USD/CAD Daily Outlook

USDCAD Outlook | Written by ActionForex.com | Mar 09 11 07:54 GMT

Daily Pivots: (S1) 0.9698; (P) 0.9722; (R1) 0.9738; More.

Consolidation from 0.9683 is still in progress and intraday bias remains neutral. Even in case of another recovery, upside is expected to be limited by 0.9836 support turned resistance and bring fall resumption. Below 0.9683 will target 161.8% projection of 1.0851 to 1.0138 from 1.0671 at 0.9517 next. Nevertheless, above 0.9836 will dampen this view and bring stronger rebound back to parity instead.

In the bigger picture, whole medium term fall from 1.3063 (2009 high) is still in progress and such down trend could possibly extend further towards 2007 low of 0.9056. Nevertheless, fall from 1.3063 is still looking corrective and hence, we'd expect strong support between 0.9056/9709 to contain downside and bring another medium term rise. Though, break of 1.0851 resistance is needed to confirm medium term reversal. Otherwise, medium term outlook will remain bearish.

Read more...

AUD/USD Daily Outlook

AUDUSD Outlook | Written by ActionForex.com | Mar 09 11 07:54 GMT

Daily Pivots: (S1) 1.0056; (P) 1.0095; (R1) 1.0136; More

No change in AUD/USD's outlook. While upside momentum is clearly seen diminishing with bearish divergence condition in daily MACD, AUD/USD is still drawing strong support from 55 days EMA. Recent up trend is still in favor to continue further. Break of 1.0200 again will target another high above 1.0254. On the downside, break of 0.9943 support is needed to be the first signal of topping. Otherwise, we won't turn bearish yet.

In the bigger picture, note that bearish divergence condition remains in daily and weekly MACD. Reversal should be imminent even if 1.0254 is not yet the major top. We'll continue to look for topping signal in case of another rise. On the downside break of 0.9803 support will now be an early signal of medium term reversal and will turn focus to 0.9536 support for confirmation.

Read more...

EUR/USD Daily Outlook

EURUSD Outlook | Written by ActionForex.com | Mar 09 11 07:51 GMT

Daily Pivots: (S1) 1.3848; (P) 1.3918 (R1) 1.3975; More.

EUR/USD's retreat from 1.4035 is still in progress and deeper fall might be seen. But still, strong support should be seen from near term rising trend line (now at 1.3804) to contain downside and bring another rise. Break of 1.4035 will bring rally resumption towards 1.4281 key resistance next. However, sustained trading below the trend line support will argue that whole rebound from 1.2873 is possibly completed and will bring deeper decline to 1.3472 support instead.

In the bigger picture, as long as 1.3427 support holds, we'd favor the case that rise from 1.2873 is extending rebound from 1.1875. Also, that would mean that we're favoring the case that medium term correction 1.6039 was completed with three waves down to 1.1875 and the long term up trend might be resuming. Break of 1.4281 resistance will further affirm this case and target 1.5143 resistance and then 1.6039 high. However, break of 1.3472 will leave the whole rise from 1.2873 in three wave corrective structure, which in turn indicate that fall from 1.4281 is not finished and will turn favors back to the bearish case for at least a test on 1.2873 support.

Read more...

China May Deflect Geithner Pressure by Reporting Smaller February Surplus

China may deflect international pressure for faster yuan appreciation by reporting the nation’s smallest trade surplus in 10 months tomorrow. Photographer: Andrew Harrer/Bloomberg

Play Video

March 7 (Bloomberg) -- Shaun Rein, Shanghai-based managing director of China Market Research Group, talks about the outlook for the yuan and inflation in China. He speaks with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)

Play Video

March 4 (Bloomberg) -- Hugh Simon, chief executive officer of Hamon Asset Management Ltd. and co-manager of the Dreyfus Greater China Fund, discusses China's economy and currency policy. Simon speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Play Video

March 7 (Bloomberg) -- Eswar Prasad, a senior fellow at the Brookings Institution and a professor at Cornell University, discusses China's five-year plan and the outlook for the country’s economy. Prasad speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

China may deflect international pressure for faster yuan appreciation by reporting the nation’s smallest trade surplus in 10 months tomorrow.

The excess was $4.9 billion in February, from $6.5 billion a month earlier, according to the median estimate in a Bloomberg News survey of 21 economists. Data for the first two months of the year is typically distorted by the timing of a Lunar New Year holiday.

A smaller surplus may support China’s contention that the world’s second-largest economy is moving toward balanced trade as imports climb. Commerce Minister Chen Deming said March 7 that it’s “totally unreasonable” to say the yuan is undervalued, rejecting renewed calls by U.S. Treasury Secretary Timothy Geithner for faster gains.

“The smaller surplus in the last three months, combined with the trend we saw in the last two years, shows China’s rebalancing efforts are working,” said Sun Chi, a Hong Kong- based economist at Nomura Holdings Inc. who previously worked for the U.S. Treasury in Beijing. “It will also alleviate the pressure for yuan gains.”

Economists combine Chinese data for the first two months of the year to eliminate distortions. On that basis, the surplus may be $11 billion, about half the amount a year earlier. The boost to imports from higher commodity costs is playing a role, Sun said.

Premier Wen Jiabao highlighted efforts to boost domestic demand as a “long-term strategic principle” in his annual report to the legislature in Beijing on March 5.

Yuan Falls

Exports may have climbed an annual 27 percent in February, with imports rising 33 percent, the survey showed.

The yuan dropped 0.1 percent to 6.5720 per dollar in Shanghai as of 9:44 a.m. Non-deliverable forwards traded at 6.4155, reflecting bets the currency will strengthen 2.4 percent in a year.

“While seasonal adjustment is tricky at this time of the year, the typical pattern will be for the trade surplus to rebound after narrowing early in the year,” said David Cohen, a Singapore-based economist for Action Economics who has previously worked for the U.S. Federal Reserve. The annual surplus may be about $160 billion, down from $183 billion last year, he estimated.

That level will “still leave pressure for yuan appreciation,” he added.

China may report trade deficits in some months this year, Chen said at the National People’s Congress in Beijing on March 7. That has only happened once in the past six years, in March 2010.

Currency Stability

The commerce minister also said that the yuan will appreciate gradually over the long term, adding that basic stability in the currency aids the global recovery.

Some U.S. lawmakers, including Senator Charles Schumer of New York, complain China is holding down the yuan’s value to give its exporters an unfair advantage over American rivals. China is the world’s No. 1 exporting nation by value of shipments.

Chinese companies can accept annual gains in the currency of 3 percent to 5 percent, Bank of China Ltd. President Li Lihui said at the Beijing congress on March 5. Central bank Deputy Governor Yi Gang said the same day that the yuan’s exchange rate is the closest it has been to “equilibrium.”

China is “committed” to moving to a market-determined, flexible exchange rate and understands the importance of allowing the yuan to appreciate, the International Monetary Fund’s Zhu Min said on March 7. “The only question remaining is the speed,” Zhu, a special adviser to the IMF and a former Chinese central bank deputy governor, said in Arlington, Virginia.

--Zheng Lifei. Editors: Paul Panckhurst, John Liu.

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Read more...

Euro Weakens for Third Day Before First Portuguese Bond Sale in Two Months

The 17-nation euro declined 0.3 percent today, according to Bloomberg Correlation-Weighted Currency Indexes, which track the foreign exchange of 10 developed nations. Photographer: Chris Ratcliffe/Bloomberg

The euro declined for a third day against the dollar before Portugal seeks to borrow as much as 1 billion euros ($1.4 billion) in its first bond sale for two months as it seeks to avoid a European Union bailout.

Europe’s common currency erased an earlier decline against the yen and weakened against all but one of its 16 most-actively traded peers. Portugal is trying to sell bonds due 2013, returning investor focus to the debt crisis that forced Ireland and Greece to seek aid. Greek 10-year yields yesterday soared to the most since the euro’s introduction. Australia’s dollar fell for a fifth day after a report showed home-loan approvals dropped the most in a year.

“The risks in the periphery of the euro zone are building up,” said Ian Stannard, a senior currency strategist at BNP Paribas SA in London. “Portugal’s issuance is going to be very important.”

The euro lost 0.3 percent to $1.3865 as of 8:46 a.m. in London, capping its longest run of declines since Feb. 15. It climbed to $1.4036 on March 7, the strongest level since November. It was little changed at 114.89 yen, from 114.94 yesterday in New York. Japan’s currency depreciated to 82.86 per dollar from 82.67.

The 17-nation euro declined 0.3 percent today, according to Bloomberg Correlation-Weighted Currency Indexes, which track the foreign exchange of 10 developed nations. It’s up 2.2 percent this year, driven by expectations that the European Central Bank will boost interest rates.

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

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Read more...

Crude Oil Declines as OPEC Discusses Holding Emergency Meeting on Output

Crude oil fell from a 29-month high in New York as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting.

Crude slipped 0.4 percent after Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.” Futures trimmed losses as opponents of Libyan leader Muammar Qaddafi plan to recapture a town, Bin Jawad, and after Goldman Sachs Group Inc. and Bank of America Merrill Lynch raised oil-price forecasts.

“OPEC may schedule a meeting to discuss increasing production,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The OPEC news and signals that the U.S. may release some strategic reserves is making some investors think twice about being long.”

Crude oil for April delivery dropped 42 cents to settle at $105.02 a barrel on the New York Mercantile Exchange. The contract ended yesterday at $105.44, the highest settlement since Sept. 26, 2008. Futures are up 28 percent from a year ago.

Prices declined from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles rose 3.82 million barrels to 348.5 million. April oil fell 77 cents, or 0.7 percent, to $104.68 a barrel in electronic trading at 4:34 p.m.

Brent crude oil for April settlement slipped $1.98, or 1.7 percent, to end the session at $113.06 a barrel on the London- based ICE Futures Europe exchange.

Narrowing Spread

The premium of Brent to West Texas Intermediate, the grade traded in New York, surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the WTI delivery point. The premium narrowed to $8.04 today, the least since Jan. 20.

“The spread has become so big that it’s attracted value players,” said Peter Beutel, president of Cameron Hanover Inc. in New Canaan, Connecticut, a trading-advisory company. “Widening the spread became a high-stakes poker game among a few players, and it now appears to be coming to an end.”

Kuwait’s oil minister told reporters in Kuwait City today that OPEC Secretary General Abdalla El-Badri is contacting members to see whether a meeting on production levels is needed.

“I’ve talked to Abdalla El-Badri in this regard and he is calling everybody and making a consensus on whether we’ll need an OPEC meeting, an urgent meeting,” Sheikh Ahmad al-Abdullah al-Sabah said. “We have to find out at the meeting whether there is a need for an increase or not.”

Libyan Turmoil

Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to Bloomberg estimates.

“The question now is how much geopolitical risk premium is appropriate,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Prices have risen so much that we need an ongoing stream of frightening news to keep the market moving higher.”

Vienna-based researcher JBC Energy GmbH estimated Libya accounts for 8.8 percents of total global production of light, sweet crude, or crude oil with low density and sulfur content. This type of crude yields more of more lucrative fuels such as gasoline and diesel when processed.

Some OPEC members and producers outside the group have made up for the reduction in crude shipments from Libya, Qatari Energy Minister Mohammed Saleh al Sada said today.

‘Hardly Any Effect’

“There was hardly any effect” on supply because of the Libyan unrest, he said at a conference in Doha.

Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, OPEC’s biggest producer, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.

“The big news is Libya, at least until Friday,” Beutel said. “Come Friday, all eyes will be on the Day of Rage in Saudi Arabia.”

The Obama administration will consider using the Strategic Petroleum Reserve if rising oil prices caused by turmoil in the Middle East and North Africa threaten the U.S. economy, White House Chief of Staff William Daley said on NBC’s “Meet the Press” program on March 6.

Total SA Chief Executive Officer Christophe de Margerie said there is “no reason” to tap the reserve and that to do so “is to send the message that we are scared.” He spoke at CERAWeek, a Houston conference put on by IHS Cambridge Energy Research Associates.

Goldman Sachs

Goldman Sachs raised its second-quarter outlook for Brent crude by $4.50 to $105 a barrel, citing estimates that spare capacity in OPEC has dropped below 2 million barrels a day, according to a report dated yesterday.

Bank of America Merrill Lynch increased its Brent crude price forecast for this year to $108 a barrel from $88 and for next year to $95 a barrel from $85, in a note today.

Oil volume in electronic trading on the Nymex was 861,561 contracts as of 4:31 p.m. in New York. Volume totaled 902,351 contracts yesterday, 13 percent above the average of the past three months. Open interest was 1.58 million contracts, the highest since July 16, 2007.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Read more...

Oil Falls a Second Day on OPEC Supply Speculation, Rising U.S. Stockpiles

Play Video

March 8 (Bloomberg) -- Nigel Gault, chief U.S. economist at IHS Global Insight, talks about the outlook for oil prices and the U.S. economy. He speaks with Matt Miller and Carol Massar on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Play Video

March 8 (Bloomberg) -- Alexander Ridgers, head of commodities at London-based CMC Markets, talks about the outlook for oil prices. He speaks with Andrea Catherwood on Bloomberg Television's "Last Word." (Source: Bloomberg)

Oil dropped for a second day in New York as speculation mounted that OPEC will consider boosting output to compensate for disruptions in Libya and rising U.S. supplies signaled weakening demand.

Futures slid as much as 0.8 percent after U.S. crude inventories climbed the most since November, according to American Petroleum Institute data. Angola’s oil minister said the Organization of Petroleum Exporting Countries should wait to see how events in Libya unfold before calling an emergency meeting about prices and production. Kuwait’s oil minister yesterday said members of the group are weighing an “urgent” meeting to determine whether more output is needed.

“I think the situation in Libya to some degree is contained from an oil-price point of view,” said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. “There is also a lot of supply in the market, it’s not tight.”

Crude for April delivery decreased as much as 81 cents to $104.21 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.30 at 3:39 p.m. Singapore time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.

Brent oil for April settlement slipped 41 cents, or 0.4 percent, to $112.65 a barrel on the London-based ICE Futures Europe exchange. The contract jumped 3.4 percent last week, its sixth weekly increase.

Crude Inventories

U.S. crude inventories climbed 3.8 million barrels last week to 348.5 million, the industry-funded American Petroleum Institute said. An Energy Department report today may show stockpiles increased by 1 million barrels, according to a Bloomberg News survey of analysts.

Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to Bloomberg estimates.

Crude dropped yesterday after Sheikh Ahmad al-Abdullah al- Sabah, Kuwait’s oil minister, told reporters that OPEC Secretary General Abdalla El Badri is contacting members to see whether a meeting on output levels is needed.

“The information that we have is that the market is supplied,” Angolan Oil Minister Jose Maria Botelho de Vasconcelos told reporters at an IHS Cambridge Energy Research Associates conference in Houston yesterday. Prices have risen because of geopolitical problems in North Africa, and “we need to wait a little bit” to act, he said.

Brent Premium

Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, OPEC’s biggest producer, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.

The premium of front-month Brent futures to West Texas Intermediate, the grade traded in New York, surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the WTI delivery point. The premium was at $8.33 today.

The spread has narrowed even as supplies at Cushing continue to rise. Stockpiles there have climbed to a record 40.3 million barrels, the API data showed yesterday. Brent’s premium has narrowed as hedge funds and other financial investors buy New York futures, according to Anthony Nunan, the assistant general manager for risk management at Mitsubishi Corp. in Tokyo.

“Even though there is this oversupply there is a lot of demand for WTI as a financial asset,” Nunan said by telephone today. “Despite all this talk about it being a broken benchmark the financial community doesn’t seem to care.”

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

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

Read more...

China Imports of New Zealand Milk Jump Five-Fold, Aiding Quake-Hit Nation

China’s milk imports from New Zealand surged more than five-fold since 2008 as rising incomes stoked demand, sending prices to a record and bolstering the economy as it recovers from the deadliest earthquake in 80 years.

China, the biggest importer of New Zealand dairy products by value, purchased about 353 million kilograms of the country’s milk products in 2010, up from 69 million kilograms in 2008, according to government data supplied by Fonterra Cooperative Group Ltd., the world’s largest exporter. Fonterra processes 95 percent of the country’s milk and earns a fifth of its export revenues, the company said.

New Zealand is relying on China and other emerging markets to buy more dairy products to rekindle economic growth after a contraction in the quarter ended Sept. 30. Asian consumers are demanding more protein as incomes and nutrition levels rise, said Con Williams, rural economist at ANZ National Bank Ltd.

“Milk’s going to be an important component because it’s about 25 percent of export earnings,” Williams said. “It’s going to be a cornerstone in terms of earning overseas dollars and then getting that through the economy.”

Prime Minister John Key said March 2 there’s likely to be “virtually no growth” in New Zealand for the financial year through June. The economy might have contracted in the fourth quarter of 2010, entering its second recession in two years, Finance Minister Bill English said last month.

An economic recovery may be slowed by the 6.3-magnitude earthquake that struck the South Island city of Christchurch on Feb. 22, killing more than 160 people and causing an estimated NZ$15 billion in damage.

Growth Cut

Economic growth in 2011 is expected to be 1.5 percentage points lower because of the temblor, according to the Treasury Department. A “small contraction” in real gross domestic product is predicted in the March quarter, compared with a 0.5 percent growth forecast before the quake, it said on March 6.

High prices for New Zealand’s commodity exports may help Christchurch recover from its second quake in six months, English said March 1. Export prices rose for a sixth month to a record in February, according to the ANZ Commodity Price Index.

Whole milk powder prices surged 41 percent in Fonterra’s last seven global auctions, prompting the company to freeze local wholesale prices for the rest of this year.

Prices reached a record on March 2 amid sustained demand from China and concerns rising input costs may curb supply. Milk prices will likely remain at least 50 percent above historical averages in the longer term, Fonterra’s Chief Executive Officer Andrew Ferrier said on Feb. 14.

Diet Shift

As developing nations’ incomes rise, diets are expected to include more meat and processed foods, favoring dairy and livestock, according to an annual outlook from the Organization for Economic Cooperation and Development and the United Nations’ Food and Agriculture Organization last June.

Global food prices have surged on increased demand coupled with harvest disruptions, including a drought in China, as well as heavier-than-usual rains across parts of Asia. Food prices climbed to a record last month, according to a 55-item basket tracked by the United Nations.

China imported about NZ$2.1 billion ($1.6 billion) worth of New Zealand dairy products in 2010 from $732 million in 2008, according to the government data. The country’s milk imports are likely to remain strong this year as local supply struggles to meet demand growth, according to a Feb. 14 forecast from Dairy Australia.

Higher incomes, population growth and concerns about the safety of domestic milk supply after a melamine contamination in 2008 killed at least six infants will buoy demand, Williams said.

Dairy Farms

“Over the medium term, New Zealand is well positioned to supply that,” he said. “Longer term, it’s how can you work with the Chinese in the country to grow supply from what they have in terms of resources.”

Fonterra in October agreed to develop a dairy farm in China’s Hebei province to expand local milk production. Its existing Tangshan farm has doubled to more than 6,000 cows since it opened in 2007 and produces about 25 million liters of milk for local consumption.

Other countries that recorded the largest growth in imports include India and Sudan. India’s imports of New Zealand dairy products more than doubled to NZ$162 million last year, according to the government data. The value of Sudan imports jumped to NZ$114 million from NZ$39 million in 2008.

Australia and the U.S. were the second- and third-biggest importers of New Zealand dairy products in 2010, according to the data. Australia bought NZ$853 million and the U.S. purchased NZ$748 million of dairy products last year.

To contact the reporter for this story: Phoebe Sedgman in Wellington at psedgman2@bloomberg.net.

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net.

Read more...

Boston Beer, Ciena, Finisar, JDS Uniphase: U.S. Equity Preview

Shares of the following companies may have unusual moves in U.S. trading.

AeroVironment Inc. (AVAV) : The maker of low-flying drones for U.S. military forces reported fiscal third-quarter profit of 52 cents a share excluding some items, beating the average analyst estimate by 37 percent.

Boston Beer Co. (SAM US): The maker of Samuel Adams lager said 2011 profit will be as low as $3.45 cents a share, compared with a prior forecast of $3.95 a share.

Diamond Foods Inc. (DMND) : The nut processor and distributor said 2011 profit will be as low as $2.45 a share versus the average analyst estimate of $2.51.

Finisar Corp. (FNSR) : The maker of fiber-optic transmission gear said it won’t earn more than 35 cents a share excluding some items in the fourth quarter, missing the average analyst estimate of 48 cents.

Other makers of networking equipment may move, including JDS Uniphase Corp. (JDSU) , Ciena Corp. (CIEN) , Infinera Corp. (INFN) , Oclaro Inc. (OCLR) and Oplink Communications Inc. (OPLK) .

Texas Instruments Inc. (TXN) : The largest analog chipmaker narrowed its first-quarter profit estimate to 56 cents to 60 cents a share from 54 cents to 62 cents. The average analyst estimate in a Bloomberg survey was 59 cents.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

Read more...

U.S. Stocks Advance as Oil Retreats; Sprint, Bank of America Shares Rise

Sprint Nextel rallied 7.1 percent after Bloomberg News reported that people with knowledge of the matter said Deutsche Telekom AG has held talks to sell its T-Mobile USA unit. Photographer: Jacob Kepler/Bloomberg

U.S. stocks advanced, snapping a two-day decline for benchmark indexes, as crude oil retreated and Bank of America Corp. (BAC) sparked a rally in financial shares after saying its home-loan business is in “recovery mode.”

Bank of America jumped 4.7 percent, leading a gauge of financial shares to the biggest gain among 10 Standard & Poor’s 500 Index industries. Sprint Nextel Corp. (S) climbed 4.9 percent after people with knowledge of the matter told Bloomberg News that Deutsche Telekom AG held talks to sell its T-Mobile USA unit to the company. PulteGroup Inc. climbed 8.4 percent after the homebuilder reported “good traffic and sign-up rates.”

The S&P 500 increased 0.9 percent to 1,321.82 at 4 p.m. in New York. The benchmark gauge had fallen 1.6 percent over the previous two trading days. The Dow Jones Industrial Average advanced 124.35 points, or 1 percent, to 12,214.38. Crude oil declined 0.4 percent to $105.02 a barrel in New York.

“We’re in an economic recovery and the stock market is reflecting that,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “Companies are flush with cash and there’s been a pick-up in M&A activity, which is an indication of corporate confidence. In addition to that, crude oil prices are down and people can relax a bit about energy costs not going through the roof.”

The S&P 500 yesterday erased last week’s gain as oil reached a 29-month high. The gauge rallied 5.1 percent this year as companies reported earnings that topped analysts’ estimates for the eighth straight quarter and the Federal Reserve kept interest rates at a record low.

‘Urgent Meeting’

Crude oil fell as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting and Libyan rebels prepared an offensive to regain a town. Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.”

Nouriel Roubini, who predicted the global financial crisis, said an increase in oil prices to $140 a barrel will cause some advanced economies to slide back into recession. Underlying how fragile the recovery is, Roubini said the European Central Bank may be making a mistake by raising interest rates “too soon” when debt-ridden countries on the euro region’s periphery struggle to restore the competitiveness of exports.

Stock-index futures erased gains before the open of exchanges as European Central Bank Governing Council member Axel Weber said he doesn’t want to correct market expectations for as many as three quarter-point increases in the bank’s benchmark interest rate this year.

‘Zero Rate Trap’

“One of the biggest fears is that the developed nations have gotten themselves into a zero rate trap,” said Peter Sorrentino, who helps oversee $14.4 billion at Huntington Asset Advisors in Cincinnati. “So, if they start to raise rates, the market will begin to move beyond their control.”

Financial shares in the S&P 500 rose 2.2 percent, collectively, the biggest gain within 10 groups. The KBW Bank Index added 2.7 percent, as all of its 24 stocks gained.

Bank of America jumped 4.7 percent, the most in the Dow, to $14.69. The largest U.S. lender said its commercial- and investment-banking businesses are already transitioning this year and may post what the company considers normalized earnings in 2012 and 2013.

Chief Executive Officer Brian T. Moynihan, hosting the lender’s first investor day since 2007, is seeking to assure investors the bank will return to profitability as the economy stabilizes and the company recovers from disputes with investors over soured mortgages. The company’s net loss last year was driven by writedowns at credit-card and home-lending units acquired by Moynihan’s predecessor, Kenneth D. Lewis.

‘Growth Company’

“We are changing the culture of the company from a company that was built upon acquisitions and consolidation,” Moynihan said today in New York. “We are again a growth company.”

Sprint gained 4.9 percent to $4.70. Deutsche Telekom has held talks to sell its T-Mobile USA unit to Sprint in exchange for a major stake in the combined entity, said people with knowledge of the matter. Talks have been on and off, and a deal may not be reached, said the people, who spoke on the condition of anonymity because the talks are private.

“In general, all options are open in the U.S. -- the sale of the whole business or of parts,” Deutsche Telekom Chief Financial Officer Timotheus Hoettges said in an e-mail today. He said the company could also find a partner, sell shares in the market or form a network agreement.

Bill White, a spokesman for Overland Park, Kansas-based Sprint, declined to comment.

M&A Scorecard

Announced takeovers of U.S. companies have totaled $186.4 billion so far in 2011, 21 percent more than in the same period last year, according to data compiled by Bloomberg.

A gauge of homebuilders in S&P indexes rallied 4.8 percent. PulteGroup jumped 8.4 percent, the most in the S&P 500, to $7.09. The largest U.S. homebuilder by revenue said it signed up 2,674 homes for sale in the first two months of the year. The orders showed “demand continues to stabilize and slightly improve entering the current spring selling season,” JPMorgan Chase & Co. said in a note.

The Bloomberg U.S. Airlines Index of 12 stocks jumped 7.3 percent, as the retreat in crude oil prices eased concern about higher energy costs. US Airways Group Inc. (LCC) climbed 12 percent to $9.28. Delta Air Lines Inc. (DAL) added 9.7 percent to $11.07.

Energy shares had the only decline in the S&P 500 among 10 industries, falling 0.6 percent, collectively. Occidental Petroleum Corp. (OXY) slumped 2.1 percent to $100.92. ConocoPhillips (COP) decreased 1.1 percent to $78.32.

McDonald’s Slumps

McDonald’s Corp. (MCD) fell 1 percent, the most in the Dow, to $75.54. The world’s biggest restaurant chain reported sales rose 2.7 percent at stores open at least 13 months in the U.S. last month, missing analysts’ estimates. Analysts had projected a gain of 4 percent, according to the average of three estimates compiled by Bloomberg.

Urban Outfitters Inc. (URBN) had the biggest decline in the S&P 500, tumbling 17 percent to $31.66. The operator of the namesake and Anthropologie clothing chains said profit margins shrank last quarter. Gross margin, or the percentage of sales after the cost of goods sold, narrowed 2 percentage points to 39.7 percent in the quarter ended Jan. 31, the Philadelphia-based company said yesterday. Profit amounted to 45 cents a share, trailing the 52-cent average of estimates compiled by Bloomberg.

The past two years have shown that stock investors need to focus on “the beaten-up areas of the market” when prices rebound, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist.

More than Quintupled

Auto stocks set the S&P 500’s pace since March 9, 2009, according to data compiled by Bloomberg, as the industry-group index more than quintupled in the period through yesterday. Grocery and drugstore stocks had the smallest gain, at 34 percent. The two industries’ rankings were almost exactly the opposite in the preceding bear market, which lasted 17 months. The S&P 500 Automobiles and Components Index tumbled 84 percent, more than any other industry except banks. The S&P 500 Food and Staples Retailing Index did best by losing only 26 percent.

“Fears of a Great Depression reenactment provided investors with a powerful trading opportunity over the past two years,” Levkovich wrote today. The auto industry is among those most closely linked to the economy’s performance, while food and drug retailers had less to gain from economic growth.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

Read more...

European Stocks Fluctuate; EADS Advances on Earnings, Alcatel Shares Slide

European stocks fluctuated as a second day of declines in the price of oil offset concern about the levels of euro-region government debt. U.S. index futures and Asian shares were little changed.

European Aeronautic, Defence & Space Co. advanced 3.3 percent after the company returned to profit in 2010 and reinstated its dividend. Alcatel-Lucent SA dropped more than 4 percent after U.S. rival Finisar Corp. forecast earnings that missed estimates. E.ON AG (EOAN) declined 1.2 percent after the world’s largest utility by sales said net income will fall.

The Stoxx Europe 600 Index fell 0.1 percent to 281.42 at 9 a.m. in London. The gauge has lost 3.1 percent since peaking at a 2 1/2-year high on Feb. 17 as oil surged amid escalating unrest in North Africa and the Middle East, increasing concern that higher energy costs will harm the economic recovery.

“Any gains from the easing oil price are offset by the threat of euro-zone debt troubles and prospects of tighter monetary policy,” said Jonathan Sudaria, a London-based trader at London Capital Group.

Standard & Poor’s 500 Index futures slipped 0.2 percent today. The MSCI Asia Pacific Index gained 0.1 percent.

Crude fell as much as 0.8 percent to $104.21 a barrel in New York as speculation mounted that OPEC will consider boosting output to compensate for disruptions in Libya and U.S. crude inventories climbed.

OPEC Production

Angola’s oil minister said the Organization of Petroleum Exporting Countries should wait to see how events in Libya unfold before calling an emergency meeting about prices and production. Kuwait’s oil minister yesterday said members of the group are weighing an “urgent” meeting to determine whether more output is needed.

In Europe, Moritz Kraemer, managing director of European sovereign ratings at S&P, warned some countries may have their credit ratings cut further while a Greek debt default is a “possibility.”

Asked if the worst was over for the region’s sovereign credit-rating outlook, Kraemer said: “I wish I could say yes, but the answer is no.” Kraemer was speaking in an interview at a EuroMoney conference in London yesterday.

EADS rose 3.3 percent to 20.49 euros after reporting full- year net income of 553 million euros ($767 million) compared with a 763 million-euro loss a year earlier. The aerospace company also said profitability will rebound after this year as it smoothes out currency swings and jet deliveries gain.

Alcatel Falls

Alcatel, France’s largest telecommunications equipment maker, dropped 4.4 percent to 3.80 euros. Finisar, the Sunnyvale, California-based maker of fiber-optic transmission gear, yesterday forecast fourth-quarter earnings of 31 to 35 cents a share. That missed analyst estimates of 48 cents.

E.ON lost 1.2 percent to 22.85 euros after the German utility said adjusted net income will fall as much as 32 percent this year after the government imposed a new tax on its nuclear plants and it sells power at lower prices.

Prudential Plc (PRU) gained 3.4 percent to 738.5 pence after the U.K.’s biggest insurer by market value more than doubled full- year net income to 1.43 billion pounds ($2.31 million). Operating profit for the period rose 24 percent to 1.94 billion pounds, beating analyst estimates of 1.74 billion pounds.

Iberdrola Renovables SA (IBR) jumped 8.4 percent to 2.97 euros, the biggest gain since 2008, after parent company Iberdrola SA (IBE) bid 2.5 billion euros to buy out minority investors in its renewable energy unit. Iberdrola SA shares slipped 0.8 percent to 5.94 euros.

Tognum AG (TGM) climbed 4.1 percent to 24.16 euros as Daimler AG and Rolls-Royce Group Plc offered 24 euros a share to purchase the German maker of heavy-duty engines. Tognum surged 23 percent on March 7 after Daimler and Rolls-Royce said they were considering a joint bid for the company.

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

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

Read more...