US Economic Indicators Preview

Weekly Forex Fundamentals | Written by BHF-BANK | Nov 23 09 11:35 GMT |

(Week of 23 to 29 November 2009) Existing and new home sales (Oct): up due to higher affordability and tax credit rules GDP (Q3 2nd estimate): downward revision Consumer confidence indicators (Nov): slight improvement after sharp drop Durable goods orders (Oct): up again PCE core deflator (Oct): close to the lower end of the Fed's comfort zone Existing home sales jumped by 9.4% mom in September, and they could have continued to increase in October: as the graph illustrates, pending home sales tend to lead by one to two months, and given their sharp upward trend and their rise by about 12% in the last two months, we forecast that existing home sales will have increased by about 5% mom to 5.85m in October. The higher affordability and particularly the tax credit rules for firsttime home buyers have been boosting sales since spring. Contrary to existing home sales, new home sales declined by almost 4% mom in September. However, we expect them to have recovered somewhat to 420k in October. This would not only be the highest level so far this year but also the first time since November 2005 that they were higher than the previous year. According to the first estimate, Q3 GDP grew by 3.5% qoq annualised, following four quarters of sharp declines. Personal consumption contributed the most to growth in the summer months, particularly because of higher car sales due to the “cash for clunkers” programme. The smaller depletion of inventories also had a very positive impact, and residential investment rose for the first time after 14 consecutive quarterly declines. However, the government pointed out that the fiscal measures had boosted growth by 3 to 4 percentage points. The second GDP estimate for Q3 could show a slight downward revision to 3.0% qoq annualised: revised retail sales figures revealed a larger decline in September, and the trade deficit was wider than initially estimated. But, given the unexpected increase in September retail inventories, the growth contribution of inventories is likely to have been slightly higher. Consumer confidence, which had already been on a relatively low level, plummeted in October, from 53.4 to 47.7. The main reason was probably the unfavourable assessment of labour market conditions, which plunged to a 26-year low. After the unemployment rate soared to 10.2%, the University of Michigan's (UMI) preliminary November consumer sentiment also fell further by 4.6 points to 66.0. However, the weekly ABC consumer comfort poll improved in the first three weeks of November, and jobless claims have gone down to the lowest level so far this year. We thus predict that consumer confidence will have increased slightly to 49.0. UMI's final November consumer sentiment could also have risen marginally to 67.0. The FOMC minutes of 4 November are likely to confirm that the majority of committee members still consider it warranted to maintain the fed funds rate at exceptionally low levels for an extended period, given low resource utilisation rates, subdued inflation and stable inflation expectations. There will have been some discussion about the timing of exit strategies, and some members might have stated that rates would have to be raised if inflation expectations increased noticeably, even if unemployment was unacceptably high. But most members will have agreed that raising rates too soon could endanger the still fragile economic recovery. Thus the FOMC is likely to maintain its expansive monetary policy stance in the December meeting. Personal income remained stable in September, after having increased marginally by 0.1% mom in July and August. Average hourly earnings went up by 0.3% mom in September, but this is likely to have been cancelled out to some extent by the drop in aggregate working hours.We thus expect personal income to have risen by a mere 0.1% mom in October. Given the 1.4% mom increase in retail sales, which was almost entirely due to a rebound in car demand, we forecast that personal spending will have gone up by about 0.6% mom in October. We expect the PCE core deflator to have risen by 0.1% mom only in October, just like core CPI. The annual rate would thus remain at 1.3%, close to the lower end of the Fed's comfort zone (1-2%). The low level of core inflation measures and a 26-year high in the unemployment rate suggest that the Fed is in no hurry to end its zero-interest rate policy. Durable goods orders could have posted a moderate increase of 0.3% mom in October: according to Boeing, aircraft orders went down from 20 to 14, and the decline in car production indicates that vehicle orders could have dropped too. Given that the ISM new orders component is still a relatively high 58.5, we predict that durable goods orders ex transportation will have increased by 0.8% mom. The 4-week moving average of jobless claims has improved for 11 consecutive weeks, falling to 514k, as opposed to a peak of 659k at the beginning of April. We predict that jobless claims will have gone down moderately from 505k to 500k in the week ending 21 November. BHF-BANK http://www.bhf-bank.com This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHFBANK Group") solely for the information of its clients. The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities. This publication must not be distributed in the United States.

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Beware Thanksgiving Volatility

Daily Forex Fundamentals | Written by Investica | Nov 23 09 11:51 GMT |

Over the past two years, there has been an increase in volatility during the US Thanksgiving week when trading activity is significantly lower. There is also the beginning of institutional year-end pressures which makes funds much more cautious over holding positions. In this environment, it can be much easier for short-term players to break technical levels, create momentum and trigger stop-loss activity. It is likely that key central banks will be very mindful of this and will be looking to avoid instability. To keep the correction prospects alive, it will be critical for the dollar to hold support in the 1.5050 area against the Euro this week. The Euro dipped to test key support near the 1.48 level on Friday, but found support close to this level and rallied back to around 1.4850 later in the US session. Over the past few years, there has tended to be volatile trading during the Thanksgiving week and there will be speculation over large currency moves this week. The dollar weakened again on Monday, undermined from comments by regional Fed Governor Bullard who stated that the Fed’s bond-buying programme should be extended beyond the current period to give greater policy flexibility. The Euro rose to near 1.4950 with gold prices also higher. The latest Euro-zone PMI readings were firm, although the manufacturing index was slightly below expectations. There will be further concerns over the Euro-zone structural outlook. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

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Weekly Technical Commentary

Weekly Forex Technicals | Written by Mizuho Corporate Bank | Nov 23 09 11:44 GMT |

USD/JPY Chart Levels: Support 88.50..88.00..87.00..85.00. Resistance 89.75..90.62..91.34..92.33 This week: ↘ This month: ↘ Moving at a snail's pace but nevertheless the trend to generalised US dollar weakness is underway. Which currency will lead is unclear though for dollar/yen we continue to favour a series of cautious downside tests of key support between 87.00 and 1995's 85.00 (below which it spiked to a low 79.75 over a three month period only). The slower the move, the longer it should last but remember that the threat of verbal or actual intervention is great. The USD is not oversold and bearish momentum has increased over the last week to the mid-point of the range of this decade. FX rates generally are an increasing problem for many authorities in any countries whose track records are poor at best. Don't bank on them to sort things. EUR/USD Chart Levels: Support 1.4900..1.4800..1.4700..1.4625. Resistance 1.5064..1.5115..1.5250..1.5300. This week: ↗ This month: ↗ Holding up better than we had hoped as it consolidates around the psychological 1.5000 area. It is not in the least overbought and bullish momentum remains steady at the sort of levels established since May. Over the year-end we continue to expect another bout of generalised US dollar weakness, a feature that is likely to be repeated again and again over many months. The Euro will likely be somewhere in the middle of the pack, neither the best performer or the worst. On the ECB's Effective Exchange Rate basis the Euro is trading close to its highest ever levels, where it started off in 2008, and just under this year's all-time peak of 118.82 set in mid-October. GBP/USD Chart Levels: Support 1.6460..1.6260..1.6100..1.5700. Resistance 1.6745..1.6880..1.7044..1.7520. This week: → This month: ↗ Retreating from a high at 1.6880, just under this year's high of 1.7044. Expect more work under here this week and maybe next as Cable steadies itself for another upside attack. Obviously a sustained break above here is needed to set off the next rally, forcing many into short-covering and reviewing their outlook. The pound is no longer overbought and bullish momentum is almost at its strongest since late 1990. Futures volume remains high though subdued open interest suggests a lot of day-trading. Where it might form a new interim base is a guess, at best, and probably not worth pushing too hard at. More interestingly the rush into precious metals underlines investors' mistrust of the authorities. EUR/GBP Chart Levels: Support 0.8950..0.8895..0.8833..0.8750. Resistance 0.9055..0.9070..0.9155..0.9200. This week: → This month: ↘ Bouncing a little more strongly than we had thought possible while still consolidating under the 'neckline' of an irregular 'head-and-shoulders' top, back inside a very large Ichimoku 'cloud'. This week a new interim high ought to form. One-month at-the-money implied volatility should base in the 10.00% area and move back up to 14.00% towards year-end. As the mean view is that this pair should hold above 0.8800 for the next twelve months, many will have to review assumptions and economic consequences. Long term only when this pair starts holding consistently under 0.8400, two standard deviations form the calculated mean of the last twenty years, is long term sterling weakness avoided. EUR/JPY Chart Levels: Support 131.75..131.00..129.00..127.00. Resistance 134.35..135.75..137.50..138.70 This week: → This month: ↘ Holding in the middle of the broad range that has dominated since April. One wonders whether things might get a little more interesting as year-end looms. What might turn out to be a massive 'quadruple top' is very clear, but the fact it has taken so long to build is a little worrying. Quite what will cause it to drop below trendline support and the bottom of the very big Ichimoku 'cloud' is unclear, but our view remains unchanged: towards the end of November we expect a break below the pivotal 127.00 support area. This effect will be mirrored across all Yen crosses so very much a Yen buying situation. The very long term view is still for more broadly sideways moves similar to what we saw over the last six months. GBP/JPY Chart Levels: Support 146.25..145.75..144.00..143.00. Resistance 148.75..150.50..151.70..153.25. This week: → This month: ↘ Moving averages (9 and 26-day as well as 50 and 200-day ones) have crossed to a bearish position as we prepare to re-test early November's low and the bottom of the large Ichimoku 'cloud'. Rather slow but very neat work though, suggesting there is enough momentum to keep the trend moving. A break below the bottom of the weekly Ichimoku 'cloud' might be postponed until very late November/early December when its lower edge starts rising. We expect the Yen to gain against all other currencies, so that yen crosses drag each other lower one step at a time, moving towards last year's extreme lows. Being closest to that low, GBP/JPY may have less downside scope than others. Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Nov 23 09 10:43 GMT |

EUR/USD Current level-1.4975 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 Last week's test of 1.4796 support failed and this time a bottom has been confirmed at 1.4801, that should start the expected upmove for new highs beyond 1.5063. Intraday bias is positive for a break through 1.4990, en route to 1.5063 with an initial support at 1.4947. Resistance Support intraday intraweek intraday intraweek 1.4990 1.5290 1.4947 1.4623 1.5063 1.6040 1.4796 1.4444 USD/JPY Current level - 88.79 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. The bias continues to be negative for 88.21 reversal area and important resistance on the upside is 89.60. We expect one more leg downwards to complete the whole slide from 92.50 and to start the third phase of the prolonged consolidation above 88.01. 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- 1.6590 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 break below 1.6515 confirmed, that a top is set at 1.6877 and the uptrend from 1.6250 is over, so current rebound from 1.6460 is to be considered corrective in nature, before further depreciation towards 1.6130 support. Intraday bias is positive for 1.6619 and 1.6710 where a reversal should be expected for 1.6531. Resistance Support intraday intraweek intraday intraweek 1.6619 1.7042 1.6530 1.6130 1.6840 1.7442 1.6460 1.5706 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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Bills Yielding Zero as Stocks Soar Make 1938 Moment

By Liz Capo McCormick and Daniel Kruger

Nov. 23 (Bloomberg) -- For the first time in seven decades, Treasury bills are paying no interest while stocks continue to appreciate -- a divergence in U.S. financial markets that might be perilous if Federal Reserve Chairman Ben S. Bernanke didn’t know all about 1938.

That’s when the Standard & Poor’s 500 Index climbed 25 percent even as bill rates tumbled to 0.05 percent from 0.45 percent. As 1939 began, stocks began a three-year, 34 percent decline after the Fed increased borrowing costs prematurely to stymie inflation that never materialized.

While almost no one expects Bernanke, a self-described “Great Depression” buff, to raise rates before mid-2010, bond investors say with unemployment above 10 percent and housing taking another downturn, they have no qualms about lending the government money for nothing to ensure their capital is preserved. Stock investors, meanwhile, say the worst is over and that low borrowing costs coupled with the $12 trillion of fiscal and monetary stimulus will bolster earnings.

“The question is what are you going to do with all the money that has been created?” said James Hamilton, a former visiting scholar at the Fed who teaches at the University of California, San Diego. “It’s not a contradiction at all to see very low short-term yields and at the same time have people trying to buy stocks. They are both reflecting that same force.”

Dipping Below Zero

Three-month bill rates closed at 0.005 percent last week, down from 0.11 percent at the end of September and the year’s high of 0.34 percent in February. Traders said the rate dipped below zero on some bills due in January on Nov. 19.

As money poured into bills, the S&P 500 ended little changed on the week at 1,091.38, up 64 percent from the low this year of 666.79 on March 6. The S&P GSCI Index of 24 commodities rose 46 percent this year, rebounding from last year’s 43 percent slump. Investors in high-yield, high-risk, or junk, corporate bonds earned a record 52 percent this year, according to Merrill Lynch & Co. indexes.

“A lot of these markets have been driven by excess liquidity and are not necessarily supported by economic fundamentals,” said Thomas Girard, a managing director at New York Life Investment Management who helps oversee $115 billion in fixed-income assets. “Clearly there is a class of investors that are nervous,” said Girard, who is avoiding bills and instead buying high-rated corporate bonds.

‘Not Obvious’

Bernanke, who has been studying the causes of the Depression since he was a graduate student at Massachusetts Institute of Technology, said on Nov. 16 that it’s “not obvious” that asset prices in the U.S. are out of line with underlying values. He didn’t address asset prices outside of the country. In 1989, he wrote an article with Mark Gertler, a New York University economics professor, for the American Economic Review in which they presented a detailed model that helps to explain the cascade of events that led to the collapse of markets in the years after the 1929 crash.

“It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value,” Bernanke said in response to audience questions after a speech in New York. “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.”

Equity investors say they have history on their side. The S&P 500 rose an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and added another 82 percent in the bull markets that followed, according to data compiled by Bloomberg. Shares typically rise before central banks push up interest rates because markets anticipate economic expansion first.

‘Enough of It’

The median estimate of economists surveyed by Bloomberg News is for policy makers to keep their target rate for overnight loans between banks in a range of zero to 0.25 percent until the third quarter of 2010.

The Fed will raise the rate to 0.50 percent by the end of September and to 1 percent by the close of 2010, the survey shows. The median prediction of analysts and strategists surveyed by Bloomberg is for the rate to be at 1.13 percent in the first quarter of 2011.

“There’s clearly room for the stock market to do better,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “If money is all going into short-term securities, at some point, investors will say ‘enough of it’ and the next incremental change will be for money to chase riskier assets.”

The bulls got a boost last week when the Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year as China powers a global recovery. The economy of the group’s 30 countries will expand 1.9 percent in 2010, the Paris-based organization said in a Nov. 19 report, up from a prediction of 0.7 percent in June.

‘Recovery in Motion’

“We now have numbers that support a recovery in motion,” Jorgen Elmeskov, the OECD’s acting chief economist, said.

Demand for bills has also been driven by banks adding the safest securities to improve balance sheets at year-end, a drop in sales as the Treasury lessens its dependence on short-term financing and fewer alternatives as companies cut back on sales of commercial paper.

“I don’t see negative yields in this current environment as anything anomalous,” said Joseph Mason, a banking professor at Louisiana State University in Baton Rouge and former economist at the Office of the Comptroller of the Currency.

Recovery Doubts

Even so, bond investors doubt the strength of the recovery after the Federal Housing Administration said last week that foreclosures on prime mortgages and home loans insured by the agency rose to three-decade highs in the third quarter. Builders broke ground on 529,000 houses at an annual pace in October, down 11 percent from September and the fewest since April’s record low, Commerce Department figures showed Nov. 18.

“Everything is not dandy in this world,” said Axel Merk, who manages more than $550 million as president of Palo Alto, California-based Merk Investments LLC and has been buying bills. “Sure money is flowing into risky assets and people are leveraging up, but it is only available to those with pristine credit. It is still a very difficult environment for people to function in and many would still rather hold Treasuries.”

In Treasury auctions during the week ended Nov. 6, the combined bids for the $86 billion in one-, three- and six-month bills sold was a record $361 billion, $100 billion more than the peak set during the height of the credit crisis last year, according to Jim Bianco, president of Bianco Research in Chicago.

The bid-to-cover ratio for the three-month bill auction reached 4.29 in September, the highest since 1998. The ratio has averaged 3.9 since September, up from 2.74 in 2008. When the U.S. sold $32 billion of four-week bills Nov. 16, the figure was 3.79.

‘Tremendous Demand’

“We cannot spin a positive story from the fact that a third-of-a-trillion dollars a week is trying to lock down Treasury bill yields of less that 0.05 percent,” Bianco said. “There is still tremendous demand for the front end of the curve despite the fact that people are saying things like there is no yield there and that cash is trash.”

Yields on government bonds are falling, too, with the average dropping to 2.20 percent last week from 2.50 percent in August, according to the Merrill Lynch Global Sovereign Broad Market Plus Index.

Finance officials in Japan and China, Asia’s two largest economies, said last week that the Fed’s monetary policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery. The central bank’s target rate has been between 0 and 0.25 percent since December.

‘Process of Reflation’

Bill Gross, who runs the world’s biggest bond fund at Newport Beach, California-based Pacific Investment Management Co., said that the “systemic risk” of new asset bubbles is rising with the Fed keeping rates at record lows.

“The Fed is trying to reflate the U.S. economy,” Gross said in his December investment outlook on Nov. 19. “The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks.”

Economic growth will be unlike most post-recession periods with banks reluctant to lend, the personal savings rate lower, the labor market less cyclical, excess housing supply greater and state and local budget gaps larger, according to Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York. His forecast of 2.1 percent growth in 2010 is below the 2.6 percent median of 63 economists surveyed by Bloomberg News.

Yield Curve

The flight into bills may mean that yields on shorter- maturity debt hold at about record lows into 2010 as longer-term yields rise. The so-called yield curve that measures the gap in rates between 2- and 10-year Treasury notes expanded to 2.66 percentage points this month, the widest since July.

That benefits Citigroup Inc., JPMorgan Chase & Co. and banks which have taken $1.7 trillion in writedowns and losses since the start of 2007 and which make money on the difference between the rates they pay on short-term deposits and the interest income generated on loans.

“A lot of people have been hiding out in the front end of the curve, waiting to see how this economy turns out,” said Christopher Bury, co-head of fixed-income rates in New York at Jefferies & Co., one of the 18 primary dealers that trade with the Fed and are required to bid at Treasury auctions. “As a short-term parking mechanism, Treasury bills provide great liquidity and safety.”

Allure of Bills

The allure of bills increased last quarter after the government dropped its guarantee of money market mutual funds, said Merk, who is now only putting his fund’s dollar-denominated cash in bills. The Treasury’s guaranteed money market mutual fund deposits a year ago to stem an investor run the week after Lehman Brothers Holdings Inc.’s bankruptcy led to the collapse of the $62.5 billion Reserve Primary Fund, triggering a run on assets. The guarantee expired Sept. 18.

The supply of bills will decline about 10 percent from September through February as the Treasury cuts its Supplementary Financing Program for the Fed to $15 billion from $200 billion, said Louis Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey. When the Treasury sells bills at the Fed’s behest, it drains reserves from the banking system and makes the central bank’s job of controlling rates easier.

“Bill yields can stay down here for a considerable period,” said Robert Auwaerter, head of fixed income at Valley Forge, Pennsylvania-based Vanguard Group Inc., which manages $1 trillion in assets. “There’s still a demand for high-quality assets at the front end of the curve, and a lack of alternatives.”

Commercial Paper Contraction

Unsecured commercial paper outstanding was $1.24 trillion in the week ended Nov. 11. While that is up from a seasonally adjusted $1.07 trillion in July, it’s below the $2.22 trillion reached in July 2007, before the collapse of the subprime mortgage market.

Demand for bills typically rises at year-end as banks buy more to bolster their balance sheets at that time, said Thomas L. di Galoma, head of U.S. rates trading at Guggenheim Securities, a New-York based brokerage for institutional investors.

Fed officials are stepping up scrutiny of the biggest U.S. banks to ensure the lenders can withstand a reversal of soaring global-asset prices, people with knowledge of the matter said last week. Supervisors are examining whether banks such as JPMorgan, Morgan Stanley and Goldman have enough capital for the risks they take, how much they know about the strength of their counterparties.

“At some point reality is going to bite us in the backside,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “We are living in the best of times and the worst of times. Unfortunately the best of times cannot continue celebrating like this when the economic fundamentals are worsening rapidly.”

To contact the reporters on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net; Daniel Kruger in New York at dkkruger1@bloomberg.net.

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Bills Yielding Zero as Stocks Soar Make 1938 Moment

By Liz Capo McCormick and Daniel Kruger

Nov. 23 (Bloomberg) -- For the first time in seven decades, Treasury bills are paying no interest while stocks continue to appreciate -- a divergence in U.S. financial markets that might be perilous if Federal Reserve Chairman Ben S. Bernanke didn’t know all about 1938.

That’s when the Standard & Poor’s 500 Index climbed 25 percent even as bill rates tumbled to 0.05 percent from 0.45 percent. As 1939 began, stocks began a three-year, 34 percent decline after the Fed increased borrowing costs prematurely to stymie inflation that never materialized.

While almost no one expects Bernanke, a self-described “Great Depression” buff, to raise rates before mid-2010, bond investors say with unemployment above 10 percent and housing taking another downturn, they have no qualms about lending the government money for nothing to ensure their capital is preserved. Stock investors, meanwhile, say the worst is over and that low borrowing costs coupled with the $12 trillion of fiscal and monetary stimulus will bolster earnings.

“The question is what are you going to do with all the money that has been created?” said James Hamilton, a former visiting scholar at the Fed who teaches at the University of California, San Diego. “It’s not a contradiction at all to see very low short-term yields and at the same time have people trying to buy stocks. They are both reflecting that same force.”

Dipping Below Zero

Three-month bill rates closed at 0.005 percent last week, down from 0.11 percent at the end of September and the year’s high of 0.34 percent in February. Traders said the rate dipped below zero on some bills due in January on Nov. 19.

As money poured into bills, the S&P 500 ended little changed on the week at 1,091.38, up 64 percent from the low this year of 666.79 on March 6. The S&P GSCI Index of 24 commodities rose 46 percent this year, rebounding from last year’s 43 percent slump. Investors in high-yield, high-risk, or junk, corporate bonds earned a record 52 percent this year, according to Merrill Lynch & Co. indexes.

“A lot of these markets have been driven by excess liquidity and are not necessarily supported by economic fundamentals,” said Thomas Girard, a managing director at New York Life Investment Management who helps oversee $115 billion in fixed-income assets. “Clearly there is a class of investors that are nervous,” said Girard, who is avoiding bills and instead buying high-rated corporate bonds.

‘Not Obvious’

Bernanke, who has been studying the causes of the Depression since he was a graduate student at Massachusetts Institute of Technology, said on Nov. 16 that it’s “not obvious” that asset prices in the U.S. are out of line with underlying values. He didn’t address asset prices outside of the country. In 1989, he wrote an article with Mark Gertler, a New York University economics professor, for the American Economic Review in which they presented a detailed model that helps to explain the cascade of events that led to the collapse of markets in the years after the 1929 crash.

“It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value,” Bernanke said in response to audience questions after a speech in New York. “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.”

Equity investors say they have history on their side. The S&P 500 rose an average 8.4 percent in the six months before the last five increases in the Fed’s target rate for overnight loans between banks and added another 82 percent in the bull markets that followed, according to data compiled by Bloomberg. Shares typically rise before central banks push up interest rates because markets anticipate economic expansion first.

‘Enough of It’

The median estimate of economists surveyed by Bloomberg News is for policy makers to keep their target rate for overnight loans between banks in a range of zero to 0.25 percent until the third quarter of 2010.

The Fed will raise the rate to 0.50 percent by the end of September and to 1 percent by the close of 2010, the survey shows. The median prediction of analysts and strategists surveyed by Bloomberg is for the rate to be at 1.13 percent in the first quarter of 2011.

“There’s clearly room for the stock market to do better,” said Mark Bronzo, a money manager in Irvington, New York, at Security Global Investors, which oversees $21 billion. “If money is all going into short-term securities, at some point, investors will say ‘enough of it’ and the next incremental change will be for money to chase riskier assets.”

The bulls got a boost last week when the Organization for Economic Cooperation and Development doubled its growth forecast for the leading developed economies next year as China powers a global recovery. The economy of the group’s 30 countries will expand 1.9 percent in 2010, the Paris-based organization said in a Nov. 19 report, up from a prediction of 0.7 percent in June.

‘Recovery in Motion’

“We now have numbers that support a recovery in motion,” Jorgen Elmeskov, the OECD’s acting chief economist, said.

Demand for bills has also been driven by banks adding the safest securities to improve balance sheets at year-end, a drop in sales as the Treasury lessens its dependence on short-term financing and fewer alternatives as companies cut back on sales of commercial paper.

“I don’t see negative yields in this current environment as anything anomalous,” said Joseph Mason, a banking professor at Louisiana State University in Baton Rouge and former economist at the Office of the Comptroller of the Currency.

Recovery Doubts

Even so, bond investors doubt the strength of the recovery after the Federal Housing Administration said last week that foreclosures on prime mortgages and home loans insured by the agency rose to three-decade highs in the third quarter. Builders broke ground on 529,000 houses at an annual pace in October, down 11 percent from September and the fewest since April’s record low, Commerce Department figures showed Nov. 18.

“Everything is not dandy in this world,” said Axel Merk, who manages more than $550 million as president of Palo Alto, California-based Merk Investments LLC and has been buying bills. “Sure money is flowing into risky assets and people are leveraging up, but it is only available to those with pristine credit. It is still a very difficult environment for people to function in and many would still rather hold Treasuries.”

In Treasury auctions during the week ended Nov. 6, the combined bids for the $86 billion in one-, three- and six-month bills sold was a record $361 billion, $100 billion more than the peak set during the height of the credit crisis last year, according to Jim Bianco, president of Bianco Research in Chicago.

The bid-to-cover ratio for the three-month bill auction reached 4.29 in September, the highest since 1998. The ratio has averaged 3.9 since September, up from 2.74 in 2008. When the U.S. sold $32 billion of four-week bills Nov. 16, the figure was 3.79.

‘Tremendous Demand’

“We cannot spin a positive story from the fact that a third-of-a-trillion dollars a week is trying to lock down Treasury bill yields of less that 0.05 percent,” Bianco said. “There is still tremendous demand for the front end of the curve despite the fact that people are saying things like there is no yield there and that cash is trash.”

Yields on government bonds are falling, too, with the average dropping to 2.20 percent last week from 2.50 percent in August, according to the Merrill Lynch Global Sovereign Broad Market Plus Index.

Finance officials in Japan and China, Asia’s two largest economies, said last week that the Fed’s monetary policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery. The central bank’s target rate has been between 0 and 0.25 percent since December.

‘Process of Reflation’

Bill Gross, who runs the world’s biggest bond fund at Newport Beach, California-based Pacific Investment Management Co., said that the “systemic risk” of new asset bubbles is rising with the Fed keeping rates at record lows.

“The Fed is trying to reflate the U.S. economy,” Gross said in his December investment outlook on Nov. 19. “The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks.”

Economic growth will be unlike most post-recession periods with banks reluctant to lend, the personal savings rate lower, the labor market less cyclical, excess housing supply greater and state and local budget gaps larger, according to Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York. His forecast of 2.1 percent growth in 2010 is below the 2.6 percent median of 63 economists surveyed by Bloomberg News.

Yield Curve

The flight into bills may mean that yields on shorter- maturity debt hold at about record lows into 2010 as longer-term yields rise. The so-called yield curve that measures the gap in rates between 2- and 10-year Treasury notes expanded to 2.66 percentage points this month, the widest since July.

That benefits Citigroup Inc., JPMorgan Chase & Co. and banks which have taken $1.7 trillion in writedowns and losses since the start of 2007 and which make money on the difference between the rates they pay on short-term deposits and the interest income generated on loans.

“A lot of people have been hiding out in the front end of the curve, waiting to see how this economy turns out,” said Christopher Bury, co-head of fixed-income rates in New York at Jefferies & Co., one of the 18 primary dealers that trade with the Fed and are required to bid at Treasury auctions. “As a short-term parking mechanism, Treasury bills provide great liquidity and safety.”

Allure of Bills

The allure of bills increased last quarter after the government dropped its guarantee of money market mutual funds, said Merk, who is now only putting his fund’s dollar-denominated cash in bills. The Treasury’s guaranteed money market mutual fund deposits a year ago to stem an investor run the week after Lehman Brothers Holdings Inc.’s bankruptcy led to the collapse of the $62.5 billion Reserve Primary Fund, triggering a run on assets. The guarantee expired Sept. 18.

The supply of bills will decline about 10 percent from September through February as the Treasury cuts its Supplementary Financing Program for the Fed to $15 billion from $200 billion, said Louis Crandall, chief economist of Wrightson ICAP in Jersey City, New Jersey. When the Treasury sells bills at the Fed’s behest, it drains reserves from the banking system and makes the central bank’s job of controlling rates easier.

“Bill yields can stay down here for a considerable period,” said Robert Auwaerter, head of fixed income at Valley Forge, Pennsylvania-based Vanguard Group Inc., which manages $1 trillion in assets. “There’s still a demand for high-quality assets at the front end of the curve, and a lack of alternatives.”

Commercial Paper Contraction

Unsecured commercial paper outstanding was $1.24 trillion in the week ended Nov. 11. While that is up from a seasonally adjusted $1.07 trillion in July, it’s below the $2.22 trillion reached in July 2007, before the collapse of the subprime mortgage market.

Demand for bills typically rises at year-end as banks buy more to bolster their balance sheets at that time, said Thomas L. di Galoma, head of U.S. rates trading at Guggenheim Securities, a New-York based brokerage for institutional investors.

Fed officials are stepping up scrutiny of the biggest U.S. banks to ensure the lenders can withstand a reversal of soaring global-asset prices, people with knowledge of the matter said last week. Supervisors are examining whether banks such as JPMorgan, Morgan Stanley and Goldman have enough capital for the risks they take, how much they know about the strength of their counterparties.

“At some point reality is going to bite us in the backside,” said Michael Cheah, who manages $2 billion in bonds at SunAmerica Asset Management in Jersey City, New Jersey. “We are living in the best of times and the worst of times. Unfortunately the best of times cannot continue celebrating like this when the economic fundamentals are worsening rapidly.”

To contact the reporters on this story: Liz Capo McCormick in New York at Emccormick7@bloomberg.net; Daniel Kruger in New York at dkkruger1@bloomberg.net.

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South African Economy Rebounds as World Cup Nears

By Nasreen Seria

Nov. 23 (Bloomberg) -- South Africa’s spending to host the 2010 FIFA World Cup, the world’s most-watched sporting event, and a rebound in manufacturing may have pulled the economy out of its first recession in 17 years in the third quarter.

The economy expanded an annualized 0.5 percent in the three months through September, ending three consecutive quarters of contraction, according to the median estimate of 23 economists surveyed by Bloomberg. Statistics South Africa will release the data at 11:30 a.m. in Pretoria tomorrow.

Construction has expanded more than 10 percent in the first half as the government spends $115 billion over three years to build a high-speed rail link in Johannesburg, erect stadiums for next year’s soccer tournament and build roads. That is cushioning the economy at the same time that manufacturers begin to recover from a collapse in exports.

“Construction has been powering along,” said Dennis Dykes, chief economist at Johannesburg-based Nedbank Group Ltd., South Africa’s fourth-biggest bank. “Investment has been absolutely massive.”

Africa’s biggest economy contracted an annualized 3 percent in the three months through June as manufacturing, which accounts for 14 percent of gross domestic product, plunged 10.9 percent following a slump in consumer spending and exports. Construction grew 12.2 percent in the same period.

The yield on the benchmark 13.5 percent security due September 2015 was at 8.36 percent as of 11:56 a.m. in Johannesburg, up from a low of 7.01 percent on Dec. 18 last year at the depths of the global financial crisis.

Tourism Boost

South Africa is building or renovating 10 stadiums for next year’s soccer tournament, which is being held in Africa for the first time. The government expects the games, which begin on June 11, to attract 450,000 non-African visitors, boosting GDP by about 1 percent.

Murray & Roberts Holdings Ltd., the country’s largest construction company, is building some of the stadiums and the Gautrain rapid speed train that will link Johannesburg, the country’s biggest city, to the capital, Pretoria, about 50 kilometers (30 miles) away. The Johannesburg-based company posted an 18 percent jump in profit in the year through June 30.

Highways around Johannesburg are being dug up as part of the National Road Agency’s project to upgrade 185 kilometers of roads in the Gauteng province by May, at a cost of about 22 billion rand ($2.9 billion).

“We need to produce additional capacity to ensure that our economy can continue to grow,” said Nazir Alli, chief executive officer of the agency. “We’re spending lots of time and money on increasing capacity and improving our roads.”

Creating Jobs

The government is betting that spending on public infrastructure projects, which it estimates will climb to 9.8 percent of GDP in the year through March 2013, will help to stimulate growth and jobs in an economy where almost one in four people are without work.

“Large-scale public infrastructure projects, including those linked to the World Cup, have been instrumental in supporting domestic demand as private investment and consumption shrank,” the Organization for Economic Cooperation and Development said in a report on Nov. 19.

The economy will probably expand 2.7 percent next year after contracting 2.2 percent in 2009, the OECD said. That is better than the government’s forecast of 1.5 percent growth in 2010.

State-owned power utility Eskom Holdings Ltd. is spending 385 billion rand over the next five years building power plants and expanding electricity capacity to prevent a repeat of shortages that shut gold and platinum mines, the country’s biggest export earners, for five days last year. Transnet Ltd. is spending 80.5 billion rand on pipeline, rail and port projects over the next five years.

Manufacturers

Manufacturers are also starting to turn the corner. Production rose 2.5 percent in the third quarter from the previous three months, when it contracted 3 percent, the statistics office said on Nov. 10.

“Manufacturing has turned the tide,” said Johan Rossouw, chief economist of Vunani Securities in Cape Town. “We are seeing the lagged effects coming through from monetary and fiscal policy. But the rand’s strength could be a significant dampener and prevent a strong resurgence.”

The rand has climbed 40 percent against the dollar since March, hurting exporters and making imports cheaper. Seardel Investment Corp., South Africa’s biggest clothing and textile maker said on Nov. 5 the rand’s gains are of “significant concern” as it’s made the local industry uncompetitive.

Event                                             Date
Netcare Ltd. annual earnings                      Nov. 23
African Bank Investments Ltd. annual earnings     Nov. 23
Nampak Ltd. annual earnings                       Nov. 23
Telkom South African Ltd. annual earnings         Nov. 23
Harmony Gold Mining Co. annual general meeting    Nov. 23
Gross domestic product                            Nov. 24
Adcock Ingram Healthcare Ltd. annual earnings     Nov. 24
Tiger Brands Ltd. annual earnings                 Nov. 24
RMB/BER business confidence index                 Nov. 25
Consumer price inflation                          Nov. 25
Massmart Holdings Ltd. annual general meeting     Nov. 25
Remgro Ltd. annual earnings                       Nov. 25
Argent Industrial Ltd. annual earnings            Nov. 25
Producer price inflation                          Nov. 26
Naspers Ltd. annual earnings                      Nov. 26
Liberty Holdings Ltd. third-quarter earnings      Nov. 27
FirstRand Ltd. annual general meeting             Nov. 27
DRDGold Ltd. annual general meeting               Nov. 27
Sasol Ltd. annual general meeting                 Nov. 27
African Rainbow Minerals Ltd. annual general meeting Nov. 27

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net

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Crude Oil Rises on Iranian Military Test, Weaker U.S. Dollar

By Grant Smith

Nov. 23 (Bloomberg) -- Crude oil rose from a one-week low after an Iranian military exercise renewed concerns over Middle Eastern supply, while the weaker dollar heightened oil’s appeal as an inflation hedge.

Iran is testing an air defense system this week, in the largest military exercises the country has conducted to assess the vulnerability of its nuclear plants. The most accurate dollar forecasters predict the world’s reserve currency will continue sliding even when the Federal Reserve begins to raise interest rates.

“The Iranian test is supportive psychologically,” said Eugen Weinberg, senior analyst at Commerzbank AG in Frankfurt. “The market will only focus on positive news for as long as the dollar is weak, the Fed is generous with liquidity and the wall of money keeps pouring into commodities.”

Crude oil for January delivery rose as much as $1.13, or 1.5 percent, to $78.60 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.44 at 11:18 a.m. London time.

The December contract expired on Nov. 20 down 74 cents, or 1 percent, to $76.72 a barrel. Oil traded between $74.79 and $82 the past five weeks after surging in early October.

“We are seeing the oil price higher today and a lot of that has to do with the fact the U.S. dollar is a bit softer,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “You get investment inflows into commodities as a hedge against dollar weakness.”

Iran Sanctions

Iran, the world’s fourth-largest oil producer, is under three sets of United Nations Security Council sanctions, the first imposed in December 2006, for its refusal to halt uranium enrichment for its nuclear program.

The U.S. and its European allies suspect Iran of using the program to develop atomic weapons. The government in Tehran says the technology is for domestic power generation.

The U.S. Dollar Index, a measure of the currency against its six major counterparts, dropped 0.8 percent today to 75.04 after posting its first weekly advance this month.

Standard Chartered Plc, Aletti Gestielle SGR, HSBC Holdings Plc and Scotia Capital Inc. say the dollar will depreciate as much as 7.1 percent versus the euro.

Hedge-fund managers and other large speculators decreased their bets on rising oil prices for a third week, according to U.S. Commodity Futures Trading Commission data.

Speculative net-long positions, the difference between orders to buy and sell the commodity, fell 1.9 percent to 86,348 contracts in the week ended Nov. 17, the Washington-based commission reported last week.

Brent crude oil for January settlement rose as much as $1.27, or 1.65 percent, to $78.32 a barrel on London’s ICE Futures Europe exchange. It was at $78.47 a barrel at 11:17 a.m. London time. It fell 0.6 percent to $77.20 on Nov. 20.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net

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Europe Manufacturing, Services Expansion Accelerates

By Simone Meier

Nov. 23 (Bloomberg) -- Europe’s services and manufacturing industries expanded at the fastest pace in two years in November after a reviving global economy helped the euro region emerge from the worst recession in more than 60 years.

A composite index based on a survey of purchasing managers in both industries in the 16-nation euro area rose to 53.7 from 53 in October, London-based Markit Economics said today in a statement. That was the highest since November 2007. A reading above 50 indicates expansion.

The European economy is gathering strength after global governments spent billions on stimulus measures to encourage spending. While euro-area exports increased the most in more than a year in September, the euro’s strength is making goods less competitive abroad just as rising unemployment undermines consumer spending, threatening the recovery.

“It’s another pretty solid reading,” said James Nixon, European chief economist at Societe Generale SA in London. “It shows that the recovery is being sustained from the third quarter into the fourth.”

An index of services rose to 53.2 from 52.6, Markit said. A gauge of manufacturing increased to 51 from 50.7.

Governments around the world have spent $2 trillion to fight the recession and the European Central Bank has cut its key interest rate to a record low of 1 percent and purchased covered bonds to stimulate bank lending. ECB President Jean- Claude Trichet said on Nov. 17 that the bank expects the euro- area economy to recover only “at a gradual pace” in 2010.

Benchmark Bond

The euro was little changed against the dollar on the report, trading at $1.4971 at 9:53 a.m. in London, up 0.7 percent on the day. The yield on the German 10-year benchmark bond rose 0.3 basis point to 3.27 percent.

Adding to signs of recovery, European investor confidence rose for a fourth month in November and industrial output also increased in September. In Germany, where Chancellor Angela Merkel’s government is spending 85 billion euros ($127 billion) to boost Europe’s largest economy, business confidence rose to the highest in 13 months in October.

German Finance Minister Wolfgang Schaeuble said on Nov. 20 that the nation’s economy will probably expand at a weaker pace in the current quarter than the 0.7 percent in the previous three months. Merkel on Dec. 2 will host a meeting to consider additional stimulus measures, according to Schaeuble.

‘Very Optimistic’

Puma AG, the second-largest European sporting-goods maker controlled by Paris-based PPR SA, said on Nov. 17 it expects to be profitable in the fourth quarter. HeidelbergCement AG, Germany’s largest cement maker, said earlier this month that it is “very optimistic” about 2010 and 2011.

The Dow Jones Stoxx 600 Index has risen 24 percent over the past four months, bringing annual gains to 31 percent. Germany’s DAX benchmark has advanced 18 percent this year.

The ECB said on Nov. 12 that professional forecasters expect Europe’s economy to expand 1 percent in 2010 instead of a previously projected 0.3 percent. In 2009, the economy may shrink 3.9 percent, less than the 4.5 percent contraction forecast in August, according to the survey.

“We are approaching recovery, positive territory,” European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said on Nov. 18. Still, “we shouldn’t be over- optimistic.”

Weaker Dollar

The euro’s 18 percent gain against the dollar since mid- February is threatening to curb a recovery and hurting companies including European Aeronautic, Defence & Space & Co. The owner of Airbus SAS said on Nov. 16 that third-quarter earnings slumped 77 percent, partly because of a weaker dollar.

Companies across the euro region continue to cut jobs and reduce costs to help bolster earnings. European unemployment rose to 9.7 percent in September from 9.6 percent in the previous month. That’s the highest since January 1999.

Hugo Boss AG, Germany’s largest clothing maker, expects sales to remain “challenging” in the first half of next year, Chief Executive Officer Claus Dietrich Lahrs said on Nov. 17. The Metzingen-based company may see a “soft recovery” in the U.S. market, while sales in western Europe, the company’s largest market, may stagnate over the coming months, he said.

“The recovery may lack stamina and could well slow early in 2010,” said Howard Archer, chief European economist at IHS Global Insight in London. “There is a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures, and to keep interest rates down at 1 percent until deep into 2010.”

The ECB has already signaled it is in no rush to withdraw stimulus measures as the economy gathers strength. ECB Executive Board member Jose Manuel Gonzalez-Paramo said on Nov. 13 that the exit will be “gradual and opportune.”

“There are many reasons to expect a general recovery in 2010, but it will not be the end of the problems,” ECB council member Guy Quaden said on Nov. 17. “After that we’ll have to face and discuss the problems of an exit strategy.”

To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

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U.K. Companies Will Rely Less on Banks After Crisis, CBI Says

By Brian Swint

Nov. 23 (Bloomberg) -- U.K. companies plan to rely less on banks for credit in favor of funding from bonds and equities, according to a survey for the Confederation of British Industry.

Fifty percent of companies will decrease financing from bank debt after the recession, the CBI survey of 66 company executives published in London today showed. Forty-two percent see no change in bank funding and 8 percent expect to increase it, according to the survey conducted by Ipsos MORI between Oct. 22 and Nov. 17.

“Companies will want to take lower risks with their balance sheets for some time to come,” CBI Director General Richard Lambert told reporters in a briefing last week. “The cost of credit is expected to be higher, and banks will be more risk averse.”

Lambert, who hosts the CBI’s annual conference today in London, said Britain may be on the brink of a “new era for business” after the deepest recession since the 1980s. The outlook for the U.K. economy may become clearer this week with Bank of England Governor Mervyn King’s testimony to lawmakers tomorrow and gross domestic product data the day after.

The British economy contracted 0.4 percent in the three months through September, the government reported a month ago. Economists forecast the figure to be revised up to a 0.3 percent drop when the statistics office publishes the second estimate for third-quarter GDP on Nov. 25, along with a breakdown of the data’s spending components.

Strauss-Kahn, King

International Monetary Fund Managing Director Dominique Strauss-Kahn will speak on the global economy at the CBI conference at 9:30 a.m. in London.

King, along with other central bank policy makers Paul Tucker, Paul Fisher, Andrew Sentance and Adam Posen, will testify to Parliament’s Treasury Select Committee at 9:45 a.m. in London tomorrow. The bank’s latest economic forecasts showed that economic growth may pick up enough to return inflation to the 2 percent target in three years.

Banks’ reluctance to lend has exacerbated the slump that has now lasted six quarters, the longest stretch since records began in 1955. About 27 percent of companies see a “slight improvement” in their access to finance next year, and 4.5 percent predict a “significant improvement,” the CBI survey showed.

“What we now need is a more balanced, less risky pathway to growth -- one in which short-term returns may be lower, but the long-term rewards for management success will be a lot more sustainable and secure,” said Lambert, a former member of the central bank’s Monetary Policy Committee. “There are important questions around how businesses are going to finance growth and investment in the future.”

Financial Strength

The financial strength of U.K. companies has started to improve, according to a separate report released today by Experian Plc, the world’s largest credit-checking company. Its index of businesses’ financial positions rose to 81.14 in October from 79.80 a year earlier, signaling that companies now have a smaller chance of failing.

Confidence among members of the Institute of Chartered Accountants in England and Wales has also risen for a third quarter, another report showed today. The group’s index of sentiment, based on 1,001 responses in a telephone survey from Aug. 5 to Oct. 24, climbed to 24.6 from 4.8 in the previous three months.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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