South Korean Consumer Prices Probably Rose by Least in 4 Months

By William Sim

Oct. 1 (Bloomberg) -- South Korea's inflation probably slowed in September, indicating prices may have peaked and giving the central bank scope to consider an interest-rate cut to bolster flagging economic growth.

Consumer prices rose 5.3 percent from a year earlier, the smallest increase in four months and cooling from a 5.6 percent gain in August, according to the median estimate of 15 economists surveyed by Bloomberg. Inflation reached a 10-year high in July. The report is due at 1:30 p.m. in Seoul today.

Asia's central banks have started to lower borrowing costs to counter the effect of the U.S. financial crisis on their export-dependent economies as inflation peaks. Still, a weaker won and increases in power costs may keep consumer prices elevated in South Korea, making it difficult for interest-rate reductions soon.

``A rate cut is possibly looming as the economy faces a higher risk of slower growth and a reduced risk of inflation,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul, who expects a 25 basis-point rate cut by the end of 2008.

Bank of Korea Governor Lee Seong Tae and his board kept the benchmark rate unchanged at an eight-year high of 5.25 percent in September. Their next decision is due on Oct. 9.

The bank raised borrowing costs for the first time in 12 months in August to prevent an oil-led pickup in inflation from leading to a surge in wages and more widespread price increases. One board member opposed the increase, saying higher rates may exacerbate the economy's slowdown.

``The Bank of Korea will actively consider the downside and upside risks to inflation and the economy,'' according to its semiannual report released yesterday to parliament.

Slowing Growth

The economy grew 4.8 percent in the second quarter, the slowest pace in more than a year as households cut spending.

Increased shipments to China and other emerging markets have helped Asia's fourth-largest economy weather the domestic slowdown and U.S. financial crisis.

Exports, which make up more than half of gross domestic product, surged 27 percent in September from a year earlier after rising 18.7 percent in August, a separate survey of economists showed.

Taiwan cut borrowing costs on Sept. 25, joining China, Australia and New Zealand in easing the price of money last month. Inflation rates have slowed in Thailand and Sri Lanka, and policy makers in the Philippines, India and Indonesia forecast price gains will cool before the end of the year.

Inflation Fight

Lower borrowing costs may spur growth as the economies of the U.S., Europe and Japan weaken and the deepening credit crisis threatens to tip the world into a recession. Still, some analysts say the inflation fight isn't over and that loose monetary policy or a surge in oil costs may spark another bout of higher prices.

Inflation probably will stay high for a while and the economy will keep slowing as weakening local demand offset export gains, the central bank said yesterday.

The Korean won fell to the weakest since 2003 against the dollar yesterday, extending its decline this year to more than 21 percent and making imported goods more expensive

Following are forecasts for consumer prices and trade in September. The trade data is due at 10 a.m. tomorrow.

----------------------------------------------------
Consumer Prices                   YoY%      MoM%
----------------------------------------------------
Median                            5.3%      0.3%
Average                           5.4%      0.4%
High Forecast                     5.8%      0.8%
Low Forecast                      5.0%      0.0%
Number of Participants              15        11
Previous                          5.6%     -0.2%
----------------------------------------------------
Action Economics                  5.3%      0.3%
Citi                              5.2%      0.2%
DBS Group                         5.5%      0.5%
Forecast Pte                      5.2%      ---
Good Morning Shinhan Secs         5.2%      0.2%
Hana Daetoo Securities            5.3%      0.3%
HI Investment & Securities        5.4%      0.4%
HMC Investment Securities         5.7%      0.7%
HSBC                              5.4%      ---
Hyundai Securities                5.3%      0.3%
Mirae Asset Securities            5.3%      0.2%
Moody's Economy.com               5.4%      ---
Samsung Securities                5.0%      0.0%
SC First Bank                     5.8%      0.8%
UBS Securities                    5.5%      ---
====================================================


-----------------------------------------------------
                               Exports   Imports
Trade                            YoY%      YoY%
-----------------------------------------------------
Median                           27.0%     40.0%
Average                          25.3%     40.3%
High Forecast                    37.0%     58.0%
Low Forecast                     14.0%     26.0%
Number of Participants              15        15
Previous                         18.7%     37.0%
-----------------------------------------------------
Action Economics                 25.0%     40.0%
Citi                             27.0%     49.7%
DBS Group                        34.5%     39.7%
Forecast Pte                     28.9%     38.1%
Good Morning Shinhan Secs        29.3%     40.3%
Hana Daetoo Securities           23.4%     41.9%
HI Investment & Securities       29.4%     41.2%
HMC Investment Securities        30.3%     50.9%
HSBC                             15.0%     26.0%
Hyundai Securities               24.2%     39.1%
Mirae Asset Securities           30.0%     46.0%
Moody's Economy.com              17.8%     30.4%
Samsung Securities               14.3%     33.2%
SC First Bank                    37.0%     58.0%
UBS Securities                   14.0%     30.0%
=====================================================

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

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Japanese Yen, Korean Won, Indian Rupee: Asia Currency Preview

By Bob Chen

Oct. 1 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Markets in China, Hong Kong, Indonesia, Malaysia, Pakistan and Singapore are closed today. Exchange rates are from the previous session.

Japanese yen: The Bank of Japan releases its quarterly Tankan business sentiment survey at 8:50 a.m. in Tokyo.

Chief Cabinet Secretary Takeo Kawamura will hold briefings at 11 a.m. and 4 p.m. Finance Minister Shoichi Nakagawa is scheduled to hold a press conference at 5 p.m.

The yen traded at 106.05 per dollar at 7:40 a.m. in Sydney.

South Korean won: The Ministry of Knowledge Economy will report the nation's exports and imports in September at 10 a.m. in Gwacheon. Overseas shipments grew 27 percent in September from a year earlier, quickening from an 18.7 percent pace in August, economists forecast in a Bloomberg News survey.

Consumer prices grew 5.3 percent in September from a year earlier, after increasing 5.6 percent the previous month, a separate survey showed before the statistics office reports inflation at 1:30 p.m. in Gwacheon.

The won traded at 1,206.95.

Thai baht: The Commerce Ministry will report inflation in September at 2:30 p.m. in Bangkok. Consumer prices rose 5.9 percent from a year earlier, slowing from 6.4 percent the previous month, economists forecast in a Bloomberg News survey.

The baht traded at 33.86.

Indian rupee: The government will report August trade figures today. Overseas shipments, which account for about 15 percent of the economy, rose 31 percent in July from a year earlier, after gaining 24 percent in June. Import growth accelerated to 48 percent from 26 percent and the trade deficit swelled to a record $10.8 billion.

The rupee traded at 46.985.

To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.



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Oil Rises a Second Day on Signs U.S. Will Revive Bailout Plan

By Mark Shenk

Oct. 1 (Bloomberg) -- Crude oil rose for a second day after U.S. lawmakers said they intend to salvage a $700 billion bank- rescue package that may avert an economic slowdown and U.S. stocks jumped the most in six years.

Oil rose and equities rallied after both were battered when the House of Representatives failed to pass a rescue bill on Sept. 29 and European governments bailed out three banks. The U.S. Senate will try to revive the financial package today.

``The market is being totally driven by what is happening in Washington,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``What happens to oil prices depends completely on whether the rescue package is approved or not.''

Crude oil for November delivery rose $1.46, or 1.5 percent, to $102.10 a barrel at 8:09 a.m. Sydney time on the New York Mercantile Exchange. Futures are down 31 percent from the record $147.27 a barrel reached on July 11.

Oil added $4.27, or 4.4 percent, yesterday to $100.64 a barrel, the biggest gain since Sept. 22. Futures fell 28 percent in the third quarter, the biggest drop since 1991.

``We won't be seeing oil near $150 anytime soon,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``Even if we get the bailout, there's no guarantee that it will work.''

Oil fell $10.52, or 9.8 percent, to $96.37 a barrel, on Sept. 29, the biggest slide in percentage terms since Nov. 15, 2001, as the Standard & Poor's index of 500 stocks tumbled the most since the 1987 crash.

`Follow the Leader'

``We're playing follow-the-leader,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. Oil followed when stocks plunged and rebounded with equities yesterday, he said.

The Standard & Poor's 500 Index rose 58.35 points, or 5.3 percent, to 1,164.74, its biggest rally since July 2002. The Dow Jones Industrial Average jumped 485.21, or 4.7 percent, to 10,850.66 and earlier gained more than 500 points. The Nasdaq Composite Index added 5 percent to 2,082.33.

The euro's drop against the dollar limited the crude rally yesterday, Bentz said. The euro dropped the most yesterday against the dollar since the introduction of the shared currency in 1999 as France and Belgium led a state-backed rescue of Dexia SA, the world's biggest lender to local governments. A falling euro curbs the appeal of commodities as an inflation hedge.

President George W. Bush said the defeat of his plan to revive credit markets ``is not the end of the legislative process,'' and warned lawmakers that they must act or the result will be ``painful and lasting'' economic damage to the country.

Avoiding a `Bloodbath'

``If the legislation is passed, we may avoid another bloodbath in the market,'' Barakat said. ``If it's not passed, prices will easily go below the $90 of a couple of weeks ago.''

Traders are betting the Federal Reserve will cut interest rates next month, potentially shoring up fuel demand. Futures on the Chicago Board of Trade show a 28 percent chance the Fed will trim its 2 percent target rate for overnight lending between banks by 50 basis points on Oct. 29, versus little changed last week. The odds on a quarter-point cut are 72 percent.

Gasoline for November delivery rose 2.73 cents, or 1.1 percent, to $2.4850 a gallon in New York. Yesterday, it settled up 9.62 cents, or 4.1 percent, at $2.4577 a gallon. The October gasoline and heating oil contracts expired yesterday

Heating oil increased 3.03 cents, or 1.1 percent, to $2.9250 a gallon. It rose 10.62 cents, or 3.8 percent, yesterday to $2.8947 a gallon.

Fuel Inventories

U.S. gasoline stockpiles probably fell 2.05 million barrels in the week ended Sept. 26 from 178.7 million barrels the week before, according to the median of 13 analyst estimates before an Energy Department report today. Supplies in the week ended Sept. 19 were the lowest since 1967. Inventory levels prior to 1990 were reported on a monthly basis.

Refineries, production platforms and ports along the Gulf of Mexico were shut this month because of hurricanes Gustav and Ike.

``There's potential upward pressure on prices because of hurricanes and how much production has been disrupted,'' said Tim Evans, an energy analyst for Citi Futures Perspective in New York.

Brent crude oil for November settlement increased $4.19, or 4.5 percent, to settle at $98.17 a barrel on London's ICE Futures Europe exchange.

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



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Australian, New Zealand Dollars Fall Amid Growth, Rates Concern

By Candice Zachariahs

Oct. 1 (Bloomberg) -- The Australian and New Zealand dollars fell to the lowest in more than a week on speculation their central banks will cut interest rates to combat slowing growth and declining prices for commodities the nations export.

The currencies also fell as the U.S. dollar rose on speculation the U.S. Senate will salvage a $700 billion bank- bailout plan. Gold, Australia's third most-valuable raw material export, slid in New York trading.

``U.S. dollar strength across the board last night saw the Aussie and Kiwi lower,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``In the medium-term, the trend is still to the downside with the U.S. dollar likely to strengthen, global growth concerns taking commodity prices lower and both central banks cutting rates.''


The Australian dollar fell 1.4 percent to 79.49 U.S. cents at 7:40 a.m. in Sydney, from 80.62 cents late in Asia yesterday. It earlier touched 78.68 cents, the weakest since Sept. 18. It declined 0.5 percent to 84.28 yen.

New Zealand's dollar slid to 66.42 U.S. cents, the lowest since Sept. 18, before trading at 67.12 U.S. cents from 67.59 cents late in Asia yesterday. It rose 0.2 percent to 71.20 yen.

U.S. Bailout

The currencies fell after reports the U.S. Senate will try to revive a $700 billion rescue plan for the financial sector. The bill would have allowed the government to buy troubled assets from banks.

``The high-yielding commodity currencies continue to trade heavy as the markets focus on events in the U.S.,'' wrote Nick Jonas, a Brisbane-based treasury analyst at Suncorp-Metway Ltd., in a research note today.

The Reserve Bank of New Zealand is certain to cut interest rates by 0.5 percentage point on Oct. 23, according to a Credit Suisse Group index based on interest-rate swaps. Australia's central bank is a certainty to trim borrowing costs by at least 0.25 percentage point and an 89 percent chance to make a cut twice as large as that, according to a separate Credit Suisse index.

Benchmark interest rates are 7 percent in Australia and 7.5 percent in New Zealand, compared with 0.5 percent in Japan and 2 percent in the U.S., luring investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net


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U.S. Economy: Confidence Unexpectedly Rose This Month

By Shobhana Chandra

Sept. 30 (Bloomberg) -- Consumer confidence unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks.

The Conference Board's confidence index increased to 59.8, a third consecutive gain, from 58.5 the prior month, the New York- based group said today. Other reports showed home prices fell in July at the fastest pace on record and business activity slowed less than forecast this month.

Since the confidence survey's Sept. 23 cutoff, the odds have risen that consumers will retrench in the wake of failing banks, evaporating wealth and paychecks that aren't keeping up with inflation. Stocks tumbled yesterday after the government failed to approve a financial-rescue plan.

``The environment has become pretty negative,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who had forecast confidence would rise. ``The momentum has certainly turned down. If the turmoil continues, the risk of a severe recession goes up.''

Americans are likely to lose confidence heading into the presidential election on Nov. 4. Today's report is the next-to- last Conference Board sentiment reading before the vote.

The National Association of Purchasing Management-Chicago's business activity index fell to 56.7 in September from 57.9 the prior month. Fifty is the dividing line between growth and contraction.

Stocks Up

Stocks extended earlier gains following the reports and Treasury securities fell. The Standard & Poor's 500 index rose 5.3 percent to close at 1,164.74. The yield on the benchmark 10- year note rose to 3.83 percent at 4:30 p.m. in New York from 3.58 percent late yesterday.

Equities rallied on expectations lawmakers would salvage the bank rescue package. The House of Representatives yesterday voted down a $700 billion plan intended to restore confidence in U.S. banks, sending the S&P 500 Index tumbling almost 9 percent.

The confidence gauge was forecast to drop to 55 from an originally reported 56.9 in August, according to the median forecast in a Bloomberg News survey of 62 economists. Projections ranged from 48 to 66. The index reached a 16-year low of 51 in June and averaged 103.4 last year.

Since the cutoff date, Washington Mutual Inc. joined Lehman Brothers Holdings Inc. in bankruptcy, Citigroup Inc. acquired Wachovia Corp. to prevent the collapse of the sixth-biggest U.S. bank by assets, and stocks suffered their biggest drop since 1987.

Home Values Drop

Earlier today, the S&P/Case-Shiller home-price index of 20 U.S. metropolitan areas dropped 16.3 percent in July from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

``The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,'' said Derek Holt, an economist at Scotia Capital Inc. in Toronto.

The Conference Board's measure of present conditions dropped to 58.8, the lowest since 1993, from 65 the prior month. The gauge of expectations for the next six months increased to 60.5 from 54.1.

``These results did not capture all of the tumultuous events in the financial sector this month,'' Lynn Franco, director of the Conference Board's confidence survey, said in a statement. ``Until the dust settles a bit more, we will not know the full impact.''

Jobs Outlook

Temporary shocks usually have a detrimental effect on confidence for two to four months unless they are accompanied by job losses, she said.

The share of consumers who said jobs are plentiful dropped to 12.2 percent, the fewest in five years, from 13.5 percent last month, today's report showed. The proportion of people who said jobs are hard to get increased to 32.8 percent from 31.7 percent.

Compared with other sentiment measures, the Conference Board's index tends to be more influenced by consumer attitudes about the labor market, economists said. So far this month, 466,000 Americans a week on average filed first-time claims for unemployment benefits, up from 443,000 in August and 363,000 in the first six months of the year.

A report last week showed the Reuters/University of Michigan final sentiment reading for this month declined from a preliminary figure issued in early September as the credit crisis deepened. The reading was still up from August, reflecting the decline in gasoline prices, economists said.

Payroll Forecast

The economy probably lost another 105,000 jobs in September, the ninth consecutive monthly decline, according to the median estimate in a Bloomberg survey ahead of a Labor Department report due Oct. 3. Payrolls dropped by 605,000 workers in the first eight months of the year.

Job cuts may swell as the effects of the financial meltdown ripple through other industries. Fewer jobs and less-available credit indicate consumer spending, which accounts for more than two-thirds of the economy, will weaken further.

Fewer Americans were able to obtain an auto loan this month, according to CNW Marketing Research in Bandon, Oregon, which analyzes auto-industry data.

``Given the relatively weak state of the economy, that's obviously impacting the consumer's ability or willingness to come out and buy a new car,'' General Motors Corp. Chief Executive Officer Rick Wagoner said in a Bloomberg Radio interview on Sept. 25 from Flint, Michigan.

Consumer spending this quarter will be unchanged, the weakest performance since 1991, according to the median estimate in a Bloomberg survey earlier this month.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net



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U.S. Sept. Chicago Purchasing Managers' Index Slowed

By Timothy R. Homan

Sept. 30 (Bloomberg) -- A measure of U.S. business activity slowed for the first time in seven months in September as new orders and inventories weakened.

The National Association of Purchasing Management-Chicago said today its business index decreased to 56.7 this month from 57.9 in August. Fifty is the dividing line between growth and contraction. The index averaged 54.4 last year.

Demand for American exports is helping offset a domestic slowdown in consumer spending. Still, the credit crisis that brought down Lehman Brothers Holdings Inc., American International Group Inc. and Washington Mutual Inc. is causing companies to cut back on spending.

``Manufacturing is not doing too badly when you think about how poor the domestic conditions are,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. ``Credit conditions for large machinery purchases are definitely getting much tighter.''

Economists surveyed by Bloomberg News had projected the index would fall to 53, according to the median of 59 forecasts. Estimates ranged from 49 to 56.

Earlier today, a private report showed house prices in 20 U.S. cities declined in July at the fastest pace on record. The S&P/Case-Shiller index dropped 16.3 percent after a drop of 15.9 percent the prior month.

New Orders

The Chicago report's measure of new orders decreased to 53.9 from 60.2 in August, which was the highest since September 2007. The production gauge rose to 71.4, the highest since October 2004, from 63.4 the previous month.

Order backlogs fell to 54.9 from 63, while the employment index increased to 49.1, the highest level since December, from 39.2 a month ago.

The group's inventories index dropped to 37.7, the lowest since February 2002, from 52.2.

The purchasing managers' measure of prices paid for raw materials increased to 80.7 from 80.6 in August.

Manufacturers such as Xerox Corp., the world's largest maker of high-speed color printers, are seeing weaker demand as companies rein in spending amid tighter credit conditions.

``We are seeing a slowdown in Xerox North America,'' President Ursula Burns told reporters at an event in Lisbon Sept. 26. ``Corporate clients are more cautious, but we are seeing strong signs from our services business.''

Second-Half Slump

Economists monitor the Chicago index for an early reading on the outlook for U.S. manufacturing, which makes up about 12 percent of the economy.

Manufacturing in the U.S. probably contracted in September for a sixth time in nine months, economists project a report tomorrow will show. The Institute for Supply Management's factory index probably dropped to 49.5 from 49.9 in August, according to the survey median.

In the second quarter the economy expanded at a 2.8 percent annual pace, slower than the prior estimate of 3.3 percent, as consumer spending contributed less to growth, the Commerce Department said last week.

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



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Mexico's Currency Rises on Bets U.S. Bank Bailout Plan to Pass

By Valerie Rota

Sept. 30 (Bloomberg) -- Mexico's peso strengthened for the first time in three days on speculation the U.S. Senate will salvage a $700 billion bank bailout package after the House of Representatives rejected it yesterday.

Demand for pesos rose on optimism approval of the plan to rid financial institution of bad loans will bolster economic growth in the U.S., the biggest buyer of Mexican exports. The defeat of the plan in the House yesterday sent the peso tumbling 2.3 percent, its biggest drop in more than five years.

``Approval of the package is essential for keeping financial markets from entering into a profound crisis,'' said Jaime Ascencio, a fixed-income strategist at Mexico City-based Actinver SA, the country's biggest independent money manager. ``There's more tranquility in the market today.''

The peso strengthened 0.85 percent to 10.9378 per U.S. dollar at 5 p.m. New York time, from 11.0320 yesterday, when it touched its weakest level in a year.

Judd Gregg, the Senate Banking Committee's ranking Republican, and Barack Obama, the Democratic presidential candidate, said legislators would eventually push through legislation after the House of Representatives voted down the plan.

The rally today cuts the peso's decline this month to 6.3 percent. That's still the biggest monthly drop in a decade. Almost $600 billion of credit losses and writedowns at global financial institutions have sapped demand for higher-yielding assets in developing nations.

`No Doubt'

The lending crunch in the U.S. will ``no doubt'' hurt Mexican growth as the tourism industry slows, Finance Minister Agustin Carstens said at a news conference in Washington yesterday. A slump in the U.S. housing industry will curb transfers home to Mexico from migrant workers, Carstens said. Mexico lowered its 2008 growth forecast this month to 2.4 percent from 2.8 percent.

Yields on Mexico's 10 percent bond due in December 2024, the country's most-traded security in pesos, fell 6 basis points, or 0.06 percentage point, to 8.46 percent. The price rose 0.61 centavo to 113.53 centavos per peso, according to Banco Santander SA.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.



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Brazilian Real Gains on Speculation U.S. Will Revive Bailout

By Adriana Brasileiro

Sept. 30 (Bloomberg) -- Brazil's real rose for the first time in three days on speculation U.S. lawmakers will try to revive a $700 billion rescue plan for financial markets.

The real jumped 3.1 percent to 1.9023 per dollar at 3:39 p.m. New York time, after most trading had ended in Brazil. The currency fell yesterday the most in nine years, weakening past the 2-per-dollar level for the first time this year. Brazil's real is the worst performer among the 16 most-actively traded currencies, having tumbled 14 percent this month.

``Everybody believes that something will happen soon,'' said Fernando Fix, chief economist at Votorantim Asset Management in Sao Paulo.

Stocks rose as Brazil's benchmark Bovespa index soared as much as 5.7 percent, led by utilities and banks.

Brazil's fundamentals remain solid, Nick Chamie and a group of analysts at RBC Capital Markets wrote in a report.

``Foreign direct investment flows are forecast to remain relatively high at $32 billion in 2008, covering this year's current account deficit in full and helping cushion the real from volatile risk appetite and portfolio investment swings in a world of tighter liquidity,'' the analysts wrote.

They predict the real will hold in the 1.75 to 1.85 per dollar range in the fourth quarter, and weaken to 1.95 by the end of 2009 as the trade surplus shrinks and growth slows, reducing investment flows.

The yield on Brazil's zero-coupon bond due in January 2010 fell 24 basis points, or 0.24 percentage point, to 14.53 percent. The yield on Brazil's overnight futures contract for January 2009 delivery was little changed at 14.02 percent.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net



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Euro Falls Most Since 2001 Against Dollar as Bailouts Spread

By Daniel Kruger and Ye Xie

Sept. 30 (Bloomberg) -- The euro fell the most against the dollar since 2001 after France and Belgium led a state-backed rescue of Dexia SA, as the widening financial crisis forces governments to prop up financial institutions across Europe.

The cost of borrowing in dollars and euros reached record highs today as banks' reluctance to lend at the end of the third quarter exacerbated the freeze in global credit markets. The dollar rose against the yen on speculation the U.S. Senate will salvage a $700 billion bank-bailout plan as early as tomorrow after Congress rejected it yesterday.

``The consensus is the U.S. banking system is a little bit further along in its exposure of its toxic assets,'' said Firas Askari, head currency trader at BMO Nesbitt Burns in Toronto. ``It's a case of which is relatively worse. The dollar's going to benefit against the euro because Europe has more to expose.''

The euro tumbled 2.4 percent to $1.4092 at 5 p.m. in New York, from $1.4434 yesterday, the most since a 2.5 percent slide in January 2001. The currency dropped as much as 3 percent, the biggest intraday decline since its 1999 debut. The euro slid to 149.56 yen from 150.38. The yen weakened to 106.11 per dollar from 104.18, after reaching 103.54, the most since Sept. 16.

Implied volatility on one-month euro-dollar options rose to 16.9575 percent, or the highest in almost eight years. On Sept. 18, it reached 15.55 percent, the same level that triggered the Group of Seven nations to buy euros in 2000 to halt the 27 percent slide from its 1999 debut. The dollar had its biggest drop ever against the euro Sept. 22, falling 2.1 percent.

The euro also fell against the British pound after Belgium and France said they would lend Dexia, the world's biggest lender to local governments, $9.2 billion to shore up capital.

Bank Borrowing

The capital infusion for Dexia comes two days after Belgium, the Netherlands and Luxembourg rescued Fortis, the largest Belgian financial-services company, Britain took control of Bradford & Bingley Plc, the country's biggest lender to landlords, and Germany bailed out Hypo Real Estate Holding AG.

Banks are being squeezed amid a surge in borrowing costs as lenders hoard cash on concern more financial institutions will fail. The euro interbank offered rate, or Euribor, for one-month loans jumped to a record 5.05 percent, the European Banking Federation said. The London interbank offered rate, or Libor, that banks charge each other for overnight loans climbed 431 basis points to an all-time high of 6.88 percent today, the British Bankers' Association said.

`Fundamentals Are Irrelevant'

``There's a dollar shortage globally,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``Demand for liquidity trumps the fundamentals. Fundamentally, the U.S. is awful, and Europe is awful. Fundamentals are irrelevant today.''

Foreign banks are paying the highest premiums in at least a decade to borrow in dollars in the swaps market even after the Federal Reserve more than doubled the amount of funds available to other central banks yesterday by expanding swap lines.

The Fed's actions included increasing existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The price on one-year cross-currency basis swaps between yen and dollars reached minus 70 basis points, the biggest effective premium for dollar funding since Bloomberg began tracking the data in 1997. The highest reached in 1998, during the Asian banking crisis was minus 38.5 basis points in October 1998, according to Bloomberg data.

`Mad Scramble'

``There is a mad scramble for U.S. dollar funding demand from a global U.S. dollar-based financial system,'' said Claudio Piron, Singapore-based head of Asian currency research at JPMorgan Chase & Co, the second-biggest U.S. bank by market value. ``Central banks have been extending swap lines as lenders of the last resort. The banks access this liquidity, but they hoard it for themselves as they believe it too risky to lend to anyone else.''

The U.S. Senate will try to revive a $700 billion financial-rescue package after yesterday's defeat in the House of Representatives. The bill would have allowed the government to buy troubled assets from banks. Institutions posted $590 billion of losses and writedowns since the start of last year following the collapse of the U.S. subprime-mortgage market.

``The U.S. problem has been public for a while, we're dealing with it,'' said Russell LaScala, the New York-based head of foreign exchange trading at Deutsche Bank AG, the world's biggest foreign-exchange trader. ``Traders are very confident something's going to be passed in the next seven days. That's definitely a sentiment that's being priced in the market.''

Rising Yen

Higher-yielding currencies recouped losses against the Japanese yen as Europe's benchmark Dow Jones Stoxx 600 Index gained 1 percent. The New Zealand dollar gained 1.5 percent to 71.07 yen after dropping 3.7 percent yesterday. The Australian dollar was little changed at 84.08 yen, after rising as much as 1.6 percent to 85.18 yen after falling 4.9 percent yesterday.

``I would be very cautious in betting on further near-term dollar-yen losses,'' said Michael Klawitter, a currency strategist at Dresdner Kleinwort in Frankfurt. ``Any positive news on the political front would have quite an impact.''

The yen typically declines when demand for high-yielding currencies rises, as traders put on so-called carry trades. In such transactions, investors get funds in countries with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7 percent in Australia and 7.5 percent in New Zealand.

Quarter End

The yen rose the most of all 16 most-actively traded currencies yesterday after the Standard & Poor's 500 Index plunged the most since the 1987 crash.

The Japanese currency rose 12 percent against the euro this quarter. The dollar fell 0.9 percent against the yen, paring a 7 percent gain in the previous three months. The euro is down 11 percent against the dollar.

``It is the last day of the quarter,'' said Daragh Maher, deputy head of global currency strategy in London at Calyon, the investment-banking arm of France's Credit Agricole SA. ``You can get more unusual volatility, and I think we will get back to a more real market toward the end of the week and we can reassess what is happening then.''

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net.



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Cotton Has Biggest Monthly Drop in 13 Years on Slowing Economy

By Shruti Date Singh

Sept. 30 (Bloomberg) -- Cotton fell, capping the biggest monthly drop in 13 years, on concern that the slowing U.S. economy may reduce demand for clothing, furniture and bedding made from the fiber.

Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said the economy contracted in the third quarter as credit-strapped consumers cut spending for the first time since 1991. In September, cotton tumbled 18 percent, the most since June 1995.

``Cotton, being an industrial commodity, has a little bit more troubled waters to get through,'' said Keith Brown, a principal of Keith Brown & Co. in Moultrie, Georgia. ``The economy slowing down may diminish demand.''

Cotton futures for December delivery declined 0.13 cent, or 0.2 percent, to 57.25 cents a pound on ICE Futures U.S. in New York. The price earlier touched 55.11 cents, the lowest for a most-active contract since June 7, 2007. In the third quarter, the fiber slumped 27 percent, the most since the three months ended March 31, 2001.

The Cotlook A Index, the average of the five cheapest prices offered from around the world, touched 67.8 cents a pound today, the lowest since Oct. 9.

``Globally, prices have been weak in anticipation of an economic slowdown,'' Mike Stevens, an analyst at Swiss Financial Services in Mandeville, Louisiana, said in an e-mail.

Yesterday, cotton prices fell 5 percent, the most since March 17, as U.S. lawmakers rejected a $700 billion proposal to rescue financial companies, sending commodities and equities plunging.

President George W. Bush and Senate leaders vowed today to revive the plan.

``There is hope that some type of support is going to come from Congress,'' Brown of Keith Brown said.

Cotton has dropped 16 percent this year.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.



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Copper Caps Record Quarterly Plunge in N.Y. on Demand Outlook

By Millie Munshi

Sept. 30 (Bloomberg) -- Copper tumbled to the worst quarterly decline on record, falling to an 18-month low on concern that a spreading financial crisis will stifle global growth and slash metals demand.

Lawmakers in the U.S. House of Representatives yesterday rejected a $700 billion financial rescue plan aimed at loosening clogged credit markets. The vote eroded investor confidence and borrowing costs jumped. Copper fell 26 percent in the third quarter, the biggest drop since at least 1989, as bank failures and a credit crunch cooled global growth.

``The markets are trying to figure out what all this means for the economy and the outlook for demand,'' said Ron Goodis, a futures-trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. ``Copper will probably continue to fall down this treacherous path because of the economic crisis.''

Copper futures for December delivery sank 2.75 cents, or 0.9 percent, to $2.879 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the metal touched $2.765, the lowest since March 12, 2007.

This quarter's drop is the first for the metal this year. Copper declined 15 percent in September, the largest monthly decline since June 1996. The losses follow the metal's 28 percent surge in the first half of the year, with the price touching a record $4.2605 a pound on May 5.

``Everything for copper is pointing down right now,'' Goodis said. ``Sentiment in this market has really swung around. We saw a great performance earlier, and now it's made a huge run down. Copper has really shown that there is no support left for it in this market.''

Housing Slump

Copper has tumbled as the U.S. housing slump has deepened. Builders are the biggest users of the metal, accounting for about 46 percent of demand, according to the Copper Development Association. A housing slump and the collapse of the U.S. subprime mortgage market led to the financial crisis that has engulfed credit markets.

Home prices in 20 U.S. cities dropped 16 percent in July, the fastest pace on record, signaling the worst housing decline in a generation hadn't found a bottom even before the failure of banks and the government takeover of mortgage financiers Freddie Mac and Fannie Mae this month, an industry report showed today.

``The outlook for base metals does not look promising going forward,'' Edward Meir, an analyst at MF Global in Darien, Connecticut, said today in a report. A global ``synchronized slowdown'' will not be ``a conducive backdrop for commodities to thrive in, and we suspect that we could see much lower prices.''

London Trading

On the London Metal Exchange, copper for delivery in three months dropped $80, or 1.2 percent, to $6,360 a metric ton ($2.88 a pound).

Copper will average $5,000 a ton in the first quarter of next year and betting against the metal is one of the lowest- risk trades in commodities right now, Barclays Capital said.

Demand for the metal including in China, the world's largest consumer, is ``very soft,'' London-based Barclays analyst Kevin Norrish said today in a report.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.



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Gold, Silver Fall in N.Y. as Equities Rebound, Dollar Rallies

By Halia Pavliva and Karla Palomo

Sept. 30 (Bloomberg) -- Gold fell in New York, capping its first quarterly decline in more than a year, as U.S. equities rallied and the dollar surged to a record gain against the euro, cutting investment demand for the metal. Silver also dropped.

Major U.S. equity indexes rebounded from the worst plunge since October 1987 after lawmakers sought to repair a $700 billion financial rescue plan voted down yesterday. The dollar climbed the most ever against the 15-nation European currency as France and Belgium led a state-backed rescue of Dexia SA, the world's biggest lender to local governments.

``Today's theme was: rally like there is no tomorrow,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. The ``Dow Jones index took the advice and made back nearly half of yesterday's historic losses. The U.S. dollar made astounding progress to the upside'' and gold was ``cratering in an implosion of selling.''

Gold futures for December delivery fell $13.60, or 1.5 percent, to $880.80 an ounce on the Comex division of the New York Mercantile Exchange. The metal posted a 5.1 percent third- quarter drop, the first such decline since June 2007.

Gold still rose 5.5 percent this month, as the credit crunch spread, and is up 17 percent in the past year. The Standard & Poor's 500 Index of equities jumped as much as 5 percent, recovering from an 8.8 percent plunge yesterday, the biggest drop since October 1987.

Silver futures for December delivery declined 75 cents, or 5.8 percent, to $12.275 an ounce. The metal fell 10 percent this month and is down 12 percent from a year ago.

Outlook

``Investors will be allocating more money to gold and silver'' in the next six to nine months, Jeffrey Christian, a managing director at CPM Group in New York, said today in a Bloomberg Television interview.

Gold and other precious metals, including silver, may rise as investors seek a haven on concerns that more financial institutions may fail, Christian said. Lawmakers in the U.S. House of Representatives rejected the bailout proposal to help financial companies and ease a spreading credit crunch. Treasury Secretary Henry Paulson met with Republican and Democratic leaders in Washington today to reshape the rescue plan, which may come up for a Senate vote tomorrow.

``Gold and silver will probably rise because they will be seen as a safe haven and as a portfolio diversifier,'' Christian said. ``Investors around the world are turning to gold and silver as a means of protecting their assets from the financial maelstrom that we are in the middle of.''

Holding Value

``Gold continues to hold its value as a protection in adverse market conditions,'' Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said today in a note. ``The world is looking for the other shoe to drop.''

The precious metal may gain 5.4 percent over the next year as investors shun equities, bonds and currencies as too risky, delegates to the London Bullion Market Association conference said. Gold rose to the highest in two months after yesterday's House vote, which defied the leadership of both major parties.

``Gold will make a new high sometime in the fourth quarter of this year or early 2009, and we think it is going over $1,032 an ounce,'' Christian said. ``Silver is going to surpass the $22 an ounce that we saw in March.''

Silver, which topped $40 an ounce in the mid-1970s, ``is still far from its record high, but will be making new highs over the next nine months,'' Christian said.

Gold surged 14 percent in the past two weeks before today as worries about bank failures and government rescue plans spurred demand for a haven from market turmoil. Federal Reserve Chairman Ben S. Bernanke said last week that the economy faces ``grave threats'' and warned that the credit crisis already is hurting business spending.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Karla Palomo in New York at kpalomo@bloomberg.net



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Wheat Rises as U.S. Report Shows Smaller-Than-Expected Supplies

By Tony C. Dreibus

Sept. 30 (Bloomberg) -- Wheat rose from a 13-month low after a government report showed U.S. inventories were smaller than some analysts expected.

Warehouses held 1.86 billion bushels (50.6 million metric tons) as of Sept. 1, up 8.1 percent from a year earlier, the U.S. Department of Agriculture said. That was less than the 1.94 billion expected by analysts surveyed by Bloomberg News. Wheat still fell 15 percent in September, the biggest monthly decline since May 1997.

``The wheat quarterly stocks was a little positive,'' said Clark Neighbors, an analyst at Bump Investor Services in Cedar Rapids, Iowa. ``The average trade guess was 1.94 billion, so that is a little supportive.''

Wheat futures for December delivery rose 12 cents, or 1.8 percent, to $6.80 a bushel on the Chicago Board of Trade. The price earlier touched $6.4775, the lowest intraday price for a most-active contract since Aug. 6, 2007. The grain has tumbled 50 percent from a record $13.495 on Feb. 27.

Global stockpiles may increase 18 percent to 139.9 million tons in the year that started June 1, the USDA said in a Sept. 12 report. World production is expected to jump to a record 676.3 million tons, the agency said.

Still, a lack of precipitation in parts of Australia, forecast to be the third-biggest exporter of wheat behind the U.S. and Canada, probably will shrink the nation's crop. Drought slashed the country's output in the past two years.

Australia Forecast

Rabobank Group lowered its production forecast for Australia today by 500,000 tons to 20.5 million.

``Production expectations have edged lower in September following frost in Western Australia and dry conditions, particularly in Victoria, parts of South Australia and southern New South Wales,'' Luke Chandler, a senior commodity analyst at Rabobank in Sydney, said in a report.

Futures also rose on speculation that lawmakers will salvage the U.S. government's $700 billion bank-bailout plan, spurring investors to sink more money into commodities and equities. The Dow Jones Industrial Average rose as much as 4.1 percent today after plunging 7 percent yesterday.

Wheat is the fourth-biggest U.S. crop, valued at $13.7 billion in 2007, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at Tdreibus@bloomberg.net.



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Soybeans Futures Have Biggest Quarterly Slide in 35 Years

By Jeff Wilson

Sept. 30 (Bloomberg) -- Soybeans fell, capping the biggest quarterly decline in 35 years, after the U.S. Department of Agriculture said the oilseed crop and inventories were larger than forecast.

Reserves supplies on Sept. 1 were 205 million bushels, up 46 percent from 140 million projected by the agency on Sept. 12. Analysts in a Bloomberg survey expected 143 million on average. Last year's crop was 2.676 billion bushels, up 3.5 percent from an earlier estimate, after more acres were harvested and yields rose, the USDA said today in a report.

``Last year's crop was bigger than most people assumed, so this was quite a surprise,'' said Mark Schultz, a vice president at Northstar Commodity Investments LLC in Minneapolis. ``This supply boost puts the market in a position to fall because it means that even if this year's crop is a little smaller, there will be ample supplies.''

Soybean futures for November delivery tumbled 49 cents, or 4.5 percent, to $10.45 a bushel on the Chicago Board of Trade. The price fell 34 percent in the quarter, the most since 1973. Earlier, the price touched $10.39, the lowest for a most-active contract since Nov. 12.

In the month, the oilseed dropped 21 percent, the most since March. Soybeans rose to a record $16.3675 on July 3.

The number of acres planted last year was revised to 64.74 million, up 1.7 percent from a year earlier, the USDA said. Harvested acres were 64.14 million acres, up 2.1 percent. The yield was 41.7 bushels an acre, up 1.2 percent from a January forecast.

Annual Forecast

U.S. farmers will harvest 2.934 billion bushels this year, up 9.6 percent from last year's revised crop, the USDA said on Sept. 12. Yields were forecast at 40 bushels an acre, down from 40.5 bushels estimated in August.

Soybean usage in the quarter that ended Aug. 31 fell 9.2 percent to 471 million from a year earlier, the government said.

Index funds that invest in baskets of commodities reduced net-long positions, or bets prices will rise, by 3 percent to 134,607 soybean contracts in the week ended Sept. 23, Commodity Futures Trading Commission data showed on Sept. 26. That was down 32 percent from the all-time high of 198,707 in February.

``Record prices slowed demand,'' said Chad Henderson, a market analyst for Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. ``The supply story is likely to keep people from rushing back into the market.''

Soybeans are the second-biggest U.S. crop, valued last year at $26.8 billion, government figures show. Corn is the largest at $52.1 billion.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net.



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Asian Stocks Rebound in U.S.; Banks, Commodity Shares Advance

By Lu Wang

Sept. 30 (Bloomberg) -- Asian stocks trading in the U.S. rebounded from their biggest loss in almost seven years on speculation U.S. lawmakers will pass a $700 billion financial bailout plan to alleviate the global credit crisis.

Mitsubishi UFJ Financial Group Inc. and BHP Billiton led a recovery in financial and commodity shares, lifting the Bank of New York Mellon Asia ADR Price Index 4.7 percent to 122.16. Nikkei 225 Stock Average futures expiring in December were at 11,655 in Chicago, compared with 11,340 in Singapore and 11,320 in Osaka.

The stock benchmark, which tracks the region's American depositary receipts, yesterday slumped 9.4 percent after the House of Representatives voted down the proposal aimed at rescuing the U.S. banking system. The index fell 11 percent this month, the worst since at least December 2001.

President George W. Bush and Senate leaders vowed today to revive the bailout plan. Optimism that the bill will be passed helped send the Standard & Poor's 500 Index to its biggest rally in six years.

Mitsubishi UFJ, Japan's largest lender, climbed 41 cents, or 4.9 percent, to $8.74. Mizuho Financial Group Inc., the second biggest, rallied 62 cents, or 7.7 percent, to $8.72. China Life Insurance Co., the country's largest insurer, surged $4.05, or 7.9 percent, to $55.62.

Energy shares gained as oil rebounded from its biggest drop in seven years. Melbourne-based BHP Billiton, the world's biggest mining company that also produces oil, added $1.49, or 3 percent, to $51.99. PetroChina Co., the country's top energy company, climbed $6.04, or 6.3 percent, to $102.73.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.



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Europe Options Index Rises to 5-Year High After Plan Rejected

By Gareth Gore

Sept. 30 (Bloomberg) -- The benchmark index for European options rallied to the highest in more than five years on concern economic growth will falter after U.S. lawmakers failed to agree on a $700 billion bank rescue plan.

The VStoxx Index rose as much as 8.8 percent to 42.88, the highest since April 2003, and was at 41.86 as of 3:48 p.m. in Frankfurt. The index measures the cost of using options as insurance against declines in the Dow Jones Euro Stoxx 50 Index.

``The fear factor we're seeing in Europe is a direct result of what is happening in the U.S.,'' said Gerry Fowler, head of trading floor strategies at Citigroup Inc. in London. ``Global growth is slowing and we could see the VStoxx go much higher.''

U.S. legislators yesterday rejected the rescue plan in a 228 to 205 vote, sending the Dow Jones Industrial Average tumbling 778 points for its biggest point drop ever and erasing more than $1 trillion in market value. The Standard & Poor's 500 Index fell 8.4 percent, the most since Oct. 26, 1987.

Today's most-active options contracts were puts expiring in December with a strike level of 2,800 points, 6.9 percent below the Euro Stoxx 50's close yesterday. The gauge slid as much as 2.8 percent today and was last at 2,982.31. European-style puts such as those traded on the Euro Stoxx give the buyer the right to sell at a pre-agreed strike price on a specific date.

The VIX, which measures the cost of using options against declines in the Standard & Poor's 500 Index, rose to a record high yesterday. That eclipsed the previous closing record of in October 1998, when the collapse of hedge fund Long-Term Capital Management destabilized markets worldwide.

To contact the reporter on this story: Gareth Gore in Madrid ggore1@bloomberg.net



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U.S. Stocks Surge on Speculation Bank-Rescue Plan Will Pass

By Eric Martin

Sept. 30 (Bloomberg) -- U.S. stocks jumped the most in six years as growing expectations that lawmakers will salvage a $700 billion bank-rescue package helped the Standard & Poor's 500 Index recover more than half of yesterday's 8.8 percent plunge.

JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. climbed more than 13 percent as Senate leaders vowed to resume work on the bailout plan this week after its rejection spurred the market's steepest decline in two decades. Hess Corp. and Schlumberger Ltd. added more than 5.8 percent as optimism about the proposal helped oil rebound from a $10-a-barrel drop. All 10 industries in the S&P 500 advanced at least 1.3 percent.

``There is some renewed hope that Congress will come back and try to get the amended plan through,'' Robert Doll, who oversees $1.3 trillion as chief investment officer of global equities at BlackRock Inc. in Plainsboro, New Jersey, said in a Bloomberg Television interview. ``We have to restore confidence, we have to reduce fear, we have to get banks to lend money.''

The S&P 500 rose 58.35 points, or 5.3 percent, to 1,164.74, its biggest rally since July 2002. The Dow Jones Industrial Average jumped 485.21, or 4.7 percent, to 10,850.66 and earlier gained more than 500 points. The Nasdaq Composite Index added 5 percent to 2,082.33. More than five stocks climbed for each that fell on the New York Stock Exchange.

Worst Since 2002

Even with the advance, the S&P 500 had its worst month since 2002, with a decline of 9.2 percent, and tumbled 9 percent for the quarter. The cost of borrowing dollars overnight increased the most on record after the defeat of the bailout plan.

About 1.62 billion shares changed hands on the NYSE, 15 percent more than the three-month moving average. European stocks rose, while Asian shares declined. Government bonds in the U.S. and Europe fell. The dollar climbed the most against the euro since the shared currency's 1999 introduction.

More than $1 trillion in market value was erased yesterday in the worst day for the S&P 500 since the ``Black Monday'' crash of 1987 after the House of Representatives rejected a plan designed to rid financial institutions of bad loans. President George W. Bush this morning urged passage of the legislation to prevent ``lasting damage'' to the economy.

The Dow average lost 6 percent in September, and the Nasdaq fell 12 percent. The S&P 500's retreat since the end of June was its fourth-straight quarterly decline, the longest stretch since 2001. The Dow slipped 4.4 percent and the Nasdaq tumbled 9.2 percent.

$600 Billion

The MSCI World Index of 23 developed nations dropped 12 percent this month as almost $600 billion of credit losses and writedowns at financial institutions worldwide prompted banks to hoard cash, forced Lehman Brothers Holdings Inc. into bankruptcy and spurred government seizures of American International Group Inc. and the U.K.'s Bradford & Bingley Plc.

Financial companies in the S&P 500 this month traded at 1.1 times their book value, the lowest valuation since Bloomberg began tracking the data in 1995. Commercial banks in the gauge trade at 0.8 times book value, also a 13-year low.

``The market was way overdone, and we're seeing a bounce back,'' said John Wilson, the co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. ``The stage was set for saner minds to step in and pick some things off today. We've seen some nice gains in some of the financials.''

JPMorgan, Citigroup

JPMorgan, the biggest U.S. bank by deposits, climbed 14 percent to $46.70. Citigroup rose 16 percent to $20.51. Bank of America surged 16 percent to $35. Goldman Sachs Group Inc. increased 6.1 percent to $128 and Morgan Stanley gained 9.6 percent to $23.

Senate Majority Leader Harry Reid said approving the bank bailout legislation remains a top priority. Congress will take action on the plan this week, Senate Minority Leader Mitch McConnell said. Voters have flooded Capitol Hill offices with complaints about the bill's rejection, according to a House Republican leadership aide.

Bush said the defeat of the plan ``is not the end of the legislative process.'' Presidential candidates Barack Obama and John McCain joined him in urging Congress to return to work on the plan.

The S&P 500 Regional Banks Index of 12 stocks climbed 16 percent after plunging 24 percent yesterday, its biggest tumble since the gauge was created in 2003.

Sovereign Surges

Sovereign Bancorp, which plummeted 72 percent yesterday, surged 70 percent to $3.95. The second-largest U.S. savings and loan said its chief executive officer will be replaced and analysts raised their stock recommendations. The bank also said it sold its holdings of collateralized debt obligations and is ``well capitalized.''

National City Corp., Ohio's largest bank, climbed 29 percent after losing 63 percent yesterday. Fifth Third Bancorp increased 31 percent to $11.90.

Hess, the fifth-biggest U.S. oil company, added 7.8 percent to $82.08. Schlumberger, the largest oilfield-services contractor, climbed 5.9 percent to $78.09. Crude for November delivery rose $4.27, or 4.4 percent, to $100.64 a barrel on speculation that new action on the rescue plan may avert an economic slowdown that would curb demand. The fuel dropped the most in seven years yesterday.

Officials from Microsoft Corp. to Office Depot Inc. and Schering-Plough Corp. said the government's failure to bail out the U.S. banking industry put the entire economy at risk unless a deal comes soon. They called on lawmakers to put aside partisan differences and work to restore credit supplies and confidence to the financial markets.

Microsoft Gains

Microsoft, the world's biggest software maker, added 6.7 percent to $26.69 as Merrill Lynch & Co. recommended buying the shares. Schering-Plough, the Kenilworth, New Jersey-based drugmaker, rose 5.5 percent to $18.47. Office Depot, the second- largest office-supplies company, gained 2.5 percent to $5.82.

Apple Inc. jumped 8 percent to $113.66, the biggest advance since November. The stock's 18 percent drop yesterday was ``overdone,'' and the maker of the iPhone and Macintosh computer may climb to $145 in the ``intermediate term,'' according to Goldman Sachs.

Dr Pepper Snapple Group Inc. advanced 9.1 percent to $26.48. The drinks maker spun off by Cadbury Plc this year was picked to replace Wm. Wrigley Jr. Co. in the S&P 500. Wrigley is being acquired by closely held Mars Inc.

Hartford Financial Services Group Inc. fell the most in the S&P 500 on concerns the Connecticut-based insurer may need to raise capital after Fitch Ratings lowered its outlook. Hartford dropped 18 percent to $40.99.

VIX Retreats

The benchmark index for U.S. stock options slid 16 percent to 39.39 after closing yesterday at a record 46.72. The VIX, as the measure is known, is considered the market's ``fear gauge'' because it tends to rise as stocks fall. Stocks usually advance after the VIX peaks, according to a note to clients by Harrison, New York-based research firm Bespoke Investment Group LLC.

Transportation stocks yesterday signaled U.S. shares may be poised for more losses, according to Dow Theory, which holds that the 30-stock industrial average takes cues from the Dow Jones Transportation Average. The gauge of companies such as FedEx Corp. and Ryder Systems Inc. slid to the lowest level since March 17 yesterday. That may suggest the industrials' record 777.68- point plunge yesterday won't mark its bottom, investors said.

Consumer confidence unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks. The Conference Board's confidence index rose to 59.8, a third consecutive increase, from 58.5 the prior month. A separate report showed home prices fell in July at the fastest pace on record from a year earlier.

Chicago PMI

A measure of U.S. business activity slowed for the first time in seven months as new orders and inventories weakened. The National Association of Purchasing Management-Chicago said its business index decreased to 56.7 this month from 57.9 in August. Fifty is the dividing line between growth and contraction.

The London interbank offered rate, or Libor, that banks charge each other for overnight loans jumped 431 basis points to an all-time high of 6.88 percent, the British Bankers' Association said today.

Europe's Dow Jones Stoxx 600 Index added 1.8 percent as Dexia SA, the world's biggest lender to local governments, climbed 6.1 percent on a 6.4 billion-euro ($9.2 billion) state- backed rescue.

Anglo Irish Bank Corp. Plc rallied 67 percent after Ireland's government said it will guarantee bank deposits and debts for two years, seeking to restore confidence in the country's financial industry.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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German Stocks Rise on Bank Rescue Speculation; Banks Decline

By Jann Bettinga and Frances Robinson

Sept. 30 (Bloomberg) -- German stocks rose following their biggest drop in eight months after U.S. lawmakers said they plan to salvage a $700 billion bank-rescue bill, easing concern more economies will fall into recession.

The DAX Index rose 23.94, or 0.4 percent, to 5,831.02 in Frankfurt after falling 4.2 percent yesterday. The HDAX Index of the country's 110 biggest companies climbed 0.6 percent.

Hypo Real Estate Holding AG, Germany's second-biggest commercial-property lender, surged 63 cents, or 18 percent, to 4.15 euros after tumbling 74 percent yesterday, when news broke the company will receive a 35 billion-euro ($50 billion) loan guarantee to avert potential collapse.


Infineon Technologies AG, Europe's second-largest maker of semiconductors, rebounded, adding 25.5 cents, or 7 percent, to 3.915 euros. The shares dropped 25 percent yesterday on concern the planned disposal of memory-chip unit Qimonda AG may face competition for investors from a sale of Hynix Semiconductor Inc.

Commerzbank AG, Germany's second-biggest bank, slumped for a third day as Cheuvreux reduced its recommendation on the stock to ``underperform'' from ``outperform.'' Deutsche Bank AG, the country's largest bank, declined 2.2 percent.

The DAX Index has lost almost 10 percent in September, the worst monthly performance since January, as Lehman Brothers Holdings Inc. of the U.S. filed for bankruptcy and credit losses at financial firms worldwide reached $590 billion, spurring government bailouts and takeovers.

Commerzbank fell 55 cents, or 5 percent, to 10.40 euros, while Deutsche Bank lost 1.115 euros, or 2.2 percent, to 49.535 euros.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Arcandor AG (ARO GY) rallied 46 cents, or 25 percent, to 2.33 euros. The German retailer hopes to find a buyer for its majority stake in U.K.-based Thomas Cook Group Plc, Europe's second-largest travel company, within two to three months, the Financial Times Deutschland reported, citing unidentified company officials.

Balda AG (BAD GY) lost 8 cents, or 11 percent, to 66 cents. The maker of mobile-phone casings said it will sell a 12 percent stake in its China-based TPK Holding unit to partner Michael Chung, without disclosing a price for the deal.

Daimler AG (DAI GY) fell 1.51 euros, or 4.1 percent, to 35.40. Sal. Oppenheim Jr. & Cie. cut its recommendation for the world's second-largest maker of luxury cars to ``neutral'' from ``buy.''

Hornbach Holding AG (HBH3 GY) added 1.75 euros, or 3.4 percent, to 53.75 euros. The operator of home-improvement stores said second-quarter profit rose after selling more do-it- yourself products outside its home market.

ProSiebenSat.1 Media AG (PSM GY) fell 4 cents, or 0.8 percent, to 4.76 euros. Credit Suisse Group AG cut its share- price estimate for Germany's biggest private broadcaster 25 percent to 6.2 euros.

To contact the reporter on this story: Frances Robinson in Frankfurt at Frobinson6@bloomberg.net


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Canadian Stocks Rally, Led by Manulife, on Bailout Talk, Oil

By John Kipphoff

Sept. 30 (Bloomberg) -- Canadian stocks rallied from their biggest drop in almost eight years, led by financial and energy companies, on speculation the U.S. government will revive its $700 billion bank rescue and temper an economic slowdown.

Manulife Financial Corp. climbed the most since 2003, pacing a rally among banks and insurers. Canadian Natural Resources Ltd. led energy shares higher after oil prices rebounded to above $100. Research In Motion Ltd. advanced on speculation that a two-day selloff was overdone. Canada's main stock index still completed its worst quarter in a decade.

``The bottom line is that some sort of package will get done,'' said Andrew Martyn, who helps manage about C$450 million at Toronto-based Davis-Rea Ltd. ``Otherwise half the U.S. bank branches will close down. If it doesn't get done, make sure you have a healthy stock of cash underneath your mattress.''

The Standard & Poor's/TSX Composite Index added 4.2 percent to 11,752.90 in Toronto, bouncing back after yesterday's 6.9 percent drop. The S&P/TSX fell 19 percent in the three months since June, its worst such drop since a 24 percent quarterly decline a decade ago.

Manulife Financial Corp., the country's biggest insurance company, added 5.6 percent to C$38.28. Royal Bank of Canada, the country's largest lender by assets, advanced 6.3 percent to C$50.50 and Toronto-Dominion Bank rose 6.7 percent to C$64.08. Canadian Imperial Bank of Commerce gained 7.4 percent to C$61.08. Bank of Montreal climbed 9.4 percent to C$45.95 for the biggest gain among financial shares in the S&P/TSX today, after a 9.3 percent drop yesterday.

Only Gainer

A measure of financial shares rose 5.3 percent today, swinging to a quarterly gain of 1.7 percent. The group, with a 31 percent weighting in the S&P/TSX, is the only one among the index's 10 industries to have risen since June 30.

Canadian Natural climbed 12 percent to C$73 for its steepest gain in 15 years. The nation's second-biggest natural- gas producer dropped 19 percent yesterday, the most since 1989.

EnCana Corp. added 4.6 percent to C$67.96. Suncor Energy Inc. gained 7 percent to C$44. Nexen Inc. climbed 10 percent to C$24.70, the most in more than three years.

Crude oil rose 4.4 percent to $100.64 a barrel in New York, recovering from its biggest drop in seven years, after U.S. lawmakers said they intend to salvage the bank bailout. Senate Majority Leader Harry Reid said that approving the rescue legislation remains a top priority. Congress will take action on the plan this week, Senate Minority Leader Mitch McConnell said.

Crude oil futures slid 28 percent in the third quarter for their biggest quarterly drop since 1991. Soybeans had their worst quarter in 35 years and copper the biggest drop on record.

Takeover Approved

Fording Canadian Coal Trust jumped 10 percent to C$87.27, the most in two weeks. Shareholders of the second-biggest exporter of coal used in making steel approved its $13.3 billion takeover by Teck Cominco Ltd. today and Teck said it completed agreements for $9.8 billion in loans to help finance the acquisition. Teck, Canada's biggest diversified mining company, added 4.5 percent to C$30.22.

Gains among mining companies were limited as bullion producers fell along with gold prices. Barrick Gold Corp., the biggest miner of the metal, fell 3.6 percent to C$38.97.

Gauges of energy and materials shares, which account for more than two fifths of the S&P/TSX's value, added 5.4 percent and 0.7 percent today. In the quarter, they've led the index lower, dropped 28 percent and 34 percent, respectively.

``We're pretty much in a hold mood,'' said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. ``This may be a dead cat bounce.''

Research In Motion climbed 8.7 percent to C$71.71. The maker of the BlackBerry e-mail phone lost about C$20 billion of its market value in the previous two days after giving lower- than-expected profit forecasts on Sept. 25. RIM was raised to ``market outperform'' from ``market perform'' by JMP Securities analyst Samuel Wilson in San Francisco, who said the stock's set to exceed expectations following its retreat, and on new products.

``Some stocks have come off so far so fast, they're starting to show some value,'' Martyn said, citing EnCana and Teck Cominco among others. ``You can start to look at RIM.''

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



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U.K. Stocks Rebound From Three-year Low; Xstrata, Miners Rally

By Sarah Jones

Sept. 30 (Bloomberg) -- The U.K.'s FTSE 100 Index rebounded, trimming its biggest monthly slump since 1987, on speculation the U.S. government's $700 billion bank rescue plan will be revived and as mining shares rallied.

Standard Chartered Plc and Old Mutual Plc climbed after the shares fell more than 10 percent yesterday. Xstrata Plc and Rio Tinto Group advanced as investors judged a sell off of as much as 19 percent was overdone.

The benchmark FTSE 100 index added 83.68, or 1.7 percent, to 4,902.45 having swung between gains and losses at least 16 times in the session. The index lost 5.3 percent yesterday, sending the gauge to the lowest since 2005.

``I think a deal will be made by the end of the week,'' said Philip Manduca, who helps manage $2 billion as head of investments at ECU Group Plc in London. ``I don't think we will see as much smash and grab'' on the markets like yesterday.

The FTSE All-Share Index added 1.6 percent. Ireland's ISEQ Index advanced 7.9 percent after the government said it will guarantee Irish bank's deposits and debts for two years.

The House of Representatives voted 228 to 205 against the bail out plan overnight. Even so Judd Gregg, the Senate Banking Committee's ranking Republican, and Barack Obama said a deal will eventually pass.

``Expectations are that this bail out will get rubber stamped sooner rather than later,'' said Anthony Grech, a London- based market strategist at IG Index. ``It would be somewhat over optimistic to expect that this rescue plan will be the answer to all of the current problems.''

Black Monday

The FTSE 100 has dropped 13 percent this month, its worst monthly retreat since the so-called Black Monday stock market crash in October 1987, when the gauge slumped 29 percent. Indexes retreated as bank bailouts worldwide accelerated and the proposed bailout plan to rescue U.S. financials failed to unlock money markets.

Standard Chartered, the U.K. bank that gains most of its profit in Asia, increased 8 percent to 1,345 pence, rebounding from an 11 percent sell off yesterday. Old Mutual, the insurer that replaced its chief executive officer this month after announcing additional losses, added 8.9 percent to 77 pence.

Xstrata, the world's fourth-largest copper producer, climbed 8.8 percent to 1,716 pence, recovering some of yesterday's 17 percent drop. Rio Tinto, the third-biggest mining company, added 4.9 percent to 3,471 pence. Anglo American Plc, the world' fourth-largest diversified mining company, rose 2.2 percent to 1,855 pence as Goldman Sachs Group Inc. added the shares to its ``conviction buy'' list.

The Dow Jones Stoxx Basic Resource Index yesterday was valued at 6.8 times earnings, the cheapest this decade, data compiled by Bloomberg show.

`Rescued'

HBOS Plc, the mortgage bank being acquired by Lloyds TSB Group Plc, declined 14 percent to 122.4 pence, widening the gap between its market value and the price that Lloyds TSB agreed to pay in a stock swap.

``HBOS isn't a done deal until Lloyds' shareholders vote for it,'' said Leigh Goodwin, an analyst at Fox-Pitt, Kelton Ltd. in London. ``There's a part of the market that thinks that if the deal didn't go through, HBOS would need to be rescued.''

Bank of Ireland Plc, Ireland's second-biggest lender, jumped 21 percent to 3.95 euros. Anglo Irish Bank Corp. Plc, the third- largest, soared 63 percent to 3.844 euros. Both stocks fell as much as 20 percent yesterday.

The Irish government said it will guarantee all deposits, covered bonds, senior debt and dated subordinated debt of four publicly traded banks and two building societies.

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

Enterprise Inns Plc (ETI LN) jumped 21.25 pence, or 14 percent, to 178.5 after Chief Executive Officer Ted Tuppen said the company, Britain's second-biggest pub landlord, is ``entirely happy'' with its financing structure.

The pub owner has ``very long-term secure debt,'' Tuppen said today by telephone, easing concern among investors over the company's borrowings. Enterprise plans to reduce spending on renovation work and acquisitions and will focus on selling ``underperforming pubs,'' he said.

IG Group Plc (IGG LN) increased 32.5 pence, or 12 percent, to 313.75, rebounding from yesterday's 12 percent decline. UBS AG upgraded the company, which takes bets on financial markets under the IG Index name, to ``buy'' from ``neutral.''

ITV Plc (ITV LN) increased 1 pence, or 2.4 percent, to 42 after the U.K.'s biggest commercial broadcaster said it will cut a total of about 1,000 jobs in 2008 and early 2009 as it's ``on track'' to deliver targeted cost savings.

The cuts, which include disposals, will lead to about 430 job losses at the company's news operations, the company said.

RAB Capital Plc (RAB LN) gained 1 pence, or 5.1 percent, to 20.5 after the company won a vote to freeze client redemptions for three years, stopping the liquidation of its flagship hedge fund after its value fell by half this year.

Investors in RAB's Special Situations fund approved the plan by a ``considerable margin,'' the company said.

Tesco Plc (TSCO LN) increased 17.7 pence, or 4.8 percent, to 387.6. The U.K.'s biggest supermarket company reported first-half profit that beat analysts' estimates after cutting prices to retain British shoppers concerned about their finances.

To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;



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Diebold, Force Protection, R.R. Donnelley: U.S. Equity Preview

By Lu Wang

Sept. 30 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:45 p.m. in New York, unless otherwise specified.

Standard & Poor's 500 Index futures expiring in December added 48.60, or 4.3 percent, to 1,167.40. Dow Jones Industrial Average futures gained 387, or 3.7 percent, to 10,861. Nasdaq-100 Index futures rose 82.25, or 5.4 percent, to 1,594.25.

Anadarko Petroleum Corp. (APC US): The second-largest independent U.S. oil and natural-gas producer said it made a so- called pre-salt discovery at the Wahoo prospect offshore Brazil in the Campos Basin. The stock rose 8.1 percent to $48.51 in regular trading.

Diebold Inc. (DBD US) gained $1.04, or 3.1 percent, to $34.15. The teller-machine maker said it targets 2008 earnings excluding certain items of as much as $2.45 a share, or 15 cents higher than an August forecast.

Force Protection Inc. (FRPT US) rose 31 cents, or 12 percent, to $2.99. The Ladson, South Carolina-based maker of blast-resistant trucks said it had a backlog of 763 trucks as of June 30.

Rockwell Automation Inc. (ROK US): The world's largest maker of factory automation products said it will cut about 3 percent of its workforce, or 600 employees, to reduce costs and take a $50 million fourth-quarter pretax charge. The stock rose 6.7 percent to $37.34 in regular trading.

R.R. Donnelley & Sons Co. (RRD US): The largest North American printer said it won an $875 million contract from Houghton Mifflin Harcourt Publishing Co. The stock rose 4 percent to $24.53 in regular trading.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net



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European Stocks Rise on Bank Rescue Speculation; Dexia Advances

By Adria Cimino

Sept. 30 (Bloomberg) -- European stocks rebounded from their steepest drop in eight months after U.S. lawmakers said they plan to salvage a $700 billion bank-rescue bill.

Standard Chartered Plc gained 8 percent and HSBC Holdings Plc added 4.2 percent as congressional leaders said a bailout deal would eventually pass after its rejection yesterday sparked a 7 percent drop in the MSCI World Index. Dexia SA climbed 6.1 percent after the largest lender to local governments got a 6.4 billion-euro ($9.2 billion) state-backed bailout. Anglo Irish Bank Corp. Plc rallied 67 percent as the government guaranteed the deposits and borrowings of six Irish lenders.

``To restore confidence, we have to restore solvency of financial establishments,'' said Benoit de Broissia, an equity analyst at KBL Richelieu Gestion in Paris, which oversees $6.2 billion. ``There are hopes it will be re-voted.''

The Dow Jones Stoxx 600 Index increased 1.8 percent to 256.05 at the close as Xstrata Plc and Norsk Hydro ASA led a rally in raw-materials companies, trimming the gauge's loss for the third quarter to 11 percent. The benchmark yesterday retreated 5.5 percent, the steepest decline since Jan. 21.

The market's gains were limited earlier in the day as the British Bankers' Association said the cost of borrowing in dollars overnight jumped the most on record. The London interbank offered rate, or Libor, rose 4.31 percentage points to 6.88 percent, an all-time high, the BBA said today. It was at 2.95 percent a week ago.

The MSCI World, a gauge of 23 developed markets, posted the steepest loss since October 1987 yesterday after the House of Representatives voted 228 to 205 against the measure to give the Treasury broad authority to buy troubled assets from financial companies.

Dodd, Obama

Standard Chartered, the U.K. bank that gets most of its profit from Asia, gained 8 percent to 1,345 pence. HSBC, Europe's biggest bank, added 4.2 percent to 901 pence.

Christopher Dodd, chairman of the Senate Banking Committee, said senators may deal with the bill as early as tomorrow.

``We don't intend to leave here without the job being done,'' said Dodd, a Connecticut Democrat.

Democratic presidential candidate Barack Obama called for calm after the House vote, saying the plan ``will get done.'' Republican nominee John McCain urged lawmakers to ``go back to the drawing board'' and come up with legislation that will pass.

The Stoxx 600 fell 11 percent in September, the worst monthly slump since January, after Lehman Brothers Holdings Inc. filed for bankruptcy, American International Group Inc. was taken over by the U.S. Treasury and Washington Mutual Inc. was seized by regulators in the biggest U.S. bank failure in history.

Yesterday's decline left the index valued at 10.68 times the earnings of its companies, near the cheapest since at least 2002, data compiled by Bloomberg show.

`Can't Get Much Worse'

``Things can't get much worse,'' said Leonardo Lara, who manages about $150 million at Metagestion SGIIC SA in Madrid. ``I'm optimistic some kind of plan will be passed before the week is out. There are still some attractive sectors out there.''

National benchmarks gained in 14 of the 18 western European markets. The U.K.'s FTSE 100 added 1.7 percent, France's CAC 40 gained 2 percent and Germany's DAX rose 0.4 percent. Ireland's ISEQ Overall Index jumped 7.9 percent as Irish Life & Permanent Plc also rallied.

Dexia climbed 6.1 percent to 7.50 euros after Prime Minister Yves Leterme said Belgium's federal and regional governments, France and the company's largest shareholders will fund the rescue. CEO Axel Miller and Chairman Pierre Richard will leave once replacements are found, the bank said.

Irish Banks

Xstrata, the world's fourth-largest copper producer, gained 8.8 percent to 1,716 pence. Norsk Hydro, Europe's second-biggest aluminum producer, advanced 20 percent to 38.75 kroner. Basic- resources stocks gained more than any of the other 18 industry groups in the Stoxx 600.

The Reuters/Jefferies CRB Index of 19 commodities yesterday plunged 5.9 percent, the biggest drop since 1956, on concern the spreading financial crisis may slash demand for raw materials. The Dow Jones Stoxx 600 Basic Resource Index yesterday was valued at 6.79 times earnings, the cheapest since at least 1999, data compiled by Bloomberg show.

Anglo Irish, Ireland's third-biggest lender, jumped 67 percent to 3.844 euros and Irish Life & Permanent surged 36 percent to 4.85 euros after the stocks yesterday tumbled 46 percent and 38 percent, respectively.

The Irish government said today it will guarantee all deposits, covered bonds, senior debt and dated subordinated debt of four publicly traded banks and two building societies.

Glitnir Bank hf, the Icelandic bank bailed out by the government yesterday, plunged 71 percent to 4.55 kronur as the shares resumed trading in Reykjavik. Byr Savings Bank canceled talks with the lender about a possible merger.

Enterprise Inns

HBOS Plc, the U.K.'s biggest mortgage lender, declined 14 percent to 122.4 pence, widening the gap between its market value and the price that Lloyds TSB Group Plc agreed to pay in a stock swap that may be in doubt.

``HBOS isn't a done deal until Lloyds' shareholders vote for it,'' said Leigh Goodwin, an analyst at Fox-Pitt, Kelton Ltd. in London. Officials at Edinburgh-based HBOS couldn't immediately be reached for comment.

Enterprise Inns Plc, Britain's second-largest pub landlord, climbed 14 percent to 178.5 pence as CEO Ted Tuppen said the company is ``entirely happy'' with its financing structure.

ASML Holding NV, Europe's biggest maker of semiconductor equipment, added 5.9 percent to 12.41 euros after winning five orders for its machines based on a new lithography technology.

Hennes & Mauritz AB sank 9.7 percent to 278 kronor. The region's second-largest clothes retailer reported its weakest profit growth since 2003. Fiscal third-quarter net income climbed 5 percent to 3.33 billion kronor ($490 million).

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



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Some Google, Rohm & Haas Trades Canceled, Nasdaq Says

By Lynn Thomasson

Sept. 30 (Bloomberg) -- Some Google Inc. and Rohm & Haas Co. trades that occurred around 4 p.m. today will be canceled, the Nasdaq Stock Market said.

Trades of Google shares above $425.29 or below $400.52 that were executed between 3:57 p.m. and 4:02 p.m. New York time today will be broken, Nasdaq's regulatory arm said on its Web site. Rohm & Haas trades above $73.20 or below $68.93 during the same time period also will be canceled.

``Participants should review their trading activity for potentially erroneous trades outside the above referenced times,'' Nasdaq said.

Google, owner of the world's most popular search engine, fell as low as $200 at 4 p.m. Rohm & Haas, a chemicals producer, climbed to $100,000 moments before U.S. exchanges closed.

Google's closing price will be adjusted to $400.52, Nasdaq said.

``It's disturbing to watch the number of these things and there seem to be more and more,'' said Laszlo Birinyi, who oversees more than $350 million as president of Birinyi Associates Inc. in Westport, Connecticut. ``We're watching trades more closely.''

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



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Brazil Stocks Rebound, Led by Utilities, Banks; Bolsa Rises

By Alexander Ragir and Paulo Winterstein

Sept. 30 (Bloomberg) -- Brazilian stocks rebounded from the biggest plunge in a decade after U.S. lawmakers said they intend to revive a $700 billion bank rescue and Morgan Stanley advised buying electric utilities as ``defensive'' investments.

Eletropaulo Metropolitana SA led a rally in utility stocks after Morgan Stanley cited its strong balance sheet and high dividends. Banco do Brasil SA, Latin America's largest bank, gained the most in more than a week as Deutsche Bank AG said it may be better prepared than rivals to withstand the U.S. crisis. Petroleo Brasileiro SA, Brazil's state-controlled oil company, gained as crude rebounded from its biggest drop in seven years.

``They're going to get something together in Washington that's going to unfreeze the credit markets a bit,'' said Greg Lesko, who helps oversee $900 million at Deltec Asset Management Corp. in New York. ``It will help, and if it does, I don't think global growth will go into the death spiral that some are expecting, and things will get better.''

The Bovespa index rose 7.6 percent to 49,541.27. For the month, the index dropped 11 percent, the worst performance in more than four years. The BM&FBovespa MidLarge Cap index rose 7.6 percent, while the BM&FBovespa Small Cap index climbed 5.8 percent. Mexico's Bolsa index gained 3.9 percent and Chile's Ipsa rose 4.3 percent. The MSCI Latin America Index rose 7.3 percent.

`Pass Eventually'

The rescue plan ``appears likely to pass eventually, either in its current form or with minor changes,'' Citigroup strategist Geoffrey Dennis wrote. ``These developments, therefore, are likely to trigger, at least, a short-term bounce in Latin America equities.''

The Bovespa tumbled 9.4 percent yesterday after the U.S. House of Representatives voted down the plan designed to rid financial institutions of bad loans. President George W. Bush said yesterday's defeat ``is not the end of the legislative process'' and he warned lawmakers that they must act or damage to the U.S. economy will be ``painful and lasting.'' Christopher Dodd, chairman of the Senate Banking Committee, said senators may deal with the bill as early as tomorrow.

Eletropaulo gained 13 percent to 26.50 reais, and dropped 12 percent this month. The utility controlled by AES Corp. was recommended, along with rival Cia. Energetica de Minas Gerais, by Morgan Stanley because of high dividends and strong balance sheets. Cemig, as the electric utility is known, jumped 8 percent to 37.60 reais, for a monthly gain of 6.8 percent.

Banco do Brasil rallied 11 percent to 22.75 reais, paring its monthly loss to 3.8 percent. The bank's dependency on core deposits makes its better positioned than rivals to deal with the rising funding costs and weaker asset quality caused by limited demand for assets and decelerating growth, wrote Mario Pierry, a Deutsche Bank analyst.

Petrobras surged 7.2 percent to 35.10 reais, for a monthly gain of 0.6 percent. The most heavily weighted stock on the index rose as crude gained 4.4 percent in New York.

Bolsa Gains

In Mexico, the Bolsa climbed for the first time in three days, led by plastic pipe-maker Mexichem SA. The index dropped 5.3 percent this month, the most since July.

Mexichem rose 4.6 percent to 20.02 pesos after Citigroup Inc. said it will still be able to carry out a joint venture in fluorine production after delaying a share sale. Recent share declines are ``not warranted'' and represent an ``attractive entry point,'' analyst Luis Vallarino wrote.

Chilean stocks rose the most in eight months, led by energy and materials companies, rebounding from the biggest drop in a decade.

Investors ``overreacted'' to the House rejection of the financial rescue plan, said Valentin Carril, who oversees $3 billion at Principal Asset Management SA.

Chile's pension funds, which own a 10th of the Ipsa's market value, may start to buy domestic shares again ``near term'' as inflation eases, JPMorgan strategist Brian Chase wrote.

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



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