Japan's June Corporate Goods Price Index: Summary (Table)

By Harumi Ichikura

July 10 (Bloomberg) -- Following is the summary table for the Corporate Goods Price Index from the Bank of Japan in Tokyo. (Index 2005=100)

===============================================================================
                       June     May    April   March   Feb.    Jan.    Dec.
                       2008    2008    2008    2008    2008    2008    2007
===============================================================================
                       -------------Month-on-Month Percent Change-------------
Corporate goods prices   0.8%    1.2%    0.7%    0.6%    0.5%    0.2%    0.4%
export prices            2.7%    1.8%    2.4%   -3.0%    0.4%   -2.4%    0.5%
import prices            7.4%    4.3%    4.9%   -2.7%    1.6%   -2.3%    4.1%
                      ---------------Year-on-Year Percent Change--------------
Corporate goods prices   5.6%    4.8%    3.9%    3.9%    3.5%    3.0%    2.7%
Export prices           -4.2%   -5.6%   -5.9%   -6.8%   -5.2%   -5.7%   -2.0%
Import prices           17.0%   10.8%   10.0%    8.3%   11.0%    7.1%   12.8%
                      ------------------------Yen level-----------------------
Yen                     106.9   104.2   102.5   101.0   107.2   107.7   112.4
MoM percent change       2.6%    1.6%    1.6%   -5.9%   -0.4%   -4.2%    1.0%
===============================================================================

SOURCE: Bank of Japan http://www.boj.or/jp/en

To contact the reporter on this story: Harumi Ichikura in Tokyo at hichikura@bloomberg.net





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Ito Says Japan Should Make $33 Billion Sovereign Fund

By Ron Harui and Liza Lin

July 10 (Bloomberg) -- Japan should start a sovereign wealth fund with about $33 billion in assets, using interest earned on its $1 trillion of foreign reserves, said Takatoshi Ito, a member of a government advisory committee.

The fund would invest in higher-yielding assets overseas including equities, Ito said in a Bloomberg Television interview in Singapore. It needs to be set up ``as soon as possible'' to avoid exchange-rate fluctuations that may hurt the reserves, which are second only to those of China, he added.

Ito has scaled back his plan since suggesting a $700 billion fund a year ago because of opposition from the Ministry of Finance. Since then the value of the $592 billion that Japanese investors hold in U.S. Treasuries has been eroded by the dollar's 12 percent drop against the yen. Japan has also lagged behind China, which set up a fund to manage $200 billion of its $1.68 trillion of reserves in September.

``My proposal is to take interest income separate from foreign reserves, accumulate it and manage it more actively,'' said Ito, a member of Prime Minister Yasuo Fukuda's key economic panel. ``The reserves are very exposed to currency and interest- rate risks in the future, so this is not desirable.''

He estimates that the government receives interest payments of about 3.5 trillion yen ($33 billion) a year on the reserves, which are held in highly-liquid assets such as Treasuries.

Assets managed by sovereign wealth funds will triple to more than $10 trillion by 2015, International Financial Services London said in March.

Funds' Rising Influence

The funds invested $58 billion in the first quarter, more than they spent from 2000 to 2005, according to a report by Cambridge, Massachusetts-based Grail Research, a unit of consulting firm Monitor Group.

The funds' rising influence has caused U.S. and European lawmakers to call for greater transparency about their investments and motives. The U.S. Senate Banking Committee held a hearing last month on concerns that the funds may be buying stakes in American companies for political reasons. The European Commission in February called for an international accord to limit the political influence of the funds.

Finance Minister Fukushiro Nukaga said in March the ministry focuses on liquidity and safety in managing the reserves. His ministry has said the money should be used in case Japan needs to intervene in the currency markets.

`Huge Carry Trade'

The finance ministry is ``opposed to doing anything about foreign reserves,'' said Ito, who described the current investment strategy as ``basically a huge carry trade.''

In such trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits. The benchmark interest rate is 0.5 percent in Japan, compared with 2 percent in the U.S., 8.25 percent in New Zealand and 12.25 percent in Brazil.

The yen has risen against 12 of the 16 most-active currencies in the past year as deepening credit-market losses prompted investors to cut carry trades. The currency traded at 106.83 per dollar as of 10:10 a.m. in Tokyo from 106.76 late in New York yesterday. It reached 95.76 on March 17, the strongest since Aug. 15, 1996.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Liza Lin in Singapore at llin15@bloomberg.net



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Asian Currencies: Korean Won Gains on Intervention Speculation

By Aaron Pan and Kim Kyoungwha

July 10 (Bloomberg) -- Asian currencies advanced, led by South Korea's won, on speculation the government is intervening to strengthen the currency and curb inflation.

The won rose for a fourth day as Finance Minister Kang Man Soo pledged again today the government will tackle risks stemming from higher oil costs, accelerating inflation and turmoil in financial markets. The Bank of Korea kept interest rates on hold at 5 percent today. Six of the 10 most-traded Asian currencies outside of Japan rose.

``There's been around-the-clock intervention from the government to propel the won higher,'' said Kim Sung Soon, a currency dealer at Industrial Bank of Korea in Seoul. ``It's a blanket policy from spot to forward markets.''

South Korea's currency gained 0.5 percent to 999.75 against the dollar as of 1:09 p.m. local time, according to Seoul Money Brokerage Services Ltd. The government's won buying amounted to at least $5 billion yesterday alone, Kim said.

As part of efforts to support the won, South Korea may allow foreign banks operating in the nation to borrow more from overseas and help increase dollar inflows, the Herald Business newspaper reported yesterday.

Elsewhere, the Singapore dollar added 0.2 percent to S$1.3607, the Taiwan dollar was little changed at NT$30.401 and Thailand's baht fell 0.1 percent to 33.67 versus the dollar. Vietnam's dong traded at 16,846.50 from 16,845.50 yesterday.

Indonesia's rupiah advanced to the highest level in three months on speculation the central bank wants a stronger currency to help temper inflation.

`Still Aggressive'

The currency rose 0.5 percent in the past five days as a decline in oil prices from last week's record $145.85 a barrel eased concern that state finances will deteriorate. Bank Indonesia Governor Boediono said yesterday his focus was on maintaining economic stability rather than growth and he would use exchange and interest rates to tame inflation.

``Even if the rupiah is strengthening, our central bank is still aggressive to defend the rupiah, to make the currency stronger,'' said Iwan Ridwan Gunandar, a currency dealer at PT Bank Niaga in Jakarta. ``Government finances will also be better if oil prices go down.''

The currency rose as high as 9,161 per dollar, the strongest since April 8, before trading at 9,167 from 9,173 late yesterday, according to data compiled by Bloomberg. The rupiah may trade between 9,150 and 9,200 today, Gunandar said.

Malaysia's ringgit

Malaysia's ringgit gained as investors shunned the U.S. currency on concern a deepening housing-market slowdown will lead to more losses at mortgage-finance companies.

The ringgit rose for a sixth day after U.S. stocks tumbled yesterday, pushing the Standard & Poor's 500 Index into a bear market for the first time since 2002. The currency also advanced on speculation Asian central banks will buy their currencies, emulating South Korea, to help stem inflation.

``The broad dollar-weakness is coming back again and it's supportive of the ringgit trades,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Korea's moves to intervene are giving some optimism'' that other central banks will do the same, he said.

The ringgit traded at 3.2425 per dollar versus 3.2432 late yesterday, according to data compiled by Bloomberg. The currency may advance to 3.2350 today, Yahya said.

Malaysia's currency is headed for the longest winning streak since April 2007 on speculation Bank Negara will raise its overnight policy rate this month after saying consumer prices may have climbed more than 6 percent in June, the most in 10 years.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.



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Yuan's Advance May Slow in Fourth Quarter, Bank of China Says

By Judy Chen

July 10 (Bloomberg) -- The yuan's gains will slow in the fourth quarter as authorities rely more on interest rates and less on currency appreciation to cool inflation, according to Bank of China Ltd., the nation's largest foreign-exchange trader.

The central bank will shift its policy later this year because a stronger currency will risk hurting exports, Shi Lei, a foreign-exchange analyst at Bank of China, wrote in a report dated yesterday. The yuan has strengthened 6.5 percent versus the dollar this year, almost matching the advance in all of 2007, as China seeks to lower import costs and stem inflation stoked by record oil prices.

``The yuan's appreciation can only curb a 20 percent gain in oil prices,'' Beijing-based Shi said. ``The side effects are a sharp drop in exports and a steep rise in imports, crippling China's manufacturers.''

The currency may rise 2 percent to 6.72 per dollar by the end of this quarter, and a further 1 percent in the fourth quarter to end the year at 6.65, Shi forecast. The currency closed at 6.857 in Shanghai yesterday, according to data compiled by Bloomberg.

Premier Wen Jiabao and Vice Premier Wang Qishan last week visited exporters in Jiangsu, Shanghai and Shandong, listening to their concerns about a decline in global demand, the state- run Xinhua news agency reported on July 5 and 6.

Exports may have risen 22.4 percent in June from a year earlier after gaining 28.1 percent in May, according to the median estimate of economists surveyed by Bloomberg News before the government reports the data by July 15. Imports increased 37.1 percent, according to a separate Bloomberg survey, as a stronger yuan boosted the spending power of Chinese consumers and companies.

`Rate Hike'

``The central bank will turn to rate hikes in the fourth quarter as inflationary pressure increases,'' Shi said in an interview yesterday, confirming the contents of the report. ``A rate hike may hurt exporters less than the yuan's rise.''

Non-deliverable forward contracts show traders have pared bets on the extent of the yuan's appreciation in the next 12 months. The currency will rise 5.7 percent to an implied rate of 6.49 a dollar in the next year, versus a prediction of 6.2755 on April 7, Bloomberg data show.

China has refrained from raising interest rates this year following six increases in 2007. It allowed the yuan to strengthen to curb the price of imports, and also ordered banks to set aside more deposits as reserves five times this year. Inflation quickened to 8.1 percent in the first five months, exceeding the government's target of 4.8 percent for this year.

The yuan was the best performer against the dollar in the past three months of the 10 most-active Asian currencies excluding the yen.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.



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Gilts to Beat U.S., German Debt After Worst Quarter in 14 Years

By Agnes Lovasz

July 10 (Bloomberg) -- U.K. government bonds are poised to rebound from their worst quarter in more than 14 years, beating U.S. and European debt, as the slowest economic growth since 1992 keeps the Bank of England from raising interest rates.

The slumping economy will drive 10-year gilt yields down to 4.74 percent by year-end, from about 4.87 percent yesterday, according to the median estimate of 13 strategists surveyed by Bloomberg. Pacific Investment Management Co., manager of the world's largest bond fund, says U.K. debt looks ``attractive.'' Invesco Asset Management is going ``overweight'' gilts, meaning it plans to hold a greater percentage of the debt than the benchmark indexes it uses to measure performance.

``The U.K. economy will do pretty badly and this will support the bond market,'' said Axel Blase, a Frankfurt-based fund manager at Invesco, which holds about $160 billion in fixed- income assets.

The worst property slump in 30 years, the highest mortgage rates since 2000 and rising fuel and food costs in Europe's second-biggest economy are stoking demand for the safest assets. The economy will expand 1.7 percent in 2008, according to the median estimate of 31 strategists surveyed by Bloomberg, down from 3 percent last year. The risk of a recession is ``serious,'' the British Chambers of Commerce said July 8.

The slump is likely to keep the Bank of England from raising its key interest rate from 5 percent at a meeting today even after inflation accelerated in May to 3.3 percent, the fastest pace in more than a decade. All but one of 49 economists surveyed by Bloomberg predict the bank will leave rates unchanged.

`Extremely Weak'

The housing market will be ``extremely weak'' and policy makers won't ``overreact'' to inflation, central bank Governor Mervyn King said in testimony to Parliament on June 26. The European Central Bank lifted its main rate to 4.25 percent on July 3, its first increase in a year.

``The U.K. looks attractive against Europe,'' said Myles Bradshaw, a fund manager at Pimco in London. ``In terms of rate expectations they are pretty similar but the difference is that the U.K. has got a much weaker growth outlook than Europe. Our sense is that the BOE won't need to raise rates as the weakness in growth will pull inflation down.''

The yield on the 10-year gilt fell 2 basis points to 4.87 percent yesterday. The 4.75 percent security due March 2018 rose 0.17, or 1.7 pounds per 1,000-pound ($1,981) face amount, to 100.98. The two-year yield was little changed at 4.88 percent.

Inflation Threat

The 17 basis-point decline in the 10-year yield forecast in the Bloomberg survey would give an investor buying $10 million of the securities today a profit of about $336,000 by Dec. 31. Ten- year bund yields will drop 11 basis points, producing a gain of $287,000 on the same amount invested, while 10-year Treasury yields will rise 13 basis points for a profit of $68,000, based on Bloomberg surveys.

Yields have further to rise because inflation will accelerate as fuel and food prices increase, according to Philipp Brugger, a fixed-income manager in Frankfurt at DWS Investment GmbH. The firm oversees about $52 billion.

``I don't want to enter the market now because in the short term high inflation numbers will limit a rally in gilts,'' he said. ``They'll get cheaper and cheaper.''

Expectations for inflation over the next decade have risen to the highest level since April 1997, according to the difference in yield, or spread, between the 10-year gilt and its index-linked counterpart. The so-called breakeven rate was at 3.97 percent today, from 3.69 percent on May 26.

Second-Quarter Losses

Bonds around the world fell in the second quarter as crude oil rose to records, stoking speculation that central banks would have to raise borrowing costs to quell inflation. Oil climbed 35 percent in the three months through June, the biggest quarterly gain in nine years, and traded at an all-time high of $145.85 a barrel on July 3.

Investors holding U.K. government debt lost 3.9 percent in the three months through June 30, the worst return since the second quarter of 1994, according to Merrill Lynch & Co.'s U.K. Gilts Index. U.S. bonds lost 2.1 percent, according to Merrill's Treasury Master Index, and euro-region debt tumbled 3 percent, Merrill Lynch's EMU Direct Government Index showed.

The prospect of rising rates pushed the yield on U.K. two- year notes to 5.57 percent on June 16, the highest level since August, just as the global credit markets started to seize up and investors sought the safety of government debt.

Traders pared bets on rate increases, with the implied yield on the September short-sterling futures contact falling 28 basis points to 5.94 percent since June 16. Policy makers will reduce rates by 25 basis points to 4.75 percent by year-end, according to the median estimate of 16 economists surveyed by Bloomberg.

``The Bank of England would like to avoid any rate hike due to the dismal growth outlook,'' said Martin Hochstein, a fund manager in Frankfurt at Cominvest Asset Management, which oversees about $27 billion of bonds. He also said gilts are ``looking attractive.''

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net



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King's Hands `Tied' as U.K. Economy Edges Closer to a Recession

By Brian Swint and Jennifer Ryan

July 10 (Bloomberg) -- Bank of England Governor Mervyn King may have little option other than to stand by and watch as the U.K. edges closer to its first recession in a generation.

Inflation accelerated to the fastest pace in more than a decade in May, making it harder for King to cut interest rates and help an economy threatened by falling house prices, record oil costs and tighter credit. Policy makers will probably leave the key rate at 5 percent today, according to all but one of the 49 economists in a Bloomberg News survey.

``Their hands are tied,'' said Amit Kara, an economist at UBS AG in London. ``The outlook for growth has clearly deteriorated, but on the flip side inflation is set to get worse. It's hard to see them doing anything other than holding rates unchanged.''

Prime Minister Gordon Brown's popularity is waning as the deteriorating economy erodes consumer confidence and companies including homebuilder Persimmon Plc and Barclays Plc cut jobs. King, chairing the first rate decision of his second term today, has already signaled that Britons should brace themselves for a decline in living standards.

Inflation accelerated to 3.3 percent in May, exceeding the government's upper 3 percent limit for only the second time in a decade. At the same time, surveys show services and manufacturing industries contracted in June, billionaire investor George Soros says a recession is ``likely'' and Lehman Brothers Holdings Inc. says the economy may start to contract this quarter.

``I know that some families will find it particularly difficult,'' said King, who doesn't expect a recession, on June 19. ``These changes to our spending power and to the housing market are real shifts that, although not easy to accept, we cannot side-step.''

Voter Confidence

Brown is losing Britons' confidence as growth slows. Seventy- two percent of respondents said they're not satisfied with his performance since he succeeded Tony Blair last year, according to a poll by Populus Ltd. published July 7. A separate poll last week showed voters are more concerned about inflation now than at any time since 1990.

Consumer confidence fell to the lowest in 18 years last month, GfK NOP Ltd. says. Marks & Spencer Group Plc lost a quarter of its value on July 2 after saying trading conditions won't improve for two years. Persimmon, the U.K.'s second-biggest homebuilder, said July 8 it's eliminating 1,100 jobs.

``A recession could really put the bank into a tough position,'' said Peter Newland, an economist at Lehman.

Raising Rates

For now, King and his colleagues on the nine-member Monetary Policy Committee are signaling they're more likely to follow the European Central Bank and raise rates rather than cut them. At least four policy makers have said they considered increasing borrowing costs last month and King said June 26 that inflation may exceed 4 percent this year.

The ECB last week raised its benchmark lending rate to a seven-year high of 4.25 percent. The Federal Reserve's benchmark stands at 2 percent.

``The bank isn't in a position where it feels it can cut rates,'' said David Page, an economist at Investec Securities in London. ``They're going to have to leave rates on hold until next year.''

U.K. borrowing costs are rising independently of monetary policy as the credit squeeze deepens. Brown was forced to nationalize Northern Rock in February and Bradford & Bingley Plc, the biggest lender to U.K. landlords, was last week unable to complete a rights offer to boost capital.

`Grave Concern'

Banks are also refusing to pass on the Bank of England's three rate cuts since December, threatening to exacerbate the housing slowdown. The rate on a home loan fixed for two years rose to 6.63 percent in June, the highest since February 2000, the Bank of England said yesterday.

Labour Party Deputy Leader Harriet Harman, standing in for Brown in Parliament yesterday, said ``the current state of the U.K. housing market is of grave cause for concern.''

``We are at a dangerous point when businesses are starting to act like a recession is due,'' said Adam Lent, head of economics at the Trades Union Congress, which represents 7 million workers and is calling for a rate cut today. ``The MPC needs to send a clear message that it is doing all it can to ease the credit crunch.''

While King says a sharp slowdown could push inflation below its central 2 percent target, giving them room to ease policy, economists including Lehman's Newland say a contraction would create as many problems as it would solve.

``Once people feel like the economy is in a downward spiral it becomes harder to get the economy back on an even keel,'' said Newlannd. ``No one wants one.''

To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at Jryan13@bloomberg.net



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Dollar Is Little Changed Before Bernanke, Paulson Testimony

By Stanley White and Kosuke Goto

July 10 (Bloomberg) -- The dollar was little changed against the euro before Federal Reserve Chairman Ben S. Bernanke and U.S. Treasury Secretary Henry Paulson address U.S. lawmakers on their response to widening credit-market losses.

The U.S. dollar fell against Australia's currency as traders increased bets the Fed will keep interest rates on hold through 2008, boosting the appeal of higher-yielding assets. The British pound declined on speculation the Bank of England will keep interest rates unchanged today to curb inflation, increasing the risk that the economy will enter a recession.

``Bernanke may mention the downside risk of the U.S. economy,'' said Masafumi Yamamoto, head of foreign-exchange strategy in Tokyo at Royal Bank of Scotland Group Plc, the world's fifth-largest currency trader. ``That would reduce expectations of the Fed's rate increases this year and be a catalyst for dollar-selling.''

The dollar traded at $1.5725 per euro at 12:38 p.m. in Tokyo from $1.5743 yesterday in New York. The U.S. currency bought 106.87 yen from 106.76. The yen was at 168.04 per euro from 168.06.

The pound fell to $1.9815 from $1.9832. Against the euro, it was little changed at 79.36 pence.

The Australian dollar rose to 95.90 U.S. cents from 95.70 cents after data showed employment climbed by 29,800 in June, more than the median estimate in a Bloomberg News survey. The currency also advanced to 102.51 yen from 102.16 on speculation the Reserve Bank of Australia will keep interest rates at 7.25 percent this year, compared with benchmark rates of 0.5 percent in Japan and 2 percent in the U.S.

Congressional Testimony

Bernanke and Paulson are scheduled to testify before Congress at 10 a.m. in Washington. The Fed may extend securities dealers' access to direct loans from the central bank into next year, the central bank head said on July 8, as the collapse of the U.S. subprime mortgage market made banks reluctant to lend.

The dollar has fallen 11 percent against the euro since September, when the Fed made the first of seven reductions in its target lending rate to avert a recession. Futures contracts on the Chicago Board of Trade show the odds that policy makers will keep borrowing costs unchanged this year rose to 32 percent from 7 percent a month ago.

Fannie Mae, one of the two-largest U.S. mortgage finance companies, said it sold $3 billion of two-year debt yesterday at record yield spreads over benchmark rates on concern that the company doesn't have enough capital to see out the credit crunch.

Dollar Selling

Global banks and securities firms have reported losses of more than $400 billion as the subprime mortgage market collapsed.

``Fannie Mae could be the catalyst for further dollar declines,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan's largest brokerage. ``The U.S. financial sector isn't healthy. Things are likely to get worse, and that isn't fully reflected in the value of the dollar.''

The U.S. currency may fall to $1.58 per euro and 106 yen today, he forecast.

U.K. inflation accelerated to the fastest pace in more than a decade in May, making it harder for the BOE to cut rates. The central bank will leave the key rate at 5 percent today, according to all but one of the 49 economists in a Bloomberg survey before the decision at noon in London.

``We remain short in pound-dollar,'' BNP Paribas SA analysts led by Hans-Guenter Redeker wrote in a research note yesterday. ``Inflation should continue to push higher in the near term while the growth outlook continues to deteriorate.''

ECB on Inflation

A short is a bet a currency will fall. Investors should sell the pound as long as it is below $1.9890 with a target of $1.95, according to the report.

European Central Bank President Jean-Claude Trichet told the European Parliament in Strasbourg, France, yesterday that the level of inflation is ``worrying.'' He also said it's important for the U.S. to repeat support for a strong currency.

Traders yesterday increased bets the ECB will raise borrowing costs again to curtail 4 percent annual inflation that is twice the central bank's 2 percent target. The implied rate on the December Euribor interest-rate futures contract rose 0.02 percentage point to 5.12 percent.

``The ECB will have no choice but to raise rates later on this fall,'' Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, said in an interview with Bloomberg Television. ``You'll see the euro-dollar break back above $1.60.''

Technical Analysis

The euro may rise to $1.5909 against the dollar should it stay above its five-day moving average, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.

The five-day moving average, currently at $1.5715, will provide a level of so-called support for the euro, Tokyo-based Hashimoto said, citing technical charts traders use to predict price movements. The target of $1.5909 will match a two-month high set by Europe's single currency on July 3. Support is an area where buy orders may be clustered.

``Should the euro break through its five-day moving average completely, it will likely challenge its July 3 high,'' said Hashimoto at the unit of Japan's largest publicly traded financial group.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net



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Euro May Advance to $1.5909 on Charts, Tokyo-Mitsubishi Says

By Kosuke Goto

July 10 (Bloomberg) -- The euro may rise to $1.5909 against the dollar should it stay above its five-day moving average, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.

The five-day moving average, currently at $1.5715, will provide a level of so-called support for the euro, Tokyo-based Hashimoto said, citing technical charts traders use to predict price movements. The target of $1.5909 will match a two-month high set by Europe's single currency on July 3. Support is an area where buy orders may be clustered.

``Should the euro break through its five-day moving average completely, it will likely challenge its July 3 high,'' said Hashimoto at the unit of Japan's largest publicly traded financial group.

Europe's 15-nation currency traded at $1.5728 against the dollar as of 11:55 a.m. in Tokyo, from $1.5743 late in New York yesterday. It reached a record high of $1.6019 on April 22.

Traders typically look for evidence of a currency's short- term trend by using the five-day moving average, and seek to predict its two- to three-week outlook by using the 21-day moving average. They use moving averages to identify levels of support, where they expect buying, or resistance, where they expect selling.

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

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.



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Macquarie Expects Gains in Soft Commodities on Global Demand

By Bernard Lo and Madelene Pearson

July 10 (Bloomberg) -- Macquarie Group Ltd., Australia's biggest investment bank, said global demand for food will continue to drive a rally in soft commodities.

``We're in the very early stages of an upward trend for soft commodities at the moment,'' Tim Hornibrook, director of the bank's pastoral services unit, said in an interview with Bloomberg Television today. ``Ultimately we feel the world needs food more than it needs oil, so we like the longer term fundamentals.''

The UBS Bloomberg Constant Maturity Commodity Index has gained 29 percent this year, compared with the 22 percent slump in Australia's benchmark stock index. Macquarie has established a fund to buy cattle and sheep farms in Australia.

``It's a very good time to be investing in agricultural assets, particularly with what's happening with financial assets in terms of the downward trend at the moment,'' he said today in Singapore. ``We feel the purest play is to go to the producers end and buy the farm land.''

Demand for beef is growing, driven by rising incomes in emerging markets, Hornibrook said. ``There's definitely more upside there,'' he said.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net; Bernard Lo in Hong Kong at blo2@bloomberg.net;



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Rubber Drops Fourth Day as Falling Stocks Raise Demand Concern

By Aya Takada

July 10 (Bloomberg) -- Natural rubber futures in Tokyo fell for a fourth day and traded near a four-week low as declines in global stock markets added to concern that slowing economies may curb demand for the commodity used to make car tires.

Futures dropped as much as 0.6 percent, retreating further from a 28-year high reached last month. U.S. stocks tumbled yesterday, sending the Standard & Poor's 500 Index into its first bear market since 2002 on concern continued turmoil in financial markets will erode earnings.

``Futures came under pressure from plunging U.S. stocks,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone. ``U.S. car sales are falling amid an economic slowdown, leading to decreased demand for rubber.''

Rubber for December delivery lost 0.5 percent to 335.3 yen a kilogram ($3,140 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract reached a 28-year high of 356.9 yen on June 30, as record oil boosted production costs for competing synthetic rubber.

Rubber futures also dropped on expectations supplies will rise in coming months with the approach of the high production season in Thailand, the world's largest producer and exporter, Saito said.

Natural rubber stockpiles in China, the world's biggest consumer, rose by 1,735 tons to 18,960 tons, the Shanghai Futures Exchange said July 4 based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin. It was the second weekly gain.

Rubber inventories monitored by the Tokyo Commodity Exchange fell to 6,587 tons on June 30 from 6,862 tons on June 20, the bourse said today in a faxed statement. The volume was the lowest since Nov. 10.

September-delivery rubber on the Shanghai Futures Exchange, the most-active contract, was little changed at 26,800 yuan ($3,914) a ton at 10:59 a.m. local time.

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



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Platinum Futures Gain as Japan Wholesale Inflation Rate Climbs

By Dave McCombs

July 10 (Bloomberg) -- Platinum futures in Tokyo gained as a Bank of Japan report showed wholesale inflation jumped to a 27- year high last month, boosting demand for a hedge against rising consumer prices.

Metal for immediate delivery has jumped 30 percent this year, driven partly by concern soaring commodity prices will erode company profits, damp demand for equities and slash returns on bonds. Japanese producer prices for June climbed 5.6 percent from a year ago, the central bank said today.

``People are certainly concerned about rising food and energy prices and inflation, it's out of control,'' Peter McGuire, managing director at Commodity Warrants Australia, said today by phone. ``You've got to look at precious metals. There's nowhere else to turn.''

Platinum for June delivery in Tokyo gained 36 yen, or 0.5 percent, to 6,720 yen a gram ($1,957 an ounce) at the 11 a.m. break on the Tokyo Commodity Exchange.

Metal for immediate delivery rose $12 to $1,980.50 an ounce at 11:16 a.m. in Tokyo, 0.6 percent higher than yesterday in New York.

Japan's benchmark Nikkei 225 Stock Average has dropped 15 percent this year, while an index of Japanese government bonds with three to 10 years to maturity has dropped 0.09 percent.

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net



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China's Jinchuan Group Raises Nickel Price as Global Rates Gain

By Li Xiaowei

July 10 (Bloomberg) -- Jinchuan Group Co., Asia's biggest nickel producer, raised the price of the refined metal to reflect the increase in global rates.

The price was by lifted by 4,000 yuan, or 2 percent, to 175,000 yuan ($25,537) a metric ton effective today, according to a statement on the Web site of the company, which is based in the western province of Gansu.

To contact the reporter on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net;



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Gold Advances in Asia on Crude Oil Rebound, U.S. Dollar Outlook

By Iris Leung

July 10 (Bloomberg) -- Gold advanced for the second day in Asia after crude oil gained boosting the appeal of the precious metal as an inflation hedge.

Gold also rose on expectations the dollar may fall against the euro for a second day, increasing the appeal of bullion as a haven. Oil rose as much as 0.9 percent today.

``Gold is often viewed as a hedge against inflation and exchange rate movements,'' Michael Widmer, an analyst at Lehman Brothers Holdings Inc., said in a report e-mailed today. ``Movements of oil prices are an important determinant of inflation.''

Bullion for immediate delivery climbed as much as $2.38, or 0.3 percent, to $930.95 an ounce, and stood at $929.80 at 9:57 a.m. in Hong Kong. Silver traded little changed at $18.1425 an ounce.

The dollar may extend declines against the euro and yen on speculation losses will deepen at Fannie Mae and Freddie Mac, the largest U.S. mortgage finance companies. It traded at $1.5724 per euro from $1.5743 yesterday, and was at 106.80 yen from 106.76 yen at 9:58 a.m. Hong Kong time.

``We believe that even if the dollar may strengthen, gold prices are set to increase as we move into the fourth quarter this year, on continued difficulties in the global economy and a problematic risk environment,'' said Widmer.

Gold for August delivery gained 0.3 percent to $930.80 an ounce in after-hours electronic trading on Comex at 9:59 a.m. Hong Kong time, while gold for December delivery traded in Shanghai gained 1 percent to 205.60 yuan a gram ($933 an ounce) at the same time.

Gold for June 2009 delivery fell 0.2 percent to 3,222 yen a gram ($938 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

To contact the reporter for this story: Iris Leung in Hong Kong at Ileung7@bloomberg.net



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Australian S&P/ASX Falls to 2-Year Low on Credit Market Concern

By Shani Raja

July 10 (Bloomberg) -- The S&P/ASX 200 Index fell to its lowest in almost two years on concern financial losses will widen after U.S. mortgage-finance company Fannie Mae's borrowing costs surged on speculation it won't be able to fund its business.

Australia & New Zealand Banking Group Ltd., the country's third-largest lender, slumped the most in almost two weeks, while the nation's largest, National Australia Bank Ltd., posted its biggest drop since June 27.

The benchmark lost 84.60 points, or 1.7 percent, to 4,927.30 at 11:15 a.m. in Sydney, its lowest since July 19, 2006.

The S&P/ASX 200 has tumbled 28 percent since reaching a high on Nov. 1, 2007, on concern over the extent of U.S. subprime- related losses and consequent tightening of global credit markets.

``The markets are in a negative mindset,'' said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management in Sydney. ``Our banks are fundamentally solid, but that doesn't mean they won't go down further because they get dragged down with the rest of what's going on in the world.''

U.S. financial stocks had their biggest decline in six years yesterday after Fannie Mae paid a record yield over benchmark rates on $3 billion of two-year notes, fueling concern it doesn't have enough capital to weather the biggest housing slump since the Great Depression. The decline sent Standard & Poor's 500 Index 2.3 percent lower and into its first bear market since 2002.

Reserve Bank of Australia Governor Glenn Stevens said in a speech yesterday that the global shakeout from the credit squeeze has further to run as banks and securities firms report losses, cut workers and improve risk monitoring.

The following companies were among the biggest gainers and losers on the Australian stock exchange.

CSR Ltd. (CSR AU), Australia's third-largest maker if building products, slumped 34 cents, or 15 percent, to A$1.97, the most since 1987 and the biggest loser on the benchmark. The company said the housing industry is ``challenging'' as 12-year high interest rates dent confidence.

Metcash Ltd. (MTS AU), Australia's biggest grocery wholesaler, gained 4 cents, or 1 percent, to A$3.87, the highest since June 20. The company withdrew from bidding for a pharmaceuticals wholesaling unit of Primary Health Care Ltd. (PRY AU) after the antitrust regulator called for further submissions on the takeover.

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



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Japan's Chip Stocks Fall on Earnings Outlook; Developers Surge

By Masaki Kondo and Makiko Kitamura

July 10 (Bloomberg) -- Japan's chipmaker stocks fell on speculation a slowing global economy will crimp demand, while Urban Corp. led by property developers higher after BNP Paribas SA decided to buy its convertible bonds, allaying funding concern.

Elpida Memory Inc., Japan's largest maker of memory chips, sank to the lowest in four months after Merrill Lynch & Co. said global chip leader Intel Corp. may not beat earnings estimates. Urban, Japan's eighth-largest developer, surged the most in two years, while Creed Corp., a real-estate advisory company, headed for a two-week high after forecasting higher profit.

The Nikkei 225 Stock Average dipped 12.64, or 0.1 percent, to 13,039.49 at the 11 a.m. break in Tokyo. The broader Topix slid 0.62, or less than 0.1 percent, to 1,284.91. The Nikkei swung between a gain and loss 10 times.

``What have been considered fundamentals for investing are crumbling,'' said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co., which manages the equivalent of $54 billion. ``Now is the time to fasten your seatbelt and not move around too much.''

Corporate technology spending has fallen, and consumers in emerging markets have slowed purchases, hurting Intel's earnings, Merrill Lynch said yesterday. Cisco Systems Inc., the world's biggest maker of computer-networking equipment, may forecast revenue for next quarter that's less than analyst estimates, UBS AG said yesterday, sending the shares to a near two-year low.

Elpida, Japan's largest maker of computer-memory chips, dropped 3.8 percent to 3,030 yen, headed for the lowest since March 17. Advantest Corp., the world's biggest maker of memory- chip testers, fell 2.4 percent to 2,070 yen. Tokyo Electron Ltd., a semiconductor equipment maker, lost 1.2 percent to 5,730 yen.

Developers Surge

Electronics makers were the largest drag on the Topix, while developers posted the biggest gain among 33 industry groups.

Urban surged 18 percent to 245 yen, set for the sharpest advance since May 2006. BNP Paribas will proceed with the purchase of 30 billion yen ($281 million) worth of convertible bonds from Urban, the developer said yesterday. Urban plunged 28 percent on July 4 amid speculation the deal might not go through.

Creed soared 13 percent to 89,400 yen, en route to the biggest gain since April 2. Annual profit is expected to rise 8.3 percent this business year, after having fallen by almost a fifth in the previous period, the company said yesterday.

Nikkei futures expiring in September retreated 0.4 percent to 13,070 in Osaka and slumped 0.7 percent to 13,050 in Singapore.

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.



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Asian Stocks Gain, Reversing Decline; Banks, Steelmakers Climb

By Chua Kong Ho

July 10 (Bloomberg) -- Asian stocks rose, reversing earlier declines, led by financial companies and steelmakers.

Industrial & Commercial Bank of China Ltd. gained in Hong Kong and Posco, Asia's third-biggest steelmaker, surged the most in two months in Seoul.

The MSCI Asia-Pacific Index advanced 0.5 percent to 132.61 at 1:15 p.m. Tokyo time, reversing a loss of 0.6 percent.

Japan's Nikkei 225 Stock Average rose 0.5 percent to 13,120.50.

To contact the reporter for this story: Chua Kong Ho at in Shanghai or kchua6@bloomberg.net;



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Camaieu, Carrefour, Icade, Vet'Affaires: French Stocks Preview

By Alan Katz

July 10 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.

France's CAC 40 Index rose 64.05, or 1.5 percent, to 4,339.66 in Paris, gaining for a second time this week. The SBF 120 Index added 1.6 percent.

Air France-KLM Group (AF FP): Europe's biggest airline holds its annual shareholder meeting in Paris on July 10. The shares gained 26 cents, or 1.7 percent, to 15.48 euros.

Camaieu SA (AMA FP): The women's clothing retailer said first-half revenue rose 11 percent to 327.1 million euros. The shares closed unchanged at 230 euros.

Carrefour SA (CA FP): Europe's biggest retailer said second-quarter sales growth slowed as consumer spending dwindled in its domestic French market. Revenue rose 6 percent to 23.7 billion euros, less than the first quarter's 10 percent increase and missing the 24.2 billion-euro median estimate of six analysts. The shares added 81 cents, or 2.4 percent, to 34.45 euros.

Egide SA (GID FP): The producer of ceramic packages that protect electronic systems used by the U.S. Air Force reported a 20 percent increase in first-half revenue to 15.4 million euros. The shares closed unchanged at 8.99 euros.

Geci International SA (GECP FP): The aerospace services company agreed to buy a majority stake in Reims Aviation for 4.5 million euros in order to enter the airplane customization market. The shares added 22 cents, or 8.6 percent, to 2.77 euros.

Icade SA (ICAD FP): The real-estate investment trust controlled by France's Caisse des Depots et Consignations acquired four clinics near Paris from Generale de Sante SA (GDS FP) for 202 million euros. Icade shares gained 78 cents, or 1.1 percent, to 71.50 euros, while Generale de Sante closed unchanged at 13 euros.

Vet'Affaires SA (VET FP): The discount clothing retailer said second-quarter sales rose 1.1 percent to 23.8 million euros and forecast an increase in full-year revenue from 2007 levels. The shares closed unchanged at 18.72 euros.

To contact the reporter on this story: Alan Katz in Paris at akatz5@bloomberg.net.



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Experian Group, FirstGroup, Hays: U.K., Irish Equity Preview

By Kari Lundgren

July 10 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. markets today. Stock symbols are in parentheses and prices are from the last market close.

The benchmark FTSE 100 Index rose 89.1, or 1.6 percent, to close at 5,529.6. The FTSE All-Share Index gained 45.41 pence, or 1.7 percent, to 2,790.15.

Ireland's ISEQ Index climbed 126.67, or 2.7 percent, to close at 4,786.18.

U.K. Companies:

Barratt Developments Plc (BDEV LN): The U.K. homebuilder may announce agreements today extending the group's 400 million-pound ($792.4 million) debt repayment, the Financial Times reported. Barratt rose 15 pence, or 38.46 percent, to 54 pence.

Experian Group Ltd. (EXPN LN): The world's largest credit- checking company is releasing a trading update. Experian added 13.75 pence, or 4 percent, to 361.25 pence.

FirstGroup Plc (FGP LN): Britain's biggest train operator is releasing a trading update. FirstGroup lost 1.5 pence, or 0.3 percent, to 541 pence.

Hays Plc (HAS LN): The U.K.'s largest recruitment company is releasing a trading update. Hays dropped 1 penny, or 1.3 percent, to 78 pence.

Helphire Group Plc (HHR LN): The U.K. supplier of rental cars for motorists involved in accidents, said it would raise 45 million pounds ($89.1 million) in a share offer, while two executives would leave the company. Helphire increased 2.5 pence, or 2.5 percent, to 103 pence.

Rightmove Plc (RMV LN): Operator of the U.K.'s largest residential-property Web site was downgraded to ``sell'' from ``buy'' by analyst Anthony Chow at Canaccord Adams. Rightmove jumped 7 pence, or 2.9 percent, to 244.75 pence.

Spectris Plc (SXS LN): The maker of production-testing gear for clients including GlaxoSmithKline Plc is releasing a trading update. Spectris gained 19 pence, or 2.8 percent, to 687 pence.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net



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Buy Petrobras Preferred, Sell Common Becoming Top Brazil Trade

By Alexander Ragir

July 10 (Bloomberg) -- The best trade in Brazil may be buying preferred shares of Petroleo Brasileiro SA, the nation's biggest company, and betting its common stock will fall after international investors pushed up prices 19 percent since March.

Common shares of the Rio de Janeiro-based company, the world's fourth-largest oil producer by market value, cost 22 percent more than its preferred, the biggest price difference since at least 1994, according to data compiled by Bloomberg. Petrobras, as the company is known, rose to a record in May after announcing the largest oil discovery in the Western hemisphere in three decades.

The expanding gap prompted hedge funds Ciano Investimentos Gestao, Mercatto Gestao de Recursos and Neo Gestao de Recursos to bet in the past three weeks that prices will converge. Petrobras, the most heavily traded Latin American company on the New York Stock Exchange, is controlled by the government, so common shareholders get no say in company decisions and a sale is prohibited by Brazil's constitution.

``The premium for common shares isn't justified and we can't find any good reason that it widened so much,'' Felipe Taylor, a portfolio manager at Ciano Investimentos Gestao, the $142 million Sao Paulo hedge fund managed by former central bank chief economist Ilan Goldfajn. ``It's a good opportunity to short the common and buy the preferred.''

Short sellers borrow shares and sell them, hoping to replace the stock at a lower price and pocket the difference.

Investors outside Brazil mistakenly assume common shares of Petrobras are worth more than the preferred, even though the securities are virtually identical, according to Credit Suisse Group AG analyst Emerson Leite.

Biggest ADR

American depositary receipts on Petrobras common stock surged 81 percent in the past year, surpassing the 68 percent gain in the preferred ADRs. An average of 17.9 million common ADRs trade daily on the NYSE, more than double the preferred shares. That's the most of any Latin American company, according to data compiled by Deutsche Bank AG.

Petrobras's market value of $249.6 billion makes it the sixth-largest company in the world, according to data compiled by Bloomberg. The only bigger oil producers are Exxon Mobil Corp., based in Irvine, Texas, PetroChina Co., based in Bejing, and Moscow's OAO Gazprom.

The company gained worldwide attention in November when it said an offshore oil discovery may be the biggest since Mexico's Cantarell field in 1976. The Tupi field has 8 billion barrels of recoverable oil, Petrobras said in November, worth $1.1 trillion at current prices.

International Investors

``Foreigners like common shares,'' said Bruno Garcia, who helps oversee the equivalent of $5.5 billion as a hedge fund manager at BNY Mellon Arx in Rio de Janeiro and only holds preferred stock. ``That's all that's going on.''

Common shares at most companies are more attractive to investors because they give the right to vote in shareholder meetings, sell for more in takeovers and pay higher dividends, according to reports by Credit Suisse and Merrill Lynch & Co.

That's not the case with Petrobras, said Leite. What's more, preferred shares get ``priority'' for dividends, according to Petrobras's Web site. The 12-month dividend yield on Brazil- preferred shares is 1.89 percent, compared with the common's 1.54 percent yield, according to data compiled by Bloomberg.

Goldman's `Buy'

Daniella Marques, who manages the equivalent of $1.2 billion at Mercatto Gestao de Recursos in Rio de Janeiro, started selling short the locally traded common shares and buying preferred three weeks ago.

``You have a company that has such a low risk that it would be bought and the dividend is more in the preferred shares, so why would you ever pay 22 percent more for common shares?'' Marques said.

The difference between preferred and common prices of the locally traded shares and the American depositary receipts hit records June 30 after the Sao Paulo-listed common stock jumped by 2 percentage points more from a March 20 low. Goldman Sachs Group Inc. began coverage of Petrobras preferred ADRs with a ``buy'' recommendation on July 7, citing the discount to common shares even though differences are ``largely insignificant.''

The higher level of trading in Petrobras' common ADRs may be boosting the spread. The average three-month daily trading of common ADRs increased 57 percent from a year ago, compared with a 30 percent rise in average volume for the preferred ADRs.

Liquidity Concern

``It would be great to get the preferred shares if there was enough liquidity,'' said Mark Mobius, who oversees about $47 billion of emerging-market equities as executive chairman of Templeton Asset Management Ltd. in Singapore.

In Brazil, Petrobras preferred shares Petrobras trade almost seven times more than the common.

``When we see no reason for the spread widening, we mount a position,'' said Cristina Sarian, who helps manage $850 million at Neo Gestao de Recursos in Sao Paulo and began short-selling Petrobras common shares and buying its preferred shares three weeks ago. ``Nothing's changed with Petrobras, so there's no reason for the premium.''

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;



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Daily Forex Fundamentals | Written by Trade The News | Jul 10 08 04:22 GMT |
Asian Market Update
More evidence that China's overall trade surplus may have peaked

China's trade surplus falls -11.8% y/y in 1H08: (CH JUNE TRADE SURPLUS: $21.35B V $22.35B expected, $20.21B prior) China's imports outpaced exports once more, as they have all this year with the exception of March, providing more evidence that China's overall trade surplus may have peaked. - Aussie jobs market surprisingly strong during June: (AU JUNE EMPLOYMENT CHANGE: 29.8K V 10K expected, prior revised to -25.6K from -19.7K; UNEMPLOYMENT RATE: 4.2% V 4.3% expected, 4.3% prior; PARTICIPATION RATE: 65.3% V 65.3% expected, 65.2% prior) Analysts were quick to downplay the significance of the data, with many pointing out that statistical payback was to be expected after last month's shocker. 'You can't read too much into it,' said Adam Carr at UBS. 'The labor force is a lagging indicator, and the leading indicators of employment are telling us that things are going to moderate in second half of the year.' The AUD/USD was soft going into the number, but spiked from 0.9555 to 0.9615 in the moments after the release. It is currently hovering around 0.9595.

New Zealand manufacturing contracts for the third time in four months: (NZ JUNE BUSINESS NZ PMI: 45.7 V 47.9 prior, prior revised from 49.3; This is the second lowest result recorded since the survey began in 2002) The current run of manufacturing data is showing 'a more persistent trend downwards,' said Business NZ chief executive Phil O'Reilly. 'The first half of 2008 has been the toughest six months manufacturers have had to deal with for some time, with the possibility of ongoing contraction for the next half of 2008.'

Japanese wholesale price inflation at a 27yr high: (JP JUNE DOMESTIC CORPORATE GOODS PRICE INDEX: MOM: 0.8% V 0.6% expected, 1.1% prior; YOY: 5.6% V 5.3% expected, 4.7% prior) Analysts said that Japanese companies seem to be exhibiting a little more determination to pass on more of the cost increase, suggesting that continuous inflation pressure, coupled with a weakening economy, may make life difficult for the Bank of Japan. 'On top of rises in crude oil prices, some final goods prices are starting to increase so the upward price pressure may spread to consumer prices,' said Seiji Adachi at Deutsche.

Japan's current account narrows on a y/y basis for a third consecutive month: (JP MAY CURRENT ACCOUNT: ¥2.0T V ¥1.92T expected, ¥1.38T prior; ADJUSTED: ¥2.03T V ¥1.96T expected, ¥1.51T prior) Japan had a surplus of ¥2.0T in its current account, down -5.9% from a year earlier. Exports grew 4.2% during May, with solid demand from emerging Asia offsetting the impact of a U.S. slowdown. However, few analysts expect Japan's export momentum to continue, and the trade surplus is expected to deteriorate over the coming months as higher oil prices boost the value of imports.

Australia's median inflation expectations stays at a 15yr high: (AU JULY CONSUMER MEDIAN INFLATION EXPECTATION: 5.9% V 5.9% prior) The survey found that only 7.5% of the 1,200 respondents believed that inflation would come back down to within the RBA's target band of 2%-3% in the coming year, off from an 8.0% reading in June. 'Although inflationary expectations did not rise in July, the effect of income tax cuts and the path of crude oil prices will be significant factors in determining whether inflationary expectations fall in the next few months,' said Melbourne Institute research fellow Sam Tsiaplias.

Equities: At 0:04 EDT Japan's Nikkei is +0.56%, the S&P/ASX200 is -1.31%, South Korea's KOSPI is -0.10%, and the Shanghai composite index is -0.74%. The S&P500 futures contract gained +0.09% since the U.S. close, last trading at 1,249. Chipmakers and commodities related companies listed in Tokyo traded lower, dragging the benchmark Nikkei index down to 12,950 in mid morning. Since then the index has rebounded, with short-covering of financials pushing the index above 13,100. The S&P/ASX200 remains stuck below 5,000, with financials, retailers and miners generally trading lower. Technology companies and automakers pushed the KOSPI lower, while airlines listed in Shanghai also traded lower.

Commodities: Nymex crude oil gained +0.34% between 18:00 EDT and 0:03 EDT, last trading at $136.51/bbl. Spot gold gained +0.19%, last trading at $930.90/oz.

Trade The News Staff
Trade The News, Inc.



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Agrenco, BM&F, Tractebel Energia, Walmex: Latin Equity Preview

By William Freebairn and Paulo Winterstein

July 10 (Bloomberg) -- The following stocks may have significant gains or losses in Latin American markets. Symbols are in parentheses after company names, and stock prices are from the last session.

The MSCI index of Latin American shares fell 0.3 percent to 4,359.75 yesterday. Markets in Argentina and Brazil were closed yesterday for holidays.

Brazil

Agrenco Ltd. (AGEN11 BS): Noble do Brasil Ltda., the Brazilian unit of the third-largest U.S. offshore oil driller, is seeking to buy a stake in Brazilian agriculture company Agrenco on terms ``substantially equivalent'' to Louis Dreyfus & Cie.'s June 25 offer, Agrenco said yesterday in a Brazil regulatory filing. Closely held commodities trader Louis Dreyfus agreed to buy at least $33.5 million in a sale of 77.4 million or more new shares. Noble's offer is valid for seven days and includes payment to cover fines that would result from Agrenco deciding to not sell a stake to Louis Dreyfus, Agrenco said in the filing. Agrenco fell 0.7 percent to 1.40 reais.

Bovespa Holding SA (BOVH3 BS) and Bolsa de Mercadorias & Futuros-BM&F SA (BMEF3 BS): The merger between the operator of Latin America's largest stock and derivatives exchanges, respectively, was approved by regulators without restrictions, Reuters reported yesterday. Bovespa advanced 4.9 percent to 20 reais. BM&F rose 3.6 percent to 13.97 reais.

Tractebel Energia SA (TBLE3 BS): The Brazilian power generator controlled by Suez SA agreed to buy hydropower companies Tupan Energia Eletrica SA and Hidropower Energia SA for 203.9 million reais ($126.7 million) and will assume 110 million reais of the companies' debt. Tupan operates a 26.6 megawatt hydroelectric dam, and Hidropower runs a 23.7 megawatt dam, Tractebel said in a filing posted yesterday on Brazil's securities regulator Web site. Tractebel fell 1.5 percent to 22.60 reais.

Mexico

Wal-Mart de Mexico SAB (WALMEXV MM): Mexico's largest retailer said second-quarter net income rose 9 percent to 3.23 billion pesos ($313.5 million), more than the 3.19 billion peso average of five analyst estimates compiled by Bloomberg. Revenue increased 12 percent to 57.2 billion pesos, the company said in a statement e-mailed yesterday after markets closed. Walmex, as the company is known, fell 1 percent to 40.78 pesos.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net



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Daily Forex Market Commentary

Daily Forex Technicals | Written by Global Forex Trading | Jul 10 08 03:24 GMT |

The dollar's attempts to pad its gains were unsuccessful on Wednesday, as Iran's test of missiles triggered a knee-jerk reaction. The US currency sank broadly and my model went short. Firing nine missiles doesn't change a thing, but the US equity indices sinking into recession do. Thus, choppy trading should continue in FX.
Euro/dollar

Euro/dollar rallied on Wednesday, but remained stuck in an inside range. My model is now long, but with the market alternating up and down days, I'm not sure for how long. Expect choppy trading.

Immediate resistance is at 1.5765. Above 1.5820, euro/dollar faces key resistance at 1.5905.

Below 1.5710, support now comes at 1.5675. The next good levels are at 1.5630 and 1.5575.

Oscillators are mixed.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Dollar/yen

Dollar/yen fell on Wednesday, but once again didn't break any new ground. Expect more choppy trading today as well, but the upside seems limited.

Good support is at 106.75 from a 50-point pivot, which targets 106.25 and 107.25.

Initial resistance is at 107.25. Strong resistance iis at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

Oscillators are rising.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Sterling/dollar

Sterling/dollar rallied sharply and unexpectedly and obliterated losses made in the previous two days. My model is long, but the upside looks limited.

Initial resistance is seen at 1.9865. Above 1.9908, cable now faces distant resistance at 2.0004.

Below 1.9775, support is now seen at 1.9730. Distant support is now seen at 1.9650.

Oscillators are mixed.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc

Dollar/Swiss fell from a nearly two-week high and formed an incipient bearish reversal formation. Expect further choppy trading, but my model is now short.

Initial support is now seen at 1.0250. The next level is 1.0215. Distant support is seen at 1.0166.

Above 1.0320, resistance remains at 1.0415 and 1.0450. Distant resistance comes at 1.0540.

Oscillators are rising.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Cornelius Luca
Global Forex Trading
http://www.gftforex.com



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Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Jul 10 08 03:04 GMT |

EURUSD Outlook

The Euro was traded stronger against Dollar yesterday. The pair topped at 1.5750 and closed at 1.5738. We have a bullish channel on hourly chart. We might still in consolidation/correctional phase of bullish outlook, so the pair might make another attempt to push lower. As long as the pair move above 1.5650, the bias is up. My model for today is mixed with upside bias. CCI in neutral area on daily chart. A consistent move above 1.5750 could trigger further upside scenario.

EURUSD Daily Supports and Resistances:

S1= 1.5676
S2= 1.5614
S3= 1.5577
R1= 1.5775
R2= 1.5812
R3= 1.5874
GBPUSD Outlook

The Greenback slumped against Sterling yesterday. GBPUSD topped at 1.9837 and closed at 1.9835. The pair is making a new bullish channel on hourly and 4h chart. My model goes long targeting 1.9895. Immediate support is seen at 1.9780. CCI in overbought area in 4h chart so watch out for a minor downside pullback.

GBPUSD Daily Supports and Resistances:

S1= 1.9725
S2= 1.9615
S3= 1.9559
R1= 1.9891
R2= 1.9947
R3= 2.0057
USDJPY Outlook

The Japanese Yen recovered against Dollar yesterday. The pair bottomed at 106.68 and closed at 106.80. We have a valid bearish channel from last high on 16/06/2008 (108.58) on daily chart. My model is short, targeting 106.15. Immediate resistance is seen at 106.91. CCI heading down towards -100 line on daily chart.

USDJPY Daily Supports and Resistances:

S1= 106.43
S2= 106.06
S3= 105.45
R1= 107.41
R2= 108.02
R3= 108.39
USDCHF Outlook

The Swiss Franc recovered against US Dollar yesterday. The pair bottomed at 1.0276 and closed at 1.0284. The pair is making a new bearish channel on hourly chart. My model is short targeting 1.0215. Immediate resistance is seen at 1.0310. CCI in neutral area on daily chart.

USDCHF Daily Supports and Resistances:

S1= 1.0256
S2= 1.0228
S3= 1.0181
R1= 1.0331
R2= 1.0378
R3= 1.0406

FX Instructor LLC
www.fxinstructor.com



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FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | Jul 10 08 01:26 GMT |

Euro 1.5730

Initial support at 1.5651 (July 9 low) followed by 1.5606 (50.% retracement 1.5303 to 1.5910). Initial resistance is now located 1.5754 (July 7 high) at followed by 1.5910 (July 3 high).
Yen 106.85

Initial support is located at 106.25 (July 8 low) followed by 105.78 (Jul 3 low). Initial resistance is now at 107.76 (July 7 high) followed by 108.19 (Jun 26 high).
Pound 1.9820

Initial support at 1.9673 (July 9 low) followed by 1.9637 (61.8% retracement of 1.9410 to 2.008 rally). Initial resistance is now at 1.9834 (July 7 high) followed by 1.9849 (July 4 high)
Australian Dollar 0.9555

Initial support at 0.9477 (July 9 low) followed by 0.9459 (61.8% retracement of the 0.9328 to 0.9670 advance). Initial resistance is now at 0.9592 (July 9 high) followed by 0.9642 (July 7 high).
Gold 929

Initial support at 913.35 (Jul 8 low) followed by 885.1 (Jun 26 low). Initial resistance is now at 936.5 (July 4 high) followed by 946.5 (July 3 high).
Currency Sup 2 Sup 1 Spot Res 1 Res 2
EUR/USD 1.5606 1.5651 1.5730 1.5754 1.5910
USD/JPY 105.78 106.25 106.85 107.76 108.19
GBP/USD 1.9637 1.9673 1.9820 1.9834 1.9849
AUD/USD 0.9459 0.9477 0.9555 0.9592 0.9642
XAU/USD 885.10 913.35 928.00 936.58 946.50

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FTSE jumps 1.6% as banks and miners lead bounce

Wed Jul 9, 2008 12:13pm EDT
* FTSE 100 up 1.6 pct; analysts doubt rally's sustainability

* Banking stocks lead the upside after Fed comments

* Miners track rising metal prices, Alcoa results

By Michael Taylor

LONDON, July 9 (Reuters) - Britain's blue-chip index ended 1.6 percent higher on Wednesday as beaten-down banking stocks rebounded, while firmer metal prices buoyed miners.

The FTSE 100 .FTSE rose 89.1 points to 5,529.6 after falling 1.3 percent in the previous session, and is down 14.3 percent for the year to date.

But with data light and volumes thin, many market participants doubted the sustainability of the rise on the UK benchmark.

"Equity markets are reacting to the likelihood of recession. The U.S. economy is verging on recession and, as for the UK, a recession may be under way already," said Mike Lenhoff, chief market strategist at Brewin Dolphin.

"Interest rates and oil prices need to come down before confidence in equity markets returns," he said, cutting his year-end target for the FTSE 100 to 6,200 from 7,200.

Banks were the leading sector, accounting for 24 positive index points after Fed Chairman Ben Bernanke said on Tuesday the U.S. central bank may keep an emergency lending facility for big Wall Street banks open longer than it initially intended.

Barclays , Royal Bank of Scotland , HSBC , HBOS , Lloyds TSB and Standard Chartered advanced between 1 and 6.7 percent.

Mid-cap Bradford & Bingley , which has been battered by concerns over its future and the impact of a deteriorating UK economy, bounced 27.2 percent despite several investment banks cutting their price targets on the lender.

The Bank of England began a two-day rate-setting policy meeting and will announce its verdict on Thursday. Analysts expect the central bank to leave rates unchanged at 5 percent.

Miners tracked higher metal prices, with gold trading higher after news that Iran had test-fired nine long-range and medium-range missiles.

BHP Billiton , Rio Tinto , Vedanta Resources , Anglo American , Antofagasta , Ferrexpo and Xstrata were all up between 0.4 and 5.1 percent.

U.S. aluminium producer Alcoa also boosted sentiment after it posted stronger-than-expected results late on Tuesday.

Within the commodity sector, Tullow Oil added 0.5 percent after the oil explorer gave an optimistic outlook for reserves and for the production start-up at its main Ghana field and disclosed another discovery in Uganda.
In individual shares, London Stock Exchange jumped 10.3 percent to top the FTSE 100 leaderboard and recover some recent losses after the company said its revenue for the first quarter rose 8 per cent to 178 million pounds.

"Traders are speculating that losses in financial firms will not be as bad as initially feared," said David Evans, market analyst at BetOnMarkets.com. "Iran's testing of missiles has caused a small spike in crude oil prices back towards $140, but the reaction is small in comparison to previous gut-wrenching moves seen over the last fortnight."

BP , Shell and Petrofac all traded lower.

"In all it is a relatively slow day for global markets with most of the day's movement in Europe a reaction to the previous night's buying in the U.S.," added Evans. WPP Group reversed earlier losses to end up 1.2 percent after the world's second-largest advertising company launched a hostile bid worth 1.08 billion pounds ($2.13 billion) for British market research firm Taylor Nelson Sofres , which gained 10.7 percent as Germany's GfK Holdings said it was working on a rival cash offer.

Other media stocks boosted by the positive sentiment included ITV , BSkyB and Yell Group . (Additional reporting by Dominic Lau and Atul Prakash; Editing by Quentin Bryar)

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