Gross Likes Dollar More Than Euro for 1st Time on EU

By Gavin Finch

July 14 (Bloomberg) -- For three years euro bulls used the prospect of higher interest rates in Europe to justify the currency's 31 percent rally against the dollar. No more.

A growing number of the world's biggest investors say a slowdown in the region's economy may be more severe than in the U.S., forcing the European Central Bank to reverse this month's rate increase. By January, the euro will be lower against the dollar, yen and even the pound, according to the median estimate of strategists surveyed by Bloomberg. Bill Gross, manager of the world's biggest bond fund, turned bearish on the euro for the first time since the currency's inception in 1999.

``We might have hit a point where the euro doesn't have a lot to stand on,'' said Emanuele Ravano, co-head of European strategy in London for Gross's Pacific Investment Management Co., which runs the $129 billion Pimco Total Return Fund. ``The euro is ultimately very overvalued. It could be quite a bit lower at some point in time over the next couple of years.''

The euro fell as much as 1.7 percent to $1.5611 in the week following President Jean-Claude Trichet's comments on July 3 that he had ``no bias'' on further changes in borrowing costs after boosting the main refinancing rate to 4.25 percent from 4 percent. Before Trichet spoke the currency traded near a record high on speculation the ECB would signal more than one rate increase was needed to tame inflation.

Hedge Funds Flee

As the odds that the ECB will lift rates dwindled, hedge funds sold the 15-nation common currency, according to Zurich- based UBS AG, the world's second-biggest currency trader behind Deutsche Bank AG in Frankfurt. New York-based Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, said it's ``increasingly confident'' the euro will fall.

``Capital flows look less supportive for the euro and, with the ECB out of the way, the interest-rate policy would also seem to support our view,'' Stephen Hull, a strategist for Lehman in London, wrote in a research note July 11.

The euro is 30 percent overvalued versus the dollar, based on purchasing power parity, according to Newport Beach, California-based Pimco. That's more than any other currency among the Group of 10 richest nations. Purchasing power parity accounts for differences in the exchange rates of national currencies.

``When a currency gets between 25 percent and 30 percent overvalued it tends'' to revert to the mean, said Ravano. The euro may drop to $1.535 from $1.5938 last week, he said.

Burger Test

The Economist's Big Mac Index, which compares prices for the McDonald's Corp. product globally, shows the hamburger is 22 percent more expensive in Europe than in the U.S.

``We're not far off the capitulation point for the euro,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the investment-banking unit of Credit Agricole SA, France's second-biggest bank. The euro will fall to $1.52 by the end of the third quarter and to $1.45 by April 2009, he said.

The European single currency's gain since December 2005 was spurred by eight increases in the ECB's key refinancing rate.

French President Nicolas Sarkozy complained that the currency's strength was harming the competitiveness of European exporters and risked damaging economic growth. Exports from Germany, Europe's largest economy, declined 3.2 percent in May, the most in almost four years, the Federal Statistics Office in Wiesbaden said July 9.

Gross domestic product in the 15 nations sharing the euro will slow to 1.4 percent in 2009, from 1.7 percent this year, according to the median forecast of 29 economists in a Bloomberg survey. The U.S. economy will grow 1.8 percent next year, from 1.5 percent this year, according to the median of 78 estimates.

`Sharp Slowing'

There are ``concrete signs of a sharp slowing of euro-zone growth,'' Robert Sinche, head of global currency strategy at Bank of America Corp. in New York, wrote in a note dated July 11. Investors should sell the euro against the dollar, he said.

It may be too soon to bet against the euro because the U.S. economy is also slowing, according to Derek Halpenny, head of currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest bank by market value. The euro will rise to $1.62 by the end of the third quarter, before falling back to $1.58 in the final three months of the year, he said.

``We're bullish on the euro,'' Halpenny said. ``The real story over the next three months is going to be the obvious and continued downturn in the U.S. economy compared to Europe.''

The ECB will cut the key rate a quarter-percentage point to 4 percent by the end of June 2009, according to the median of 30 economists in a Bloomberg survey. The Federal Reserve has lowered its target rate for overnight loans seven times since September to 2 percent.

`Incredibly Bearish'

``The rally in the euro is over and we're now incredibly bearish on the currency given the outlook for Europe's economy,'' said Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, the most accurate foreign-exchange forecaster in a 2007 Bloomberg survey.

The euro will slide to $1.50 by the end of the third quarter and $1.45 by year-end, he said. Redeker is more bearish than most strategists. The common European currency will weaken 5.7 percent to $1.50 by year-end, and slip to $1.45 by mid-2009, according to the median of 37 analysts surveyed by Bloomberg.

``At current levels the euro is an awfully expensive currency,'' said Stephen Jen, chief currency strategist at Morgan Stanley in London and a former Fed economist. ``We see fair value for the currency at around $1.30.''

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net



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Dollar Index May Decline to Record Low on Charts, Goldman Says

By Kosuke Goto

July 14 (Bloomberg) -- The U.S. Dollar Index may extend its decline to reach a record low of 70.70 should it close below so- called support at 71.82, said Kevin Edgeley, a technical analyst at Goldman Sachs Group Inc., the world's biggest securities firm.

The index, which tracks the performance of the dollar against six of the nation's biggest trading partners, has fallen through the lower boundary, or support, of an ascending channel that connects the lows of March 17, April 22 and May 22, London- based Edgeley said. The next support level at 71.82 is the low set on May 22, he said. Support is a level where buy orders may be clustered.

``The Dollar Index has broken below the shallow bull channel base line again, testing wave support at 71.82,'' Edgeley wrote in a research note yesterday. ``A close below would suggest a retest of the all-time lows at 70.70.''

The U.S. Dollar Index traded on ICE Futures in New York fell as low as 71.77, the weakest since April 23, before trading at 72.03 as of 1:03 p.m. in Tokyo from 72.10 on July 11. The index declined to 70.70 on March 17, the lowest since it was first compiled in 1973. The index has fallen 6 percent this year.

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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Zinc Rallies for Fourth Day in Asia After China Cuts Production

By Glenys Sim

July 14 (Bloomberg) -- Zinc advanced for a fourth day in Asia, extending the 15 percent gain made in the past three days, after some Chinese zinc producers agreed Saturday to cut output.

Zinc and lead smelters in China, the world's largest producer of the metals, agreed to cut output by 10 percent from July to September to reduce costs and ease a power shortage, the Shanghai Nonferrous Metals Trade Association said in a statement.

``The problem zinc faces is oversupply, and this is what will keep the rally in check,'' said Li Zhicheng, an analyst at Zhujiang Futures Co. in Guangzhou. ``It's not just ample supply of the metal itself. In China, the concentrates market is also well supplied at the moment.''

Zinc for delivery in three months on the London Metal Exchange gained as much as 4.7 percent to $2,120 a metric ton, and traded at $2,080 at 1:23 p.m. Singapore time. The contract has declined 12 percent since the beginning of the year.

Zinc for delivery in September, the most-active contract, rose as much as 345 yuan, or 2.2 percent, to 16,150 yuan ($2,364) a ton on the Shanghai Futures Exchange, and stood at 16,120 yuan at the 11:30 a.m. local time break. The contract has gained 5.5 percent in the past two days.

The International Lead and Zinc Study Group forecasts the metal used to galvanize steel will have a surplus of 215,000 tons this year as global output expands.

Lower Forecasts

Macquarie Bank Ltd. and UBS AG lowered their zinc price forecasts this year, citing weak demand and adequate supply.

Zinc will average 95.3 cents a pound ($2,100 a metric ton) this year, down 11 percent from a previous forecast of 107.6 cents, Macquarie said today. Zinc will average 97 cents a pound this year, UBS said July 11. Its previous forecast was $1.15.

``We continue to see 2008 and 2009 as a challenging time for zinc producers, with rapid growth in global zinc mine production and slow growth in demand, leaving both the concentrates and the metal markets in surplus,'' Macquarie analysts led by Jim Lennon said in a report today.

Prices of zinc have also fallen as stockpiles more than doubled in the past year. Inventories tracked by the London Metal Exchange stood at 151,000 tons July 11, up from 69,825 tons a year ago.

Among other LME-traded metals, copper gained 0.7 percent to $8,325 a ton, aluminum added 0.5 percent to $3,333, lead was up 3.8 percent at $2,040.25, and nickel was 1.4 percent higher at $21,900 a ton. Tin had not traded as of 1:20 a.m. in Singapore.

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



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Global Demand for Coconut Oil May Exceed Exports, Producers Say

By Luzi Ann Javier

July 14 (Bloomberg) -- Global demand for coconut oil will exceed exports in the second half, boosting prices, as restaurant companies including McDonald's Corp. shift to trans-fat-free oils, according to a forecast from the biggest producers' group.

Demand from buyers including the U.S. may reach 1.58 million metric tons, while exports may total 1.01 million tons, according to the Asian and the Pacific Coconut Community, which comprises 15 exporting nations and accounts for about 90 percent of global output. Coconut oil is used in cooking and beauty creams.

Increased demand, partly spurred by health concerns, has boosted coconut oil prices 60 percent in the past year. So-called trans-fat oils, or vegetable oils like soybean oil which are treated with hydrogen to extend the shelf life of products like fried foods, have been linked to artery-clogging cholesterol, prompting some users to seek alternatives.

``The preference for tropical oils such as coconut oil and palm oil is increasing in the U.S. after the trans-fat issue has become a big health concern,'' Amrizal Idroes, a marketing officer at the community, said today in a phone interview. Idroes helped to draw up the group's forecasts for exports, demand and prices.

Coconut oil futures in Rotterdam, the global benchmark, may trade between $1,500 and $1,650 a ton in the second half compared with an average of $1,448 in the first six months, Idroes said from Jakarta.

The price in Rotterdam, a major destination for the commodity, was $1,485 a ton on July 11, said Idroes, who forecast in January that the oil would range from $1,200 to $1,300 in the first half.

U.S and China

U.S. coconut oil imports may rise 24 percent to 304,200 tons in the second half from a year ago, boosted by demand for trans- fat-free oils, Idroes said. China's imports may rise 89 percent to 122,500 tons in the second half as demand for food rises during the summer Olympic games, Idroes said.

McDonald's will complete a switch to trans-fat-free cooking oils at U.S. stores by the end of the year, Chief Executive Officer Jim Skinner said on May 22. Walt Disney Co., the world's largest theme-park operator, said last October, it was planning to phase out trans fats from food over the next two years.

The switches present ``an opportunity'' for coconut oil exporters, he said.

The monthly average opening inventory of coconut oil in Rotterdam fell 40 percent to 14,667 metric tons in the first six months of the year, from a year earlier, as demand outstripped production, Idroes said.

To contact the reporter for this story: Luzi Ann Javier in Manila at ljavier@bloomberg.net



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Corn Falls to 1-Month Low on U.S. Stockpiles Forecast, Weather

By Jae Hur

July 14 (Bloomberg) -- Corn tumbled to a one-month low after a government report showed an increase in U.S. inventories before the 2009 harvest and on speculation ideal crop weather will help the U.S. crop recover from the worst Midwest flooding in 15 years.

About 833 million bushels of unsold corn will be on hand before next year's harvest, up from 673 million forecast a month ago, the U.S. Department of Agriculture said July 11. The surplus for the year ending Aug. 31 will be 1.598 billion bushels, up 12 percent from last month's estimate as ethanol-plant construction delays and falling demand for animal feed lifts this year's corn supply, the government said.

``The USDA report last Friday was the main catalyst for the movement in today's trade,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``The numbers were certainly very bearish for corn.''

Corn for December delivery lost as much as 24.75 cents, or 3.5 percent, to $6.845 a bushel, the lowest since June 11, in after-hours trading on the Chicago Board of Trade and stood at $6.86 as of 12:17 p.m. Singapore time.

The price declined 8.7 percent last week, the biggest such drop since March. Most-active futures still have almost doubled in the past year, reaching a record $7.9925 on June 27.

Global inventories will total 105.3 million tons, up 2 percent from 103.3 million tons predicted a month ago, and down from the 124.6 million expected this year, the USDA said July 11.

The corn market was also under pressure from forecasts for favorable crop weather this week that could help develop plants in the U.S. Midwest, said Takaki Shigemoto, an analyst at Tokyo- based broker Okachi & Co.

Soybeans Drop

In other markets, soybeans declined for the first day in four on concern the recent gains close to a record were overdone. Wheat fell on speculation that a drop in corn prices will reduce demand for the grain as a cheaper alternative to feed livestock.

Soybeans for November delivery fell as much as 41 cents, or 2.6 percent, to $15.55 a bushel and traded at $15.60 as of 12:17 p.m. Singapore time. The contract rose as high as $16.20 on July 11, the highest since its July 3 record of $16.3675. Most-active futures have risen 79 percent in the past year.

The USDA projection of drops in U.S. output and reserves has already been factored into the market, UBS's Reeves said.

This year's U.S. crop will total 3 billion bushels, down 3.4 percent from 3.105 billion forecast in June, the USDA said. Yields are projected to fall to 41.6 bushels an acre from 42.1 bushels estimated in June. Inventories before next year's harvest will total 140 million bushels, down 20 percent forecast in June.

Wheat Falls

Wheat for September delivery declined as much as 1.5 percent to $8.18 a bushel and traded at $8.2075 as of 11:53 a.m. Singapore time. Prices have slumped 39 percent from a record $13.495 set on Feb. 27 as higher prices spurred farmers to boost planting.

The USDA predicted the U.S. winter-wheat crop will total 1.864 billion bushels after ample rain and warm temperatures in May and June helped plants in the southern Great Plains from Texas to Kansas. The harvest, which the USDA said was 52 percent complete as of July 6, has been helped by dry weather.

U.S. inventories of all varieties, before next year's harvest, are forecast to rise 75 percent to 537 million bushels, compared with 306 million this year. Last month, the government forecast reserves would rise to 487 million bushels.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net



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MSCI World May Lose 14% Before Bear Market Ends, History Shows

By Lynn Thomasson

July 14 (Bloomberg) -- The MSCI World Index, the global benchmark for stocks in developed nations that tumbled into a bear market last week, may not stop falling until it reaches a three-year low, if history is any guide.

The measure of 1,742 companies in 23 markets slid 1.1 percent to 1,345.47 on July 11, bringing the loss since its October record to 20 percent. A decline of another 14 percent would match the average slump of seven bear markets since calculations on the index began in 1969, data compiled by Birinyi Associates Inc. and Bloomberg show.

Shares around the world dropped for six straight weeks, the longest streak since October 2002, as losses and writedowns at banks exceeded $400 billion, oil prices rose to a record and growing concerns about the health of Fannie Mae and Freddie Mac caused their stocks to plunge more than 60 percent. Companies in the Standard & Poor's 500 Index will report a 14 percent decline in second-quarter profits, according to estimates of analysts compiled by Bloomberg.

``It is unlikely we have seen the low point for equity markets,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which oversees about $125 billion. ``The next few months will see worse news on economic growth, profits and inflation, and worries about the financial sector are also likely to persist.''

Previous Bear Markets

The MSCI World's retreat has lasted 257 calendar days. In the seven previous bear markets, the index fell an average of 31 percent from its peak over 391 days, according to data from Birinyi Associates, the Westport, Connecticut-based research and money management firm founded by Laszlo Birinyi.

A similar drop would send the MSCI World down to about 1,160, a level it last closed below on July 8, 2005. The index at that point had advanced 64 percent from its previous bear- market low of 703.70 on Oct. 9, 2002.

The five-year bull market that ended on Oct. 31, 2007, was the MSCI World's third-longest, as the index posted a 139 percent gain over 1,848 days, data from Birinyi and Bloomberg show.

Stock indexes in Japan, France, Germany, Hong Kong, Australia, Switzerland and Italy already fell more than 20 percent from their highs -- the common definition of a bear market. The MSCI World passed the threshold last week after the S&P 500, the benchmark for American equities, and the U.K.'s FTSE 100 Index also entered bear markets.

Financial Shares Tumble

U.S. and British financial companies and homebuilders led the drop after the worst U.S. housing slump since the Great Depression drove bank losses related to subprime-contaminated securities to $410 billion and forced lenders to raise almost $325 billion. The MSCI World Financials Index slid 28 percent this year, the steepest decline among 10 industry groups.

Fannie Mae and Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, and Lehman Brothers Holdings Inc., once the biggest U.S. underwriter of mortgage bonds, lost about three-fourths of their value in 2008. Washington-based Fannie Mae slid 45 percent last week, while McLean, Virginia-based Freddie Mac sank 47 percent on concern they may require a bailout that would wipe out shareholders. New York-based Lehman declined 17 percent on July 11.

Taylor Wimpey Plc, the U.K.'s largest homebuilder, is the only stock in the MSCI World to drop more in 2008, losing 81 percent. The London-based company may need cash to avoid a default on its 1.7 billion pounds ($3.4 billion) of debt in the worst U.K. housing slump since 1978.

Gloomy Consumers

British house prices fell by the most since 1992 in June, and consumer prices jumped 3.3 percent in May from a year earlier, the most since at least 1997.

The surge in oil, which climbed above $147 a barrel last week, helped send consumer confidence in Britain to the lowest since the poll tax riots 18 years ago. American shoppers are even more pessimistic, with U.S. consumer confidence near the lowest since 1980 after six months of job losses.

``You've got a situation where all the major growth engines of economies around the world are slowing down,'' said George Feiger, chief executive officer of Contango Capital Advisors, which oversees about $2 billion in Berkeley, California. ``It's going to be sluggish coming around.''

Companies dependent on discretionary spending by consumers lost 22 percent this year, the second-steepest drop among the MSCI World's 10 industry groups.

London to Las Vegas

Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, slid 59 percent as the London-based company's sales dropped the most since 2005. Las Vegas-based MGM Mirage and Las Vegas Sands Corp. retreated 71 percent and 67 percent, respectively, as gambling revenue from the Las Vegas Strip declined for five straight months.

This year's decline left the MSCI World valued at 14.1 times the profits of its companies, the cheapest since at least 1995, according to weekly data compiled by Bloomberg.

Financial companies trade at the lowest in at least 13 years, with a price-to-earnings ratio of 9.7, while the MSCI World Consumer Discretionary Index is valued at 17.7 times earnings, the cheapest since March 2006. Those prices aren't low enough to lure some investors.

``I've been very pessimistic about the banks and consumer stocks for some time,'' said Patrick Evershed, a London-based fund manager at New Star Asset Management Ltd., which oversees $41 billion. ``I cannot see any relief any time soon.''

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.



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Alfa, B2W, Embraer, Minera Cerro Verde: Latin Equity Preview

By William Freebairn and Paulo Winterstein

July 14 (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 rose 0.1 percent to 4,344.8 on July 11. In Brazil, preferred shares are the most commonly traded class of stock.

Brazil

B2W Cia. Global do Varejo (BTOW3 BS): Brazil's biggest Internet retailer should benefit from expanding access to broadband services in Brazil, Credit Suisse analyst Marcel Moraes said July 11 in a note to clients. Brazilian Internet commerce rose 42 percent in the second quarter, in line with the analyst's estimate for B2W, Moraes wrote, citing E-BIT market research company's data. Rio de Janeiro-based B2W gained 1.5 percent to 55.83 reais.

Empresa Brasileira de Aeronautica SA (EMBR3 BS): The world's fourth-largest aircraft maker sold five EMB-190 jets to China's Kun Peng Airlines for $187.5 million. Delivery of the 98-seat planes are expected to begin this year, Sao Jose dos Campos, Brazil-based Embraer said July 11 in an e-mailed statement. Embraer fell 0.6 percent to 10.84 reais.

Chile

Cap SA (CAP CC): Chile's biggest steel producer plans to sell $550 million in new shares to finance a doubling of iron- ore production by 2012, the company said July 11. The announcement that Cap will decide on a steelmaking expansion plan within 30 days is ``positive,'' Larrain Vial SA analyst Juan Jose Ponce said in a phone interview from Santiago on July 11. Cap fell 7.2 percent to 18,832 pesos.

Mexico

Alfa SAB (ALFAA MM): Mexican auto production fell 1.2 percent in June from a year earlier, a ``lackluster'' performance, Banco Santander SA analysts Luis Miranda and Diego Laresgoiti wrote in a research report e-mailed July 11. ``If the current trend continues, we can expect to see weaker numbers'' in the second half, the analysts said. Alfa is the world's largest maker of engine blocks and heads. Alfa fell 0.6 percent to 66.24 pesos.

Peru

Sociedad Minera Cerro Verde (SMCV PE): The unit of Freeport McMoran Inc. that is Peru's third-largest copper producer failed to reach an agreement with workers in talks, union General Secretary Leoncio Amudio said in a phone interview July 11. The workers may go on strike July 16, he said. Cerro Verde fell 0.4 percent to $24.

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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Ivanhoe Energy, NovaGold Resources: Canada Stock Market Preview

By John Kipphoff

July 14 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading on July 14. Stock symbols are in parentheses, and share prices are from the last close in Toronto.

The Standard & Poor's/TSX Composite Index fell 0.3 percent to 13,709.10 on July 11.

Ivanhoe Energy Inc. (IE CN): The company developing a method to increase profit from heavy-oil production said it completed the purchase of oil-sands assets in Alberta from Talisman Energy Inc. (TLM CN) for C$90 million ($88.9 million), instead of C$105 million as announced on May 29.

Ivanhoe is buying Talisman's interest in two leases, not three, as originally planned, the Calgary-based company said in a statement on Canada NewsWire. Ivanhoe fell 2.3 percent to C$2.94

NovaGold Resources Inc. (NG CN): The co-developer of the Donlin Creek gold mine in Alaska reported a second-quarter loss of 8 cents a share before one-time items after markets closed. The deficit was twice as big as two analysts in a Bloomberg survey predicted. The shares rose 6 percent to C$7.62.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.



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Continental, Philips, Fortis, EADS: European Equity Preview

By Nadja Brandt

July 14 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 fell 2.7 percent to 270.36. The Dow Jones Stoxx 50 Index dropped 2.7 percent to 2,756.09. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, decreased 2.6 percent to 3,197.78.

BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.

Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.

Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.

The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.

E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.

E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros or 1.3 percent to 77.81 euros.

European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at this week's Farnborough air show, Le Figaro said, without citing anyone.

EADS separately said as much as one third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.

Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.

Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.

Fortis (FORB BB): Belgium's biggest financial-services company ousted Chief Executive Officer Jean-Paul Votron after the 24 billion-euro ($38 billion) purchase of ABN Amro Holding NV depleted capital and forced him to cancel a dividend. Fortis lost 41 cents, or 4.2 percent, to 9.45 euros.

ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.

BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.

Royal Philips Electronics NV (PHIA NA): Europe's largest consumer-electronics maker plans to report second-quarter results. The company may say profit plunged as U.S. television prices fell and after selling a semiconductor stake a year earlier, according to analysts surveyed by Bloomberg News. The shares fell 1.23 euros, or 6 percent, to 19.42 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net



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BP, Centrica, ITV, Low & Bonar: U.K., Irish Equity Preview

By Lenka Ponikelska

July 14 (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 fell 145.2, or 2.7 percent, to 5,261.6. The FTSE All-Share Index lost 70.54, or 2.6 percent, to 2,660.9.

Ireland's ISEQ Index declined 271.81, or 5.8 percent, to 4,414.8.

U.K. Companies:

BP Plc (BP/ LN): Europe's second-largest oil company failed to reach an agreement with its Russian partners over the management of their Moscow-based TNK-BP venture at a meeting in Cyprus, the Financial Times reported, citing a person familiar with the matter. The stock declined 1.5 pence, or 0.3 percent, to 538.75.

Centrica Plc (CNA LN): Britain's biggest energy supplier is in discussions with potential investors in its planned 3.5 billion pound ($6.7 billion) wind-farm program, the Financial Times reported, without citing anyone. The shares fell 13.5 pence, or 4.5 percent, to 285.5.

Diageo Plc (DGE LN): The company's American depositary receipts may rise more than 30 percent in a year as the maker of Johnnie Walker scotch and Guinness stout withstands concerns about declining sales, Barron's reported, citing an analyst.

Banc of America Securities analyst Bryan Spillane expects the world's largest distiller will post a 9 percent gain in operating profit this year and as much as 8 percent in 2009, the weekly newspaper said in its July 14 issue. The shares fell 28 pence, or 3.2 percent, to 857.

ITV Plc (ITV LN): The U.K.'s biggest commercial broadcaster has talked to strategic investors who want to buy British Sky Broadcasting Group Plc's 18 percent stake, the Observer reported, without saying where it got the information.

BSkyB will be told soon whether it has won an appeal against a ruling by the Competition Commission that it must reduce its stake in ITV to at least 7.5 percent, the newspaper reported. The stock declined 1.8 pence, or 4.5 pence, to 38.3.

Low & Bonar Plc (LWB LN): The U.K. flooring and fabrics maker with U.S. operations is releasing earnings. The shares fell 6 pence, or 6.5 percent, to 87.

Playtech Ltd. (PTEC LN): The company may announce a four- year license with Viacom Inc.'s Paramount Pictures to produce games based on the Hollywood movies ``Gladiator'' and ``The Untouchables,'' the London-based Times reported, without saying where it got its information. The stock fell 12.75 pence, or 2.6 percent, to 476.25

Scottish & Southern Energy Plc (SSE LN): The company may be considering a takeover offer for Arcapita Bank BSC's electricity- supply division in Ireland, the London-based Sunday Times reported, citing unidentified people with direct knowledge of the matter. The shares fell 49 pence, or 3.4 percent, to 1,379.

St. Modwen Properties Plc (SMP LN): The U.K. company that regenerates town centers and industrial areas is due to report earnings. The stock fell 1.5 pence, or 0.5 percent, to 315.

Wolseley Plc (WOS LN): The company plans to cut hundreds of jobs after a decline in the U.K. and U.S. housing markets, the Sunday Telegraph reported, without saying where it got the information.

Wolseley is expected to say the housing turmoil has made forecasting revenue ``increasingly difficult,'' the newspaper reported. The stock fell 11 pence, or 3.6 percent, to 297.

To contact the reporter on this story: Lenka Ponikelska in London lponikelska1@bloomberg.net



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Continental, E.ON, Henkel, RWE, Siemens: German Equity Preview

By Andreas Hippin

July 14 (Bloomberg) -- The following companies may have unusual price changes in Germany today. Stock symbols are in parentheses, and share prices are from the previous close.

The X-DAX Index fell 2.3 percent to 6,168.22. The measure, derived from trading in DAX Index futures, provides an estimate of Germany's benchmark index. The DAX retreated 151.7, or 2.4 percent, to 6,153.30.

313 Music JWP AG (JWP GY): Major investors in the music company which emerged from Jack White Productions AG offered their support, Berlin-based Tagesspiegel said. The company will publish its annual report next week, according to the report. The shares jumped 9 euro cents, or 18 percent, to 59 cents.

Bayerische Motoren Werke AG (BMW GY): The world's biggest luxury carmaker has reached only half of its target to cut 8,100 jobs by the end of the year, Auto Motor und Sport reported, citing Manfred Schoch, a supervisory board member and BMW works council head. The shares dropped 1.1 euros, or 3.7 percent, to 28.76 euros.

Continental AG (CON GY): Schaeffler Group, a closely held German car-parts maker, held talks with Continental about taking the company private and may spin off Continental's tire business to help finance the transaction, Frankfurter Allgemeine Zeitung said, citing unidentified people.

Hannes Boekhoff, a spokesman for Hanover, Germany-based Continental, and Detlef Sieverdingbeck, a spokesman for Herzogenaurach, Germany-based Schaeffler Group, both said their companies don't comment on speculation.

The shares slumped 4.44 euros, or 7.6 percent, to 53.96 euros.

E.ON AG (EOA GY): Shares of the world's largest utility by sales, RWE AG (RWE GY) and Energie Baden-Wuerttemberg AG (EBK GY) may move after Chancellor Angela Merkel told Bild am Sonntag she will stand up for prolonging the lifespan of the country's nuclear power plants beyond their scheduled permanent shutdown.

E.ON shares retreated 2.38 euros, or 1.9 percent, to 122.39 euros. Shares of RWE, Germany's second-largest utility, slipped 1.02 euros, or 1.3 percent, to 77.81 euros. Energie Baden- Wuerttemberg, the country's third-biggest, was unchanged at 45.50 euros.

Freenet AG (FNT GY): Chief Executive Officer Eckhard Spoerr predicted shareholders United Internet AG and Drillisch AG will boost their joint stake in the German mobile-phone and Internet company to 29.9 percent, Welt am Sonntag reported, citing an interview with Spoerr. The shares added 14 cents, or 1.2 percent, to 12.33 euros.

GfK AG (GFK GY): Germany's biggest market research company sees ``good prospects'' for taking over U.K.'s Taylor Nelson Sofres Plc, Berlin-based Welt am Sonntag reported, citing Chief Executive Officer Klaus Wuebbenhorst. The shares fell 92 cents, or 4.2 percent, to 21.10 euros.

Henkel KGaA (HEN3 GY): The maker of Persil detergent and Dial soap said it will raise prices as some of its raw material costs almost doubled, Frankfurter Allgemeine Sonntagszeitung reported, citing an interview with Chief Financial Officer Lothar Steinebach. The shares declined 1.09 euros, or 4.5 percent, to 23.39 euros.

Highlight Communications AG (HLG GY): EM.Sport Media AG (EV4 GY), the company partly owned by German media entrepreneur Leo Kirch, won't increase its stake in Highlight beyond 49 percent, Spiegel magazine reported, citing no one. The shares decreased 1 cent, or 0.1 percent, to 7.13 euros.

Norddeutsche Affinerie AG (NDA GY): Europe's largest copper refiner plans acquisitions outside of Europe, such as in Asia and South America, Euro am Sonntag said, citing Chief Executive Officer Bernd Drouven. The shares rose 1.17 euros, or 3.3 percent, to 36.30 euros.

Siemens AG (SIE GY): The region's largest engineering company may exit a computer-manufacturing venture with Japan's Fujitsu Ltd., the world's last computer maker to produce PCs in a high-income country, Sueddeutsche Zeitung reported. Siemens shares retreated 1.78 euros, or 2.5 percent, to 68.78 euros.

Wirecard AG (WDI GY): Oyster Asset Management SA reduced its stake in the vendor of online payment software to about 9,000 companies below 3 percent. The shares fell 29 cents, or 4.2 percent, to 6.62 euros.

To contact the reporter on this story: Andreas Hippin in Frankfurt at ahippin@bloomberg.net.



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Air France-KLM, Carrefour, EADS, Total: French Equity Preview

By Francois de Beaupuy and David Whitehouse

July 14 (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 tumbled 130.92, or 3.1 percent, to a three-year low of 4,100.64 in Paris. The SBF 120 Index lost 3 percent.

Companies that are sensitive to the price of oil may be active after the price of crude breached $147 a barrel for the first time. Total SA (FP FP), Europe's third-largest oil company, added 32 cents, or 0.6 percent, to 50.17 euros. Air France-KLM Group, (AF FP), Europe's largest airline, sank 1.17 euros, or 7.9 percent, to 13.70 euros. Michelin & Cie. (ML FP), the world's second-largest tiremaker, tumbled 2.99 euros, or 6.5 percent, to 42.90 euros.

Carrefour SA (CA FP): Europe's biggest retailer won't proceed with an initial share sale of its property unit if the price doesn't correspond to the market value of its assets, Le Journal des Finances reported, citing Carrefour Chief Executive Officer Jose Luis Duran. The shares of Carrefour fell 75 cents, or 2.4 percent, to 30.75 euros.

European Aeronautic, Defence & Space Co. (EAD FP): The company's Airbus unit, the world's biggest maker of commercial jets, may announce about $60 billion of orders at next week's Farnborough air show, Le Figaro said, without citing anyone.

EADS separately said as much as one-third of its order book is at risk of deferral or cancellation as spiraling oil prices wipe out airline earnings.

Airbus's revenue is also being hurt by the weakness of the dollar, the denomination for plane sales, and the U.S. currency may also scupper its plans to sell a U.K. factory to bring to down costs, EADS Chief Executive Officer Louis Gallois said.

Shares of EADS fell 1.29 euros, or 11 percent, to 10.74 euros.

Eurofins Scientific SA (ERF FP): The company, which provides quality testing for wine and drugmakers, expects its operating profit to rise in 2009, founder and Chairman Gilles Martin said in an interview with Investir. He said the company aims for an operating profit of 15 percent of sales in the ``medium term,'' according to the newspaper. The shares fell 9 cents, or 0.2 percent, to 50.3 euros.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net.



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Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Jul 14 08 05:10 GMT |

Treasury to lend to Fannie and Freddie, Bush backs Israel plan for strike on Iran

U.S. Treasury Secretary Paulson on Sunday asked Congress to approve a rescue package that would give officials the power to inject billions of federal dollars into Freddie and Fannie through investments and loans. The Fed also announced it would make one of its short-term lending programs available to the two companies. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300B, according to the New York Times. To 'protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards,' said Paulson.

Market reaction to the FNM/FRE news: It looks like the market was prepared for a worst-case scenario for the mortgage giants, and the knee-jerk reaction was to celebrate and buy the USD and U.S. stocks futures on the back of the announcement. Some traders were puzzled by the sharp market movement on the news, because the details of the package were already leaked through newspaper articles in the WSJ and the FT over the weekend. It looks like the USD will continue to struggle in the near-term, unless these announced measures are perceived as likely to bring FNM and FRE back to health. Focus now shifts to Fed chairman Bernanke's semi-annual testimony to Congress on Tuesday, where he will be questioned on the prospects for the U.S. economy and health of the financial system. Overall, Asia took the news as a positive, but European markets may take a different view. Some analysts say the U.S. government is signaling it won't throw a lifeline to struggling financial companies apart from Fannie Mae and Freddie Mac, marking a shift to a new and potentially more volatile phase of the credit crisis. 'The credit crisis has obviously entered into a new phase - the government has one bailout left in them, and this is it,' said Jeffrey Gundlach at TCW Group, in an interview with AP. 'One consequence of Freddie and Fannie is that other firms are allowed to go under,' he said.

President Bush tells the Israeli government that he may be prepared to approve a future military strike on Iran: President George W Bush has told the Israeli government that he may be prepared to approve a future military strike on Iranian nuclear facilities if negotiations broke down, according to a senior Pentagon official quoted in The London Times. 'It's really all down to the Israelis,' the Pentagon official added. 'This administration will not attack Iran. This has already been decided. But the president is really preoccupied with the nuclear threat against Israel and I know he doesn't believe that anything but force will deter Iran.'

New Zealand retail sales fall at fastest pace in four years in May: (NZ MAY RETAIL SALES MOM: -1.2% V -0.1% expected, 1.0% prior; EX-AUTO: 0.7% V 0.5% expected, -0.5% prior) Retail sales fell a seasonally adjusted -1.2% in May, the biggest monthly decline since February 2004, led by lower car and furniture sales, Statistics New Zealand data showed. Analysts now shift focus to tomorrow's inflation data, with money markets pricing in a 50/50 chance of a rate cut at the RBNZ's next review on July 24.

New Zealand's service sector at a 16 month low: (NZ JUNE PERFORMANCE OF SERVICES INDEX: 45.6 V 49.1 prior) Business NZ chief executive Phil O'Reilly said the latest result was consistent with the general downturn of the Kiwi economy. Analysts also talked about the weaker than expected employment subcomponent. 'This fits with a number of other measures that warn us the jobs market is about to come off the boil much more obviously than has been the case in the official records to date,' said Craig Ebert at Bank of New Zealand.

Equities: At 0:08 EDT Japan's Nikkei is +0.69%, the S&P/ASX200 is -0.80%, South Korea's KOSPI is -0.07%, and the Shanghai composite index is +0.34%. The S&P500 future contract gained +0.86% since Friday's close, last trading at 1,250.50. A rising USD/JPY inspired investors to buy the battered Japanese exporters, pushing the Nikkei above 13,100. But the Nikkei's upside looks limited, with many Asian investors staying on the sidelines and awaiting Wall Street's reaction to the FNM/FRE news. Retailers, selected resource stocks and banks dragged the S&P/ASX200 index lower, with the index finding support around 4,940. South Korea's Posco Steel reported solid earnings results, but offshore events continue to dominate price action in Seoul.

Commodities: Nymex crude oil sold off in the early Asian morning, but the commodity rebounded back to $145/bbl. Oil prices look set to move higher, with energy traders betting that the USD will remain under pressure this week. Spot gold rose +0.50% between 18:00 EDT and 0:04 EDT, last trading at $965.40/oz.

Other news: The U.S. Federal Deposit Insurance Corporation has suspended service at IndyMac Bank, one of the largest U.S. mortgage originators, after a bank run from depositors. IndyMac had $19B of deposits as of March 31, and the bailout could cost the FDIC 7.5%-15% of its insurance fund. Some analysts think the Indymac suspension would result in an increase in insurance costs for all U.S. banks, and a New York Times article suggests that up to 150 U.S. banks could fail or seek mergers over the next 12-18 months.

Trade The News Staff
Trade The News, Inc.

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Asian Stocks Fall on Near-Record Crude Oil; Cathay, Kepco Drop

By Chen Shiyin

July 14 (Bloomberg) -- Asian stocks fell for the first time in four days, led by airlines and shipping companies, on speculation that near-record crude-oil prices and a slump in transportation rates will hurt earnings.

Cathay Pacific Airways Ltd. led airlines lower on concern crude's surge beyond $147 a barrel on July 11 will raise fuel costs. Shipping lines declined, paced by Mitsui O.S.K. Lines Ltd., as a gauge of commodity-transportation rates dropped. Korea Electric Power Corp. slumped on speculation a price increase by the power supplier won't make up for increased fuel expenses.

``It's very tricky at the moment,'' Sean Fenton, who manages the equivalent of $700 million as portfolio manager at Tribeca Investment Partners in Sydney, said in a Bloomberg TV interview. ``You're seeing high oil prices destroy demand'' in some regions.

The MSCI Asia-Pacific Index lost 0.5 percent to 132.94 at 1:15 p.m. Tokyo time, after gaining as much as 0.6 percent. About two stocks retreated for each that gained on the measure, which has dropped 15 percent this year.

Most benchmarks declined, with Japan's Nikkei 225 Stock Average little changed at 13,044.81. Daiichi Sankyo Co. dropped after U.S. courts started probes against Ranbaxy Laboratories Ltd., which is set to be acquired by the Japanese drugmaker.

Posco advanced to a two-week high in Seoul, leading gains by steelmakers, after the company boosted its profit forecast.

U.S. markets declined on July 11, extending the longest stretch of weekly losses for the Standard & Poor's 500 Index since 2004, as growing concern about the health of Fannie Mae and Freddie Mac sent bank shares to an 11-year low.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Hanny Wan in Hong Kong at hwan3@bloomberg.net.



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Forex and Dow Jones Recommended Levels

Daily Forex Technicals | Written by FXtechtrade | Jul 14 08 05:12 GMT |

EUR/USD

Today's support: - 1.5868 and 1.5840(main), where correction is possible. Break would give 1.5814, where correction also may be. Then follows 1.5781. Break of the latter would result in 1.5750. If a strong impulse, we would see 1.5728. Continuation will give 1.5716 and 1.5694.

Today's resistance: - 1.5955, 1.5973 and 1.5997(main). Break would give 1.6023, where a correction is possible. Then goes 1.6054. Break of the latter would result in 1.6076. If a strong impulse, we'd see 1.6098. Continuation will give 1.6120.
USD/JPY

Today's support: - 106.20(main). Break would bring 105.94, where correction is possible. Then 105.72. If a strong impulse, we would see 105.53. Continuation would give 105.24.

Today's resistance: - 106.88, 107.23 and 107.33(main), where a correction may happen. Break would bring 107.56, where also a correction may be. Then 107.81. If a strong impulse, we would see 108.03. Continuation will give 108.19 and 108.37.
DOW JONES INDEX

Today's support: - 11 058.74 and 11 025.00(main), where a delay and correction may happen. Break of the latter will give 10 980.00, where correction also can be. Then follows 10 884.36. Be there a strong impulse, we would see 10 856.20. Continuation will bring 10 819.68 and 10 800.00.

Today's resistance: - 11 250.00, 11 296.30, 11 317.40 and 11 340.00 (main), where a delay and correction may happen. Break would bring 11 373.72, where a correction may happen. Then follows 11 396.22, where a delay and correction could also be. Be there a strong impulse, we'd see 11 418.80. Continuation would bring 11 441.26.

FXtechtrade
http://www.fxtechtrade.com



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Most Japan Stocks Fall, Led by Shipping Lines; Steelmakers Gain

By Patrick Rial and Satoshi Kawano

July 14 (Bloomberg) -- Most Japanese stocks fell, led by shipping lines after cargo rates for commodities fell. Steelmakers advanced after a South Korean producer raised its earnings forecast.

Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping line by sales, fell the most in almost two weeks. Daiichi Sankyo Co. dropped the most in four months after its Indian buyout target was probed for falsification of data on generic drugs. JFE Holdings Inc., the world's third-largest steelmaker, soared after South Korea's Posco said demand from China helped profit climb last quarter.

The Nikkei 225 Stock Average fell 38.94, or 0.3 percent, to 13,000.75 as of 1:59 p.m. in Tokyo, erasing a 1.1 percent gain. The broader Topix index dipped 3.34, or 0.3 percent, to 1,282.57. Seventeen of 33 industry groups on the Topix sank.

Mitsui O.S.K. fell 2.6 percent to 1,410 yen, the biggest drop since July 2. Market leader Nippon Yusen K.K. dropped 2 percent to 953 yen. The Baltic Dry Index, a measure of shipping costs for commodities, tumbled on Friday for the first time since July 4.

Daiichi Sankyo, Japan's third-biggest drugmaker, sank 4.8 percent to 3,010 yen, the steepest slump since March 17 and the Nikkei's second-biggest decline. India's Ranbaxy Laboratories Ltd., set to be acquired by Daiichi, is being probed by U.S. courts for falsifying data and failing to meet quality controls on generic drugs.

JFE Holdings jumped 5.4 percent to 5,460 yen, its steepest advance since April 25. Nippon Steel Corp., the world's second- biggest steelmaker, gained 3.6 percent to 582 yen.

Posco, Asia's third-biggest steelmaker, said second-quarter profit rose 34 percent after increasing prices as demand from automakers and shipbuilders rose. Also, ArcelorMittal, the world's biggest steelmaker, and ThyssenKrupp AG are seeking to renegotiate steel contracts with Nissan Motor Co. and other automakers, NHK television said on July 12. JFE and Nippon Steel have been raising prices in order to offset material costs.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net



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Malaysia Stocks to Rise as Political Woes Ease, JPMorgan Says

By Chan Tien Hin

July 14 (Bloomberg) -- Bumiputra-Commerce Holdings Bhd., Bursa Malaysia Bhd. and WCT Bhd. are among stocks recommended by JPMorgan Chase & Co. to benefit from a rebound in Malaysia's market as concern about a government leadership struggle abates.

Prime Minister Abdullah Ahmad Badawi, who led the ruling coalition this year to its worst electoral performance, last week set June 2010 to hand over power to his deputy, Najib Razak. The Kuala Lumpur Composite Index has fallen 12 percent since the March 10 elections, pushing the benchmark into a bear market.

``The Malaysian market is poised for a bounce,'' Chris Oh, an analyst at JPMorgan, wrote in a report today. The move is an ``optimal outcome'' and provides a ``calming effect'' for investors who have ``steered away from the equity market,'' he said.

Announcing the handover date may thwart a leadership challenge this year and ease Malaysia's political turmoil after Abdullah's National Front coalition in March lost its two-thirds parliamentary majority and ceded control of almost half the contested states.

The index has tumbled 25 percent since its Jan. 11 record high, more than the 20 percent threshold many consider to signal a bear market. The index dropped 0.7 percent to 1,142.59 as of 11:06 a.m. local time.

The leadership transition allows for Abdullah to focus on ``policy making and structural reform as the infighting abates,'' Oh said in the report.

Abdullah's announcement gives him time for an ``orderly transition and enables proper restructuring of the party leadership to be more relevant to the public in the run-up to the next election,'' he said.

Bumiputra-Commerce, Malaysia's second-biggest bank, fell 5 sen, or 0.6 percent, to 7.75 ringgit at 10:58 a.m. local time. It has fallen 30 percent this year. Bursa, the stock exchange manager, lost 2.2 percent to 6.75 ringgit. It's down 53 percent this year. WCT, a builder that's fallen 32 percent this year, slid 1 percent to 2.85 ringgit.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net



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China's Stocks Gain, Led by Mining Companies on Higher Prices

By Chua Kong Ho

July 14 (Bloomberg) -- China's stocks rose for the first time in three days as mining companies advanced along with prices of gold and copper.

Shandong Gold Mining Co. and Yunnan Copper Industry Co. advanced along with gold and copper prices. China Petroleum & Chemical Corp. and PetroChina Co., the country's two largest refiners, declined as oil climbed above $147 a barrel to a record on July 11.

The CSI 300 Index, a measure of 300 yuan-denominated stocks traded in Shanghai and Shenzhen, gained 21.91, or 0.7 percent, to 2,975.41, as of 10:24 a.m. local time, reversing a loss of 1.2 percent. About three stocks advanced for each that declined.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net



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Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Jul 14 08 02:07 GMT |

EURUSD Outlook

In last three days, the Greenback slumped against Euro. Friday, the pair topped at 1.5947 and closed at 1.5936, but sharply corrected early today in Asian market, bottomed at 1.5882 (temporarily?). It's a little bit tricky at this phase. My model is mixed with neutral bias. A correctional downside move towards 1.5800 area might happen as the pair already in overbought area on daily chart. The nearest key level (support) is 1.5850. Should the bullish momentum continue, the pair is heading towards 1.6019 (22/04/2008 high) level.

EURUSD Daily Supports and Resistances:

S1= 1.5818
S2= 1.5700
S3= 1.5636
R1= 1.6000
R2= 1.6064
R3= 1.6182

GBPUSD Outlook

The Greenback also slumped against Sterling on Friday, but corrected early today in Asian market. My model for today is mixed with downside bias. Immediate support is seen at 1.9780 which also the nearest key level at this phase. A break to the downside could trigger further correctional downside move, while consistent move above that level can be seen at long opportunity targeting 2.0000 area. Initial resistance is seen at 1.9958 (Friday's high). CCI heading up towards 100 line on daily chart.

GBPUSD Daily Supports and Resistances:

S1= 1.9775
S2= 1.9661
S3= 1.9570
R1= 1.9980
R2= 2.0071
R3= 2.0185

USDJPY Outlook

The USDJPY attempted to push lower Friday, but failed to move below key level 105.50. My model is long, targeting 107.15. Immediate support is seen at 105.90. CCI in neutral area on daily chart.

USDJPY Daily Supports and Resistances:

S1= 105.51
S2= 104.76
S3= 103.87
R1= 107.15
R2= 108.04
R3= 108.79

USDCHF Outlook

The US Dollar slumped against the Swiss Franc on Friday. The pair bottomed at 1.0136 and closed at 1.0160, but corrected early today in Asian market. My model is mixed with downside bias. Immediate resistance is seen at 1.0230. Initial support at 1.0136 (Friday's low). CCI about to cross -100 line down on daily chart.

USDCHF Daily Supports and Resistances:

S1= 1.0096
S2= 1.0033
S3= 0.9930
R1= 1.0262
R2= 1.0365
R3= 1.0428

FX Instructor LLC
www.fxinstructor.com

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jul 14 08 01:15 GMT |

News And Views

It was a sadly familiar tale for the US dollar in Friday's NY session, hammered once again on the back of worries over the government-sponsored mortgage giants Fannie Mae and Freddie Mac. FRE opened a staggering 50% below Thursday's close, recovering much lost ground over the session but US equities overall stayed heavy, weighing on USD. This helped the New Zealand dollar rally from 0.7585 during the London morning to a high of 0.7648 before easing to a 0.7614.

AUD/USD was also a willing participant in the USD rout in the NY morning, punching through long-standing resistance to new post-float (1983) highs of 0.9716 before it too backed off to 0.9662.

EUR/USD made hefty gains, pressing up from 1.5775 to a high of 1.5943 near the time of the NZD and AUD highs (and oil >$147/bbl) but proved more resilient, popping up late to close at 1.5937.

The safe haven Japanese yen enjoyed strong demand in the NY morning, falling as far as 105.65 vs over 107 in late Asia-Pacific, closing the week at 106.27.

US trade deficit narrows to $59.8bn in May. The trade deficit unexpectedly narrowed in May due mainly to a reduced oil import bill, despite surging prices (i.e. volumes were down sharply). With exports continuing to grow, though more slowly than in April, the deficit edged back below $60bn again. However with import price data for June showing yet another 2.6% surge, mostly but not entirely due to rising oil prices, the trade deficit is sure to jump rapidly in coming months. That said, the real trade deficit narrowed by $3bn in May, which means net exports will make a bigger than expected contribution to Q2 GDP growth (which could come in closer to 2% than 1% annualised, depending on what the Commerce Dept assumes for trade and inventories in June).

US UoM consumer sentiment edges up to 56.6 in July. Consumer sentiment remained very weak in early July but, in line with weekly confidence measures, did not slump further, despite a renewed bounce in inflation expectations. It may be the case that the tax rebates helped boost spending in May (and possibly June), but with no confidence impact apparent, the risk is that sales slump again once the cheques have been spent.

Slumping share prices for Fannie Mae and Freddie Mac, the shareholder-owned firms that participate (as owners or guarantors) in half of all outstanding mortgages in the US, prompted Treasury Secretary Paulson to say that 'our primary focus is supporting [them] in their current form as they carry out their important mission'. The problem for the firms is that losses they have borne due to the mortgage market meltdown might have been greater than their capital, rendering them insolvent. Their regulator, the Office of Federal Housing Enterprise Oversight, also indicated that 'the steps necessary' would be taken to allow them to continue operating.

Japanese consumer confidence on expectations: very pessimistic. Confidence recorded a 32.9 outcome in June, down from 34.1.

Canadian employment posted its first decline this year in June (-5k), as factory jobs growth stalled and falling construction jobs offset strength in the commodity sector. Unemployment edged higher, firming the case against any retightening of monetary policy by the Bank of Canada, although the data are not weak enough to put a further rate cut back on the agenda. Also, the trade surplus widened to C$5.4bn in May as energy-driven exports strength more than offset another solid month of imports growth; and flat house prices in May add to the growing body of evidence pointing to a softening housing market.

Outlook

We have been brazenly bearish on the NZD for some time now and have remained short via the TWI since April 24. But for the week ahead, we have to temper our negativity. If we are correct on our CPI forecast, it will make the July OCR outcome that much more difficult to price. With the OIS market allocating about a 3 in 4 chance of a 25bps cut at the July meeting, we have to see some short term upside risks for the NZ$ and potentially the TWI.

Events Today

Date	Country	Release	Last	Forecast
14-Jul	NZ	May Retail Sales	1.00%	-0.5%
	Eur	May Industrial Production	0.90%	-1.0%
	UK	Jun Producer Prices %yr	8.90%	9.90%
15-Jul	NZ	Q2 CPI %qtr	0.70%	1.60%
		Jun Food Price Index	1.00%	0.30%
	Aus	Jul RBA Meeting Minutes
	US	Jun Producer Price Index	1.40%	1.80%
		Jun PPI Core	0.20%	0.20%
		Jun Retail Sales	1.00%	0.10%
		Jun Retail Sales Ex Auto	1.20%	0.60%

Westpac Institutional Bank
http://www.wib.westpac.co.nz/

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Gold May Rise for 5th Week as Investors Seek Haven, Survey Says

By Pham-Duy Nguyen

July 14 (Bloomberg) -- Gold may rise for a fifth straight week on speculation record energy costs and slumping equities will spark demand for a haven.

Eighteen of 25 traders, investors and analysts surveyed from Mumbai to Chicago on July 10 and July 11 advised buying gold, which gained 2.9 percent to $960.60 an ounce last week in New York. Five said to sell, and two were neutral.

Crude-oil futures reached a record $147.27 a barrel on July 11, heightening inflation expectations. The Standard & Poor's 500 Index fell into a bear market last week. Gold reached an all-time high of $1,033.90 on March 17.

A majority of analysts surveyed July 3 and July 4 anticipated gold's gain last week. The survey has forecast prices accurately in 134 of 219 weeks, or 61 percent of the time.

This week's survey results: Bullish: 18 Bearish: 5 Neutral: 2

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.



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Philippines Beats Six-Month Rice Output Target by 200,000 Tons

By Luzi Ann Javier

July 14 (Bloomberg) -- Rice production in the Philippines, the world's biggest importer of the grain, likely exceeded a government target by 200,000 metric tons after the state boosted spending on agriculture.

Output in the first half may have risen 9 percent to 7.3 million metric tons, from 6.7 million tons a year earlier, the Agriculture Department said in a statement e-mailed yesterday. That compares with a January-to-June target of 7.1 million tons.

The government aims to expand production to 10 million tons in the second half, from 9.5 million tons a year ago, by providing fertilizer subsidies to farmers to make up for production losses caused by Typhoon Fengshen, according to the statement.

The typhoon caused more than 7 billion pesos ($153.5 million) of damage to crops and fisheries when it hit the Philippines on June 20 and 21, the government said.

To contact the reporter for this story: Luzi Ann Javier in Manila at ljavier@bloomberg.net



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Oil Falls as Dollar's Gains Reduces Appeal as Inflation Hedge

By Nesa Subrahmaniyan and Gavin Evans

July 14 (Bloomberg) -- Crude oil fell for the first time in four days in New York as the dollar advanced, reducing the commodity's appeal as a hedge against inflation.

Oil dropped after the dollar rose from a two-month low against the euro as U.S. Treasury Secretary Henry Paulson said he will seek approval to buy stakes in and lend to Freddie Mac and Fannie Mae, the nation's largest mortgage financiers, to help stem a slump in the housing market. Oil has gained 50 percent this year as the sliding dollar and falling U.S. equities prompted investors to buy commodities.

``There's probably a general view that the dollar is close to bottoming, and that we could see some firmness in the coming months,'' Mark Pervan, a senior commodity analyst at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a Bloomberg Television interview. ``The market is very news-sensitive'' and any decline in the dollar or threats to supply will send oil prices higher, he said.

Crude oil for August delivery fell as much $2.59, or 1.8 percent, to $142.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $143.63 at 9:36 a.m. in Singapore.

The contract jumped to a record $147.27 on July 11 after the dollar fell and the Jerusalem Post said Israeli war planes practiced over Iraq for an attack on Iran's nuclear research facility. Israel denied the newspaper's report and oil settled at $145.08, a gain of 2.4 percent on the day.

The dollar climbed after Treasury Secretary Paulson's announcement, and traded at $1.5896 per euro at 9:32 a.m. in Tokyo, from an earlier low of $1.5971, and $1.5938 in late New York trading July 11. The dollar touched an all-time low of $1.6019 on April 22.

Demand Risk

While high prices are curtailing demand, there has been a noticeably lagged affect, ANZ's Pervan said. Oil may have to reach $175 a barrel, where it will be at a record relative to GDP expenditure, before the global economy reacts.

``At that point we could see some real demand erosion,'' he said. ``Somewhere between $170 and $180 we could see a pull back.''

Brent crude oil for August settlement fell as much as $1.99, or 1.4 percent, to $142.50 a barrel on London's ICE Futures Europe exchange. The contract, which expires July 16, reached a record $147.50 on July 11.

The more widely held September contract fell $1.27, or 0.9 percent, to $144.30 a barrel.

To contact the reporters on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net



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Bernanke Embrace May Turn as Fed Seeks More Powers

By Scott Lanman

July 14 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke picked a good time to ask Congress for the biggest expansion of his office's powers since the Great Depression. He has to make the most of an opportunity that may prove fleeting.

Bernanke, who testifies before Congress this week, has stored up goodwill with lawmakers after reducing interest rates at the most aggressive pace in two decades and acting to prevent a financial-market meltdown.

``The chairman has done a good job at crisis management,'' says Representative Carolyn Maloney of New York. ``I like the moves he's made,'' says Representative Mel Watt of North Carolina. Both are Democratic members of the House Financial Services Committee, which will question Bernanke July 16 after he delivers his semi-annual report on the economy to Congress.

The favorable reviews on Capitol Hill will serve Bernanke, 54, well as Congress considers his bid to expand his authority over the financial-services industry, a debate that will probably continue into early 2009. The longer it lasts, the more he may find his popularity strained whenever he has to start taking the rate cuts back.

The chairman already faces pressure from some regional Fed- bank presidents to start raising the cost of credit to curb expectations of higher inflation. Such a move would test both his political skills and the Fed's independence, requiring him to justify higher rates to the same lawmakers he's asking for authority to help prevent future financial crises.

Bad Position

``From a political standpoint for the Fed, that's a bad position to be in,'' says Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina, who formerly worked at the Fed in Washington. ``You're going to have senators and congressmen breathing down their necks.''

While Watt, 62, and Maloney, 60, give Bernanke high marks for helping to keep the economy out of a recession and stepping in to prevent the bankruptcy of Bear Stearns Cos., both say it's much too soon to be talking about higher interest rates. Their support matters because the committee they sit on would decide on any expansion of the Fed's regulatory powers.

Although those powers and changes in interest rates ``are unconnected on a policy level, they could be connected politically,'' says Senator Michael Crapo, an Idaho Republican who sits on the Banking Committee, which will be the first to hear Bernanke's report in a session tomorrow. Raising rates may lead some politicians to try ``to stop efforts'' to expand the Fed's authority, he says.

Inflation Mandate

Bernanke's appearances this week on Capitol Hill provide him with the chance to separate the Fed's approach to financial markets from its mandate to keep a lid on inflation, says Dean Maki, chief U.S. economist at Barclays Capital in New York.

``There can be a fuzzy line between them at times,'' says Maki, a former Fed researcher.

Bernanke's decision in March to allow investment banks to borrow from the Fed on terms similar to those it extends to commercial banks has opened a discussion about how to legislate oversight of the securities firms, with bills likely to be debated next year.

Yesterday, Bernanke decided to open the Fed's lending window to Fannie Mae and Freddie Mac, government sponsored companies that are the biggest buyers of mortgage securities. The Fed board's action was part of a broader effort led by Treasury Secretary Henry Paulson, who asked Congress for authority to buy unlimited stakes in and lend to the companies, aiming to stem a collapse in confidence.

A Single Regulator

Last week, Bernanke told the Financial Services Committee that Congress should give a single federal regulator enhanced jurisdiction to set standards for the capital, liquidity and risk management of investment banks.

While he didn't say the regulator should be the Fed, Bernanke did tell the committee that if the central bank is given responsibility for the ``overall stability of financial markets,'' it needs additional authority to examine institutions and collect information on those markets.

``Holding the Fed more formally accountable for promoting financial stability makes sense only if the institution's powers are consistent with its responsibilities,'' Bernanke said in a July 8 speech.

To accomplish that mission, the Fed needs the ``ability to look at financial firms as a whole,'' as well as the ``authority to set expectations and require corrective actions as warranted in cases in which firms' actions have potential implications for financial stability,'' he said.

Skepticism Among Lawmakers

Some lawmakers are skeptical of granting Bernanke any more authority. Senator Jim Bunning, a Kentucky Republican, says he ``wouldn't give the Fed an inch more of power.'' Individual senators can block bills from coming to a vote.

Democratic Representative Barney Frank of Massachusetts, who chairs the Financial Services Committee, may be more accommodating. ``There's an increasing consensus that there should be new powers given to the Federal Reserve to regulate some of the activities of investment banks and hedge funds,'' he says.

The tradeoff for such authority would be heightened scrutiny by lawmakers. ``If we grant additional powers to the Fed or to other regulatory bodies, I certainly hope that that will provide more reliable information to the Congress,'' says Representative Brad Miller, a North Carolina Democrat.

Regional Fed Presidents

Frank, 68, is also demanding scrutiny of the role regional Fed presidents play in setting monetary policy. While Bernanke has yet to advocate increasing borrowing costs, some Fed-bank presidents who sit on the central bank's policy committee are agitating to do so.

Dallas Fed President Richard Fisher dissented from the Fed's June 25 decision to leave the benchmark rate at 2 percent, the first pause after seven cuts totaling 3.25 percentage points. Fisher sought an increase. Last week, Richmond Fed President Jeffrey Lacker said in a speech that the Fed should consider raising rates to limit inflation.

Frank said in an interview July 9 that he plans to probe how the 12 regional Fed presidents are appointed and their role in setting interest rates.

``There's a real question whether or not they should have as much governmental power as they do,'' Frank said. Still, he said, ``we're not talking about compromising'' the Fed's independence on monetary policy.

Political Interference

Political interference with that policy has been rare since the early 1990s, when some lawmakers pushed unsuccessfully to pass legislation that would have taken interest-rate votes away from Fed bank presidents, and then-Treasury Secretary Nicholas Brady was criticizing the Fed for not lowering rates fast enough.

Now, a potential rate increase looms for the first time since Democrats won control of Congress in the 2006 elections, taking over from Republicans, who had been in charge for most of the previous 12 years. Traders see a 69 percent probability of higher rates before Americans vote Nov. 4 on electing a new president, the entire House of Representatives and one-third of the Senate.

That prospect isn't sitting well with some lawmakers after the first half's 438,000 job cuts, soaring home foreclosures and plunging housing prices.

``It would be counterproductive to be talking about raising interest rates right now,'' says Watt. Maloney says ``it's hard to see how the Fed can start raising rates in the face of widespread job losses, declining consumer confidence and weak growth.''

`Difficult Medicine'

Crapo says interest-rate increases are ``probably going to happen'' and he wouldn't necessarily object. ``It's difficult medicine to take, but I think it's the medicine that's going to be applied, and it probably is called for.''

For Bernanke, accomplishing his goals on regulatory powers without compromising on monetary policy may help keep the central bank independent from political pressure by lawmakers, something his predecessor, Alan Greenspan, has flagged as a major risk.

``An independent Federal Reserve is important in good times,'' says James Leach, who formerly chaired the House Financial Services Committee and now directs the Institute of Politics at Harvard University's Kennedy School of Government. ``It's imperative in challenging times.''

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net



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Russian Industrial Output Probably Slowed in June: Week Ahead

By Alex Nicholson and Emma O'Brien

July 14 (Bloomberg) -- Russian industrial production growth slowed in June because of a traditional summer lull and a decline in state manufacturing orders, the Federal Statistics Service may say this week.

The annual rate slipped to 6 percent from 6.7 in May, according to the median of 21 forecasts in a Bloomberg survey.

State orders for goods have lost momentum since government changes carried out in early May, said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. in Moscow. Vladimir Putin, appointed prime minister on May 8 after leaving the presidency, moved officials from the Kremlin into new roles in government.

``In summer, activity slows,'' Tikhomirov said. ``It's nothing catastrophic. We expect to see an acceleration in the second half.''

The economy of Russia, the world's biggest energy exporter, grew 8.5 percent in the first quarter, the second-fastest pace since 2000, as annual investment growth averaged more than 20 percent in the first three months, spurring expansion in the construction and retail industries. Industrial production rose to a nine-month high of 9.2 percent in April.

The Federal Statistics Service is scheduled to release industrial production data on July 16 or July 17.

Company News

In corporate news, the new board of OAO GMK Norilsk Nickel, with billionaire Vladimir Potanin as chairman, meets on July 14 to discuss the long-term strategy of Russia's biggest mining company.

United Co. Rusal, which owns 25 percent in Norilsk and wants to combine with the nickel miner, said last week the board's lineup was skewed in favor of Potanin. Rusal wants to re-elect it and expand it to 13 from nine at a special shareholders' meeting.

Mikhail Prokhorov, the billionaire who together with Potanin acquired Norilsk from the state in 1996 and is now a Rusal shareholder, said on July 10 he would consider returning as chief executive officer of the nickel miner.

Evraz Group SA, Russia's second-largest steelmaker, will release a trading update on production on July 15.

VTB Group, Russia's second-biggest bank, may say profit in the first quarter dropped on trading losses.

Markets

Russia's benchmark Micex stock index declined for a third week, falling 2.7 percent, led by OAO GMK Norilsk Nickel, Russia's largest mining company, on concern global demand for steel will decline. OAO Gazprom, the world's biggest gas company, slid 3.9 percent in the week to 306.19 rubles.

The ruble strengthened 0.3 percent against its dollar-euro basket last week as the central bank said it expanded the currency's trading range for the second time in a month. The ruble advanced as much as 0.4 percent on July 10 to a record 29.4001. Bank Rossii purchased as much as $3 billion to weaken it again later in the day, according to Trust Investment Bank estimates.

The currency was at 29.4389 to the basket by the end of last week, after it slipped 0.3 percent to 36.9980 per euro, and gained to a nine-year high of 23.2260 per dollar bringing its rise from July 4 to 1 percent.

Russian government bonds climbed last week, as the central bank boosted its key interest rates July 11 by a quarter- percentage point for the fourth time this year.

The yield on the benchmark 7.5 percent bond due in March 2030 was at 5.54 percent by July 11, from 5.69 percent a week earlier. The yield on the 8.25 percent note maturing in March 2010 was at 5.49 percent, from 5.52 percent on July 4. Bond yields move inversely to prices.

The following is a list of events in Russia this week:

OAO GMK Norilsk Nickel board meeting              July 14
German Economy Minister Gloss Arrives in Russia   July 14
Evraz Group SA trading update                     July 15
Russian consumer price growth update              July 16
Russian industrial production update              July 16 or
later
VTB Group reports first-quarter profit            July 16

To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net


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