Australia's Economy Faces First Recession Since 1990

By Jacob Greber

Nov. 11 (Bloomberg) -- Australia's economy, which cruised through the 1997 Asian financial crisis and the dot-com bust, is facing the prospect of its first recession in almost two decades.

Waning global demand for commodities threatens to staunch a five-year flood of export earnings that helped boost Australian incomes by the most in more than 30 years. Without shipments overseas, the economy would have contracted in the second quarter.

China's performance may be the key to whether the economy shrinks: A slowdown in Australia's fastest growing export market would hurt shipments of iron ore, coal, copper and cotton. Treasurer Wayne Swan said this week Australia may be hit harder than expected as the global slowdown spreads to the emerging markets that are among the nation's main trading partners.

``It'll be no mean feat for Australia to stay out of a recession,'' said Rory Robertson, an economist at Macquarie Group Ltd. in Sydney. ``Consumers and business are hunkering down across the world, almost as we speak, shocked to the core by the financial dislocation.''

Australian business confidence plunged last month to the lowest since National Australia Bank Ltd. began measuring sentiment in 1989, the bank said today.

``Fear reigns supreme,'' said Alan Oster, chief economist at National Australia in Melbourne. Share market declines, falling commodities and ``continuing talk of global recession have finally broken business optimism'' in Australia, he said.

Stocks, Currency Drop

The benchmark S&P/ASX 200 Index of stocks sank 4.4 percent at 11:46 a.m. in Sydney, taking its slump for the year to 38 percent. The Australian dollar fell by 4.1 percent to 66.56 U.S. cents from 69.40 in Asia yesterday. The currency has dropped 32 percent since reaching a 25-year high of 98.49 on July 16.

Central bank Governor Glenn Stevens responded to the threat with the most aggressive round of interest-rate cuts since a recession in 1991, slashing the benchmark rate by 2 percentage points to 5.25 percent in nine weeks.

Prime Minister Kevin Rudd plans to pump A$10.4 billion ($7.1 billion) into the pockets of pensioners, first-home buyers and families to boost spending.

The International Monetary Fund forecasts global growth of 2.2 percent next year, a level it has called the ``equivalent to a global recession.''

The Reserve Bank of Australia yesterday cut its forecast for economic growth in 2008 to 1.5 percent from the 2 percent it predicted in August.

Australia is Vulnerable

The slide in global growth ``will be more dramatic than many had thought previously,'' Treasurer Swan said on Nov. 9.

While the government and central bank don't forecast a recession, Australia is vulnerable. Without exports, the economy would have contracted 0.2 percent in the second quarter instead of expanding 0.3 percent.

The drop in global demand has hurt commodities. The Reuters/Jefferies CRB futures index for prices of 19 raw materials tumbled 46 percent since hitting a record on July 2.

The declines could get worse should China's economy weaken.

``If China stops being fine, then Australia runs the risk of being buggered,'' said Chris Richardson, head of Canberra-based research company Access Economics. ``Is there a risk that China won't be fine? You bet there is.''

China's Stimulus Package

China this week pledged a 4 trillion yuan ($586 billion) stimulus plan to prop up growth. Richardson predicts China will expand 7.4 percent in 2009, the weakest pace since 1990. The economy grew 11.9 percent in 2007.

Rio Tinto Group, the world's second-largest iron ore exporter, said yesterday it will cut output at its mines in Western Australia by 10 percent.

Waning commodity prices are forcing miners such as Oz Minerals Ltd., the world's second-biggest zinc producer, and Minara Resources Ltd. to cut jobs. They are also shelving spending on investment, which accounts for about a quarter of gross domestic product, up by about half since the start of the decade, according to Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney.

``All the economy's eggs are in the mining basket,'' said Walters. ``The ripple effects through the economy for the next two years will be massive.''

Economy to Contract

Walters predicts GDP will contract in the six months through March, trimming 2009 growth to 0.7 percent. Unemployment will more than double to 9 percent, he said.

A drop in shipments is also bad news for Australia's indebted consumers. The mining boom fueled a 30 percent surge in household incomes in the past five years, more than any other developed economy, according to the central bank.

Many households used the cash to take on debt, which almost doubled since 1999 to around 160 percent of incomes, a higher ratio than the U.S. and U.K., according to Shane Oliver, senior economist at AMP Capital Investors in Sydney. The median national house price soared about 140 percent in the same period.

House prices fell 1.8 percent in the third quarter and retail sales slumped the most in more than three years last month.

``The average person in the street senses something is wrong,'' said Macquarie's Robertson. ``Households and businesses are pulling in their horns. Whatever people were planning two or three months ago, much of it has been put on hold.''

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

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Bank Indonesia `Open to Possibility' of Cut in Rates

By Shamim Adam

Nov. 11 (Bloomberg) -- Indonesia's central bank is ``open'' to the possibility of reducing interest rates to boost the economy as global growth slows and inflation eases, Deputy Governor Miranda Goeltom said.

Bank Indonesia kept its key rate unchanged at 9.5 percent this month, after six increases since May, amid lower-than- expected consumer price gains. Policy makers still need to monitor inflationary pressures before making any decisions on borrowing costs, Goeltom told Bloomberg News yesterday in Sao Paulo where she attended a meeting of central bank officials.

Central banks in Asia and around the globe have slashed interest rates and governments are boosting spending as the world battles the threat of a prolonged slowdown. The International Monetary Fund last week predicted the first simultaneous recession in the U.S., Japan and euro region in the post-World War II era next year.

``We've already seen that the slowing down of the world economy and demand will eventually have an effect on our growth,'' Goeltom said. ``While the central bank is still targeting lower inflation for the future, we're not immune to the increasing need of addressing the issues of a future slowing down of productive capacities.''

Consumer prices in Indonesia increased 11.8 percent from a year earlier in October, after gaining 12.1 percent in September. The central bank expects to keep inflation between 11.5 percent and 12.5 percent this year, and for price gains to be no higher than 7.5 percent in 2009.

`Any Possibility'

Policy makers will consider ``going further than only pausing'' on interest rates as it did at its most recent meeting, Goeltom said.

``If inflationary pressures have started to go down as early indications that we have seen, we are open to any possibility of responding to it timely,'' she said. ``We don't want to be seen as over-reactive to the inflation numbers that came out this month because we have to see the longer-term picture.''

The central bank is also battling a declining currency because of a scarcity of U.S. dollars in the market. The rupiah has dropped 11.3 percent in the past month making it the worst performer among Asia's 10 most traded currencies.

``I think early in the first quarter of next year will be the right time for Bank Indonesia to cut rates given heavy pressure on the rupiah at the moment,'' said Destry Damayanti, an economist at PT Mandiri Securities in Jakarta.

Indonesia's economy may expand as little as 5 percent next year as the world tilts toward a recession, Finance Minister Sri Mulyani Indrawati said Nov. 9, adding that inflationary pressures are easing as commodity prices decline.

``It is very important to have credible decisions,'' Goeltom said. ``Credible monetary policy is even more so important when the market is so uncertain.''

To contact the reporter on this story: Shamim Adam in Sao Paulo at sadam2@bloomberg.net

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Elderly Crime Wave Spotlights Japan's Underbelly: William Pesek

Commentary by William Pesek

Nov. 11 (Bloomberg) -- One of the more amusing parts of living in Japan as a foreigner is how startled many elderly folks get when encountering you on a quiet street.

Actually I'm the one who should be watching my back.

No, I'm not being ageist, just taken aback by a new government report highlighting senior-citizen crime for the first time since 1991. It's no coincidence that the economy was entering a crisis back then.

The latest elderly-crime wave comes after markets plunged and as Japan frets about a return of deflation. In 2007, a total of 48,605 elderly people were arrested or investigated for crimes other than traffic offenses, a fourfold jump from the early '90s.

Besides theft and shoplifting, acts included embezzlement and assaults. Reasons cited for the increase include money troubles and isolation from families.

You don't need to be a criminal psychologist to see how this touches on many of the economic challenges facing Japan's 127 million people. It gets at everything from the gap between rich and poor to pressure on executives to how the government is dithering as the population ages.

``Elderly crime is a serious problem that our society must shoulder in the years to come,'' the government report said. ``With baby boomers becoming elderly within five years, we have reached a state where we must make a fundamental review of anti- crime measures in a fast-aging society.''

Crime Worries

Japan's crime worries may seem mild. It is one of the developed world's safest nations, where children commute to school without parents, women leave behind their pocketbooks while visiting the restroom at cafes, and lost wallets, cameras and mobile phones are routinely turned in at police stations.

When there is crime in Japan, it's often of the shocking and aberrational kind. In June, a 25-yead-old man drove a truck into a crowd of pedestrians in Tokyo and began knifing people. His spree left seven dead and scores injured.

Economics sometimes plays a role. In August, a 79-year-old woman was arrested for stabbing a younger woman in Tokyo. She was quoted as saying: ``I had no place to stay, so I wanted the police to take care of me.''

Such events expose Japan's underbelly. The government acknowledged last month that Japan is probably in its first recession in six years as exports and production slow.

Japan's Poverty

Even when Japan was growing steadily, few benefited from it. Paychecks didn't fatten along with corporate profits during the longest postwar recovery. That dynamic, which many attribute to former Prime Minister Junichiro Koizumi's free-market policies, is widening the rich-poor gap in a nation that long prided itself as being egalitarian.

The number of households on welfare reached 1.1 million last year, an increase of 300,000 since 2001. Labor unions argue that the trend accelerated because of efforts by Koizumi -- in power from 2001 to 2006 -- to cut state pensions, raise health- insurance premiums and change laws to allow companies to hire more temporary staff on lower wages.

Poverty in Japan? An Organization for Economic Cooperation and Development report last month ranked Japan fourth among 30 members in terms of poverty levels. The OECD's definition is the ratio of a population living on less than half the median income.

Japan certainly needs to modernize its rigid economy and encourage entrepreneurship. Yet such steps haven't been matched with improvements to the social-safety net. Koizumi pushed the ideas of former U.S. President Ronald Reagan and may end up with a legacy more akin to George W. Bush's: Gains were enjoyed very narrowly by the wealthy.

Internet-Cafe Refugees

Television networks are increasingly doing features on Japan's working poor. More 20-somethings are joining the ranks of so-called Internet-cafe refugees -- young people with no home or job who sleep in 24-hour cafes. Women are having a particularly hard time getting full-time employment. Homelessness, too, is on the rise in what's by far one of the wealthiest nations.

``Hardship isn't something people associate with Japan, but it's something that is becoming more and more common,'' says Masaharu Takenaka, director of economic research at the Institute for International Monetary Affairs in Tokyo.

That problem is only made worse by the rapidly aging population. Twenty-one percent of Japanese are over 65, compared with 13 percent in the U.S. Due to a declining birthrate, there will be twice as many elderly Japanese as there are children within five years.

The upshot could be a steady increase in crime among the unlikeliest of demographics. Who knew budget debates of the future would include more funding to revamp prisons to house ever-growing numbers of elderly inmates?

The combination of the Nikkei 225 Stock Average's 41 percent drop this year and the yen's 14 percent increase against the dollar will reduce government-tax revenue and pressure companies to fire workers. With the Bank of Japan's overnight rate at 0.3 percent and headed lower, household wealth will drop even more.

Economic realities may push only the 65-plus age category to desperate measures. In a nation as wealthy as Japan, that's a crime in itself.

(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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Radioactive Beer Kegs Menace Public, Boost Costs for Recyclers

By Jonathan Tirone and Subramaniam Sharma

Nov. 11 (Bloomberg) -- French authorities made headlines last month when they said as many as 500 sets of radioactive buttons had been installed in elevators around the country. It wasn't an isolated case.

Improper disposal of industrial equipment and medical scanners containing radioactive materials is letting nuclear waste trickle into scrap smelters, contaminating consumer goods, threatening the $140 billion trade in recycled metal and spurring the United Nations to call for increased screening.

Last year, U.S. Customs rejected 64 shipments of radioactive goods at the nation's ports, including purses, cutlery, sinks and hand tools, according to data released by the Department of Homeland Security in response to a Freedom of Information Act request. India was the largest source, followed by China.

``The world is waking up very late to this,'' said Paul de Bruin, radiation safety chief for Jewometaal Stainless Processing BV in Rotterdam, the world's biggest stainless-steel scrap yard. ``There will be more of this because a lot of the scrap coming to us right now is from the 1970s and 1980s, when there were a lot of uncontrolled radioactive sources distributed to industry.''

On Oct. 21, the French nuclear regulator said elevator buttons assembled by Mafelec, a Chimilin, France-based company, contained radioactive metal shipped from India. Employees who handled the buttons received three times the safe dose of radiation for non-nuclear workers, according to the agency.

Operations at the factory are now back to normal and the company has cut ties with the ``source'' of the radiation, Mafelec said in a statement. ``In the worst-case scenario the exposure would have been under that of a medical scan,'' Chief Executive Officer Gilles Heinrich said.

1 Million Missing Sources

Many atomic devices weren't licensed when they were first widely used by industry in the 1970s. While most countries have since tightened regulations, it is still difficult to track first-generation equipment that is now coming to the end of its useful life.

Abandoned medical scanners, food processing devices and mining equipment containing radioactive metals such as cesium-137 and cobalt-60 are often picked up by scrap collectors and sold to recyclers, according to the International Atomic Energy Agency, the UN's nuclear arm. De Bruin said he sometimes finds such items hidden inside beer kegs and lead pipes to prevent detection.

There may be more than 1 million missing radioactive sources worldwide, the Vienna-based IAEA estimates.

``We're passing by the first era of nuclear applications, so disused material is increasing,'' said Vilmos Friedrich, an IAEA inspector. ``Until recently, there hasn't been licensing'' for industrial devices.

`Alarms Will Go Up'

Smelting such items contaminates recycled metal used to make new products and the furnaces that process the material. Cleanups cost as much as $30 million, according to the Brussels-based Bureau of International Recycling, which represents metal, paper and glassmakers.

The danger increases when metal prices rise, pushing scavengers to pick up and sell more material, said Martin Magold, who led a Geneva-based UN team that tracked radioactive metal shipments in Europe.

Prices for scrap steel quadrupled to $665 a ton in Rotterdam over the past five years. After peaking on July 3, prices dropped to $115.50 last week as the slowing global economy eroded demand.

``Because of high scrap prices, any little piece is being sold for recycling,'' Magold said. ``Alarms will go up dramatically in coming years.''

Nucor Corp., the biggest U.S.-based steel producer, has spent more than $1 million installing and upgrading radiation detection equipment at its plants, said Steve Roland, environmental director for the Charlotte, North Carolina company.

``Orphaned sources are a significant problem worldwide for the recycling industry,'' Roland said. ``Anything governments can do to remove sources from commerce and hold people accountable for the loss is to our benefit.''

Cancer, Birth Defects

Chronic exposure to low doses of radiation can lead to cataracts, cancer and birth defects, according to the U.S. Environmental Protection Agency.

A study of 6,252 Taiwanese people who lived in apartments built with radioactive reinforcing steel found that 117 cancer cases were diagnosed from 1983 to 2005. The research showed a statistically significant increase in leukemia and breast cancer.

``People don't understand the risk,'' said Dr. Peter Chang, a professor of environmental health at Taiwan's National Medical Center who developed the study. ``We have an extreme lack of education.''

Spanish Cloud

In 1998, equipment containing cesium-137 was smelted at a foundry in Los Barrios, Spain, operated by Acerinox SA, the world's largest stainless steel producer. Radiation spread over Italy and France, triggering concern that a reactor had melted down in Russia, according to an IAEA report on the incident.

While only six people were exposed to radiation, the cleanup, hazardous waste storage and interruption of business cost the company an estimated $25 million, the report said.

At the time, Acerinox had radiation detectors installed in parts of the factory and assumed the scrap it purchased had been inspected by the dealer, said Juan Garcia, a Madrid-based spokesman for the company. Acerinox has since improved security by spending about 100 million euros ($129 million) on ``advanced contamination-detection technologies,'' he said.

The event also led Spain to rewrite rules governing the scrap metal industry and to create an agency that helps recyclers dispose of radioactive materials.

The IAEA may recommend that governments increase monitoring of scrap shipments at international borders and recyclers screen all material entering their plants, according to draft guidelines circulated by the agency.

ArcelorMittal Scanners

Many large metal producers in the U.S. and western Europe say they already screen for nuclear material.

``All our steelworks are equipped to verify possible radioactivity contamination of the scrap shipments,'' Jean Lasar, a spokesman for Luxembourg-based ArcelorMittal, the world's biggest steelmaker, said in an e-mail.

Much of the contaminated scrap originates in or passes through countries with inadequate licensing regulations and detection equipment.

For example, about 1,000 radio-electronic thermal generating units were misplaced after the collapse of the Soviet Union, said Abel Gonzalez, a former IAEA inspector who helped retrieve such orphaned sources in Russia. The devices, used to power remote lighthouses, each contain as much radiation as was released by the Chernobyl meltdown in 1986, he said.

Cesium-137 in Kyrgyzstan

In December, officials in Kyrgyzstan discovered cesium-137 that probably came from discarded food-irradiation equipment in a trainload of scrap bound for Iran. Four emergency workers were exposed to high levels of radiation when they responded to the incident, according to local media reports. Kyrgyzstan's delegation to the IAEA declined to comment.

Russia and the other former Soviet states accounted for 13 percent of the scrap exported worldwide last year, according to the World Steel Association, which represents about 180 metal companies.

Overall, 123 shipments of contaminated goods have been denied entry to U.S. ports since screening began in 2003, according to the Homeland Security data. Of those, 67 originated in India, 23 came from China and 20 were from Canada. This year, a total of 32 cases had been reported through early July.

`No Authority, No Control'

There is no guarantee materials rejected by the U.S. won't reappear in countries with less stringent monitoring.

``The only authority we have is that we don't let them into the U.S., so that ship was turned around and those components left the U.S.,'' said Dale Klein, chairman of the Nuclear Regulatory Commission. ``Where they went, we have no authority and no control.''

Homeland Security declined to give information on where shipments ended up after being turned away from the U.S.

At Kandla, India's biggest port by volume, most scrap is imported in shipping containers that are unloaded at one of 12 cargo docks. None of it is screened for contamination.

``There are no means as of today to check the radioactive material in the scrap that's imported or exported,'' said H.C. Venkatesh, a traffic manager at Kandla Port Trust.

India plans to install scanners at Kandla and three other ports that handle about 80 percent of the nation's container traffic. They will become operational starting in April.

A year ago, Dutch authorities seized a shipment of radioactive purses in Amsterdam and traced them to Maple Exports Ltd., a Kolkata-based leather goods maker, according to the inspectors who impounded the cargo.

`Rogue Supplier'

Gaurav Bhalotia, a director at Maple Exports, denied that any of his company's purses were contaminated, though he said, ``It's impossible for us to check every item.'' The merchandise belonged to another company that shared space in the same shipping container, he said in a telephone interview.

Maple Exports has become more careful about who it buys metal from and may buy a radiation scanner, Bhalotia said.

Competition discourages some manufacturers from asking questions about where metal originates, he said.

``People are driven so much by price, they buy from any supplier,'' Bhalotia said. ``They want to buy cheap, and when there is this rogue supplier the whole chain suffers.''

Some firms already screen products for contamination. Indian Union Manufacturers Pvt. sends samples of its bells, buckles and belts to Indian labs, said D. Roy Chowdhury, a director of the company based at Kanpur in northern Uttar Pradesh state.

Cobalt and Nickel

The problem for Chowdhury is that the nickel he uses to burnish his products is prone to contamination. Cobalt-60 and nickel are often melted together and are chemically suited to stick to each other.

``There is concern among exporters about the presence of radioactive substances,'' Chowdhury said. ``I have heard from my buyers in Kolkata about consignments coming back.''

India began probing the nation's scrap-metal handlers after the radioactive elevator buttons were detected in France.

``This is causing a big economic loss to the exporters,'' said Satya Pal Agarwal, head of radiological safety at India's Atomic Energy Regulatory Board. ``We are trying to trace the source. Most probably it is from imported metal scrap.''

Homeland Security and the U.S. Department of Energy are funding a $60 million program to install radiation monitors at ports around the world. The Secure Freight Initiative started in October 2007 at three sites in the U.K., Pakistan and Honduras. About 800 ports worldwide handle cargo containers, according to London's Drewry Shipping Consultants Ltd.

`You Die'

Similar equipment is already used in Rotterdam, Europe's busiest port, where 30-meter (100-foot) mountains of disfigured metal wait to be processed.

At nearby Jewometaal, De Bruin switched on a dosimeter, the modern equivalent of a Geiger counter. The device squealed as he entered the corner of a warehouse where radioactive metals are stored until they are sent to Covra NV, the Netherlands' state- run nuclear waste dump.

In his office, De Bruin donned gloves before selecting a pair of long tweezers and pulling a piece of cesium-137 the size of a match head out of a bottle.

``If you get a dose of this on your hands it's no problem,'' said De Bruin, a former customs agent who has worked in nuclear research reactors. ``If you get it in your lungs you die.''

Hours before, he'd sent a truckload of Venezuelan scrap to the Netherlands' nuclear waste dump.

Covra charges a one-time fee of 110 euros a liter (1.06 quarts) to watch over corroding cobalt and cesium metals.

``We should accept these orphaned sources rather than making a fuss over which country is responsible and who should bear the burden,'' said facility manager Henry Codee, in his office overlooking the mango-colored waste hangar. ``That's the only way to solve the problem.''

To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net; Subramaniam Sharma in New Delhi at ssharma@bloomberg.net

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Oil, Gold Fall as Equities Decline on Slowing Economy Concern

By Christian Schmollinger

Nov. 11 (Bloomberg) -- Crude oil, gold and soybeans fell as equities dropped because of a worsening outlook for company earnings, renewing concern the global financial crisis will curtail energy and commodity demand.

Oil slumped as Japanese stock markets started the day down 1.6 percent, following a drop in U.S. equities. The Standard & Poor's 500 Index retreated 1.3 percent yesterday, extending last week's 3.9 percent slide. Crude rose yesterday on a $586 billion Chinese economic stimulus plan.

``The weakness in equity markets is adding to concerns about the international economic outlook and what that means for consumption,'' said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``Even with the stimulus plan in China and interest rate cuts elsewhere, the markets are still worried about slower growth.''

Crude oil for December delivery fell as much as $2.12, or 3.4 percent, to $60.29 a barrel on the New York Mercantile Exchange. It was at $60.41 a barrel at 9:53 a.m. Singapore time. Oil slumped 10 percent last week as equities dropped, U.S. fuel stockpiles rose more than expected and the nation's unemployment rate climbed to a 14-year high.

Prices, which have tumbled 59 percent since reaching a record $147.27 on July 11, are down 36 percent from a year ago. Yesterday, oil rose $1.37, or 2.2 percent, to $62.41 a barrel, and also dropped to $59.10, the lowest since March 20, 2007.

The Group of 20 nations said it's prepared to act ``urgently'' and called for lower interest rates. OPEC, the International Energy Agency and the U.S. Energy Department have cut fuel-demand forecasts over the past month.

Commodities

Gold for immediate delivery was down $1.2 at $745.00 an ounce as of 9:30 a.m. Singapore time and platinum fell $10, or 1.2 percent, to $847.00 an ounce. Soybeans for delivery in January delivery in Chicago dropped 10.75 cents, or 1.1 percent, to $9.3725 per bushel and copper for three-month delivery in London was down $5 at $3,870 a metric ton.

U.S. crude-oil supplies probably rose for a seventh week as imports rebounded, a Bloomberg News survey of analysts showed. Stockpiles probably increased 500,000 barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of nine analyst estimates before an Energy Department report this week.

Gasoline inventories probably climbed 500,000 barrels from 196.1 million barrels the week before, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1.1 million barrels from 127.8 million barrels the week before, according to the survey.

The Energy Department is scheduled to release its weekly report on Nov. 13 at 11 a.m. in Washington. The report is being delayed by a day because of the Veterans Day holiday tomorrow.

IEA Forecast

Brent crude oil for December settlement fell as much as $1.74, or 3 percent, to $57.34 a barrel, on London's ICE Futures Europe exchange and traded at 9:11 a.m. Singapore time. The contract increased $1.73, or 3 percent, to settle at $59.08 a barrel yesterday.

The International Energy Agency may cut its 2009 oil demand forecast for a third month as the threat of the worst recession since World War II saps fuel consumption, former IEA analysts said.

The Paris-based adviser to 28 oil consuming nations will reduce the estimated growth in global demand from 700,000 barrels a day, or 0.8 percent, in its next monthly report on Nov. 13, said four analysts who used to work at the IEA and are now at banks. The International Monetary Fund last week warned of the first simultaneous recession in the U.S., Japan and Europe in more than 60 years.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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IEA to Cut Oil Demand Forecast on Slowdown, Former Analysts Say

By Grant Smith and Mark Shenk

Nov. 11 (Bloomberg) -- The International Energy Agency may cut its 2009 oil demand forecast for a third month as the threat of the worst recession since World War II saps fuel consumption, former IEA analysts said.

The Paris-based adviser to 28 oil consuming nations will reduce the estimated growth in global demand from 700,000 barrels a day, or 0.8 percent, in its next monthly report on Nov. 13, said four analysts who used to work at the IEA and are now at banks. The International Monetary Fund last week warned of the first simultaneous recession in the U.S., Japan and Europe in more than 60 years.

``Given the downward revisions to the IMF data, it is highly likely they will revise demand down,'' said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York, who expects demand to shrink 0.4 percent, or 320,000 barrels a day in 2009. ``Anything above zero demand growth now is an optimistic forecast.'' Eagles joined JPMorgan in September after five years at the IEA, where he was editor of the monthly report.

Oil prices plunged more than $80 from a record $147.27 a barrel in July as U.S. fuel use slumped to the lowest in nine years. China's economy is expanding at the slowest pace since 2003 as the credit crunch spread to the world's fastest-growing energy consumer.

``It's safe to assume the direction of revisions of the IEA forecast will continue to be down,'' said Mike Wittner, head of oil market research at Societe Generale SA in London and former co-author of the IEA's monthly report during 1997 to 2002.

Decline in Consumption

The IEA predicted oil consumption would rise to an average 87.2 million barrels of oil a day next year in its most recent monthly Oil Market Report on Oct. 10.

BNP Paribas SA's Harry Tchilinguirian said there is ``downside risk'' to his forecast that oil demand will expand by 500,000 barrels a day next year. Tchilinguirian left the IEA in 2006.

Societe Generale predicts a 300,000 barrel-a-day increase, while Vitol Group, Wood Mackenzie Consultants Ltd. and JBC Energy said they expect demand to fall in 2009, the first annual contraction since 1983.

IEA Chief Economist Fatih Birol said at a conference in London on Oct. 28 that his demand assumptions for next year range between growth of 500,000 barrels a day and a contraction of the same amount.

`Probably Downgrade'

``Monthly U.S. data paints a weaker picture of demand than the weekly data,'' said Dresdner Kleinwort Group Ltd.'s Gareth Lewis-Davies, who worked as an IEA analyst until 1998. ``If the IEA thinks this data is accurate, then yes, they will probably downgrade their demand numbers.''

The IEA already cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week, it published a summary of its annual World Energy Outlook, in which it slashed its 2030 projection by 9.4 percent to 106 million.

``They have been overly optimistic about demand for the last few years,'' said David Knapp, senior editor of Energy Intelligence Group and a former director of the IEA's Oil Markets Division.

Gasoline demand from U.S. motorists declined for 28 consecutive weeks and is 3.9 percent lower than a year ago, according to spending data released by MasterCard Inc. on Nov. 4.

Ian Taylor, chief executive officer of closely held commodity trader Vitol Group, said Oct. 28 that crude consumption may decline by 1 million barrels a day next year. John Waterlow, principal analyst at Wood Mackenzie Consultants Ltd., expects a decline of 250,000 barrels.

OPEC View

The Organization of Petroleum Exporting Countries cited falling demand for its Oct. 24 decision to reduce production by 1.5 million barrels a day. OPEC forecasts 87.2 million barrels a day -- the same as the IEA's assessment -- and is scheduled to release its monthly report on Nov. 17. OPEC ministers will discuss the market situation when they meet next on Dec. 17 and may agree to another supply cut then, the group's president, Chakib Khelil, said on Nov. 8 in Algiers.

U.S. fuel demand in the four weeks ended Oct. 10 sank to 18.6 million barrels a day, the lowest since June 1999, according to the Energy Department.

China's gross domestic product may advance 7.5 percent or less next year, the weakest since 1990, according to estimates by Credit Suisse AG, UBS AG and Deutsche Bank AG.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.netMark Shenk in New York at mshenk1@bloomberg.net

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Japan Stocks Fall on Earnings Outlook; Fanuc Slumps on Orders

By Masaki Kondo

Nov. 11 (Bloomberg) -- Japanese stocks dropped on concern that slumping demand and the stronger local currency will force companies to lower earnings forecasts.

Citizen Holdings Co., the world's biggest maker of mechanical watches, sank 10 percent after cutting its profit target by a third. Canon Inc., which last month predicted its first profit drop in nine years, dived 5.5 percent. Fanuc Ltd., the world's top industrial-robot maker, sank 5.3 percent after orders for machine tools plunged the most in more than six years.

The Nikkei 225 Stock Average declined 337.27, or 3.7 percent, to 8,744.16 as of 10:06 a.m. in Tokyo. The broader Topix index fell 29.11, or 3.2 percent, to 887.54, with almost five stocks slumping for each that rose.

``In such a volatile market with low prospects for global economic growth, long-term investors are hesitant to buy in,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

Waning demand in the U.S. and Europe is dimming the earnings outlook for Japanese companies, prompting businesses from Toyota Motor Corp. to Sony Corp. to slash their forecasts. Of 922 companies that have reported first-half earnings through Nov. 10, more than half reduced full-year profit targets, according to a report by Shinko Research Institute Co.

Japan's current-account surplus narrowed for a seventh month in September as overseas demand weakened and higher energy costs pushed the import bill higher, the government said today.

Corporate earnings are not likely to start recovering until the second half of fiscal 2010 at the earliest, Shinichi Ichikawa, chief equity strategist at Credit Suisse Group, wrote in a report yesterday. He cut his 2008 pretax-profit estimate on Japanese companies to a 40 percent decline from a 30 percent drop.

Canon, Nintendo

Citizen, the world's biggest maker of mechanical watches, plummeted 10 percent to 500 yen, after slashing its annual net- income estimate by 32 percent, citing a stronger yen and weakening demand. Canon, the world's biggest camera maker, retreated 5.5 percent to 3,250 yen, while Nintendo Co., the largest maker of handheld game players, lost 5.6 percent to 30,500 yen in Osaka trading.

The yen strengthened against the dollar to as much as 97.49 from 99.00 at the close of stock trading in Tokyo yesterday, while appreciating versus the euro to as much as 123.81 from 127.29. A stronger local currency reduces the value of repatriated overseas sales of Japanese companies.

Fanuc fell 5.3 percent to 6,060 yen, and JTEKT Corp., which makes bearings for electronic equipment, plunged 8.9 percent to 729 yen. Makita Corp., a maker of electric power tools, fell 4.3 percent to 2,005 yen.

Tool Orders

Orders for machine tools tumbled 40 percent in October from a year earlier, the biggest slump since January 2002, the Japan Machine Tool Builders' Association said yesterday. With a decline in orders, toolmakers will likely post operating losses in the next fiscal year to March 2010, Hidehiko Hoshino, an analyst at UBS AG, wrote in a note.

Iseki & Co., a maker of agricultural machinery, surged 10 percent to 195 yen, bringing its two-day gain to 23 percent. The company yesterday posted 690 million yen ($7.1 million) in first- half net income, defying its loss forecast.

Nikkei futures expiring in December retreated 4.2 percent to 8,740 in Osaka and slumped 4.1 percent to 8,735 in Singapore.

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

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Australia Stocks: Asciano, Harvey, Macquarie, Rio, Westfield

By Ian C. Sayson

Nov. 11 (Bloomberg) -- The S&P/ASX 200 Index fell 172.20, or 4.2 percent, to 3,935.60 as of 12:22 p.m. Sydney. The S&P/ASX 200 Index futures contract expiring in December decreased 3.4 percent to 3,958, while the All Ordinaries Index fell 164.40, or 4.1 percent, to 3,895.60.

The following are among the most active companies in Australian trading. Stocks symbols are in parentheses after company names.

Financial stocks: Commonwealth Bank of Australia (CBA AU), the nation's biggest mortgage provider, fell $2.02, or 5.3 percent, to A$35.98, heading for its lowest close since May 2005, after business confidence fell last month to a record low, increasing signs the economy may fall into its first recession since 1991. Macquarie Group Ltd. (MQG AU), Australia's biggest securities firm, sank A$2.66, or 8.9 percent, to A$27.15, heading for its lowest close since Oct. 28.

The sentiment index slumped 21 points to minus 29 from September, the lowest level since the series began in 1989, according to a National Australia Bank Ltd. survey. Separately, Commonwealth Bank was downgraded to ``sell'' from ``hold'' at Citigroup Inc., which lowered the stock's price target to A$35 from A$42 on prospects the bank will have to raise capital in six months.

Retail stocks: Harvey Norman Holdings Ltd. (HVN AU), Australia's biggest furniture and electronics retailer, fell 7 cents, or 2.4 percent, to A$2.82, heading for its biggest loss since Oct. 31 on indications consumer spending is slowing. CFS Retail Property Trust (CFX AU), an Australian shopping-center operator, fell 3.5 cents, or 1.8 percent, to A$1.965. Woolworths Ltd. (WOW AU), Australia's biggest retailer, dropped 91 cents, or 3.1 percent, to A$28.27, heading for its biggest loss since Oct. 22.

Harvey Norman said its like-for-like sales in the 28 days ended Nov. 9 fell 2.8 percent and that its margins remain under pressure. Separately, CFS said its retail sales showed signs of slowing in September and that it expects weakening growth in the next 12 months.

U.S.-related stocks: Westfield Group (WDC AU), the world's biggest shopping mall owner by market value, fell 30 cents, or 2.1 percent, to A$13.70. James Hardie Industries NV (JHX AU), the biggest seller of home siding in the U.S., decreased 10 cents, or 2 percent, to A$4.93.

U.S. stocks dropped as a worsening outlook for companies from Goldman Sachs Group Inc. to Google Inc. overshadowed China's $586 billion stimulus plan and pledges by the world's biggest nations to bolster economic growth. The Standard & Poor's 500 Index lost 1.3 percent to 919.21.

Alumina Ltd. (AWC AU), a partner in the world's No. 1 producer of the material used to make aluminum, dropped 24 cents, or 11 percent, to A$2.01, set for its lowest close since Oct. 17. The company and its partner Alcoa Inc. suspended expansion work on the Wagerup refinery, citing the global financial crisis.

Asciano Ltd. (AIO AU), an Australian port and railroad operator, plunged A$1.03, or 60 percent, to 69 Australian cents after Citigroup told investors to sell the stock and slashed its target price 87 percent. The stock, previously rated ``buy'' at Citigroup, was halted today on the Australian stock exchange.

Count Financial Ltd. (COU AU), a provider of personal loans and financial planning services, sank 5 cents, or 4.3 percent, to A$1.12, heading for its biggest loss since Oct. 24. The stock was downgraded to ``equalweight'' from ``overweight'' at Morgan Stanley, which cut the stock's price target to A$1.16 from A$1.98.

Foster's Group Ltd. (FGL AU), the nation's biggest brewer, fell 14 cents, or 2.4 percent, to A$5.79. The company scrapped plans to sell its A$4.5 billion ($3 billion) wine business for cash as the price would have been too low, the Australian Financial Review newspaper reported, without saying where it got the information.

National Australia Bank Ltd. (NAB AU), the country's biggest bank by assets, decreased A$1.98, or 8.9 percent, to A$20.17 after the company said it increased the size of a share sale by 50 percent to A$3 billion to shore up capital.

Rio Tinto Group (RIO AU), the world's second-biggest aluminum producer, declined A$3.45, or 4.4 percent, to A$74.55 after it said a transformer failure at its New Zealand smelter cut capacity by about 30 percent. The company said its studying options to restore production.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net.

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Malaysia's Ringgit Declines on Slowdown Concern, Stock Losses

By David Yong

Nov. 11 (Bloomberg) -- Malaysia's ringgit fell on speculation a global economic slowdown will damp demand for Asian exports, forcing manufacturers to cut back production.

The currency traded near a two-week low as stocks in Japan, South Korea and Australia tumbled, tracking losses in the U.S. A government report today may show industrial production grew at an annual pace of 0.6 percent in September, the slowest since March 2007, according to a Bloomberg News survey.

``The outlook for growth is extremely negative,'' said James McCormack, head of Asia sovereign ratings at Fitch in Hong Kong. South Korea and Malaysia are ``the most affected in the region'' as growth, capital flows and commodity prices ease, he said in a Bloomberg Television interview today.

The ringgit dropped 0.7 percent to 3.5710 versus the dollar as of 8:40 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It has weakened 1.6 percent in the past month.

Fitch yesterday cut the outlook on Malaysia's credit rating to ``stable'' from ``positive,'' citing a slowdown in electronics exports and lower commodity prices on its trade balance. The country's rating remained at A-, the fourth-lowest investment grade.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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Korean Won Falls as Stocks Drop on Corporate Earnings Outlook

By Kim Kyoungwha

Nov. 11 (Bloomberg) -- South Korea's won weakened, halting a two-day gain, as regional stocks declined on concern that corporate earnings will be hurt by the global slowdown, cutting demand for emerging-market assets.

Korea's currency has lost 24 percent over the past three months, Asia's worst performer, as credit markets froze and caused a shortage of dollars for banks and companies to service maturing debt. Fitch Ratings lowered its credit ratings outlook for the country to negative from stable yesterday because currency reserves may fall.

``The stock market set the bearish tone for the won today,'' said Roh Sang Chil, a foreign-exchange dealer with Seoul-based Kookmin Bank, Korea's largest lender. ``The currency may be supported near the 1,350 level where exporters are willing to settle their deals.''

The won fell 2 percent to 1,353.75 per dollar at 9:38 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency has declined 31 percent this year, the most in Asia.

The Kospi index of shares was down 2.7 percent today, ending two days of gains.

Choi Jong Ku, director general at the finance ministry's international bureau, said yesterday that Fitch's outlook downgrade is a reflection of the global economic slowdown.

Investors overseas sold more Korean stocks than they bought today, wiping out yesterday's net purchases, according to the Korea Exchange.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

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Australian, New Zealand Dollars Slide as U.S. Equities Fall

By Candice Zachariahs

Nov. 11 (Bloomberg) -- The Australian and New Zealand dollars fell by the most in more than two weeks as U.S. stocks dropped on a worsening outlook for company earnings, prompting investors to dump higher-yielding assets.

The currencies gave back all of their gains from yesterday, which came as China pledged to spend $586 billion dollars to prop up its economy, Australia's biggest trading partner.

``Currency markets continue to look at stocks to gauge the health of the banking sector, corporate sector and the economy generally,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``That's driving risk aversion through the market, which weighs on the Aussie,'' he said, referring to the currency by its nickname.

Australia's currency dropped 3.7 percent, the most since Oct. 24, to 66.82 U.S. cents as of 8:02 a.m. in Sydney, from 69.40 cents late in Asia yesterday. The currency slid 5.2 percent to 65.40 yen.

New Zealand's dollar slumped 3.9 percent, also the most since Oct. 24, to 57.89 U.S. cents, from 60.21 in Asia yesterday. It bought 56.60 yen from 59.83.

The currencies slipped as U.S. equities halted a global rally that began after China announced its stimulus package and the Group of 20 nations said it will act ``urgently'' to bolster growth and called on policy makers to cut interest rates worldwide.

General Motors Corp. plummeted after Deutsche Bank AG said the automaker's shares may go to zero, while Google Inc., the biggest seller of online ads, sank on concern fourth-quarter revenue growth will stall.

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

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Yen Gains as Global Economic Slump Saps Demand for High Yields

By Stanley White and Daniel Kruger

Nov. 11 (Bloomberg) -- The yen rose against the euro on speculation the world's biggest economies will contract, prompting investors to sell higher-yielding assets and pay back loans in Japan.

The yen also advanced against versus the dollar as Asian stocks extended losses on concern a recession will reduce corporate earnings. The euro fell against the dollar before data that may show investor confidence in Germany, Europe's largest economy, remained near a record low this month.

``Sentiment is in favor of further yen gains,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``A weak stock market causes a reversal in risk trades, which is supportive of the yen. The euro is vulnerable because the economic outlook points to lower interest rates in the future.''

The yen rose to 124.49 per euro at 9:22 a.m. in Tokyo from 124.95 late yesterday in New York. The yen gained to 97.78 against the dollar from 98.00. The euro bought $1.2726 from $1.2748. The yen may rise to 97.30 per dollar and 124.20 against the euro today, Ishikawa said. Trading may be less than normal as U.S. financial markets are closed today for a public holiday, he said.

Investors have been reducing carry trades, where they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate is the lowest among major economies.

Stock Markets

The Nikkei 225 Stock Average fell 2.6 percent as watchmaker Citizen Holdings Co. cut its annual earnings target by a third. Japanese Prime Minister Taro Aso's support declined as dissatisfaction increases over his government's response to the global crisis, the Asahi newspaper said today, citing its own survey. Japan will contract 0.2 percent next year, the U.S. by 0.7 percent and the euro area 0.5 percent, the International Monetary Fund said last week.

The Group of 20 industrial and emerging nations, meeting Nov. 9 in Sao Paulo, said they're ready to act ``urgently'' to support global growth. The group called on countries to cut interest rates and raise spending to combat the threat of a global recession. The leaders of the industrial and emerging countries, due to gather Nov. 14 and 15 in Washington, will consider steps ranging from raising bank-capital standards to regulating hedge funds.

German Confidence

Gains in the euro may be curbed before the ZEW Center for European Economic Research releases its German investor confidence index today. The index of investor and analyst expectations was minus 63 in November, the same as last month, according to a Bloomberg survey. The gauge reached an all-time low of minus 63.9 in July.

European Central Bank President Jean-Claude Trichet said yesterday in Sao Paulo that receding inflation may allow central banks to further reduce interest rates.

``The euro area's economy isn't doing well and rate cuts are likely to continue,'' said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale SA, France's second- largest bank by market value. ``The euro may be sold.''

The euro may decline to $1.2600 and 123.50 yen today, he said.

Traders increased bets the ECB will reduce its 3.25 percent rate in the first quarter of next year. The implied yield on Euribor interest-rate futures contracts expiring in March fell to 2.86 percent yesterday from 3.005 percent on Nov. 7. The ECB benchmark is 0.39 percentage point higher than the Euribor contract yield, compared with a 12-month average of 19 basis points below the futures rate.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net

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Chinese Stocks May Need More Than Stimulus to Lure Investors

By Chua Kong Ho and Michael Patterson

Nov. 11 (Bloomberg) -- China may have more work ahead to revive investors' confidence in the world's worst-performing major stock market after unveiling a 4 trillion yuan ($586 billion) stimulus plan.

The government's announcement on Nov. 9 followed three interest-rate cuts in two months and the end of a tax on equity purchases. China's benchmark CSI 300 Index is still down 66 percent this year, twice the drop of the Dow Jones Industrial Average.

``What's the point of looking at the market?'' said Trudi Li, a 32-year-old Shanghai restaurant owner who lost about 80 percent of her investment in Chinese shares since August 2007. ``There had been many measures before and the market continued to fall.''

While the CSI 300 rose 7.4 percent yesterday, the most in almost two months, it has lagged behind 39 of 48 developed and emerging countries in MSCI Inc.'s indexes since global equities began rallying Oct. 28 and underperformed the 20 biggest markets this year. China needs to restore faith among individual investors, the majority owners of stocks in the country, before a rebound can take hold, RBC Capital Markets and Putnam Investments say.

A slowdown in Chinese growth may keep buyers away, said Nick Chamie, the Toronto-based global head of emerging-markets research at RBC Capital.

``You really need the retail investors to be jumping in with both feet in order to get the market hopping,'' Chamie said. ``I just don't see that materializing over the next year or so as we get increasing reports of jobs losses, factories shutting down and slower growth and export activity.''

`Gun Shy'

China's gross domestic product expanded 9 percent in the third quarter, the slowest pace in five years. Exports may cool to 18.1 percent in October from a year earlier, compared with 21.5 percent in September, according to a Bloomberg News survey of economists. China's stimulus package, worth almost a fifth of its output, is aimed at sustaining domestic demand as the credit crunch slows economic expansions around the world.

``The domestic investor is still very gun shy in China, having suffered significant drops, and amid increasing news of a deteriorating economic situation,'' said Simon Davis, London- based chief investment officer for Putnam Investments' international equities team, which oversees about $10 billion.

About 8.9 million brokerage accounts were opened this year through October in China, compared with 38 million in 2007, when the CSI 300 surged 162 percent, according to the China Securities Depository & Clearing Corp. Last year's rally pushed the index's price-to-earnings ratio as high as 53.1 in October 2007, the most expensive valuation among the biggest equity markets. The P/E ratio has since tumbled by 76 percent to 12.7.

QFII Restrictions

Individual investors accounted for 54 percent of the Chinese stock market at the end of last year, China Securities Regulatory Commission data show. Only 67 overseas institutions could invest a combined $10 billion in yuan-denominated securities under the qualified foreign institutional investor, or QFII, program as of Oct. 10.

The CSI 300, a benchmark for the so-called A-shares traded in Shanghai and Shenzhen, gained 8.9 percent in the past two weeks. The Hang Seng China Enterprises Index of Hong Kong-listed shares, including China Construction Bank Corp. and PetroChina Co., surged 49 percent during the same period.

The MSCI Emerging Markets Index added 28 percent as Brazil's Bovespa jumped 25 percent, Russia's Micex gained 44 percent and India's Bombay Stock Exchange Sensitive Index rose 24 percent.

China's 10-point plan allocates money for affordable housing, rural infrastructure, railways, power grids, social welfare to raise incomes and rebuilding after the May 12 Sichuan earthquake. China will also allow tax deductions for purchases of fixed assets such as machinery to stimulate investment. The proposal didn't detail how much would be spent on each area nor how much of the spending had already been announced.

Still Not Enough

Zheng Tuo, a money manager at Bank of Communications Schroders Fund Management Co. in Shanghai, said the government stimulus may prevent a broad decline in the Chinese market. He said he's buying financial stocks because ``valuations are pretty low.''

``The plan is what the market would like to see most -- something concrete that will do good to the economy,'' Tuo said.

It's still not enough to lure Li, who hasn't bought shares since January and may sell a Bayerische Motoren Werke AG sedan she bought with her initial stock profits last year.

``Even if it goes up, it'll take a long time before I can recoup my losses,'' she said.

To contact the reporters on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

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Japan Stocks Fall on Earnings Outlook; Citizen Poised to Drop

By Masaki Kondo

Nov. 11 (Bloomberg) -- Japanese stocks dropped on mounting concern that slumping demand will force companies to lower earnings forecasts.

Nomura Holdings Inc., Japan's biggest brokerage, declined 2.5 percent after Barclays PLC said Goldman Sachs Group Inc. may have its first quarterly loss. Mitsubishi Motors Corp., which expects operating profit to decline by half this year, slid 1.4 percent. Watchmaker Citizen Holdings Co. was poised to drop after cutting its annual earnings target by a third.

The Nikkei 225 Stock Average declined 147.34, or 1.6 percent, to 8,934.09 as of 9:06 a.m. in Tokyo. The broader Topix index fell 12.41, or 1.4 percent, to 904.24. All but three of 33 industry groups on the Topix retreated.

``In such a volatile market with low prospects for global economic growth, long-term investors are hesitant to buy in,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

In New York, the Standard & Poor's 500 Index slid 1.3 percent, led by financial shares. Barclays analyst Roger Freeman said Goldman's fourth-quarter loss will probably be about $2.50 a share, joining Merrill Lynch & Co., UBS AG, JPMorgan Chase & Co. and Morgan Stanley in estimating a loss for the firm. Goldman's shares tumbled to a five-year low.

Waning demand in the U.S. and Europe is dimming the earnings outlook for Japanese companies, prompting businesses from Toyota to Sony Corp. to slash their forecasts. Of 837 companies that have reported first-half earnings through Nov. 7, more than half reduced full-year profit targets, according to a report by Shinko Research Institute Co.

Delayed Recovery

Japanese corporate earnings are not likely to start recovering until the second half of fiscal 2010 at the earliest, Shinichi Ichikawa, chief equity strategist at Credit Suisse Group, wrote in a report yesterday. He lowered his 2008 pretax-profit estimate on Japanese companies to a 40 percent decline from a 30 percent drop.

Orders for machine tools tumbled 40 percent in October from a year earlier, the biggest slump since January 2002, the Japan Machine Tool Builders' Association said yesterday. With a decline in orders, toolmakers will likely post operating losses in the next fiscal year to March 2010, Hidehiko Hoshino, an analyst at UBS AG, wrote in a note.

Nikkei futures expiring in December retreated 2.4 percent to 8,900 in Osaka and slumped 2.3 percent to 8,895 in Singapore.

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

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Asian Stocks Fall as Earnings Outlook Worsens; Confidence Drops

By Masaki Kondo and Patrick Rial

Nov. 11 (Bloomberg) -- Asian stocks dropped after Mitsubishi Materials Corp. cut its profit forecast and Australian business confidence fell to the lowest level on record.

Mitsubishi Materials, Japan's third-largest copper producer, declined 6.7 percent. National Australia Bank Ltd. tumbled 7.6 percent after selling shares at discount and as slumping business sentiment suggested the nation's economy may fall into a recession for the first time since 1991. Toyota Motor Corp., Japan's biggest carmaker, lost 2.9 percent after HSBC Holdings Plc said the shares have further room to fall because of poor earnings next year.

The MSCI Asia Pacific Index retreated 2 percent to 88.45 as of 9:54 a.m. in Tokyo. The measure jumped 3.5 percent yesterday after China unveiled a $586 billion economic stimulus package.

``In such a volatile market with low prospects for global economic growth, long-term investors are hesitant to buy in,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

All Asian benchmark indexes open for trading dropped. Japan's Nikkei 225 Stock Average fell 3.1 percent to 8,800.19.

Australia's S&P/ASX 200 Index slumped 4.3 percent, set for its biggest decline in a month. The nation's sentiment index slid to minus 29 from September, the lowest level since the series began in 1989, according to a National Australia Bank survey of more than 400 companies conducted between Oct. 23 and Oct. 30.

In New York, the Standard & Poor's 500 Index slid 1.3 percent, led by financial shares after Barclays PLC said Goldman Sachs Group Inc. may have its first quarterly loss.

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

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Australia Stocks Update: S&P/ASX 200 Falls 33.80 to 4,074.00

By Darren Boey

Nov. 11 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 0.82 percent at 10:05 a.m.

The index of 200 companies traded on the Australian Stock Exchange fell 33.80 to 4,074.00. Among the stocks in the index, 15 rose, 106 fell and 79 were unchanged.

Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Commonwealth Bank Of Australia and Csl Ltd/australia. About 116.35 million shares changed hands on the Australian Stock Exchange.

Gpt Group, which rose 2 cents to A$1.02, was the most active stock by value in Australia.

The next most-active issues were Bhp Billiton Ltd, which fell 40 cents to A$29.49, and Goodman Group, which fell 7 cents to A$1.06.

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Markets Lack Momentum as Trading is of Low Volume!

Daily Forex Fundamentals | Written by Crown Forex | Nov 10 08 15:19 GMT |

Despite having a inflationary data from the United Kingdom, trading remains of low volumes with majors attempting to recover the market gaps witnessed since early morning where no currency was able to do except for the sterling pound. Calendars remain fundamental free and the trend could remain neutral for the rest of the day. The 15 nation currency is still trading within a contracting triangle that is getting narrower yet the euro failed to cover the market gap as we see the 14 hour MA on the 4 hour charts at 1.2790 offering a strong support as the pair so far recorded a low of 1.2791 for the day so far. Technical indicators show no specific trend for the pair suggesting this sideways channel to remain for the rest of the day. As for the Royal pound, it was able to recover the market gap trading within a narrow range between the 1.5670 support level and the resistance level at 1.5830 where it is currently being pressured to the downside but is facing troubles breaching the mentioned support. However, overall trading isn't expected to be of high volatility or of high volume as technical indicators are still supporting the sideways trend as it is limited between the two levels. The USD/JPY pair was retesting the resistance level at 99.30 but failed to breach it and maintain trading above it after it slightly inclined to record the high for the day so far at 99.48. The 50 day MA on the four hour charts at 99.50-99.60 is currently an obstacle for the pair as it limits further losses. We see the pair slowly exiting the oversold bought area as seen on the stochastic indicator, where similar to the other majors, a neutral pattern will be undergone. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Week Starts With Markets Gaining Across the Board...

Daily Forex Fundamentals | Written by Lena Manousarides | Nov 10 08 14:56 GMT |

The week is starting with currencies moving in tight ranges after a very volatile week last week with. What with US elections, ECB and BOE rate decisions being the main events and also NFP which really disappointed markets after it printed -240.000. EUR/USD is trading within 1.28-29 range so far and only a break of 1.2930 might push pair towards 1.30 again. On the downside, the level to watch is 1.2780 and if that level gives way then the pair might gave another go at 1.25 in the coming days. Today the economic calendar had PPI out of UK which printed a really lower number and gave sterling more pressure as traders now are pricing in further cuts by the Bank of England. The fact that BOE cut rates by 150 pbs last week didn’t seem to help market sentiment and the pound and until we see some better economic data out of UK, the sentiment will remain negative. We don’t have anything else major data wise today and so traders might take it easy today amid tomorrows US National holiday which banks and markets will remain closed. In the coming days we have quite a lot economic releases out of Europe and US and it will be interesting to see how the markets will react on the data. Asian markets were trading on a positive territory after NIKEI gained more than 400 points and European markets followed in the same tone. DOW JONES is expected to gain too today as traders seem more positive after the announcement by China regarding a new plan to help with the recent crisis. The outcome of the G20 last weekend showed all nations commitment to try and fight the global recession and the Finance Ministers will be announcing ways to do it in the coming weeks. However, there is still a lot of work to be done and it will be interesting to see how the US will try and tangle the problems with the new president taking g over. A slow start for currencies today, with EUR/USD, GBP/USD, USD/JPY trading in very tight ranges- something we are not really used to in the last few weeks and the reason is that market participants are still trying to make sense of what happened last week and also the fact that traders are getting ready for tomorrows holiday. Let’s not forget though that at holiday times with lack of liquidity, wild moves can happen so the best way to go is to remain aside until all markets are operating normally... Lena Manousarides Independent Market Analyst and Professional Trader Email: manousarides@yahoo.comThis email address is being protected from spam bots, you need Javascript enabled to view it Lena Manousarides is a professional Trader and an independent Market Analyst, who pioneers in Fx trading in Athens, Greece. After several years of professional trading in the Forex Market, Lena formerly worked with FXGreece as a Market Analyst, writing articles on a daily basis, using fundamental and technical analysis. She also writes for several major financial newspapers in Greece and is in the process of becoming professional Commodity Trading Advisor.

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