USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 82.43; (P) 82.81; (R1) 83.25

Intraday bias in USD/JPY remains neutral and some more consolidations could be seen below 83.20 temporary top. But break of 80.50 support is needed to signal short term topping. Otherwise, outlook will remains cautiously bullish and we'd continue to favor further rally. Above 83.20 will target 84.49 key resistance next.

In the bigger picture, with 84.49 resistance intact, there is no confirmation of trend reversal yet and the multi-decade down trend in USD/JPY could still be in progress for a new low below 76.40. However, note that decisive break of 84.49 will argue that an important medium term bottom is formed. Focus will then turn to whether USD/JPY could sustain above 55 weeks EMA (now at 85.22). In that case, stronger rise could be seen towards 94.97 resistance and above.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6006; (P) 1.6044; (R1) 1.6111;

GBP/USD's sharp reversal after hitting 1.6140 minor resistance revives the original bearish view that fall from 1.6400 is not over. Break of 1.5935 will target medium term trend line support (now at 1.5811). Sustained break there will indicate that whole rise form 1.4230 has finished too and will turn outlook bearish for 1.5343 support. On the upside, however, above 1.6149 will dampen this immediate bearish case again and turn focus back to 1.6400 high instead.

In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4230 is treated as the third leg of such consolidation and with 1.5343 support intact, such rise could still continue for 1.7043 resistance. But after all, strong resistance should be seen between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside. On the downside, break of 1.4230 support will be the first signal of down trend resumption and will turn focus to 1.3503 low for confirmation.

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Japan Sold 692.5 Billion Yen in March to Weaken Currency From Postwar High

Japan sold 692.5 billion yen ($8.4 billion) from Feb. 25 to March 29, the Ministry of Finance said in Tokyo today, showing the nation’s efforts to bring the currency down from a postwar high that threatened a recovery from its biggest-ever earthquake.

The yen climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade. The currency had risen on prospects Japanese investors would repatriate assets to pay for rebuilding.

“The intervention’s impact has been huge,” Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank, said before the Finance Ministry released the data. “It’s not only stemmed the yen’s gain, but also sent a clear message that they will step into the market should the yen rapidly strengthen beyond 80 per dollar. That’s significant.”

The yen traded at 82.92 per dollar at 11:07 a.m. in London from 82.89 in New York yesterday, and compared with 82.98 on March 10, a day before the magnitude-9 temblor struck. The currency was at 117.86 per euro from 117.10, down from 114.49 on March 10.

G-7 finance chiefs said in a joint statement on March 18 they will “provide any needed cooperation” with Japan. “We will monitor exchange markets closely and will cooperate as appropriate,” the statement also said. The G-7 members hadn’t stepped in the market together since September 2000 when they sought to support the euro as it tumbled in its second year of existence.

September Intervention

Japan unilaterally sold 2.12 trillion yen in foreign- exchange markets from Aug. 28 through Sept. 28 in its first intervention since 2004 to keep the yen from reaching its previous postwar high of 79.75 per dollar reached in April 1995.

The Bank of Japan pumped 40 trillion yen into the banking system in successive one-day emergency cash operations from March 14 to March 22 to try to settle financial markets after the quake. The Japanese government said there’s no evidence insurance companies were repatriating assets from abroad due to the risk of radiation leaks from a quake-crippled nuclear plant.

Totan Research Co. had estimated that the BOJ may have spent about 690 billion yen when it intervened in the currency markets on March 18, based on the central bank’s holdings of government securities. The BOJ’s debt assets temporarily increase when Japan intervenes because the government sells bills to the bank to obtain funds for intervention, said Izuru Kato, chief market economist at Totan Research in Tokyo.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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Sarkozy Backs Broader Role for Yuan as Geithner Urges Flexibility at G-20

French President Nicolas Sarkozy said the yuan should be in the International Monetary Fund’s Special Drawing Rights, a unit of account derived from the value of the dollar, yen, pound and euro. Photographer: Qilai Shen/Bloomberg

The U.S. and France signaled openness to a greater role for the yuan while stressing the importance of exchange-rate flexibility as Group of 20 officials met in China to discuss the international monetary system.

French President Nicolas Sarkozy said the yuan should be in the International Monetary Fund’s Special Drawing Rights, a unit of account derived from the value of the dollar, yen, pound and euro. U.S. Treasury Secretary Timothy F. Geithner said world powers’ currencies should be included “over time” so long as they have flexible exchange rates and free capital flows.

Chinese officials said that the yuan’s value wouldn’t be a topic at today’s seminar in Nanjing and Geithner didn’t refer to the currency directly in his prepared remarks. At the same time, he said the mismatch between flexible currencies and the “tightly managed” exchange rates of some emerging economies is the most important problem to solve in the international monetary system.

“China will continue to proceed with currency reform at its own pace” and regardless of Sarkozy and Geithner’s comments, said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., who formerly worked for the International Monetary Fund and the European Central Bank.

The yuan touched 6.5488 per dollar in Shanghai today, the highest in 17 years. The U.S. describes the currency as still “substantially undervalued,” with American lawmakers arguing that gives China, the world’s biggest exporter, an unfair advantage in global trade.

‘Overwhelming’ Support

The Special Drawing Rights basket is reviewed every five years by the IMF’s executive board, and the most recent changes took effect in January. The next review will be in 2015, according to the Washington-based fund’s website.

Jim O’Neill, chairman of Goldman Sachs Asset Management, said the “overwhelming” view at today’s event seemed to be that the yuan should be included earlier than the IMF procedures may currently allow. His view is that the currency doesn’t need to be fully convertible and should be brought in “now.”

Sarkozy said that imbalances under existing monetary arrangements indicate the need for a “more flexible system” rather than a return to fixed or managed exchange rates.

G-20 finance chiefs, central bankers including the European Central Bank’s Jean-Claude Trichet and private economists are meeting for the one-day seminar that Sarkozy initiated on altering the monetary system to reduce the risk of a repeat global financial crisis.

IMF’s Role

The French president said that the IMF should have a bigger role in supervising nations’ balance of payments and reserves to help limit risks.

In October 2008, after the collapse of Lehman Brothers Holdings Inc., the volatility of the world’s major currencies rose to the highest level since at least 1992, according to a JPMorgan Chase & Co. index. Price swings also increased in May last year because of Europe’s debt turmoil and this month because of Japan’s earthquake.

The Group of Seven nations intervened to weaken Japan’s yen after the March 11 disaster. Sarkozy suggested today that a broader group should monitor currency markets.

Today’s meeting at the Purple Palace resort is being attended by economists including Nobel laureate Robert Mundell. It’s intended to lay the groundwork for an agreement at the G-20 summit in Cannes, France, in November that would lead to a more “stable and resilient” monetary order, Sarkozy said.

‘Financial Protectionism’

With France holding the presidency of the G-20 this year, Sarkozy has made the monetary system one of his priorities. He said today that without extra rules for foreign-exchange regimes, there is a risk of more conflict over currencies.

Sarkozy recalled the G-20’s unity at the height of the global financial crisis in 2009. Now, nations pursuing their own interests risk a “proliferation of unilateral measures during crises resulting in a new financial protectionism in which all economies suffer,” he said.

A gathering of G-20 finance ministers in February underscored the difficulties, with China resisting the inclusion of foreign-exchange reserves as a yardstick for gauging global imbalances. Sarkozy views China’s decision to host today’s event as a first step toward a more flexible yuan that should result in its inclusion in the IMF’s currency basket.

Created in 1969, Special Drawing Rights serve as international reserve assets and represent potential claims on usable currencies of IMF members. As of March 30, one SDR was the equivalent of $1.5797.

Capital Flows

“Currencies of large economies heavily used in international trade and financial transactions should become part of the SDR basket,” Geithner said. “To achieve this objective, the concerned countries should have flexible exchange-rate systems, independent central banks and permit the free movement of capital flows.”

An SDR system without the yuan would be “ridiculous” and lack legitimacy, People’s Bank of China adviser Li Daokui said in Nanjing.

Chinese President Hu Jintao told Sarkozy yesterday in Beijing that China views the internationalization of the yuan as inevitable, with only the pace of the move in question, a French official said.

Officials including French Finance Minister Christine Lagarde are discussing topics including “shortcomings in the international monetary system” and dealing with volatile capital flows, according to the schedule for the conference at Nanjing, a city on the Yangtze River, about 170 miles (270 kilometers) from Shanghai.

U.S. Monetary Policy

Nations including Brazil, China and South Korea have argued that U.S. monetary easing has added to the threat of inflows of capital fueling inflation and asset bubbles. Ahead of today’s meeting, Xu Hongcai, a Chinese state economist, revived complaints about U.S. monetary policy in a paper that said the world had fallen into a “dollar trap.” Xu is an official at the China Center for International Economic Exchanges, the co- host of the Nanjing event.

China has an extra stake in the U.S. maintaining the value of the dollar as the biggest foreign holder of Treasuries, owning more than $1.1 trillion of the securities. China’s build- up of a world-record $2.85 trillion of foreign-exchange holdings, driven by trade surpluses and limits on gains in the yuan, highlights imbalances blamed for contributing to the global financial crisis.

--James Hertling, Michael Forsythe, Kevin Hamlin, Bonnie Cao in Nanjing and Zheng Lifei in Beijing. Editors: Paul Panckhurst, Sunil Jagtiani

To contact the Bloomberg News staff on this story: James Hertling at jhertling@bloomberg.net

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

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Soybeans Gain on Speculation Lower U.S. Sowing, Brazil Rain May Cut Supply

Soybeans gained on speculation that reduced planting in the U.S., the world’s largest exporter, and rain in Brazil that is slowing collection of the oilseeds will curb production.

The area planted with soybeans in the U.S. may total 76.79 million acres this year, compared with the Department of Agriculture’s February estimate of 78 million acres, according to the average forecast of 32 analysts surveyed last week by Bloomberg News. Rain in Brazil, the third-biggest shipper of the oilseeds, has delayed the harvest and may curb yields.

“The Brazilian situation is still a major issue, and the continuing rain is still holding exports down,” said Jonathan Bouchet, an analyst at broker OTCex Group in Geneva. Investors may be buying contracts ahead of the USDA report, set to be released at 8:30 a.m. in Washington, expecting planting estimates to be lower than previously forecast, Bouchet said.

Soybeans for May delivery gained 6 cents, or 0.4 percent, to $13.78 a bushel by 10:07 a.m. London time on the Chicago Board of Trade. The most-active contract is set for a 1.8 percent loss this quarter, the first in three.

“Soybean values are sitting just under resistance levels,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA), said today in a report. “A low-acreage estimate should be enough to push the market through these,” he wrote, referring to points where investors may sell contracts.

The U.S. is estimated to account for 39 percent of global corn harvests in the 2010-2011 season, 35 percent of soybean output, and 28 percent of world wheat exports, according to USDA estimates on March 10.

Expand Plantings

Wheat futures were little changed on speculation that farmers in the U.S., the world’s largest shipper, may expand plantings, easing supply concerns.

Sowing of the grain may reach 57.2 million acres, up from the USDA’s estimate last month of 57 million acres, and 53.6 million acres a year ago, according to a Bloomberg News survey last week.

Wheat for May delivery dropped 1 cent, or 0.1 percent, to $7.2625 a bushel in Chicago. Futures have dropped 8.6 percent this quarter, the first such loss in four.

Corn for May delivery gained 0.2 percent to $6.6475 a bushel in Chicago, taking the quarterly gain for the most-active contract to 5.7 percent. Futures jumped 93 percent in the past year as production lagged behind demand, draining global stockpiles.

Areas seeded with the grain in the U.S., the largest grower and exporter, may climb to 91.751 million acres from 88.192 million last year, according to the Bloomberg survey. That would be the biggest since 2007 and the second-largest since 1944.

“The grains are holding pretty well following that Japanese quake, as they are expected to boost imports very soon,” Bouchet said. “But for today, most traders are waiting for the USDA report to come out.”

To contact the reporter on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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Euro Rises Versus Dollar After Inflation Accelerates; Norway's Krone Gains

The euro strengthened against the dollar and the yen after euro-region inflation unexpectedly accelerated in March, bolstering the case for the European Central Bank to raise interest rates next week.

The 17-nation currency remained higher against most its major counterparts after Ireland announced that four of the country’s banks need to raise 24 billion euros ($34 billion) of additional capital. The dollar weakened as fewer Americans filed jobless benefits applications last week before the March employment report tomorrow. Norway’s krone rose to a two- and one-half-year high against the dollar as oil prices advanced and retail sales exceeded forecasts.

“As risk is being put back on, the euro is benefitting as the market looks forward to interest-rate expectation, regardless of what their economy is doing, the Irish stress test or any banking issues,” said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo New York. “Not only is the euro resilient against the dollar, it’s kicking everyone’s tail.”

The euro climbed 0.4 percent against the dollar to $1.4185 as of 11:41 a.m. in New York. It appreciated 0.3 percent to 117.42 yen and reached 117.90 yen.

Japan’s currency was little changed at 82.78 per dollar. It earlier depreciated to 83.21, the weakest since March 11, when Japan was struck by its biggest recorded earthquake.

Futures Bets

The shared currency earlier pared gains against the greenback after Anglo Irish Bank Corp. Chief Executive Officer Mike Aynsley said he’s “not sure we’ll get details” of plans for a funding facility for Irish banks after results of the stress tests.

Inflation in the 17-nation euro region quickened to 2.6 percent in March from 2.4 percent in February, European Union estimates showed today. That’s the fastest pace since October 2008, and exceeds the ECB’s 2 percent limit for a fourth month. Economists had forecast inflation to hold steady.

“Consumer price data is outweighing Portugal and Ireland,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “It adds supports to the euro.”

The euro is the second-best performer, after the Swedish krona, in the past quarter, according to Bloomberg Correlation Weighted Indexes, which tracks nine-developed market currencies. It has gained 3.6 percent against nations like the U.S., Canada and Britain.

Trichet Stand

ECB President Jean-Claude Trichet signaled on March 3 that policy makers may raise interest rates at their April 7 meeting. The implied yield on the three-month Euribor contract expiring in December rose three basis points to 2.09 percent today, as investors added to bets that rates will rise.

“The rate differential is being borne out more by the fact that the Fed is still printing money,” said Derek Halpenny, European head of currency research at Bank of Tokyo in London, referring to the Fed’s bond-buying program. “That tells you how far away we are from a shift in yields, and that is what’s dictating the dollar selling at the moment.”

U.S. jobless claims fell by 6,000 to 388,000 in the week ended March 26, Labor Department figures showed today in Washington. Nonfarm payroll are forecast to increase by 190,000 in March, according to the median estimate of 83 economists. The unemployment rate is projected to remain at 8.9 percent.

The Dollar Index, which InterContinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.3 percent to 75.894. It approached a 15-month low of 75.249 reached on March 22 and headed for a 4.1 percent decline this quarter. The gauge is weighted 57.6 percent to moves in the euro.

Krone Performs

The Norwegian krone was the best performer against the dollar today, reaching a two and a half year high after retail sales in February were greater than expected. The krone appreciated 0.8 percent to 5.53083 per dollar after reaching 5.51028, the strongest since September 2008.

Crude oil rose 1.4 percent to $105.75 a barrel in New York. Norway, the world’s sixth-largest oil exporter.

Norges Bank, which has kept its benchmark rate at 2 percent since May last year, signaled this month it may start raising borrowing costs earlier than previously indicated to quell a credit-driven surge in property prices.

The yen headed for an 8.4 percent quarterly loss against the euro and 2 percent decline versus the dollar as Japan sold 692.5 billion yen ($8.4 billion) from Feb. 25 to March 29, the Ministry of Finance said in Tokyo today.

Yen Declines

The Japanese currency climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade.

Australia’s dollar reached a record versus the U.S. currency after a government report showed retail sales increased in February by more than economists forecast. Sales rose 0.5 percent last month, the Bureau of Statistics said today, surpassing the 0.4 percent increase projected by economists.

The Aussie was 0.2 percent stronger at $1.0353, after rising to $1.0362, the strongest level since the currency was freely floated in 1983.

China’s yuan rose to a 17-year high as G-20 finance chiefs are meeting in Nanjing, China. The yuan gained as much as 0.12 percent to 6.5478 per dollar, the strongest level since the country unified official and market exchange rates in 1993.

China may face pressure from nations including the U.S., India and Brazil to allow a stronger yuan, a seminar initiated by French President Nicolas Sarkozy on reshaping the global monetary system. former U.S. Trade Representative Susan Schwab said.

“My guess is that the conversations will take place, but they will take place quietly,” Schwab, a strategic adviser at law firm Mayer Brown LLP, told Bloomberg Television from Washington.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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Gold Heads for Longest Run of Quarterly Gains in 3 Decades on Libya, Debt

Gold rose in New York, heading for the longest streak of quarterly gains in more than three decades, as fighting in Libya and concerns about European debt spurred demand for an alternative investment.

Troops loyal to Muammar Qaddafi forced Libyan rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces. Gold futures reached a record $1,448.60 an ounce on March 24 as fighting in Libya, the Japanese nuclear crisis and concerns about European debt boosted demand for a protection of wealth.

“Given the unrest in the Middle East and North Africa region, increasing debt issues in the euro zone and the environment of historically low interest rates, gold and silver should continue to remain underpinned and test towards recent highs,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold futures for June delivery rose $14.80, or 1 percent, to $1,439.70 an ounce at 10:06 a.m. on the Comex in New York. Prices are up 1.3 percent this quarter. A 10th quarterly increase would be the best run of gains since at least 1975. The metal for immediate delivery in London was 1.1 percent higher at $1,438.40.

Libyan Foreign Minister Moussa Koussa quit Qaddafi’s government as rebels were forced to abandon much of the territory they captured after the U.S.-led air campaign against Qaddafi’s army began almost two weeks ago. The fighting in Libya is the most violent seen in more than two months of popular uprisings across the Middle East and North Africa.

Portuguese Debt

Standard & Poor’s this week cut credit ratings for Greece and Portugal, and the cost of insuring Portuguese government debt reached a record according to CMA prices, as speculation mounted the nation will be forced to restructure its borrowings.

Tokyo Electric Power Co. has been spraying water on the reactors at the Fukushima Dai-Ichi plant damaged after this month’s earthquake and tsunami in Japan. Work to repair the plant’s monitoring and cooling systems has been hampered by discoveries of hazardous radioactive water. The government hasn’t ruled out pouring concrete over the whole facility as one way to shut it down, Chief Cabinet Secretary Yukio Edano said.

Gold and silver are being supported by “inflation, geopolitical and euro zone debt concerns,” analysts at GoldCore Ltd. in Dublin said in a report.

Inflation Accelerates

European inflation unexpectedly accelerated to 2.6 percent in March, the fastest in more than two years, the European Union’s statistics office said today.

Gains were limited this quarter on signs the U.S. economy is improving, boosting investor appetite for higher-yielding assets like stocks. St. Louis Federal Reserve Bank President James Bullard yesterday said the central bank may need to begin pulling back from record levels of monetary accommodation even amid uncertainties in Japan and the Middle East.

Silver for May delivery in New York rose 1.1 percent to $37.91 an ounce. It reached $38.18 on March 24, the highest level since February 1980, the year futures reached a record $50.35. Prices are up 23 percent this year, heading for a ninth straight quarterly advance, the best run of gains since at least 1975.

An ounce of gold bought as little as 37.72 ounces of silver in London today, the lowest level since October 1983, data compiled by Bloomberg show. Silver is used more in industry than gold.

“Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices,” GoldCore analysts said. With gold near a record, “silver is the cheap alternative to gold and an attractive store of value.”

Palladium for June delivery was up 1.6 percent at $769.95 an ounce, and is down 4.2 percent this quarter. Platinum for July delivery gained 0.5 percent to $1,782.80 an ounce. Prices are up 0.3 percent this quarter.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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Commodities Heading for a Third Quarterly Advance on Recovery, Oil's Surge

Commodities headed for a third quarterly advance as the global economy extended its recovery, and as crude oil climbed on concern that conflict in Libya and unrest in the Middle East would curb supplies.

Raw materials measured by the Standard & Poor’s GSCI Spot Index of 24 futures increased 0.2 percent to 712.61 at 1:42 p.m. in Singapore, extending its gain to 13 percent this year. Oil jumped 15 percent, cotton increased 35 percent, silver gained 22 percent and lean hogs rose 28 percent in the past three months.

Fighting in Libya, the toppling of leaders in Tunisia and Egypt and protests in countries from Bahrain to Syria drove crude oil past $100 a barrel this year. Floods in Australia and dry weather in China threatened crops, while Japan’s worst earthquake on record spurred speculation of increased commodity demand for rebuilding and food. That offset concern over a potential growth slowdown in China, the biggest commodity user, as the government seeks to tame inflation.

“We had a significant change in the overall environment, with some unexpected introduction of external risk,” said Yingxi Yu, Barclays Capital’s commodities analyst in Singapore.

Oil climbed 0.3 percent to $104.56 a barrel today, heading for its third quarterly increase on concern supplies will be reduced by an escalating conflict in Libya. Troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces.

Military Action

Commodities will “attract inflows” on strong emerging market growth and inflation risks and as investors seek to hedge against “tail events” such as military action in the Middle East and Africa and the nuclear accident in Japan, Michael Lewis, head of commodities research at Deutsche Bank AG, wrote in a quarterly report yesterday.

Gold for immediate delivery jumped to a record $1,447.82 an ounce on March 24 and silver surged to a 31-year high of $38.165 an ounce as investors sought precious metals to protect their wealth from geopolitical risk and rising energy costs. Gold traded at $1,427.65 and silver at $37.6850 today.

“The big picture is that the global economy is continuing to recover,” Pu Yonghao, Hong Kong-based chief investment strategist at UBS Wealth Management, said in a Bloomberg Television interview. “Emerging markets continue to remain strong although inflation is a problem.”

The LME index of six industrial metals is up 0.9 percent this year, led by tin. The metal increased to a record $32,799 a metric ton on Feb. 15 and copper touched an all-time high of $10,190 a ton on expectations supply will trail demand.

Slowdown Risk

Crude oil prices at more than $100 a barrel, the potential for further monetary tightening in China and the debt crisis in Europe may weigh on the global recovery, analysts said.

“We’re already starting to see some demand destruction,” said Francisco Blanch, Bank of America Merrill Lynch’s head of commodities research.

China’s central bank boosted banks’ reserve-requirement ratios eight times and raised interest rates three times since the start of 2010 to cool the economy and tame inflation. The People’s Bank of China may raise interest rates again in early April, according to Citigroup Inc.

“If China over-tightens and this leads to a faster than expected slowdown, there is some downside risk but it shouldn’t be overstated,” said Barclays’s Yu. Europe’s “economy is not on a strong footing and the sovereign debt issue is not over.”

The debt crisis which began in Greece persists as Portugal had its credit rating cut this week, after the country’s parliament rejected a deficit-cutting plan, sparking the resignation of Prime Minister Jose Socrates on March 23.

In Ireland, top finance officials will today seek to show investors, taxpayers and the rest of the euro region that the banking crisis in the country might be nearing an end.

Central Bank Governor Patrick Honohan will publish the results of a third round of stress tests on the country’s banks at 4:30 p.m. in Dublin. Shortly afterwards, Finance Minister Michael Noonan will set out how more capital will be raised.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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

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Commodities Heading for a Third Quarterly Advance on Recovery, Oil's Surge

Commodities headed for a third quarterly advance as the global economy extended its recovery, and as crude oil climbed on concern that conflict in Libya and unrest in the Middle East would curb supplies.

Raw materials measured by the Standard & Poor’s GSCI Spot Index of 24 futures increased 0.2 percent to 712.61 at 1:42 p.m. in Singapore, extending its gain to 13 percent this year. Oil jumped 15 percent, cotton increased 35 percent, silver gained 22 percent and lean hogs rose 28 percent in the past three months.

Fighting in Libya, the toppling of leaders in Tunisia and Egypt and protests in countries from Bahrain to Syria drove crude oil past $100 a barrel this year. Floods in Australia and dry weather in China threatened crops, while Japan’s worst earthquake on record spurred speculation of increased commodity demand for rebuilding and food. That offset concern over a potential growth slowdown in China, the biggest commodity user, as the government seeks to tame inflation.

“We had a significant change in the overall environment, with some unexpected introduction of external risk,” said Yingxi Yu, Barclays Capital’s commodities analyst in Singapore.

Oil climbed 0.3 percent to $104.56 a barrel today, heading for its third quarterly increase on concern supplies will be reduced by an escalating conflict in Libya. Troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces.

Military Action

Commodities will “attract inflows” on strong emerging market growth and inflation risks and as investors seek to hedge against “tail events” such as military action in the Middle East and Africa and the nuclear accident in Japan, Michael Lewis, head of commodities research at Deutsche Bank AG, wrote in a quarterly report yesterday.

Gold for immediate delivery jumped to a record $1,447.82 an ounce on March 24 and silver surged to a 31-year high of $38.165 an ounce as investors sought precious metals to protect their wealth from geopolitical risk and rising energy costs. Gold traded at $1,427.65 and silver at $37.6850 today.

“The big picture is that the global economy is continuing to recover,” Pu Yonghao, Hong Kong-based chief investment strategist at UBS Wealth Management, said in a Bloomberg Television interview. “Emerging markets continue to remain strong although inflation is a problem.”

The LME index of six industrial metals is up 0.9 percent this year, led by tin. The metal increased to a record $32,799 a metric ton on Feb. 15 and copper touched an all-time high of $10,190 a ton on expectations supply will trail demand.

Slowdown Risk

Crude oil prices at more than $100 a barrel, the potential for further monetary tightening in China and the debt crisis in Europe may weigh on the global recovery, analysts said.

“We’re already starting to see some demand destruction,” said Francisco Blanch, Bank of America Merrill Lynch’s head of commodities research.

China’s central bank boosted banks’ reserve-requirement ratios eight times and raised interest rates three times since the start of 2010 to cool the economy and tame inflation. The People’s Bank of China may raise interest rates again in early April, according to Citigroup Inc.

“If China over-tightens and this leads to a faster than expected slowdown, there is some downside risk but it shouldn’t be overstated,” said Barclays’s Yu. Europe’s “economy is not on a strong footing and the sovereign debt issue is not over.”

The debt crisis which began in Greece persists as Portugal had its credit rating cut this week, after the country’s parliament rejected a deficit-cutting plan, sparking the resignation of Prime Minister Jose Socrates on March 23.

In Ireland, top finance officials will today seek to show investors, taxpayers and the rest of the euro region that the banking crisis in the country might be nearing an end.

Central Bank Governor Patrick Honohan will publish the results of a third round of stress tests on the country’s banks at 4:30 p.m. in Dublin. Shortly afterwards, Finance Minister Michael Noonan will set out how more capital will be raised.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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

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U.S. Stocks Fluctuate as Jobless Claims Top Economist Estimates

David Sokol, former Midamerican Energy Chairman David Sokol. Photographer: Daniel Acker/Bloomberg

U.S. stocks fluctuated at the end of the biggest first-quarter rally in 13 years as higher oil and metal prices drove commodity producers higher, while consumer companies and banks slumped.

Chevron Corp. (CVX) added 0.9 percent as oil headed for a third quarterly gain in New York. Berkshire Hathaway Inc. (BRK/A) lost 1.6 percent as David Sokol, once a candidate to succeed Warren Buffett as the head of the investment firm, resigned after helping to negotiate the acquisition of a company whose shares he had purchased. Carmax Inc. (KMX) slumped 7.1 percent after the largest U.S. seller of used cars said gross margin dropped.

The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,327.48 at 11:14 a.m. in New York. The Dow Jones Industrial Average rose 4.73 points, or less than 0.1 percent, to 12,355.34. Equity index futures retreated before the open of exchanges after first-time claims for unemployment insurance topped economists’ estimates.

“You had the weekly jobless claim numbers slightly weaker, so you don’t have anything helping the market here,” said Timothy Ghriskey, chief investment officer at the Solaris Group LLC in Bedford Hills, New York, which manages $2 billion. “The market also had quite a recovery here since mid-March and there could be some profit-taking today as we end the quarter.”

The S&P 500 advanced 5.6 percent in this quarter through yesterday and is poised for its biggest gain in the January- March period since 1998. An earthquake and tsunami in Japan and concern that revolts in the Middle East and northern Africa will curb global growth dragged the S&P 500 as much as 6.4 percent lower from its high for the year on Feb. 18 through March 16. The gauge has recovered most of that loss, trimming its drop from its 2011 high to 1.1 percent.

First-Quarter Gains

The S&P 500 usually climbs further following first-quarter gains similar to this year’s, according to Birinyi Associates Inc. The index rises about 7.1 percent in the final three quarters of years following January-March gains of 5 percent to 7 percent, Birinyi data dating back to 1928 show.

The benchmark gauge of U.S. stocks is trading for about 13.7 times its companies’ estimated operating earnings, compared with an average multiple of 18.1 times reported profits over the last decade, data compiled by Bloomberg show.

Jobless claims fell by 6,000 to 388,000 in the week ended March 26, Labor Department figures showed. The median forecast of economists in a Bloomberg survey was for a decline to 380,000 claims. The report comes before tomorrow’s monthly government report on non-farm payrolls, expected to show that the economy added 190,000 jobs in March.

European Bonds

Other reports showed U.S. factory orders unexpectedly fell 0.1 percent after a 3.3 percent gain in January, the Commerce Department said today. The Institute for Supply Management- Chicago Inc.’s business barometer fell in March. The Bloomberg Consumer Comfort Index rose for the first time in five weeks to minus 46.9 in the period ended March 27 from a seven-month low of minus 48.9 the prior week.

European stocks slipped as the bonds of the region’s most- indebted nations sank and the cost of insuring against a Portuguese default jumped to a record as Ireland prepared to give banks more aid, deepening concern over Europe’s debt crisis.

“There are clearly quite a few risks out there that might hurt growth, not just in the U.S. but also the rest of the world,” Philippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets, said in a Bloomberg Radio interview.

Energy Companies Gain

Energy companies in the S&P 500 added 0.4 percent as a group as oil jumped 1.8 percent to $106.18 a barrel amid concern that the Libyan conflict will prolong production cuts. Chevron advanced 0.9 percent to $108.93.

Berkshire Hathaway Class B shares fell 1.6 percent to $84.11. Sokol bought about 96,000 Lubrizol Corp. shares in January before recommending the company as a takeover target, Buffett, Berkshire’s chairman and chief executive officer, said late yesterday in a statement. Sokol had initiated confidential talks with Lubrizol the month before. Berkshire agreed to buy the firm for $9 billion on March 14.

Carmax slumped 7.1 percent to $32.13 after declining 7.9 percent, the most intraday since Dec. 21. The largest U.S. seller of used cars said gross margin for the fourth-quarter fell to 14.2 percent from 14.5 percent in the year-ago period.

American International Group Inc. (AIG) fell 2.7 percent to $35.09 after the Federal Reserve Bank of New York said it has declined the insurer’s $15.7 billion offer to purchase the residential-mortgage backed securities owned by the central bank’s Maiden Lane II LLC rescue fund.

To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net

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

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