CPI, Empire Manufacturing, and Confidence, Busy Day for U.S. Markets!

Daily Forex Fundamentals | Written by ecPulse.com | Jan 15 10 12:54 GMT |

The U.S. economy continues to show more signs of improvement, where activity in the manufacturing, services, and housing sectors started to rebound, as the recovery seems to be undergoing indeed, however, the recovery will take some time before conditions are back to normal, while the outlook for inflation remains rather uncertain, and today markets will be focused on the CPI figures since it would provide further clues over the outlook for inflation. The U.S. Commerce Department will release today the consumer price index for the month of December, where CPI is expected to rise by 0.2% in December compared with the prior reported rise of 0.4% back in November, while compared with a year earlier, CPI is expected to rise by 2.8% up from the prior reported rise of 1.8%. Core CPI which excludes prices of food and energy is expected to rise by 0.1% in December following the prior reported flat estimate back in November, while compared with a year earlier, core CPI is expected to rise slightly to 1.8% from the prior reported estimate of 1.7%. Upside risks to inflation still hasn’t started to materialize, as the ongoing economic slack continues to weigh down on prices up to a certain extent, where elevated unemployment and tightened credit conditions are still expected to weigh down on economic growth over the upcoming period, and accordingly we should expect inflation to remain under control over the short run at least. However, over the long term the outlook for inflation remains highly uncertain, since the hefty amounts of liquidity that were pumped into the financial system in order to help promote growth and facilitate lending will eventually increase money supply, which means upside risks to inflation should rise. Also, the effect of rising energy prices will surely materialize by higher risks to inflation. The Federal Reserve Bank still expects core inflation to remain subdued over the next two years; however, it’s probably too early to tell whether inflation will remain below the 2% unspoken target set by the Feds, and we will probably see upside risks to inflation rising further as the recovery strengthens, where expectations now signal that the U.S. economy will continue to recover in 2010 before the economy can fulfill its long term growth potentials in 2011. Meanwhile, the NY Empire manufacturing index will be released today, where the index is expected to show that manufacturing activity continued to improve in January, as the index is expected to rise to 12.00 from the prior reported estimate of 2.55 reported for December. The manufacturing sector has been one of the first sectors to emerge from the recession, where the manufacturing sector expanded back in August 09 for the first time since the beginning of the recession. The manufacturing sector went back to the 1980s during this recession, as the slump in manufacturing activity was indeed the worst since the early 1980s, however, as the economy started to recover during the second half of 2009, the manufacturing sector started to show signs of stabilization, before manufacturing activity started to rise noticeably, however, we still expect the manufacturing sector to continue its recovery over the upcoming few months. Moreover, the industrial production index is expected to show that activity rose in December by 0.6% following the prior reported rise of 0.8%, while capacity utilization, a measure of how much resources are being used by factories, is expected to rise in December to 71.8% from the prior reported estimate of 71.3%. Capacity utilization is also considered an inflationary gauge, and rising activity means that inflationary pressures are building up, though the index is still rather low, but the fact that it has been rising over the past few months to reflect the recent developments in economic activity, which means that the recovery will surely increase upside risks to inflation as well. Finally, the University of Michigan will release its preliminary estimate for consumer confidence in the month of January, where consumer confidence is expected to rise to 74.0 from the prior reported estimate of 72.5, where improving economic conditions over the past few months has been reflected onto consumers, yet confidence remains somehow low, as it will take more time before conditions are back to normal. 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 15 10 10:52 GMT |

EUR/USD Current level-1.4396 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. With the recent break below 1.4450 support, there is a chance that a top is in place at 1.4580 and it can be the final of the prolonged consolidation above 1.4216. A clear break below 1.4260 will state, that the focus is set on the 1.3740 support from the daily frame. Intraday bias is negative with a resistance around 1.4450 and target at the 1.4312 dynamic support Resistance Support intraday intraweek intraday intraweek 1.4450 1.4499 1.4312 1.4170 1.4670 1.5146 1.4260 1.3740 USD/JPY Current level - 90.73 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 expected reversal is already a fact at 92.04 high, so the overall bias is negative for 88.90 target area. Intraday crucial level is 91.32. Take a look at the JPY crosses, as they could be more profitable, than the major itself Resistance Support intraday intraweek intraday intraweek 91.30 93.40 90.60 88.90 93.70 95.60 89.45 79.60 GBP/USD Current level- 1.6312 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. Current bias is still positive for 1.6410, but a reversal seems possible around that zone, so keep an eye on 1.6240 support, as a break below will signal, that a top is already in place. Resistance Support intraday intraweek intraday intraweek 1.6410 1.6410 1.6243 1.5706 --- 1.7042 1.6134 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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Euro-Region Strains May ‘Undermine’ Currency, Citigroup Says

By Daniel Tilles

Jan. 15 (Bloomberg) -- The euro may be hurt by fiscal turmoil within the 16-nation union, Citigroup Inc. said.

“The sharpening internal strains illustrate that the euro- zone is far from being an optimal currency union,” Michael Hart, a foreign-exchange strategist in London, wrote yesterday in a report. “These internal strains are independent of the external value of the euro but will in turn continue to undermine it.”

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

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Wall Street May Reduce Compensation Costs to Avoid More Outcry

By Michael J. Moore

Jan. 15 (Bloomberg) -- Wall Street firms, facing pressure from lawmakers and shareholders to rein in pay, may report smaller bonus pools because of lower fourth-quarter revenue and mounting public outrage, analysts say.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank may hand out $27.6 billion in bonuses, according to analysts’ estimates. While that’s 49 percent higher than a year ago and more than the previous high of $26.8 billion in 2007, it’s less than some analysts expected in October.

Banks have announced plans to pay more in stock and defer cash payments to satisfy regulators’ calls to tie pay to long- term performance. They may still face public anger over the size of bonus pools after the Troubled Asset Relief Program injected capital into the major financial institutions during the crisis. President Barack Obama yesterday called bank bonuses “obscene” as he proposed a levy on as many as 50 large financial firms to recoup all the U.S. bailout money.

“They know that everyone is looking at this stuff with a microscope, and I think they know what the reaction is going to be,” said David Schmidt, a senior consultant at James F. Reda & Associates LLC, a New York-based compensation firm. “The public perception is still going to be that it’s a lot of money.”

Analysts expect JPMorgan, the second-largest U.S. bank by assets, to post a 13 percent decline in net revenue from a record $30.1 billion in the third quarter. Goldman Sachs’s revenue may drop 21 percent, and Morgan Stanley’s may fall 8 percent, according to analysts’ estimates.

Goldman Sachs Compensation

The fall in compensation costs is expected to outpace the revenue decline at Goldman Sachs, which may pay the most of the three firms. Goldman Sachs, the most profitable securities firm in Wall Street history, probably cut compensation to 25 percent of revenue in the fourth quarter, after setting aside $16.7 billion, or 47 percent, through the first nine months, Credit Suisse Group AG analyst Howard Chen wrote in a note on Jan. 4.

That would bring full-year compensation to 43 percent of revenue, the lowest proportion since Goldman Sachs went public in 1999, Chen wrote.

Lloyd Blankfein, 55, and Jamie Dimon, 53, the chief executive officers of Goldman Sachs and JPMorgan, and John Mack, 65, chairman of Morgan Stanley, defended their firms’ pay practices in a Jan. 13 hearing of the Financial Crisis Inquiry Commission. They said making senior executives hold shares they receive as compensation aligns their interests with shareholders.

“If you’d look at the history of our compensation, the compensation always correlated with the results of the firm, as it did last year,” said Blankfein, who said he is required to hold 90 percent of his shares until retirement.

Morgan Stanley Bonuses

Morgan Stanley, the second-largest securities firm before becoming a bank last year, plans to defer at least 65 percent of year-end bonuses for its top 30 executives, a person familiar with the matter said last month. One-fifth of the deferred amount will be tied to Morgan Stanley’s performance, the person said.

Goldman Sachs said last month that its top 30 executives will get year-end bonuses in stock that they can’t sell for five years. The stock vests over three years and can be repossessed if the firm determines that the executive failed to adequately analyze or raise concern about risks.

JPMorgan said in a Dec. 14 statement that it gives a “significant share” of bonuses in stock, and that compensation is based on multi-year performance periods. Senior executives must hold 75 percent of all equity awards they are granted, the firm said.

Income Statement ‘Challenge’

Payment of bonuses in stock as opposed to cash lowers the expense firms have to record on their income statements because the cost often isn’t realized until the shares vest. That may boost earnings in the quarter and allow firms to avoid topping their previous record compensation amounts.

“The move to stock is going to give them a lower number in that compensation and benefits line,” Schmidt said. “Interpreting the income statement is going to be more of a challenge now.”

Goldman Sachs and Morgan Stanley’s new pay plans, which include more stock and longer vesting periods for many employees, reduce compensation expense for a new managing director by 10 percent to 15 percent, Brad Hintz, a Sanford C. Bernstein & Co. analyst, wrote in a Dec. 15 research note.

“While the immediate financial impact is positive, the organizational impact on some sectors of the business could be significant,” Hintz wrote. “Bankers may find working for a financial boutique more attractive on a risk-adjusted basis than staying with a large bank facing regulatory uncertainty, Capitol Hill intrigue and compensation ‘clawbacks.’”

Full-Year Compensation

Goldman Sachs is facing lawsuits from a pension fund and an individual investor over its bonus plans.

Kristin Lemkau, a JPMorgan spokeswoman, declined to comment. Morgan Stanley spokesman Mark Lake and Lucas van Praag, a spokesman for Goldman Sachs, didn’t return calls for comment.

Securities firms typically use slightly less than half of their revenue to pay salaries, benefits and bonuses, a percentage that is adjusted throughout the year. In the first nine months, Goldman Sachs, Morgan Stanley, and JPMorgan’s investment bank told shareholders that they planned $36.4 billion for compensation, up 27 percent from the same period a year earlier.

The three New York-based firms may set aside $46.1 billion for full-year compensation, according to estimates from five analysts, including Macquarie Group’s David Trone, Bank of America Corp.’s Guy Moszkowski and Sandler O’Neill’s Jeff Harte.

That’s up from $30.9 billion in 2008 and $44.7 billion in 2007. Year-end bonuses usually account for about 60 percent of compensation, New York-based pay consultant Options Group said in a report.

Bank of America in Charlotte, North Carolina, and New York- based Citigroup Inc. don’t break out compensation data for their investment-banking units. Bank of America plans to cut the cash component of investment bankers’ bonuses to about 15 percent, four people familiar with matter said this week.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net.

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Yen, Dollar Gain as China-Slowdown Concern Spurs Safety Demand

By Bo Nielsen and Yoshiaki Nohara

Jan. 15 (Bloomberg) -- The yen and the dollar rose on speculation a slowdown in Chinese bank lending will damp growth in the world’s third-biggest economy, boosting demand for the safety of the Japanese and U.S. currencies.

The yen strengthened against all 16 of its major counterparts this week as weaker-than-expected U.S. retail sales and concern Chinese banks are reducing property loans sapped appetite for higher-yielding assets. The euro fell for a second day against the dollar as Greece’s struggle to cut its budget deficit dented investor confidence in European assets.

“The world is looking for China to drive growth, so a tightening policy there is bad for risk,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. “The correlation between the yen and risk aversion is becoming tight again.”

The yen climbed to 130.84 per euro as of 10:01 a.m. in London from 132.25 in New York yesterday, after earlier rising to 130.49, the strongest level since Dec. 22. The dollar advanced to $1.4405 per euro from $1.4499. The yen traded at 90.81 per dollar from 91.21.

Chinese banks are now only interested in making loans for residential developments, the Guangzhou-based 21st Century Business Herald said on its Web site. The banks aren’t extending loans for luxury homes and commercial developments, the newspaper said, citing unidentified commercial bank officials.

China’s Slowdown

The People’s Bank of China this week unexpectedly said it will increase the proportion of deposits the nation’s lenders must set aside as reserves in an effort to rein in growth. China’s economy is overheating as asset bubbles and inflation pressures build, posing a “major risk” to global growth, the World Economic Forum said yesterday.

“China is beginning to show signs of tightening, which should lead to risk aversion,” said Yoshihiro Nomura, a Tokyo- based foreign-exchange team manager at Trust & Custody Services Bank Ltd. “Investors are sensitive to China’s news. I wouldn’t be surprised if the euro-yen were to drop further.”

Commodity-related currencies fell on concern a slowdown in China will curtail the nation’s demand for raw materials. The Australian dollar dropped 0.6 percent to 92.65 U.S. cents and slipped 0.7 percent to 84.42 yen. China is Australia’s biggest trading partner.

‘No Special Treatment’

The euro extended its weekly decline against the yen after European Central Bank President Jean-Claude Trichet said individual members of the currency region can’t expect “special treatment.”

“The sharpening internal strains illustrate that the euro zone is far from being an optimal currency union,” Michael Hart, a foreign-exchange strategist at Citigroup Inc.in London, wrote yesterday in a report. “These internal strains are independent of the external value of the euro but will in turn continue to undermine it.”

Trichet, speaking after the central bank kept its benchmark interest rate at 1 percent yesterday, said nations must take the steps needed to tackle “sharply rising” budget deficits or face higher borrowing costs. German Chancellor Angela Merkel said Greece’s mounting budget deficit risks hurting the euro, adding the currency faces a “very difficult phase.”

The dollar still headed for a second weekly loss against the yen and the euro as traders added to bets that the Federal Reserve will keep interest rates near zero to revive growth in the world’s biggest economy.

U.S. Reports

U.S. industrial production growth slowed to 0.6 percent in December from 0.8 percent the previous month, according to a Bloomberg News survey of economists before the report today.

Retail sales unexpectedly fell in December, the Commerce Department said yesterday. U.S. employers the same month eliminated 85,000 jobs, the Labor Department said on Jan. 8. The median estimate of 76 economists in a Bloomberg News survey was for no change.

“My worry is about whether we’re going to have a sustainable recovery,” World Bank chief economist Justin Lin said yesterday to the Council on Foreign Relations in Washington. “I think a second dip is a very likely scenario.”

Futures on the Chicago Board of Trade show a 28 percent chance the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, down from 49 percent odds a month ago.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Palm Oil Declines to Six-Week Low on Stockpiles, Soybean Crop

By Claire Leow

Jan. 15 (Bloomberg) -- Palm oil dropped to the lowest level in six weeks on prospects for a record world soybean harvest and as crude oil and soybean oil declined.

“The supply-demand outlook for palm doesn’t look good,” said Ryan Long, a futures trader at OSK Investment Bank Bhd. in Kuala Lumpur. “Outside factors like crude, soy do not seem to be helping.” There may be further losses next week, Long said.

The contract for March delivery dropped 1.7 percent to 2,487 ringgit ($745) a metric ton on the Malaysia Derivatives Exchange, the lowest close since Dec. 3. It has lost 5.3 percent this week, extending last week’s 1.4 percent drop.

The U.S. Department of Agriculture forecast a record U.S. soybean crop of 3.361 billion bushels on Jan. 12, 1.3 percent more than projected last month and 13 percent more than last year’s harvest. It predicted world soybean production in the year that began Oct. 1 at a record 253.4 million tons, up from 250.3 million forecast a month ago and 210.9 million last year.

“Grains and oilseed markets are still struggling to find a base post the bearish USDA report,” said Scott Briggs, an agricultural commodities strategist at Australia & New Zealand Banking Group Ltd., in a report today.

March-delivery soybeans on the Chicago Board of Trade fell as much as 0.5 percent, extending yesterday’s 0.9 percent loss. They traded 0.4 percent lower at $9.805 a bushel at 5:57 p.m. Singapore time. Soybean oil for March delivery lost 0.5 percent to 38.34 cents a pound at the same time, extending a 1.2 percent decline yesterday.

Palm oil stockpiles in Malaysia, the top producer after Indonesia, surged 16 percent in December to 2.24 million tons, the second-highest level on record. Exports slumped 20 percent to 1.21 million tons, the Palm Oil Board said Jan. 11.

Malaysian Exports

Exports from the country rose 9.8 percent to 669,758 tons in the first 15 days of January, preliminary estimates by independent market surveyor Intertek showed today. Still, the figure “was rumored at 680,000 yesterday,” Long said.

February-delivery crude oil dropped 0.4 percent to $79.07 a barrel, its fifth day of decline, at 5:03 p.m. Singapore time.

China may be oversupplied with soybeans in the first quarter as imports are expected to be about 4.5 million tons in January, a survey by the China National Grain & Oils Information Center said today.

In China, soybeans for September delivery in Dalian dropped 0.1 percent to 3,915 yuan ($574), down 1.7 percent for the week. Soybean oil lost 0.7 percent to 7,498 yuan, down 3.2 percent for the week. Palm oil lost 0.7 percent to 6,842 yuan, a drop of 2.8 percent for the week.

India surpassed China last year as the world’s biggest buyer of palm oil, data from Mumbai-based Solvent Extractors’ Association showed this week.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

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Oil Falls for a Fifth Day on Dollar Strength, Rising Supplies

By Rachel Graham and Grant Smith

Jan. 15 (Bloomberg) -- Crude oil fell for a fifth day, its longest losing streak in a month, as the dollar gained against the euro, curbing demand for commodities as a currency hedge.

Oil is heading for its first weekly decline in five weeks after a U.S. government report showed supplies of crude and fuels increased, leaving the nation’s stockpiles of distillates like heating oil 18 percent higher than normal. The International Energy Agency kept its forecast for 2010 global oil demand unchanged at 86.3 million barrels a day in a monthly report today.

“If the economy is improving there is an expectation oil stocks will start to fall, but it’s not happening,” said Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg. “The dollar is an extra point for today.”

Crude oil for February delivery fell as much as 82 cents, or 1 percent, to $78.57 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $78.67 at 11:31 a.m. London time. A close at that level would mean a drop of 5 percent this week.

The dollar gained the most in nearly a month against the euro as Greece’s struggles with its budget deficit dented confidence in the region. The dollar traded as high as $1.4378 against the euro.

Crude oil may fall next week on speculation that U.S. inventories will climb for a third week and as fuel demand declines, a Bloomberg News survey of 41 analysts showed.

Oil prices will drop through Jan. 22, according to 42 percent of the respondents. Thirteen respondents, or 32 percent, forecast an increase and 11 said prices will be little changed. Last week, 44 percent of analysts forecast a decline in futures.

Stockpiles Drop

Oil settled below $80 a barrel on Jan. 13, the first time this year, after the U.S. Energy Department said crude and fuel inventories increased. Distillate fuel stockpiles rose for the first week in five.

Crude oil stockpiles climbed for a second week, adding 3.7 million barrels to 331 million barrels, the Energy Department said Jan. 13. Gasoline and distillate inventories also rose.

The International Energy Agency cut its forecast for oil supplies from outside the Organization of Oil Exporting Countries this year because of lower-than-expected production in Azerbaijan.

Supplies from outside OPEC will climb by 200,000 barrels a day next near compared with 2009. Production from Azerbaijan’s Azeri-Chirag-Guneshli field was cut by a gas leak in 2008.

Brent crude for March settlement fell as much as 93 cents, or 1.2 percent, to $77.64 a barrel on the London-based ICE Futures Europe exchange. It was at $77.81 at 11:33 a.m. London time.

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

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Gold Falls in London as Stronger Dollar Curbs Investment Demand

By Kim Kyoungwha and Nicholas Larkin

Jan. 15 (Bloomberg) -- Gold declined in London, erasing a weekly gain, as a stronger dollar sapped demand for the metal as an alternative asset. Palladium climbed to an 18-month high.

The U.S. Dollar Index, a six-currency gauge of the strength of the greenback, rose for the first time in six days. It gained on speculation Chinese growth will weaken because of a slowdown in local bank lending and on concern that investor confidence in European assets will wane as Greece struggles to cut its budget deficit. Gold typically moves inversely to the greenback.

“It’s the dollar move driving prices,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “There’s some light bargain-hunting” when prices fall below $1,130 to $1,140 an ounce, he said.

Gold for immediate delivery slid $10.25, or 0.9 percent, to $1,132.60 an ounce at 11:32 a.m. local time. Prices are down 0.5 percent this week. Bullion for February delivery fell 0.9 percent to $1,133.20 on the New York Mercantile Exchange’s Comex division.

The metal dropped to $1,132 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from $1,138.25 at yesterday’s afternoon fixing. Spot prices last week gained for the first time since November.

Bullion rallied 24 percent in 2009, the ninth straight annual gain, and reached an all-time high of $1,226.56 an ounce on Dec. 3. The dollar index, which added as much as 0.6 percent today, declined 4.2 percent last year.

Interest Rates

The dollar index is still on course for a second weekly decline amid prospects that the Federal Reserve may keep interest rates near zero to spur the economic recovery. U.S. jobless claims climbed 2.5 percent, the most in five weeks, and retail sales slipped 0.3 percent in December after a 1.8 percent jump a month ago, data showed yesterday.

“The near-term outlook is neutral, with the longstanding factors that have been driving the price higher, such as economic uncertainty and dollar weakness, still in play,” said Gavin Wendt, a senior analyst at Mine Life Pty in Sydney. “My overwhelmingly bullish longer-term view, however, remains firmly in place.”

Gold may gain next week as investors seek an alternative to the dollar, a survey showed. Twelve of 19 traders, investors and analysts surveyed by Bloomberg, or 63 percent, said the metal would rise. Five forecast lower prices and two were neutral.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, fell 2.13 metric tons to 1,113.75 tons yesterday, according to the company’s Web site.

Among other precious metals for immediate delivery in London, silver fell 1 percent to $18.49 an ounce. Platinum lost 0.6 percent to $1,603.75 an ounce. Palladium jumped as much as 2.2 percent to $454 an ounce, the highest price since July 15, 2008, and was last at $449.83.

Exane BNP Paribas raised its 2010 palladium estimate by 57 percent to $400 an ounce and increased its platinum forecast by 22 percent to $1,550 because of “better supply-demand balances,” it said in a report today.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net

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Asian Stocks Rise on Commonwealth, Intel Forecasts; Cnooc Drops

By Shani Raja

Jan. 15 (Bloomberg) -- Asian stocks rose, driving the MSCI Asia Pacific Index to a five-month high, as forecasts from Commonwealth Bank of Australia and Intel Corp. boosted finance and technology companies.

Commonwealth Bank, the nation’s biggest lender, jumped 2.3 percent in Sydney after saying first-half unaudited cash profit rose. Hynix Semiconductor Inc. climbed 2.6 percent in Seoul as Intel forecast first-quarter sales that beat analyst estimates. JFE Holdings Inc, Japan’s second-largest steelmaker by market value, fell 3.4 percent on speculation it may have to pay more for iron ore. Cnooc Ltd., China’s largest offshore oil producer, sank 1.1 percent as crude fell for a fifth day.

The MSCI Asia Pacific Index gained 0.5 percent to 126.95 at 5:50 p.m. in Tokyo, its highest level since Aug. 12. The measure has risen 2.2 percent in the past five days. The gauge surged 53 percent in the past year on signs of recovery in the region’s economies.

“The good news is still flowing through, but some of it is looking a bit more mixed,” said Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, which oversees about $90 billion globally. “Investors are feeling a bit cautious.”

Japan’s Nikkei 225 Stock Average gained 0.7 percent, while Taiwan’s Taiex index advanced 0.8 percent. China’s Shanghai Composite Index added 0.3 percent.

Improved Markets

South Korea’s Kospi Index climbed 1 percent. Daewoo Shipbuilding & Marine Engineering Co. surged 15 percent in Seoul after Posco’s chief executive officer said he would consider a bid for the shipbuilder.

Futures on the U.S. Standard & Poor’s 500 Index were little changed. The gauge added 0.2 percent yesterday as technology shares climbed before Intel reported earnings and the government reported a better-than-estimated gain in business inventories.

The MSCI Asia Pacific Index was set for its fourth weekly advance as reports this week of a bigger-than-expected increase in Australian jobs, a surge in Chinese exports and Japanese machine-tool orders boosted confidence in the strength of the global economy.

The gauge has climbed 80 percent from its lowest level in more than five years on March 9, outpacing gains of 70 percent by the S&P 500 and 64 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI measure are valued at 20 times estimated earnings, compared with 15 times for the S&P and 13 times for the Stoxx 600.

Bank Profits

Commonwealth Bank gained 2.3 percent to A$58.10, reversing an earlier 1 percent decline. The lender said minutes before trading ended in Sydney today that first-half cash profit rose 44 percent from a year ago, boosted by fewer bad debts, improved equities markets and volume growth.

National Australia Bank Ltd. added 0.9 percent to A$27.30. Westpac Banking Corp. rose 0.5 percent to A$25.50.

“The operating environment for Australian banks is very supportive,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “The appetite for loans remains healthy and the risk of bad debts reduces in such an environment.”

Intel, the world’s biggest chipmaker, predicted higher first-quarter revenue than analysts estimated as demand for notebook computers rebounded. Fourth-quarter net income increased more than ninefold to $2.28 billion, or 40 cents a share, the company said in a statement.

‘Second Wind’

Hynix, the world’s second-largest computer-memory chipmaker, gained 2.6 percent to 26,100 won. The company was raised to “buy” from “neutral” at Goldman Sachs Group Inc., which said shares of dynamic random access memory chipmakers are “primed for a second wind of strong outperformance.”

Elpida Memory Inc., Japan’s biggest maker of computer- memory chips, added 1.5 percent to 1,839 yen after raised its rating on the company to “buy” from “neutral.” Acer Inc., the world’s second-largest computer supplier, gained 1 percent to NT$103 in Taipei. Clevo Co., which makes laptop computers, jumped 6.9 percent to NT$58.80 in Taipei.

“The outlook for corporate earnings will likely increase after the earnings at Intel,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo.

Daewoo Shipbuilding surged 15 percent to 22,250 won. Posco CEO Chung Joon Yang said yesterday at an investor relations session in Seoul that he would consider a bid for the company.

JFE Holdings fell 3.4 percent to 3,450 yen. Steelmakers may have to pay more for iron ore after Rio Tinto Group, the world’s third-largest mining company, said yesterday that sales of the material rose to a record. BlueScope Steel Ltd., Australia’s largest steelmaker, dropped 1.9 percent to A$3.03.

Cnooc sank 1.1 percent to HK$12.28, while PetroChina Co., China’s largest oil producer, dropped 1.1 percent to HK$9.52. Crude oil in New York fell 0.5 percent in after-hours trading to $79.01 a barrel, taking a five-day decline to 4.5 percent.

Santos Ltd., Australia’s No. 3 oil and gas producer, dropped 1.4 percent to A$13.76. The stock was cut to “neutral” from “buy” by analysts at Bank of America Corp.’s Merrill Lynch, who cited higher costs and the risk of “a material capital raising.”

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

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German Stocks Extend Weekly Drop; SAP Falls as Fresenius Gains

By Cornelius Rahn

Jan. 15 (Bloomberg) -- German stocks snapped a two-day advance, with the benchmark DAX Index extending its biggest weekly decline in a month, as analysts cut their recommendations for SAP AG and Salzgitter AG.

SAP, the biggest maker of business-management software, and Salzgitter, Germany’s second-largest steelmaker, declined at least 2.5 percent. Solarworld AG and Q-Cells SE led solar companies lower amid speculation the German government plans to cut subsidies by as much as 17 percent.

The DAX slid 0.6 percent to 5,954.32 as of 12:02 p.m. in Frankfurt, having declined 1.4 percent over the week. The gauge rallied 24 percent last year as Europe’s biggest economy emerged from recession, supported by rising exports, government stimulus measures and record-low interest rates in the region. The broader HDAX Index decreased 0.6 percent today.

JPMorgan Chase & Co., the first of the largest U.S. banks to report fourth-quarter results, may say today that profit more than tripled from the depths of the financial crisis in 2008, according to analyst estimates compiled by Bloomberg. Production in the U.S. probably rose in December for the fifth time in past six months, indicating manufacturing gave the economy a boost into 2010, economists said before a report.

SAP fell 2.6 percent to 34.44 euros, ending a two-day advance. Morgan Stanley cut the shares to “equal-weight” from “overweight,” while UniCredit SpA downgraded the stock to “hold” from “buy.”

Solar Shares

Salzgitter dropped 2.5 percent to 68.41 euros, poised for its lowest close this year. NordLB cut its recommendation for Salzgitter to “sell” from “hold.”

Q-Cells, a German solar-cell maker, fell 5.9 percent to 11.64 euros, the biggest drop since October. Solarworld declined 5.2 percent to 14.86 euros. SMA Solar Technology AG, a producer of alternating-current converters, sank 8.1 percent to 95.29 euros as WestLB AG cut the stock to “reduce” from “neutral.”

Reuters reported that Germany plans to cut subsidies for solar energy systems by 16 percent to 17 percent in April. Such a reduction would be “negative for the whole sector,” according to UniCredit. “The mentioned cuts are not only higher than the 10 percent expected, but in particular would also be implemented one quarter earlier,” analyst Michael Tappeiner wrote in a report today.

Germany won’t decide on how it will cut solar subsidies until next week at the earliest, Ronald Heinemann, a spokesman for the Environment Ministry said today by phone. People familiar with the government’s plans said it aims to reduce subsidies by 17 percent or 18 percent from July.

Fresenius SE, owner of the world’s biggest provider of kidney dialysis, advanced 2.5 percent to 51.40 euros. Merck KGaA, the European maker of the Erbitux cancer drug, climbed 1.9 percent to 66.49 euros.

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

Aareal Bank AG (ARL GY) increased 1.5 percent to 14.62 euros as the shares were raised to “buy” from “hold” at Equinet AG, which set a new price estimate of 18 euros and said Aareal is one of the “cheapest” banks in Europe relative to net asset values.

Celesio AG (CLS1 GY) advanced for a seventh day in the longest winning streak since November, gaining 2.6 percent to 20.96 euros. The German drug wholesaler was raised to “outperform” from “underperform” at CA Cheuvreux.

HeidelbergCement AG (HEI GY), the world’s third-biggest cement maker, slid 3.4 percent to 49.65 euros, following two days of gains. The stock was downgraded to “hold” from “buy” at ING Groep NV, which said in a note to clients that “the discount to the sector has narrowed and much of the optionality realized with balance sheet restructuring.”

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

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European Stocks Advance; Carrefour, Daily Mail Shares Climb

By Sarah Jones

Jan. 15 (Bloomberg) -- European stocks advanced as Carrefour SA, Europe’s largest retailer, reported earnings that beat estimates and analysts recommended shares of media companies. Asian stocks rose, while U.S. index futures slid.

Carrefour climbed more than 3 percent to a 16-month high. Daily Mail and General Trust Plc led media shares higher as Credit Suisse Group AG and UBS AG both recommended the newspaper publisher. Hynix Semiconductor Inc. climbed 2.6 percent in Seoul after Intel Corp., the world’s biggest chipmaker, forecast better-than-estimated sales.

Europe’s Dow Jones Stoxx 600 Index added 0.2 percent to 259.4 at 11:24 a.m. in London. The measure is heading for its fifth straight weekly advance, the longest winning streak since April. Record-low interest rates in the U.S. and Europe and about $12 trillion committed by governments worldwide to boost the economy have pushed the gauge 65 percent higher since March.

U.S. stocks rose for a second day yesterday as technology shares climbed before Intel reported earnings and business inventories increased more than forecast. The MSCI Asia Pacific Index gained 0.5 percent today while futures on the Standard & Poor’s 500 Index fell 0.3 percent before JPMorgan Chase & Co. reports results ahead of the U.S. open.

JPMorgan, the first of the largest U.S. banks to post fourth-quarter results, may say profit more than tripled from the depths of the financial crisis in 2008, according to analyst estimates compiled by Bloomberg. Combined profit for companies in the S&P 500 surged 62 percent during the fourth quarter following a record nine-quarter slump in profits, analysts’ estimates show.

Hynix, Intel

Hynix, the world’s second-largest computer-memory chipmaker, gained 2.6 percent to 26,100 won. Elpida Memory Inc., Japan’s biggest maker of computer-memory chips, added 1.5 percent to 1,839 yen.

Intel climbed 1 percent to $21.70 in pre-market New York trading after forecasting first-quarter revenue of about $9.7 billion, citing a rebound in demand for notebook computers. That beat the average analyst estimate of $9.34 billion in a Bloomberg survey. Fourth-quarter net income also increased more than ninefold to $2.28 billion.

“It could still be” the year of technology, Andreas Utermann, chief investment officer at RCM unit of Allianz Global Investors, which manages about $1.3 trillion, said in a Bloomberg Television interview. “The tech sector will exhibit some top-line growth and we think the market will concentrate on that.”

Carrefour Climbs

Carrefour surged 3.2 percent to 35.70 euros, heading for the highest close since September 2008. The French retailer said late yesterday that full-year operating profit fell about 16 percent to 2.78 billion euros ($4 billion). That was at the higher end of its forecast of 2.7 billion euros to 2.8 billion euros and beat the average analyst estimate of 2.6 billion-euros in a Bloomberg survey.

Celesio AG increased 2.6 percent to 20.96 euros as CA Cheuvreux raised its recommendation for Europe’s biggest publicly traded drug wholesaler to “outperform” from “underperform.”

Daily Mail led a gauge of media shares 1 percent higher, rallying 5.4 percent to 475 pence. Credit Suisse raised its recommendation for the publisher of the U.K.’s Daily Mail newspaper to “outperform” from “underperform” and UBS upgraded the shares to “buy” from “neutral.”

ITV advanced 2.5 percent to 57.7 pence as UBS upgraded Britain’s biggest private television company to “buy” from “neutral” and added the shares to its “media most preferred” list.

Irish Banks

Allied Irish Banks Plc rallied 4.1 percent to 1.55 euros in Dublin as Morgan Stanley rated the shares “overweight” in new coverage. Bank of Ireland Plc, which was rated “equal weight” at Morgan Stanley, climbed 4.7 percent to 1.57 euros.

Separately, the Irish Independent said Allied Irish may sell Goodbody Stockbrokers as part of its restructuring plan. The Dublin-based newspaper didn’t cite anyone.

Man Group Plc lost 5.3 percent to 297.8 pence, the biggest intraday drop since October. The largest publicly traded hedge- fund firm posted a bigger-than-expected decline in assets in the last three months of 2009 as its main fund posted its first annual loss.

QinetiQ Group Plc sank 12 percent to 143.5 pence, the worst performer on the Stoxx 600. The military researcher split off from the British defense ministry said U.S. and U.K. order delays will hurt its second-half performance.

A report today may show U.S. production rose in December for the fifth time in past six months, economists said before a report due at 9:15 New York time. Separately, economists forecast that the Reuters/University of Michigan preliminary sentiment index for January probably rose to 74, the highest level in two years.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net;

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Turkey Stocks Head for 1st Weekly Loss in Five as IMF Bets Wane

By Seda Sezer

Jan. 15 (Bloomberg) -- Turkish stocks fell, heading for the first weekly decline in five, and the lira weakened after comments by Deputy Prime Minister Ali Babacan damped investor expectations of a deal with the International Monetary Fund.

The ISE National 100 index of stocks dropped 1.1 percent to 54,116.63 at 1:30 p.m. in Istanbul, heading for a 1.2 percent slide for the week. The lira fell 0.3 percent to 1.4509 per dollar, heading for its first weekly slump in four.

Babacan said yesterday there were no new developments in loan talks with the IMF and told journalists it was “wrong” that the talks are “on the agenda so frequently.” While Zaman newspaper reported Turkey and the IMF may decide on a loan this month at the World Economic Forum in Davos, Switzerland, Babacan said yesterday he won’t be there.

“IMF expectations started losing strength in the market since yesterday,” said Orhan Canli, a trader at Is Investment in Turkey.

Babacan said his decision not to attend Davos has nothing to do with the IMF discussions. “If there are any new developments then the public will be informed,” he said at the news conference in Ankara yesterday.

Turkey has been discussing a deal with the IMF since a previous program expired in May 2008. Investor expectations of a new loan helped cut bond yields by almost half last year as the government said it was nearing an agreement and the central bank cut interest rates by 10.25 percentage points to 6.5 percent.

Not Definite

Prime Minister Recep Tayyip Erdogan has balked at the IMF’s demands for spending restraints as Turkey sank into its deepest recession in half a century.

Babacan said last month that Turkey may sign a two-year IMF accord though there were still details to be agreed. Erdogan said on Jan. 11 that a decision could come in days or weeks. A day later Erdogan said an IMF accord was not definite, causing a halt to the lira’s longest rally since 1981 after 13 days of gains.

Lira-denominated benchmark bonds were little changed today, with yields falling 2 basis points to 8.53 percent, according to an ABN Amro index of securities.

To contact the reporter on this story: Seda Sezer in Istanbul at ssezer2@bloomberg.net.

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U.K. Stocks Advance for Second Day; RBS, Lloyds, Experian Gain

By Adria Cimino and Daniela Silberstein

Jan. 15 (Bloomberg) -- U.K. stocks advanced for a second day, with the benchmark FTSE 100 Index trimming its weekly decline, as Deutsche Bank AG said U.K. banks are still cheap and Experian Plc forecast “modest improvements” in growth.

Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc advanced more than 1 percent. Experian rose 2 percent after reporting third-quarter sales. Pearson Plc, the publisher of the Financial Times newspaper, climbed 2.1 percent.

The FTSE 100 Index gained 0.4 percent to 5,518.86 as of 10:17 a.m. in London, trimming its weekly drop to 0.2 percent. The gauge surged 22 percent in 2009 for its biggest annual rally since 1997 and has rebounded 56 percent since March 3 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy. The FTSE All-Share Index added 0.4 percent today and Ireland’s ISEQ Index rose 0.7 percent.

RBS, recipient of the world’s biggest banking bailout, climbed 3.1 percent to 37.11 pence. Lloyds, the U.K.’s biggest mortgage lender, gained 1.1 percent to 58.15 pence. U.K. banks are still cheap, even though increased capital and liquidity requirements pose a “significant share price risk,” Deutsche Bank AG.

HSBC Holdings Plc, Europe’s biggest bank, added 1 percent to 721.4 pence. Deutsche Bank upgraded the shares to “buy” from “hold.”

JPMorgan Earnings

JPMorgan Chase & Co., the first of the largest U.S. banks to report fourth-quarter results, may today say profit more than tripled from the depths of the financial crisis in 2008, according to analyst estimates compiled by Bloomberg. Combined profit for companies in the S&P 500 surged 62 percent during the fourth quarter following a record nine- quarter slump in profits, analysts’ estimates show.

Experian rose 2 percent to 610.5 pence. The world’s largest credit-checking company reported third-quarter revenue growth that was little changed and said it expected “modest improvements” in sales growth in the fourth quarter.

Pearson Plc added 2.1 percent to 906.5 pence, gaining for a fifth day, its longest winning streak since October. Interactive Data Corp., which is majority owned by Pearson, is sounding out potential buyers, the Financial Times reported, citing sources close to the situation.

Man Group Plc, the biggest publicly traded hedge-fund manager, slid 5.7 percent to 296.6 pence. The company said assets fell 4 percent in the final three months of 2009 as its largest fund posted its first annual loss.

QinetiQ Group Plc plunged 11 percent to 144.9 pence, a record drop. The company said its “normal trading pattern” of a seasonally stronger second half will not occur this fiscal year after seeing delays in orders from government customers.

To contact the reporters on this story: Adria Cimino in Paris at acimino1@bloomberg.net; Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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