s Dow Jones Stoxx 600 Index are at 1.7 times.

The International Monetary Fund raised its forecast for growth in the global economy next year to 3.1 percent from 2.5 percent, led by a 9 percent expansion in China and 6.4 percent in India, the Washington-based organization said on Oct. 1. That compares with growth of 1.7 percent in Japan, 1.5 percent in the U.S. and 0.3 percent in the euro region.

Singapore’s economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year, the trade ministry said today. Gross domestic product climbed a revised annualized 14.2 percent last quarter from the previous three months, the second consecutive expansion, it said.

‘Reasonably Attractive’

Singapore Technologies, Asia’s biggest aircraft maintenance company, climbed 2.6 percent to S$3.16. United Overseas Bank Ltd., Singapore’s second-largest bank by market value, climbed 0.6 percent to S$19.50, while Oversea-Chinese Banking Corp. added 1.2 percent to S$8.46.

Asian banks are “reasonably attractive” even after recent gains, especially when compared with Western banks, investor Marc Faber said in an interview with Bloomberg Television yesterday in Singapore. He said he holds shares of United Overseas Bank and Oversea-Chinese Banking.

Korea Line added 2 percent to 45,150 won after the Baltic Dry Index, a measure of shipping costs for commodities, jumped 6 percent yesterday. The gauge’s 15-day advance is the longest winning streak since June 3.

Pacific Basin Shipping Ltd., Hong Kong’s largest operator of dry-bulk vessels, climbed 3.5 percent to HK$6.84. China Shipping Development Co., the dry-bulk arm of the nation’s second-biggest shipping group, advanced 3.4 percent to HK$12.82.

In Seoul, Grand Korea Leisure surged 32 percent to 15,850 won from its initial share offer price of 12,000 won.

The stock was rated “buy” as Daewoo Securities Co. initiated coverage on the stock with a 16,000 won price target. Earnings at the company will continue to grow in 2010, the brokerage said today in a report.

Maxis rose 8.4 percent to 5.42 ringgit on its debut. The Kuala Lumpur-based carrier raised 11.2 billion ringgit ($3.3 billion) for its parent Maxis Communications Bhd. in the share sale, in which institutional investors bid for 3.7 times the stock on offer.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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