Monday, August 4, 2008

US Payrolls Data Mixed, Greenback Finding Support

Daily Forex Fundamentals | Written by Easy Forex | Aug 04 08 01:36 GMT |

U.S. Dollar Trading (USD) the much anticipated July Nonfarm Payrolls failed to impact the markets as the data came in mixed. Employment change of -51K was better than the -75K expected but the Unemployment rate notched up to 5.7% from 5.6% in June. Also released the July Manufacturing ISM beating expectations at 50 vs. 49.3 forecast. The USD on the whole was slightly better bid even as stocks weakened and Oil gained. In the U.S. share markets, the NASDAQ was down 14 points (-0.65%) and the Dow Jones was down -51 points (-0.45%). Crude Oil closed up $1.02 ending the New York session at $125.10 per barrel. Looking ahead, June Core PCE m/m expected at 0.2% and June Factory Orders seen at 0.7%.

The Euro (EUR) was initially sold after US Jobs data but recovered as Oil moved higher. Also hurting sentiment was the June German Retail Sales down 1.4% vs. expectations of -0.5%. Overall the EUR/USD traded with a low of 1.5514 and a high of 1.5604 before closing the day at 1.5544 in the New York session. Looking ahead, June PPI forecast at 0.8% m/m and 7.9% y/y.

The Japanese Yen (JPY) gained against most currencies as carry trades were unwound with only the USD remaining near opening levels. AUD/JPY and NZD/JPY continued to make new lows. Overall the USDJPY traded with a low of 107.28 and a high of 107.89 before closing the day around 107.69 in the New York session.

The Sterling (GBP) was on the back foot as Manufacturing PMI fell to 44.3 in July and the USD was broadly bid. Ongoing concern about the UK economy heading into the MPC meeting weighed. Overall the GBP/USD traded with a low of 1.9729 and a high of 1.9841 before closing the day at 1.9735 in the New York session.

The Australian Dollar (AUD) extended falls as the market speculation of rate cuts hit fever pitch. The RBA meets on Tuesday and is expected to hold rates at 7.25%. Overall the AUD/USD traded with a low 0.9293 and a high of 0.9417 before closing the US session at 0.9296.

Gold (XAU) continued to fall as the USD strengthened, unable to sustain gains on the back of a rally in Oil. Overall trading with a low of USD$902.90 and high of USD$916.90 ending the New York session at USD$910 an ounce.

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China's Inflation Is Harder to Control Than Web: William Pesek

Commentary by William Pesek

Aug. 4 (Bloomberg) -- Suddenly, the new China is looking a lot like the old China.

The most obvious sign is the security clampdown before the Olympics' opening ceremony on Aug. 8. The Beijing Games were meant to showcase the new China, yet the International Olympic Committee finds itself pressuring officials to allow journalists to view Web sites previously barred in the nation's capital.

The most important reminder that China isn't evolving as hoped concerns economic policy.

The yuan last week had its biggest weekly loss since China scrapped its dollar peg in 2005. On July 25, the Politburo, the Communist Party's top decision-making body, left little doubt that the currency gains of recent years are over for now. It said China will focus on ``steady'' growth after the economy expanded at the slowest pace since 2005 in the second quarter.

The politics of such a shift are clear enough; the economics of it are less persuasive.

Part of China's rationale is reducing so-called hot-money flows. As the yuan appreciates, it can attract capital inflows that pump up the money supply. That has increased risks for Asia's second-largest economy.

If China expects to control things, it will have to make its monetary policy consistent with exchange-rate policy. That means lower domestic interest rates, which could cause new problems.

Dangerous Dynamic

``Ending appreciation, cutting rates and relaxing lending curbs would certainly support growth,'' says Council on Foreign Relations economist Brad Setser in New York. ``It also would risk pushing Chinese inflation up to the levels seen in the Gulf.''

Gulf states, including Saudi Arabia and the United Arab Emirates, are under pressure to revalue currencies or drop their pegs to the U.S. dollar. Inflation is running at more than 10 percent in five of the six Gulf Cooperation Council states as oil-fueled growth creates shortages of real estate and services, while the weaker dollar and surging global food prices increase import costs.

It's a dangerous dynamic even for governments awash in petrodollars. While they can afford to help low-income families, the risk of losing economic control has to be considered. If you are China, home to the biggest population and run by a single party obsessed with keeping things that way, imported inflation is a bigger problem.

Bewildering Risks

Setser is among a sizeable group of economists who would prefer to see the yuan strengthen further. It would keep China from importing some inflation and increase the international purchasing power of many of the nation's 1.3 billion people. China also is enjoying the fastest growth among major economies and the largest current-account surplus of all major oil- importing nations.

Considering the bewildering number of risks facing Chinese officials -- a global credit crunch, social instability, the widening gap between rich and poor, worsening environmental conditions -- the focus on currency policy is predictable.

There are many risks to this approach. One is how global growth is slowing and imperiling China's outlook. Realistically, Setser says, China can't rely as heavily on exports for growth in the future as it has in the past.

``It has the policy tools available to shift the basis of its growth,'' he says. ``The political will to do so, though, seems lacking -- at least for now.''

Growth Obstacles

JPMorgan Chase & Co. is advising investors to close three- month bets on a stronger yuan, an investment it first recommended in May. Increasing growth impediments are expected to slow yuan appreciation this year, says Claudio Piron, a Singapore-based currency strategist at the bank.

China has been more willing to tolerate a stronger yuan than many investors expected just a year ago. The Chinese currency, after all, is the best performer among the 10 most-active Asian currencies, excluding the yen, over the past year.

Yet a few stubborn facts are worth considering. One is how daunting China's balancing act really is. The People's Bank of China says controlling inflation is taking a ``prominent position'' in decisions. With inflation advancing at a 7.1 percent rate in June, a stronger yuan would help.

The other side of China's balancing act is economic growth, something that would be aided by a weaker yuan. The key is deciding which is the greater risk. China appears to be siding with U.S. Federal Reserve Chairman Ben Bernanke, whose policies are putting recession risks ahead of the inflation threat.

Internet Is Easier

China will find that controlling the Internet is easier than taming price pressures. Officials in Beijing have compliant executives at Google Inc. and Yahoo! Inc. helping them censor cyberspace. Even after employing all of the conventional tools of economic policy, cooling inflation is easier said than done.

The second fact is the nature of China's economy. The country has yet to develop a private sector that can jumpstart a viable domestic economy. The longer that China subsidizes its companies with a weaker currency, the longer it will take for them to become globally competitive.

Governments sitting atop massive oil reserves often put off diversifying economies. Gulf states may feel they have that luxury; China doesn't. Halting the yuan's gains may not be in China's best interest.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Optique's Fitzpatrick Says Crude Oil May Fall Below $100: Video

Aug. 4 (Bloomberg) -- William Fitzpatrick, who helps manage $1.5 billion at Optique Capital Management, talks with Bloomberg's Bernard Lo from Chicago about the outlook for U.S. stocks, oil prices, and Fitzpatrick's investment strategy. (Source: Bloomberg)

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TRUenergy to Spend A$57 Million on Geothermal Venture

By Angela Macdonald-Smith

Aug. 4 (Bloomberg) -- TRUenergy Pty, the Australian power and gas supplier owned by CLP Holdings Ltd., will invest A$57 million ($53 million) in a geothermal energy project as it seeks to cut emissions blamed for global warming.

TRUenergy will take as much as 30 percent of Petratherm Ltd.'s Paralana project in South Australia state, which seeks to tap underground heat resources for conversion into electricity, the Melbourne-based company said today in an e-mailed statement.

Australia's government has a target to generate 20 percent of the nation's power from renewable sources such as the sun and wind by 2020 as it seeks to tackle greenhouse gas emissions. Hong Kong-based CLP, producer of electricity in six Asian economies, has a target to cut carbon emissions per unit of generation by 75 percent by 2050 and has invested in wind energy projects in China and India, and in an Australian solar venture.

``We certainly believe that this technology has a very major part to play in reducing the overall carbon footprint of the Australian energy sector,'' TRUenergy Managing Director Richard McIndoe said in a telephone interview. ``We felt we really needed to get a foothold in the geothermal and hot rock technology sector.''

Petratherm, based in Adelaide, gained 19 cents, or 29 percent, to 84 cents in Sydney trading at 10:40 a.m. local time, its biggest advance since November 2006.

Heat From Granites

TRUenergy has committed about A$1 billion in renewable and clean energy generation projects and expects to add more, McIndoe said.

TRUenergy, the nation's fourth-biggest electricity and gas retailer, will contribute skills in power generation, transmission and marketing to the venture, Petratherm Managing Director Terry Kallis said by telephone. Beach Petroleum Ltd., the Adelaide-based oil and gas producer, also has a stake in the Paralana project, which aims to convert heat from underground granites into steam that will drive power turbines.

Petratherm and Beach are in the ``advanced stages'' of negotiating a contract to start drilling wells at Paralana, Petratherm said in a separate statement to the exchange.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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China's Shandong Power Shortage Worsens, Evening News Says

By Wang Ying

Aug. 4 (Bloomberg) -- China's Shandong province is facing its worst electricity shortage in a decade and a third of the region's power demand couldn't be met, the Qilu Evening News reported, citing Shandong Electric Power Corp.

Electricity shortage reached 10,220 megawatts, compared with a total peak demand estimated at 37,000 megawatts, the Chinese-language newspaper reported, citing Shandong Electric, a unit of the State Grid Corp. of China. Coal stockpiles in Shandong province are falling and the power shortages may worsen this month, it said.

The Shandong provincial government will ``resolutely'' restrict power supplies to industrial users and ensure household demand will be met, the report said. The capital city of Jinan plans to shut half of the power supplies on the shortage, the newspaper said in a separate report.

To contact the reporter on this story: Wang Ying in Beijing at wang30@bloomberg.net.

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Crude Oil Rises as Storm Edouard Strengthens in Gulf of Mexico

By Gavin Evans and Catherine Yang

Aug. 4 (Bloomberg) -- Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico, and Israeli and U.S. officials sought additional sanctions against Iran.

Tropical Storm Edouard lies about 90 miles (145 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research.

``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said.

Crude oil for September delivery rose as much as $1.21, or 1 percent, to $126.31 a barrel in after-hours electronic trading on the New York Mercantile Exchange and traded at $125.93 at 9:15 a.m. in Singapore.

The contract gained 0.8 percent on Aug. 1 on speculation the odds of a military strike against nuclear research facilities in Iran, the world's fourth-largest oil producer, were increasing.

Iran didn't respond by an Aug. 2 deadline to an offer from the U.S., Russia, China, France, the U.K. and Germany of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program.

Extra sanctions are needed, Tzipi Livni, Israel's foreign minister, said yesterday on CNN's ``Late Edition'' program.

Brent, Edouard

Brent crude oil for September settlement climbed as much as $1.12, or 0.9 percent, to $125.30 a barrel on London's ICE Futures Europe exchange, and traded at $125 at 9:09 a.m. in Singapore.

Tropical storm Edouard, with maximum wind speeds of 50 miles an hour, is likely to strengthen as it moves west parallel to the Louisiana coast before making land on the upper Texas coast Aug. 5, the Miami-based hurricane center said at 7 p.m. local time. There is a 24 percent chance it will strengthen to a hurricane, with winds of more than 74 miles an hour, before striking land.

``Keep a close eye on the storm,'' Rebecca Waddington, a meteorologist with the center, said in an interview. ``The industry knows better than we do how to safeguard their installations. I'd advise them to act early.''

New York oil futures have slipped more than $21 a barrel, or 14 percent, from the record $147.27 on July 11 as U.S. gasoline demand slowed, and a firming of the dollar reduced the attraction of commodities as an investment.

Speculators

Hedge fund managers and other large speculators last week reduced their bets on falling prices, according to Commodity Futures Trading Commission data.

Net-short positions, the difference between orders to buy and sell the commodity, fell to 660 contracts at July 29, 82 percent less than a week earlier.

While the U.S. economy may be heading toward recession, demand in India and China remains strong and global production is straining to keep up, Fat Prophets' Wendt said. He expects oil to reach $175 a barrel before the end of the year.

An Institute for Supply Management report tomorrow will probably show U.S. service industries shrank for a second month in July, based on a Bloomberg survey of economists. Futures trading on the Chicago Board of Trade suggests less than a 7 percent chance the U.S. Federal Reserve will raise interest rates after it meets the same day.

``It's likely that we're going to see further weakness in the dollar,'' Wendt said. ``We can't see it bouncing back and sustaining any gains so we're looking towards further increases in the price of crude oil.''

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Catherine Yang in Hong Kong at cyyang@bloomberg.net

PetroChina Parent First-Half Sales Rise 39%, Business News Says

By Winnie Zhu

Aug. 4 (Bloomberg) -- China National Petroleum Corp.'s sales rose 39 percent as output gained in the first six months, China Business News said, citing an unnamed company official.

Revenue rose to a record 658.2 billion yuan ($96.2 billion), the newspaper said. China National boosted crude oil output to more than 54 million metric tons and natural gas output to over 30 billion cubic meters, it said.

Spokesman Liu Weijiang wasn't immediately available to comment on the newspaper report when contacted by Bloomberg News. China National, the nation's largest oil company, is the parent of Hong Kong-listed PetroChina Co.

To contact the reporter on the story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net;

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Australian Dollar Trades Near 3-Month Low as Yield Gap Shrinks

By Chris Young

Aug. 4 (Bloomberg) -- The Australian dollar traded near its lowest in three months as the yield advantage of the nation's two-year government bonds over similar-dated U.S. Treasury notes shrank to the lowest level this year.

The currency, known as the Aussie, has slid 5.6 percent since reaching a 25-year high on July 16, as signs the economy is slowing prompted traders to bet the central bank will cut interest rates by a half percentage point in the next 12 months. Australia's dollar fell before a government report that economists estimate will show house prices dropped last quarter for the first time in almost three years.

``Talk of rate cuts will cost the Aussie dearly,'' Peter Pontikis, a treasury strategist at Suncorp-Metway Ltd. in Brisbane, Australia, wrote in a note to clients. ``The pressure is on the Australian dollar to fall to earth and back to more reasonable support at just below 90 U.S. cents.''

The Australian dollar traded at 93.01 U.S. cents as of 8:48 a.m. in Sydney, compared with 92.93 cents late last week in New York. It reached 92.86 cents, matching the three-month low touched Aug. 1. Trading volumes may be reduced because of a bank holiday in New South Wales, Australia's most populous state.

House prices dropped 1.3 percent last quarter compared with a 1.1 percent increase in the first three months of the year, according to the median estimate of economists surveyed by Bloomberg News. The Australian Bureau of Statistics will release the report at 11:30 a.m. in Sydney.

Rate Outlook

The Reserve Bank of Australia raised its overnight cash- rate target twice this year to a 12-year high of 7.25 percent to slow inflation. Reports last week showed retail sales fell by the most in six years in June and lending to consumers and businesses rose at the slowest annual pace since 2002.

Investors expect the central bank will cut borrowing costs by 68 basis points in the next year, according to a Credit Suisse Group index based on trading in interest-rate swaps. Investors were betting on higher rates as recently as July 14.

The difference in yield between Australian and U.S. government bonds with a two-year maturity narrowed to 3.67 percentage points, from 3.84 points a week ago, the least since Dec. 26.

Australian government bonds gained for fourth day, pushing the yield on the 10-year bond down 2 basis points to 6.10 percent, the lowest since April 15. The price of the 5.25 percent bond maturing in March 2019 rose 0.15, or A$1.50 per A$1,000 face amount, to 93.411. Bond yields move inversely to prices and a basis point is 0.01 percentage point.

To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.

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Loonie Loses Currency Wings as Canada Reels From U.S. Slump

By Liz Capo McCormick

Aug. 4 (Bloomberg) -- Currency traders are beginning to realize that for all its riches in oil, copper and lumber, Canada's economy may not be so different than the U.S. after all.

While Canadians celebrated last year as the country's dollar reached parity with its U.S. counterpart for the first time since 1976, traders now predict the currency will fall as much as 17 percent through 2009.

After soaring 17 percent in 2007, the loonie, as the currency is known because of the aquatic bird on the one-dollar coin, is down 2.8 percent in 2008 amid a shrinking economy and an 18 percent drop in oil prices the past month. It's one of five of the 16 most-widely traded currencies to drop against the U.S. greenback, joining the New Zealand dollar, South Korean won, South African rand and British pound.

``The way energy prices and certain commodities have boomed, many thought we would weather the downturn better,'' said Steve Butler, director of foreign-exchange trading in Toronto at Scotia Capital Inc., a unit of Canada's third-largest bank. ``You've got a pessimistic look at the economy by the market. It's forced a lot of people to rethink that view.''

Canada's economy shrank 0.1 percent in May, as the extraction of natural gas slowed and car production dropped, Statistics Canada said last week in Ottawa. Economists surveyed by Bloomberg predicted a 0.2 percent expansion, according to the median of 24 estimates.

Forecast Cut

The Bank of Canada cut its 2008 growth forecast on July 15 to 1 percent from 1.4 percent. That's even less than the U.S., where the economy is likely to expand 1.5 percent, according to the median estimate of 81 analysts in a separate poll.

Canada's currency closed last week at C$1.0272 per U.S. dollar, depreciating 13 percent since it reached 90.58 Canadian cents on Nov. 7, the strongest since 1950.

The loonie will slide to C$1.05 by the end of December, and to C$1.09 by the start of 2010, according to the median estimate of 30 strategists surveyed by Bloomberg. New York-based Lehman Brothers Holdings Inc. is the biggest bear, predicting the currency will weaken to C$1.15 this year and C$1.20 in 2009. Paris-based BNP Paribas, the most accurate foreign-exchange forecaster in a 2007 Bloomberg survey, predicts C$1.12 this year.

``The Canadian dollar is extremely overvalued at these levels,'' said Momtchil Pojarliev, head of currencies at London- based Hermes Pension Management Ltd, which has about $70 billion under management. ``Oil prices have come down quite a lot from their peak but the Canadian dollar still hasn't moved at all. The currency should also weaken due to the weaker economic data.''

Export Driven

Commodities such as gold and crude oil account for 54 percent of Canada's exports. As the price of crude oil soared 57 percent in 2007 to $95.83 a barrel, Canada's economy expanded 2.54 percent, compared with 2 percent in the U.S.

And though oil surged 53 percent this year to a record of $147.27 a barrel on July 11, it has since slid to $125.10 on speculation that high prices may cut demand for fuel in the U.S., the world's largest energy consumer. U.S. motorists drove less for a seventh consecutive month in May, pointing toward the first annual drop in road travel since 1980, the Federal Highway Administration said in a report last week.

``From a technical and fundamental perspective, we are looking for the Canadian dollar to weaken,'' said George Davis, chief technical analyst in Toronto at RBC Capital Markets, a unit of the Royal Bank of Canada, the country's biggest bank. `Continued contraction in global growth, would be negative for the Canadian dollar.''

Buy Orders

If the currency weakens past C$1.0343, a so-called level of resistance where strategists say orders to buy the loonie may be clustered based on past trading patterns, then it may depreciate to about C$1.0460, Davis said.

The downturn in the Canadian economy is already largely priced into the currency, said Bettina Mueller, a fund manager at Deutsche Bank AG's DWS Investments unit in Frankfurt, which manages $398 billion.

``Commodities are still a positive story, as the strategic direction is upward,'' said Mueller. ``The Canadian dollar is underpinned from this point of view.''

Canada's fixed-income securities are losing their interest- rate advantage over the U.S., further weighing on the currency.

Three-month deposit rates in Canada exceed those in the U.S. by 0.55 percentage point, compared with 0.91 percent in the first quarter. By year-end, the gap will shrink to 0.09 percentage point, according the median estimate of 47 strategists surveyed by Bloomberg News.

Story `Over'

``Canada's own sluggish domestic fundamentals suggest their interest rate cycle will lag'' behind an increase in U.S. rates, said Peter Pontikis, a treasury strategist at Brisbane, Australia-based Suncorp-Metway Ltd., the country's third-largest general insurer. ``Like many good stories, as the Canadian dollar had been, it is over. We are targeting a retracement back to more comfortable levels at C$1.14 per U.S. dollar, if not higher into end 2008.''

Interest-rate futures show traders no longer expect the Bank of Canada will raise borrowing costs this year.

Policymakers kept the overnight lending rate at 3 percent on July 15 for a second straight meeting, after lowering it four times from 4.5 percent at the beginning of December. Futures on the Chicago Board of Trade show speculators assign a 31 percent chance that the Federal Reserve will raise its target rate, which has been unchanged at 2 percent since April 30, in September.

Interest rates ``will take a back seat to another catalyst: the end of the oil rally,'' said Kathy Lien, chief strategist at currency dealer DailyFX.com in New York. ``The exchange rate will push higher as the rally in oil prices reverses'' with the Canadian dollar weakening, she said.

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net;

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Dollar Trades Near 1-Month High Before Federal Reserve Meeting

By Stanley White

Aug. 4 (Bloomberg) -- The dollar traded near a one-month high against the euro before a Federal Reserve meeting tomorrow at which policy makers may leave interest rates on hold and signal that prices are rising too quickly.

The U.S. currency was also near a one-month high against the yen before data today that is forecast by economists to show the Fed's preferred measure of prices rose in June by the most in six months, backing the case for higher borrowing costs. The New Zealand dollar traded near a 10-month low on speculation the yield advantage of the nation's bonds will shrink as a slowing economy prompts more rate cuts.

``The dollar should remain firm as we're moving away from a weak trend,'' said Akio Shimizu, chief manager of foreign- exchange trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``The Fed is slowly inching toward raising rates. I expect them to confirm their slightly more hawkish stance.''

The dollar traded at $1.5575 per euro at 10:06 a.m. in Tokyo from $1.5564 late in New York on Aug. 1 when it reached $1.5515, the highest since June 24. The dollar bought 107.55 yen from 107.71 yen at the end of last week. It touched a one-month high of 108.38 on July 31. The euro traded at 167.52 yen from 167.55 yen. The dollar may rise to $1.5520 versus the euro and 107.90 yen today, Shimizu forecast.

New Zealand's currency bought 72.80 U.S. cents from 72.73 cents late last week in New York, when it fell to 72.47 cents, the lowest since Sept. 19, 2007.

Investors expect the Reserve Bank of New Zealand to lower borrowing costs by 1.5 percentage points over the next year, according to a Credit Suisse Group index based on trading of interest-rate swaps. The RBNZ lowered rates by a quarter point to 8 percent on July 24, saying more cuts may be necessary.

The Fed

The Fed will keep its target lending rate at 2 percent tomorrow, according to the median estimate of economists surveyed by Bloomberg News. The U.S. central bank should raise rates ``sooner rather than later'' to contain inflation expectations, Philadelphia Fed President Charles Plosser said on July 22.

The personal consumption expenditure index, the Fed's preferred price gauge, rose 2.2 percent in June after excluding food and fuel, according to economists surveyed by Bloomberg. It climbed 2.1 percent the previous month.

Futures contracts on the Chicago Board of Trade showed a 53 percent chance the Fed will raise its target rate by at least a quarter-percentage point on Oct. 29, up from 51 percent a day earlier.

Net Shorts

Currency traders reversed their bets that the yen will gain against the U.S. dollar, data based on futures contracts from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 6,280 on July 29, compared with net longs of 10,524 a week earlier.

Gains in the dollar may be limited by speculation data this week will show the U.S. services industry contracted for a second month and home sales declined, casting doubt on the strength of the U.S. economy.

The Institute for Supply Management's non-manufacturing index, which covers almost 90 percent of the economy, rose to 48.8 from 48.2 in June, according to a Bloomberg News survey. A reading below 50 indicates contraction. The Tempe, Arizona - based purchasing managers' group will release the data tomorrow.

Pending home resales fell 1 percent in June, the fourth decline in six months, economists project a report from the National Association of Realtors will show on Aug. 7.

Consumers are trimming spending as gasoline prices remain near $4 a gallon, home values fall, credit becomes more difficult to obtain and the job market weakens.

``The ISM data may pose some downside risks to the dollar,'' said Kimihiko Tomita, head of foreign exchange in Tokyo at State Street Bank & Trust Co., a unit of the world's largest money manager. ``There's still quite a lot of uncertainty about whether the Fed can actually deliver an increase in rates given the state of the economy.''

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net

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Gold Holds Over $900 in Asia as Crude Oil Gains, Dollar Steady

By Glenys Sim

Aug. 4 (Bloomberg) -- Gold traded little changed above $900 in Asia as the dollar held near a one-month high against the euro and yen, while crude oil prices rose, boosting demand for haven investments.

The precious metal tends to rise in tandem with oil as demand for an inflation hedge increases. Oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico and on geopolitical tension in then Middle East.

``Gold may be settling into a modest trading range for the near term,'' said James Steel, an analyst at HSBC Securities in New York. ``A combination of influences from the U.S. dollar, the credit markets and oil prices are likely to determine gold prices going forward.''

Bullion for immediate delivery rose as much as 0.4 percent to $914.40 an ounce, and traded at $910.02 at 7:57 a.m. in Singapore. Silver for immediate delivery gained 0.2 percent to $17.5125 an ounce at the same time.

Dollar-denominated gold tends to move in the opposite direction to the U.S. currency. The dollar traded near a one- month high against the euro and yen ahead of a Federal Reserve meeting tomorrow at which policy makers decide on interest rates.

The dollar was at $1.5570 against the euro, compared with $1.5564 at the end of last week. It traded at 107.58 yen from 107.71 yen.

Gold for June delivery on the Tokyo Commodity Exchange climbed 10 yen to 3,173 yen a gram ($917 an ounce) at 8:15 a.m. Singapore time.

Gold for December delivery on the Comex division of the New York Mercantile Exchange was little changed at $918.30 an ounce in after-hours electronic trading.

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

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Platinum Futures in Tokyo Fall by Limit on Car Demand Concern

By Aya Takada

Aug. 4 (Bloomberg) -- Platinum futures in Tokyo fell by the daily price limit of 300 yen per gram to the lowest in more than six months on concern slowing auto sales may curb demand for the metal used in car catalysts.

Platinum for June delivery fell 300 yen, or 5.1 percent, to 5,567 yen a gram ($1,610 an ounce) on the Tokyo Commodity Exchange at 10:29 a.m. local time.

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

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Crude Oil Rises as Storm Edouard Strengthens in Gulf of Mexico

By Gavin Evans and Catherine Yang

Aug. 4 (Bloomberg) -- Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico, and Israeli and U.S. officials sought additional sanctions against Iran.

The contract gained 0.8 percent on Aug. 1 on speculation the odds of a military strike against nuclear research facilities in Iran, the world's fourth-largest oil producer, were increasing.

Extra sanctions are needed, Tzipi Livni, Israel's foreign minister, said yesterday on CNN's ``Late Edition'' program.

Brent, Edouard

Brent crude oil for September settlement climbed as much as $1.12, or 0.9 percent, to $125.30 a barrel on London's ICE Futures Europe exchange, and traded at $125 at 9:09 a.m. in Singapore.

Speculators

Hedge fund managers and other large speculators last week reduced their bets on falling prices, according to Commodity Futures Trading Commission data.

Net-short positions, the difference between orders to buy and sell the commodity, fell to 660 contracts at July 29, 82 percent less than a week earlier.

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Catherine Yang in Hong Kong at cyyang@bloomberg.net

China Cosco May Join Hang Seng, Yue Yuen to Leave

By Hanny Wan

Aug. 4 (Bloomberg) -- China Cosco Holdings Co., the world's largest operator of iron-ore and coal ships, may join Hong Kong's Hang Seng Index and sports-shoe maker Yue Yuen Industrial (Holdings) Ltd. may be removed as part of a quarterly review, according to Nomura Holdings Inc.

China Cosco, based in Tianjin in northeastern China, would become the 11th company from the mainland to be included in the Hang Seng Index. Hong Kong-Based Yue Yuen may be dropped because it has the lowest trading level of any stock in the gauge in the past eight quarters, according to Nomura, Japan's largest brokerage, and Fulbright Securities Ltd.

Adding China Cosco would ``reflect the trend that an increasing number of large companies tend to be from mainland China,'' said Francis Lun, general manager at Fulbright, a Hong Kong-based brokerage.

Mainland companies that trade in Hong Kong, known as H shares, made up 25 percent of the value traded on the Hong Kong stock exchange's main board at the end of June, up from 1.5 percent at the end of 1997. The city's $2.12 trillion stock market is Asia's third-biggest after Japan and China.

HSI Services Inc., which compiles the benchmark indexes, said in February 2007 that it plans to expand the Hang Seng Index to 50 companies from 43. The changes, based on criteria such as market capitalization and trading volume, may prompt funds that buy shares based on the index to adjust their holdings. HSI Services will announce the changes on Aug. 8.

China Cosco Declines

Shares of China Cosco fell 15 percent this year, less than the 18 percent decline in the Hang Seng Index.

About 31 million of the company's shares traded daily this year, up from 25.8 million in the same period a year earlier. It ranks 59th among all the companies listed on Hong Kong's exchange by average market value, Sandy Lee, a quantitative analyst at Nomura in Hong Kong, wrote in a research note dated July 29.

Yue Yuen slumped 27 percent this year. Castor Pang, an analyst at Sun Hung Kai Securities in Hong Kong, said Yue Yuen may be kept on the Hang Seng index.

``There's no urgency in deleting Yue Yuen, given that the goal is to increase the membership to 50,'' Pang said.

China Railway Construction Corp., based in Beijing, may join the Hang Seng China Enterprises Index, which tracks H shares, while Shenzhen, China-based Guangshen Railway Co. may be removed, according to the Nomura report.

China Railway, builder of more than half the nation's railroads, climbed 14 percent since its March initial offering was priced at HK$10.70 ($1.37) a share. Guangshen Railway, the operator of trains in China's richest province, plunged 31 percent this year.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

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Asian Stocks Fall for a Second Day; Nissan, BHP Billiton Drop

By Chen Shiyin and Chua Kong Ho

Aug. 4 (Bloomberg) -- Asian stocks fell for a second day, led by automakers and raw-material producers, after Nissan Motor Co. posted a 43 percent drop in profit and metal prices declined.

Nissan, the Japan's third-largest automaker, fell the most in four months and Toyota Motor Corp., the largest, fell to the lowest in almost three years. BHP Billiton Ltd., the world's biggest mining company, dropped after a gauge of metals fell the most in more than a week. Daewoo Shipbuilding & Marine Engineering Co. led shipbuilders lower in Seoul after it canceled an order as the client failed to make payments.

``We expect corporate earnings to stay weak for the rest of 2008 in Asia,'' said Diane Lin, Sydney-based portfolio manager at Pengana Capital, which oversees about $1.9 billion. Exporters that are ``exposed to the overseas markets, such as Japanese and Korean automakers, will see a challenging second half.''

The MSCI Asia-Pacific Index lost 1.2 percent to 129.07 as of 10:54 a.m. in Tokyo, adding to its 1.3 percent decline on Aug. 1. More than two stocks retreated for each that gained.

Japan's Nikkei 225 Stock Average declined 1.3 percent to 12,927.47, poised for its lowest close since July 18. South Korea's Kospi index fell 2.4 percent, Asia's biggest retreat.

Yamaha Corp. posted the biggest drop on the MSCI Asian index after Goldman Sachs Group Inc. cut its rating on the Japanese musical-instrument maker. Lend Lease Corp. fell in Sydney after the developer reported lower profit.

U.S. Stocks Drop

U.S. stocks fell on Aug. 1, adding to two months of losses for the Standard & Poor's 500 Index, after the Labor Department said the jobless rate climbed to 5.7 percent in July. General Motors Corp., the No. 1 U.S. carmaker, declined the most since June after posting the third-biggest quarterly loss in its 100- year history on plunging domestic sales.

GM's $15.5 billion loss was four times more than analysts estimated after the value of truck leases declined. It coincided with a report showing that U.S. auto sales tumbled 13 percent in July, pushing the industry to its lowest annualized selling rate since April 1992.

Nissan lost 5 percent to 787 yen, set for the lowest close since March 13. Toyota dropped 2.2 percent to 4,510 yen, on course for its lowest close since September 2005.

Nissan's net income dropped to 52.8 billion yen ($491 million) for the three months ended June as it wrote down the value of leased vehicles, the automaker said on Aug. 1. UBS AG, Merrill Lynch & Co. and Credit Suisse Securities (Japan) Ltd. cut their share-price forecasts.

Metal Prices

Metal prices fell on Aug. 1, partly on speculation that demand for the auto industry will drop. Platinum declined the most in four months in New York, while copper fell the most in three weeks.

BHP dropped 2.1 percent to $38.30. Rio Tinto Group, the world's third-largest mining company, slipped 1.7 percent to A$118.55. Sumitomo Metal Mining Co., Japan's biggest nickel producer, dropped 5 percent to 1,324 yen.

Daewoo Shipbuilding, the world's third-largest shipbuilder, plunged 11 percent to 36,550 won, set for the largest decline since Jan. 30. It canceled an order valued at 619 billion won ($609 million) for eight container vessels from an unidentified buyer, the company said on Aug. 1.

Hyundai Mipo Dockyard Co., a unit of the world's largest shipbuilder, lost 6.6 percent to 184,500 won. The company also scrapped a 197 billion won contract after an unidentified European customer failed to make an initial payment. Hyundai Heavy Industries Co., its parent, lost 8.8 percent to 280,500 won.

Yamaha Slumps

Yamaha slumped 13 percent to 1,800 yen after Goldman Sachs cut its rating for the company to ``sell'' from ``neutral,'' citing the outlook for earnings. Yamaha cut its profit forecast for the year ending March 2009 on Aug. 1, sending the shares 7.4 percent lower.

Lend Lease, the Sydney-based developer building London's 2012 Olympic Village, dropped 11 percent to A$8.94 after saying net income declined 47 percent as it wrote down U.K. assets for the third-straight year and global property values fell. The shares were on course for their largest loss since December 2000.

To contact the reporter for this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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Japan Stocks Slip a Second Day on Nissan Profit, U.S. Car Sales

By Patrick Rial

Aug. 4 (Bloomberg) -- Japan stocks fell a second day, led by carmakers, after Nissan Motor Co.'s profit fell by two fifths and U.S. auto sales fell to the lowest annual rate in 16 years.

Nissan, Japan's third-largest automaker, sank to a five-year low after net income sank due to a writedown on leased vehicles and a stronger yen, and as U.S. auto sales dropped to the lowest since 1992. Smaller rival Mazda Motor Corp. plunged the most in six years. Canon Inc., which gets more than a quarter of its revenue in the Americas, declined to the lowest since April after the U.S. jobless rate rose to the highest level in four years.

``The U.S. auto figures were extremely poor, and I expect the gradual deterioration of the U.S. economy to continue until the beginning of next year,'' said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which manages about $94 billion.

The Nikkei 225 Stock Average slumped 169.34, or 1.3 percent, to 12,925.25 as of 10:43 a.m. in Tokyo. The broader Topix index fell 19.91, or 1.6 percent, to 1,253.02. Four stocks fell for each that advanced on the Topix.

Nissan slumped 4.8 percent to 788 yen, the lowest level since March 2003. The company said on Aug. 1 net income dropped 43 percent to 52.8 billion yen ($492 million) in the first quarter. Three brokerages cut their price targets on the company.

Toyota Motor Corp., the world's largest automaker by value, slumped 3.3 percent to 4,460 yen, the lowest since August 2005. Honda Motor Co., which gets more than half its sales in North America, tumbled 4.3 percent to 3,330 yen, a seventh day of declines. Toyota reported a 12 percent slide in U.S. sales for July on Aug. 2, while Honda's dipped 1.6 percent.

`Shocking' Auto Sales

Mazda Motor Corp. a third owned by Ford Motor Co., plunged 8.9 percent to 551 yen, the steepest slide in more than six years, after July U.S. sales dropped 13 percent, the biggest decline among Japanese automakers.

The sales figures were ``shocking,'' even in comparison with the conservative forecasts Nomura Holdings Inc. had been making, Shinya Naruse, an analyst at the brokerage, wrote in a note today.

Olympus Corp., the world's biggest maker of endoscopes, slumped 6 percent to 3,280 yen after the company's profit declined amid slumping prices for digital cameras. JPMorgan Chase & Co. cut its rating on the stock to ``underweight'' from ``neutral.''

``With profit down by about a 10th across the board, it's not as bad as I had feared,'' Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. ``But in this market when you show a drop in earnings, it brings the sellers out almost automatically.''

U.S. Unemployment

Canon lost 2 percent to 4,810 yen. Sony Corp., the maker of the PlayStation 3 game console, slipped 1.7 percent to 4,030 yen.

U.S. unemployment rose to 5.7 percent in July from 5.5 percent the prior month. As recently as April, it was 5 percent. A separate report showed that U.S. manufacturing stagnated in July as companies were hit by rising raw-materials costs and slower spending.

Nippon Telegraph & Telephone Corp., the nation's largest telephone company, jumped 2.5 percent to 573,000 yen, the highest since May 31, 2007, after the Nikkei newspaper said on Aug. 2 the company may report a first quarter operating profit of as much as 400 billion yen, boosted by a 45 percent jump in profit at its mobile phone subsidiary NTT DoCoMo Inc.

Nikkei futures expiring in September lost 0.8 percent to 12,920 in Osaka and fell 1.2 percent to 12,920 in Singapore.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

Australia to Leave Benchmark Rate at 7.25% as Job Growth Slows

By Jacob Greber

Aug. 4 (Bloomberg) -- Australia's central bank will probably leave its benchmark interest rate at a 12-year high amid signs rising unemployment will cool inflation that has surged above its target range.

Governor Glenn Stevens will keep the overnight cash rate target at 7.25 percent tomorrow in Sydney, according to all 24 economists surveyed by Bloomberg News. A separate survey shows employment growth probably slowed to 5,000 extra jobs in July from 29,800 in June.

Slower jobs growth adds to signs four interest-rate increases in 12 months are cooling Australia's $1 trillion economy. Record gasoline prices and declining stock values also are prompting consumers and companies to slash spending, offsetting a surge in income from iron ore and coal exports.

``Reserve Bank policy makers aren't ready to cut yet, but when they do, it's likely to be 50 basis points,'' said Rory Robertson, an economist at Macquarie Group Ltd. in Sydney. ``The economy is seriously slowing.''

The Reserve Bank of Australia will announce its decision at 2:30 p.m. tomorrow in Sydney.

Policy makers have left borrowing costs unchanged since March, when they raised the benchmark rate for a second straight month to curb inflation.

Consumer prices jumped 4.5 percent in the second quarter from a year earlier as gasoline costs rose, a report showed last month. The central bank aims to keep annual inflation between 2 percent and 3 percent on average.

Consumer Confidence

Stevens said last month that the chances of keeping inflation ``low over the medium term are good.'' There is ``pretty clear evidence'' consumers and businesses are cutting expenditure, the governor said on July 16.

Since the bank's last meeting on July 1, reports show consumer confidence slumped in July to the lowest level in 16 years, retail sales fell in June by the most in six years, and lending to consumers and businesses rose at the slowest annual pace since 2002.

Home-loan approvals, which fell 7.9 percent in May, the most in eight years, probably dropped 2 percent in June, according to the median estimate of 21 economists surveyed by Bloomberg News. The government publishes its home-loan report at 11:30 a.m. on Aug. 6 in Sydney.

Rate Outlook

``It looks more likely now than it did a couple of months ago that this more moderate track for demand will continue,'' Stevens said on July 16. That will ``in due course begin to exert downward'' pressure on inflation, he said.

Investors have increased bets that the central bank will cut interest rates, according to a Credit Suisse Group index based on trading in interest-rate swaps.

Stevens will lower the benchmark rate by 70 basis points, or 0.70 percentage point, in the next 12 months, the index showed at 3:20 p.m. in Sydney on Aug. 1. At the start of July, traders forecast 19 basis points of gains.

The Reserve Bank may cut its benchmark by as much as 3 percentage points by the end of 2009, said Stephen Koukoulas, a senior economist at TD Securities Ltd. in London.

``The collapse in the domestic economy appears to have gained breadth and momentum in recent months,'' Koukoulas said.

Job Losses

Qantas Airways Ltd., Australia's largest airline, said last month it will sack 1,500 workers, and meat processing company Don Smallgoods will cut 640 at factories in Perth and Melbourne.

Starbucks Corp., the world's largest chain of coffee shops, said July 29 it will close three-quarters of its 84 Australian stores, part of a plan to cut at least 12,000 jobs globally.

The jobless rate, which fell to a 34-year low of 3.9 percent in February, probably rose to 4.3 percent last month from 4.2 percent in June, according to the median estimate of 24 economists surveyed by Bloomberg News.

The government will publish the jobs report at 11:30 a.m. in Sydney on Aug. 7.

``The risk of recession is now very high,'' said Shane Oliver, senior economist at AMP Capital Investors in Sydney. ``The Reserve Bank should be cutting rates.''

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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South Korea's Foreign Currency Reserves Fall to $247.52 Billion

By William Sim

Aug. 4 (Bloomberg) -- South Korea's foreign-exchange reserves declined for a fourth month in July because of a stronger dollar and the central bank's intervention in the currency market.

The nation's reserves dropped to $247.52 billion last month from $258.1 billion in June, the Bank of Korea said in a statement released in Seoul today. A stronger U.S. currency decreased the value of assets in euros and other currencies when converted into dollars, the bank said.

The won jumped 3.4 percent last month, the biggest monthly gain since January 2006, as the central bank bought the local currency with its dollar reserves to help reduce imports costs and tame inflation, which accelerated to the fastest in almost a decade in July.

South Korea ranks sixth after China, Japan, Russia, India and Taiwan among the world's largest holders of foreign exchange, according to central bank data.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net

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N.Z. Dollar Trades Near 10-Month Low on Outlook for Economy

By Tracy Withers

Aug. 4 (Bloomberg) -- The New Zealand dollar traded near a 10-month low on speculation the nation's yield advantage will diminish as the outlook for slowing economic growth prompts more interest-rate cuts.

The local dollar is the worst-performer among the 16 most- traded currencies in the past three months, slumping 6.6 percent against the U.S. dollar. It reached its lowest in more than 10 months on Aug. 1 as traders increased bets that Reserve Bank of New Zealand Governor Alan Bollard will cut borrowing costs by as much as half a percentage point next month.

``Things are looking increasingly dreary and this has taken a toll on the New Zealand dollar,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``Not only is the New Zealand economy teetering on the brink of recession, but the Reserve Bank is expected to cut interest rates significantly over the coming months.''

New Zealand's currency bought 72.87 U.S. cents at 9:56 a.m. in Wellington from 72.73 cents in late New York trading Aug. 1, when it fell as low as 72.47 cents. It bought 78.47 yen from 78.32 yen.

The currency fell last week after a survey showed a net 8.2 percent of firms expect sales will fall over the next year, adding to signs the economy has stalled. The fifth straight month of pessimism was the worst in the ANZ National Bank Ltd. survey's 20-year history.

Last month, Bollard cut the official cash rate a quarter- point to 8 percent, the first reduction in five years, saying the slowing economy will ease inflation.

`Slow Further'

``There is a risk that the domestic economy will slow further,'' he said in a July 24 statement. Weak growth will curb inflation over the next two years, he said.

The economy contracted 0.3 percent in the first quarter and 9 of 13 economists surveyed by Bloomberg News estimate it also shrank in the three months ended June 30, putting the nation in its first recession since 1998.

The deteriorating outlook for the economy has increased expectations of future rate reductions. The chance of a quarter- point cut at the next review is 128 percent, according to an index calculated by Credit Suisse Group based on swaps trading. A separate index shows the market expects 1.5 percentage points of rate cuts over the next year.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

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Japan's Yen, Chinese Yuan, Ringgit, Won: Asia Currency Preview

By Anoop Agrawal

Aug. 4 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.

Exchange rates are from the previous session.

Japanese yen: Vice Finance Minister Kazuyuki Sugimoto is scheduled to speak to reporters at 5 p.m. in Tokyo.

The yen was at 107.61 a dollar at 7:06 a.m. in Tokyo.

Malaysian ringgit: The trade surplus in June decreased to 13.7 billion ringgit from 15.6 billion ringgit in May, economists said in a Bloomberg News survey before a government report at 12:01 p.m. in Kuala Lumpur.

The ringgit was at 3.2635.

South Korean won: Crude oil imports dropped for a sixth month as high energy prices curbed demand and threatened to slow growth. Oil imports dropped to 69.6 million barrels in July from 72.8 million barrels a year ago, the government said on Aug. 1.

The won was at 1,014.60.

Indonesian rupiah: Exports in June rose 35 percent to $12.9 billion from a year ago, the government said Aug. 1. Inflation accelerated to 11.9 percent in July from a year earlier, the fastest in 22 months, another report showed the same day.

The rupiah was at 9,096.

Taiwan dollar: Consumer prices rose 5.6 percent in July from a year earlier, compared with a 4.97 percent gain the previous month, economists said in a Bloomberg survey. The government will report the data tomorrow.

The Taiwan dollar was at NT$30.645.

Thai baht: Foreign-exchange reserves fell 1.2 percent to $105.1 billion in the week ended July 25, from $106.4 billion a week earlier, the central bank said on Aug. 1.

The baht traded at 33.53.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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China Cosco May Join Hang Seng, Yue Yuen to Leave, Nomura Says

By Hanny Wan

Aug. 4 (Bloomberg) -- China Cosco Holdings Co., the world's largest operator of iron-ore and coal ships, may join Hong Kong's Hang Seng Index and sports-shoe maker Yue Yuen Industrial (Holdings) Ltd. may be removed as part of a quarterly review, according to Nomura Holdings Inc.

China Cosco, based in Tianjin in northeastern China, would become the 11th company from the mainland to be included in the Hang Seng Index. Hong Kong-Based Yue Yuen may be dropped because it has the lowest trading level of any stock in the gauge, according to Nomura, Japan's largest brokerage, and Fulbright Securities Ltd.

Adding China Cosco would ``reflect the trend that an increasing number of large companies tend to be from mainland China,'' said Francis Lun, general manager at Fulbright, a Hong Kong-based brokerage.

Mainland companies that trade in Hong Kong, known as H shares, made up 25 percent of the value traded on the Hong Kong stock exchange's main board at the end of June, up from 1.5 percent at the end of 1997. The city's $2.12 trillion stock market is Asia's third-biggest after Japan and China.

HSI Services Inc., which compiles the benchmark indexes, said in February 2007 that it plans to expand the Hang Seng Index to 50 companies from 43. The changes, based on criteria such as market capitalization and trading volume, may prompt funds that buy shares based on the index to adjust their holdings. HSI Services will announce the changes on Aug. 8.

China Cosco Declines

Shares of China Cosco fell 15 percent this year, less than the 18 percent decline in the Hang Seng Index.

About 31 million of the company's shares traded daily this year, up from 25.8 million in the same period a year earlier. It ranks 59th among all the companies listed on Hong Kong's exchange by average market value, Sandy Lee, a quantitative analyst at Nomura in Hong Kong, wrote in a research note dated July 29.

Yue Yuen slumped 27 percent this year. Castor Pang, an analyst at Sun Hung Kai Securities in Hong Kong, said Yue Yuen may be kept on the Hang Seng index.

``There's no urgency in deleting Yue Yuen, given that the goal is to increase the membership to 50,'' Pang said.

China Railway Construction Corp., based in Beijing, may join the Hang Seng China Enterprises Index, which tracks H shares, while Shenzhen, China-based Guangshen Railway Co. may be removed, according to the Nomura report.

China Railway, builder of more than half the nation's railroads, climbed 14 percent since its March initial offering was priced at HK$10.70 ($1.37) a share. Guangshen Railway, the operator of trains in China's richest province, plunged 31 percent this year.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

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Australia Stocks Preview: Consolidated Media, Origin, Rio Tinto

By Shani Raja

Aug. 4 (Bloomberg) -- The following is a list of companies whose shares may rise or fall in Australia. This preview includes news announced after markets closed on Friday. Prices are from Friday's close unless otherwise stated.

The S&P/ASX 200 Index futures contract due in September fell 0.8 percent to 4,875 at 6:59 a.m. in Sydney. The Bank of New York Australia ADR Index declined 5.3 percent in New York.

The S&P/ASX 200 Index dropped 73.40, or 1.5 percent, to 4,904.

Mining shares: A measure of six metals traded on the London Metal Exchange fell 1.9 percent. Zinc lost 3.3 percent, copper 1.9 percent and nickel 0.3 percent.

American depositary receipts of BHP Billiton Ltd. (BHP AU), the world's largest mining company, slipped 5.9 percent to the equivalent of A$37.77 a share in New York, A$1.34 lower than the A$39.11 close in Sydney.

Rio Tinto Group (RIO AU), the world's third-largest mining company, declined A$3.80, or 3 percent, to A$121.60.

Oil companies: Crude oil rose after Israeli Deputy Prime Minister Shaul Mofaz said all options are open as Iran drives toward a ``major breakthrough'' in its nuclear weapons program. Crude for September delivery rose $1.02, or 0.8 percent, to settle at $125.10 a barrel in New York on Aug. 1.

Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, dipped A$1.07, or 2 percent, to A$52.73.

National Australia Bank Ltd. (NAB AU): U.S. credit markets deteriorated rapidly last month and may get ``quite a bit worse,'' National Australia Bank Chairman Michael Chaney told the Australian Broadcasting Corp.'s Inside Business Program on August 3. The lender's shares dropped 36 cents, or 1.5 percent, to A$24.34.

Origin Energy Ltd. (ORG AU): Royal Dutch Shell Plc and BP Plc have approached Origin over its coal seam gas assets in Queensland, Australia, the Sunday Telegraph reported, citing unidentified sources. Origin gained 21 cents, or 1.3 percent, to A$16.06.

Consolidated Media Holdings Ltd. (CMJ AU): Seven Network Ltd., the television broadcaster controlled by billionaire Kerry Stokes, has increased its stake in James Packer's Consolidated Media Holdings to 5 percent, the Australian Financial Review reported, without saying where it got the information. Consolidated declined 4 cents, or 1.4 percent, to A$2.90. Seven rose 22 cents, or 3 percent, to A$7.60.

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

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Economic Calendar Eco Data 8/4/08

GMT	Ccy	Events	Consensus	Previous
01:30	AUD	Australia Hse price index Q/Q Q2	-1.30%	1.10%
01:30	AUD	Australia Hse price index Y/Y Q2	8.00%	13.80%
07:30	CHF	Swiss SVME PMI Jul	53.3	54.9
08:30	GBP	U.K. PMI construction Jul	37.5	38.8
09:00	EUR	Eurozone PPI M/M Jun	0.80%	1.20%
09:00	EUR	Eurozone PPI Y/Y Jun	7.90%	7.10%
12:30	USD	U.S. PCE core M/M Jun	0.20%	0.10%
12:30	USD	U.S. PCE core Y/Y Jun	2.20%	2.10%
12:30	USD	U.S. PCE index M/M Jun	N/A	0.40%
12:30	USD	U.S. PCE index Y/Y Jun	3.90%	3.10%
12:30	USD	U.S. Personal income Jun	-0.20%	1.90%
12:30	USD	U.S. Personal spending Jul	0.50%	0.80%
14:00	USD	U.S. Factory orders Jun	0.70%	0.60%
		Canada Market holiday

Sunday, August 3, 2008

Services Probably Shrank for Second Month: U.S. Economy Preview

By Courtney Schlisserman

Aug. 3 (Bloomberg) -- Service industries in the U.S. probably shrank in July for a second straight month, signaling the slowdown in growth broadened, economists said before a report this week.

The Institute for Supply Management's non-manufacturing index, covering almost 90 percent of the economy, rose to 48.8 from 48.2 in June, according to the median forecast of economists surveyed by Bloomberg News. A reading of 50 is the dividing line between contraction and expansion.

Other reports this week may show home sales declined and consumer spending slowed, indicating the real-estate recession and soaring fuel costs are rippling through the economy. Concern over the outlook for both growth and inflation will prompt Federal Reserve policy makers to keep interest rates unchanged at the conclusion of their meeting on Aug. 5.

``There are downside risks to the economy on the housing front, the manufacturing front and household spending,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. ``The Fed has little choice but to stand pat.''

The Tempe, Arizona-based purchasing managers' group is scheduled to release its services report on Aug. 5. The institute said on Aug. 1 that its manufacturing index dipped to 50 last month from 50.2, signaling factory activity stalled.

Consumers are trimming spending as gasoline prices remain near $4 a gallon, home values fall, credit becomes more difficult to obtain and the job market weakens.

Job Losses

Employers cut 51,000 workers from payrolls in July, the seventh straight decline, and the unemployment rate rose to 5.7 percent, the Labor Department said on Aug. 1. The rate has jumped by 0.7 percentage point since April, the biggest three- month gain since the end of the last U.S. recession in 2001.

``My outlook is cautious -- the consumer clearly is pulling in and is not spending as much,'' Stephen Holmes, Chief Executive Officer at Wyndham Worldwide Corp., said in a July 31 interview. ``We are assuming this will be an issue and a challenge and a headwind for our industry throughout 2009.''

Parsippany, New Jersey-based Wyndham franchises Ramada and Super 8 hotels. U.S. revenue per available room, a measure of rates and occupancy, declined 3.7 percent in the quarter.

A report tomorrow is projected to show consumer spending slowed in June as the boost from tax rebates waned. Purchases increased 0.4 percent after a 0.8 percent rise in May, according to economists surveyed. Incomes probably dropped 0.2 percent as fewer rebate checks reached taxpayers bank accounts.

Less Spending

Economists anticipate spending will continue to weaken in coming months as the housing and labor markets remain depressed.

Pending home resales fell 1 percent in June, the fourth decline in six months, economists project a report from the National Association of Realtors will show on Aug. 7.

The figure is considered a signal of future home sales because it is calculated based on contract signings. The Realtors group said on July 24 that its existing home sales measure, which is recorded at the time a contract closes, fell in June to a 10-year low.

Investors anticipate the Fed will hold its benchmark interest rate at 2 percent in two days as it tries to steer the economy through the slowdown in growth and pickup in prices.

                        Bloomberg Survey

================================================================
                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Pers Inc MOM%             8/4       June      1.9%     -0.2%
Pers Spend MOM%           8/4       June      0.8%      0.4%
PCE Deflator YOY%         8/4       June      3.1%      3.7%
Core PCE Prices MOM%      8/4       June      0.1%      0.2%
Core PCE Prices YOY%      8/4       June      2.1%      2.2%
Factory Orders MOM%       8/4       Jan.      0.6%      0.7%
ISM NonManu Index         8/5       July      48.2      48.8
Initial Claims ,000's     8/7      Aug. 3     448       420
Cont. Claims ,000's       8/7      27-Jul     3282      3265
Pending Homes MOM%        8/7       June     -4.7%     -1.0%
Productivity QOQ%         8/8        1Q       2.6%      2.5%
Labor Costs QOQ%          8/8       1Q P      2.2%      1.4%
Whlsale Inv. MOM%         8/8       June      0.8%      0.6%
=============================================================================

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net.

Economic Calendar Summary 8/3 - 8/8

Sunday, Aug 3, 2008

GMT	Ccy	Events	Consensus	Previous
22:45	NZD	Average Hourly Earnings (QoQ) (2Q)	1.4%	1.1%
22:45	NZD	Private Wages ex Overtime (QoQ) (2Q)	0.8%	0.7%
22:45	NZD	Labor Cost Private Sector (QoQ) (2Q)	0.8%	0.7%
23:30	AUD	AiG Performance of Service Index (JUL)	--	45.4
23:50	JPY	Monetary Base (YoY) (JUL)	--	0.4%

Monday, Aug 4, 2008

GMT	Ccy	Events	Consensus	Previous
1:30	AUD	ANZ Job Advertisements (MoM) (JUL)	--	-3.0%
1:30	AUD	House Price Index (QoQ) (2Q)	-1.3%	1.1%
1:30	AUD	House Price Index (YoY) (2Q)	8.0%	13.8%
3:00	NZD	ANZ Commodity Price (JUL)	--	0.0%
7:30	CHF	SVME-Purchasing Managers Index (JUL)	53.6	54.9
8:30	GBP	Purchasing Manager Index Construction (JUL)	37.5	38.8
8:30	EUR	Euro-Zone Sentix Investor Confidence (AUG)	-10	-9.3
9:00	EUR	Euro-Zone Producer Price Index (MoM) (JUN)	0.8%	1.2%
9:00	EUR	Euro-Zone Producer Price Index (YoY) (JUN)	7.9%	7.1%
11:30	USD	Challenger Job Cuts (YoY) (JUL)	--	46.7%
12:30	USD	Personal Income (JUN)	-0.2%	1.9%
12:30	USD	Personal Spending (JUN)	0.5%	0.8%
12:30	USD	Personal Consumption Expenditure Core (MoM) (JUN)	0.2%	0.1%
12:30	USD	Personal Consumption Expenditure Core (YoY) (JUN)	2.2%	2.1%
12:30	USD	Personal Consumption Expenditure Deflator (YoY) (JUN)	--	3.1%
14:00	USD	Factory Orders (JUN)	0.7%	0.6%

Tuesday, Aug 5, 2008

GMT	Ccy	Events	Consensus	Previous
4:30	AUD	Reserve Bank of Australia Rate Decision	7.25%	7.25%
7:45	EUR	Italian Purchasing Manager Index Services (JUL)	47.3	48.5
7:50	EUR	French Purchasing Manager Index Services (JUL F)	47	47
7:55	EUR	German Purchasing Manager Index Services (JUL F)	53.3	53.3
8:00	EUR	Euro-Zone Purchasing Manager Index Services (JUL F)	48.3	48.3
8:00	EUR	Euro-Zone Purchasing Manager Index Composite (JUL F)	47.8	47.8
8:30	GBP	Purchasing Manager Index Services (JUL)	46.6	47.1
8:30	GBP	Industrial Production (MoM) (JUN)	0.1%	-0.8%
8:30	GBP	Industrial Production (YoY) (JUN)	-1.2%	-1.6%
8:30	GBP	Manufacturing Production (MoM) (JUN)	0.1%	-0.5%
8:30	GBP	Manufacturing Production (YoY) (JUN)	-0.6%	-0.8%
8:30	GBP	Official Reserves (Changes) (JUL)	--	$462M
9:00	EUR	Euro-Zone Retail Sales (MoM) (JUL)	-0.6%	1.2%
9:00	EUR	Euro-Zone Retail Sales (YoY) (JUN)	-1.3%	0.2%
14:00	USD	ISM Non-Manufacturing Composite (JUL)	48.0	48.2
18:15	USD	Federal Open Market Committee Rate Decision	2.00%	2.00%
23:01	GBP	NIESR Gross Domestic Product Estimate (JUL)	--	0.2%
23:01	GBP	Nationwide Consumer Confidence (JUL)	57	61
23:30	AUD	AiG Performance of Construction Index (JUL)	--	40.3

Wednesday, Aug 6, 2008

GMT	Ccy	Events	Consensus	Previous
1:30	AUD	Home Loans (JUN)	-2.0%	-7.9%
1:30	AUD	Investment Lending (JUN)	--	--
1:30	AUD	Value of Loans (MoM) (JUN)	--	--
5:00	JPY	Leading Index (JUN P)	91.1%	92.9%
5:00	JPY	Coincident Index (JUN P)	101.7%	103.3%
9:30	GBP	BRC Shop Price Index (JUL)	--	--
10:00	EUR	German Factory Orders s.a. (MoM) (JUN)	0.4%	-0.9%
10:00	EUR	German Factory Orders n.s.a. (YoY) (JUN)	-4.7%	-2.0%
11:00	USD	MBA Mortgage Applications (AUG 1)	--	--
14:00	CAD	Ivey Purchasing Managers Index (JUL)	62.5	69.6
22:45	NZD	Unemployment Rate (2Q)	3.8%	3.6%
22:45	NZD	Employment Change (QoQ) (2Q)	0.2%	-1.3%
22:45	NZD	Employment Change (YoY) (2Q)	-0.6%	-0.2%
23:50	JPY	Machine Orders (MoM) (JUN)	-9.5%	10.4%
23:50	JPY	Machine Orders (YoY) (JUN)	--	--
23:50	JPY	Foreign Buying Japan Stocks (Yen) (AUG 1)	--	--
23:50	JPY	Foreign Buying Japan Bonds (Yen) (AUG 1)	--	--
23:50	JPY	Japan Buying Foreign Stocks (Yen) (AUG 1)	--	--
23:50	JPY	Japan Buying Foreign Bonds (Yen) (AUG 1)	--	--

Thursday, Aug 7, 2008

GMT	Ccy	Events	Consensus	Previous
1:30	AUD	Employment Change (JUL)	5.0K	29.8K
1:30	AUD	Unemployment Rate (JUL)	4.3%	4.2%
1:30	AUD	Participation Rate (JUL)	65.3%	65.3%
6:00	EUR	German Trade Balance (euros) (JUN)	15.5B	14.4B
6:00	EUR	German Current Account (euros) (JUN)	12.0B	7.5B
6:00	EUR	German Imports s.a. (MoM) (JUN)	1.8%	0.5%
6:00	EUR	German Exports s.a. (MoM) (JUN)	1.8%	-3.4%
6:45	EUR	French Trade Balance (euros) (JUN)	-4.6B	-4.7B
8:00	EUR	Italian Industrial Production s.a. (MoM) (JUN)	0.3%	-1.4%
8:00	EUR	Italian Industrial Production w.d.a. (YoY) (JUN)	-2.0%	-4.1%
8:00	EUR	Italian Industrial Production n.s.a. (YoY) (JUN)	-4.5%	-6.6%
10:00	EUR	German Industrial Production s.a. (MoM) (JUN)	0.8%	-2.4%
10:00	EUR	German Industrial Production n.s.a. and w.d.a. (YoY) (JUN)	1.5%	0.8%
11:00	GBP	Bank of England Rate Decision	5.00%	5.00%
11:45	EUR	European Central Bank Rate Decision	4.25%	4.25%
12:30	EUR	ECB President Trichet Holds Public Press Conference	--	--
12:30	CAD	Building Permits (MoM) (JUN)	-1.0%	1.1%
12:30	USD	Initial Jobless Claims (AUG 2)	413K	448K
12:30	USD	Continuing Claims (JUL 26)	--	--
14:00	USD	Pending Home Sales (MoM) (JUN)	-1.0%	-4.7%
17:30	USD	ICSC Chain Store Sales (YoY) (JUL)	--	--
19:00	USD	Consumer Credit (JUN)	$6.4B	$7.8B
23:50	JPY	Loans Individual Hedgefund (YoY) (2Q)	--	3.7%
23:50	JPY	Japan Money Stock M2+CD (YoY) (JUL)	2.4%	2.3%
23:50	JPY	Japan Money Stock M3 (YoY) (JUL)	1.0%	0.9%
23:50	JPY	Bank Lending incl Trusts(YoY) (JUL)	--	1.8%
23:50	JPY	Bank Lending Banks ex-Trust (YoY) (JUL)	--	2.0%
23:50	JPY	Bank Lending Banks Adjust (YoY) (JUL)	--	2.4%

Friday, Aug 8, 2008

GMT	Ccy	Events	Consensus	Previous
--	JPY	Eco Watchers Survey: Outlook (JUL)	--	32.1
--	JPY	Eco Watchers Survey: Current (JUL)	--	29.5
5:45	CHF	Unemployment Rate (JUL)	2.3%	2.3%
5:45	CHF	Unemployment Rate s.a. (JUL)	2.5%	2.5%
6:30	AUD	Foreign Reserves (Australian dollar) (JUL)	--	35.9B
6:45	EUR	French Central Government Balance (euros) (JUN)	--	-50.1B
8:00	EUR	Italian Gross Domestic Product s.a. and w.d.a. (QoQ) (2Q P)	0.0%	0.5%
8:00	EUR	Italian Gross Domestic Product s.a. and w.d.a. (YoY) (2Q P)	0.3%	0.3%
9:00	EUR	Euro-Zone Industrial Confidence (AUG)	--	--
11:00	CAD	Net Change in Employment (JUL)	5.0K	-5.0K
11:00	CAD	Unemployment Rate (JUL)	6.2%	6.2%
12:30	USD	Nonfarm Productivity (2Q P)	2.6%	2.6%
12:30	USD	Unit Labor Costs (2Q P)	1.2%	2.2%
14:00	USD	Wholesale Inventories (JUN)	0.6%	0.8%