Asia Stocks Fall to 2-Year Low on Oil, Gold Drop; Huiyuan Jumps

By Chua Kong Ho and Shani Raja

Sept. 3 (Bloomberg) -- Asian stocks fell, sending the region's benchmark index to a two-year low, after a slump in oil and gold dragged down commodities producers.

Cnooc Ltd., China's largest offshore oil explorer, and Sumitomo Metal Mining Co., Japan's biggest gold producer, both dropped more than 5 percent. Nippon Steel Corp. declined after ArcelorMittal said it will cut South African steel prices. China Huiyuan Juice Group Ltd. leapt 167 percent in Hong Kong after Coca-Cola Co. offered to buy it.

``There'll probably be more pain in the near term for commodities,'' said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management in Sydney.

The MSCI Asia Pacific Index declined 0.4 percent to 120.58 at 3:45 p.m. in Tokyo, headed for the lowest close since July 19, 2006. Raw-materials and energy shares had the biggest losses among the index's 10 groups, while utility companies led gains.

The measure has declined 24 percent this year as the global economy slowed and financial companies reported more than $500 billion in writedowns and credit losses.

Australia's S&P/ASX 200 Index dropped 1.1 percent after the country's economic expansion slowed in the second quarter to 0.3 percent, the weakest pace in two years. Newcrest Mining Ltd. fell.

Japan's Nikkei 225 Stock Average added 0.6 percent to 12,689.59. Bridgestone Corp., the world's largest tiremaker, gained 5.6 percent as raw-material costs declined. South Korea's Kospi Index rose 1.4 percent. Hyundai Motor Co. advanced after workers agreed to a pay increase, signaling an end to stoppages.

Commodities Drop

Most Asian markets open for trading declined, while India's markets are closed for a holiday. U.S. stocks declined yesterday as a slump in commodity producers overshadowed gains in airlines and consumer companies, sending the Standard & Poor's 500 Index down 0.4 percent. S&P 500 futures were little changed today.

BHP Billiton Ltd., the world's biggest mining company, fell 3.4 percent after the Reuters/Jefferies CRB Index of commodities declined the most since March 19 as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Commodities also slumped after the U.S. dollar jumped to the highest since October against six major currencies, eroding the appeal of raw materials priced in the U.S. currency.

Cnooc tumbled 5.3 percent to HK$10.78 in Hong Kong. Inpex Holdings Inc., Japan's largest oil explorer, lost 3.9 percent to 1.025 million yen. Sumitomo Metal sank 6.4 percent to 1,252 yen, while Newcrest Mining, Australia's largest gold producer, slumped 9 percent to A$22.60. BHP dropped 3.4 percent to A$37.95.

Concerns Deepen

``Concerns have deepened that commodities and energy prices will drop further,'' said Wu Kan, a fund manager in Shanghai at Dazhong Insurance Co., which oversees $285 million.

Gasoline futures tumbled 9.2 percent. Oil futures fell as much as 8.7 percent to $105.46, the lowest since April 4, before closing at $109.71 yesterday. Gold futures lost 3 percent, the biggest drop since Aug. 11.

Fuel-dependent companies gained on speculation lower energy costs will bolster earnings. Tokyo Electric Power Co., the world's second-biggest non-state buyer of liquefied natural gas, rose 3.9 percent to 3,230 yen. Korean Air Lines Ltd., South Korea's largest carrier, rose 13 percent to 34,800 won.

Bridgestone added 5.6 percent to 1,951 yen. About seven gallons of oil are required to produce a car tire, according to the Rubber Manufacturers Association. Oji Paper Co., Japan's biggest user of high-sulfur fuel oil, climbed 6.9 percent to 586 yen, the highest since Oct. 11, 2007.

``Relief from falling energy prices provides a significant boost to earnings of fuel-dependent companies,'' said Platypus Asset's Patkar.

Coca-Cola Takeover

Huiyuan Juice, China's biggest maker of pure fruit juice, jumped 167 percent to HK$11.06. Coca-Cola offered to buy the company for HK$17.9 billion ($2.3 billion), Beijing-based Huiyuan said in a statement.

Hyundai Motor, South Korea's largest automaker, rose 0.6 percent to 71,100 won, after workers tentatively agreed yesterday to a 5.6 percent increase in basic pay.

Nippon Steel, the world's second-largest steelmaker, fell 2.9 percent to 503 yen, the most in two weeks, after rival ArcelorMittal said it will cut South African steel prices, raising concern prices will drop in Asia.

JFE Holdings Inc., Japan's No. 2 steelmaker, dropped 4.1 percent to 4,500 yen. South Korea's Posco declined 2.5 percent to 471,500 won. BlueScope Steel Ltd., Australia's largest steelmaker, lost 4.2 percent to A$8.88.

Komatsu Ltd., the world's second-largest maker of earthmoving equipment, dropped 7.1 percent to 2,095 yen, the most since Feb. 6. Mitsubishi UFJ cut its rating to ``market perform'' from ``outperform,'' citing increased concern that Komatsu may miss its profit forecast due to falling demand for construction machinery globally.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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French Stocks: Devoteam, Michelin, Natixis, Theolia, Total

By Adria Cimino

Sept. 3 (Bloomberg) -- France's CAC 40 Index lost 47.49, or 1.1 percent, to 4,491.58 at 9:09 a.m. in Paris, retreating for the second time this week. The SBF 120 Index slipped 1.1 percent.

The following shares rose or fell in Paris. Stock symbols are in parentheses.

Business & Decision Group (BND FP) climbed 23 cents, or 4.8 percent, to 4.98 euros, rising for a second day. The consulting firm forecast improved profitability for the second half and estimated full-year sales, excluding currency fluctuations, may rise as much as 25 percent.

Devoteam SA (DVT FP) advanced 64 cents, or 3.1 percent, to 21.65 euros, gaining for a second day. The French information- technology consultant reported a 41 percent rise in first-half net income and raised its full-year sales target to 450 million euros ($650 million).

Michelin & Cie. (ML FP) added 54 cents, or 1.1 percent, to 49.60 euros, gaining for a third day. The world's second- largest tiremaker will increase prices on tires for cars, trucks and buses by an average 3 percent to 5 percent to keep pace with the rising cost of raw materials including natural rubber. Credit Suisse raised its recommendation on the stock to ``outperform'' from ``underperform.''

Natixis SA (KN FP) sank 25 cents, or 4.1 percent, to 5.84 euros, falling the most in a week. The bank will sell shares at less than 3 euros apiece excluding the value of the preferential subscription rights, Les Echos reported, without saying where it obtained the information.

Theolia SA (TEO FP) tumbled 1.45 euros, or 10 percent, to 12.60, for the biggest drop in three weeks. The French wind- power operator part-owned by General Electric Co. reported a first-half net loss of 25.3 million euros compared with a profit a year earlier. The company cut its forecast for 2008 earnings before interest, taxes, depreciation and amortization to at least 20 million euros from the range of 55 million euros to 60 million euros.

Total SA (FP FP), Europe's third-largest oil company, lost 48 cents, or 1 percent, to 46.87, falling a fourth day. Goldman Sachs Group Inc. cut the stock from its ``conviction buy'' list and reduced its recommendation to ``neutral.''

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.



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Allianz SE, Colonia Real Estate AG, IVG: German Equity Preview

By Nadja Brandt and Henrietta Rumberger

Sept. 3 (Bloomberg) -- The following companies may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.

DAX Futures expiring in September dropped 51.5, or 0.8 percent, to 6,468.5 as of 8:05 a.m. in Frankfurt. Germany's benchmark DAX increased 1.5 percent to 6,518.47.

Allianz SE (ALV GY): Europe's biggest insurer may take writedowns of about 1.2 billion euros ($1.74 billion) after the sale of its Dresdner Bank division to Commerzbank AG, Frankfurter Allgemeine Zeitung reported.

Citigroup Inc. raised its share-price estimate to 142 euros from 138 euros. The shares climbed 2 euros, or 1.8 percent, to 116.14 euros.

Colonia Real Estate AG (KBU GY): The property investor confirmed its forecast that profit would be lower this year than initially estimated. The shares added 5 cents, or 0.9 percent, to 5.68 euros.

Deutsche Postbank AG (DPB GY): The sale of Germany's biggest consumer bank by number of clients is becoming increasingly unlikely, the Financial Times Deutschland reported, citing unidentified people close to Deutsche Post AG. Postbank retreated 43 cents, or 1 percent, to 43.87 euros.

Infineon Technologies AG (IFX GY): Europe's second-largest maker of semiconductors is in talk with three parties that may be interested in buying the Qimonda AG memory-chip unit, Financial Times Deutschland reported, citing unidentified people close to Infineon.

Micron Technology Inc. and Elpida Memory Inc. are among the three potential bidders, the newspaper said. Infineon shares climbed 35 cents, or 5.9 percent, to 6.25 euros.

IVG Immobilien AG (IVG GY): Germany's largest commercial- property company plans to expand its remaining oil and gas storage caverns, Frankfurter Allgemeine Zeitung said. The shares declined 1.67 euros, or 13 percent, to 11.35 euros.

SAP AG (SAP GY): UBS AG raised its price projection on shares of the world's largest maker of business-management software to 44 euros from 41 euros. SAP added 34.5 cents, or 0.9 percent, to 38.58 euros.

To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.



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U.K. Stocks Update: FTSE 100 Falls 55.00 to 5,565.70

By Daniel Hauck

Sep. 3 (Bloomberg) -- The U.K.'s benchmark stock index, the FTSE 100, fell 0.98 percent at 8:05 a.m.

The index of 102 stocks traded on the London Stock Exchange fell 55.00 to 5,565.70. Among the stocks in the index, 14 rose, 83 fell and 5 were unchanged.

Declines in the FTSE 100 were led by Vodafone Group Plc (Vod Ln), Rio Tinto Plc (Rio Ln) and Hsbc Holdings Plc (Hsba Ln). About 26.50 million shares traded in the FTSE 100.



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Stocks in Europe, Asia Decline; BHP Billiton, Vodafone Retreat

By Adam Haigh

Sept. 3 (Bloomberg) -- Stocks in Europe and Asia dropped on concern a slowing economy is dimming the earnings prospects for commodity producers while credit-market losses at banks increase. U.S. index futures were little changed.

BHP Billiton Ltd. fell for a third day and Rio Tinto Group slipped 1.2 percent as gold and oil prices declined. Vodafone Group Plc sank 2.4 percent after Credit Suisse Group AG cut its recommendation on the shares and said the world's largest mobile- phone company is likely to miss its new sales forecast. UBS AG led declines among financial companies as Ospraie Management LLC said it will close its biggest hedge fund.

The Dow Jones Stoxx 600 Index lost 1 percent to 287.24 at 8:08 a.m. in London. The MSCI Asia Pacific Index fell 0.5 percent. Futures on the Standard & Poor's 500 Index expiring in September added less than 0.1 percent.

``We would stay very cautious on everything that is commodity-related,'' said Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management. ``There are maybe some more capital increases to come'' for financial firms, he added.

Stocks in the U.S. fell yesterday as a slump in commodity producers overshadowed gains in airlines and consumer companies after oil sank to a five-month low.

The MSCI World Index has declined for three straight days this week following a 1.6 percent August retreat that was led by metals producers on concern slowing demand for the raw materials is undermining the earnings capacity of the companies. The measure is down 17 percent this year after the global economy cooled and the world's largest banks posted writedowns and credit losses of more than $500 billion.

Mining Shares

BHP Billiton, the world's biggest mining company, fell 1 percent to 1,542 pence, while Rio Tinto, the third-largest, lost as 1.2 percent to 4,736 pence.

Crude oil retreated for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.

There's ``the slowing demand to take into account here and this serves as something of a reminder as to the current health of the global economy,'' said Matt Buckland, a trader at CMC Markets in London.

Financial shares declined as Ospraie, the investment firm run by Dwight Anderson, said it will close. The Ospraie Fund fell 26.7 percent in August alone after a ``substantial sell-off'' in a number of its energy, mining and resource equity investments, Anderson, 41, said in a letter to investors yesterday. Jonathan Gasthalter, a spokesman for Ospraie, declined to comment.

Banks Drop

UBS, Switzerland's largest bank, declined 1 percent and Credit Suisse, the second-biggest, lost 0.9 percent.

Lehman Brothers Holdings Inc. slumped 5 percent to $15.32 in German trading. The securities firm bought a 20 percent stake in Ospraie Management in 2005.

Barclays Plc slid 2.8 percent to 353.5 pence after Royal Bank of Scotland Group Plc said the U.K.'s third-biggest bank may need to raise as much as 7.5 billion pounds ($13.3 billion) to bring its capital ratio in line with investment banking peers. The shares were cut to ``sell'' from ``hold.''

Svenska Handelsbanken AB fell 1 percent to 98.75 kronor and Swedbank AB sank 1.7 percent to 115 kronor after having their recommendations cut by UBS, which said the Swedish banks are ``heading from good times to bad.''

Handelsbanken, Sweden's second-largest bank by market value, was reduced to ``sell'' from ``neutral,'' while Stockholm-based Swedbank, the biggest bank in the Baltic states, was downgraded to ``neutral'' from ``buy'' by analyst Andreas Hakansson.

Theolia SA slumped 10 percent to 12.60 euros after the French wind-power company part-owned by General Electric Co. had a loss in the first-half and lowered its full-year target for operating profit on a plan to sell less wind capacity and produce more power.

Vodafone dropped 2.4 percent to 140.8 pence. Credit Suisse lowered its recommendation on the mobile-phone company to ``neutral'' from ``outperform.''

``We believe Vodafone is likely to slightly miss its new revenue guidance on an underlying basis,'' analysts Justin Funnell and Paul Sidney wrote in a note.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net



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Ospraie to Close Flagship Hedge Fund After 38% Loss

By Katherine Burton, Saijel Kishan and Christine Harper

Sept. 3 (Bloomberg) -- Ospraie Management LLC, the investment firm run by Dwight Anderson, will close its biggest hedge fund after losing 38.6 percent this year because of bad bets on commodity stocks.

The Ospraie Fund fell 26.7 percent in August after a ``substantial sell-off'' in energy, mining and resource equity investments, Anderson said in a letter to investors yesterday.

That New York-based Ospraie, once the largest commodity hedge fund firm, has shut its flagship fund underscores how the sudden swing in commodities caught even experienced managers off- guard. The Morgan Stanley Commodity Related Index of 20 mining, energy and agricultural companies declined 13 percent in July and August as the slowing global economy cut demand for raw materials.

``Commodities have been the story du jour, what with China's 1.2 billion population industrializing,'' said Peter Rup, chief investment officer at New York-based Orion Capital Management LLC, which invests in hedge funds. ``It's easy to find a trend and ride the train. The problem is, managers don't know when to get off it.''

The shuttering of the Ospraie Fund, which opened in 1999 and managed $2.8 billion at the start of August, leaves Anderson's firm with three funds overseeing more than $4 billion of assets, down from $9 billion in March.

``I am extremely disappointed with this result and the fund's sudden reversal in performance,'' Anderson, 41, said in the letter. ``After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.''

Jonathan Gasthalter, a spokesman for Ospraie, declined to comment.

ConAgra Foods

Lehman Brothers Holdings Inc., based in New York, bought a 20 percent stake in Ospraie Management in 2005 and Zurich-based Credit Suisse Group AG invested an undisclosed amount the following year. Ospraie this year bought ConAgra Foods Inc.'s commodity-trading unit for $2.8 billion.

The Ospraie Fund had returned an average of 15 percent annually through the end of last year. Anderson generally invested about half of the fund in shares of natural-resource companies and the rest in commodity futures such as oil and zinc. Investments are usually held for two years.

Futures are contracts for delivery of a security at a specified time in the future at an agreed price.

Returning Funds

Ospraie plans to return 40 percent of the fund's assets to investors by the end of September and another 40 percent by year- end, Anderson said in the letter. The remainder, mostly held in so-called illiquid investments, may take as long as three years to distribute, he said.

Clients were locked into the fund for two or three years, depending on the fees they paid. The fund's loss of more than 30 percent triggered a clause that would have allowed investors to withdraw money at the end of September.

Ospraie's remaining funds include the $1.2 billion Special Opportunities Fund, which makes private-equity-type investments in companies such as miners and barge operators; the $200 million Real Return fund, a so-called long-only fund that bets on rising commodity prices; and Wingspan, which invests in other hedge funds that together manage $2.5 billion.

The Standard & Poor's GSCI index of 24 commodity futures declined 18 percent during July and August, led by losses in oil and oil products, soybeans, aluminum and copper.

Anderson has faced losses before. The Ospraie Fund fell 19 percent in the first five months of 2006 on losing bets in the metals market. That year the firm also closed its Point Fund, which had slumped 29 percent.

History at Princeton

``The fact that I had a horrible quarter is a statistical probability, and we had always told people there is that possibility,'' Anderson said in an interview last year. ``We do everything that we can to manage the risk, and I think we're better at it today than we were a year ago.''

Anderson graduated from Princeton University with a degree in history and earned a master's in business administration at the University of North Carolina at Chapel Hill. He joined Julian Robertson's Tiger Management LLC in 1994 and was soon put in charge of the New York-based hedge fund's basic-industries group.

Five years later he moved to Tudor Investment Corp., the Greenwich, Connecticut-based hedge-fund firm run by Paul Tudor Jones. Anderson started the Ospraie Fund at Tudor, named after the marine bird of prey. He spun off from Tudor in 2003.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices and participate substantially in profits from money invested. This year they've lost 5.09 percent through Aug. 28, according to data compiled by Chicago-based Hedge Fund Research Inc.'s HFRX Global Hedge Fund Index.

Ospraie has planned a conference call for investors tomorrow at 9 a.m. New York time.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net; and Saijel Kishan in New York at skishan@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.



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Asur, Inpar, JBS, Parque Arauco, Tenaris: Latin Equity Preview

By William Freebairn and Paulo Winterstein

Sept. 3 (Bloomberg) -- The following companies may have unusual price changes today in Latin America trading. Stock symbols are in parentheses, and share prices are from the previous close. Preferred shares are usually the most-traded class of stock in Brazil.

The MSCI Latin America Index fell 1.5 percent yesterday to 3,851.12.

Argentina

Tenaris SA (TS AF): The world's biggest maker of pipes for the energy industry said it will invest $1.6 billion to expand capacity at a steel-pipe-making plant in Mexico. The Veracruz plant will install a rolling mill with annual production capacity of 450,000 tons of seamless pipes, Luxembourg-based Tenaris said yesterday in a statement distributed by Market Wire. Tenaris dropped 6.4 percent to 77.40 pesos.

Brazil

Inpar SA (INPR3 BS): The Brazilian developer that last month said sales this year will be less than previously forecast was rated ``hold'' in new coverage at Fator Corretora. Difficulty in finding financing for construction projects may lead Inpar to miss its forecast of 1.4 billion reais ($841 million) of contracted sales, analyst Eduardo Silveira wrote in a note yesterday. Inpar fell 2 percent to 3.50 reais.

JBS SA (JBSS3 BS): The world's biggest beef producer may have its B1 credit rating cut by Moody's if its purchase of National Beef Packing Company LLC and Smithfield Beef Group Inc. is approved by U.S. antitrust agencies ``in its current form.'' JBS's ``risk profile would increase in the short-to-medium term following the acquisitions of the new assets,'' Moody's Senior Analyst Soummo Mukherjee wrote in a statement yesterday. JBS, which had its rating put on review for downgrade on July 25, fell 1.5 percent to 6.40 reais.

Chile

Parque Arauco SA (PARAUCO CC): The shopping center developer and operator plans to spend $1 billion on 11 projects to be opened by the end of 2010. The Santiago-based company hopes to double the floor space it rents out by 2010, Chief Executive Officer Andres Olivos said in an interview with Bloomberg Television yesterday. Arauco closed unchanged at 460.02 pesos.

Mexico

Grupo Aeroportuario del Sureste SAB (ASURB MM): Mexico's biggest non-government airport operator will be allowed to bid on a project to build a new airport in the southeastern region of the country, Reuters reported yesterday. The tender will be published at the end of October, the news agency said, citing Ministry of Transport and Communications Chief of Staff Manuel Rodriguez. Asur, as the company is known, rose 2.2 percent to 50.06 pesos.

To contact the reporter 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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Suncor Energy, Virtek Vision May Move: Canadian Equity Preview

By John Kipphoff

Sept. 3 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading tomorrow. Stock symbols are in parentheses, and share prices are from the previous close.

The Standard & Poor's/TSX Composite Index dropped 3.4 percent to 13,299.54.

Suncor Energy Inc. (SU CN): The world's second-largest oil- sands producer may spend as much as C$9 billion ($8.4 billion) next year as expenditures peak for two expansion projects scheduled to be complete by 2012.

The shares fell 9.7 percent to C$54.86, the most in at least 15 years, as crude-oil prices tumbled and Suncor announced the unscheduled shutdown of a hydrogen plant.

Virtek Vision Ltd. (VRK CN): The maker of precision laser projection systems received a takeover offer for C$1.05 a share cah. The bid, from an unidentified party, is superior to a prior agreement to sell part of the company to Mitek Inc. and affiliates, Waterloo, Ontario-based Virtek said. The shares rose 6.7 percent to 95 cents before being halted.

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



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Forex and Dow Jones Recommended Levels

Daily Forex Technicals | Written by FXtechtrade | Sep 03 08 03:12 GMT |

EUR/USD

Today's support: - 1.4446 and 1.4418 (main), where correction is possible. Break would give 1.4402, where correction also may be. Then follows 1.4380. Break of the latter would result in 1.4366. If a strong impulse, we would see 1.4344. Continuation will give 1.4313 and 1.4278.

Today's resistance: - 1.4558 и 1.4583(main). Break would give 1.4606, where a correction is possible. Then goes 1.4628. Break of the latter would result in 1.4650. If a strong impulse, we'd see 1.4681. Continuation will give 1.4714.
USD/JPY

Today's support: - 108.34, 108.00, 107.71 and 107.55(main). Break would bring 107.37, where correction is possible. Then 107.12. If a strong impulse, we would see 106.81. Continuation would give 106.54 and 106.20.

Today's resistance: - 109.13 and 109.38(main), where a correction may happen. Break would bring 109.56, where also a correction may be. Then 109.80. If a strong impulse, we would see 110.03 Continuation will give 110.34.
DOW JONES INDEX

Today's support: - 11 452.36, 11 430.10, 11 363.00 and 11 336.47(main), where a delay and correction may happen. Break of the latter will give 11 317.47, where correction also can be. Then follows 11 283.74. Be there a strong impulse, we would see 11 261.20. Continuation will bring 11 238.40.

Today's resistance: - 11 545.20(main), where a delay and correction may happen. Break would bring 11 576.26, where a correction may happen. Then follows 11 600.00, where a delay and correction could also be. Be there a strong impulse, we'd see 11 618.44. Continuation would bring 11 643.72.

FXtechtrade
http://www.fxtechtrade.com

Disclaimer: Any information presented by Nikolajs Serikovs at this very website should be in no way understood as an offer, promise or guarantee for receiving a profit or avoiding the losses. Stated here levels of support and resistance must not be construed as an investment advice or endorsement for any financial instrument. There exists no guarantee that the market would behave in accordance with the information stated here Prepared in Republic of Latvia for the worldwide distribution.



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Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Sep 03 08 03:09 GMT |

EURUSD Outlook

The EURUSD hit my short target at 1.4495 yesterday, even further, bottomed at 1.4466 but closed a little bit higher at 1.4513. We still have a valid bearish channel on hourly chart. My model remains short targeting 1.4430. Only a consistent move above 1.4545 resistance level would be a violation to the current bearish momentum. CCI about to cross -100 line up on 4h chart so we might have a minor upside correction.

EURUSD Daily Supports and Resistances:

S1= 1.4453
S2= 1.4393
S3= 1.4320
R1= 1.4586
R2= 1.4659
R3= 1.4719
GBPUSD Outlook

The GBPUSD continued it's bearish scenario yesterday. The pair bottomed at 1.7781 and closed at 1.7831. My model remains mixed with downside bias. Immediate resistance is seen at 1.7862. Initial support at 1.7781 (yesterday's low) followed by 1.7730. CCI just cross -100 line up on 4h chart, so watch out for minor upside risks.

GBPUSD Daily Supports and Resistances:

S1= 1.7740
S2= 1.7650
S3= 1.7519
R1= 1.7961
R2= 1.8092
R3= 1.8182
USDJPY Outlook

The USDJPY was traded higher yesterday, topped at 109.18, closed a little lower at 108.59. We have a valid bullish channel on hourly chart. My model goes long targeting 109.50. Immediate support is seen at 108.45 followed by 108.20. CCI just cross -100 line up on daily chart suggesting a bullish view.

USDJPY Daily Supports and Resistances:

S1= 107.85
S2= 107.11
S3= 106.45
R1= 109.25
R2= 109.91
R3= 110.65
USDCHF Outlook

The USDCHF hit my long target at 1.1085 yesterday, even further, topped at 1.1129. We still have a valid bullish channel on hourly chart. My model remains long targeting 1.1185. Immediate support is seen at 1.1040. A break to the downside from that support level could be a violation to the current bullish momentum. CCI about to cross 100 line down on 4h chart so we might have a minor downside risks.

USDCHF Daily Supports and Resistances:

S1= 1.1006
S2= 1.0947
S3= 1.0886
R1= 1.1126
R2= 1.1187
R3= 1.1246

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results



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A Flat Asian Session

Daily Forex Fundamentals | Written by TheLFB-Forex.com | Sep 03 08 03:35 GMT |

Overall, the Asian session had been slow, having most of the pairs trading flat in a small range.

The Euro (Eur/Usd) declined 70 pips in the last trading day, reflecting the selling pressure from the crude oil market. The pair reached a 7-month low because the dollar is advancing against a wide range of currencies, and the market sees the yield differential between the dollar and the other major pair as getting smaller. In the Asian session, the pair moved in a 35 pips range.

The Pound (Gbp/Usd) extended losses from the last trading sessions even after Mr. Brown proposed a number of measures to steer the economy from the face to recession. The pair fell 180 pips yesterday, reaching the lowest valuation since March 2006. Since the U.S. session closed, the pair decline 25 pips.

The Aussie (Aud/Usd) closed the session 130 pips lower as the RBA decided to cut the overnight rate for the first time in the last seven years. The market was expecting this move for a long time since the aussie had a huge fall in a short period of time. In the Asian session, the pair fell another 60 pips, extending the losses from the last days of trading.

The Cad (Usd/Cad) had a very volatile session, moving all over the place in a 60 pip range. At the beginning of the U.S. session, the Bank of Canada will set the overnight interest rate and this will certainly affect the pair's behavior. In the last trading session, the cad reached the highest point in over a year.

The Swissy (Usd/Chf) gained 50 pips yesterday, even though at one point the pair was trading above TheLFB R2. In the Asian session, the swissy moved around the neutral pivot point, in a 35 pip range.

The Yen (Usd/Yen) managed to break the high of the previous session yesterday and tested the TheLFB S2 area. The pair very closely followed the movement in the equity markets yesterday, moving in the same direction most of the time. The daily chart shows the pair is trading between the 20 and 50-day moving average.
Asian shares advancing from a two year bottom

Current Futures: CAC +67.00, DAX +89.50, FTSE +21.00

Asian trade: Asian stocks are trading in the green, advancing from a two year bottom, despite the U.S. equity markets closed lower. The market sees a better outlook for the economy now that oil touched a 5-month low. Asian shares are advancing for the first time this week.

The future market was pointing to a very strong U.S. equity market open yesterday, something that we have not seen lately. However, after the opening bell, shares started slowly to decline and by the end of the session, both the Dow Jones and the S&P 500 were down in the red. The motive behind this was that the losses from the commodity stocks were bigger than the gains from airline and retail companies, the winners, from the oil decline.

In Japan, the market rose, lead by manufacturers. The crude oil decline will help the manufacture's balance sheets by cutting some parts from the production costs. The Nikkei advanced 132.22 points (1.05%) to 12,741.69. The Australian S&P/Asx fell 3.60 points (0.07%) to 5,112.40, because an important number of the shares listed on the Australian stock market are commodity stocks.

Gold fell $0.90 (0.11%) to $809.60 due to a plunge in energy costs and a strengthening dollar curbed the demand for the precious metal as a hedge against inflation.

Crude oil slipped $0.53 (0.48%) to $109.18, after it fell almost 5% yesterday, attributable to the Gulf of Mexico rigs will begin to produce oil again.

Previous Wall Street trade: After rising in the morning, stocks couldn't hold on to their gains in the afternoon as concerns regarding the overall global economy may have weighed on investor sentiment and spurred traders to take their gains off the table. "Oil has been declining on the "Peak Oil" theory, and investors may now be trading stocks on the Peak Growth theory," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "Falling prices for oil and other commodities are viewed as a proxy with regards to the overall health of the U.S. and global economy. If the world is demanding less resources, it is doing so as a result of slower growth now and because growth is expected to slow in the future. The assumption is that Q2 U.S.GDP probably represents a peak for the year, especially since growth decelerations in Europe and parts of Asia are expected to crimp demand for U.S. exports."

Previous European trade: Both European and Asian stocks are building up pressure from two possible threats: inflation and lower growth. The gains from the oil market, fueled by fear that hurricane Gustav will disrupt the world supply; make investors see inflation as a big problem in coming quarters. Inflation erodes the purchasing power of consumers, reducing the demand side for retail goods and services. At the same time, the global slowdown will further reduce demand, both from consumers and from industrial clients. On the day, the fall in oil was a boost to airlines and auto manufacturers. The UK FTSE rose 17.90 points (0.32%) to 5,620.70, while the German dax advanced 96.67 points (1.51%) to 6,518.47.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com



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Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Sep 03 08 03:31 GMT |

Sharp declines in the Korean Won, lead Asian currencies lower

Economic Data: Australia's Q2 GDP came in less than expected, led by the slowdown in consumer spending (Q2 GDP QOQ: 0.3% V 0.4%E; YOY: 2.7% V 2.9%E). In other economic data, Australia's August AiG performance of service index hit an all time low (AUG AIG PERFORMANCE OF SERVICE INDEX: 39.3 V 42.8 PRIOR).

Forex: The AUD and NZD are weaker against both the USD and JPY on the weaker than expected Australian GDP data and the unwinding of commodities positions. The USD is firmer against the EUR, CHF, GBP and JPY. Gains in the dollar are tracking the rise in the 10 yr Treasury yield. In other currency pairs, EUR/JPY and GBP/JPY are both higher, tracking the gains in USD/JPY. The Asian currencies are sharply lower against the USD, led by losses in the Korean Won, which is lower by more than 1.5%.


Asian Equities: The Nikkei 225 is higher by more than 0.50% on short covering. Gains in Tokyo are being led by shares of exporters and banks. The S&P ASX 200 is marginally lower on declines in shares of resources companies. The Kospi is higher by more than 0.75%, after reversing the losses seen earlier during the session. Gains in South Korea are being led by shares of airlines and technology companies. Chinese equities are declining by more than 1%, while the Hang Seng is also off by more than 1%.

Commodities: Crude oil prices are lower by more than 0.20% and trading below $110.00/bbl on signs that damage from Hurricane Gustav may be less than expected. Additionally, crude is tracking the weakness in the EUR against the USD. Spot Gold is little changed, after falling by more than $24.00 during the US session. In other commodities related news, following the US close it was reported that US hedge fund Ospraie Management plans to close its flagship commodities fund, which had assets under management equal to $2.8B.

Trade The News Staff
Trade The News, Inc.

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Australia Second Quarter GDP: Summary (Table)

By Daniel Petrie

Sept. 3 (Bloomberg) -- Following is a summary of Australia's key GDP figures for the second quarter, seasonally adjusted, released by the Australian Bureau of Statistics in Sydney.

==============================================================================
                                 2Q     1Q     4Q     3Q     2Q     1Q     4Q
                               2008   2008   2007   2007   2007   2007   2006
==============================================================================
GDP QoQ                         0.3%   0.7%   0.7%   1.1%   0.8%   1.5%   1.0%
GDP YoY                         2.7%   3.3%   4.2%   4.5%   4.2%   3.8%   2.7%
                             -------------------- QoQ% ----------------------
GDP per capita                 -0.1%   0.3%   0.3%   0.7%   0.5%   1.1%   0.7%
GDP chain price index           4.0%   1.4%   0.7%   0.3%   0.9%   1.1%   0.9%
Terms of trade                 13.1%   1.5%   1.3%  -0.5%  -0.2%   1.6%   2.2%
------------------------------------------------------------------------------
Gross national expenditure      0.4%   1.2%   1.4%   1.2%   1.0%   2.3%   1.8%
Domestic demand                0.9%   1.1%   1.5%   0.8%   1.5%   1.7%   1.4%
Goods/Services Exports         2.7%   1.9%  -0.7%   2.1%   0.2%   0.8%   0.9%
Goods/Services Imports         2.2%   4.3%   3.2%   2.7%   1.7%   2.3%   5.9%
==============================================================================
                                 2Q     1Q     4Q     3Q     2Q     1Q     4Q
                               2008   2008   2007   2007   2007   2007   2006
==============================================================================
                             -------------------- QoQ% ----------------------
Consumption                     0.2%   0.6%   1.4%   1.1%   0.5%   1.2%   0.9%
Household                     -0.1%   0.6%   1.4%   1.0%   0.6%   1.3%   1.6%
General Govt                   1.2%   0.6%   1.4%   1.4%   0.2%   0.8%  -1.2%
 National                      1.0%   0.0%   2.4%   1.7%  -0.7%   1.7%  -3.2%
  Defence                      2.5%  -1.5%   7.0%   4.5%  -5.3%   6.0% -17.0%
  Non-defence                  0.5%   0.5%   1.1%   1.0%   0.7%   0.5%   1.6%
 State & local                 1.3%   1.0%   0.8%   1.1%   0.8%   0.2%   0.1%
------------------------------------------------------------------------------
Gross Fixed capital formation   2.9%   2.2%   1.7%   0.0%   4.1%   3.3%   2.5%
Private capital formation      3.0%   1.4%   0.8%   1.5%   2.3%   6.2%   1.3%
 Total machinery/equipment    11.3%  -0.3%   3.8%  -0.1%   5.5%   6.8%  -1.7%
  New                         10.1%  -0.3%   3.8%  -0.6%   5.2%   6.3%  -1.2%
 Non-dwelling construction    -2.8%   5.2%  -2.2%   5.5%  -0.8%  12.0%   3.4%
  New building                -0.6%   2.0%  -2.4%  11.4%  -3.4%   2.9%   6.0%
  New engineering             -5.4%   9.9%  -2.0%  -1.7%   3.0%  14.3%   6.2%
 Livestock                     0.0%   0.0%   0.0%  10.0%   0.0%   0.0%   0.0%
==============================================================================
                                 2Q     1Q     4Q     3Q     2Q     1Q     4Q
                               2008   2008   2007   2007   2007   2007   2006
==============================================================================
                             -------------------- QoQ% ----------------------
 Business investment           4.6%   2.3%   1.2%   2.4%   3.1%   8.6%   0.7%
  Computer software            3.1%   1.6%   3.1%   0.0%   0.0%   0.0%   2.2%
  Mineral exploration          0.8%  10.1%   2.1%   0.0%   0.0%   0.0%   4.8%
  Art                          0.7%   1.2%   2.4%   0.0%   0.0%   0.0%   2.5%
 Intangible fixed assets       2.3%   4.0%   2.8%   1.4%   8.7%   5.0%   2.9%
 Dwelling                      0.5%   0.6%   0.2%   1.2%  -1.9%   0.5%   3.6%
  New                          1.6%   1.2%  -0.8%   1.0%  -2.7%   1.7%   3.0%
  Alterations                 -0.8%   0.0%   1.3%   1.5%  -0.8%  -0.9%   4.3%
 Ownership transfer costs     -4.5%  -4.0%  -1.9%  -4.9%  10.7%   6.8%  -2.8%
------------------------------------------------------------------------------
Public capital formation       2.4%   6.2%   6.9%  -7.8%  14.6% -11.1%   9.3%
 Public corporations           1.2%   4.1%   2.0%   1.5%  12.1% -10.4%   1.8%
  Commonwealth               -32.6%  13.5%  12.7%  11.2%  25.6% -84.8%  30.8%
  State & local                3.3%   3.6%   1.4%   1.0%  11.6%  12.9%  -4.8%
 General govt                  3.1%   7.7%  10.5% -13.5%  16.1% -11.5%  14.7%
  National                   -17.9%  45.3%   2.9% -23.6%  28.2% -24.7%  25.5%
==============================================================================
                                 2Q     1Q     4Q     3Q     2Q     1Q     4Q
                               2008   2008   2007   2007   2007   2007   2006
==============================================================================
                             -------------------- QoQ% ----------------------
   National defense          -45.9% 178.7%  -7.0% -47.9%  16.3% -44.4%  60.5%
   National non-defence        7.1%   1.8%   6.6%  -7.4%  37.6%   4.1%  -5.0%
  State & local               11.8%  -2.7%  12.8%  -9.9%  12.4%  -6.4%  11.0%
==============================================================================

Note: Figures are seasonally adjusted. Reference year for chain volume

measures is 2005-06. Year-on-year GDP growth figures are calculated

by Bloomberg.

Source: Australian Bureau of Statistics

To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net

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British Consumer Confidence Held at a Four-Year Low in August

By Jennifer Ryan

Sept. 3 (Bloomberg) -- British consumer confidence held at the lowest level in at least four years in August after economic growth stalled, Nationwide Building Society said.

An index of sentiment taken from the responses of 1,000 people in a survey stayed at 52, the same as in July, which was the lowest since the survey began in May 2004, the U.K.'s second- biggest mortgage lender said in a statement today.

Prime Minister Gordon Brown's government suspended a tax on some home purchases and pledged to accelerate 1 billion pounds ($1.8 billion) of spending yesterday to help reverse the housing slump. The fastest inflation in at least a decade will prevent the Bank of England from bolstering the economy by cutting interest rates tomorrow, economists say.

``Economic uncertainty continues to affect sentiment around spending and employment,'' Fionnuala Earley, Nationwide's chief economist, said in the statement. ``It seems that consumers are beginning to take a more realistic view of the future and are factoring in the possibility of tougher times ahead.''

Sixty-five percent of those questioned said the current economic situation worsened in August, up from 61 percent in July, Nationwide said. Forty-seven percent of people surveyed think there will be few jobs available in six months' time, up from 42 percent in July, the report showed.

Job Placements

The number of workers placed in permanent jobs fell the most since November 2001 last month, a separate report today by the Recruitment and Employment Confederation and KPMG showed. Their index of permanent placements fell to 41.5 from 44.1 in July, according to an e-mailed statement.

Brown's government yesterday introduced measures to tackle the worst slump in residential property values in almost two decades. Chancellor of the Exchequer Alistair Darling said the tax plans would help half of all homebuyers.

``We face a unique set of circumstances that we have not seen in a generation,'' Darling said in an interview broadcast yesterday on U.K. television channels. ``I remain optimistic that we can get through it. We will get through it.''

Britain's economy stalled in the second quarter, ending the nation's longest stretch of expansion in more than a century. The Organization for Economic Cooperation and Development yesterday cut its forecast for U.K. economic growth to reflect the deterioration in the housing market.

The Bank of England has kept the benchmark interest rate at 5 percent since April to control inflation, which accelerated to 4.4 percent in July, more than double the 2 percent target. The bank's panel will probably keep the rate unchanged tomorrow, according to all 61 economists in a Bloomberg News survey.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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Australia's Economic Growth Slows to 0.3% on Spending

By Jacob Greber

Sept. 3 (Bloomberg) -- Australia's economic expansion slowed in the second quarter to the weakest pace in two years as consumers reduced spending, reinforcing the central bank's decision to cut interest rates for the first time since 2001.

Gross domestic product rose 0.3 percent from the first quarter, when it increased a revised 0.7 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for a 0.4 percent gain. The economy grew 2.7 percent from a year earlier.

A slump in consumer spending, business confidence and stock market values has given the central bank ``more scope'' to cut borrowing costs, Governor Glenn Stevens said yesterday. The bank, which increased borrowing costs to a 12-year high in March, reduced the benchmark interest rate by a quarter point to 7 percent yesterday and signaled it expects growth to slow further.

``The Reserve Bank's rate hikes earlier this year have increased the risk of the recession we don't have to have,'' said Clifford Bennett, chief economist at Sonray Capital Markets Ltd. in Sydney. ``We're very fortunate that China is strong. Without our export growth, GDP would be negative.''

Australia's dollar dropped to 82.98 U.S. cents at 11:35 a.m. in Sydney from 83.20 cents before the report was released. The local dollar has fallen 14 percent since June 30, the worst performer of the 17 most-active currencies. The two-year government bond yield fell 2 basis points, or 0.02 percentage point, to 5.67 percent.

Job Cuts

Retail sales dropped in June by the most in six years, business confidence tumbled, and companies including Qantas Airways Ltd. and Ford Motor Co. fired workers. Home-building approvals slumped 2.3 percent in July, the fourth decline this year, a report showed yesterday.

The unemployment rate rose to 4.3 percent in July. Qantas, Australia's largest airline, said in July it will fire 1,500 workers, and Fairfax Media Ltd. last week announced plans to cut 550 jobs.

``It is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead,'' Stevens said yesterday.

The central bank forecast last month that the economy will expand 2 percent this year and 2.5 percent in 2009 after growing 4.3 percent in 2007.

Australia's 2.7 percent annual growth rate in the second quarter compares with 2.2 percent in the U.S., 1.4 percent in the U.K. and 1.7 percent in Germany.

`No Doubt'

``We are probably at the top of the interest rate cycle at this point,'' Commonwealth Bank of Australia Chief Executive Officer Ralph Norris told Nine Network television today. ``There is no doubt that the economy is slowing.''

Australia's benchmark S&P/ASX 200 stock market index has slumped 19 percent this year on evidence the global credit squeeze is buffeting companies including Allco Finance Group Ltd. and Centro Properties Group, which last week posted the nation's biggest losses in five years.

Policy makers raised borrowing costs 12 times between May 2002 and March this year, adding 300 basis points to the benchmark rate in a bid to curb consumer prices that surged 4.5 percent in the second quarter of this year.

The bank aims to keep inflation between 2 percent and 3 percent on average.

``Today's GDP report could have a major influence on the Reserve Bank and market thinking,'' Rory Robertson, an economist at Macquarie Group Ltd. in Sydney, said ahead of the report. Slower-than-expected growth would ``force the Reserve Bank towards a half-point cut in October,'' he said.

Interest Rates

Investors see an 81 percent chance policy makers will cut the benchmark rate at their next meeting on Oct. 7, according to a Credit Suisse Group index based on trading in interest-rate swaps.

Slower household spending is being offset by a mining boom, which is forecast by the central bank to increase income from exports by 20 percent this year, stoking profits at companies including BHP Billiton Ltd., the world's largest miner.

Company profits surged 14.3 percent in the second quarter, and Chinese demand for coal and iron ore helped narrow the current account deficit from a record, reports this week showed.

The chain price index, a measure of retail prices, climbed 4 percent in the second quarter from a year earlier, today's report showed.

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

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Oil Is Steady After Slump to 5-Month Low on Light Gustav Damage

By Mark Shenk

Sept. 3 (Bloomberg) -- Crude oil was little changed after dropping to a near-five-month low yesterday as Hurricane Gustav appeared to cause only light damage to oil installations and energy companies prepared to resume Gulf of Mexico production.

All of the Gulf's 1.3 million barrels a day of oil output and 95 percent of its gas production, or 7.06 billion cubic feet, remained shut, the U.S. said yesterday. An aerial survey of oil and natural-gas platforms and rigs in the Gulf Sept. 1 found no structural damage and no oil spills, the U.S. Coast Guard said.

Yesterday's ``selloff is a direct result of the non-event that Gustav turned out to be,'' said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Connecticut. ``This is the first test of the infrastructure along the Gulf since the damage in 2005. The initial signs are that damage was light and there won't be delays starting up production.''

Crude oil for October delivery rose 29 cents, or 0.3 percent, to $110 a barrel at 8:37 a.m. Sydney time on the New York Mercantile Exchange. Prices are up 49 percent from a year ago. Yesterday, futures lost $5.75, or 5 percent, to settle at $109.71 a barrel, the lowest close since April 8.

Natural gas for October delivery dropped 12.1 cents, or 1.8 percent, to $7.14 per million British thermal units. Yesterday, it tumbled 68.2 cents, or 8.6 percent, to $7.261 per million British thermal units, the lowest settlement price since Dec. 27.

Workers from more than 70 percent of the platforms and rigs in the Gulf were evacuated as Gustav approached, according to the U.S. Minerals Management Service.

Shell, Total

Royal Dutch Shell Plc, Total SA and ConocoPhillips said they were inspecting Gulf platforms yesterday. Oil, down more than $37 from its July record, dropped because Gustav inflicted less damage to states along the Gulf than occurred in 2005 when hurricanes Katrina and Rita stuck the region.

A flight over the lower Mississippi River discovered some oil sheen, possibly from a partly sunken tugboat, Coast Guard Chief Petty Officer Adam Wine said yesterday in an interview.

Shell, Europe's largest oil company, plans to send a limited number of workers to its platforms in the Gulf of Mexico yesterday, the company said in a statement.

Louisiana refineries shut by Hurricane Gustav may take about 10 days to resume operations because of a lack of power, according to companies that include Marathon Oil Corp., Valero Energy Corp. and Exxon Mobil Corp.

Exxon Mobil shut Baton Rouge, its second-largest U.S. refinery, after Gustav's winds cut power to the Louisiana-based plant, according to an advisory on the company's Web site.

Alliance Refinery

ConocoPhillips, the second-largest U.S. refiner, said its 247,000-barrel-a-day Alliance refinery in southern Louisiana sustained ``minor damage'' and a complete assessment of the refinery would be made later yesterday, spokesman Bill Tanner said by telephone.

Gasoline for October delivery dropped 12.05 cents, or 4.2 percent, to settle at $2.7337 a gallon in New York, the lowest since April 3.

Oil's 26 percent slide from its July 11 record of $147.27 a barrel is a ``symptom'' of an economic slowdown in the U.S. and Europe and may continue over the next six months, investor Marc Faber said in a television interview in Bangkok.

Faber reiterated his forecast that the second half of 2008 won't be ``favorable'' for commodities.

The dollar rose to the highest level against the euro in almost seven months as oil fell and Federal Reserve rate cuts raised speculation that the U.S. economy will outperform Europe and Asia. The dollar increased 0.7 percent to $1.4518 per euro from $1.4617 Sept. 1. It touched $1.4467, the strongest level since Feb. 8.

Trade Balance

``A lower crude-oil price directly impacts the U.S. trade balance, which helps the dollar,'' said Tim Evans, an energy analyst with Citi Futures Perspective in New York. ``The dollar's rise can then feed into the drop in oil, which is the reverse of what occurred during the first half of the year.''

Brent crude oil for October settlement fell $1.07, or 1 percent, to $108.34 a barrel on London's ICE Futures Europe exchange yesterday, the lowest close since April 10.

The 13 members of the Organization of Petroleum Exporting Countries, will meet on Sept. 9 in Vienna to review production targets.

``Now the big question is how OPEC will respond to the drop in prices,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``It will probably be a battle between those who are looking for prices at $100 or $80. The Saudis will probably be happy with lower prices and they are the ones with the barrels.''

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



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Five Places to Look for Next Investment Bubble: Matthew Lynn

Commentary by Matthew Lynn

Sept. 3 (Bloomberg) -- Dot-coms? Done that. Property? Oil? Corn? Been there, got the T-shirt and nursed the losses, as well.

One thing we know for sure about today's global economy is that there is always an investment bubble somewhere. If you get in early enough, you can make a fortune riding the boom.

So with property prices collapsing faster than a tent on a stormy day and with the oil-and-commodity bandwagon gone, where should investors be looking for the next big thing? There are five areas worth thinking about: Old Europe, automobiles, stockbroking, the dollar, and private islands.

Anyone looking at the financial markets over the last 20 years would have noticed one common thread: Something is always the flavor of the month. Investors spot a trend, and everyone piles in until valuations become overextended and the whole thing collapses in a heap of bankruptcies and lawsuits.

At the turn of the decade, we saw the bubble in dot-com shares. More recently, we have witnessed the same in real estate -- fueled by the availability of subprime mortgages -- as well as in oil, food and commodities.

We have seen buying frenzies in the much-hyped BRIC economies -- Brazil, Russia, India and China. And there have been bubbles in financial instruments, such as collateralized debt obligations, that helped trigger the subprime meltdown. Along the way, we have some minor bubbles in the things purchased by the people who made money out of the other bubbles. Look at how the price of art or English Premier League soccer teams has soared.

Basic Truth

Of course, bubbles are never entirely ludicrous. The boom always has some basis in reality. The Internet was an important new technology, and a few companies would make a lot of money from it over time. The dot-com boom took that basic truth, and blew it out of proportion.


Likewise, adding China and India to the developed world is going to mean commodities get more expensive. And yet the natural-resources boom took that upward-sloping graph and assumed it carried straight on into the sky.

So where are the next bubbles? You need to find something where there are solid reasons for expecting good growth, but which can also be puffed up into a mega-trend once some smart investment bankers get to work on it.

Here are some places to start looking, bearing in mind that bubbles come in five basic types: places, industries, financing, currencies and luxuries.

FIGs Beat BRICs

First, the place: Old Europe. Forget about the BRICs. The next decade will belong to the FIGs -- France, Italy and Germany. We have written them off for so long that we're in danger of forgetting that all three have been among the richest societies in the world for more than 1,000 years.

As the Chinese and Indian middle classes expand, they will spend money on the kind of upmarket, design-led, history-rich products the FIGs are so good at making. After the credit crunch, their mix of stable, export-led, self-financing growth will look more attractive than the debt-fueled U.K. and U.S. models.

Next, the industry: automobiles. It has been almost a century since we last witnessed a gold rush in cars, suggesting it's high time for a replay. After oil prices reached records, some of the world's smartest people began looking more seriously at creating cheap and non-polluting electric cars. If they crack it, a few hundred million vehicles will be replaced within a few years. Think about the fortune the music industry made when we replaced our vinyl records with compact discs and then multiply it by 10,000 or more. It sure sounds like a boom.

Stockbroker Boom

How about the financial bubble? That will be stockbroking. It's so long since it was in fashion, there aren't even many left in business. Most are just divisions of investment banks. And yet, there are now thousands of companies with shattered balance sheets from the credit crunch. They need advisers who have strong relationships with investors and can raise money for their clients by selling shares.

That's what stockbrokers used to do. If you are smart, quietly shut down that hedge fund, and become a stockbroker. In a few years, UBS AG will pay a fortune to buy you out.

The currency bubble will involve the dollar. The markets have kicked it around for a long time, and yet by next year it may well be the U.S. that has the world's strongest economy. The weak dollar will spark an export boom. Pretty soon we'll be describing the U.S. as the new Germany -- an export-led, manufacturing economy, held back only by the reluctance of its consumers to spend money.

And how will the mega-rich, who make their money from those bubbles, put their new wealth on display? Forget about a Matisse to hang on the wall. That is too vulgar. As for soccer teams, that is just another bubble waiting to pop. The new FIG- automobile-stockbroker billionaires will value privacy and discretion above all else.

There is no better way of doing that than by buying part of a country. Grab yourself a windswept, Scottish island now, ignore the gales howling in from the North Sea, and you'll be able to sell it for a fortune in a few years' time. Just remember to get out before all the bubbles burst.

(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net.


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Korea Won Falls Below 1,150 Per Dollar for 1st Time Since 2004

By Kim Kyoungwha and Judy Chen

Sept. 3 (Bloomberg) -- South Korea's won fell past 1,150 per dollar for the first time since August 2004 on speculation importers increased purchases of the U.S. currency.

The won slumped for a fourth day as the dollar traded higher against the yen and euro, as falling crude oil increased speculation that the Federal Reserve's monetary policy will help the U.S. economy outperform Europe and Asia. South Korea will take ``stern action'' to stem the won's decline and fears that the nation is facing a financial crisis are ``groundless,'' Vice Finance Minister Kim Dong Soo said yesterday.

``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''

Korea's won traded at 1,157.35 per dollar as of 9:48 a.m. in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The won has slumped 18.9 percent this year, the worst performance of major Asian currencies, according to data compiled by Bloomberg.

Investors should bet for the won to weaken to 1,200 per dollar by year's end, the weakest since 2003, and buy six-month non-deliverable forward contracts that will profit from a stronger U.S. currency against the Chinese yuan and Taiwan dollar, according to ABN Amro Bank NV.

``The dollar's uptrend is still in play with a majority of market participants willing to dump the won,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``The market will see another day of big volatility.''

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net;



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Asia Currencies to Fall 12% on Capital Flight, ABN Amro Says

By Lilian Karunungan and David Yong

Sept. 3 (Bloomberg) -- Asian currencies could weaken another 12 percent in the next six to 12 months, with South Korea's won at most risk, as $1 trillion of capital inflows into the region since 2001 reverse, according to ABN Amro Bank NV.

``There is more downside to Asian currencies from a reflow of capital out of Asia,'' Irene Cheung, a Singapore-based strategist at ABN Amro Bank, said in a phone interview. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''

Nine of the 10 most-traded currencies in Asia outside Japan weakened in the past month, with the South Korea won leading losses with an 11 percent drop. The won was at 1,134 per dollar as of the 4:00 p.m. close in Seoul yesterday, according to Seoul Money Brokerage Services Ltd. The yuan was little changed, the only currency of the 10 that didn't decline in the past month.

Investors should bet for the won to weaken to 1,200 per dollar by year's end, the weakest since 2003, and buy six-month non-deliverable forward contracts that will profit from a stronger U.S. currency against the Chinese yuan and Taiwan dollar, the Amsterdam-based bank said. Cheung, who confirmed the contents of a research report sent to clients yesterday, declined to forecast forward rates.

Portfolio Selling

As much as $1 trillion flowed into Asia since 2001, of which two-fifths went to China, slightly more than a third to Korea and the rest went mostly to India and Taiwan, according to ABN's estimate.

``There is room for further sell-offs'' of Korean stocks as overseas investors still hold $217 billion of the country's shares, ABN Amro said. The KOSPI index of South Korean shares declined for five of the first eight months of the year.

Selling of Taiwan shares will also continue should the global technology and semiconductor industries slow further, the bank said.

``India is vulnerable, though the risk is not imminent yet, as foreigners have yet to bail out of the SENSEX,'' ABN Amro said, referring to the benchmark index. Foreigners sold $4.3 billion more Indian shares than they bought this year, compared with net purchases of $103 billion since 2001, according to the report.

ABN Amro was bought last year by Royal Bank of Scotland in partnership with Banco Santander SA and Fortis.

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; David Yong in Kuala Lumpur at dyong@bloomberg.net.

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Euro Trades Near 7-Month Low Before Report on European Retail

By Stanley White

Sept. 3 (Bloomberg) -- The euro traded near a seven-month low against the dollar before a report that may show European retail sales declined in July from a year earlier.

The 15-nation currency was also close to its lowest in five months versus the yen on speculation the European Central Bank will signal this week it is concerned about growth in the region's economy. The pound traded near a two-year low against the dollar on concern the U.K is heading for a recession as house prices plunge.

``The euro and pound will continue to be sold against the dollar,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``The outlook for European economies has deteriorated a lot in a very short time span. It's only natural to speculate about when officials will have to lower rates.''

The euro traded at $1.4506 as of 9:56 a.m. in Tokyo, little changed from yesterday when it touched $1.4467, the weakest since Feb. 8. The U.S. currency was at 108.73 yen. The pound was at $1.7816 after reaching $1.7783 yesterday, the lowest level since April 2006. The euro was at 157.77 yen. It fell yesterday to 157.01 yen, the lowest since April. The euro may decline to $1.44 today, Amikura said.

The U.S. currency surged 6 percent versus the euro in August, its biggest monthly gain since the European currency started trading in 1999. The economies of Europe and Japan shrank in the second quarter, while U.S. gross domestic product expanded at a 3.3 percent annual pace.

European Retail

European retail sales fell 2.1 percent in July from a year earlier, after a record 3.1 percent decline in the previous month, according to the median forecast of 18 economists surveyed by Bloomberg News. The European Union's statistics office, which started to compile the data in 1995, is scheduled to release the report today in Luxembourg.

``The euro seems poised to grind lower,'' said Mitsuru Sahara, senior currency sales manager in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's biggest publicly listed lender. ``Higher-yielding currencies are losing their luster because the economic outlook suggests interest rates in several countries are going to start falling.''

The euro may decline to $1.4430 today, he said.

Standard Chartered Plc and BNP raised their forecasts for the U.S. currency yesterday. London-based Standard predicts the dollar will rise to $1.44 per euro by year-end and $1.36 by the end of the first quarter, compared with previous forecasts of $1.49 and $1.42. BNP, based in Paris, forecasts the dollar will gain to $1.42 versus the euro and $1.71 against the pound by year-end, stronger than the old forecasts of $1.45 and $1.88.

`Double Top'

A move through $1.4555, an extension of a decline from a ``double top'' in the euro-dollar, signaled the European currency may fall to $1.4310, a level last reached in December, wrote Kevin Edgeley, an analyst at Goldman Sachs Group Inc. in London who uses charts to predict currency movements, in a research note yesterday.

A double top occurs when a currency makes two successive peaks, often indicating a trend's reversal. The euro reached $1.6019 on April 22, dropped to a two-month low of $1.5285 on May 8, and rose to the record $1.6038 on July 15.

The Fed has cut its target rate for overnight lending between banks from 5.25 percent in September 2007 to 2 percent in response to the housing slump and credit market losses.

The European Central Bank will hold its main refinancing rate at a seven-year high of 4.25 percent at its meeting tomorrow, according to all but one of the 53 analysts surveyed by Bloomberg News.

`Sterling Struggling'

The pound depreciated as much as 0.6 percent to 81.64 pence per euro yesterday, the weakest level since the European currency's debut. U.K. mortgage approvals dropped to the lowest level in nine years and manufacturing contracted, reports showed Sept. 1. The Bank of England will keep its target lending rate unchanged at 5 percent tomorrow, according to all of the 61 economists surveyed by Bloomberg News.

U.K. inflation will reach about 5 percent in coming months and may slow to below the central bank's 2 percent target in two years if the benchmark rate remains unchanged, BOE Governor Mervyn King said on Aug. 13.

``Sterling is struggling to shore up support ahead of the BOE meeting,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note yesterday. ``Sterling weakness will continue while the BOE remains trapped by above- target inflation.''

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



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Australia Stocks: Australand, Lihir, Newcrest, Santos, Woodside

By Shani Raja

Sept. 3 (Bloomberg) -- The S&P/ASX 200 Index rose 7.80 points, or 0.2 percent, to 5,123.80 at 10:15 a.m. in Sydney. The broader All Ordinaries Index lost 4 points, or 0.1 percent, to 5,191, while the futures index expiring in September slipped 0.1 percent to 5,134.

Gold producers: Newcrest Mining Ltd. (NCM AU), Australia's biggest gold producer, slumped A$1.41, or 5.7 percent, to A$23.43, the lowest in a year and the benchmark's biggest loser. Lihir Gold Ltd. (LGL AU) fell 6 cents, or 2.7 percent, to A$2.19, the lowest since Aug. 12.

Gold fell the most in three weeks as a plunge in energy costs and a strengthening dollar curbed demand for the precious metal as a hedge against inflation. Gold futures for December delivery fell $24.70, or 3 percent, to $810.50 an ounce on the Comex division of the New York Mercantile Exchange.

Oil companies: Woodside Petroleum Ltd. (WPL AU), Australia's second-largest oil and gas producer, slumped A$1.49, or 2.6 percent, to A$57.01, the lowest in more than a week. Santos Ltd. (STO AU) dropped 56 cents, or 2.9 percent, to A$18.84, the most since Aug. 19.

Crude oil fell to the lowest close in almost five months as energy companies prepared to resume output at platforms in the Gulf of Mexico shut by Hurricane Gustav. Crude oil for October delivery fell $5.75, or 5 percent, to settle at $109.71 a barrel at 2:48 p.m. on the New York Mercantile Exchange.

Australand Property Group (ALZ AU), the Australian unit of Singapore's CapitaLand Ltd., advanced 2 cents, or 2.5 percent, to 63 cents after the company said it completed its 1-for-1 entitlement offer, raising A$461 million.

Telstra Corp. (TLS AU), Australia's biggest phone company, rose 7 cents, or 1.6 percent, to A$4.42, the highest since Aug. 20. Telstra will boost growth from Internet ads by expanding directory listings for apartment rentals, auto sales and phone numbers in Asia, Chief Executive Officer Sol Trujillo said in an interview in New York.

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



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Japan Stocks Rise After Crude Oil Tumbles; Bridgestone Advances

By Masaki Kondo

Sept. 3 (Bloomberg) -- Japan's stocks rose, breaking a two- day slide, after crude oil reached a near five-month low, brightening the earnings outlook for manufacturers.

Bridgestone Corp., the world's largest tiremaker, surged 3.3 percent, while Oji Paper Co., Japan's biggest user of high-sulfur fuel oil, climbed 5.7 percent. Oil explorer Inpex Holdings Inc. sank 2.4 percent. Elpida Memory Inc., Japan's largest maker of computer-memory chips, slumped 8.4 percent to a record low after Nomura Securities Co. cut its rating to ``neutral.''

The Nikkei 225 Stock Average climbed 134.07, or 1.1 percent, to 12,743.54 as of 10:17 a.m. in Tokyo. The broader Topix index rose 11.33, or 0.9 percent, to 1,223.70. About three stocks rose for each that retreated on the Topix.

Crude futures fell as much as 8.7 percent to $105.46, the lowest since April 4, before closing at $109.71 yesterday after Hurricane Gustav appeared to cause only light damage to oil installations and energy companies prepared to resume Gulf of Mexico production.

Bridgestone added 60 yen to 1,908, headed for the highest close since Aug. 18, while Yokohama Rubber Co. rose 3.4 percent to 582 yen. Oji leapt 31 yen to 579, and smaller rival Nippon Paper Group Inc. gained 3.6 percent to 319,000 yen.

Inpex, the nation's largest oil and gas explorer, dived 26,000 yen to 1.041 million yen and Japan Petroleum Exploration Co., the No. 2 explorer, fell 1.6 percent to 6,640 yen.

Metals Fall

Sumitomo Metal Mining Co., Japan's largest gold producer, sank 3 percent to 1,298 yen and Nippon Mining Holdings Inc., the nation's biggest copper producer, extended its decline to a third day, dropping 3.2 percent to 540 yen.

Gold futures for December delivery fell 3 percent, the most since Aug. 11, on the Comex division of the New York Mercantile Exchange yesterday. Copper futures fell to as low as $3.159, the lowest since Jan. 28.

Elpida tumbled 195 yen to 2,115 yen, set for the lowest since it listed on the bourse in November 2004. Nomura lowered its rating on the stock from ``buy.''

Nikkei futures expiring in September added 0.9 percent to 12,720 in Osaka and gained 0.8 percent to 12,725 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Economic Calendar Eco Data 9/3/08

GMT Ccy Events Actual Consensus Previous Revised 23:01 GBP U.K. N'wide Consumer Confi. Aug 52 49 51 01:30 AUD Australia GDP Q/Q Q2 0.40% 0.60% 01:30 AUD Australia GDP Y/Y Q2 2.90% 3.60% 07:55 EUR Germany Services PMI Aug F 50.6 53.1 08:00 EUR Eurozone Services PMI Aug F 48.2 48.3 08:30 GBP U.K. Services PMI Aug 47 47.4 09:00 EUR Eurozone GDP Q/Q Q2 -0.20% 0.70% 09:00 EUR Eurozone GDP Y/Y Q2 1.5.% 2.10% 09:00 EUR Eurozone Retail sales M/M Jul 0.00% -0.60% 09:00 EUR Eurozone Retail sales Y/Y Jul -2.10% -3.10% 13:00 EUR BOC rate decision 3.00% 3.00% 14:00 USD U.S. Factory orders Jul 1.00% 1.70% 18:00 USD U.S. Beige Book

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Mid-Day Report: Dollar Gives Back Some Gains after ISM

Market Overview | Written by ActionForex.com | Sep 02 08 14:36 GMT |

Dollar extended rally throughout the dollar following sharp decline in oil price but gives back some gains after ISM manufacturing report. ISM manufacturing index dropped slightly from 50.0 to 49.9 in Aug. More importantly, price paid component dropped sharply to 77.0, lowest level since Feb. Employment component also dropped back into contraction region at 49.7. Construction spending dropped -0.6% in Jul, worse than expectation of -0.4%.

Other data released today saw UK PMI construction unexpectedly rebounded to 40.5 in Aug, but still remain deep in contraction region below 50. Eurozone PPI rose 1.1% mom, 9.0% yoy in Jul, below expectation of 1.3% mom, 9.1% yoy. Swiss CPI dropped -0.3% mom in Aug, with yoy rate moderated from 3.1% to 2.9%. Q2 GDP growth came in at 0.4% qoq, 2.3% yoy.

UK Prime Minister Gordon Brown proposed spending 1 billion pounds to help the housing market to reverse the worse recession in at least 18 years, including suspending tax on UK houses cost less that 175,000 pounds, and exempting stamp duty for a year.

RBA cut rates for the first time in seven years as widely expected. The overnight cash rate is lowered by 25bps to 7.00%. The statement is somewhat less dovish than expected and suggests that the next policy move will be data dependent. The statement said that the Board will continue to assess prospects for demand and inflation over the period ahead, and set monetary policy as needed to bring inflation back to the 2-3 per cent target over time."
USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.0621; (P) 1.0656; (R1) 1.0702; More.

USD/CAD rises to as high as 1.0747 today following broad based strength in the greenback. Some retreat is seen in early US session but intraday bias remains on the upside as long as 1.0612 minor support holds. Further rally is expected to be seen to 1.0791/98 cluster resistance. On the downside, below 1.0612 minor support will turn intraday outlook neutral first. But pull back should be contained above 1.0471 support and bring another rise. However, break of 1.0471 will indicate that a short term top is in place and bring deeper decline towards 0.9974 support.

In the bigger picture, medium term rise from 0.9056 is still in progress towards mentioned cluster resistance at 1.0791/98 (61.8% retracement of 1.1874 to 0.9056 at 1.0798, 61.8% projection of 0.9056 to 1.0378 from 0.9974 at 1.0791) first. Sustained break of 1.0791/98 will argue that rise from 0.9056 is probably more than just a correction in the long term down trend and will set the stage to test key long term resistance at 1.1874. On the downside, a break below 0.9974 support is needed to confirm that rise from 0.9056 has completed. Otherwise, further rally is still expected even in case of a deep pull back.

Economic Indicators Update
GMT  Ccy  Events  Actual  Consensus  Previous  Revised
04:30  AUD  RBA rate decision  7.00%  7.00%  7.25%  
05:45  CHF  Swiss CPI M/M Aug  -0.30%  -0.10%  -0.40%  
05:45  CHF  Swiss CPI Y/Y Aug  2.90%  3.10%  3.10%  
05:45  CHF  Swiss GDP Q/Q Q2  0.40%  0.20%  0.30%  
05:45  CHF  Swiss GDP Y/Y Q2  2.30%  2.40%  3.00%  
08:30  GBP  U.K. PMI construction Aug  40.5  36  36.7  
09:00  EUR  Eurozone PPI M/M Jul  1.10%  1.30%  0.90%  
09:00  EUR  Eurozone PPI Y/Y Jul  9.00%  9.10%  8.00%  
14:00  USD  U.S. ISM manufacturing Aug  49.9  49.9  50  
14:00  USD  U.S. ISM manufacturing Prices Aug  77  82  88.5  
14:00  USD  U.S. Construction spending Jul  -0.60%  -0.40%  -0.40%  

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European Factory Prices Rose 9% in July on Oil Record

By Fergal O'Brien

Sept. 2 (Bloomberg) -- European producer prices increased the most in at least 18 years in July as crude oil reached a record before easing last month.

The 9 percent increase from a year earlier in the 15 euro countries was the biggest since the series began in 1990 and followed an 8 percent gain in June, the European Union statistics office in Luxembourg said today. Core prices, which exclude energy, accelerated to 4.3 percent from 4 percent.

Crude oil, which reached a record $147.27 a barrel on July 11, has fallen almost 28 percent since then to a five-month low, easing inflation pressures. Still, the European Central Bank will probably keep interest rates at a seven-year high this week even after the economy contracted in second quarter as it seeks to prevent a wage-price spiral.

``The core measure has also shown some signs of pass- through as it has climbed up over the last twelve months,'' said Carsten Brzeski, an economist at ING Group in Brussels. While retailers may find it hard to pass on price increases as consumer demand weakens, ``today's numbers are new evidence that it is far too early for the ECB to give the all-clear on the inflation front.''

Interest Rates

The ECB raised the benchmark interest rate to 4.25 percent in July on concerns that consumer-price gains at twice the bank's 2 percent limit will become embedded in the economy even as growth cools. While it left rates unchanged last month, policy makers Axel Weber and Lucas Papademos last week said the ECB remains focused on inflation risks and may need to lift rates again if they intensify.

All but one of 53 economists surveyed by Bloomberg News predict the bank will leave the benchmark rate at 4.25 percent on Sept. 4 and only five expect a cut this year.

Annual energy-price inflation accelerated to 29.4 percent in July from 27.6 percent in June, today's report showed. Crude oil fell as low as $105.46 a barrel today, the lowest since April 4, and was at $108.39 as of 12:15 p.m. in London.

``The data reflect the pressure from oil we saw until last month, but this may be the peak,'' said Aurelio Maccario, chief euro area economist at Unicredit MIB in Milan. After Hurricane Gustav passed the U.S. Gulf Coast without causing major damage to offshore platforms, ``it seems the downward trend we've seen in oil has become a little bit more entrenched.''

Economists expected overall producer price inflation of 9.1 percent in July, according to the median of 24 forecasts in a Bloomberg News survey. From a month earlier, producer prices rose 1.1 percent in the euro area in July.

To contact the reporter on this story: Fergal O'Brien in Dublin at fobrien@bloomberg.net.



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