Japan Returns to Pre-Thriller Era as Nikkei Slumps to '82 Level

By Patrick Rial

Oct. 27 (Bloomberg) -- The last time Japan's Nikkei 225 Stock Average was at today's level, headbands and legwarmers were in, Steven Spielberg's E.T. topped box offices, and Michael Jackson's Thriller was about to be released.

That was 1982, the fifth year of a rally that pushed the Nikkei to nearly 40,000 by the end of 1989 in an asset bubble that purportedly made the land around the Imperial Palace as valuable as all of California. The Nikkei today slumped 6.4 percent to 7,162.90, the lowest since Oct. 7, 1982. That values its members at 8.6 times reported earnings, compared with about 70 times at the 1989 peak.

The measure's 53 percent tumble in 2008, fueled by the credit crisis, slowing economic growth and as the stronger yen threatened exporters' profits, has made shares ``shockingly cheap,'' said Peter Tasker, a strategist with hedge fund Arcus Investment Ltd. and Dresdner Kleinwort in Tokyo.

Shares on the Topix index, the broadest gauge of Japan's stock market, trade at 0.89 times book value, the first time the average has been below 1, according to Mizuho Securities Co. That means the companies would be worth more if liquidated.

Japan in the early 1980s was a different country from the one it is today, with the stock market akin to ``the wild, wild east,'' said Tasker, 52, who's been a resident since 1983.

``You had this feeling that almost anything was possible for Japan,'' he said. ``I'm shocked; the Topix has been trading below book, which we never saw even during the darkest days of 90s and in 2002 and 2003.''

Greed and Fear

John R. Alkire, chief investment officer, at Morgan Stanley Asset & Investment Trust Management Co. in Tokyo, which has about $40 billion in assets, expects the bottom will soon be reached.

``I would think the next big move is up, not down,'' said Alkire, a lifetime resident of Japan. ``We are most likely at a phase in this cycle where greed will likely soon replace fear.''

Back in 1982, Japan was just hitting its stride as the baby boom generation reached peak productivity. Inflation had been tamed through conservation efforts during the oil shock of the 1970s while the U.S. entered a recession resulting from Federal Reserve Chairman Paul Volcker's 15 percent interest rates.

Japan's vertically integrated electronics companies were the envy of the world as both the breadth of products and constant innovation gave them dominant market share.

Sony Corp. and Victor Company of Japan were battling for control of the home video market, with Sony's Betamax format gradually ceding position to VHS. In 2008, Sony redeemed itself with a video format victory for its Blu-ray high definition technology, besting Toshiba Corp.'s HD DVD.

Sony, Toyota

Sony's shares traded at an average of about 1,700 yen in October 1982 after adjusting for stock splits, compared with 1,821 yen the shares can be bought for today.

Toyota Motor Corp. launched its Camry brand in 1982. More than 12 million units have since been sold and it was the top- selling U.S. passenger vehicle for eight of the last nine years.

Toyota shares traded at 775 yen in October 1982, while the stock now is worth 2,940 yen.

``It was the age of equities until the bubble burst,'' said Yuuki Sakurai, 56, a general financial-planning manager at Fukoku Mutual Life Insurance Co. in Tokyo, which manages the equivalent of $54 billion in assets. ``People were much more optimistic about the future.''

Lost Generation

Then came the crash in 1990, followed by a generation of economic stagnation and deflation that ripped apart the lifetime employment system and saw once vaunted companies such as Yamaichi Securities Co. disappear.

Today, Japan is struggling with weak domestic demand and intensifying global competition for its largest exporters as the economies of Asia caught up. The median age in Japan was 32.5 in 1980; today it's 43.6, with three elderly for every two children.

While all the world's major stock markets entered bear territory this year, none have reached the lows set in Japan today. On Oct. 7, 1982, the Dow Jones Industrial Average closed at 965.97 and the Nasdaq Composite Index at 195.59. Today they stand at 8,378.95 and 1,552.03 respectively.

In Asia, Korea's Kospi Index was at 119.22 compared to today's 946.45 and Australia's All Ordinaries Index was at 508.7 versus 3,768.30 now. China was eight years away from the re- opening of its market.

Masayuki Kubota, a senior fund manager at Daiwa SB Investments Ltd. in Tokyo, who helps oversee $1.7 billion, thinks the stock market has echoed its excessive movement of a generation ago, but in the opposite direction this year.

``We're in a reverse bubble now,'' he said. ``Large mountains make deep valleys. It's an old Japanese saying and it's true for markets as well as economic cycles.''

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

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Crisis? Not yet, say expats in China

Updated: 2008-10-27
By Erik Nilsson (China Daily)

As the global financial crisis threatens to poison lives around the globe, many expatriates in China are finding they are largely immune to its toxicity.

A foreigner steps out of a Beijing fruit stand with his just-purchased items. The RMB has largely survived the hit that other currencies have suffered. [Agencies]

And generally speaking, the fewer economic ties they have to back home, the safer they are, says renowned economist Liu Baocheng, director of the Center for International Business Ethics, a nongovernmental organization hosted by the University of International Business and Economics in Beijing.

Liu reckons that "most foreigners have good reason to be confident about their lives in China" but that there are often differences between "full expats" - those sent by multinationals - and "local expats" - those who work for Chinese employers.

"If they work for a Chinese company or organization and earn RMB, they're better off," he explains.

"The other category - those paid from home and sent as expats - may feel a more negative impact."

Still, the pain felt by full expats is usually softer than if they were working for the same firms back home. "For many US companies, their China operations are enjoying greater success than their headquarters," he says.

He cites Lehman Brothers as an example. The company's China operation has chugged along as a revenue engine during its infamous crash, boding well for expats here.

Nigel Clark, chairman of the British Chamber of Commerce in China, says the impact of the crisis on his compatriots in China varies but "on balance the effect is likely to be less for those living here".

"Most expatriates living in China are enjoying working in a vibrant economy," says Clark, "but the effect will vary by individual and family, depending on their age group and how they have positioned themselves regarding past and future financial arrangements, particularly retirement".

Furthermore, while several overseas currencies have wobbled of late, the RMB has been appreciating.

This is of great relief to Australian Daniel Sanderson, who has lived in China for five years and works for his homeland's embassy in Beijing.

"The only way it (the crisis) would affect me is if the Australian dollar goes down. I get paid in RMB, so I'm actually making more money," he says.

In addition, China's Consumer Price Index (CPI) remains stable and generally low, while expat wages remain relatively high, says Liu.

"Expats on average earn three to five times more than their Chinese colleagues and enjoy the same low prices for commodities and services," he says.

As American Jarrod Wolf puts it: "A hundred kuai goes a long way here."

However, the 20-year-old university student says he's saving cash, because he doesn't know what will happen after he returns home in three months.

"It's not that my purchasing power has decreased, but I'm more (careful) about how I spend my money," he says..

"I would go out and do a lot more things in Beijing but I don't know how long or how deep the recession will be back home."

Foreigners have plenty of spare crash to dine out in Beijing. [China Daily]

Some who repatriate might even find the economic bust could boost their opportunities in their native economies.

"One good thing is that house prices are going down in Australia and if I'd stayed, I might have gotten into something that I couldn't afford," Sanderson says. "But that didn't happen."

Instead, the price plunge means he's better positioned to buy a home when he repatriates next year.

As a demographic, Liu says expats like Sanderson are likely to have few or no investments, debts or properties in their home countries.

While American business instructor Paul Cokeley does own mutual funds in the US, he says he feels "separated from the issues back home", adding: "They're not affecting the money I need to survive right now."

Cokeley says he hasn't checked on how the funds are doing since July. "I know it's bad but there's not much I can do about it," he says.

"I just hope things bounce back before I move back to the US. Maybe I could use that money on the down-payment for a house."

American Jim Spear, co-owner of China Bound Ltd, says his business has yet to feel the brunt of the global economic downturn. However, the company based in Beijing's suburban Mutianyu area is bracing itself for what might come.

"I work in the hospitality and tourism field where spending is discretionary," he says. "So we are concerned that the global economic downturn could impact our business from overseas while the situation sorts itself out and people get their confidence back.

"But we hope and expect that in the meantime our customers from inside China will find nearby destinations like ours even more attractive when they think of how to get away from it all. So the world will doubtlessly go on."

Spear says China Bound's lodging and tour business is "booming" but expects to take fewer bookings for corporate meetings next year.

"When times are tough and they need to control their budgets a little, they're still going to have meetings but they're more likely to have them closer to home," he says.

Still, he remains optimistic.

"The world's been through this before," he says, "and I'm confident we can make it through again."

Liu says the way expats in China react to the financial crisis should go beyond the fiscal to the psychological.

"Live smart and get informed about developments on both ends of the market," he advises.

"Don't overreact and always see the bottle as half full, because the quality of life is subjective."

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Wall Street workers leaving NYC for fresh start

Updated: 2008-10-27

ALBANY, N.Y. – Bankers and brokers looking to escape the financial meltdown are scrambling to relocate their families, possessions and rarified talent far from Wall Street to places such as Florida, Chicago, Milwaukee, Virginia and Asia.

In this Oct. 2, 2008 file photo, a man walks to work on Wall St. Thursday, Oct. 2, 2008 in New York. Many Wall Street bankers and brokers are already scrambling to relocate their families, possessions and rarified talent to far-flung venues including Florida, Chicago, Milwaukee, Virginia, and Asia to find a job and get out from under an avalanche of layoffs. [Agencies]

Travis Lacey left investment bank Jeffries & Co. and Wall Street behind in September to work for Baird in Chicago. He also left behind the nagging sense of worry that had plagued him since his company had started announcing layoffs earlier in the year.

"Anyone in that environment, you never know what's going to happen," Lacey said. "There are a lot of good bankers that unfortunately are at the wrong place at the wrong time, especially in New York."

Corporate headhunters say Wall Street's malaise will lead to a permanent talent loss for New York. It could help small boutique firms become bigger players with employees they would never have been able to lure from the city long-regarded as the world's financial capital.

"We're definitely hiring," said Robert Escobio, chief executive officer of Coral Gables, Fla.-based Southern Trust Securities Inc., a broker-dealer and investment banking firm. "Right now we have the capital, and right now we're looking to expand. And I think that's what a lot of boutiques are looking to do, too."

Escobio said in the past few months, one out of every four or five resumes comes from top Wall Street firms -- compared with about one out of 100 in years past.

Former Wall Streeters also tend to bring clients with larger net worth -- another potential long-term blow to firms trying to recover from the meltdown -- so boutiques and middle market firms stand to reap the profits. In turn they deliver something that's currently elusive on Wall Street: stability. Jobs in the financial sector can pay anywhere from $100,000 to well into the seven-figure range depending on location, experience and the size of a firm, said Kimberly Bishop, vice chairman of Slayton Search partners, a Chicago-based headhunting firm.

"There's some talent available to some companies that wasn't available before," she said.

Wall Street workers who are thinking about relocating need to be flexible about income, Bishop said. Some junior Wall Street workers may be able to get more senior positions in smaller firms, getting comparable or better pay. But many more will make less while benefiting from a cheaper cost of living outside of New York City.

"They are going to make less, most of them," said Kurt Kraeger, the managing director of the New York Office of Robert Walters headhunting firm. "Even before this (economic downturn), the same type of positions overseas, let's say, did pay about 20 percent less than you would make here ... the people who go to smaller firms, often times the bonuses are smaller."

New York is the top paying state for personal financial advisers, with an average salary of $131,660, according to the US Bureau of Labor statistics. Colorado followed, paying an average of $119,590, then Massachusetts, with an average pay of $116,170, according to the 2007 occupational employment survey.

Idaho was the lowest paying state for financial advisers, paying an average of $50,980. West Virginia, North Dakota, Alaska, Nebraska and Kentucky all follow, paying an average below $60,000 a year for the same job.

Middle market and boutique firms are also appealing because they offer increased job responsibility and freedom, said Peter Kies, a managing director at Robert W. Baird, a Milwaukee-based middle market firm.

"As every round of cuts occurred, we got an increasing flow of resumes," Kies said. "You can have a Wall Street kind of experience and live in Richmond, Milwaukee or Chicago."

Baird has seen roughly 50 percent more applications from Wall Street than they received last year, he said.

European and Asian banks are also seeing the abundance of workers as an opportunity to strengthen their position in the US market.

"I'm noticing that people are willing to work places that they would have hung up on me if I had suggested it a year ago," Kraeger said of his headhunting work.

More bankers are willing to go to Asia than ever before because it is still viewed as an emerging market, said James Constable, owner of Albany Beck Consulting, an English headhunting firm that places financial workers in jobs from London to Singapore.

"Banks (in New York and London) are not looking to add to their work force in the short term," Constable said in an e-mail interview. "This means that the volume is down, so instead the banks are opting to hire one senior candidate rather than a number of more junior ones."

So far this month, Albany Beck has received 38 percent more resumes from Wall Street candidates willing to work overseas than they did in October of 2007, Constable said.

New York Comptroller Thomas DiNapoli expects 40,000 Wall Street jobs could be lost by the end of the year. So far he said 13,200 people have lost jobs in New York's financial sector since a year ago.

While some boutiques and middle market firms were hit hard by the economic downturn, larger banks had bought much more of the toxic mortgage-backed assets at the heart of the meltdown.

While headhunting to link new securities jobs with Wall Street casualties is one of the few growth industries these days, it's not easy, said Robin Judson, managing director of Smiths Hanley Associates LLC, a New York City hiring firm.

The finance job market is flooded with highly qualified executives and bankers, but "there aren't enough jobs to go around," Judson said.

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Nikkei Crash Sends Global Stocks Tumbling

Daily Forex Fundamentals | Written by Easy Forex | Oct 27 08 01:30 GMT |

U.S. Dollar Trading (USD) extended gains against all currencies except the Yen as risk aversion ran unchecked through the markets and panic spread. Emerging currencies collapsed triggering overwhelming dollar demand. Oil crumbled to year lows and the Euro spooked by contagion fears hit levels not seen since 2006. One small positive was US stocks recovered from lows and September Existing Home Sales jumping 5.5% to 5.18Mln. In the U.S. share markets, the NASDAQ was down 51.88 points (-3.23%) and the Dow Jones was down 312 points (-3.59%). Crude Oil closed down $3.69 ending the New York session at $64.15 per barrel. Looking ahead, New Home Sales are expected at 0.45Mln vs. 0.46Mln. The Euro (EUR) Downside pressure reemerged after a brief retest of 1.30. Concerns over Ukraine and other emerging Eastern European Economies ability to repay debt led to concerns countries within the EU may face trouble and create disunity for the single currency. On the Data front EU Manufacturing PMI was at 41.3 vs. 44 expected in October, a record low. Overall the EUR/USD traded with a low of 1.2496 and a high of 1.3007 before closing the day at 1.2625 in the New York session. Looking ahead, October German IFO is expected at 91.2 vs. 92.9. The Japanese Yen (JPY) was the strongest currency of the day as demand for a safe haven soared. Year lows against the USD and multiyear lows against the pound saw technical resistance give way and panic buying emerge. EUR/JPY hit all time lows under 115. Overall the USDJPY traded with a low of 90.87 and a high of 98.08 before closing the day around 94.30 in the New York session. The Sterling (GBP) traded with a very weak tone after Q3 GDP came in at -0.5% vs. -0.2% expected. Cable lost ground across the board testing .8000 against the Euro and over 15 big figures against the Yen. The Pound recovered off lows going into the weekend as US stocks recovered from lows. Overall the GDP/USD traded with a low of 1.5260 and a high of 1.6290 before closing the day at 1.5900 in the New York session. The Australian Dollar (AUD) took the brunt of the risk aversion falling all day as AUD/JPY capitulated. AUD/USD hit New Year lows under 0.6100. Oil continued to fall and Gold broke below $700 an ounce at the height of the USD strength adding to the Aussie slide. Overall the AUD/USD traded with a low of 0.6055 and a high of 0.6745 before closing the US session at 0.6225. Gold (XAU) broke through $700 an ounce as Oil slumped and investors dumped the precious metal on deflation fears and cash needs. The recovery in US shares prompted a relief rally to day highs. Overall trading with a low of USD$682.80 and high of USD$741.20 before ending the New York session at USD$734 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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Daily Forex Market Commentary

Daily Forex Technicals | Written by GFT | Oct 27 08 01:40 GMT |

Rumors of a possible default by Russia or of collapse of big Japanese, US or European institutional investors triggered an explosive rally if the dollar the European currencies and an aggressive slide against the yen on Friday. The markets relaxed a little later in the day, but panic is driving the markets and liquidity continues to suffer. Expect more of the same and the market is expecting concerted rate cuts as early as today. The US economic agenda will open on Monday with the release of the New Home Sales report for September - it's hard to expect anything positive here.
Euro/dollar

Euro/dollar remains weak after falling on Friday to a two-year low. The medium-term bias remains bearish.

Immediate support is between 1.2490 and 1.2500. Distant support is at 1.2375.

Above 1.2730, resistance is seen at 1.2935. Only a break above 1.3260 would signal a sustained recovery of euro/dollar.

Oscillators are bearish.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Dollar/yen

Dollar/yen collapsed to a ten-year low in wild trading on Friday amid rumors of sovereign default. The medium-term outlook remains bearish even after the pair already reached the target of a head-and-shoulders formation.

Good support is at 92.25. The next level is Friday's low of 90.94.

Immediate resistance is at 95.75. Above 98.13, resistance looms at 100.50.

Oscillators are falling.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Sterling/dollar

Sterling/dollar plunged further to a six-year low and my model remains short. The downside is still favored, as the medium-term outlook remains bearish.

Immediate support is at 1.5590. The next level is at 1.5269.

Initial resistance is at 1.6040. Distant resistance looms at 1.6285.

Oscillators are falling.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish
Dollar/Swiss franc

Dollar/Swiss reversed early losses and surged to a one-year high. My model remains long. The medium-term risk remains on the upside.

Initial resistance is at 1.1767. The next level is between 1.1867 and 1.1873.

Immediate support is still seen between 1.1585 and 1.1595. The next level is 1.1410. Distant support comes at 1.1205.

Oscillators are rising.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Cornelius Luca
Global Forex Trading
http://www.gftforex.com

DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.



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FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | Oct 27 08 01:36 GMT |

Euro 1.2585 Initial support at 1.2497 (Oct 24 low) followed by 1.2334 (April 24 2006). Initial resistance is now located at 1.3078 (Oct 22 high) at followed by 1.3359 (Oct 21 high). Yen 93.20 Initial support is located at 90.93 (Oct 24 low) followed by 90.00 (Key level). Initial resistance is now at 98.32 (Oct 24 high) followed by 100.57 (Oct 22 high). Pound 1.5805 Initial support at 1.5269 (Oct 24 low) followed by 1.5000 (Key level). Initial resistance is now at 1.6327 (Oct 24 high) followed by 1.7198 (Oct 21 high). Australian Dollar 0.6165 Initial support at 0.6057 (Oct 24 low) followed by the 0.5929 (April 07 2003 low). Initial resistance is now at 0.7076 (Oct 15 high) followed by 0.7239 (Oct 14 high). Gold 736 Initial support at 671.49 (Sept 04 2007 low) followed by 600 (Key Level). Initial resistance is now at 745.15 (Oct 24 high) followed by 750 (Key Level). Currency Sup 2 Sup 1 Spot Res 1 Res 2 EUR/USD 1.2334 1.2497 1.2585 1.3078 1.3359 USD/JPY 90.00 90.93 93.20 98.32 100.57 GBP/USD 1.5000 1.5269 1.5805 1.6327 1.7198 AUD/USD 0.5929 0.6057 0.6165 0.7076 0.7239 XAU/USD 600.00 671.49 736.00 745.15 750.00 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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Today's Rip Van Winkle Would Get a Real Shock: William Pesek

Commentary by William Pesek

Oct. 27 (Bloomberg) -- Imagine what Rip Van Winkle might make of the world today.

You wouldn't need to sleep 20 years, like the title character in Washington Irving's 1819 short story, to wake up and be shocked by events. How about just one year?

Say you checked out of the world 12 months ago, maybe on an Indonesian beach, or at a Thai monastery or in the Malaysian rainforest. No phones, no newspapers, no television, no Internet - - a total news vacuum. Think how disorienting current events like these 10 would be.

1. The subprime crisis isn't containable. Like the canard about Asia decoupling from the U.S., the oft-argued point that mortgage-market troubles won't spread and that economists like Nouriel Roubini are worrywarts has been roundly humiliated. Just as Asian markets are plunging, credit markets are being dragged lower and lower and lower.

2. Bear Stearns and Lehman are no more. Who might have thought a year ago that Wall Street titans Bear Stearns Cos. and Lehman Brothers Holdings Inc. would go kaput? Or that Goldman Sachs Group Inc. and Morgan Stanley would become bank holding companies, heralding the end of the investment-banking model? Oliver Stone is even beginning a sequel to 1987's ``Wall Street,'' a film released during an earlier stock-market crash.

Japan Redux

3. Japan is recession-bound. Well, this shouldn't be such a surprise. One of Japan's biggest consistencies is disappointing bulls. Japan was growing stably a year ago. Now, with the Nikkei 225 Stock Average less than half what it was then, the yen at 13- year highs and Japan on its third prime minister in two years, recession risks abound and a Bank of Japan rate cut looks inevitable. The U.S., meanwhile, is indeed looking Japan-like. Next stop for the Federal Reserve: zero-interest rates?

4. The IMF is back in business. A year ago, commentators argued the International Monetary Fund was no longer needed. Now that Iceland is tapped out and Ukraine, Pakistan, Hungary and Belarus may need financial assistance, the IMF is plenty busy. South Korea, meanwhile, has been airlifted back to 1997. Its Kospi Index just had the worst week in at least two decades and the won is in virtual free-fall.

The World Is Red?

5. Socialism is in; capitalism is out. China used to be the most-watched socialist nation. Now it's the U.S., which is nationalizing its economy with a speed that will soon have students asking: ``Ronald Reagan who?'' How far the stock of laissez-faire capitalism is falling can be seen in how fast former Fed Chairman Alan Greenspan went from maestro to villain. You'd think that after the Long-Term Capital Management debacle in 1998 even Greenspan would've wondered if unregulated derivatives markets were a good idea. Guess not.

6. Barack Obama?!?!?! Anyone out of play for a year might be shocked to find that a black, 47-year-old junior U.S. senator may soon be elected U.S. president. Asia is keenly awaiting the Nov. 4 contest in hopes the next president, whether Obama or Senator John McCain, will act fast to stabilize the world's biggest economy.

7. Thaksin Shinawatra is still dominating Thailand. So you thought the Thai prime minister had been removed in a 2006 coup? While technically true, his shadow still dominates Asia's No. 8 economy. The guy running Thailand these days is Thaksin's brother- in-law, Somchai Wongsawat. Somchai is so unpopular that street protesters, in addition to insults, are throwing shoes and plastic water bottles at him. One of these days, they'll get around to changing the country's name to Thaksinland.

Oil's Not Well

8. Oil prices. The collapse of oil would be a real eye-opener after an out-of-touch year. Talk of $200 a barrel has ended and a panicky OPEC is cutting production to stabilize prices that fell below $64 on Friday. Well, at least the aggressive fuel surcharges imposed by airlines are still with us. What's up with that?

9. Dow 36,000? More like 3,600. From just over 13,500 a year ago, the Dow Jones Industrial Average closed at 8,378 on Friday. If there's any good news here it's that President George W. Bush didn't get his way privatizing Social Security. Otherwise, the U.S. might need to build a whole lot of homeless shelters for the elderly.

Poverty Power

10. The ``poor'' now have the power. Sovereign wealth funds certainly were in the news a year ago. Yet the extent to which cash-rich developing nations are bailing out wealthy economies has been humbling. You have to wonder how much U.S. Treasury Secretary Henry Paulson is going to love going hat-in-hand to China or Saudi Arabia for a handout.

Ok, so this is a rude awakening, one Rip Van Winkle never could have fathomed. You might be tempted to escape from the world for another year -- or to fulfill that dream of doing humanitarian work in, say, Cambodia, or teaching English to kids in Mozambique.

But hey, lighten up. Things can only get better. More to the point, they really, really need to.

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

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

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BHP Sees `Outstanding' Growth in Australian Oil, Gas

By Angela Macdonald-Smith

Oct. 27 (Bloomberg) -- BHP Billiton Ltd., Australia's biggest oil and gas producer, said it has ``outstanding'' opportunities for growth in Australia, with five ``major'' petroleum projects under assessment for future investment.

Potential ventures include developing the Macedon gas field for supply to the Western Australian market and the Thebe, Scarborough and Browse fields, also off the northwest coast, for liquefied natural gas exports, Melbourne-based BHP Billiton said today in a presentation sent to the Australian Stock Exchange.

BHP, which is also the world's biggest mining company, is forecasting 10 percent annual compound growth in oil and gas output through to the 2011 financial year as new fields in the Gulf of Mexico and Australia ramp up output. The company owns one-sixth of the North West Shelf venture, which expanded LNG production capacity by 37 percent this year.

LNG demand growth in Asia is likely to remain ``strong, though near-term volatility'' is likely, BHP said in one of the slides, to be presented by Phil Byrne, Australia country manager for BHP Billiton's petroleum unit, during an analysts tour. New LNG projects in Australia are likely to face a ``challenging financial and regulatory environment,'' it said.

BHP said it's discussing with partner Exxon Mobil Corp. the ``optimum development plans'' for the 8 trillion-cubic-feet Scarborough field, targeting LNG buyers in north Asia. The company is ``looking at options'' for the development of the Thebe field, which lies 50 kilometers (31 miles) north of Scarborough, it said.

Oil Ship

The Woodside Petroleum Ltd.-operated North West Shelf venture may this quarter approve an investment to replace the Cossack Pioneer oil production ship to extend the life of the Cossack, Wanaea, Lambert and Hermes crude-oil fields, BHP said. The Perth-based venture said in May it had agreed to replace the vessel because that would cost about the same as the A$855 million- ($525 million)-plus estimate to refit the ageing ship with a shorter production shutdown.

BP Plc, Chevron Corp., Woodside's 34 percent shareholder Royal Dutch Shell Plc and a venture between Mitsubishi Corp. and Mitsui & Co. own stakes in the A$25 billion North West Shelf venture. BHP's partner in the Macedon field is Apache Corp.

LNG is natural gas cooled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline.

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

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Australian Central Bank Intervened on Oct. 24 as Currency Fell

By Garfield Reynolds

Oct. 27 (Bloomberg) -- The Reserve Bank of Australia intervened to buy Australian dollars on Oct. 24, when the currency slid to a five-year low of 60.57 U.S. cents.

The central bank was ``providing liquidity into an illiquid market,'' a spokesman for the Sydney-based RBA said today by phone. He declined to be identified. The bank ``will continue to provide liquidity'' and may intervene again in similar circumstances, according to the spokesman.

Australia's dollar plunged 9.7 percent against the greenback and 16 percent versus the yen last week as investors bought back currency borrowed in so-called carry trades.

The Australian dollar fell 0.9 percent to 61.71 U.S. cents at 9:57 a.m. in Sydney, from 62.23 cents on Oct. 24 late in New York. It dropped 1.9 percent to 57.56 yen, from 58.68 yen in New York last week.

In carry trades, investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. The risk is that currency moves erase the profits.

Australia's benchmark interest rate is 6 percent, compared with 0.5 percent in Japan and 1.5 percent in the U.S.

Central banks intervene in currency markets by arranging sales or purchases of foreign exchange.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net



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Australia, New Zealand Dollars Slide on Global Recession Fears

By Candice Zachariahs

Oct. 27 (Bloomberg) -- The Australian dollar slid against the yen and the U.S. currency as concern about a global recession prompted investors to dump higher-risk assets. New Zealand's dollar also fell against the yen.

The Australian currency traded near record lows against the yen touched on Oct. 24 late in New York as prices fell for commodities the nations export. Australia's dollar plunged 20 percent against the yen the past week and New Zealand's dropped 18.5 percent as investors bought back Japanese currency borrowed in so-called carry trades and used to buy high-yielding assets in the South Pacific nations.

``Investor confidence is shot to ribbons and it's the carry trades that are copping it fair and square in the face,'' said Paul Milton, chief foreign-exchange dealer at Societe Generale SA in Sydney. ``We're approaching levels where we should start finding some natural support in the Aussie. However, it's a brave man who buys Aussie in this environment,'' he said referring to the currency by its nickname.

The Australian dollar fell 1.4 percent to 57.85 yen as of 8:06 a.m. in Sydney from 58.68 yen in New York on Oct. 24, when it had touched 55.14 yen, the weakest since the Australian currency started trading freely. The currency slid 0.5 percent to 61.92 U.S. cents from 62.23 cents in New York last week, when it touched the lowest since April 2003.

New Zealand's dollar dropped 0.8 percent to 52.07 yen from 52.48 late last week in New York. The currency gained 0.2 percent to 55.80 U.S. cents from 55.67 cents.

The Australian dollar had tumbled 34.4 percent against the yen and 25.5 percent versus the greenback over the past month as investors have dumped equities amid widespread concern that the global economy will fall into recession. New Zealand's currency has fallen 29.3 percent and 18.7 percent against the yen and dollar, respectively.

The VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk aversion, reached a record of 79.13 on Friday.

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

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Yen, Hong Kong Dollar, South Korean Won: Asia Currency Preview

By Bob Chen

Oct. 27 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.

Japanese yen: The Trade Ministry may report no growth in retail sales last month compared with a year earlier, economists said in a Bloomberg survey, after gaining 0.7 percent in August.

The yen was at 92.37 a dollar at 8:41 a.m. in Sydney.

Hong Kong dollar: Exports grew 2.1 percent in September from a year earlier, economists said in a Bloomberg survey before the government reports the data at 4:30 p.m. local time. Shipments rose 1.9 percent in August from a year earlier.

The Hong Kong dollar was at HK$7.7535.

South Korean won: The central bank's monetary policy board will convene at 8 a.m. today in an unscheduled meeting after data last week showed the economy expanded at the slowest pace in four years in the quarter ended Sept. 30.

The won was at 1,424.

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

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Sell Canada's Dollar After Crude Oil Fell 11%, RBC Capital Says

By Candice Zachariahs

Oct. 27 (Bloomberg) -- Investors should sell Canada's currency against the U.S. dollar as declining expectations for global growth push down prices for commodities the nation exports, RBC Capital Markets Inc. said.

Canada's currency, dubbed the loonie for the aquatic bird on the one-dollar coin, is poised for its worst month since at least 1950 and on Oct. 24 touched the weakest since September 2004. Crude oil, which accounted for a 10th of Canada's export revenue in 2007, dropped 11 percent last week to $64.22 a barrel, a 16- month low.

``The somber global economic outlook which is adversely effecting commodity prices,'' supports additional U.S. dollar gains, wrote Toronto-based Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc., in a research note.

Investors should buy the U.S. dollar targeting an initial advance to C$1.30, wrote Strauss. They should exit the trade if the greenback slips to C$1.2409.

The Canadian dollar traded at C$1.2754 per U.S. dollar at 8:15 a.m. in Tokyo, from 1.2775 on Oct. 24, when it touched C$1.2842, the lowest since Sept. 23, 2004. The loonie has fallen 20 percent over the past three months as oil declined from its July 11 record of $147.27.

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



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Yen Rises as Carry Trades Pared on Global Recession Concern

By Stanley White

Oct. 27 (Bloomberg) -- The yen rose against the dollar and was approaching a 13-year high as the risk of a global recession and an extended slump in the world's stock markets prompted investors to slash carry trades.

The yen also advanced against the Australian and New Zealand dollars, two favorites of so-called carry trades, in which investors fund purchases of higher-yielding assets with Japanese currency. Gains in the yen may be limited after the Reserve Bank of Australia said it bought Australian dollars on Oct. 24 after the currency fell 22 percent this month.

``The yen has further to rise,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``Higher- yielding currencies are falling apart. The global economy is in trouble and the yen looks relatively attractive because Japan isn't as damaged as other countries.''

The yen rose to 93.20 per dollar as of 8:51 a.m. in Tokyo, from 94.32 in New York on Oct. 24, when it surged as much as 7 percent to 90.93, the highest level since August 1995. Japan's currency gained to 117.54 per euro from 118.96 at the end of last week, when it reached 113.81, the strongest level since May 2002. The euro bought $1.2613 from $1.2623. The yen may rise to around 90 per dollar today, Amikura forecast.

Japan's currency has jumped this month by 14 percent against the greenback, 27 percent versus the euro, 46 percent against the Australian dollar and 37 percent versus the New Zealand dollar as traders slashed carry trades.

Japan's benchmark rate of 0.5 percent is the lowest among major economies.

RBA Intervention

Gains in the yen may be limited by speculation Japanese authorities will sell the currency to stem its rapid gains.

The Reserve Bank of Australia bought the Australian dollar on Oct. 24 as it fell to a five-year low of 60.57 U.S. cents, a central bank spokesman said today. The Aussie, as the currency is known, last traded at 6173 U.S. cents from 62.23 U.S. cents.

The RBA was ``providing liquidity into an illiquid market and may intervene again in similar circumstances, said a spokesman who declined to be identified.

``Traders may hesitate to buy the yen from here,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co., Japan's fifth-largest broker by revenue. ``Other central banks were surely aware that the RBA intervened. We can't rule out further intervention to stabilize currencies.''

Central banks intervene in foreign exchange markets when the arrange purchases and sales of currencies.

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

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Oil Little Changed as OPEC Cut May Better Match Supply, Demand

By Angela Macdonald-Smith

Oct. 27 (Bloomberg) -- Crude oil was little changed in New York near a 16-month low amid expectations that OPEC's decision to cut production will start to bring supply back in line with demand that is being curbed by the global financial crisis.

The 13 members of the Organization of Petroleum Exporting Countries agreed Oct. 24 to lower supply by 1.5 million barrels a day starting in November. The group is likely to reduce production further if the latest cut doesn't stabilize prices, Agence France-Presse said, citing an interview Iran's OPEC representative Mohammad Ali Khatibi gave on state television.

``The sentiment is negative at the moment so you can't rule out further declines,'' said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. ``OPEC has actually taken a fairly significant step towards tightening the balance between supply and demand. Over time, that may prove somewhat supportive to the oil price.''

Crude oil for December delivery was at $63.93 a barrel down 22 cents, in after-hours electronic trading on the New York Mercantile Exchange 7:43 a.m. in Singapore. The contract earlier traded as high as $64.96.

On Oct. 24, the front-month contract fell $3.69, or 5.4 percent, to $64.15, the lowest close since May 31, 2007. Futures are down 31 percent from a year ago. The front-month contract dropped 11 percent last week, the fourth straight weekly decline.

Brent crude oil for December settlement on Oct. 24 declined $3.87, or 5.9 percent, to $62.05 a barrel on London's ICE Futures Europe exchange, the lowest settlement price since March 21, 2007.

Declining Demand

Global oil demand may decline for the first time in 15 years in 2008 and stagnate next year, the Centre for Global Energy Studies said Oct. 20. OPEC, the International Energy Agency and U.S. Energy Department all cut their forecasts for growth earlier this month.

``There have been fairly dramatic adjustments to consumption,'' Commonwealth's Moore said.

Prices have dropped 56 percent from the record $147.27 a barrel reached on July 11 as stock markets declined.

Eleven of 27 analysts surveyed last week by Bloomberg News, or 41 percent, tipped a decline in prices through Oct. 31. Eight respondents, or 30 percent, said oil will rise and eight forecast little change.

Oil options contracts to sell crude at $50 by December almost tripled on Oct. 24 after the OPEC decision to slash production failed to allay concerns that the global economic slump is hurting demand.

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

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Australia Stocks: Commonwealth, Goodman, GPT Group, Woodside

By Malcolm Scott

Oct. 27 (Bloomberg) -- The S&P/ASX 200 Index fell 67.9 points, or 1.8 percent, to 3,801.50, the lowest since November 2004. The S&P/ASX 200 Index futures contract due in December slipped 1.6 percent to 3,817. The following stocks rose or fell:

Oil companies: Crude oil tumbled to a 16-month low as OPEC's decision to slash production by 1.5 million barrels a day failed to ease concern that the global economic slump is curbing fuel demand. Oil for December delivery fell 5.4 percent to $64.15 a barrel, the lowest since May 31, 2007.

Woodside Petroleum Ltd. (WPL AU), Australia's second biggest oil producer, lost A$1.49, or 3.8 percent, to A$37.72.

U.S.-related stocks: Stocks in the U.S. fell after a sell- off in Asian and European markets heightened concern the financial crisis is plunging the world's economy into a recession.

The S&P 500 sank 31.34 points, or 3.5 percent, to 876.77 after losing as much as 6.1 percent during the day.

Westfield Group (WDC AU), the world's biggest shopping mall owner by market value, lost 10 cents, or 0.8 percent, to A$13.24.

James Hardie Industries NV (JHX AU), the biggest seller of home siding in the U.S., lost 7 cents, or 1.6 percent, to A$4.39.

Commonwealth Bank of Australia (CBA AU), the nation's biggest mortgage lender, lost A$1.12, or 2.7 percent, to A$39.75. The company is planning to save A$370 million ($229 million) by cutting costs, including firing workers, the Australian newspaper reported.

GPT Group (GPT AU), an Australian real estate investment trust, tumbled 49 cents, or 42 percent, to 66 cents. The company sold A$1 billion ($620 million) in a rights offer to institutional investors at a 48 percent discount to the last traded share price of A$1.15 to repay debt amid falling property values.

Perpetual Ltd. (PPT AU), an asset manager, lost A$1.50, or 3.5 percent, to A$41.50. The company aims to lift a block on redemptions from its income and mortgage funds as soon as possible, the head of the Australian fund manager told the Australian Broadcasting Corp. in an interview.

To contact the reporter on this story: Malcolm Scott in Sydney at Mscott23@bloomberg.net.

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Ebara, Hitachi, Itoham, JFE, Nissan Motor: Japan Equity Preview

By Norie Kuboyama and Kathleen Chu

Oct. 27 (Bloomberg) -- The following companies may have unusual price changes in Japanese trading today. Stock symbols are in parentheses, and share prices are from the previous close. The information in each item was released after markets shut, unless stated otherwise.

Chubu Electric Power Co. (9502 JT): Japan's third-largest utility said in a preliminary earnings statement first-half net income totaled 23 billion yen ($242 million), 8 percent below its forecast, due to higher fuel costs. The stock fell 40 yen, or 1.6 percent, to 2,415.

Ebara Corp. (6361 JT): The pump maker may sell a new technology to extract phosphorus from sewage amid rising import prices for the fertilizer ingredient, the Nikkei English News reported. The company is targeting 1.5 billion yen of orders for the technology in the year starting April 2011, Nikkei said. Shares fell 15 yen, or 8.3 percent, to 166 yen.

Gunze Ltd. (3002 JT): The maker of underwear, socks and textiles cut its full-year net income outlook 34 percent to 3.9 billion yen, citing a slump in consumer sentiment and a surge in material costs. Gunze slumped 15 yen, or 5.2 percent, to 276.

Hitachi Ltd. (6501 JT): The world's third-biggest maker of hard-disk drives said in a preliminary earnings statement that first-half operating profit rose 62 percent to 197 billion yen, beating its forecast by 58 percent. The company reported better- than-expected earnings from sales of storage devices and software services. Hitachi plummeted 51 yen, or 11 percent, to 414.

Hitachi Cable Ltd. (5812 JT): The cable and electronic equipment maker's first-half net income was 400 million yen, missing its outlook by 90 percent, as demand in the car and memory chip markets plunged in the second quarter. Rising raw material and production costs also diminished earnings, Hitachi Cable said in preliminary earnings statement. The stock sagged 16 yen, or 6.8 percent, to 218.

Honda Motor Co. (7267 JT): Operating profit at Japan's second-largest automaker may fall 40 percent this year because of the yen's gains against other currencies and slower sales in North America, Nikkei English News said. The shares fell 120 yen, or 5.7 percent, to 1,990.

Itoham Foods Inc. (2284 JT): The sausage maker said it will recall 2.67 million packs of wieners and other products after discovering contamination of well water used at one of its factories. Shares fell 28 yen, or 6.1 percent, to 432 yen.

JFE Holdings Inc. (5411 JT): The world's third-largest steelmaker said first-half net income fell 4.8 percent to 153.1 billion yen as product price increases failed to keep pace with soaring materials costs. The company lifted its full-year profit outlook 3.7 percent to 280 billion yen. Also, JFE said it will spend as much as 80 billion yen to buy back up to 9.05 percent of its total shares through March 31. The stock tumbled 170 yen, or 7.7 percent, to 2,035.

Linical Co. (2183 JT): The contract research organization for drugmakers will start trading on the Tokyo Stock Exchange's Mothers section. The initial offering price was set at 1,000 yen.

Marubeni Corp. (8002 JT): The Japanese trading house won a 240 million ringgit ($67 million) order for 30 train cars from Malaysia's government, the Nikkei newspaper said. Shares declined by 30 yen, or 8.2 percent, to 336 yen.

Mitsubishi Motors Corp. (7211 JT): The maker of Outlander and Eclipse autos plans to cut production by as many as 100,000 vehicles starting next month to cope with a slump in sales, the Sankei Newspaper reported. The shares fell 8 yen, or 6.6 percent, to 113.

Mitsubishi UFJ Financial Group Inc. (8306 JT): The Japanese bank that's investing $9 billion in Morgan Stanley may raise as much as 1 trillion yen ($10 billion) in additional capital, the Nikkei newspaper said. ``No decision has been made at this moment,'' Mitsubishi UFJ said in a statement to the Tokyo Stock Exchange. The shares fell 62 yen, or 8.3 percent, to 683 yen.

Mitsui Engineering & Shipbuilding Co. (7003 JT): Japan's largest maker of ship engines posted an 88 percent drop in first- half profit as costs increased. Net income fell to 500 million yen in the six months ended Sept. 30, half what it had forecast, the company said in a preliminary earnings statement. The stock declined 12 yen, or 8.5 percent, to 129.

Mizuho Financial Group Inc. (8411 JT): Japan's second- largest bank by revenue may raise several hundred billion yen in additional capital to offset losses on shareholdings, public broadcaster NHK reported, without citing its sources. The stock fell 390,000 yen, or 12.6 percent, to 270,000 yen.

Nippon Electric Glass Co. (5214 JT): The world's third- biggest maker of glass for flat-panel televisions said first-half net income climbed 63 percent to 34.4 billion yen, with an 18 percent rise in sales. The stock plunged 100 yen, or 16 percent, to 542.

Nissan Motor Co. (7201 JT): Japan's third-largest carmaker and parent Renault SA may adopt more labor-intensive production in emerging markets, including India, to take advantage of lower wages, Nikkei English News reported. Nissan dropped 25 yen, or 5.4 percent, to 441.

Nisshin Oillio Group Ltd. (2602 JT): The cooking oil maker said in a preliminary earnings release that first-half net income totaled 2 billion yen, beating its forecast by 82 percent, buoyed by improved earnings in overseas subsidiaries. The stock sagged 21 yen, or 4.4 percent, to 461.

Nissin Foods Holdings Co. (2897 JT): The instant noodle maker voluntarily recalled 500,000 packs of its Cup Noodles because a woman became sick after eating the product, company spokesman Jun Aoki said. Japanese health officials had said it found instant noodles tainted with a chemical used in moth repellant. The woman wasn't hospitalized and is recovering, according to officials. The stock sank 490 yen, or 14 percent, to 3,100.

Nomura Research Institute Ltd. (4307 JT): The information- technology provider said it expects full-year net income of 28.5 billion yen, 12 percent below its forecast. It posted a 22 percent drop in profit to 14.2 billion yen in the six months ended Sept. 30. The stock tumbled 139 yen, or 9 percent, to 1,406.

Pacific Metals Co. (5541 JT): The maker of stainless steel cut its full-year net income outlook by a quarter to 14.6 billion yen, citing decreasing demand and prices for ferronickel. The stock plummeted 41 yen, or 10 percent, to 360.

PanaHome Corp. (1924 JT): The homebuilder said first-half net income amounted to 1.81 billion yen, rebounding from a 4.05 billion yen loss a year earlier, citing effects from a business reorganization. PanaHome slumped 34 yen, or 7.2 percent, to 437.

Sangetsu Co. (8130 JT): The interior products trader said in a preliminary earnings statement first-half net income was 1.4 billion yen, beating its forecast by 40 percent, citing streamlined marketing. The stock slid 37 yen, or 2.6 percent, to 1,381.

Shinko Electric Co. (6507 JT): The maker of aerospace parts reversed its full-year forecast to a net loss of 300 million yen from a 2.1 billion yen profit, and cut its annual dividend to 5 yen from 6 yen, citing lower-than-expected sales and a charge from devalued stockholdings. The stock sank 21 yen, or 8.8 percent, to 217.

Sumitomo Mitsui Financial Group Inc. (8316 JT) and Mizuho Financial Group Inc. (8411 JT): The lenders may sell new shares to raise capital, the Asahi newspaper reported. Sumitomo Mitsui may sell as much as 1 trillion yen worth of shares, the report said, without saying how much Mizuho might raise. Sumitomo Mitsui tumbled 49,000 yen, or 10 percent, to 435,000. Mizuho plunged 39,000 yen, o4 13 percent, to 270,000.

Takasago Thermal Engineering Co. (1969 JT): The builder of air-conditioning facilities had a first-half net loss of 730 million yen, narrower than its 800 million yen loss outlook, as better-than-expected results at home offset unfavorable earnings overseas, according to a preliminary earnings statement. The stock fell 37 yen, or 4.8 percent, to 729.

Tokyo Steel Manufacturing Co. (5423 JT): Japan's biggest maker of steel girders boosted its full-year net income forecast 71 percent to 29 billion yen, saying that a decline in its product prices shipped between October and December was limited. The stock lost 63 yen, or 8.7 percent, to 664.

Tokyu Construction Co. (1720 JT): The contractor reversed its full-year forecast to a net loss of 3.9 billion yen from 2.2 billion yen in profit. It canceled its full-year dividend of 10 yen. The stock fell 12 yen, or 5 percent, to 227.

Tosoh Corp. (4042 JT): The chemical products maker slashed its full-year net income forecast 62 percent to 10 billion yen, due to a surge in fuel costs. Tosoh lost 13 yen, or 6.5 percent, to 187.

Yahoo Japan Corp. (4689 JT): The operator of Japan's most visited Internet portal said first-half net income rose 26 percent to 36.9 billion yen, with a 12 percent advance in sales. The stock slipped 870 yen, or 3.2 percent, to 26,530.

Yamaha Corp. (7951 JT): The maker of musical instruments said first-half net income was 4.3 billion yen, short of its outlook by 43 percent, on lower-than-expected sales, according to a preliminary earnings statement. The stock tumbled 100 yen, or 10 percent, to 883.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.



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Japan Stock Futures Drop; Australian Shares Fall to 4-Year Low

By Kyung Bok Cho

Oct. 27 (Bloomberg) -- Japanese stock-index futures declined as concern deepened that the financial crisis is dragging the global economy into recession. Australia's main equity index fell to the lowest level in four years.

Nikkei 225 Stock Average futures expiring in December closed at 7,550 in Chicago on Oct. 24, down from 7,620 in Osaka and 7,645 in Singapore, and putting Japan's benchmark index on course for its lowest level since 1982. Nikkei futures opened at 7,480 in Singapore today. U.S.-traded receipts of Canon Inc., the world's biggest digital-camera maker, lost 5 percent from the closing share price in Tokyo on Oct. 24.

Australia's S&P/ASX 200 Index fell 1.7 percent to 3,804.00 as of 10:30 a.m. in Sydney, heading for its lowest close since November 2004. GPT Group, an Australian real-estate investment trust, plunged 39 percent after selling shares at a discount to repay debt. New Zealand markets are closed for a holiday.

U.S. stocks declined on Oct. 24, extending a global sell-off as concern mounted about the world economy. The Standard & Poor's 500 Index sank 3.5 percent to 876.77, while the Dow Jones Industrial Average lost 3.6 percent to 8,378.95.

Japan's government may take steps to halt the yen's rapid advance against global currencies, the Nikkei newspaper reported on Oct. 25. That would be the first intervention in currency markets since 2004, according to the newspaper. The government will compile a package of measures to support the country's stock market, Finance Minister Shoichi Nakagawa told reporters last night after meeting with Prime Minister Taro Aso.

The yen traded at 92.94 per dollar as of 7:36 a.m. today in Tokyo, from 94.32 in New York on Oct. 24. Japan's currency gained to 116.80 per euro from 118.96.

GPT resumed trading today, falling 39 percent to 70 Australian cents. The company said on Oct. 24 that it sold A$1 billion ($620 million) in a rights offer to institutional investors at a 48 percent discount to its last price before a Oct. 22 trading halt.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net.



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U.S. Stock Futures Advance as Traders Increase Rate-Cut Bets

By Jeff Kearns

Oct. 27 (Bloomberg) -- U.S. stock-index futures advanced, indicating the market may pare the worst monthly plunge in 70 years, as speculation the Federal Reserve will cut interest rates outweighed concern the global economic slowdown is deepening.

Traders increased bets that the Fed will cut its target for overnight loans between banks in half to 0.75 percent this week. Reports may show the U.S. economy shrank last quarter for the second time in a year as consumers and companies retrenched. More than 40 heads of state at a government meeting in Beijing called for an overhaul of World War II-era banking rules.

Standard & Poor's 500 Index futures expiring in December added 3.40 points, or 0.4 percent, to 869.40 at 7:37 a.m. in Tokyo. U.S. stocks tumbled last week, driving the S&P 500 toward the steepest monthly loss since 1938, on concern the global economy is sliding into a recession.

``A cut would send a positive signal that the Fed remains vigilant in keeping the financial system fluid and flooded with money as the credit markets thaw,'' said Mark Luschini, who oversees $1 billion as chief investment officer at Parker Hunter Asset Management in Pittsburgh.

The S&P 500 retreated 6.8 percent to 876.77 last week, the lowest level since April 2003. The benchmark index for U.S. equities plunged 25 percent in October. The Dow average fell 5.4 percent to 8,378.95 last week. The MSCI World Index of 23 developed markets lost 8.3 percent, while Brazil, Russia and India drove a gauge of 25 emerging markets to a 17 percent slump.

Alcoa, Citigroup Plunge

Alcoa Inc., Citigroup Inc. and Hewlett-Packard Co. retreated the most in the Dow Jones Industrial Average last week, losing more than 18 percent, on speculation the financial crisis spread beyond banks to industrial companies and computer makers. General Motors Corp. approached the lowest price since the 1950s, and Ford Motor Co. plunged 17 percent.

``There are forced sellers and no one willing to stick their neck out,'' said Henry Herrmann, Overland Park, Kansas-based president of Waddell & Reed Financial Inc., which manages $70 billion.

Futures showed odds increased the Fed will cut its rate target by 0.75 percent. Traders are assigning a 26 percent chance of a three-quarter-point cut, up from no chance a week ago, while odds of a half-point cut are 74 percent.

``While things may be really ugly, the sense now is that we've looked into the abyss and we've seen the worst of it,'' said Scott Nations, president of Fortress Trading Inc. in Chicago.

`Very Tough Times'

Gross domestic product contracted at a 0.5 percent annual rate from July to September, the biggest drop since the 2001 recession, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due Oct. 30. Consumer spending, the biggest part of the economy, probably dropped by the most in almost two decades as job losses mounted, stock prices sank and property values plummeted.

Jack Welch, General Electric Co.'s former chief executive officer, said that the U.S. economy will start to improve in late 2009 after struggling for the next three quarters.

``We are going to have some very tough times,'' Welch said yesterday on the ABC News ``This Week'' program. ``The fourth quarter of this year could have negative growth in the 3-to-4 percent range.''

Leaders meeting in Beijing this weekend ``pledged to undertake effective and comprehensive reform of the international monetary and financial systems,'' according to a statement. The two-day summit was the first meeting of Asian and European Union chiefs since calls for coordinated action mounted along with bank failures and plunging stock prices that began last month.

$10 Trillion Lost

More than $10 trillion has been erased from the market value of shares worldwide this month as earnings decreased. The 236 companies in the S&P 500 that have reported third-quarter results posted a 23 percent decline on average. Reports yesterday showed the U.K. economy contracted for the first time since 1992 and growth in South Korea was the slowest in four years.

All 48 of the developed and emerging markets tracked by MSCI have declined in 2008, with 22 losing at least half their value. The 73 percent plunge by Russia's Micex Index is the steepest. Benchmark indexes for China, Greece, Ireland, Peru and Austria retreated more than 60 percent. The S&P 500 dropped 40 percent. Morocco and Jordan have done the best, falling 6.4 percent and 19.2 percent, respectively.

It's ``panic creating a freefall as investors simply liquidate anything and everything,'' said Walter Gerasimowicz, the New York-based chief executive officer at Meditron Asset Management, which manages $1.1 billion. ``The market seems to be very overdone, almost pricing for a depression.''

The Chicago Board Options Exchange Volatility Index, or VIX, a gauge of how much investors are paying for insurance against S&P 500 declines, rose 13 percent to a record 79.13 last week.

Cheap Stocks

Treasuries rallied, pushing the yield on the 30-year bond to the lowest in more than three decades. It sank as low as 3.8676 percent yesterday.

``The U.S. and European markets have blown out to record levels of attractiveness versus bonds,'' Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners LLC, said during a Bloomberg Television interview. Stocks are at ``very, very cheap levels.''

Last week, 245 of the 500 companies that make up the S&P 500 dropped to the lowest price in a year or more. Russian equities are the cheapest in the world, trading for 2.5 times estimated 2008 profit. The 27 nations with price-to-earnings ratios of 8 or less include Germany, Turkey, South Africa, the U.K. and Indonesia. The S&P 500's multiple is 11.

``There is an extreme level of pessimism and almost despair,'' said Biggs, 75. ``As long as I have been in the business, those have always been good signs.''

Alcoa fell 20 percent to a 13-year low of $9.41. Citigroup lost 18 percent to $12.14, the lowest price since October 1996. Hewlett-Packard declined 18 percent to $32.44. GM decreased 7.5 percent to $5.95, remaining above the five-decade low of $4.76 reached two weeks ago. Ford slipped 17 percent to $2.01.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.



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U.S. Retail Gasoline Falls to $2.78 a Gallon, Lundberg Says

By Aaron Clark

Oct. 26 (Bloomberg) -- The average price of regular gasoline at U.S. filling stations fell to $2.78 a gallon as the global economic slump curbed demand.

Gasoline dropped 53 cents, or 16 percent, in the two weeks ended Oct. 24, according to oil analyst Trilby Lundberg's survey of 7,000 filling stations nationwide. Crude oil, which accounts for about 73 percent of gasoline's pump price, has fallen 56 percent from a record $147.27 a barrel reached on July 11.

``There's never been a price crash like this,'' Lundberg said today. Prices have dropped 88 cents over the past 30 days ``thanks to lower crude oil prices and shrinking U.S. gasoline demand.''

AAA, the nation's biggest motoring club, said today that regular gasoline at the pump costs $2.699 a gallon on average, down 34 percent from the record $4.114 reached July 17 and 4.9 percent lower than a year ago.

Crude oil futures on the New York Mercantile Exchange tumbled to a 16-month low as OPEC's decision to slash production by 1.5 million barrels a day failed to ease concern that the global economic slump is curbing fuel demand. Oil dropped $3.69, or 5.4 percent, to $64.15 a barrel on Oct. 24.

Gasoline futures on the New York Mercantile Exchange fell 9.99 cents, or 6.3 percent, to $1.4779 a gallon on the same date.

U.S. motorists drove less in August for a 10th consecutive month even as gasoline prices fell from a record, the Federal Highway Administration said. Vehicle-miles traveled fell 5.6 percent from a year earlier, the agency said Oct. 24.

Gasoline Demand

U.S. gasoline demand fell 6.4 percent last week, a smaller decline than in the previous two weeks, as consumers paid lower prices at the pump, a MasterCard Inc. report showed Oct. 21.

Motorists bought an average 8.986 million barrels of gasoline a day in the week ended Oct. 17, down from 9.605 million a year earlier, MasterCard, the second-biggest credit-card company, said in its weekly SpendingPulse report. It was the 26th consecutive weekly slide.

Gasoline use for the year is down 3.2 percent from a year earlier, the report showed. The average price for regular gasoline has not been this low since Oct. 5, 2007, when it was $2.75 a gallon, according to the report.

The highest average price for self-serve regular gasoline in the U.S. was $3.50 a gallon in Anchorage, Alaska, Lundberg said. The lowest was in Wichita, Kansas, at $2.26 a gallon. On New York's Long Island, the price was $3.02 a gallon.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net.



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LSE Said to Hire Recruiting Company to Find Successor for CEO

By Nandini Sukumar

Oct. 26 (Bloomberg) -- London Stock Exchange Group Plc, which operates Europe's oldest independent bourse, has hired a recruiting firm to find a successor to Chief Executive Officer Clara Furse, according to a person familiar with the matter.

Furse, 51, will likely remain the company's CEO until the end of 2009 to oversee the exchange's purchase of Borsa Italiana SpA, said the person, who declined to be identified. LSE Group, whose shares have slumped 76 percent this year, hired a London- based headhunter to seek a new CEO from candidates both within and outside the company, the person said. Furse has discussed succession plans with LSE Chairman Chris Gibson-Smith, although no list of candidates exists, said the person.

Canadian-born of Dutch parents, Furse was previously chief executive of Credit Lyonnais Rouse Ltd., the derivatives unit of Credit Lyonnais SA, before joining the LSE in 2001. The exchange, which started in 1698 when a group of brokers met in Jonathan's Coffee House to trade stocks and commodities, is facing competition from as many as seven new rivals. In September, the LSE's trading system broke down on the day European equities posted their biggest gain in five months, hurting clients who trade an average $17.5 billion a day.

`Fully Committed'

``Clara has been with the exchange for eight years and it's natural that the board is thinking about succession planning,'' London-based LSE spokesman Patrick Humphris said in an e-mail. ``Clara remains fully committed to the exchange's continued success and, in particular, to the completion of its integration with Borsa Italiana.''

The Sunday Telegraph reported earlier today that the LSE hired a search company to look for a successor to Furse.

As the first woman to serve as CEO of the LSE, Furse rebuffed five takeover offers in two years and bought the operator of the Milan stock exchange in 2007.

Furse was brought in after shareholders forced Gavin Casey to resign following a failed attempt to merge the exchange with Frankfurt-based Deutsche Boerse AG. LSE has spurned takeover approaches since December 2004 from Euronext NV, Deutsche Boerse and twice from New York-based Nasdaq Stock Market Inc.

The LSE's shares fell as low as 437.5 pence on Oct. 24, dropping below their Dec. 10, 2004, level for the first time. That was the last trading day before Deutsche Boerse made a takeover offer for the LSE. The stock closed last week at 477.5 pence, bringing its year-to-date decline to 76 percent, the fifth-largest in the FTSE 100 Index.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net.

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Dillard's, Ford, PNC, Spectra, Walt Disney: U.S. Equity Preview

By Lu Wang

Oct. 26 (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 8 p.m. in New York on Oct. 24, unless otherwise specified.

Dillard's Inc. (DDS US) fell 7.2 percent to $3.10. The department-store chain may have its debt rating cut by Moody's Investors Service, which cited the company's ``continuing weak operating performance.''

Ford Motor Co. (F US): The second-biggest U.S. carmaker may sell Volvo to Bayerische Motoren Werke AG (BMW GY) to raise cash, the Sunday Times reported, citing people it didn't identify.

General Motors Corp. (GM US): A merger of GM and Cerberus Capital Management LP's Chrysler LLC is a good idea because it would eliminate excess production capacity, Barron's reported, citing John Casesa, managing partner of Casesa Shapiro Group.

Johnson & Johnson (JNJ US): J&J and Schering-Plough Corp.'s (SGP US) experimental inflammatory disease drug improved joint and skin symptoms in people with arthritis, who told researchers they also felt and functioned better with the medicine.

Pfizer Inc. (PFE US): The drugmaker's experimental pill for rheumatoid arthritis helped relieve joint swelling and pain with side effects similar to older treatments that are taken as shots, a study found.

PNC Financial Services Group Inc. (PNC US) fell 1.2 percent to $58.19. Pennsylvania's biggest bank may have its debt rating reduced by Standard & Poor's after agreeing to buy National City Corp. (NCC US).

Spectra Energy Corp. (SE US): The second-biggest U.S. pipeline company by market value said it plans to expand two natural-gas lines in its Transportation North operations in northern British Columbia.

Thoratec Corp. (THOR US) plunged 51 percent to $12.35. The company said five people died while using its mechanical heart that is smaller than a D-cell battery and urged doctors and patients to check the devices for damage.

Walt Disney Co. (DIS US): The company's ``High School Musical 3: Senior Year'' opened as the top film at U.S. and Canadian theaters with $42 million in sales, making it the best- ever debut for a movie musical.

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



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IMF, Ukraine Reach Agreement on $16.5 Billion Loan

By Daryna Krasnolutska and John Martens

Oct. 26 (Bloomberg) -- The International Monetary Fund reached agreement with Ukraine on a $16.5 billion loan to help support the nation's financial system as turmoil in global credit markets and recession concerns sweep eastern Europe.

The 24-month loan is conditional on parliamentary approval of legislation to support the country's banks, the Washington- based lender said today in a statement. Ukraine also will need to balance its budget by reining in social spending and narrow the current-account deficit, the Kiev-based central bank said in a separate statement.

Eastern Europe is being buffeted by the global credit crunch as investors stung by losses in developed nations sell riskier emerging-markets stocks, bonds and currencies. Ukraine is the first nation in the region to receive IMF help during the crisis. Belarus this past week joined Iceland, Pakistan, Hungary and Ukraine in requesting at least $20 billion of emergency loans from the IMF to help repay debt.

``The money is only half of the issue, conditionality is key,'' Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, said in a telephone interview. ``We hope the Fund is maintaining its push for a more flexible exchange rate, far-reaching reforms in the banking sector and more privatization.''

Banks

President Viktor Yushchenko faces an economic meltdown as prices for the nation's main exports, including steel, drop and a weakening currency makes goods purchased abroad more costly. He has urged the cabinet to raise custom duties to curb imports and help domestic producers boost exports to counter the widening trade gap.

Ukraine agreed to set up a fund that will buy stakes in the nation's banks and pass legislation that forces lenders to halt dividend payments to retain capital, central bank official Serhiy Kruhlik said in a telephone interview in Kiev today.

The central bank took control of closely held Prominvestbank on Oct. 7 and promised an injection of 5 billion hryvnia ($830 million) to bail out Ukraine's sixth-biggest bank by assets after a run by depositors.

The government also plans to raise the state guarantee on bank deposits to 100,000 hryvnia from 50,000 now and will use proceeds from privatizations and bond sales for the bank bailout fund, according to Kruhlik. The parliament is scheduled to vote on the amended legislation on Oct. 28.

`No Consensus'

``As of now, there is no consensus between Ukrainian political forces about a stabilization program,'' said Svitlana Maslova, an analyst at Barclays Capital in London. Investors ``will closely look at the details of the policy package to assess the impact of the program.''

Industrial production contracted 4.5 percent from a year earlier in September and the trade gap widened to a record $12.5 billion in the eight months through August.

Ukraine's current-account deficit may widen to $15 billion this year, central bank governor Volodymyr Stelmakh said earlier this month. The current-account gap was $7.5 billion, or about 6 percent of gross domestic product, in the first eight months of the year.

The former Soviet republic's currency tumbled 13 percent last week and touched a record 6.0812 per dollar on Oct. 24. the lowest since the hryvnia was introduced in 1996. Ukraine's annual inflation rate almost tripled to a record 31.1 percent in May before easing back to 24.6 percent in September.

Elections

Ukraine is the least creditworthy of Europe's transition economies measured by the cost of credit-default swaps, conceived to protect bondholders against default. Its economic predicament is complicated by a political crisis that led to collapse of the government and calling of early elections.

Yushchenko dissolved the parliament on Oct. 8 and a new one will be chosen on Dec. 14, the second national elections in as many years. His party, which seeks closer ties with the European Union and the North Atlantic Treaty Organization, quit the coalition on Sept. 3 after former ally, Prime Minister Yulia Timoshenko, joined with the pro-Russian opposition to strip the president of some powers.

Yushchenko and Timoshenko joined forces to win the 2004 election after the bloodless Orange Revolution on promises to move the country toward the West. After a split in 2005, the two reunited before last year's elections.

Since then, Yushchenko and Timoshenko have been locked in a battle over how to tackle Europe's fastest inflation rate, sell state assets and how to spend budget funds.

To contact the reporter on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; John Martens in Brussels at jmartens1@bloomberg.net



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