U.K. Pound Advances After Sentance Underscores Inflation Focus

By Andrew MacAskill and Lukanyo Mnyanda

Sept. 25 (Bloomberg) -- The pound rose to its highest level in a month versus the dollar after Bank of England policy maker Andrew Sentance said the central bank must temper its response to the financial crisis and stick to the inflation mandate.

The British currency also rose against the euro and the yen. Policy makers should guard against ``allowing the economic slowdown to develop into a deflationary spiral which would not be consistent with our mandate to meet the 2 percent inflation target,'' Sentance said in a speech late yesterday.

``There has to have been a shift in thinking within the BOE, or at least a heightened resistance, towards moving to a more dovish stance,'' said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. ``This should keep sterling reasonably well supported.''

The pound climbed to $1.8589 as of 9:26 a.m. in London, the highest level since Aug. 22, from $1.8546 yesterday. It traded at 79.16 pence per euro, from 79.21, and 196.67 yen, from 195.93. The pound's trade-weighted index, a gauge of the currency's performance against Britain's major trade partners, rose 0.2 percent to 87.85, according to Deutsche Bank AG.

The implied yield on the short-sterling futures contract due in March rose 7 basis points today to 5.40 percent, from 5.24 percent at the end of last week. The odds of the central bank cutting rates in October dropped 10 percent, according to a Credit Suisse derivatives index.

Inflation accelerated to 4.7 percent in August after oil prices rose to a record this year. Sentance reiterated Bank of England Governor Mervyn King's remark that 80 percent of price gains since December are accounted for by food, gasoline and utility bills.

Blanchflower Vote

Policy makers kept the rate unchanged on Sept. 4 as they weighed the risks of accelerating inflation against the danger that mounting bank losses will push Europe's second-biggest economy into its first recession since 1991. Of the nine policy makers, only David Blanchflower voted for a cut last month.

The pound has advanced 2.3 percent versus the dollar this week as Congress stalls a $700 billion plan to restore stability in the financial markets.

``The longer the delays over the bailout, then the more the dollar will continue to edge lower and we could see sterling stage a modest rally,'' said Paul Robson, a London-based currency strategist at the Royal Bank of Scotland Group Plc.

U.K. gilts declined, with the yield on the 10-year note rising 4 basis points to 4.61 percent. The 5 percent security due March 2018 gained 0.30, or 3 pounds per 1,000-pound ($1,861) face amount, to 102.99. The yield on the two-year note climbed 4 basis points to 4.29 percent.

``We are seeing a downward trend in gilts,'' said David Keeble, London-based head of fixed-income strategy at Calyon, the investment-banking unit of Credit Agricole SA. ``Andrew Sentance has been trying to crush any imminent expectations of a rate cut.''

The U.K.'s Debt Management Office is scheduled today to auction 2.5 billion pounds of 4.5 percent bonds maturing in 2019.

To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.netLukanyo Mnyanda in London at lmnyanda@bloomberg.net;

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Goods Orders in U.S., New-Homes Sales Probably Fell in August

By Timothy R. Homan

Sept. 25 (Bloomberg) -- Orders for U.S. durable goods and sales of new houses probably dropped in August, signaling the credit crunch hurt the economy prior to the downfall of major Wall Street firms, economists said before reports today.

Bookings for goods meant to last several years fell 1.9 percent last month, the most since January, according to the median estimate in a Bloomberg News survey. Americans probably purchased 510,000 new homes at an annual pace, down 1 percent from July, the survey also showed.

The figures underscore Federal Reserve Chairman Ben S. Bernanke's warning that financial instability poses a ``grave threat'' to economic growth. The collapse in lending prevents companies from investing in new equipment and makes mortgages harder to obtain.

``Facing tighter credit conditions, slowing demand and squeezed profit margins, businesses have been trimming payrolls and inventories,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York. ``The current economic environment is not conducive to strong equipment investment.''

The Commerce Department is scheduled to release its durable-goods report at 8:30 a.m. in Washington. Projections in the Bloomberg survey of 74 economists ranged from a drop of 5.9 percent to a 0.3 percent gain.

Excluding transportation equipment, orders probably fell 0.5 percent, the first decline in three months, according to the survey median.

Commerce's new-home sales report is due at 10 a.m. Estimates ranged from 493,000 to 555,000, according to the survey.

Claims Elevated

A report from the Labor Department is forecast to show the number of Americans filing first-time claims for unemployment benefits fell 5,000 to 450,000 last week, according to the survey. The level still indicates weakness in the labor market.

``Economic activity appears to have decelerated broadly,'' Bernanke said yesterday in testimony before a congressional Joint Economic Committee hearing. The Fed chief reiterated his call for Congress to pass Treasury Secretary Henry Paulson's plan for a $700 billion rescue fund to remove devalued assets from the banking system.

Boeing Co., the world's second-largest commercial planemaker, may have to provide more financing for its customers and may see more cancellations because of the spreading financial turmoil, Chief Executive Officer Jim McNerney said yesterday.

Order Cancellations

Previous economic slumps saw 5 percent to 10 percent of Boeing's orders cancelled, McNerney told reporters after a speech in Boston. This time around, ``it could be a little worse, could be better than that. We'll have to monitor the situation,'' he said. The company has a record $275 billion in order backlogs for commercial planes.

Chicago-based Boeing received orders for 38 aircraft in August, down from 70 a month earlier. About 27,000 Boeing machinists went on strike on Sept. 6.

American manufacturers have offset weakening domestic demand in recent months by filling overseas orders, with support from a lower dollar that's made U.S. goods more competitive. Still, further export expansion is in question as economies overseas falter.

Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago. Japan's economy shrank in the same period as consumers spent less and exports fell, the Japanese government said last month.

A technology slump that started in the U.S. last quarter spread to Western Europe and some Asian countries, Dell Inc., the No. 2 personal-computer maker, said on Sept. 16, reiterating comments made last month.

``We saw a very weak August,'' Chief Financial Officer Brian Gladden said at a Bank of America investment conference in San Francisco. ``It is not coming back the way we thought it would.''

                        Bloomberg Survey

================================================================
                         Durables Durables  Initial New Home
                           Orders Ex-Trans   Claims    Sales
                             MOM%     MOM%   ,000's   ,000's
================================================================

Date of Release              09/25    09/25    09/25    09/25
Observation Period            Aug.     Aug.Sept. 20      Aug.
----------------------------------------------------------------
Median                       -1.9%    -0.5%      450      510
Average                      -1.9%    -0.7%      452      510
High Forecast                 0.3%     0.9%      505      555
Low Forecast                 -5.9%    -2.5%      433      493
Number of Participants          74       42       39       75
Previous                      1.3%     0.7%      455      515
----------------------------------------------------------------
4CAST Ltd.                   -5.0%    -2.5%      460      505
Action Economics             -2.5%     0.1%      455      510
AIG Investments              -0.7%     0.9%     ---       521
Aletti Gestielle SGR         -2.0%     ---       440      513
Analytical Synthesis          ---      ---      ---       495
Argus Research Corp.          0.3%     ---      ---       520
Banc of America Securitie    -2.0%     ---      ---       508
Bank of Tokyo- Mitsubishi    -2.7%     ---      ---       498
Bantleon Bank AG             -1.0%    -1.5%     ---       500
Barclays Capital             -3.0%     ---       445      500
BBVA                         -1.2%    -0.6%      465      522
BMO Capital Markets          -2.0%    -0.6%      460      515
BNP Paribas                  -1.5%     ---       460      510
Briefing.com                 -1.5%     ---       445      515
Calyon                       -3.0%    -1.0%     ---       505
CFC Group                    -1.3%    -0.4%      450      514
CIBC World Markets           -2.0%    -0.5%     ---       520
Citi                         -1.4%    -0.3%      445      515
ClearView Economics          -2.0%     ---      ---       500
Credit Suisse                -3.0%    -1.0%      465      495
Daiwa Securities America     -1.5%     ---      ---       500
Danske Bank                   ---      ---      ---       510
DekaBank                     -2.0%     ---      ---       510
Desjardins Group             -2.2%     ---       442      510
Deutsche Bank Securities     -1.0%     0.0%      445      510
Deutsche Postbank AG         -1.0%    -0.3%     ---      ---
Dresdner Kleinwort           -1.5%    -0.5%     ---       510
DZ Bank                      -1.5%    -0.5%     ---       510
First Trust Advisors         -5.1%    -1.5%      451      499
Fortis                       -1.0%    -0.7%     ---       515
FTN Financial                -1.0%    -0.3%     ---       510
Global Insight Inc.          -2.7%     ---      ---       505
Goldman, Sachs & Co.         -2.0%     ---      ---       505
H&R Block Financial Advis    -1.5%    -0.5%     ---       515
Helaba                       -1.4%    -0.4%     ---       515
High Frequency Economics     -2.0%    -0.5%      475      525
HSBC Markets                 -2.0%    -1.3%      440      530
IDEAglobal                   -0.8%    -0.3%      445      510
Informa Global Markets       -1.9%    -0.5%      460      505
ING Financial Markets        -2.0%     ---       450      520
Insight Economics            -1.0%     ---       450      510
Intesa-SanPaulo              -2.0%    -1.0%     ---       510
J.P. Morgan Chase            -3.0%     ---       500      505
Janney Montgomery Scott L    -1.9%    -1.0%     ---       493
Landesbank Berlin            -5.9%    -1.5%      450      510
Landesbank BW                -1.0%     ---      ---       510
Lehman Brothers              -3.0%     ---       450      555
Lloyds TSB                   -1.0%    -0.4%      445      510
Maria Fiorini Ramirez Inc     ---      ---       445      530
Merk Investments             -1.3%     0.0%     ---       535
Merrill Lynch                -1.5%    -0.3%      505      510
MFC Global Investment Man    -2.0%    -1.0%      445      505
Moody's Economy.com          -0.9%    -0.5%      460      505
Morgan Keegan & Co.          -0.7%     ---      ---       511
Morgan Stanley & Co.         -2.0%     ---      ---       525
National Bank Financial      -1.9%    -0.7%     ---       505
National City Corporation    -2.0%     ---      ---       510
Natixis                      -1.7%    -0.6%     ---       505
Newedge                      -1.0%    -0.6%     ---      ---
Nomura Securities Intl.      -0.6%    -0.4%     ---       522
PNC Bank                     -1.0%     ---      ---       495
RBS Greenwich Capital        -3.0%     ---       460      500
Ried, Thunberg & Co.         -2.0%     ---       450      510
Schneider Trading Associa    -2.2%    -0.7%      433      501
Scotia Capital               -1.6%    -0.6%      450      505
Societe Generale             -1.8%     0.0%      435      515
Standard Chartered           -1.6%     ---      ---       500
Stone & McCarthy Research    -1.8%     ---       433      515
TD Securities                -1.5%    -0.5%      440      500
Thomson Financial/IFR        -1.1%    -0.9%      445      505
Unicredit MIB                -2.0%     ---       440      530
University of Maryland       -0.5%     ---      ---       515
Wachovia Corp.               -4.0%    -2.3%     ---       500
Wells Fargo & Co.            -2.5%     ---      ---       510
WestLB AG                    -1.5%     ---      ---       518
Westpac Banking Co.          -2.5%     ---       450      497
Wrightson Associates         -2.0%     ---       450      510
================================================================

To contact the report on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says

By Kevin Hamlin

Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.

``We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''

An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.

China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.


``Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. ``It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided.''

The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process. Insurer American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac also were rescued by the government.

`Grave Threats'

U.S. Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion plan to remove devalued assets from the banking system. Federal Reserve Chairman Ben S. Bernanke said Sept. 24 that the U.S. is facing ``grave threats'' to its financial stability.

China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.

``China is very worried about the safety of its assets,'' he said. ``If you want China to keep calm, you must ensure China that its assets are safe.''

Currency Manipulator

Yu said China is helping the U.S. ``in a very big way'' and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.

``It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,'' he said. ``China knows what to do. We don't need your intervention.''

The U.S. financial crisis had taught China a lesson and that was: ``Why are we piling up these IOUs if they may default?'' China's economic expansion strategy, which emphasizes export growth that has led to trade surpluses and the accumulation of $1.81 trillion in foreign-exchange reserves, is the main problem, said Yu.

``Our export-growth strategy has run its natural course,'' he said. ``We should change course.''

China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.

Without yuan appreciation, China will continue to accumulate foreign reserves, which means further accumulating ``IOUs from the U.S.,'' said Yu. ``This is paper and it may default and it will not increase China's national welfare.''

If China doesn't allow the yuan to appreciate and continues to promote export-led growth it will lead to confrontation with the U.S. and Europe, Yu said.

To contact the reporters on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net


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Kokusai, Biggest Bond Fund in Asia, Bets on Dollar

By Wes Goodman

Sept. 25 (Bloomberg) -- The biggest bond fund in Asia said it is buying the U.S. dollar, and holds the greatest amount of the currency in 18 months, because the nation's economic instability may infect the rest of the world.

Kokusai Global Sovereign Open Fund's U.S. holdings are the highest since April 2007, Masataka Horii, one of four managers for the $51.9 billion in Tokyo, said in an interview. The fund increased its allocation to 27 percent of its assets as of the end of August, from a record low of 20 percent in March.

``The slowdown in growth will spread from the U.S.,'' said Horii, 42, at Kokusai Asset Management Co. in Tokyo. ``Investors won't want to take risks. Money will go back to the dollar, especially from emerging markets.''

The dollar has fallen 3.7 percent the past two weeks against a basket comprised of six currencies of major trading partners on concern borrowing to fund a bailout of the banking sector will swell the nation's budget deficit. The U.S. currency traded at $1.4708 per euro as of 1:03 p.m. in Tokyo from $1.4621 late yesterday in New York. It was at 105.83 yen from 106.11.

Kokusai is favoring the dollar while Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system sends the currency lower.

Dollar Weakens

The dollar weakened the most against the euro on Sept. 22 since the European currency's 1999 debut, falling 2.1 percent. The combination of the plan proposed by Paulson, government spending and a slower economy may swell the U.S. budget deficit to $1.5 trillion, or 10 percent of GDP, said Michael Feroli, an economist at JPMorgan Chase & Co. in New York.

Investors in the Kokusai Global Sovereign Open Fund have lost 3.23 percent in September, versus a 1.75 percent decline in the Citigroup World Government Bond Index, the benchmark the company uses to gauge performance. The fund outperformed the benchmark last year, according to data compiled by Bloomberg.

Horii is also bullish because the Federal Reserve refrained from cutting interest rates this month even as markets crumbled, maintaining the extra yield that Japanese investors get for buying U.S. debt.

The target rate for overnight loans between banks is 2 percent in the U.S., compared with 0.5 percent in Japan. Ten-year Treasuries yield 2.30 percentage points more than Japanese securities of similar maturity, on line with the average for the past six months.

``The Fed won't cut the policy rate,'' Horii said. ``That will favor the U.S. dollar.''

Reducing Europe, Asia

Kokusai reduced its holdings of European and Asian debt to fund its U.S. purchases, Horii said. The company trimmed bonds in Europe to 39 percent of its portfolio from 44 percent, and in Japan to 9.5 percent from 13 percent since March.

Gross domestic product in the U.S. is likely to be 1.7 percent this year and 1.5 percent in 2009, according to the median estimate in a Bloomberg survey. For Japan, growth is forecast at 1 percent in 2008 and 1.15 percent next year. In the euro zone, the forecasts are 1.35 percent and 1 percent.

The U.S. rescue plan may help revive the world's biggest economy, leading investors to use funds borrowed in Japan in search of higher yields elsewhere, said Akira Takei, general manager for international bonds at Mizuho Asset Management Co. in Tokyo.

``What we have seen since last week is an unwinding of the flight to quality,'' said Takei, who helps oversee the equivalent of $36.9 billion at the unit of Japan's second-largest bank. ``It means the yen will tend to be weaker.''

Mizuho bought dollars and sold Japan's currency at the end of last week, Takei said. The greenback may rise to 115 yen by year-end, according to Takei, who correctly forecast the rally in Treasuries last year.

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net

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Dollar Falls as Bush Talks of Recession, Traders Bet on Fed Cut

By Bo Nielsen and Ron Harui

Sept. 25 (Bloomberg) -- The dollar snapped two days of gains against the euro after President George W. Bush said the U.S. may face a ``painful'' recession and as traders bet on a Federal Reserve interest-rate cut next month.

The dollar also weakened versus the Swiss franc before a U.S. government report today that may show home sales dropped in August, extending the worst housing slump in 17 years. The British pound rose against the U.S. currency after policy maker Andrew Sentance said the Bank of England must temper its response to the credit crisis and stick to its inflation focus.

``The prospects of loose fiscal and monetary conditions in a economy that's slowing rapidly is hitting the dollar, said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. ``The bailout package may restore confidence in a lot of things but it won't restore confidence in the dollar.''

The dollar fell to $1.4718 per euro as of 8:46 a.m. in London, from $1.4621 yesterday. The currency declined to 105.70 yen from 106.11. The euro was at 155.62 yen from 155.15. The U.S. currency dropped to $1.8608 against the pound from $1.8465, and to 1.0815 versus the franc from 1.0916.

Futures contracts on the Chicago Board of Trade showed 80 percent odds the Fed will cut borrowing costs in October as Congress mulls a $700 billion proposal to bail out the banking system. That compares with 58 percent odds on Sept. 23.

`Grave Threats'

Bush said in an address to the nation that without the rescue the U.S. will suffer ``a long and painful'' recession. Treasury Secretary Henry Paulson said the financial system is ``frozen to a large extent.'' Fed Chairman Ben S. Bernanke said the U.S. faces ``grave threats'' to market stability.

The U.S. Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six major trading partners, slipped to 76.477 from 76.788 yesterday. It touched 75.890 on Sept. 22, the lowest since Aug. 13.

``The U.S. is the epicenter of the financial crisis,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, in a Bloomberg television interview. ``The right medium-term trade is to be selling the dollar.''

The collapse of Lehman Brothers Holdings Inc. and the U.S. government takeover of American International Group Inc. has caused a seizure in lending between banks. The three-month London interbank offered rate, or Libor, the rate at which banks charge each other for loans in dollars, rose to 3.48 percent yesterday, the highest in eight months, according to the British Bankers' Association.

U.S. Home Sales

Sales of new houses in the U.S. fell to an annual rate of 510,000 last month, from 515,000 in July, according to the median forecast of economists surveyed by Bloomberg News. Sales declined to a 503,000 pace in June, the lowest since 1991. The Commerce Department report is due at 10 a.m. in Washington.

The dollar dropped versus 13 of the 16 most-active currencies today. It has fallen 6 percent against the euro since touching a one-year high of $1.3882 on Sept. 11. The dollar reached $1.6038 on July 15, the weakest level since the European currency made its debut in 1999.

The British pound climbed against 13 of the 16 most-traded currencies after Sentance said policy makers should guard against ``allowing the economic slowdown to develop into a deflationary spiral which would not be consistent with our mandate to meet the 2 percent inflation target.''

Risk Reduction

The yen may rise as slowing export growth added to evidence of a global economic slump, prompting investors to reduce purchases of higher-yielding assets financed in Japan, so-called carry trades. In such transactions, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits. The benchmark interest rate is 0.5 percent in Japan, compared with 13.75 percent in Brazil and 5.25 percent in South Korea.

Bank of Japan board member Tadao Noda said today that global growth will slow, threatening the bank's expectation that Japan's economy will recover after shrinking in the second quarter. Economic and Fiscal Policy Minister Kaoru Yosano said a drop in Japan's exports was triggered directly and indirectly by the U.S. subprime crisis.

``Investors may become risk-averse,'' said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe General SA, France's largest bank by market value. ``The yen may be bought.''

Technical Chart

Japan's exports grew 0.3 percent in August from a year earlier after rising 8 percent the previous month, the Finance Ministry said today in Tokyo.

The yen climbed 0.7 percent to 10.95941 versus the Korean won, and advanced 0.4 percent to 56.8295 against Brazil's real.

Technical charts used to predict price movements signal the euro may rise to $1.4900 in the next few days provided the currency stays above its moving average for the past five days, according to Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo.

Resistance at $1.4900 is near the upper Bollinger band on the euro's daily chart. Bollinger bands are two standard deviations above and below the average price of a currency or security over the past 20 days. Resistance is a level where sell orders may be clustered.

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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U.S. CFTC Checking Silver Market for Manipulation, WSJ Says

By Chris Peterson

Sept. 25 (Bloomberg) -- The U.S. Commodities Futures Trading Commission is investigating the silver industry for any signs of market manipulation, the Wall Street Journal reported, citing the regulator.

Investors have complained that a small number of banks are in control of short positions on silver on the Comex division of the New York Mercantile Exchange; the CFTC doesn't believe there is systematic manipulation although it is investigating as a matter of policy, the Journal said.



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Gold Gains on Concern Bailout Plan May Be Delayed; Dollar Falls

By Rachel Graham

Sept. 25 (Bloomberg) -- Gold rose for the first time in three days as the dollar fell and demand for a haven against financial turmoil increased on concern the U.S. Congress will delay a $700 billion plan to bail out the banking system.

The dollar fell against the euro after President George W. Bush warned the U.S. faces a ``painful'' recession. Some senators are opposed to Treasury Secretary Henry Paulson's bailout plan.

``There's again uncertainty with the U.S. plan,'' said Susanne Toren, an analyst at Switzerland's Zuercher Kantonalbank, the manager of ZKB Gold ETF backed by about 1.83 million ounces of the metal. ``As long as the uncertainty continues downside on gold is limited,'' she said by phone from Zurich.

Gold for immediate delivery gained $4.88, or 0.6 percent, to $887.50 an ounce as of 9:53 a.m. in London. Futures for December fell $2.30, or 0.3 percent, to $892.70 in electronic trading on the Comex division of the New York Mercantile Exchange.

Silver for immediate delivery rose 17.5 cents, or 1.3 percent, to $13.435 an ounce.

Assets in Barclays Plc's iShares Silver Trust, the largest exchange-traded fund backed by the metal, rose to a record on Sept. 23. Silver held by the company gained 0.5 percent to 6,759 tons on Sept. 23, according to data on the company's Web site. The assets have risen 4.5 percent this month.

Among other metals for immediate delivery, platinum fell $9.75, or 0.8 percent, to $1,192 an ounce and palladium was unchanged at $251 an ounce.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net



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Corn, Soybeans Drop After Oil Falls, Eroding Demand Prospects

By Jae Hur

Sept. 25 (Bloomberg) -- Corn fell for the first time in five days and soybeans slumped after a decline in crude oil prices reduced the appeal of the crops as a source of alternative fuel. Wheat also dropped.

Oil lost 3.3 percent the past two days as a government report yesterday showed U.S. fuel demand fell last week to the lowest in almost five years. Corn has declined 30 percent from its June record and soybeans have lost 28 percent from an all- time high in July.

``Lower energy costs depressed corn and soybeans,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone.

Corn for December delivery lost as much as 8 cents, or 1.4 percent, to $5.55 a bushel in after-hours trading on the Chicago Board of Trade. It was at $5.60 at 3:28 p.m. Singapore time. Futures rose to a record $7.9925 June 27.

Soybeans for November delivery fell as much as 18.75 cents, or 1.6 percent, to $11.6825 a bushel and last traded at $11.8325. The oilseed reached a record $16.3675 on July 3.

Grain prices fell this month as investors sold commodities on concerns about slowing world growth. Prices also fell as the dollar climbed from an all-time low against the euro in July, reducing the appeal of commodities priced in the U.S. currency.

Crude oil for November delivery was up 0.4 percent at $106.11 a barrel on the New York Mercantile Exchange after falling 0.8 percent yesterday.

The dollar dropped as much as 1 percent to $1.4768 per euro and was last at $1.4729. The currency touched $1.4866 on Sept. 22, the weakest since Aug. 22.

Wheat for December delivery dropped as much as 10.25 cents, or 1.4 percent, to $7.20 a bushel and last traded at $7.295. The contract fell 2.7 percent yesterday as planting in the U.S. progresses and on speculation global production will increase to a record this season. Futures have lost 46 percent from a record $13.495 on Feb. 27.

In the export market, Egypt is seeking at least 55,000 metric tons of wheat at a tender today.

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



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Crude Oil Falls as Concerns Grow Over U.S. Fuel-Demand Outlook

By Grant Smith

Sept. 25 (Bloomberg) -- Crude oil declined for a third day, erasing earlier gains amid growing concerns over U.S. demand.

The U.S. could ``slip into a financial panic'' if Congress doesn't pass a $700 billion bailout program to help stabilize the financial system, President George W. Bush said last night. The country's crude inventories fell less than expected, the Energy Department said, and refinery rates dropped to the lowest in at least 19 years amid slowing consumption.

``The hurricane season is behind us but stormy economic conditions are not, and there are implications for weaker demand,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd.

Crude oil for November delivery fell as much as $1.87, or 1.8 percent, to $103.86 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It earlier rose 0.8 percent to $106.60 and traded at $104.89 at 10:20 a.m. London time.


The contract settled 88 cents lower at $105.73 yesterday, even after an Energy Department report showed gasoline stockpiles dropped to 178.7 million barrels, the lowest since 1967.

``The fact prices didn't rise further after the inventory report shows the uncertainty about the U.S. recovery package,'' said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. ``Price risks are still tilted to the upside because of growing supply risks.''

Supply Threats

Threats to supply of crude and products increased today as Royal Dutch Shell Plc shut a gasoline-making unit at Europe's largest oil refinery, while in Nigeria, Chevron Corp. faces renewed strike action.

Shell shut the unit at its Pernis refinery in the Netherlands following a technical fault last night, company spokesman Wim van de Wiel said.

In Nigeria, a strike planned by Members of the National Union of Petroleum and Natural Gas Workers may disrupt exports from Chevron's Escravos terminal. The company produced 353,000 barrels of crude daily in Nigeria in 2007, according to its Web site.

U.S. supplies of crude oil fell 1.52 million barrels to 290.2 million in the week ended Sept. 19, the Energy Department said yesterday, less than the 2.5 million barrel drop forecast by analysts. Refineries operated at 66.7 percent of capacity last week, the lowest since the department began compiling weekly figures in 1989.

Brent crude oil for November settlement declined as much as $1.93, or 1.9 percent, to $100.52 a barrel on London's ICE Futures Europe exchange. It was at $101.44 a barrel at 10:23 a.m. local time.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net


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Faber Says U.S. $700 Billion Rescue Plan Isn't Enough

By Hanny Wan

Sept. 25 (Bloomberg) -- The U.S. government's $700 billion bank rescue plan won't be enough to revive the finance industry, said investor Marc Faber, who forecast the so-called Black Monday crash in 1987.

The government should buy out struggling home owners, Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report, told reporters on the sidelines of an investor conference in Hong Kong. He's also predicting Chinese economic growth to ``disappoint'' and Indian stocks to decline.

``The U.S. has many problems,'' Faber said. ``It's a period of hardly any growth in real terms in the economy for several years.''

The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process.

House Financial Services Committee Chairman Barney Frank told reporters in Washington that House and Senate Democrats have reached a deal on legislation to implement the U.S. Treasury's plan, which will allow it to buy as much as $700 billion in devalued assets to unfreeze credit markets.

``I don't believe this is going to be solved in six months to a year,'' Faber said.

Faber also forecast the Standard & Poor's 500 Index will rally to as high as 1,350 points following the approval of the bailout plan because stocks are ``oversold.'' That level is about 14 percent higher than the gauge's close yesterday.

`Earnings Bubble'

Still, ``I'm not playing that rally,'' he said. ``I'd rather think that stocks are not particularly cheap. We don't have a valuation bubble. We have an earnings bubble. In 2009, earnings will disappoint.''

Faber said he is ``negative'' on China's economic growth, which has slowed for four straight quarters. The economy expanded at 10.1 percent in the second quarter, down from the previous period's 10.6 percent, though still the fastest pace of the world's 20 biggest economies.

Industrial production grew in July at the weakest pace since February 2007 and manufacturing contracted in August for a second month, according to an official survey, underscoring government concern that an economic slump is possible.

``Economies like China that grow very rapidly can have significant adjustments,'' Faber said. ``I'm not negative for the long term. It's just that from a cyclical point of view the Chinese economy could turn out to be weaker than what analysts are telling you.''

India is also ``not problem-free,'' Faber said. He forecasts the Bombay Stock Exchange's Sensitive Index, or Sensex, will fall below 10,000. The Sensex is down 33 percent this year.

``I think new all-time highs in markets are most unlikely for the time being,'' Faber said. ``So I'm not particularly interested to play the market at the present time.''

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

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China Stocks Jump on Speculation Government to Step Up Buying

By Zhang Shidong

Sept. 25 (Bloomberg) -- China's stocks surged on speculation state-owned controlling shareholders will increase stakes in their listed units to help bolster the world's second worst- performing stock market.

China Oilfield Services Ltd. and Offshore Oil Engineering Co., the two listed units of the nation's third-largest oil producer, both surged more than 7 percent on speculation their mutual parent will increase its holdings in the companies.

``More central-government owned enterprises will buy shares in their listed units to reflect the regulators' directive to bolster the market,'' said Lu Yizhen, who oversees the equivalent of $732 million as chief investment officer at Tianhong Asset Management Co. in Beijing. ``The rebound is very likely to carry on.'' Lu said he has bought shares, declining to give details.

The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, surged 84.68, or 4 percent, to 2,223.53 at the close, extending a gain of 0.7 percent yesterday. Only 11 stocks fell on the 300-member gauge.

For Related News:

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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Japan's Stocks Fall as Exports Slow; Bush Speech Lifts Shinsei

By Patrick Rial
Enlarge Image/Details

Sept. 25 (Bloomberg) -- Japan shares fell as a drop in auto shipments dragged on export growth and Re-plus Inc.'s bankruptcy reignited credit concerns. Indexes pared losses after U.S. President George W. Bush urged lawmakers to pass a bailout package for the financial system.

Nissan Motor Co. slipped 5 percent, leading automakers lower, after data showed U.S.-bound car exports plunged as the financial crisis weighed on consumer spending. Re-plus, the latest Japanese property company to go bankrupt, was offered by its lower limit. Shinsei Bank Ltd. advanced 3 percent, helping lenders pare losses, following Bush's comments. Gauges also fell as most stocks traded without dividend rights from today.

``This is an extremely difficult time for property developers, and the sense is that we haven't seen the end of the bad news,'' said Hideyuki Ookoshi, who helps oversee about $365 million at Chiba-Gin Asset Management Co. in Tokyo. ``If the bailout doesn't pass, things will turn very grave.''

The Nikkei 225 lost 108.50, or 0.9 percent, to close at 12,006.53 in Tokyo. The broader Topix index dropped 14.02, or 1.2 percent, to 1,153.95. Both gauges lost as much as 2.3 percent before Bush's speech at 10 a.m. Tokyo time. Trading volume on the main board of the Tokyo exchange was the lowest since Sept. 1.

The 148 Nikkei-listed shares that lost the right to a dividend had a 76 point drag on the gauge, according to Bloomberg data. Over half of Topix shares traded without dividend rights.

Nissan, which generates about two-thirds of its sales outside Japan, tumbled 5 percent to 763 yen. Honda Motor Co., Japan's second biggest carmaker, sank 3.2 percent to 3,300 yen. Takeuchi Manufacturing Co., a machinery maker that exports 90 percent of its products, dropped 5.7 percent to 1,490 yen.

Exports Slow

Exports to the U.S. fell by a record 22 percent in August from a year earlier, Japan's Finance Ministry said today. Overall, exports rose 0.3 percent, while economists had forecast a 2.3 percent increase. Nissan, Honda and market leader Toyota Motor Corp. said today they cut global production last month.


Re-plus yesterday became the 11th listed property-related company to file for bankruptcy in Japan this year, with 32.6 billion yen ($307 million) in debt. The condominium builder was unable to obtain financing due to the global credit crunch, it said. The shares fell 1,000 yen to 7,170, though no trades took place because sell orders overwhelmed those to buy.

Taisei Corp., Japan's No. 2 listed construction company, reversed its projection for a full-year profit to a loss today, citing the collapse of real estate companies. Its shares slumped 1.2 percent to 259 yen, paring an earlier 8.8 percent plunge. Atrium Co., which securitizes property, sank 3 percent to 553 yen after saying it made loans to Re-plus.

``The bankruptcy of Re-plus reignites unease about the credit markets,'' Seiji Arai, a strategist at Mitsubishi UFJ Securities Co., said in an interview with Bloomberg Television.

Banks Rebound

Shinsei, the former Long Term Credit Bank of Japan, swung from a 2.4 percent slide to advance 3 percent to 305 yen. Mizuho Financial Group Inc., the nation's second-biggest listed bank, gained 1.5 percent to 463,000 yen, reversing a 2.4 percent drop.

Bush urged Congress to act on his administration's proposed $700 billion bailout plan, saying the ``entire economy is in danger.'' After the speech, House Financial Services Committee Chairman Barney Frank said House and Senate Democrats had reached a deal on legislation.

Mitsui O.S.K. Lines Ltd., the nation's second-biggest bulk shipper, declined 4.9 percent to 1,010 yen as a measure of cargo rates fell the most in three months. Kawasaki Kisen Kaisha Ltd., the third biggest, declined 3.9 percent to 722 yen. Mitsui & Co., Japan's second-largest trading company, dropped 5.6 percent to 1,498 yen after oil prices slumped for a third day.

The Baltic Dry Index, a measure of shipping costs for commodities, retreated 6.1 percent yesterday, the steepest drop since June 12. Oil prices fell as low as $105.13 today, from $130 during trading on Sept. 22.

Moritex Buyout

``The trade figures and Baltic gauge are a sign that the global economy is increasingly headed towards recession,'' said Yoshihisa Okamoto, a fund manager at Mizuho Asset Management Co., which oversees $26 billion in Tokyo. ``Cyclical stocks are not worth buying right now because even if the bailout goes through smoothly, it's not going to change the bearing we're on.''

Germany's Schott AG said yesterday it will make a tender offer for a 51 percent stake in Moritex Corp., a Japanese optical equipment maker. Schott is offering 740 yen per share, a 42 percent premium over yesterday's closing price. Moritex shares rallied 19 percent to 617 yen.

Nikkei futures expiring in December declined 0.7 percent to 12,040 in Osaka and slipped 0.3 percent to 12,035 in Singapore.

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


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French Stocks: Alcatel-Lucent, Aurea, Casino and Natixis

By Adria Cimino

Sept. 25 (Bloomberg) -- France's CAC 40 Index advanced 13.43, or 0.3 percent, to 4,127.97 at 9:07 a.m. in Paris, gaining for the first day this week. The SBF 120 Index also added 0.3 percent.

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

Alcatel-Lucent SA (ALU FP) added 4 cents, or 1.4 percent, to 3.02 euros, rising for a second day. WestLB raised its recommendation on shares of the world's biggest maker of fixed- line telephone networks to ``hold'' from ``sell.''

Aurea SA (AURE FP) slid 30 cents, or 2.8 percent, to 10.40 euros, falling for a third day this week. The recycler of raw materials such as motor oil said it remained ``cautious'' on the outlook for the second half.

Casino Guichard-Perrachon SA (CO FP) climbed 1.32 euros, or 2.2 percent, to 60.72, advancing the most in about a month. Deutsche Bank AG raised its recommendation on shares of the biggest supermarket owner in Paris to ``buy'' from ``hold.''

CBo Territoria (ALCBO FP) added 10 cents, or 4.1 percent, to 2.57 euros, rising the most in six weeks. The property developer said first-half net income rose 9 percent to 5 million euros and increased its rent target.

Natixis SA (KN FP), France's fourth-biggest bank by market value, sank 30 cents, or 10 percent, to 2.62 euros, falling for a third time this week. Merrill Lynch & Co., Credit Suisse Group and Lazard-Natixis are selling 57.3 million shares in Natixis, according to an e-mail sent to clients by the banks. The shares are being offered via a so-called accelerated bookbuild, the e-mail said, and are the leftover stock from then bank's rights offer.

Staff & Line SA (ALSTA FP) jumped 36 cents, or 9.6 percent, to 4.12 euros, climbing for a third day. The business software designer said it sees a ``favorable'' outlook for the second half and doesn't see business slowing.

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



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Most U.K. Stocks Decline, Led by Lloyds TSB; Daily Mail Slumps

By Sarah Thompson

Sept. 25 (Bloomberg) -- Most U.K. stocks slid, led by banks and travel-related companies, as investors speculated the slowdown in the economy will crimp earnings growth.

Lloyds TSB Group Plc declined 3.1 percent after Deutsche Bank AG recommended selling the shares. Daily Mail and General Trust Plc lost 8.3 percent after saying the economic slowdown has hit advertising revenue.

ITV Plc jumped 4.7 percent after the U.K.'s biggest commercial broadcaster got backing from the country's media watchdog for plans to cut costs.

The benchmark FTSE 100 index decreased 6.89, or 0.1 percent, to 5,088.68 at 9:22 a.m. in London as 50 stocks declined and 46 gained. The FTSE All-Share Index lost 0.1 percent and Ireland's ISEQ Index retreated 0.2 percent.

Growing speculation that lawmakers will derail the White House's plan to rescue banks even as Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the American economy pushed stocks lower in Europe and the U.S. yesterday. President George W. Bush called for a bipartisan approach to the rescue plan and said the U.S. will face a ``long and painful'' recession unless a bailout is agreed.

Lloyds TSB fell 3.1 percent to 258.75 after Deutsche Bank analyst Jason Napier cut his recommendation to ``sell'' from ``hold.''

``We expect property prices to fall further, arrears to rise, bank losses on default to rise and consensus earnings expectations to fall further,'' Napier wrote in a research date today. ``We see the risk of higher-than-expected loan losses as the key factor facing the sector,'' he added.

Daily Mail Falls

Daily Mail slumped 8.3 percent to 306.75 pence. Economic conditions ``are having an impact on our newspaper and property business but the B2B divisions have continued to perform well,'' Chairman Viscount Rothermere said in the statement.

TUI Travel Plc and Thomas Cook Group Plc, Europe's two biggest tour operators, fell 2.9 percent and 7.2 percent, respectively, to 200 pence and 208 pence.

ITV rose 4.7 percent to 44.25 pence after the regular allowed it to cut costs by reducing some programming with a public-service remit such as regional news in Scotland.

Some public service programs are ``increasingly commercially unattractive,'' such as ``current affairs, nations and regions programming, challenging drama, scripted comedy, and drama and factual programming for children,'' Ofcom said in a statement today.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

U.K. companies:

BP Plc (BP/ LN) slid 2 pence, or 0.4 percent, to 485. Europe's second-largest oil producer plans to start a unit at its Texas City, Texas, refinery after the plant was shut because of Hurricane Ike.

HBOS Plc (HBOS LN) added 2.4 pence, or 1.3 percent, to 182.9. The U.K.'s biggest mortgage lender, which is being bought by Lloyds TSB, issued 3 billion pounds ($5.5 billion) of bonds backed by U.K. mortgages, according to Standard & Poor's.

Highland Gold Mining Ltd. (HGM LN) increased 7 pence, or 12 percent, to 66 pence. The miner part-owned by Russian billionaire Roman Abramovich posted a first-half profit following a year- earlier loss.

London Stock Exchange Group Plc (LSE LN) added 4.5 pence, or 0.5 percent, to 887. The operator of the world's fourth-largest market said SIS x-clear will compete with LCH.Clearnet Group Ltd. as a second central counterparty for U.K. stocks.

Real Good Food Co. (RGD LN) plunged the most since at least 2003, down 2.5 pence, or 33 percent, to 5 pence. The U.K. maker of Whitworths sugar reported a first-half loss and said market conditions at its main division remain ``challenging.''

Songbird Estates Plc (SBDB LN) dropped 3.5 pence, or 3.5 percent, to 97.5. The landlord to the bankrupt Lehman Brothers at its Canary Wharf estate in east London reported a first-half loss after the value of its offices slumped.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.



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European Stocks, U.S. Index Futures Advance as Crude Oil Drops

By Adam Haigh

Sept. 25 (Bloomberg) -- Stocks in Europe and U.S. index futures advanced as oil's retreat lifted carmakers and Royal DSM NV raised its profit forecast. Asian shares fell for a third day on concern the bank bailout plan may be delayed.

Bayerische Motoren Werke AG added 1.7 percent and General Motors Corp. climbed 2 percent in Germany as crude dropped for a third day. DSM, the world's largest maker of vitamins, rallied 2.8 percent. Repsol YPF SA rose 3.4 percent as Expansion reported Total SA and Royal Dutch Shell Plc are considering buying the Spanish oil company. Swiss Reinsurance Co. increased 1.5 percent, leading insurers higher, after saying it has ``sufficient'' liquidity even when no external funding is available.

Europe's Dow Jones Stoxx 600 Index added 0.9 to 268.03 as of 9:59 a.m. in London. Futures on the Standard & Poor's 500 Index gained 0.4 percent. MSCI Asia Pacific Index retreated 1 percent on concern the U.S. Congress won't agree to a bank bailout plan soon enough to avert a global recession.

``This rescue package is extremely important and has to get through Congress,'' Stephen Thornber, who oversees about $1 billion as a London-based money manager at Threadneedle Asset Management, said in an interview on Bloomberg Television. ``It's about providing liquidity, and more than that, improving sentiment.''

Growing speculation that lawmakers will derail the White House's plan to rescue banks even as Federal Reserve Chairman Ben S. Bernanke warned of ``grave threats'' facing the American economy pushed stocks lower in Europe and the U.S. yesterday. President George W. Bush called for a bipartisan approach to the rescue plan and said the U.S. will face a ``long and painful'' recession unless a bailout is agreed.

Asian Banks

Mitsubishi UFJ Financial Group Inc. fell 1.6 percent, leading banks lower in Asia, as money-market rates in the region's biggest financial centers rates jumped on concern U.S. lawmakers may delay or dilute the rescue plan.

The MSCI World Index has erased more than a third of its biggest two-day rally in 38 years posted on Sept. 18 and 19 after the $700 billion bailout plan was proposed and regulators in the U.S. and U.K. imposed bans on short selling of financial stocks.

American equities may start to underperform European stocks, JPMorgan Chase & Co. strategist Mislav Matejka wrote in a note to clients today.

``Some of the tailwinds that U.S. stocks enjoyed so far, will become supports for European companies, namely the onset of central bank easing,'' Matejka said.

German Consumer Confidence

German market-research company GfK AG's consumer confidence index for October increased to 1.8 from a revised 1.6. Economists expected the gauge to be unchanged at 1.5, according to the median of 29 estimates in a Bloomberg News survey.

U.S. presidential nominee John McCain yesterday said the bank rescue proposal won't pass Congress in its current form and urged Democratic rival Barack Obama to join him in suspending their presidential campaigns to work with lawmakers on developing a plan.

The rescue plan won't be enough to revive the finance industry, said investor Marc Faber, who forecast the so-called Black Monday crash in 1987.

BMW, the world's largest luxury carmaker, added 1.7 percent to 28.94 euros. GM, the biggest U.S. automaker, climbed 2 percent to $10.56 in Germany.

Crude oil for November delivery fell as much as $1.52, or 0.8 percent, to $104.21 a barrel in after-hours electronic trading on the New York Mercantile Exchange, erasing earlier gains amid growing concerns over U.S. demand.

DSM Forecast

DSM advanced 2.8 percent to 35.82 euros. The company raised its profit forecast for the fourth time this year as prices advance and demand for fertilizer grows.

``There are still interesting companies in Europe that have solid business models that can weather the storm,'' said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which oversees about $60 billion.

Repsol gained 3.4 percent to 21.12 euros. Builder Sacyr Vallehermoso SA has said it may put its 20 percent stake in Madrid-based Repsol up for sale, which has spurred the interest of Total and Shell, the newspaper said, citing unidentified people close to the conversations.

A Repsol spokesman, who declined to be identified in line with company policy, said Repsol understands Sacyr doesn't wish to sell its stake. He said in a phone interview he couldn't comment on reports of plans by other companies. Total spokeswoman Lisa Wyler said she couldn't comment on the report. Shell couldn't immediately be reached.

Swiss Re

Swiss Re climbed 1.5 percent to 63.5 francs as the world's second-largest reinsurer revealed it lost an estimated 277 million francs ($256 million) on structured credit default swaps since the end of the second quarter.

Mitsubishi UFJ, Japan's biggest banking group, fell 1.6 percent to 914 yen. National Australia Bank Ltd., the nation's largest by assets, slid 2.5 percent to A$24.96.

Daily Mail and General Trust Plc declined 8.3 percent to 306.45 pence after forecasting full-year earnings at the lower end of analysts' estimates, citing ``worsening economic conditions.''

Natixis SA slid 7.2 percent to 2.71 euros. Merrill Lynch & Co., Credit Suisse Group AG and Lazard-Natixis are selling 57.3 million shares in the French bank, according to an e-mail sent to clients by the banks.

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



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Short-Sale Ban Fails to Save Ambac, Farmer Mac From 50% Plunge

By Nick Baker and Eric Martin

Sept. 25 (Bloomberg) -- Ambac Financial Group Inc. and Federal Agricultural Mortgage Corp. tumbled more than 50 percent in the past four days. And you can't blame short sellers.

Their stocks are among 942 that the Securities and Exchange Commission prohibited investors from betting against because of concern speculators were unfairly punishing the shares. Of the total, 44 percent underperformed the Standard & Poor's 500 Index since the SEC unveiled the list of banned stocks Sept. 18, according to data compiled by Bloomberg.

``Taking the short sellers out of the market doesn't change the fundamentals,'' said Dean Gulis, part of a group that manages about $3 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. ``It's wrong to say that short selling of shares was the biggest contributor to the financial crisis.''

The SEC banned short sales, where traders sell borrowed shares with the hope of buying them back later at a lower price, on concern investors took advantage of the subprime mortgage market's collapse to drive stock prices lower. Morgan Stanley Chief Executive Officer John Mack blamed short sellers for ``driving our stock down,'' according to a memo to employees sent Sept. 17. Lehman Brothers Holdings Inc. CEO Richard Fuld told Wall Street executives he believed short sellers ``actively colluded'' to topple Bear Stearns Cos., CNBC reported April 1.

JPMorgan Chase & Co.'s purchase of Bear in March saved it from bankruptcy, while Lehman, once the fourth-largest investment bank, filed the biggest bankruptcy in history last week.

Trailing S&P 500

Altogether, 418 stocks on the SEC's no-short-selling list fell more than the S&P 500's 1.7 percent decline since Sept. 18. Bloomberg's index of all U.S. shares covered by the ban climbed 3 percent, helped by 23 percent increases in Goldman Sachs Group Inc. and American International Group Inc. and a 9.9 percent gain in Morgan Stanley. They are among the 40 heaviest-weighted stocks in the index.

Ambac, the second-largest bond insurer, declined 55 percent to $3.02 in New York Stock Exchange composite trading since Sept. 18, extending its year-to-date retreat to 88 percent. The New York-based company said at the end of last week that it may delay the start of a new municipal bond insurer after Moody's Investors Service said it's considering cutting the firm's financial- strength rating by several grades.

Almost one-third of Ambac's shares available for trading were sold short on Sept. 15, according to New York Stock Exchange data compiled by Bloomberg. Although existing wagers against Ambac and other companies on the no-short list were allowed to remain in place after the SEC ban, new bets are prohibited through Oct. 2.

`Everyone Wants a Villain'

Farmer Mac, as government-sponsored enterprise Federal Agricultural Mortgage is known, plunged 65 percent to $5.25 since Sept. 18. The Washington-based company said Sept. 22 that its reserves may fall short of federal requirements. Farmer Mac hired a financial adviser to assist in selling assets and common and preferred stock.

``Everyone wants a villain,'' said Brad Alford, the Atlanta- based head of Alpha Capital Management LLC who invests in hedge funds. ``It's obviously not the short sellers.''

Financial institutions plunged during the past 19 months as banks globally racked up more than $500 billion in mortgage- related losses and writedowns following the first nationwide decline in U.S. home prices since the 1930s. Banks and brokerages led financial companies in the S&P 500 to a 54 percent retreat between Feb. 20, 2007, and July 15, 2008. That's the steepest slump since at least 1962, according to data compiled by Birinyi Associates Inc., a Westport, Connecticut-based research and money-management firm.

Morgan, Goldman Rebound

New York-based Morgan Stanley retreated 50 percent to an almost 10-year low of $21.75 in the seven days ended Sept. 17. It rebounded 14 percent, helped by the Bush administration's proposal to spend $700 billion on troubled bank assets. Goldman, which lost 36 percent to $108 over eight days ending Sept. 18, has since rallied 23 percent, helped by a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc.

Conseco Inc., a Carmel, Indiana-based insurer that's also on the no-short list, retreated 40 percent to $4.78 since Sept. 18. Western Alliance Bancorp, a Las Vegas-based lender, plunged 43 percent to $14.68, while Ames National Corp., a bank based in Ames, Iowa, sank 37 percent to $26.71.

``It's a negative to have your name on the list because you're being branded as vulnerable,'' said Dan Genter, the Los Angeles-based president of RNC Genter Capital Management, which oversees $2.9 billion. ``If I were an investor, I'd want to be out of them.''

To contact the reporters on this story: Nick Baker in New York at nbaker7@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net.



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ALL, Multiexport, Telefonica Chile, Vitro: Latin Equity Preview

By William Freebairn and James Attwood

Sept. 25 (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 0.7 percent yesterday to 3,324.77.

Brazil

ALL America Latina Logistica SA (ALLL11 BS): MRC Servicos Ferroviarios DPRS-AL Ltda. received a loan from Brazil's national development bank to build a rail terminal to be used by ALL, Latin America's largest railroad operator. The grain terminal is being built in Parana state, the bank said in a statement e- mailed yesterday. ALL fell 1.1 percent to 15.80 reais.

Cia. Vale do Rio Doce (VALE5 BS): The world's biggest iron- ore producer approved plans to build its second alumina refinery in Brazil's Para state with Hydro Aluminum AS, Vale said in a statement e-mailed yesterday. Vale rose 1.9 percent to 34.15 reais.

Chile

Compania de Telecomunicaciones de Chile SA (CTCA CC): Directors of Chile's biggest fixed-line carrier, known as Telefonica Chile, said an offer from Telefonica SA to buy shares in the Chilean company it doesn't already own ``may be convenient for shareholders.'' Telefonica Chile responded to the share purchase offer in separate letters from each director posted yesterday on the Chilean securities regulator's Web site. Madrid- based Telefonica set Oct. 16 as the deadline to accept its bid to buy the remaining 55 percent of the company for 1,000 pesos a series A share. Series A shares rose 0.8 percent to 970 pesos.

Multiexport Foods SA (MULTIFOO CC): Chile's salmon production in 2009 may decline for a second year as companies battle a virus that causes anemia in fish, an industry group said. Allowing production areas to go unused for weeks to control the spread of the sickness will trim output as more companies implement the measure, Rodrigo Infante, chief executive officer of the Santiago based Association of Chile's Salmon Industry AG, said yesterday in a telephone interview. Multiexport, the world's sixth-largest salmon producer, gained 4.5 percent to 115 pesos.

Mexico

Vitro SAB (VITROA MM): Mexico's largest glassmaker was reduced to ``hold'' from ``buy'' by Banco Santander SA because of higher energy costs. Natural gas expenses will contribute to a ``challenging'' second half of the year, analyst Luis Miranda wrote in a report e-mailed yesterday. Vitro fell 5.3 percent to 13 pesos.

To contact the reporters on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net



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AUD/CAD Short-Term Technical Outlook

Daily Forex Technicals | Written by DailyFX | Sep 25 08 05:52 GMT |

Analysis Currency Pair: AUD/CAD Short-Term Bias: Short Chart: 60 Min Charts We have held a bearish outlook for the AUD/CAD since the beginning of September, and anticipate the pair to fall lower in the days ahead. Earlier this week, the pair bounced higher to hit an intraday high of 0.8806 on 9/22, but has come back down to hold near 0.8670-0.8680. We expect the underlying downtrend that began in August to drag the pair lower, and forecast the pair to fall back below 0.8575 over the next few days. The downward momentum may also lead the pair to test the 9/18 low of 0.8395 for support over the following week. Be sure to check out Jamie's Technical Outlook for additional information on the major currency pairs DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Technical Analysis Daily: EUR/USD

Daily Forex Technicals | Written by iFOREX.bg | Sep 25 08 05:36 GMT |

EUR/USD 1.4704 EUR/USD Open 1.4459 High 1.4741 Low 1.4607 Close 1.4631 The Euro corrected significantly yesterday against the US Dollar from Wednesday's top 1.4741 to the bottom 1.4607, which are the first resistance and support levels respectively for the currency couple today. From the above bottom the currency couple started rising, and if the positive trend continues, as we expect for the moment, next resistance is expected at 1.4815, followed by 1.4900. In downward direction next support for today is expected at 1.4550, the break of which would lead to next target 1.4470. Technical resistance levels: 1.4740 1.4815 1.4900 Technical support levels: 1.4605 1.4550 1.4470 Trading range: 1.4690 - 1.4755 Trend: Upward Buy at 1.4704 SL 1.4674 TP 1.4744 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Asia Session Recap

Daily Forex Fundamentals | Written by Forex.com | Sep 25 08 05:50 GMT |

The US Dollar weakened in Asian trading on fears that the US $700 Billion Rescue Plan would be held up, or watered down in a partisan Congress intent mostly on finger pointing and showboating. Even President Bush flooded the airwaves with dire warnings of a financial system break down if the bill was not passed, however, the word is that most American's are siding against the bailout and as well pressuring their congressional leaders to do likewise. The Dollar suffered on uncertainty as EUR/USD was bid for the better part of the night, starting from lows of just above 1.4600, the pair peaked out at 1.4732, but looked to have more ammunition for the upcoming session. EUR/JPY buying played into the equation as that pair traveled from a155.15 low to a 155.95 high over the course of the session. As of this writing, EUR/JPY looks to break through the 156.00 level at any moment. USD/JPY lost some ground in thin trading as traders seemed to fear being caught on the wrong side of any announcement or rumor. The dollar slid from 106.30 to 105.74 against the Yen as Asia seemed reluctant to purchase Dollars. All eyes will be focused on Rescue Plan and how it looks to be fairing in Congress, as of right now, this is the only game in town….. Upcoming Economic Data Releases (London Session) 25-30 SEP UK Nat'wide House prices sa (MoM) SEP -1.90% -1.80% 25-30 SEP UK Nat'wide House prices nsa(YoY) SEP -10.50% -12.80% 9/25/2008 6:10 GE GfK Consumer Confidence Survey OCT 1.5 1.5 9/25/2008 8:00 EC Euro-Zone M3 s.a. (YoY) AUG 9.30% 9.10% 9/25/2008 8:00 EC Euro-Zone M3 s.a. 3 mth ave. AUG 9.60% 9.30% Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Sep 25 08 01:52 GMT |

News And Views The US dollar and equities oscillated on various headlines from Washington D.C. as Fed chief Bernanke testified on the economy and the debate continued over the Treasury's bailout plan. Ultimately the dollar emerged a touch stronger, with no outcome clear yet and equities steadying. Indeed, the DJIA flipped between small gains and losses numerous times on the day, before finally slipping in late trade to -90pts. NZD/USD was quiet, trading 0.6817-0.6887, with no real momentum. AUD/USD traded about a one cent range (high of 0.8429), heading to the NY close at the lower end of that range as equities softened. EUR/USD was choppy, rallying to about 80 pips to its high 1.4747 high in the London/ NY overlap then retreating to the 1.4640 area, with model fund buying of USD vs basket reported. The euro suffered surprisingly little damage on the poor Sep German IFO survey which points to negative Q3 GDP i.e. 'technical' recession. USD/JPY was dull, wandering from lows around 105.55 to about 106.25, paying little attention to anything. US existing home sales fall 2.2% in Aug, but have actually been 'bouncing along the bottom' for almost a year now. Since October last year, sales have ranged between 4.85-5.06 mn annualised, compared to their 7.25mn annualised peak three years ago (in September 2005). Sales have been boosted to some extent by distressed/foreclosure-related transactions at discounted prices, and we suspect that the continued downtrend in new home sales is to some extent a function of that (i.e. existing sales are cannibalising new sales). Note that in August the NAR median price measure for existing homes recorded its steepest annual pace of decline yet (9.5% yr), but corresponding to that, the stock of unsold homes actually declined somewhat, in terms of months required to clear it at the current sales pace. More testimony from Bernanke and Paulson. The Fed chair reiterated that 'the downside risks to the outlook remain a significant concern...[but] the upside risks to inflation remain a significant concern as well.' The Treasury Secretary continued to emphasise the need to approve Treasury's bailout package quickly, but made some concessions to Congress' concerns, such as limits on executive pay for firms that participate in the bailout. Japanese business survey improves but still negative. The September MoF Business Outlook Survey of large firms' current conditions index was -10.2, remaining below the neutral level, but an improvement from -15.2 in June. June was the weakest reading under new survey begun in June 2004. The reading for large manufacturers lifted to -10.0 in Sep from -15.1, with non-manufacturers improving to -10.2 from -15.3. Capital spending plans for 'all companies' for FY08 slipped to -2.4%yr from the June projection of -0.9%yr. German Ifo business climate index falls from 94.8 to 92.9 in Sep. German business confidence stumbled again this month, with favourable developments (weaker euro, lower oil prices) swamped by concern about current financial market turmoil. Also, the Euroland current account deficit narrowed to €1.7bn sa in July, making it five monthly deficits in the first seven months of the year. Euroland is probably heading for a small full-year deficit in 2008, after a balanced external account last year. UK retailing remains weak. The latest CBI retail survey recovered from its 25 year low in August but its September reading was still the third lowest on record and remains consistent with a much weaker pace of retail sales growth than recorded in the latest official retail report, which we think overstated August sales due to cooler weather bringing forward winter clothing purchases. Outlook NZD/USD remains prone to US-driven volatility but our bias is towards underlying decline ahead of what should be poor NZ GDP data on Friday and with dairy prices slammed by the Chinese milk scandal. AUD/NZD remains a buy on dips, targeting 1.25. Events Today Country Release Last Forecast Aus RBA Financial Stability Review US Aug Durable Goods Orders 1.30% –2.5% Initial Jobless Claims w/e 20/9 455k 450k Aug New Home Sales 2.40% –3.0% Fed Chair Bernanke testimony re Fannie & Freddie Fedspeak: Warsh, Evans & Fisher Jpn Aug Trade Balance ¥bn 172 113 Aug Corp. Services Prices %yr 1.30% 1.20% Eur Aug Money Supply M3 %yr 9.30% 9.00% Ger Oct GfK Consumer Confidence 1.5 1.5 UK Sep Nationwide House Prices %yr –10.5% –13.0% Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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More Stalling On The US Bailout Making Markets Nervous

Daily Forex Fundamentals | Written by Easy Forex | Sep 25 08 01:44 GMT |

U.S. Dollar Trading (USD) another day, another grilling for Paulson and Bernanke as Senators turned aggressive on the proposed Bailout plan and party lines split on demands and assurances. Markets were frozen as participants waited for news with most currencies sticking to a tight range. Stocks were sluggish and commodities slightly lower. US data was slightly weaker than expected with August Home Sales at 4.91 vs. 4.94 Million Expected. In the U.S. share markets, the NASDAQ was up 2 points (0.11%) and the Dow Jones was down 29 points (-0.27%). Crude Oil closed down $0.88 ending the New York session at $105.73 per barrel. Looking ahead, August Durable Goods are seen down -1.1% from a previous jump of 2.9% in July. Weekly Jobless claims are seen slightly lower at 448K from 455K. August New Homes seen at 0.51 Millions from 0.515 Million in July. Bernanke and Paulson are schedule to continue speaking to congress. The Euro (EUR) relatively contained, rallying on rumors that the bailout plan didn't have enough votes before settling back to roughly where it began. Poor German IFO numbers suggest that the Eurozone could be heading for a recession. September IFO 92.9 vs. 94.2 expceted. Falling Oil weighed into the US close. Overall the EUR/USD traded with a low of 1.4610 and a high of 1.4748 before closing the day at 1.4630 in the New York session. Looking ahead, October GFK German Confidence is expected at 1.3 from 1.5 September. The Japanese Yen (JPY) sluggish stocks kept the USD/JPY gains to a minimum, initially rallying on reports that buffet will be investing in Goldman Sachs. Also helping to weaken the JPY is the continuing political fallout from PM resignation. Overall the USDJPY traded with a low of 105.36 and a high of 106.35 before closing the day around 106.10 in the New York session. UPDATE AUGUST Trade Balance -324 Bln vs. -400 Bln expected. The Sterling (GBP) tracked the Euro maintaining recent range while awaiting further developments from the US. September CBI was better than expected jumping to -27 from -46 previously. Overall the GDP/USD traded with a low of 1.8463 and a high of 1.8608 before closing the day at 1.8470 in the New York session. The Australian Dollar (AUD) traded briefly above .8400 but was unable to hold the gains as US stocks came off and Commodities fell in late trading. Buffets Goldman Sachs news lifted the AUD off lows during the Asian session. Overall the AUD/USD traded with a low of 0.8309 and a high of 0.8429 before closing the US session at 0.8340. Gold (XAU) gained on Bailout stagnation rumors but was unable to hold above $900 an ounce falling back to session lows. Overall trading with a low of USD$879.00 and high of USD$901.20 before ending the New York session at USD$883 an ounce Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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