SEK Strengthens On Higher Inflation Path

Daily Forex Fundamentals | Written by AC-Markets | Jan 12 10 10:07 GMT |

News and Events: This morning's Swedish CPI came in at a firmer than expected 0.2% MoM, 0.9% YoY, against consensus estimates for 0.1% MoM, 0.7% YoY. Indeed today's reading brings the annualized headline CPI surging back into positive territory for the first time since April 2009 and seems to confirm suspicions that the Riksbank's current inflation forecast is incorrect. The steady increase in CPI from Sweden adds to the backdrop of improving fundamentals demonstrated at the end of last year, and points to the possibility of further SEK strength in 2010. The unemployment rate has continued to show encouraging signs of decline to 8.0% at the last print (down from the June 2009 peak of 9.8%), and although volatile on a monthly basis, annualized retail sales growth and industrial production also look to have passed the trough in the cycle. The Riksbank members have, up until now, erred toward the cautious side in giving their assessments of the recovery - but recent comments from Riksbank Deputy Governor Lars Nyberg suggested that the bank needed to 'begin a normalization of the repo rate' from its 'crisis' level of 0.25% during the spring or summer. We anticipate that the Riksbank will soon need to discard its lingering dovish caution as inflation continues to tick higher, and anticipate rates will rise to 1.00% in the course of 2010. For the remainder of the day, there is very little in the way of economic releases due that will have much impact on FX markets. For the most part, equity markets and USD weakness have been trading in tandem - following the same correlation that was in play for much of 2009. We expect most major currency pairs to track equity movements today, and also in the coming weeks as the headlines of Q4 earnings season gets into full swing. Today Key Issues: 13:30 USD Trade balance, $ bn Nov exp: -34.6 prev: -32.9 The Risk Today: EurUsd Yesterday's break above 1.4484 key resistance and daily close above 1.4500 keeps focus on the next upside levels of 1.4570 (38.2% retrace of 1.5145-1.4218) and 1.4590 (16 Dec highs). Despite this morning's USD retracement, 1.4450 looks to be providing interim support, and below there lies the more significant support zone between 1.4250/80. Markets seem to be adjusting their bearish EURUSD outlook, which would suggest upside potential near term and a return to 1.4800, only a close below 1.4250 would reinstate a look at the downside targets around 1.4000. GbpUsd The strong reversal above the bearish trendline resistance at 1.6150 gives the pair a bullish tone, but so far, 1.6200 has formed good resistance to the post-NFP rally, and the 200-day moving average at 1.6126 has provided a cap on today's range. We still expect prior resistance levels to be in play: 1.6248 (Dec 18 highs), followed by 1.6307 (100 day moving average), and above there the 1.6400 psychological barrier. UsdJpy USDJPY has been trading heavy today, but it still looks like we will remain range bound between the range lows of 91.10 lows and decent supply ahead of 94.00. After meeting good supply at the top of the two-and-a-half year downtrend, risks are skewed to the downside; a break below 91.10 would indicate a resumption of the larger downtrend that has been in play since mid 2007, but expect bids ahead of trendline support at 91.10, and then at before 90.60. Selling interest at 92.50 marks the top of the intraday range for now. UsdChf Yesterday's strong move through 1.0225 touched lows of 1.0131 late in the European session, just ahead of ket retracement levels at 1.0115. 1.0225 now represents an area of good supply, with further resistance expected around 1.0350 and beyond there at 1.0500. Focus now turns to the downside as traders eye a revisit of 1.0130, 1.0090, and thereafter 1.0000. EURUSD GBPUSD USDJPY USDCHF 1.4665 1.6335 95.00 1.0350 1.4600 1.6235 94.00 1.0295 1.4575 1.6195 93.77 1.0225 1.4475 1.6090 91.85 1.0195 1.4410 1.6020 91.10 1.0115 1.4330 1.6000 90.00 1.0090 1.4300 1.5900 89.10 1.0000 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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United Kingdom Trade Deficit Narrows From Higher Exports

Daily Forex Fundamentals | Written by ecPulse.com | Jan 12 10 10:01 GMT |

The United Kingdom today saw its trade deficit narrow despite the recession they are in as a result of higher exports led from the weak royal currency, as overseas consumer were encouraged by the weak pound as goods and services became cheaper, boosted exports to the highest level in a year or more. In November, visible trade balance narrowed to -6784 million pounds from the revised prior deficit of 7016 from 7108 million pounds while analysts were presuming that deficit would narrow to -7000 million pounds. Trade balance non-EU also for November also witnessed shrinkage in deficit to -3032 million pounds from the revised previous deficit of 3473 from 3533 million pounds which is better than the projected deficit of 3425 million pounds. Total trade balance narrowed to -2912 million pounds which is an improvement from the projected deficit of 3000 million pounds and the revised previous deficit of 3120 from 3213 million pounds 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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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Jan 12 10 11:09 GMT |

EUR/USD Current level-1.4486 EUR/USD is in a downtrend, after peaking at1.5146 (Nov.25,2009). Technical indicators are neutral, and trading is situated between the 50- and 200-Day SMA, currently projected at 1.4793 and 1.4169. Current bias remains positive for 1.4630-70 and initial support comes at 1.4450. A break above 1.4541 will renew the uptrend towards 1.4670. Crucial on the downside remains 1.4260. Resistance Support intraday intraweek intraday intraweek 1.4580 1.4499 1.4460 1.4170 1.4670 1.5146 1.4260 1.3740 USD/JPY Current level - 91.77 The overall downtrend has been renewed with the recent break below 87.12. Trading is situated below the 50- and 200-day SMA, currently projected at 89.50 and 93.54. The reversal around 93.40 is already a fact and current intraday bias is negative, so we'll expect further depreciation towards 91.15-24 support area. Intraday resistance comes at 92.80 Resistance Support intraday intraweek intraday intraweek 93.40 93.40 92.10 86.01 93.70 95.60 91.25 79.60 GBP/USD Current level- 1.6090 The pair is in a downtrend after peaking at 1.7042. Trading is situated between the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. A minor consolidation is unfolding below yesterday's top at 1.6192 and we expect the pair to be well supported at 1.6050-70 for the next leg upwards, to 1.6240, en route to 1.6410. Resistance Support intraday intraweek intraday intraweek 1.6240 1.6410 1.6070 1.5706 1.6410 1.7042 1.5896 1.5352 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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U.K. House Price Gauge Unexpectedly Falls, RICS Says

By Jennifer Ryan

Jan. 12 (Bloomberg) -- A U.K. house-price gauge showed the property market unexpectedly lost momentum in December as inquiries from new buyers to browse homes slipped.

The number of real-estate agents saying prices rose exceeded those reporting declines by 30 percentage points, down from 35 points in November, the Royal Institution of Chartered Surveyors said in its monthly survey today. Economists predicted 37 points, according to the median of 14 forecasts in a Bloomberg News survey.

The report suggests the U.K. property market’s pickup from the slump that shaved as much as 20 percent off values is starting to fade. House prices will be flat this year, Lloyds Banking Group Plc’s Halifax unit said Jan. 7. Prime Minister Gordon Brown is counting on stronger economic growth to help revive his popularity before a general election which must be held by June.

“What all this is suggesting is the sugar rush or pent up demand that helped housing to rebound is running out of steam,” Alan Clarke, an economist at BNP Paribas in London, said in a note today. “This series was the best early warning signal that the housing market was going to bounce back. Unfortunately, our charts suggest there is further downside for enquiries.”

Housing-Market Slack

The sales-to-stock ratio, a measure of slack in the housing market, was little changed at 30.5, close to the highest since Dec. 2007, the report showed. Average sales per surveyor over the last three months rose to 19.1 from 19.

Seven of 12 regions tracked by RICS showed price increases in the past three months, and the rest had declines. The biggest gain was in London and the southeast of England, where the net balance of surveyors saying prices increased was at 41 points.

U.K. house prices rose 0.6 percent in November from a year earlier, the Department for Communities and Local Government said separately today. On the month, prices increased 1.7 percent, the DCLG said in a statement on its Web site.

“New inquiries are continuing to outpace new instructions which is helping to push house prices higher,” Jeremy Leaf, spokesman for RICS, said in a statement. “The recent loss of momentum in prices and the moderation in new buyer interest can be in part attributed to the housing market pulling down its shutters for Christmas.”

Bank of England policy maker Kate Barker said on Dec. 16 that she is “surprised” by the pickup in house prices and predicted the recovery may stall in 2010. London-based research group Hometrack said last month that prices will decline this year as rising unemployment and concern about government spending cuts limit demand.

Retail Sales

A separate British Retail Consortium survey released today showed total sales rose 6 percent in December from a year earlier, the most for the month since 2005. Same-store sales increased 4.2 percent on the year, compared with a 3.3 percent drop in December last year after the collapse of Lehman Brothers Holdings Inc. deepened the recession.

“These are stronger figures than we dared hope for,” Stephen Robertson, director general of the London-based BRC, said in a statement. “Customers clearly felt more confident about spending than they have for some time.”

British lenders reduced the cost of mortgages for a third month in December as the Bank of England kept the benchmark interest rate at a record low and maintained its 200-billion pound ($322 billion) bond-purchase program to try and cement the economic recovery. The U.K. economy contracted 0.2 percent in the third quarter, extending the slump to a sixth quarter.

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

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Societe Generale Hires Ex-Merrill’s Okubo as Japan Economist

By Toru Fujioka

Jan. 12 (Bloomberg) -- Takuji Okubo, former senior director at Merrill Lynch Japan Securities Co. in Tokyo, has joined Societe Generale SA as its chief Japan economist.

Okubo starts work today for the Paris-based bank in the newly created position, Glenn Maguire, chief Asia-Pacific economist at Societe Generale in Hong Kong, wrote in an e-mail to Bloomberg News.

Okubo was employed at Merrill Lynch from 2007 to 2009 after working for Goldman Sachs Group Inc. in Tokyo.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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IMF Team Arrives in Greece to Aid Government on Deficit Control

By Maria Petrakis and Simon Kennedy

Jan. 12 (Bloomberg) -- A team of International Monetary Fund officials arrive in Greece today to aid the government in its efforts to tame Europe’s biggest budget deficit.

The mission, “within the context of the regular surveillance that the IMF provides to its membership,” will help the government with “pension reform, tax policy, tax administration and budget management,” a spokeswoman for the Washington-based lender said in an e-mailed statement yesterday.

The visit comes as Prime Minister George Papandreou moves to complete a plan to convince the European Union that Greece can reduce the shortfall from 12.7 percent of output in 2009 to less than 3 percent in 2012. EU and European Central Bank officials were also in Athens last week to vet the government’s efforts and EU President Herman van Rompuy also visits today.

The so-called stability pact will be discussed at a Cabinet meeting by the end of the week, Papandreou said on Jan. 10. He also plans to hold a news conference this week to outline the government’s priorities for the year.

“The Greek government is aware of the seriousness of the situation,” Olli Rehn, EU commissioner-designate, said yesterday during his confirmation hearing before a European Parliament committee in Brussels. “The commission is assessing the matter with major concern.”

Greece last week rejected speculation that it will need a bailout to tackle the deficit and avoid becoming the first euro nation to default.

‘Good Standing’

The IMF, which has moved to shore up economies from Hungary to Pakistan over the past 18 months, is “taking a close look” at Greece’s policies “and forming an opinion about their likely impact,” John Lipsky, the IMF’s first deputy managing director, said in an interview on Jan. 6. Greece is an IMF member in “good standing,” Lipsky said.

Finance Minister George Papaconstantinou will present the Greek plan later this month to the European Commission as he seeks to avoid possible penalties under the EU’s excessive- deficit procedure.

Papaconstantinou has pledged to cut the deficit to 8.7 percent of gross domestic product this year and below the EU’s 3 percent limit by the end of 2012, a year earlier than the original plan.

The widening deficit prompted Fitch Ratings, Standard & Poor’s and Moody’s Investors Service to lower Greece’s creditworthiness last month, fueling concern about a possible default.

Bonds Slump

Greek bonds slumped in December. The premium investors demanded to buy Greek 10-year government debt over comparable German bonds widened to 276 basis points on Dec. 21, the widest since March 17. That gap narrowed to 217 basis points yesterday from 220. A basis point is 0.01 percentage point.

Greece’s deficit has prompted speculation from some investors that the rest of the EU would save the country from default if such a move were necessary. The EU will support Greece’s efforts to tame the deficit, Spanish Prime Minister Jose Luis Rodriguez Zapatero, who holds the EU’s rotating presidency, said last week in Brussels.

How far support from the EU or ECB would go remains unclear. ECB Executive Board member Juergen Stark said in a Jan. 6 interview in Italian newspaper Il Sole-24 Ore that “markets are deluding themselves” if they are counting on a bailout.

The Brussels-based commission will make a recommendation on the Greek deficit-reduction plan to EU finance ministers, who will likely announce their final ruling at a meeting in Brussels on Feb. 15-16.

To contact the reporter on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Simon Kennedy at skennedy4@bloomberg.net

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Federal Reserve Seeks to Block Release of U.S. Bailout Secrets

By Thom Weidlich and David Glovin

Jan. 12 (Bloomberg) -- The Federal Reserve asked a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

The U.S. Court of Appeals in Manhattan will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News.

“This case is about the identity of the borrower,” said Matthew Collette, a lawyer for the government, in oral arguments yesterday. “This is the equivalent of saying ‘I want all the loan applications that were submitted.’”

Bloomberg argued that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

‘Right to Know’

“The question is at what point does the government get so involved in the life of the institution that the public has a right to know?” said Charles Davis, executive director of the National Freedom of Information Coalition at the University of Missouri in Columbia. Davis isn’t involved in the lawsuit.

The ruling by the three-judge appeals panel may not come for months and is unlikely to be the final word. The loser may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court, said Anne Weismann, chief lawyer for Citizens for Responsibility and Ethics, a Washington advocacy group that supports Bloomberg’s lawsuit.

New York-based Bloomberg, majority-owned by Mayor Michael Bloomberg, sued in November 2008 after the Fed refused to name the firms it lent to or disclose the amounts or assets used as collateral under its lending programs. Most were put in place in response to the deepest financial crisis since the Great Depression.

“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Thomas Golden, an attorney for the company with Willkie Farr & Gallagher LLP, wrote in court filings. He said the Fed may be trying “to draw out the proceedings long enough so that the information Bloomberg seeks is no longer of interest.”

FOIA Case

The lawsuit, brought under the U.S. Freedom of Information Act, or FOIA, came as President Barack Obama criticized the previous administration’s handling of the $700 billion Troubled Asset Relief Program passed by Congress in October 2008. Obama has said funds were spent by the administration of former President George W. Bush with little accountability or transparency.

FOIA requires federal agencies to make government documents available to the press and public.

In arguments yesterday, Golden disputed the Fed’s contention that it doesn’t have to reveal the information because it hasn’t since its inception.

“The rules changed since 1913 with FOIA’s enactment,” he said.

Much of the debate centered on the potential harm to banks if it was revealed that they borrowed from the Fed’s so-called discount window. Collette, the government lawyer, said banks don’t do that unless they have liquidity problems.

Discount Window

Yvonne Mizusawa, a lawyer for the Fed, said that if banks stopped using the discount window because of a perceived stigma, it may affect the Fed’s ability to set monetary policy.

“This would make it much more difficult to control short- term interest rates,” Mizusawa said, citing an expert for the central bank. “The stigma results from the fact that the Federal Reserve is a backup source of liquidity.”

Golden denied that revealing the loan information will hurt banks. He said that the central bank and the Clearing House Association LLC, an industry-owned group that joined the Fed in its bid to overturn the lower court order, came up with only two examples of meltdown-related bank runs: Citigroup Inc.’s offices in Asia and Northern Rock in the U.K.

‘Wasn’t a Run’

“It’s interesting that there wasn’t a run in the U.S.,” he said. “The board has the burden at all times to prove that that competitive injury would result.”

During yesterday’s hearing, the appeals court judges asked about the “staleness” of the information Bloomberg seeks. Golden said the information would concern banks that got help from the Fed from about November 2007 to May 2008.

“This court has nothing in the record to say whether this information is stale now or not,” said Robert J. Giuffra Jr., a lawyer for the Clearing House at Sullivan & Cromwell LLP in New York. “Banks will not use the discount window if they know the information will be available in, say, 20 days.”

The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.

Loan Records

In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said loan records are covered by FOIA and rejected the Fed’s claim that their disclosure might harm banks and shareholders. An exception to the statute that protects trade secrets and privileged or confidential financial data didn’t apply because there’s no proof banks would suffer, she said.

In its appeal, the Board of Governors of the Federal Reserve System argued that disclosure of “highly sensitive” documents, including 231 pages of daily lending reports, threatens to stigmatize lenders and cause them “severe and irreparable competitive injury.”

Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets, Davis said. Laws governing such disclosures may be due for a change, he said, following the far-reaching U.S. bailout.

“If you are in need of a bailout and turn to the federal government and say, ‘help,’ with that comes some requirements in terms of transparency,” Davis said.

Joined in Bid

In court papers, New York-based Clearing House, which processes payments between banks, assailed the judge’s decision for what it said were legal errors, such as applying the wrong standard in weighing the exception to FOIA.

The group includes ABN Amro Bank NV, a unit of Royal Bank of Scotland Plc, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., US Bancorp and Wells Fargo & Co.

More than a dozen other groups or companies filed amicus, or friend-of-the-court, briefs, including the American Society of News Editors and individual news organizations.

The judge postponed the application of her ruling to allow the appeals court to consider the case.

Also yesterday, the same appeals panel heard arguments in a lawsuit brought by News Corp. unit Fox News Network seeking similar documents. U.S. District Judge Alvin Hellerstein in New York sided with the Fed in that case and refused to order the agency to release the documents.

“The press is looking for facts so that the public can make informed decisions,” Steven Mintz, a lawyer for Fox at Mintz & Gold LLP in New York, told the panel.

Giuffra, the lawyer for the Clearing House, told the judges that he knows of no other central bank that discloses the information the media companies are seeking.

“Very few countries around the world have a Freedom of Information Act,” Dennis Jacobs, chief judge of the appeals court, responded.

The other two judges on the panel were Pierre Leval and Peter Hall.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

To contact the reporters on this story: Thom Weidlich in the U.S. Court of Appeals for the Second Circuit in Manhattan at tweidlich@bloomberg.net; David Glovin in U.S. District Court for the Southern District of New York at dglovin@bloomberg.net.

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India’s Industrial Production Rises Most in 25 Months

By Kartik Goyal

Jan. 12 (Bloomberg) -- India’s industrial production grew at the fastest pace in 25 months in November, strengthening the case for the central bank to raise interest rates in the first half of this year.

Output at factories, utilities and mines rose 11.7 percent from a year earlier after gaining 10.3 percent in October, the statistics agency said in New Delhi today. The gain exceeded the median estimate of 10 percent in a Bloomberg News survey of 25 economists.

The acceleration of India’s economy, Asia’s third-largest, parallels a rebound in China that may also see policy makers there boost borrowing costs in the coming months. India’s biggest stock-market advance in 18 years, along with fiscal and monetary measures, have stoked demand for cars made by Maruti Suzuki India Ltd. and plasma screens from LG Electronics Inc.

“The pace of growth is much stronger than anticipated and clearly indicates that consumption is in a self-propelling mode,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. “And with inflation surging, the probability of an increase in the cash reserve ratio in the central bank’s Jan. 29 policy statement is now very high.”

India’s bonds fell after the report. The yield on the 6.35 percent note due in January 2020 climbed to the highest level in almost two months, rising by five basis points to 7.71 percent as of 1:05 p.m. The Bombay Stock Exchange’s Sensitive Index declined 0.51 percent at 2:11 p.m., after rising 0.4 percent earlier, on concern a faster recovery will prompt the central bank to raise rates.

Stimulus Measures

Economies are recovering across Asia after the region’s policy makers unveiled about $1 trillion in stimulus measures and cut rates to spur growth. China’s industrial production rose 19.2 percent in November and its exports climbed 17.7 percent in December.

Recent data show growth is gaining traction in India as well, with manufacturing rising at the fastest pace in seven months in December, according to the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics. Exports surged to a 15-month high in December after rising 18.2 percent in November, the first increase in 14 months.

RBI Governor Duvvuri Subbarao “should begin monetary action by shrinking the excess liquidity in the local money markets and then move to increasing policy rates around March and April,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. The central bank “will be concerned about the excess liquidity and second-order inflationary effects of high food inflation.”

Food Prices

India’s benchmark wholesale-price inflation rate rose to 4.78 percent in November, more than three times October’s 1.34 percent. Wholesale food prices soared 18.22 percent in the week to Dec. 26 from a year earlier, near the most in 11 years. The government is next due to release food inflation data on Thursday.

“This release, together with the likelihood of a strong December inflation number on Thursday, seals India’s near-term interest rate fate,” said Robert Prior-Wandesforde, Singapore- based senior Asia economist at HSBC Holdings Plc. He expects the RBI to start increasing its key policy rates in April after raising lenders’ reserve requirements at this month’s meeting.

Subbarao slashed the cash reserve ratio by 400 basis points to 5 percent between October 2008 and January 2009 to shield the economy from the global recession. The central bank has left its reverse repurchase rate and repurchase rate unchanged since April, after respective cuts of 2.75 and 4.25 percentage points.

Fridges, TVs

By comparison, China’s one-year lending rate is at a five- year low of 5.31 percent and its one-year deposit rate is 2.25 percent.

Manufacturing output increased 12.7 percent in November from a year earlier, accelerating from an 11.1 percent gain in October, today’s report showed. Mining grew 10 percent, compared with 9 percent in the previous month and electricity rose 3.3 percent from 4.7 percent. Production of consumer durables such as refrigerators and televisions surged 37.3 percent in November, compared with a 20.2 percent gain.

Prime Minister Manmohan Singh last year cut taxes on consumer products, increased spending on roads and utilities, raised salaries for government workers and waived farm loans.

The central bank injected about $130 billion into India’s banking system by reducing interest rates and lowering lenders’ reserve requirements. That helped the $1.2 trillion economy to grow 7.9 percent in the three months ended Sept. 30, the most in 1 1/2 years.

Surpassing China

Faster growth has attracted overseas inflows into stocks, taking the Sensitive Index to the highest in 18 years in 2009. The rupee gained 4.8 percent.

India’s growth may quicken to 10 percent in a “couple of years,” exceeding that of China as early as 2014, Kaushik Basu, chief economic adviser to the South Asian nation’s finance ministry, said Jan. 4. The government has no plans to “suddenly” withdraw last year’s stimulus, he said.

The strength of the Indian economy is enticing foreign companies to expand and set up operations. Toyota Motor Corp., Volkswagen AG and other carmakers introduced 10 new models at the Delhi Auto show last week. Passenger car sales hit 1.43 million units in 2009, the most in three years, according to the Society of Indian Automobile Manufacturers on Jan. 8.

ArcelorMittal, the world’s biggest producer of steel, and Posco, the sixth-biggest maker of the alloy, plan to set up new steel mills in southern India. Posco will invest 323 billion rupees ($7 billion) on a mill in Karnataka state, the regional government said Jan. 7. ArcelorMittal plans to sign an accord in June for a 300 billion-rupee project in the same state.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

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BOE Should Pause Bond Plan as U.K. Recovery Looms, BCC Says

By Scott Hamilton and David Tweed

Jan. 12 (Bloomberg) -- The Bank of England should pause its bond-purchase plan after completing the current 200 billion- pound ($323 billion) tranche as the economy shifts toward a recovery, the British Chambers of Commerce said.

“The Bank of England has done as much as it can at this stage,” David Frost, director general of the BCC, told Bloomberg Television in London yesterday. “If it emerges in the spring and towards the middle of the year that the economy is not sustaining itself, then we have to come back and look to see where we need additional money pumped in.”

Confidence about sales at manufacturers and services companies rose in the fourth quarter to the highest level since the first three months of 2008, before the onset of the recession, the BCC said in a survey released today. The data shows the economy is on the brink of exiting the slump, the lobby group said.

The Bank of England last week pledged to complete its bond program as policy makers gauged the strength of the economic recovery against a backdrop of political squabbles on how to cut the nation’s budget deficit. Prime Minister Gordon Brown yesterday told his ruling Labour Party lawmakers that they can still win this year’s general election.

The index for manufacturing domestic sales rose to 3 from minus 10 in the previous three months, and the index for export sales climbed to 20 from zero, the BCC’s report showed.

For service companies, the domestic sales index slipped 1 point to minus 2, while the exports index increased to 8 from 6, the BCC said. The survey covered more than 5,400 companies.

‘Primary Concern’

“There was an improvement in the economy, but it’s not at the rate that we saw in the third quarter,” Frost said. “There was a sharp improvement in the third quarter, but it’s not been maintained. That’s got to be a primary concern.”

The lobby group, which has supported policy makers’ moves to expand the bank’s asset-purchase program to its current size, said the plan hasn’t done enough to aid bank lending, which is now a key obstacle to sustaining the recovery.

Economic reports paint a mixed picture of the U.K.’s route out of recession. Consumer confidence fell in December by the most in more than a year as expectations for the economy deteriorated, Nationwide Building Society said Jan. 6. Manufacturing activity increased to the strongest in more than two years, and mortgage approvals rose to the highest since March 2008, separate surveys showed on Jan. 4.

Bank of England policy makers last week kept the benchmark interest rate at a record low of 0.5 percent to nurture the recovery. They will next assess the effectiveness of their monetary policy in February, when officials produce quarterly economic forecasts.

“I don’t expect them to put up interest rates any time soon,” David Kern, chief economist at the BCC said in an interview. “They will not do anything until September. My focus is that by the end of the year, they’ll be 1 percent. They’ll be 2.5 percent by the end of 2011.”

To contact the reporters on this story: Scott Hamilton in London at shamilton8@bloomberg.net; David Tweed in London on jtweed@bloomberg.net.

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Pound Falls Versus Dollar as U.K. Housing Market Loses Momentum

By Anna Rascouet

Jan. 12 (Bloomberg) -- The pound fell against the dollar after a report showed Britain’s property market unexpectedly lost momentum in December.

The pound also traded near its lowest level in two weeks against the euro after the Royal Institution of Chartered Surveyors said the number of real-estate agents who reported increases in house prices exceeded those reporting declines by 30 percentage points, down from 35 in November. Economists predicted 37 points, according to the median of 14 forecasts in a Bloomberg News survey.

“The pound opened on the soft side this morning,” said Jeremy Stretch, a senior currency strategist at Rabobank International. “People are wary. The housing data is looking soft as well.”

Sterling fell to $1.6093 as of 8:42 a.m. in London, from $1.6115 yesterday. It was little changed at 90.02 pence per euro, down from 90.06.

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

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Euro May Extend Gains to One-Month High: Technical Analysis

By Ron Harui

Jan. 12 (Bloomberg) -- The euro may extend gains to a one- month high of $1.4750 after it rose above so-called resistance at $1.4485, said Andrew Chaveriat, a technical analyst in New York at BNP Paribas SA, citing trading patterns.

Resistance at $1.4485 is the top of the range in which the euro traded between Dec. 22 and Jan. 8, Chaveriat said. The target of $1.4750 was calculated by adding the difference between that top and the $1.4220 bottom of the range to the $1.4485 level, according to Chaveriat.

“The euro has decisively broken out of its recent range, targeting a rise toward the range breakout target” of $1.4750, Chaveriat said in an e-mail to Bloomberg News yesterday. “It’ll be interesting to see how high this rebound goes this week.”

Europe’s single currency traded at $1.4491 as of 11 a.m. in Tokyo from $1.4513 in New York yesterday, when it climbed to $1.4557, the highest level since Dec. 16. The $1.4750 level was last seen on Dec. 11.

The euro’s weekly momentum indicator is also on the “cusp of a bullish crossover” rising from last week’s oversold reading, indicating scope to fuel a “multi-week” rebound, said Chaveriat. “This could see a larger rebound toward $1.4801 and, if crossed, $1.4950.”

The next so-called resistance levels are at $1.4570 and $1.4680, which represent 38.2 percent and 50 percent retracements, respectively, of the euro’s decline from the November high to the December low, Chaveriat said, referring to a series of numbers known as the Fibonacci sequence. Resistance is where there may be selling orders.

“A rise above $1.4680 would suggest we’re retracing the entire November-December decline -- opening the 61.8 percent retracement of that selloff at $1.4790 -- not far above $1.4750,” he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

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

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Mexico Seeks Sale of More Bonds in Japan, Europe, Ministry Says

By Jose Enrique Arrioja and Verónica Espinosa Navarro

Jan. 12 (Bloomberg) -- Mexico will look for opportunities in Japan and Europe to sell bonds as the country moves to refinance $2.4 billion debt maturing this year, said Gerardo Rodriguez, the head of the Finance Ministry’s Public Credit Department.

Mexico yesterday sold $1 billion of bonds in the country’s first international offering since its credit rating was cut by Standard & Poor’s and Fitch Ratings. The bonds yield 5.25 percent, or about 1.42 percentage points more than U.S. Treasuries, the Finance Ministry said in a statement.

“We continue to explore Japan and Europe to issue more bonds according to our annual financing plan,” Rodriguez said in a telephone interview last night in Mexico City. After selling $1 billion in 10-year bonds, Mexico will need to allocate an additional $1.4 billion to refinance debt that expires this year, Rodriguez said.

“We has been exploring other markets, and continue exploring Japan, but without the help of the Japan Bank for International Cooperation,” Rodriguez said, declining to offer an estimate of the new issuance.

Mexico priced 150 billion yen ($1.7 billion) of 10-year Samurai Bond on December 10 to yield 0.8 percentage point more than the yen swap rate. The notes are 95 percent-backed by the state-owned Japan Bank for International Cooperation.

Attractive Rate

The 10-year bonds sold yesterday pay a 5.125 percent coupon and were allocated among 90 international investors, mainly in the United States, Europe and Latin America, the ministry said.

“We are satisfied with the transaction. We managed to issue a 10-year new benchmark at an attractive rate that guarantees liquidity to the markets,” Rodriguez said.

Standard & Poor’s lowered Mexico’s rating one level to BBB, the second-lowest investment-grade rating, on Dec. 14, three weeks after Fitch Ratings made the same move, citing a swelling budget deficit. Mexico is the first Latin American country to sell dollar bonds overseas this year as rising investor demand for higher-yielding assets drives down borrowing costs.

“Market conditions are good and there’s a lot of liquidity,” said yesterday Gabriel Casillas, chief Mexico economist at JPMorgan Chase & Co. in Mexico City.

The extra yield investors demand to own Mexican bonds over U.S. Treasuries narrowed to 1.55 percentage points from 2.84 percentage points July 8, according to the JPMorgan’s EMBI+ index.

Poland, Turkey

Mexico’s bond sale is part of a push by emerging-market countries to sell debt in the international markets before central banks around the world withdraw stimulus measures that helped to spur demand for emerging-market assets.

Poland raised yesterday 3 billion euros ($4.3 billion) in its biggest offering of euro-denominated bonds in four years. Turkey and the Philippines also tapped international investors this month and Indonesia may sell bonds as soon as this week, according to a person familiar with the transaction.

Citigroup Inc. and Bank of America Corp. arranged Mexico’s sale, the government said in a filing with the Securities and Exchange Commission.

Mexico sold $1.75 billion of 2019 and 2040 bonds in international markets in September, two months before its credit rating was cut as tumbling oil output and the worst recession since the 1930s swelled the budget deficit. The government forecasts its budget gap will reach the equivalent of 2.8 percent of gross domestic product. That would be the country’s widest deficit since 1989, according to JPMorgan.

To contact the reporters on this story: Jose Enrique Arrioja in Mexico City at jarrioja@bloomberg.net; Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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Dollar, Yen Climb as Alcoa Earnings Fuel Higher Risk Aversion

By Bo Nielsen

Jan. 12 (Bloomberg) -- The dollar and the yen rose against higher-yielding currencies including the Norwegian krone and South Africa’s rand after stock markets declined and earnings from Alcoa Inc. missed analysts’ estimates.

Japan’s yen advanced against all of the 16 most-traded currencies tracked by Bloomberg as the MSCI World Index snapped two days of gains. Australia’s dollar retreated from near a seven-week high versus the U.S. currency after a report showed home-loan approvals fell more than economists predicted.

“Alcoa rattled some people and the dollar and the yen are still doing good when stock markets fall,” said John Hydeskov, a senior analyst at Danske Bank A/S, Denmark’s biggest bank.

The dollar fell 0.4 percent to 91.77 yen as of 10:05 a.m. in London. It strengthened to $1.4497 per euro, from $1.4513 in New York late yesterday. The yen appreciated 0.5 percent to 132.99 per euro from 133.64.

The dollar rose 0.5 percent to 5.6388 kroner and 0.7 percent to 7.4263 rand. The yen gained 0.7 percent to 16.2981 per krone and 0.9 percent to 12.36 per rand.

Alcoa, the largest U.S. aluminum maker, said fourth-quarter profit excluding certain items was 1 cent a share, trailing analysts’ average estimate for earnings of 6 cents. The MSCI Index fell 0.2 percent, Europe’s Dow Jones Stoxx 600 Index dropped 0.5 percent, while futures on the Standard & Poor’s 500 Stock Index slipped 0.4 percent.

‘Lose Momentum’

“If we lose momentum in stocks it could lead to a correction and that will help the dollar and the yen,” said Antje Praefcke, a currency analyst at Commerzbank AG in Frankfurt. “People are following the stock markets closely.”

Benchmark rates in Norway of 1.75 percent and 7 percent in South Africa encourage investors to buy assets denominated in their currencies. Rates of between zero to 0.25 percent in the U.S. and of 0.1 percent in Japan fuel lending in the dollar and the yen.

The dollar declined versus the yen as the yield advantage on two-year U.S. notes versus comparable Japanese bonds extended two days of declines in the wake of the worse-than-expected payrolls report on Jan. 8.

The extra yield on two-year Treasuries relative to Japanese notes narrowed to 76 basis points today, the least since Dec. 23. as traders scaled back wagers that the Fed will increase its target rate for overnight loans amid signs the economic recovery may be uneven.

Sources of Weakness

U.S. employers cut 85,000 jobs in December after adding 4,000 the previous month, the Labor Department said on Jan. 8.

Gains in Australia’s dollar were tempered after the statistics bureau said the number of loans granted to build or buy houses and apartments dropped 5.6 percent in November from October, when they declined 1.9 percent. The median estimate of economists surveyed by Bloomberg was for a 0.5 percent decline.

“The major source of weakness is the first-home buyers segment because they’re more interest-rate sensitive,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “These are good levels to get in as we see the Aussie going up to 98 cents in about six months.”

Australia’s currency traded at 92.66 U.S. cents from 92.96 cents, after rising to 93.26 cents yesterday, the strongest level since Nov. 18.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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Rubber Advances to 16-Month High as Chinese Demand May Expand

By Aya Takada

Jan. 12 (Bloomberg) -- Rubber advanced to the highest level in 16 months as rising car sales in China, the world’s largest automobile consumer, stoked speculation that demand for the raw material used in tires will keep growing.

Futures in Tokyo gained as much as 3 percent to the highest level since Sept. 12, 2008. China supplanted the U.S. as the world’s largest auto market after its 2009 vehicle sales jumped 46 percent, ending more than a century of American dominance, data from the China Association of Automobile Manufacturers showed yesterday.

“Chinese rubber demand will keep growing as car sales in the country are forecast to rise further to around 15 million units this year,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone. “Rubber producers may fail to catch up with rising demand.”

Rubber for June delivery rose as much as 8.7 yen to 300.4 yen a kilogram ($3,261 a metric ton) on the Tokyo Commodity Exchange before settling at 299.9 yen. Prices extended last week’s 5.7 percent rally, the biggest increase since the week ended Dec. 18. The market was closed yesterday for a public holiday.

China’s sales of passenger cars, buses and trucks rose to 13.6 million last year, the fastest pace in at least 10 years, according to the China Association of Automobile Manufacturers. In the U.S., sales slumped 21 percent to 10.4 million, the fewest since 1982, according to Autodata Corp.

China’s vehicle sales have surged since 1999 as economic growth averaging more than 9 percent a year has helped automakers including General Motors Co. and Volkswagen AG compensate for slumping demand in the U.S. and Europe. The market will likely remain the world’s largest, according to Booz & Co., which advises automakers.

Thai Shippers

Shippers in Thailand, the world’s largest exporter, have raised offers for RSS-3 grade rubber for February-March shipment to $3.05 a kilogram from $2.96-$3.00 on Jan. 8, Shigemoto said. The increase reflected a rally in the futures market, he added.

Rubber output from Thailand, the world’s largest producer, may increase as much as 5 percent this year, while exports remain level amid stronger competition, according to forecasts from the Thai Rubber Association.

Output is estimated at 3 million metric tons in 2010, Luckchai Kittipol, the association’s president, said in a Web site statement. Still, exports may be steady at about 2.7 million tons, Piyaporn Saelim, the association’s manager, said yesterday from the southern province of Songkhla.

Rubber for May delivery on the Shanghai Futures Exchange rose as much as 1.5 percent to 26,100 yuan ($3,823) a ton before settling at 25,890 yuan. The contract rose yesterday to 26,170 yuan, the highest level since July 2008.

Natural-rubber stockpiles monitored by the Shanghai exchange increased 1,785 tons to 146,333 tons, the bourse said Jan. 8. It was the highest level since November 2004.

Inventories may increase further as buyers in China tend to step up raw-material purchases before the new year holiday, Shigemoto at JSC said. China’s Lunar New Year break will start Feb. 14 and last for a week.

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

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Platinum Rises on Investment, Industrial Demand; Gold Is Steady

By Nicholas Larkin and Kim Kyoungwha

Jan. 12 (Bloomberg) -- Platinum and palladium climbed to the highest prices in at least 17 months in London on speculation investment and industrial demand will increase. Gold was little changed near a one-month high.

Platinum futures headed for the longest rally in more than two years after the introduction of exchange-traded funds linked to platinum and palladium in the U.S. and as data showed China replaced the U.S. as the world’s largest auto market. Automakers account for about half of platinum consumption.

“If you have new ETFs offered in a region it is positive” and Americans “have already been strong buyers of gold ETFs,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. Higher prices are also “related to figures from the car industry.”

Platinum for immediate delivery rose as much as 2.3 percent to $1,627.38 an ounce, the highest price since August 2008, and traded at $1,616.63 at 10:08 a.m. local time. Palladium added 0.4 percent to $435.80 after reaching $443.38, the highest price in almost 18 months. Platinum futures on the New York Mercantile Exchange’s Comex division rose 1.6 percent, an eighth consecutive increase.

Gold for immediate delivery added $2.35, or 0.2 percent, to $1,154.20 an ounce. Gold for February delivery rose 0.2 percent to $1,154.20 an ounce on Comex.

“Gold really depends on how the dollar behaves,” Peter Tse, head of precious metals at Bank of Nova Scotia in Hong Kong, said today. “Gold still lacks momentum to go anywhere, closely following the track of the U.S. dollar.”

Inflation Threat

The U.S. Dollar Index, a gauge of the U.S. currency versus six major trading partners, yesterday fell to the lowest level since Dec. 16 and was up 0.1 percent today. Gold rose 24 percent last year as investors sought to protect their wealth against a declining dollar and inflation threat.

China’s sales of passenger cars, buses and trucks rose 46 percent to 13.6 million last year, the fastest pace in at least 10 years, the China Association of Automobile Manufacturers said yesterday. In the U.S., sales slumped 21 percent to 10.4 million, the fewest since 1982, according to Autodata Corp.

“Platinum group metals are a necessary component in construction of catalytic converters,” said James Steel, an analyst at HSBC Securities. “The prospect of a continued recovery in global auto demand this year is positive for platinum group metal prices.”

‘Significant Investor Interest’

The ETFS Platinum Trust and ETFS Palladium Trust started trading on the NYSE Arca stock exchange on Jan. 8, Bloomberg data show. The funds are backed by physical metal, according to notices published on the Web site of ETF Securities Ltd. The introduction of funds linked to the metals is expected to encourage “significant investor interest,” according to Standard Chartered Plc’s metals analyst Dan Smith.

Silver for immediate delivery in London added 0.5 percent to $18.65 an ounce. Ruthenium, used mostly for coating computer hard disks, yesterday jumped to the highest price since Dec. 11. It was unchanged at $170 an ounce today, according to prices from Johnson Matthey Plc on Bloomberg.

Platinum will average $1,650 an ounce this year, 18 percent more than a previous estimate, Deutsche Bank AG said in a report dated yesterday. The bank raised its palladium forecast 38 percent to $444 an ounce and increased its rhodium estimate 37 percent to $2,725 an ounce.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Kyoungwha Kim in Singapore at Kkim19@bloomberg.net.

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Most Asian Stocks Rise on China Auto Sales, Infosys Earnings

By Shani Raja

Jan. 12 (Bloomberg) -- Most Asian stocks gained as Chinese auto sales and better-than-estimated profit at Infosys Technologies Ltd. fueled optimism that regional growth will outpace the rest of the world.

SAIC Motor Corp. climbed 3.5 percent in Shanghai, after the biggest jump in Chinese auto sales in at least 10 years. Infosys, India’s No. 2 software exporter, gained 4 percent. Industrial & Commercial Bank of China Ltd. lost 2.2 percent in Hong Kong as the country moved to tighten monetary policy. Alumina Ltd. sank 4.9 percent in Sydney after venture partner Alcoa Inc.’s earnings trailed estimates.

Seven stocks advanced for every six that declined on the MSCI Asia Pacific Index, which added 0.3 percent to 126.04 as of 7:14 p.m. in Tokyo. The gauge has surged 42 percent in the past 12 months amid signs of recovery in the region’s economies, led by China.

“China and India are undoubtedly becoming the engines of growth in Asia,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which oversees about $90 billion. “They are increasingly also becoming strong contributors to overall global growth.”

The Shanghai Composite Index gained 1.9 percent, after falling 1 percent earlier. Hong Kong’s Hang Seng Index lost 0.4 percent after China’s central bank sold one-year bills at a higher yield for the first time since August, fanning concern the government is moving to tighten liquidity.

Australia’s S&P/ASX 200 Index sank 1 percent as the statistics bureau reported home-loan approvals fell in November by the most in 18 months.

China Trade Data

The Topix Index added 1.4 percent today in Japan, where markets resumed trading after a holiday yesterday. Nippon Yusen K.K. climbed 2.4 percent after China trade figures released at the weekend boosted the earnings prospects for shipping lines.

Futures on the Standard & Poor’s 500 Index lost 0.4 percent. The gauge gained 0.2 percent yesterday as China’s customs bureau reported record imports, adding to evidence that the global economy is gathering pace.

Bets on faster Asian growth helped the region’s equities outperform the rest of the world last year. The MSCI Asia Pacific Index’s 2009 advance outpaced gains of 23 percent by the S&P 500 and 28 percent for Europe’s Dow Jones Stoxx 600 Index.

Stocks in the MSCI gauge are valued at 20 times estimated earnings, compared with 15 times for the S&P 500 and 13 times for the Stoxx 600.

IMF Forecasts

Dominique Strauss-Kahn, the International Monetary Fund’s managing director, said in September that China will play a larger role in shaping a sustainable recovery from the global recession. The IMF has forecast 9 percent growth for China next year and 6.5 percent for India. The Group of Seven economies are forecast by the IMF to expand just 1.25 percent in 2010.

SAIC Motor rose 3.5 percent to 23.16 yuan after the China Association of Automobile Manufacturers said yesterday that the nation’s sales of passenger cars, buses and trucks rose 46 percent to 13.6 million last year.

Chongqing Changan Automobile Co., the Chinese partner of Ford Motor Co. and Mazda Motor Corp., climbed 2 percent to 13.49 yuan. Mazda gained 2.6 percent to 237 yen in Tokyo.

Nippon Yusen advanced 2.4 percent to 339 yen in its first day of trading since China’s customs bureau said on Jan. 10 that exports surged in December and imports rose to a record high. Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping line, gained 2.5 percent to 580 yen.

Infosys surged 4 percent to 2,587.9 rupees. The company reported profit that beat analysts’ estimates and reversed an earlier forecast for a drop in annual sales.

‘Jittery Days’

“We think economic fundamentals are likely to steadily improve,” said Angus Gluskie, who oversees $300 million at White Funds Management Pty in Sydney. “While we may have some jittery days, we suspect that investors will progressively gain comfort from other profit results and economic data releases.”

Industrial & Commercial Bank sank 2.2 percent to HK$6.15 on concern lending growth will slow. China Construction Bank Corp. lost 2.1 percent to HK$6.42.

The People’s Bank of China sold one-year bills at a yield of 1.84 percent in open-market operations, the first increase since August, according to traders at ICBC and BOC International Holdings Ltd.

The Shanghai Composite lost 2.5 percent last week as the PBOC began to roll back its monetary stimulus by offering three- month bills at a higher rate.

Alcoa Profit

“Policies are the biggest risk facing the market now,” said Wei Wei, an analyst at West China Securities Co. in Shanghai. “Tighter liquidity has caused worries among investors that growth will slow a bit this year and that the flow of fresh funds into equities will dry up.”

Alumina shares slumped 4.9 percent to A$1.96. The company owns 40 percent of a venture with Alcoa that is the world’s largest producer of alumina.

Alcoa, the largest U.S. aluminum producer, reported fourth- quarter profit that trailed analysts’ estimates as the company faced higher energy and currency costs. The company’s shares fell 5.4 percent in after-hours U.S. trading.

Intel Corp. and JPMorgan Chase & Co. are also due to report earnings this week. Combined profit for S&P 500 companies surged 62 percent during the fourth quarter in the first increase since 2007, a Bloomberg analyst survey showed.

BHP Billiton, Australia’s largest oil producer, fell 2.2 percent to A$43.49, as crude-oil futures in New York declined 0.3 percent to $82.26, adding to yesterday’s 0.3 percent drop.

Woodside Petroleum Ltd., the nation’s second-largest oil and gas producer, fell 1.3 percent to A$48.63. Cnooc Ltd., China’s largest offshore oil producer, sank 0.5 percent to HK$13.18 in Hong Kong.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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French Stocks: Accor, Air France, Alstom, Lagardere, Pernod

By Julie Cruz

Jan. 12 (Bloomberg) -- France’s CAC 40 Index lost 18.09, or 0.5 percent, to 4,025.00 as of 10:14 a.m. in Paris, on course for the biggest decline this year. The SBF 120 Index declined 13.45, or 0.5 percent, to 2,929.03.

The following shares rose or fell in Paris. Stock symbols are in parentheses.

Accor SA (AC FP) dropped 62 cents, or 1.7 percent, to 36.97 euros, on course for the lowest close in more than a month. Europe’s biggest hotel group said the devaluation of the Venezuelan bolivar will cut 2009 net income before non- recurring items by around 15 million euros ($20 million).

Air France-KLM Group (AF FP) fell 20.5 cents, or 1.7 percent, to 12.15 euros, ending the longest winning streak since November 2008. Japan Airlines Corp., Asia’s biggest carrier, plunged 45 percent to a record low on speculation it will file for the nation’s sixth-largest bankruptcy.

Alstom SA (ALO FP) slumped 1.55 euros, or 2.9 percent, to 52.14 euros, ending six days of gains. The French producer of high-speed trains and energy-generation equipment, was downgraded to “sell” from “hold” at Societe Generale SA, which cited “rising competition from China.”

Cafom SA (CAFO FP) jumped 1.09 euros, or 11 percent, to 10.99 euros, the biggest intraday gain since August. The retailer of home furnishings in France’s Caribbean and Indian Ocean territories said first-half net income rose to 2.94 million euros from 1.44 million euros.

Cegedim SA (CGM FP) added 89 cents, or 1.5 percent, to 59.41 euros. The company that supplies sales-tracking software for drugmakers including Pfizer Inc. said it has bought SK&A Information Services Inc.

Lagardere SCA (MMB FP) lost 29.5 cents, or 1.1 percent, to 27.85 euros, extending yesterday’s decline. France’s largest publisher was cut to “underweight” from “equal-weight” at Morgan Stanley.

Octo Technology SA (ALOCT FP) climbed 5 cents, or 1 percent, to 5.03 euros, for a third day of gains. The computer- consulting company said revenue last year rose to 15.42 million euros from 12.86 million euros.

Pernod Ricard SA (RI FP) rose 61 cents, or 1 percent, to 59.11 euros, the first advance in four days. The drinks company was raised to “neutral” from “underperform” at Credit Suisse Group AG.

Sechilienne-Sidec SA (SECH FP) slipped 25.5 cents, or 1 percent, to 25.62 euros, on course for the lowest close since July. The alternative energy producer was cut to “reduce” from “add” at Oddo & Cie.

Synergie SA (SDG FP) rallied 48 cents, or 2.5 percent, to 19.50 euros as the temporary employment agency was raised to “add’ from “reduce” at Oddo.

Vivalis SA (VLS FP) gained 20 cents, or 2 percent, to 10.18 euros, extending the longest winning streak since November. The biopharmaceutical company bought Humalys for 10.4 million euros. Vivalis will also pay a maximum of 15 million euros for license payments.

Zodiac Aerospace (ZC FP) slumped 93.5 cents, or 3 percent, to 30.07 euros. The maker of aircraft seats and automotive components was cut to “reduce” from “buy” at Kepler Capital Markets.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

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