U.K.'s PMI Improves In November, While The Rising Unemployment In Spain Remains The Major Threat

Daily Forex Fundamentals | Written by ecPulse.com | Dec 02 09 10:05 GMT |

After the drop in PMI manufacturing data released the previous day showing a decline, today the U.K. released its PMI construction for November showing progress in November. The indicator after rising to 18-month high in August, it fell for two consecutive months in September and October. Today's data showed that the building sector inclined to 47.0 compared with the previous 46.2 and the forecasted reading of 46.9. In October, construction dropped to 46.2 from 46.7 in September. Construction which was responsible for growth in the period preceding the global downfall, despite its surge today, is still impacted by the recession as figures are still below the 50 barrier showing contraction compared with manufacturing and services. PMI services for November will be released this week also which will give a complete picture about whole sectors of the economy. Moreover, MPC members will meet in December to set the interest rate and determine the quantity of the asset purchase facility program. Currently, the rate is at 0.5% and the APF is 200 billion pounds. Expectations are referring that there will not be further expansion to the program as a preparation to withdrawing stimulus later on. The viability of the program has been questioned recently, especially as it did not succeed in jolting the economy out of recession. World economies will embark a new monetary strategy in the coming period as they will shift toward more contractionary monetary policies by stalling stimulus plans and raising interest rate gradually. In other European economies, Spain released its unemployment monthly NET ('000s) for November coming in at -272 million from the prior -240 million. The escalating jobless rate in the euro zone's growth catalyst is underscoring concerns with regard recovery. Currently, the percentage of unemployment is 19.3, accounting for half of the region's rise in jobless rate in the previous year. Perhaps the rising figures are stemming from the fall of the housing sector which was responsible for the high growth witnessed in Spain before the global collapse. The sector shed near 1 million jobs, driving the rate of job seekers to reach the highest in the euro zone. At the time where Germany and France signaled growth in the second and third quarters, Spain is still mired in recession. In response, the Spanish government is increasing spending on infrastructure to boost the economy and generate more jobs. The government will spend 8 billion euros till the end of the year, but at the same moment the jobless benefits are rising, though putting more pressure on the budget deficit which is estimated to reach 9.5% of GDP in 2009 and 8.1% in 2010. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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Economy Risks Support Rising Gold

Daily Forex Fundamentals | Written by Finotec Group | Dec 02 09 09:54 GMT |

A weak dollar and the economic uncertainty supported the gold, which rose more than 1 percent, hitting a record high for the second straight day on Wednesday. Even though gold's take profit trend might continue supported by economy risks, traders still intend to be very cautious with every high record level registered. US gold futures for February delivery hit the record high of $1,216.90 an ounce, before trading at $1,215.90 – up 1.3 percent. Spot gold traded at a level of $ 1,214.05 an ounce at around 0621 GMT, soon after experiencing a rise to $ 1,216.90. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Dec 02 09 09:45 GMT |

Good morning and welcome to the Daily FX Report. The December began in Hamburg very cold and froze the car glasses for the first time this winter. However, we wish you a prosperous trading day Markets review The JPY weakened against the 16 most-traded currencies as signs of a faster recovering global economy increased demand for riskier assets. Economists expect today a report which will show that the U.S. companies cut fewer jobs than originally expected. Also the German unemployment rate fell unexpectedly in November by 0.1 percent from a month earlier, the German Federal Labor Agency said on Tuesday. The EUR/USD traded near a 16-month high as European finance leaders played down potential risks to their banks from Dubai's debt problems. The GBP/USD recovered after three days of losses after a U.K. report appeared that the average costs of a home in the U.K. increased 0.5 percent in November, for a seventh month. The AUD/USD strengthened as gold, the nation's third most-valuable raw material export, climbed to a new record high on Tuesday. The CHF rose to parity against the USD as a report showed that the national economy returned to growth in the third quarter, the Swiss GDP rose 0.3 percent from a quarter earlier. Technical analysis EUR/USD The EUR/USD continues trading in a longterm bullish environment but failed to cross its first weekly pivot resistance line for the fourth time. Now it seems that the bulls taking some profit, the DMI indicate a decreasing upward trend and we have to allow for declines near to the second Fibonacci fan. If this support is not strong enough the EUR could find a much stronger support at its pivot point around 1.4987 USD/CZK After the currency pair broke through its resistance lines at 17.221 rather 17.4691 it rose to its highest level in November. Since that time the USD rebounded and fell below both resistances and touched its mid-term trend-line. Could this line give enough support to cross the 17.2210 level, the currency pair may aim the 17.4691 again. Also the RSI showed an oversold market and may support the bulls. 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 Analytics

Daily Forex Technicals | Written by FOREX Ltd | Dec 02 09 07:54 GMT |

CHF Open and earlier preserved short positions have had positive result in overlap of minimal anticipated target. OsMA trend indicator, having marked fall in both party activity, does not clarify the choice of planning priorities for today. Therefore, considering a preferable case based on supposition of probable rate range movement, we can assume probability of rate return to close 1,0000/20 resistance levels, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 0,9940/60, 0,9900/20 and (or) further break-out variant up to 0,9840/60, 0,9720/60. The alternative for buyers will be above 1,0060 with the targets of 1,0100/20, 1,0160/80, 1,0200/20. GBP The pre-planned break-out variant for buyers has been implemented with attainment of basic anticipated targets. OsMA trend indicator, having marked preservation of relatively high level of bullish activity, gives grounds favoring buying in planning trading operations for today. Therefore, considering current short-term bearish cycle of indicator, we can assume probability of rate return to 1,6540/60 supports, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of the formation of topping signals the targets will be 1,6600/20, 1,6660/80, 1,6740/60 and (or) further break-out variant up to 1,6800/20, 1,6860/80. The alternative for sales will be below 1,6500 with the targets of 1,6440/60, 1,6380/1,6400, 1,6300/40. JPY The estimated test of key supports for implementation of the pre-planned buying positions has not been confirmed, but the whole technical picture remains practically unchanged favoring preservation of earlier designed trading plans. Therefore, as earlier we can assume probability of rate return to close 86,20/40, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for buying positions on condition of the formation of topping signals the targets will be 86,80/87,00, 87,40/60 and (or) further break-out variant up to 88,00/20, 88,60/80. The alternative for sales will be below 85,80 with the targets of 5,20/40, 84,60/80. EUR Open and earlier preserved long positions have had positive result in attainment of basic anticipated targets. OsMA trend indicator, having marked fall in activity of both parties, does not clarify the choice of planning priorities for today. Therefore, considering supposition of probable rate range movement we can assume probability of rate return to close 1,5040/60 supports, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of a shorter time interval. As for short-term buying positions on condition of the formation of topping signals the targets will be 1,5100/20, 1,5140/60 and (or) further break-out variant up to 1,5200/20, 1,5260/80, 1,5400/40. The alternative for sales will be below 1,4960 with the targets of 1,4900/20, 1,4840/60. FOREX Ltd www.forexltd.co.uk

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Australia’s Stevens to Keep Leading World in Increasing Rates

By Jacob Greber and Dan Petrie

Dec. 2 (Bloomberg) -- Australia’s Glenn Stevens will continue leading the world in raising interest rates, with economists predicting a record fourth straight increase at the central bank’s next meeting in February.

Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 percent on Feb. 2, adding to yesterday’s unprecedented third monthly increase, according to all 16 economists surveyed by Bloomberg News.

Australia’s economy has outpaced the U.S., Europe and Japan, which have all kept rates near record lows this year. Cash handouts by Prime Minister Kevin Rudd’s government have boosted consumer confidence and house prices, and China’s demand for resources such as iron ore from Rio Tinto Group and BHP Billiton Ltd. has stoked a new mining-jobs boom.

“Reserve Bank officials are taking the path of least hazard,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney, who tips another increase in February followed by further “steady” gains in 2010. “They are hiking while they have time on their side and the exit from emergency settings can be orderly.”

Traders aren’t as convinced. The nation’s currency fell yesterday after Stevens said the board’s “material adjustments” to the benchmark rate, now at 3.75 percent, will be enough to keep inflation within his 2 percent to 3 percent target range.

Investor Bets

Investors are betting there is only a 36 percent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late yesterday.

“I can see how people will interpret this is a pausing message -- and that’s more than fair,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Nevertheless, I think there are several reasons why the Reserve Bank won’t be pausing for too long.”

Speculation that Stevens will continue to lead the world in raising rates has stoked this year’s 30 percent surge in the nation’s dollar, making it the best performer among the 16 major currencies against the U.S. dollar. It traded at 91.24 U.S. cents at 5:55 p.m. yesterday in Sydney.

U.S. Federal Reserve Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa aren’t expected to raise borrowing costs for at least a year, according to Bloomberg calculations based on overnight interest-rate swaps.

Japan Meeting

The Bank of Japan kept its key overnight lending rate at 0.1 percent at an emergency meeting in Tokyo yesterday, in which it said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high.

Australia’s economy is in a “gradual recovery” that will see gross domestic product expand 3.25 percent in 2010 and 2011, according to Governor Stevens. Growth is being boosted by A$22 billion ($20 billion) in spending by Prime Minister Rudd’s government on roads, ports, railways and schools.

By contrast, the U.S. economy will expand 2.5 percent next year, the euro region will advance 0.9 percent and Japan will grow 1.8 percent, the Organization for Economic Cooperation and Development predicted last month.

Asia’s largest economies also show signs of outperforming most developed countries. A report published yesterday showed China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy and Australia’s largest iron-ore customer.

India, South Korea

India’s economy grew 7.9 percent in the third quarter, the fastest expansion in 1 1/2 years, and South Korea’s exports rose 18.8 percent in November from a year earlier, the first gain in 13 months, reports showed in the past two days.

“In China and Asia generally, where financial sectors are not impaired, recovery has been much quicker to date and prospects appear to be for good growth in 2010,” Stevens said.

Economic recovery in the region is helping stoke demand for Australian resources such as iron ore, and in September prompted Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc to approve the nation’s single biggest investment project, the A$43 billion Gorgon natural-gas venture in Western Australia.

Rio Tinto and BHP Billiton boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.

“Prospects for ongoing expansion of private demand, including business investment, have been strengthening,” Stevens said yesterday. “Growth in 2010 is likely to be close to trend and inflation close to target.”

House Prices

House prices have climbed 10 percent this year, employment rose in October, and companies surveyed by the Bureau of Statistics in a report published on Nov. 25 forecast investment of A$105 billion in the year ending June 30, 2010, which is 5.9 percent more than they estimated three months earlier.

This year’s interest-rate increases add about A$150 to monthly repayments on an average A$300,000 home loan, and may prompt consumers to trim spending that surged in the first half of the year after the government distributed more than A$20 billion in cash handouts to households.

The cost to some home borrowers will be even higher after Westpac Banking Corp., Australia’s second-largest lender, increased its standard variable home-loan rate by 45 basis points after yesterday’s central bank decision.

Stevens’s move “risks choking off higher retail spending,” said Margy Osmond, chief executive of the Australian National Retailers Association. “It was disappointing the bank didn’t wait until after Christmas.”

Dubai Turmoil

Yesterday’s decision also suggests Stevens is unmoved by the turmoil last week on global stock and credit markets after Dubai World, one of the emirate’s three main state-related holding companies, said it’s seeking to delay payments on $59 billion of debt.

“Financial markets have improved considerably during 2009, notwithstanding periodic setbacks, and capital flows into Asia and other emerging market regions have been picking up,” the Governor said.

A rebound in share prices and higher house prices have also caused “a noticeable recovery in household wealth,” he added.

The benchmark rate will be boosted to 5 percent by the fourth quarter of next year, according to the median estimate of economists surveyed by Bloomberg yesterday.

To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.netDaniel Petrie in Sydney at dpetrie5@bloomberg.net

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Oil Trades Near $78 on Stockpile Gains; British Sailors Freed

By Christian Schmollinger and Ben Sharples

Dec. 2 (Bloomberg) -- Crude oil traded near $78 a barrel in New York after an industry report showed U.S. supplies gained, raising concern that fuel demand in the biggest energy-consuming nation may be slow to recover.

Oil also pared yesterday’s gains after Iran today freed five British yachtsman detained last week when they entered the country’s waters by mistake. The American Petroleum Institute reported crude inventories rose 2.89 million barrels last week, while gasoline and distillate fuel stockpiles also climbed as refinery utilization dropped.

“Across the board this is pretty bearish,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “Here we are into the fourth quarter and we aren’t getting any draws in inventories, especially in distillate fuels. It’s just not good for demand.”

Crude oil for January delivery traded at $78.10 a barrel, down 27 cents, in electronic trading on the New York Mercantile Exchange at 3:48 p.m. Singapore time. Yesterday, the contract rose $1.09, or 1.4 percent, to settle at $78.37. Oil fell below $77.80 following the API report, which came after settlement. Prices have gained 75 percent this year.

Iran’s Revolutionary Guards Corps said that on questioning the sailors, it was clear they had entered Iranian waters by mistake, the Fars news agency reported. They were freed after making the “necessary commitments,” Fars said, without elaborating.

Oil prices dropped about 50 cents a barrel after the news of the release.

China Manufacturing

Crude gained after reports yesterday showed signs of increased manufacturing output in the U.S. and China, responsible for about 32 percent of global oil consumption. India’s oil processing climbed 7.2 percent in October from a year earlier, the country’s Oil Ministry said on Nov. 25.

“Yesterday’s report shows that demand isn’t that great in the U.S.,” Nunan said. “But with India and China, in terms of manufacturing, we can expect good oil demand growth countries.”

The U.S. Energy Department will release its weekly supply report today in Washington. Inventories are forecast to decline, according to a Bloomberg News survey.

The Energy Department report is forecast to show that crude inventories fell 450,000 barrels, according to the survey. Oil- supply totals from the API and Energy Department moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg.

“What is really important now is for industrial production in the U.S. to come back online,” Ben Westmore, an analyst with National Australia Bank in Melbourne, said by telephone. “Compared to the last 20 years, distillate stocks are still pretty much the highest they’ve been.”

Distillate Supplies

Inventories of distillate fuels, which include heating oil and diesel, rose 1.06 million barrels to 168 million, the API report showed. The Energy Department will probably say stockpiles fell 350,000 barrels last week, according to the Bloomberg News survey. Supplies are at 166.9 million barrels, the highest since January 1983.

“Part of that is going to be whittled away by the U.S. winter and demand for heating oil but the other big thing, and probably more important, is the industrial production story,” Westmore said. “Once that comes back online you expect, not withstanding more refinery operation, that distillate product will be wound down.”

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Brent crude oil for January settlement was at $79.17 a barrel, down 18 cents, on the London-based ICE Futures Europe exchange at 3:39 p.m. Singapore time. The contract yesterday rose 88 cents, or 1.1 percent, to end the session at $79.35.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net

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Bernanke Has Support of Majority of Senators on Banking Panel

By Scott Lanman and Alison Vekshin

Dec. 2 (Bloomberg) -- Ben S. Bernanke has the backing of a majority of U.S. senators on the Banking Committee for a second term as Federal Reserve chairman.

Eight Democrats and four Republicans, among the 23 lawmakers on the panel overseeing the central bank, made their views known in interviews, comments to reporters or written statements. Some said they will support Bernanke, while others said they’re leaning in his favor.

Committee Chairman Christopher Dodd, a Connecticut Democrat, said yesterday that Bernanke has “done a pretty good job,” and that anger in Congress over the Fed’s role in the financial crisis is “misplaced.” Judd Gregg, a New Hampshire Republican, said Nov. 20 he will “absolutely” vote for Bernanke.

Criticism of the central bank has mounted in Congress since President Barack Obama nominated Bernanke in August, with many lawmakers blaming the Fed for lax supervision of banks and for taking part in taxpayer-funded bailouts of companies including Citigroup Inc. Some senators said those concerns won’t stop them from backing the former Princeton University economist.

“He’s been far from perfect,” Senator Sherrod Brown, an Ohio Democrat, said in an interview yesterday. “He was not quick enough responding last year to many of these issues that we care about, particularly in housing. I want him to focus on jobs. But I think he’s generally done a decent job.”

The banking panel holds a hearing on Bernanke’s nomination tomorrow in Washington. A vote hasn’t been scheduled, and the full Senate would then need to confirm the Fed chief. Bernanke’s four-year term ends Jan. 31.

Traders on Intrade, an online futures exchange, give Bernanke an 89 percent chance of Senate confirmation.

Stocks Jump

The Fed under Bernanke has slashed interest rates almost to zero and pumped more than $1 trillion into the financial system to battle the deepest recession since the 1930s. The Standard & Poor’s 500 Index has jumped 64 percent from its 2009 low on March 9 as the economy showed signs of revival.

Policy makers last month repeated their pledge to keep rates low for an “extended period” to bring down an unemployment rate at a 26-year high. A government report Dec. 4 is likely to show that companies reduced payrolls for a 23rd straight month, according to a Bloomberg survey of economists.

Dodd said in August that while he’s had “serious differences” with the Fed, reappointing Bernanke is “probably the right choice.”

‘Pins and Needles’

Asked yesterday about his vote, Dodd told reporters, “I want you to be on pins and needles and wait until Thursday to hear this exciting news.”

Jim Bunning, the Kentucky Republican who was the only senator to oppose Bernanke’s first nomination in 2005, hasn’t changed his views.

“His job rating would be zero minus F,” Bunning said in an interview yesterday. “He has catered to the big banks, to the Wall Street elitists, to every major money concern in the country and in the world.”

Senator Bernard Sanders, a Vermont independent who isn’t on the banking committee, said Nov. 29 on ABC television’s “This Week” that he will “absolutely not vote for Mr. Bernanke” and that the Fed chief is “part of the problem.”

The other Democrats on the banking panel expressing support for Bernanke include South Dakota’s Tim Johnson, Jack Reed of Rhode Island, New York’s Charles Schumer, Evan Bayh of Indiana, Hawaii’s Daniel Akaka and Virginia’s Mark Warner.

‘Earth Shattering’

On the Republican side, Nebraska’s Mike Johanns said Bernanke “will have my support.” Utah’s Robert Bennett said he’ll probably vote in favor, while Bob Corker of Tennessee said he is likely to back Bernanke “if nothing earth-shattering comes out of the hearings and the follow-ups.”

Alabama Senator Richard Shelby, the panel’s top Republican, declined to comment except to say, “You’ll be there Thursday.”

Bernanke, 55, has presided over the most expansive use of Fed powers since the 1930s, taking control of insurer American International Group Inc. and launching unprecedented programs to contain fallout from a run on money-market funds and to buy short-term debt from companies such as General Electric Co.

Some lawmakers have accused the Fed of overstepping its authority and failing to properly supervise the financial firms that packaged and sold the mortgage-backed securities at the heart of the crisis.

Dodd, calling the Fed’s record on banking supervision an “abysmal failure” introduced legislation in November that would strip the central bank of that role. Also last month, the House Financial Services Committee approved a proposal to remove a three-decade ban on congressional audits of Fed interest-rate decisions.

Bernanke Commentary

The Fed chief said in a Nov. 29 commentary in the Washington Post that curbing the central bank’s authority to supervise the banking system and tampering with its independence would “seriously impair” economic stability in the U.S.

Frederic Mishkin, a former Fed governor who now teaches at Columbia University in New York, called the measure that would allow audits of Fed policy “incredibly dangerous.”

“If you make the central bank beholden to politicians on a short-run basis, you get very bad outcomes: high inflation and less of the ability to deal with shocks like the ones we had recently,” Mishkin said yesterday in an interview.

To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net; Alison Vekshin in Washington at avekshin@bloomberg.net.

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U.S. Taxpayers May Reap $3.17 Billion in TARP Warrant Auctions

By Peter Eichenbaum

Dec. 2 (Bloomberg) -- U.S. taxpayers may reap $3.17 billion from the first auctions of warrants demanded by the government for bailing out banks, including Capital One Financial Corp., JPMorgan Chase & Co. and TCF Financial Corp.

“This is definitely the best possible outcome for taxpayers,” Linus Wilson, the University of Louisiana finance professor who provided the estimate, said yesterday after the Treasury Department started auctioning 12.7 million warrants in Capital One, the McLean, Virginia-based credit-card lender.

The auction was set after the agency and the bank couldn’t agree on a price for selling the warrants back to Capital One. They were granted last year in return for money from the $700 billion Troubled Asset Relief Program. The Treasury said Nov. 19 it also will auction warrants in New York-based JPMorgan and TCF Financial. All three have repaid funds received from TARP.

The sale of Capital One’s warrants will provide returns to taxpayers beyond the $105.2 million in dividends paid to the government in June when the bank returned $3.56 billion in TARP funds received in November 2008, the Treasury said in a statement. Wilson’s low estimate for the three auctions was $1.35 billion.

Warrants give investors a long-term option to buy common shares for a specified period -- in this case, 10 years. The longer the term, the more they’re typically worth.

The auction runs tomorrow from 8 a.m. to 6:30 p.m. New York time. The minimum bid is $7.50 per warrant and the bank may be among the bidders, Capital One said in a prospectus.

Bids Values

“Taxpayers are going to get the best price when many investors bid on the warrants, instead of the bank itself,” said Wilson, whose studies earlier this year found the Treasury sold warrants back to banks for as little as 32 cents on the dollar. “It’s refreshing to see the U.S. Treasury is looking to markets to price securities instead of looking to price them through negotiations between Treasury officials and the banks.”

While Capital One’s warrants would be worth $94.9 million at the minimum bid price, Wilson expects they will fetch $242 million to $390 million based on yesterday’s closing price of $38.09 on the New York Stock Exchange. The warrants expire on Nov. 14, 2018, and give investors the option to buy the underlying shares for $42.13.

Deutsche Bank Securities Inc. is the sole book-running manager and Siebert Capital Markets is the co-manager of the offering. Capital One spokeswoman Julie Rakes and Jason Korstange at TCF declined comment. JPMorgan’s Jennifer Zuccarelli referred questions to the government, and Treasury spokesman Andrew Williams didn’t return phone and e-mail messages.

Financial Crisis

The Treasury may bring in $1.08 billion to $2.72 billion through the sale of 88.4 million JPMorgan warrants, which expire in 2018 and have a $42.42 strike price, and $10 million to $26 million for the warrants of Wayzata, Minnesota-based TCF Financial, which expire in 2018 at a strike price of $16.93, Wilson said.

JPMorgan received $25 billion and TCF Financial $361 million through the bailout program enacted in October 2008 and used to inject capital into banks during the height of the worst financial crisis since the Great Depression. JPMorgan said it paid the Treasury $795.1 million in dividends.

The Treasury has said it intends to conduct similar auctions in the future as banks repay their TARP stakes. There are 693 banks in the capital purchase program, the Treasury said. Banks that want to pay back their capital injections can offer to repurchase the warrants, as Goldman Sachs Group Inc. did for $1.1 billion.

Cumulative Tally

The policy to auction the warrants benefits taxpayers, said Robert Jarrow, an economics professor at Cornell University and former managing editor of the journal Mathematical Finance, whom the Treasury hired to review its approach.

“This is the built-in fairness to the Treasury warrant valuation and repurchase process,” he said.

Cumulatively, taxpayers are “extremely unlikely” to see profit on their investment in banks and firms including insurer American International Group Inc. and General Motors Co., TARP watchdog Neil Barofsky said in an Oct. 21 report to Congress.

The Treasury, which faces a year-end deadline on whether to extend the TARP for another 10 months, had $317.3 billion left to spend as of Sept. 30, according to the report. Recipients of government assistance have repaid about $71 billion of the $289.7 billion distributed under the program, according to Bloomberg data.

-- With assistance from Brendan Murray and Rebecca Christie in Washington. Editors: Rick Green, William Ahearn

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

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Yen Declines After Hatoyama Says Currency Can’t Be Left as Is

By Lukanyo Mnyanda

Dec. 2 (Bloomberg) -- The yen fell after Japanese Prime Minister Yukio Hatoyama was cited by the Nikkei newspaper as saying the currency’s strength can’t be left as it is, fueling speculation the central bank will intervene to stem its gains.

Japan’s currency headed for its first back-to-back losses in two weeks against the dollar following the Nikkei report. Chief Cabinet Secretary Hirofumi Hirano said later Hatoyama wasn’t suggesting the government is ready to intervene. The dollar traded near a 16-month low versus the euro and fell against higher-yielding currencies as stock markets rose.

“They are very much concerned about yen strength, and the market is quite aware that the Bank of Japan will likely intervene if the yen appreciates too much,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-largest lender. “Risk appetite is also driving the market at the moment and the dollar will also be under pressure due to the low financing costs.”

The yen dropped 0.6 percent to 87.22 per dollar as of 8:24 a.m. in London. It declined 0.7 percent to 131.69 per euro. The dollar fell 0.2 percent to $1.5088 per euro. It depreciated to $1.5144 on Nov. 25, the weakest level since August 2008.

The yen has advanced 3.8 percent versus the dollar this year and traded at a 14-year high of 84.83 against the U.S. currency on Nov. 27. Rapid fluctuations in the currency market are undesirable and the government is closely monitoring the situation, Hirano told reporters in Tokyo following Hatoyama’s comments.

Aussie Dollar

The yen fell against all its 16 most-traded peers tracked by Bloomberg, including the Australian and New Zealand dollars. Australia’s currency, the Aussie, rose as gold, the nation’s third most-valuable raw material export, advanced to a record for a second day, trading at $1,215.85 an ounce.

The Aussie rose 0.9 percent to 80.92 yen and was up 0.3 percent against the dollar at 92.78 cents. The New Zealand dollar gained 1 percent to 63.53 yen and strengthened 0.3 percent to 72.81 cents.

The dollar also declined before a report economists said will show U.S. employers fired fewer workers last month, giving investors confidence to buy assets that offer higher returns.

Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Stocks Rise

Most European stocks advanced, with the Dow Jones Stoxx 600 Index adding 0.1 percent, after jumping 2.7 percent yesterday. The MSCI World Index headed for a third day of increases.

U.S. companies cut 150,000 jobs in November, down from 203,000 in October, according to the median estimate of economists in a Bloomberg News survey before today’s report from ADP Employer Services. That would be the smallest reduction since July 2008.

“The global recovery is in motion,” said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. “A stronger employment report, of course, will lead to an increase in risk appetite, and we will probably see that weigh heavily on the U.S. dollar.”

The euro rose against the yen as European finance leaders played down potential risks to their banks from Dubai’s debt problems. Government-related Dubai World has begun talks with banks to restructure $26 billion of debt.

The risk of losses for “European banks seems to be so far, from what we can assess, at a reasonable level,” Finance Minister Anders Borg of Sweden, which holds the rotating European Union presidency, said yesterday as he arrived for a meeting of finance chiefs in Brussels.

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

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Milk Prices Rise to 16-Month High on Reduced Southern Supply

By Gavin Evans

Dec. 2 (Bloomberg) -- Milk powder prices advanced to a 16- month high on increasing global demand and reduced supplies from Australia and New Zealand.

Whole milk powder for February delivery rose 5.1 percent to $3,523 a metric ton at auction, Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said today. It was the fifth straight monthly increase and “pretty much supply driven,” said Paul Grave, manager of Fonterra’s GlobalDairyTrade unit.

Milk prices have risen 91 percent from a five-year low in July after a collapse in demand last year prompted farmers worldwide to reduce stock numbers. Unseasonably cold spring weather is slowing production in New Zealand while Australia’s dairy industry is forecasting a 4 percent output drop this year.

“Current supply is tight,” Doug Steel, agricultural economist at Westpac Banking Corp., said from Christchurch. “Australian production is back quite a bit and New Zealand isn’t going all that well. So just through the southern hemisphere supply season it’s still going to remain fairly tight.”

The New Zealand dollar bought 72.73 U.S. cents at 11:40 a.m. in Wellington from 72.82 cents in late Asian trading yesterday. Earlier, it reached 72.94 cents, helped by the gain in milk prices, Bank of New Zealand Ltd. currency strategist Mike Jones said in an e-mailed note.

Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese and is the nation’s biggest export earner. It raised the price it plans to pay New Zealand producers by 33 percent the past three months citing the global recovery and concerns about tighter supplies during 2010.

Record Prices

Milk powder reached a record $5,050 a ton in October 2007, according to U.S. Department of Agriculture data, as drought in Australia cut supplies and rising land and feed prices in Europe and the U.S. increased production costs. Prices fell to $1,841 at Fonterra’s July auction, the lowest since January 2004.

The GlobalDairyTrade auctions offer a one-month contract with delivery starting two months after the sale, and two three- month contracts with delivery starting three and six months later.

Milk powder for delivery from March through May rose 4.3 percent to $3,540 a ton, Fonterra said. Powder for shipment from June through August rose 0.9 percent to $3,716 a ton. The six- month contract jumped 21 percent last month.

The pattern in the latest auction, where near-month prices gained more than later contracts, is likely to continue, Westpac’s Steel said.

Prices above $3,700 are already “pretty hefty” and are high enough to prompt an increase in global production, he said.

“Attention is turning to how much this is going to induce global supply, especially into the northern hemisphere production season next year,” Steel said. “From the farmer point of view you’d think they would kick on and produce a bit more.”

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net

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Corn Falls After U.S. Delays Decision on Increased Ethanol Use

By Sungwoo Park

Dec. 2 (Bloomberg) -- Corn fell for a second day after U.S. regulators postponed a decision to increase the use of ethanol in gasoline until mid-2010, clouding the demand prospects of the grain used to make the fuel additive.

The Environmental Protection Agency yesterday kept the blend at a maximum of 10 percent and said it may consider a higher ratio after engine studies are completed. Ethanol producers sought a rate of 15 percent. Higher blends will be needed for the U.S. to meet the so-called renewable fuels standard, the EPA said.

“The delay is disappointing, which has pressured corn yesterday,” said Han Sung Min, a manager at the international marketing division of Korea Exchange Bank Futures Co. in Seoul. “Still, the longer-term prospect for the grain is bullish since the U.S. will eventually expand ethanol use.”

Corn futures for March delivery fell as much as 4 cents, or 1 percent, to $4.105 a bushel in the electronic trading on the Chicago Board of Trade and traded at $4.13 3:59 p.m. Seoul time. Prices fell 0.7 percent yesterday after earlier reaching $4.2125, the highest level since Nov. 18.

The U.S. Energy Independence and Security Act of 2007 calls for the nation to use 12 billion gallons of renewable fuels such as ethanol next year, up from 10.5 billion in 2009. The law requires the U.S. to use 15 billion gallons by 2015.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, according to government data. Prices surged 14 percent in November, the biggest monthly gain since June, 2008, following delays in the U.S. harvest.

January soybeans fell as much as 0.6 percent and last traded little changed at $10.63 a bushel. The oilseed was barely changed yesterday after gaining 8.6 percent last month.

Wheat futures for March delivery declined as much as 3 cents, or 0.5 percent, to $5.81 a bushel and last traded up 0.2 percent at $5.85.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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Indonesia to Develop Value-Added Palm Oil Industry, Rajasa Says

By Claire Leow and Yoga Rusmana

Dec. 2 (Bloomberg) -- Indonesia, the world’s largest producer of palm oil, plans to develop regional centers for processing the commodity into biodiesel and other products to boost profit margins and create jobs, a minister said today.

The Southeast Asian nation is seeking investment to produce oleochemicals -- used to make household products like soaps, detergents and toothpastes -- cooking oils and biodiesel from palm oil, Hatta Rajasa, Indonesia’s Coordinating Minister for the Economy, said at a conference in Bali.

“At least three areas are ready; Riau, North Sumatra and East Kalimantan,” he said.

Indonesia is poised to report record production of 20.5 million tons next year, from 19.44 million metric tons this year, Achmad Manggabarani, director general for plantations at the agriculture ministry, said Sept. 7.

Output this year may climb to 20.5 million tons, and to at least 21.5 million tons next year, Fadhil Hasan, executive director at the Indonesian Palm Oil Association, forecast on Nov. 19. Indonesia earned $12.4 billion in palm oil revenue last year, making it the country’s largest non-crude oil and gas export earner, Rajasa said.

“We have a potential 18 million hectares (44.5 million acres) of land that can be developed for palm, including 7.9 million hectares of existing areas already planted,” Suswono, Indonesia’s Agriculture Minister, said at the same event.

“The government will give fiscal or non-fiscal incentives” for the proposed expansion, Rajasa said, adding that the government plans to improve local infrastructure such as ports, roads and electricity access in those areas.

Riau Development

A state company will develop 200 hectares in Riau for oleochemicals and biodiesel investment, Manggabarani said in response to Rajasa’s announcement.

Palm oil futures on the Malaysia Derivatives Exchange, the benchmark price, have gained about 47 percent this year. The price surged to a record 4,486 ringgit ($1,329) a ton in March 2008, before slumping 70 percent to the lowest in more than three years in October last year.

February-delivery palm oil was little changed at 2,499 ringgit a ton at 12:17 p.m. in Kuala Lumpur.

To contact the reporter on this story: Claire Leow at cleow@bloomberg.net; Yoga Rusmana in Bali at yrusmana@bloomberg.net

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U.K. Stocks Pare Gains; Barclays, Royal Bank of Scotland Drop

By Adam Haigh

Dec. 2 (Bloomberg) -- U.K. stocks pared gains as Barclays Plc and Royal Bank of Scotland Group Plc declined.

The FTSE 100 Index fell 8.49, or 0.2 percent, to 5,303.68 as of 9:06 a.m. in London, having earlier risen as much as 0.3 percent.

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European Stocks Fluctuate; Stoxx 600 Index Is Little Changed

By Andrew Rummer

Dec. 2 (Bloomberg) -- European stocks fluctuated between gains and losses as advances by media and telecommunications companies offset a decline by banks.

The Dow Jones Stoxx 600 Index was little changed at 245.7 as of 9:12 a.m. in London, having jumped the most since July yesterday.

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