SP AusNet Profit Falls 23% on Writedown for Meters

By Angela Macdonald-Smith

Nov. 20 (Bloomberg) -- SP AusNet, the Australian electricity and gas distributor majority owned by Singapore Power Ltd., said first-half profit fell 23 percent after a charge for the replacement of meters in Victoria state.

Net income dropped to A$92.2 million ($59 million) in the six months ended Sept. 30, from A$119.6 million a year earlier, Melbourne-based SP AusNet said today in a statement. Sales rose 8.9 percent to A$635.5 million.

SP AusNet took a A$30.3 million after-tax charge on meters that will need to be replaced under a Victorian government program to roll out so-called smart meters that allow utilities to vary prices through the day depending on demand. The company added about 5,500 customers to its network in the half, while cooler winter weather boosted volumes.

``SP AusNet is on target to meet underlying net profit after tax guidance for the full year after adjusting for the impairment to meters,'' the company said in its statement to the Australian stock exchange. Second-half margins and profit are expected to be lower because of lower seasonal demand, it said.

The profit is lower than estimates of A$115.4 million by Credit Suisse Group and A$113.6 million by JPMorgan Chase & Co., who didn't mention one-time charges in separate reports before the earnings announcement. SP Ausnet said profit excluding one- time items gained 2.4 percent to A$122.5 million.

SP AusNet, 51 percent owned by Singapore Power, yesterday fell 1.3 percent to A$1.17 in Sydney trading.

Earnings before interest, tax, depreciation and amortization rose 11 percent to A$405.2 million. The company declared a first-half dividend to 5.927 cents, up 2.6 percent from a year earlier.

Given the deteriorating economy, SP AusNet is increasingly focusing on ``underlying fundamentals and credit metrics to ensure it continues to be able to access capital markets to fund growth at competitive rates,'' the company said.

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

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Oil Supertankers May Avoid Suez on Somalia Piracy

By Alaric Nightingale and John Martens

Nov. 20 (Bloomberg) -- Shippers controlling almost a fifth of the global fleet of crude-oil supertankers may avoid Egypt's Suez Canal after an escalation in piracy off east Africa, potentially increasing the cost of delivering the commodity.

Euronav NV and TMT Co. Ltd., owners of ships designed to haul Middle East crude to Europe and the U.S., joined Frontline Ltd., the largest operator, in saying they are reviewing whether to divert carriers around South Africa. Bergen, Norway-based Odfjell SE, the world's largest owner of chemical transporters, already said it won't sail past Somalia while BW Gas Ltd., the biggest liquefied-gas shipper, may do the same.

``We've always told our captains to stay far from the coast in that region, but that may not be enough now,'' Euronav's Chief Financial Officer Hugo De Stoop said by phone from Antwerp, Belgium, yesterday. ``Terrorists or pirates, I don't really see the difference.''

Frontline, Euronav and TMT together control 90 supertankers, enough to carry more than two days of global demand, according to Athens-based Optima Shipbrokers. A decision to avoid the Suez Canal, Egypt's third-biggest foreign-currency earner, would delay oil deliveries and reduce the supply of available vessels.

TMT Chief Executive Officer Nobu Su, in an e-mail to Bloomberg yesterday, ``urged'' other owners to take the same action to secure trade routes. Jens Martin Jensen, interim chief executive officer of Hamilton, Bermuda-based Frontline's management unit, said Nov. 18 he may also divert ships.

Somali pirates on Nov. 15 seized their largest ever prize, a Saudi Arabian supertanker laden with 2 million barrels of crude, worth about $108 million at current prices. The ship itself is worth about $148 million.

Ransom Payment

The Sirius Star is now anchored in Somalia's northern Eyl coastal region with the hijackers negotiating a ransom payment with Vela International Marine Ltd., a Saudi Arabian state- backed oil-tanker company.

There have been at least 88 attacks against ships in the area since January and Somalian pirates are holding 250 crew hostage on board 14 merchant vessels.

Shippers sailing to the U.S. and Europe from the Middle East would instead have to take vessels around South Africa's Cape of Good Hope rather than the Suez Canal. The waterway links the Mediterranean and Red Seas.

Customers have been given ``the option to safeguard their cargo,'' BW Gas Chief Executive Officer Jan Hakon Pettersen said from Oslo yesterday. ``For us, we would prefer them to use the cape route.''

The Joint Hull Committee, representing ship insurers, is advising shipowners to ``seriously consider'' avoiding Somalian waters, Chairman Simon Stonehouse said Nov. 18.

Damaging Business

Insurance premiums will rise and unless the Egyptian government becomes ``more actively interested'' in combating piracy in the region they risk damaging the business of the Suez Canal, Stonehouse said.

``If they stop shipping through the Suez, going round Africa instead, that's going to reduce supply,'' said Glenn Lodden, an analyst at DnB NOR Markets in Oslo. ``There's a clear incentive for owners to go around Africa.''

Other shipowners are likely to follow should Frontline, Euronav and TMT choose to divert vessels and after the Joint Hull Committee urged companies to do so, Lodden said.

AP Moller-Maersk A/S, Europe's biggest shipowner, may announce as soon as today that it will avoid Suez, Lloyd's List said yesterday, citing an unidentified spokesman.

Shipping Costs

Tanker owners may elect to charge more for sailing through Somalia's waters rather than re-routing, Per Mansson, managing director of shipbroker Nor Ocean Stockholm AB, said in an e- mailed note yesterday.

``Maybe one or two will avoid, but most will go there against a premium to start with,'' Mansson said. Still, ``one more hijacking of a tanker and the situation is in a different light.''

Derivatives contracts indicating the December cost of shipping Saudi Arabian crude to Japan, the industry benchmark, advanced 6 percent to 71 Worldscale points, Justin King, a broker of the contracts at Tradition Financial Services in London, said in an e-mailed note yesterday.

Worldscale points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

The fact owners say they are considering rerouting is buoying demand for the contracts, said Ben Goggin, a broker at SSY Futures Ltd., a unit of the world's second-biggest shipbroker.

The European Union last month joined the North Atlantic Treaty Organization, India, Malaysia and Russia in deploying vessels to combat piracy.

To contact the reporters on this story: Alaric Nightingale in London at Anightingal1@bloomberg.net; John Martens in Brussels at jmartens1@bloomberg.net.

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Asia-Pacific Growth May Halve in 2009 as U.S. Slows, PECC Says

By Kartik Goyal

Nov. 20 (Bloomberg) -- Growth in the Asia-Pacific region may expand in 2009 at less than half the pace of the previous two years as the global financial crisis causes the U.S. economy to contract, the Pacific Economic Cooperation Council said.

Growth in the 16 economies tracked by the council may slow to 1.2 percent next year from 3.6 percent in 2008 and 3.5 percent in 2007, it said in a statement today. The estimate includes the performance of the U.S., Chile, Peru and Japan.

The worst financial crisis since the Great Depression has pushed economies from Japan to Europe into recession, prompting policy makers around the world to cut interest rates and spend to stimulate growth. Still, falling commodity prices will help reduce Asian import costs while weakening currencies will make the region's exports more competitive, the PECC said.

``The U.S. sub-prime mortgage crisis has turned into an international financial crisis but it is not yet certain that the ensuing global downturn will result in a severe recession in Asia,'' the group said. ``In the near term, the focus for Asian governments will be to defend against further contagion effects.''

East Asia's growth is forecast to slip to 3.4 percent from 3.9 percent this year, the independent non-government group said.

The U.S. economy will probably shrink 0.5 percent in 2009 before recovering in 2010 with 2.4 percent growth, the PECC predicts. Japan may grow 0.8 percent next year, and China's growth will slow to 9 percent from 9.3 percent this year and 11.9 percent in 2007, it said.

China's growth will be supported by stronger domestic demand and government spending, the group said. China holds about half of Asia's estimated $4 trillion in foreign reserves, and surplus funds in Asia and Gulf states will be needed to recapitalize the U.S. banking industry and finance the government's deficits, it said.

``While the U.S. dollar has risen sharply since the crisis because of a flight to quality, the medium-term outlook for the greenback is more gloomy,'' said the PECC. ``With the U.S. dollar at current highs, the temptation for Asian central banks to diversify away from the dollar in the year ahead will be greater than ever. As the credit crunch eases, interest rates in the U.S. will have to rise in order to attract investment capital from the rest of the world.''

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net.

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Taiwan Economy Probably Grew the Slowest in Five Years on Trade

By Tim Culpan

Nov. 20 (Bloomberg) -- Taiwan's economy probably grew at the slowest pace in five years in the third quarter as shipments of electronics slowed and fuel costs rose.

Gross domestic product advanced 0.8 percent from a year earlier in the three months ended Sept. 30, slumping from 4.3 percent growth in the prior period, according to the median estimate of 17 economists surveyed by Bloomberg. The report is due about 4:30 p.m. today in Taipei.

The slowdown may worsen as companies such as Nan Shan Life Insurance Co. cut staff, hurting consumer demand, which accounts for more than half of the economy. Taiwan's Cabinet is boosting spending to stimulate domestic growth and offset falling exports that are equivalent to 82 percent of the island's output.

``Third quarter numbers really don't look very hopeful, private consumption and external trade were both quite weak,'' said Alan Liao, an economist at Chinatrust Financial Holding Co. in Taipei. ``This quarter is not much more optimistic as we start to look at the export orders.''

The slowest economic growth since a contraction in the second quarter of 2003 has driven the island's unemployment rate to a three-year high and local consumption is dropping amid falling exports from companies such as Taiwan Semiconductor Manufacturing Co. and AU Optronics Corp.

``Over the last couple of weeks, many of them are either looking to cut back on capacity spending next year or, if not, many of them will actually slow down new hirings,'' said Tony Phoo of Standard Chartered Bank in Taipei, one of two economists who forecast a contraction in gross domestic product for the period. ``This will have repercussions on the real economy, especially on spending.''

Export Orders

Taiwan companies' customers including Dell Inc., the world's second-largest computer maker, and Intel Corp., the largest chip manufacturer, say the economic slowdown will deepen, hurting sales. Export orders, an indicator of actual shipments in one to three months, advanced 2.8 percent in September, the slowest in six years.

Higher energy prices also detracted from growth as crude oil advanced to a record in July. Taiwan imports 99 percent of its energy needs.

Taiwan's current-account surplus probably dropped to $1.3 billion for the third quarter, the lowest in three years, according to the median of six economist estimates. The current account balance, which measures the flow of goods, services and investment income, will be published around 4:10 p.m. today.

The drop in domestic and external demand has driven Taiwan's Taiex stock index down 43 percent since the start of the third quarter, matching the 42 percent drop in the MSCI Asia-Pacific Index.

Forecast Cut

Taiwan is expected to cut its 2009 GDP forecast from its current 5.08 percent estimate after Premier Liu Chao-shiuan said Oct. 22 that the weakening global economy ``doesn't look likely to recover in the short term.''

To help boost domestic spending and offset the impact of job cuts, the government will hand out NT$3,600 in shopping vouchers to each citizen by the end of January. The move will pump NT$83 billion ($2.5 billion) into the economy and will be accompanied by other measures, Liu said this week.

In a bid to leverage the growth of China, the world's fastest-growing major economy, Taiwan signed an accord Nov. 4 that will end a nearly 60 year ban on regular direct flights and shipping between the two sides. China accounts for 40 percent of Taiwan's exports.

``Any expectations for an immediate boost coming out of cross-strait ties are premature,'' said Standard Chartered's Phoo said. ``Both sides will still need some time to get used to one another.''

The following is a table of economists' estimates for third-quarter GDP growth from a year earlier, and the current account balance for the period:

===========================================================
11/19/2008                     Current       GDP
                              Account     Qtrly
                                 $mil       YoY
===========================================================

Date of Release                20-Nov.   20-Nov.
Observation Period                  3Q        3Q
----------------------------------------------------------
Median                            1300      0.80%
Average                           1563      0.81%
High Forecast                     3280      2.80%
Low Forecast                       395     -1.86%
Number of Participants               6        17
Previous                          6493      4.32%
----------------------------------------------------------------
================================================================
11/19/2008                     Current       GDP
                              Account     Qtrly
                                 $mil       YoY
================================================================
Action Economics                  1000      2.00%
Capital Economics                 ---       0.00%
Chinatrust Commercial Bank        2100      0.80%
DBS Group                         ---       0.80%
Forecast Singapore                 395      1.05%
Ideaglobal                        ---       1.10%
ING Bank                          ---       2.10%
Japan Center for Intl Financ      1200      0.20%
KGI Securities                    ---       0.50%
Mega Securities                   ---      -1.86%
Moody's Economy.com               ---       2.80%
Nomura International(HK)          ---       0.70%
Reuters IFR                       ---       1.30%
SinoPac Holdings                  ---       1.63%
Standard Chartered Bank           1400     -0.40%
Taiwan Securities Investment      3280      0.76%
UBS                               ---       0.20%
================================================================

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

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Korea Won Slumps to Lowest Since March 1998 as Stocks Tumble

By Kim Kyoungwha

Nov. 20 (Bloomberg) -- South Korea's won slumped to the weakest level in more than a decade on concern that global investors will step up sales of emerging-market assets after U.S. stocks sank to a five-year low.

The won is down 37 percent this year, Asia's worst performer ahead of Indonesia's rupiah among the 10 most-traded regional currencies. Stock indexes in the region have lost about halt their value this year as the looming threat of a global recession deterred investors. A freeze in credit markets has also made it difficult for Korean banks to secure dollars.

``The foreign-exchange market is simply kneeling to any negative news from the outside world,'' said Lee Myung Hoon, a currency dealer with state-run Industrial Bank of Korea in Seoul. ``The local markets are not in a situation that they can easily shake off the risk from global markets.''

The won declined 2.1 percent to 1,478.50 per dollar as of 9:51 a.m. local time, according to Seoul Money Brokerage Services Ltd. It touched 1,515.05, the weakest since March 1998.

The market is on the lookout for intervention as Korean authorities are better armed with funds from a $30 billion swap deal with the Federal Reserve last month, Lee said.

Funds overseas dumped more Korean shares than they bought for an eighth day, according to Korea Exchange. The Kospi stock index fell 4 percent.

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 Risk Appetite Weakens

By Candice Zachariahs

Nov. 20 (Bloomberg) -- The Australian and New Zealand dollars dropped the most in a week against the yen as a gauge of risk aversion closed at the highest since Oct. 27, prompting investors to dump high-yielding assets.

The currencies also declined versus the dollar as stocks and commodity prices slumped amid concerns over a global slowdown. Reserve Bank of Australia Governor Glenn Stevens yesterday warned against the risk of talking ``ourselves into unnecessary economic weakness.'' The RBA is expected to continue its steepest rate- cutting cycle since 1991 when it meets in December.

``Stock markets are the leader as a reflection of risk appetite and while they remain under pressure it's hard to sense a turn in the outlook for global growth,'' said Tony Morriss, a senior currency strategist in Sydney at Australia & New Zealand Banking Group. ``The pressure will remain on the downside for the Aussie,'' he said, referring to the currency by its nickname.

The Australian dollar dropped 2.6 percent to 61.06 yen as of 8:08 a.m. from 62.70 yen late in Asia yesterday. The currency declined 1.5 percent to 63.75 U.S. cents from 64.72 cents yesterday. It could test 63.5 cents and 60 yen today if Asian equities weaken, Morriss said.

New Zealand's dollar fell 2.2 percent to 52 yen from 53.18. It bought 54.28 U.S. cents from 54.89.

The currencies fell as the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, closed at 74.45, the highest since Oct. 27.

U.S. stocks sank and benchmark indexes slid to their lowest levels since 2003 on growing concern over the fate of the nation's car industry and economic data signaling the recession is deepening.

Benchmark interest rates are 5.25 percent in Australia and 6.5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S., luring investors to the South Pacific nations' assets. The risk in such trades is that exchange-rate fluctuations erase profits.

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

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Oil Trades Near 22-Month Low on U.S. Supply Gain, Fuel Use Drop

By Mark Shenk

Nov. 20 (Bloomberg) -- Crude oil futures fell for a fifth day, trading near a 22-month low after a U.S. government report that showed inventories climbed more than forecast as fuel demand dropped.

Supplies rose 1.6 million barrels to 313.5 million barrels last week, the Energy Department said yesterday. Stockpiles were forecast to rise 1 million barrels, according to a Bloomberg News survey of analysts. U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago.

``Fuel consumption remains depressed,'' said Bill O'Grady, chief markets strategist at Confluence Investment Management in St. Louis. ``The economy remains the major focus.''

Crude oil for December delivery fell 48 cents, or 0.9 percent, to $53.14 a barrel at 10:19 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, futures touched $52.79, the lowest since Jan. 23, 2007.

Oil has dropped 64 percent since reaching a record $147.27 on July 11. Yesterday, December futures fell 77 cents, or 1.4 percent, to $53.62 a barrel, the lowest settlement since Jan. 22, 2007. The more active January futures contract is down 45 cents, or 0.8 percent, at $53.65 a barrel. December futures expire at the close of trading today.

Gasoline inventories rose 539,000 barrels to 198.6 million barrels in the week ended Nov. 14, the report showed. Analysts surveyed by Bloomberg News were split over whether supplies of the motor fuel increased or declined.

`Shooting for $50'

U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said in a report yesterday.

``The market is shooting for $50,'' said Dan Flynn, an energy analyst at Alaron Trading Corp. in Chicago. ``Prices should continue to slide, given demand and the anticipated worsening of the economy.''

Speculation that the recession will further curb demand is helping send prices lower. U.S. housing starts and permits for future construction both dropped to record lows in October, signs the housing downturn may extend into a fourth year.

Construction starts on housing fell 4.5 percent in October, less than economists forecast, to an annual rate of 791,000 that was the lowest since records began in 1959, the Commerce Department said in Washington.

``What oil prices do in the months ahead depends more on the economy than anything else,'' said Steve Maloney, a risk- management consultant for Stamford, Connecticut-based Towers Perrin. ``Until we have hope of an economic rebound, prices are going to stay under pressure.''

Brent crude oil for January settlement declined 12 cents to $51.72 a barrel on London's ICE Futures Europe exchange, the lowest settlement since Jan. 11, 2007.

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

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Karachi Exchange May End Curbs as Pakistan Fund Props Up Stocks

By Naween A. Mangi

Nov. 20 (Bloomberg) -- The Karachi Stock Exchange may end rules barring investors from selling equities once the government puts in place a $252 million fund to support share prices and the economy improves, the bourse’s managing director said.

“It would be irresponsible to remove the curbs without the necessary stabilization measures,” Adnan Afridi, managing director of the exchange, said in an interview in Karachi. The timing will become clearer “over the next few days,” he said.

The government is planning a 20 billion-rupee ($252 million) fund to help lift stocks after the exchange prohibited investors from selling shares below their Aug. 27 closing prices, a move that effectively kept investors from pulling out of the market after the benchmark index plunged 49 percent this year. Pakistan is in a stronger position to start the fund after agreeing to $7.6 billion of International Monetary Fund loans last week.

While the Karachi 100 Index rose 11-fold as Pakistan’s economy expanded at least 4.7 percent a year between 2001 and 2007, the gains diminished as the global credit freeze sent the rupee to a record low, the balance of payments deficit to its widest level ever and inflation to a 30-year high.

The market has also been rocked by protests as police last month surrounded Pakistan’s biggest stock exchange to quell violence by investors angry over the price curbs. Authorities sought to avoid a repeat of July, when hundreds of investors stoned the bourse and shouted anti-government slogans.

Trading Curbs

The exchange first imposed the trading curbs in August then extended them indefinitely on Oct. 27. It also bailed out individual investors in July and banned short selling in September, measures aimed at stemming the market’s decline.

Pakistan’s rupee fell 0.2 percent yesterday to 79.375 per dollar, extending its decline this year to 22 percent.

The KSE 100 is down 0.2 percent since the start of the trading restrictions, leaving it at 9.4 times estimated profit, or 40 percent lower than its valuation at the start of 2008.

“The trading floor effectively stopped the process of price discovery and prevented buyer-seller interaction,” said Farid Khan, director of equities at Credit Suisse Pakistan in Karachi. “This effectively blocked the exit of existing investors and scared away potential investors.”

Overseas investors sold $175.4 million of stocks between July and October, after buying $313.9 million of shares in the same period a year earlier, according to central bank data. Foreign investors hold $2 billion of stock, a fifth of the amount that is freely floated, Afridi, 38, said in the interview yesterday.

Pakistan reached an agreement Nov. 15 with the Washington- based IMF on the loan package, which is aimed at preventing the nation from defaulting on its foreign debt. The country of 165 million people sought assistance after its foreign-exchange reserves shrank 75 percent in the past year to $3.5 billion on Nov. 8.

“We’re waiting for the fund and for our macroeconomic conditions, particularly foreign exchange reserves, to stabilize,” Afridi said. “A big step has been taken in that direction with the IMF.”

To contact the reporter on this story: Naween A. Mangi in Karachi, Pakistan, at nmangi1@bloomberg.net.

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Japanese Stocks Tumble to 4-Week Low as U.S. Recession Worsens

By Patrick Rial

Nov. 20 (Bloomberg) -- Japanese stocks slumped, sending the Nikkei 225 Stock Average below 8,000, as U.S. consumer prices dropped the most on record and housing starts plunged, indicating a recession in the world's largest economy is deepening.

Nipponkoa Insurance Co. fell 8.2 percent after it and six listed peers cut profit forecasts as shareholdings plunged. Sony Corp., which gets 25 percent of its sales from North America, lost 5 percent as chances for a U.S. automaker bailout package dwindled, heightening concerns of a protracted recession. Mitsubishi Corp., Japan's biggest trading company, plummeted 10 percent economic concerns drove commodities lower.

The Nikkei 225 dropped 381.07, or 4.6 percent, to 7,892.15 as of 9:33 a.m. in Tokyo, the lowest since Oct. 28. The broader Topix index slid 32.79, or 4 percent, to 794.64. In New York, the Dow Jones Industrial Average fell below 8,000 to close at the lowest since March 2003.

``Concerns are rising that the U.S. is entering a period of deflation and that the economic picture is getting bleaker,'' Juichi Wako, a Tokyo-based strategist at Nomura Holdings Inc., said in an interview with Bloomberg Television. ``There's really no good news to hang on to today.''

The Nikkei has fallen by 47 percent this year, as the credit crisis triggered by the collapse of the U.S. housing market fed into a global recession. More than half of Japanese companies cut their profit forecasts when reporting mid-term earnings during the past two months, according to Shinko Research Institute Co.

Deflation, Insurers

U.S. consumer prices plunged 1 percent last month, the most since records began in 1947, while housing starts tumbled to an annual rate of 791,000, an all-time low. The onset of deflation can be devastating for an economy as consumers and businesses delay spending to benefit from lower prices.

Nipponkoa lost 8.2 percent to 525 yen. The company slashed its profit forecast for the year ending in March by 31 percent. T&D Holdings Inc., Japan's largest publicly traded life insurer, was offered lower by 8.6 percent to 3,170 yen. The company reduced its profit estimate by 95 percent. A gauge of insurers lost 10 percent, the biggest decline among the 33 industry group included in the Topix.

Investments in hedge funds and private equities by T&D ``raises an alarm bell on the asset allocation; it is vulnerable to further collapse of the capital markets,'' John Russell, a Hong Kong-based analyst at HSBC Holdings Plc wrote in a note to clients. Russell downgraded T&D to ``neutral'' from ``outperform.''

Sony, the maker of the PlayStation3 game console, retreated 5 percent to 1,853 yen. Nippon Electric Glass Co., the world's third-biggest maker of glass for flat-panel televisions, fell 9.8 percent to 517 yen.

Crude, Copper

Mitsubishi, which gets more than half of its earnings from commodities trading, retreated 10 percent to 1,004, the lowest since July 2004. Rival Itochu Corp. declined 6.7 percent to 421.

A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell 3.9 percent. Zinc dropped 3.7 percent, copper 4.3 percent and nickel 4.7 percent. Crude oil slumped to as low as $52.96, a level not seen since January 2007.

Nikkei futures expiring in December dropped 4.7 percent to 7,880 in Osaka and slid 4.9 percent to 7,885 in Singapore.

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

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Asian Stocks Fall, Extending Global Rout; Toyota, Nintendo Drop

By Kyung Bok Cho and Patrick Rial

Nov. 20 (Bloomberg) -- Asian stocks fell, extending a global rout, as U.S. consumer prices dropped by a record and Japan's exports declined the most in six years, adding to evidence a global recession is deepening.

Nintendo Co. lost more than 4 percent on concern demand is slumping in North America, where the company gets 40 percent of its sales. Toyota Motor Corp. slid 2.8 percent after a Japanese government report showed exports declined 7.7 percent last month. Commonwealth Bank of Australia slumped 4.4 percent after the nation's corporate bond risk approached a record.

``Concerns are rising that the U.S. is entering a period of deflation and that the economic picture is getting bleaker,'' Juichi Wako, a Tokyo-based strategist at Nomura Holdings Inc., said in an interview with Bloomberg Television. ``There's really no good news to hang on to today.''

The MSCI Asia Pacific Index fell 2.2 percent to 77.46 at 9:38 a.m. in Tokyo, dropping for a fourth day and heading for a 6.7 percent decline this week. Japan's Nikkei 225 Stock Average lost 4 percent to 7,939.67, while stocks also slumped in Australia and South Korea.

MSCI's Asian gauge has plunged 51 percent in 2008 as global financial institutions lost almost $1 trillion since the U.S. subprime-mortgage market collapsed last year. Growth in the Asia- Pacific region may expand in 2009 at less than half the pace of the previous two years, the Pacific Economic Cooperation Council said today.

Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, according to a record of their meeting released yesterday.

Commodities Fall

Futures on the U.S. Standard & Poor's 500 Index declined 0.2 percent. The S&P 500 tumbled 6.1 percent to 806.58 yesterday, while the Dow Jones Industrial Average fell below 8,000. Both measures closed at the lowest levels since March 2003. Europe's Dow Jones Stoxx 600 Index slipped 4 percent to 193.77 yesterday, the lowest level since May 2003.

U.S. consumer prices plunged 1 percent last month, the most since records began in 1947, while housing starts tumbled to an annual rate of 791,000, a record low. The onset of deflation can be devastating for an economy as consumers and businesses delay spending to benefit from lower prices.

Exports, the main engine of Japan's economic growth in the past six years, fell 7.7 percent from a year earlier, after rising 1.5 percent in September, the Finance Ministry said today in Tokyo.

Bond Risk

The Markit iTraxx Australia index of credit-default swaps was quoted 27.5 basis points higher at 345 as of 10:38 a.m. in Sydney, Citigroup Inc. data show. The gauge climbed to 389 basis points on Oct. 24, according to CMA Datavision. An increase means investor perceptions of credit quality is deteriorating.

Rio Tinto Group dropped 9 percent in Sydney as a weaker economic outlook prompted commodities to decline. A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell 3.9 percent. Zinc dropped 3.7 percent, copper 4.3 percent and nickel 4.7 percent. Crude oil slumped to as low as $52.96, a level not seen since January 2007.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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U.S. Economy: Consumer Prices Fall as Deflation Looms

By Bob Willis and Timothy R. Homan

Nov. 19 (Bloomberg) -- The cost of living in the U.S. fell by the most on record and construction began on the fewest homes ever last month, evidence the economy is in the worst recession in at least a quarter century.

The consumer price index plunged 1 percent last month, the most since records began in 1947, the Labor Department said in Washington. Commerce Department figures showed housing starts tumbled to an annual rate of 791,000, indicating the industry's contraction may extend into a fourth year.

Today's CPI report signals deflation, or a prolonged price slide, may become another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Deflation could worsen the economic downturn by making debts harder to pay off and countering the impact of Fed interest-rate cuts.

``The economy's really just in horrific shape,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. Fed officials will ``take rates as low as they have to'' to avoid ``a deflation-type scenario, which now all of a sudden is very possible.''

LaVorgna predicts the Fed will cut its main rate to 0.5 percent from its current 1 percent when it meets on Dec. 16.

Deflation Risk

Fed Vice Chairman Donald Kohn said today that while the risk of deflation is ``still small,'' policy makers must be ``aggressive'' in fighting the danger. The economy ``is declining right now'' and will record a couple of quarters of contraction, he said in answering questions after a speech in Washington.

Fed policy makers last month forecast the U.S. economy will contract through the middle of 2009, with some officials prepared to cut interest rates further in response, according to a record of the group's meeting.

``Some suggested that additional policy easing could well be appropriate at future meetings,'' the Fed said in minutes of the Oct. 28-29 Federal Open Market Committee meeting released today. ``In any event, the Committee agreed to take whatever steps were necessary to support the recovery.''

Treasuries advanced, and stocks plunged. Yields on benchmark 10-year notes fell to 3.36 percent as of 4:24 p.m. in New York, from 3.52 percent late yesterday. The Standard & Poor's 500 Stock Index closed down 6.1 percent at 806.58, extending its 2008 retreat to 45 percent.

Prices dropped last month as fuel costs plummeted and retailers used discounts for cars and clothing to entice consumers hobbled by job losses and sinking home values.

Cutting Prices

Target Corp. is among retailers cutting prices in an effort to lure cash-strapped holiday shoppers away from Wal-Mart Stores Inc., the discount retailer that last week reported a gain in third-quarter profit.

Excluding food and energy, so-called core prices unexpectedly fell 0.1 percent for the first decline since 1982.

``We are moving into an environment where prices are falling across the board,'' David Resler, chief economist at Nomura Securities International Inc. in New York, said in an interview with Bloomberg Television. ``That is going to continue. Deflation is spreading across the economy.''

Consumer prices were projected to fall 0.8 percent, according to the median forecast of 77 economists in a Bloomberg News survey. Estimates ranged from a decline of 1.2 percent to a gain of 0.4 percent. Costs excluding food and energy were forecast to rise 0.1 percent, the survey showed.

Annual Gain

Prices increased 3.7 percent in the 12 months to October, the smallest year-over-year gain since October 2007. They were forecast to climb 4 percent from a year earlier, according to the survey median.

The core rate increased 2.2 percent from October 2007, after a 2.5 percent year-over-year increase the prior month.

A slump in building permits signaled residential construction is likely to keep falling in the next couple of months. Permits dropped 12 percent to a 708,000 pace, the lowest since at least 1960, the report from Commerce showed.

Builders, already mired in a three-year housing slump, are finding it hard to attract buyers as property values drop and banks tighten lending standards.

Housing starts were projected to fall to a 780,000 annual pace from a previously estimated 817,000 in September, according to the median forecast of 75 economists polled by Bloomberg News. Estimates ranged from 700,000 to 870,000.

Compared with October 2007, work began on 38 percent fewer homes.

Core-Price Declines

The drop in core consumer prices reflected declines in the cost of clothing, automobiles, air fares and hotel rates. New- vehicle prices fell 0.5 percent and clothing costs dropped 1 percent. The price of airfares plunged 4.8 percent, the most since June 1999.

One benefit of falling prices can be seen in its effect on incomes. Today's figures also showed wages increased 1.4 percent after adjusting for inflation, following no change in September. They were still down 0.9 percent over the last 12 months. The decline in purchasing power is contributing to the slowdown in consumer spending.

Retail sales fell 2.8 percent last month, the most on record, Commerce Department figures showed last week. Mounting job losses and record foreclosures are causing American consumers, who account for more than two-thirds of the economy, to retrench.

Wal-Mart Discounts

Wal-Mart, the world's largest retailer, said yesterday it planned to reduce U.S. prices on Thanksgiving food and Christmas merchandise to lure customers during the holidays.

Target, the second-largest U.S. discounter, said this week it plans to add grocery items and offer ``sharper'' discounts to draw shoppers who are shunning jewelry, clothing and home goods, which account for more than 40 percent of its revenue.

``Right now, the consumer is very hesitant,'' Chief Executive Officer Gregg Steinhafel said during the company's Nov. 17 earnings call. ``They're very stressed.''

Obama and House Democrats are planning to spend as much as half a trillion dollars to stimulate the world's biggest economy and U.K. Prime Minister Gordon Brown pressed other leaders of the Group of 20 nations to follow that effort last weekend.

To contact the report responsible for this story: Bob Willis in Washington at bwillis@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

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Cattle Drop to 2-Year Low as Beef Demand May Slow; Hogs Gain

By Whitney McFerron

Nov. 19 (Bloomberg) -- Cattle prices fell to a two-year low and feeder cattle slid to the lowest since 2004 on speculation that the slumping global economy will curb demand for U.S. beef. Hog futures climbed.

Construction started on new homes last month at the slowest annual pace on record, the U.S. Commerce Department said today, a sign that the housing slump may extend into a fourth year. Consumers may spend less money on beef as the economy stumbles and they have less disposable income, said Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City.

``The economy is lower, and expectations that the live- cattle market was going to get better have gotten killed here the last four or five days,'' Broadbent said. ``Beef demand may slow down.''

Cattle futures for February delivery fell 2.45 cents, or 2.8 percent, to settle at 85.15 cents a pound on the Chicago Mercantile Exchange. The price later touched 84.675 cents, the lowest since Nov. 8, 2006. The most-active contract has tumbled 8.1 percent this month.

Feeder-cattle futures for January delivery dropped 1.4 cents, or 1.5 percent, to 89.85 cents a pound in Chicago. Earlier, the price touched 88.35 cents, the lowest for a most- active contract since April 12, 2004. The price has slipped 8.4 percent this month.

Wholesale choice beef rose 0.51 cent, or 0.3 percent, to $1.58 a pound at midday today, the highest price since Sept. 25, the U.S. Department of Agriculture said. The price has gained in 14 of the past 15 sessions and is up 11 percent this month.

Smaller Supply

Beef prices have risen because the supply of cattle to slaughterhouses is shrinking, Broadbent said. U.S. meatpackers processed 363,000 cattle in the first three days of this week, 7.6 percent less than in the same week last year, USDA data show.

``We've got tight numbers in here,'' Broadbent said. ``It's as tight as it's going to be.''

In another livestock market, hog prices rose the most in four weeks on speculation that U.S. grocers will step up ham purchases to prepare for increased sales before the Christmas and New Year's holidays.

The price of wholesale pork rose the most in a week yesterday after falling to a seven-month low on Nov. 17, USDA data show. Lower-cost meat supplies may have spurred buying from holiday-minded retailers, said Tom Cawthorne, the director of hog trading at R.J. O'Brien & Associates, a brokerage in Chicago.

``We've gotten pretty cheap, and you're getting some processors getting ready for holiday-ham demand,'' Cawthorne said. ``When we see the cutout going higher, that gets futures jacked up.''

Hog Futures Rise

Hog futures for February settlement rose 0.7 cent, or 1.1 percent, to 62.9 cents a pound in Chicago, the biggest gain for a most-active contract since Oct. 21. Futures have increased 8.7 percent this year.

Wholesale pork rose 0.99 cent, or 1.8 percent, to 56.7 cents a pound yesterday, according to the USDA. The price is down 8.8 percent this month. Wholesale ham gained 0.92 cent, or 2.2 percent, to 43.54 cents a pound, the USDA said.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

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Corn, Soybeans Decline, Erasing Gains, After Dollar Rebounds

By Tony C. Dreibus

Nov. 19 (Bloomberg) -- Corn and soybeans fell for a second day, erasing earlier gains, on speculation that demand for U.S. commodities will decline after the dollar pared losses.

The value of the dollar versus six major world currencies including the euro and U.K. pound was little changed after dropping as much as 1.4 percent in early trading. A stronger greenback reduces demand for U.S. supplies including corn and soybeans, eroding the purchasing power of overseas buyers.

``Today we have to watch the euro and we have to watch the pound,'' said Vince Ambrose, a trader at MF Global in Chicago. ``I'm looking for a rally and then a selloff in corn and beans.''

Corn futures for December delivery fell 1.25 cents, or 0.3 percent, to $3.7875 a bushel on the Chicago Board of Trade. The price, which gained 1.3 percent in early trading, is down 53 percent from a record $7.9925 on June 27.

Soybean futures for January delivery dropped 5 cents, or 0.6 percent, to $8.97 a bushel in Chicago. The most-active contract is down 45 percent from the all-time high of $16.3675 on July 3.

``The weaker dollar was supportive'' earlier in the day, said Bob Utterback, chief executive officer at Utterback Marketing Services Inc. in New Richmond, Indiana. ``But commodities opened too strong. They're very range-bound.''

China Trade

Soybean futures also fell on speculation that China will reduce purchases from the U.S., the biggest exporter, and try to become more self-sufficient. China may buy more soybeans from domestic growers to boost prices and farm incomes, two trading executives at state-owned companies said last week. That may prompt farmers to plant more.

``The market's getting a little dismayed because it doesn't hear positive export news coming out of China,'' Utterback said. ``They want to build a support structure and become more independent.''

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, followed by soybeans at $26.8 billion, government figures show.

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

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Canada Stocks Fall to 4-Year Low on Scotia Charge; EnCana Drops

By John Kipphoff

Nov. 19 (Bloomberg) -- Canadian stocks fell, sending the main index to a four-year low, as finance shares tumbled after a C$890 million writedown by Bank of Nova Scotia, the country's third-biggest lender.

``Scotia woke people up to the fact that they won't be the only ones with these problems,'' said Michael Sprung, president of Sprung & Co. Investment Counsel, which manages $50 million in Toronto. ``We see another quarter of similar writedowns across banks. Insurers are playing catch-up.''

Manulife Financial Corp. and Bank of Montreal paced the decline of a group of banks and insurers to the lowest since 2003, as the industry was also hit by Citigroup Inc.'s announcement that it will buy billions of dollars in assets from structured investment vehicles it advised. EnCana Corp. led energy shares lower as the price of oil extended a 22-month low.

The Standard & Poor's/TSX Composite Index fell 3.9 percent to 8,490.56 in Toronto, the lowest since September 2004. The S&P/TSX, which gets almost three-quarters of its value from finance and resource stocks, has dropped 44 percent below its June record as global credit losses approached $1 trillion and commodities slid.

Scotiabank fell 5.2 percent to C$35.24, the lowest price since June 2004. Canada's third-largest bank by assets said it will record pretax charges of C$890 million in its fourth quarter tied to trading and investments, and Lehman Brothers Holdings Inc. September bankruptcy. Profit will be cut C$595 million ($479.6 million) by the losses, Scotiabank said.

Falling Value

Citigroup agreed to acquire $17.4 billion of assets held from SIVs it advised, after the value of their investments declined from $21.5 billion as of Sept. 30.

Bank of Montreal fell 6.2 percent to C$38, the most since Sept. 29. The nation's fourth-biggest lender has agreed to lend two SIVs as much as $9.65 billion. Bank of Montreal is scheduled to kick off Canadian banks' fourth-quarter reports on Nov. 25.

``Similar losses relating to Lehman, credit spread-related valuation adjustments, and conduit asset repurchases cannot be ruled out when peer domestic banks report their results,'' Blackmont Capital analyst Brad Smith said in a note to clients.

Royal Bank of Canada, the country's largest bank, fell 5.4 percent to C$41.19. Toronto-Dominion Bank dropped 4.3 percent to C$49.33 and Canadian Imperial Bank of Commerce declined 5.1 percent to C$48.29., the lowest since May 2003.

Canadian banks may record a ``few hundred million'' dollars in writedowns each in the fourth quarter, TD Newcrest analyst Jason Bilodeau said. CIBC may have up to C$2 billion in charges, Bilodeau said, on investments tied to the U.S. housing market.

Manulife

Manulife Financial, Canada's biggest insurance company, slid 6.2 percent to C$20.97. Smaller rival Sun Life Financial Inc. dropped 5.8 percent to C$22.36, the lowest since June 2000.

A measure of financial shares, the biggest by value among the S&P/TSX's 10 industries, fell 4.9 percent to 1,195.09, the lowest price since Dec. 24, 2003. Energy shares, the next- largest group by weighting, fell 3.6 percent. Raw-materials producers lost 4.3 percent.

EnCana, Canada's largest energy company by market value, dropped 2.6 percent to C$51.21. Suncor Energy Inc., the second- largest oil-sands mining company, slid 4.5 percent to C$22.20, near a 3 ½ year low. Enbridge Inc., the nation's largest pipeline company, fell 4.8 percent to C$35.70.

Crude oil for December delivery fell 1.4 percent to $53.62 a barrel in New York after U.S. inventories climbed more than forecast on declining fuel demand. Futures have dropped 64 percent from a July 11 record of $147.27.

Copper prices fell the most in a week on signs that output is exceeding demand as a global economic slump trims consumption of the metal used in construction. Corn dropped a second day.

Potash Corp. of Saskatchewan Inc., the largest maker of crop nutrients by market value, slipped 5.9 percent to C$81.02, two-thirds below its June 17 record.

Teck Cominco Ltd. slid 15 percent to C$5.22, the lowest since May 2003. Canada's biggest diversified miner had its per- share earnings estimate cut 34 percent at JPMorgan Chase & Co.

Energy and mining ``stocks are reacting to lower commodity prices due to increasing recessionary fears,'' Sprung said.

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

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Brazil Stocks Fall for 4th Day on Commodity Slump; Bolsa Drops

By Alexander Ragir and William Freebairn

Nov. 19 (Bloomberg) -- Brazilian stocks dropped for a fourth day, led by raw-material producers, as commodity prices fell and analysts said steel demand will likely slow through next year.

Usinas Siderurgicas de Minas Gerais SA and Gerdau SA lost more than 5 percent after UBS AG said cuts in steel production show a drop in demand. Cosan SA Industria & Comercio fell the most in a week after RBC Capital Markets said the sugar-cane processor will likely ``be vulnerable to a cyclical downturn.''

``We're a market very tied to commodities and we're not seeing much good news flow on that front,'' said Rodrigo Bresser- Pereira, a hedge fund manager at Bresser Administracao de Recursos in Sao Paulo. ``The future seems much less visible now.''

The Bovespa slid 2 percent to 33,404.55. The BM&FBovespa Small Cap index retreated 1.2 percent. The BM&FBovespa MidLarge Cap index declined 2.3 percent. Brazilian markets will be shut tomorrow for a holiday.

Mexico's Bolsa dropped 2.4 percent and Chile's Ipsa fell 0.3 percent. In the U.S., the Standard & Poor's 500 Index slid 6.1 percent to its lowest close since 2003 on growing concern over the fate of the nation's car industry and economic data signaling the recession is deepening.

Gerdau, Latin America's biggest steelmaker, slumped 6.5 percent to 12.15 reais. Accelerating cuts in global steel production show a drop in demand that will likely last through 2009, UBS analysts wrote in a note to investors. About 60 percent of Gerdau's sales in 2007 were from exports.

Usiminas, Brazil's second-biggest steelmaker, dropped 5.7 percent to 20.13 reais. Usiminas said it plans to work on a blast furnace, reducing production of pig iron by 300,000 tons, or 3 percent of current capacity.

Cosan Slides

Tin, copper, lead and nickel prices all dropped in London as rising stockpiles signaled production is outpacing demand from industry. The Bloomberg Base Metals 3-Month Price Commodity Index fell 2.7 percent to its lowest level since September 2005.

Cosan slid 7.2 percent to 10.20 reais. Higher financing costs at a time of ``slim'' margins ``may present a serious challenge'' for Cosan, the RBC analysts wrote. Sao Martinho SA, Brazil's second-biggest publicly traded sugar and ethanol producer, dropped 5.5 percent to 9.30 reais.

Brazil's economy may undergo a ``sharp deceleration'' in the fourth quarter as consumers buy fewer goods because of the growth slowdown and credit squeeze, Merrill Lynch & Co. said today.

``All indicators point to an acute deterioration in domestic demand already in October, as consumers reacted to the severe tightening of credit conditions,'' Merrill strategists wrote in a note to clients today. ``We continue to expect a sharp deceleration of domestic activity in the fourth quarter.''

The Brazilian economy may expand 4.9 percent in 2008, according to a forecast by Merrill strategists. That's below the average estimate of 5.2 percent growth for 2008 in a weekly central bank survey of about 100 economists published Nov. 17.

Bolsa Drops

In the U.S., the cost of living fell by the most on record and construction began on the fewest homes ever last month, evidence the economy is in the worst recession in at least a quarter century.

Mexico's Bolsa dropped for a third day, slipping to the lowest this month.

America Movil SAB, Latin America's biggest wireless carrier, fell to the lowest in a week after Pali Research said its share of new subscribers in Brazil was below forecasts. America Movil dropped 3.8 percent to 19.45 pesos.

Grupo Mexico SAB, Mexico's biggest mining company, dropped to the lowest since Oct. 17 after JPMorgan Chase & Co. said it may have $4.8 billion in legal claims related to a bankrupt U.S. unit and its environmental liabilities. Grupo Mexico fell 8.9 percent to 7.49 pesos.

Elsewhere in Latin America, Argentina's Merval lost 2.1 percent, Peru's Lima General index fell 2.1 percent and Colombia's IGBC slid 0.3 percent.

To contact the reporters on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net; William Freebairn in Mexico City at wfreebairn@bloomberg.net.

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Gymboree, Intuit, Limited Brands, PetSmart: U.S. Equity Preview

By Lu Wang

Nov. 19 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:30 p.m. in New York, unless otherwise specified.

Standard & Poor's 500 Index futures expiring in December lost 1.40, or 0.2 percent, to 811.10. Dow Jones Industrial Average futures fell 467, or 5.5 percent, to 8,027. Nasdaq-100 Index futures slipped 3.25, or 0.3 percent, to 1,089.25.

Cyberonics Inc. (CYBX US): The maker of a nerve-stimulating device to treat epilepsy boosted its sales forecast, saying it expects revenue of as much as $140 million in fiscal 2009. The stock dropped 8 percent to $10.10 in regular trading.

Gymboree Corp. (GYMB US) rose 77 cents, or 4.7 percent, to $17.25 in trading after the official close of exchanges. The children's-clothing maker said it earned $1.06 a share in the third quarter. That beat the average estimate of $1.03 from analysts in a Bloomberg survey.

Intuit Inc. (INTU US): The world's biggest maker of tax- preparation software reported a wider loss in the fiscal first quarter and forecast profit that missed some analysts' estimates after the slowing economy and tighter credit squeezed small- business customers. The stock fell 3.4 percent to $20.55 in regular trading.

Limited Brands Inc. (LTD US) gained 28 cents, or 3.7 percent, to $7.86. The owner of Victoria's Secret shops and the Bath & Body Works chain said third-quarter profit excluding some items was 1 cent a share. Analysts, on average, expected the company to break even, according to a Bloomberg survey.

PetSmart Inc. (PETM US) rose $1.66, or 12 percent, to $14.98. The largest U.S. pet-store chain reported third-quarter profit of 28 cents a share. That's 2 cents higher than the average analyst's estimate, according to a Bloomberg survey.

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

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U.S. Stocks Slide to Five-Year Lows as Banks, Carmakers Tumble

By Eric Martin

Nov. 19 (Bloomberg) -- U.S. stocks sank and benchmark indexes slid to their lowest levels since 2003 on growing concern over the health of the financial system and survival of the nation's car industry.

Citigroup Inc. tumbled 23 percent to $6.40, a 13-year low, on a plan to buy $17.4 billion of troubled investment-fund assets. General Motors Corp. slid 9.7 percent to its lowest price since the 1940s, while Ford Motor Co. lost 25 percent. Fourteen companies in the Standard & Poor's 500 Index fell 20 percent or more as government data signaled the recession is deepening and expectations grew that insurers will post more investment losses.

``Hideous day,'' said Bill Stone, who oversees $56 billion as chief investment strategist at PNC Wealth Management in Philadelphia. ``It's hard to put a basement on this thing.''

The S&P 500 plunged 6.1 percent to 806.58 and extended its 2008 retreat to 45 percent, poised for its worst year since 1931. The Dow Jones Industrial Average lost 427.47 points, or 5.1 percent, to 7,997.28. The Nasdaq Composite Index decreased 6.5 percent to 1,386.42. Thirty stocks fell for each that rose on the New York Stock Exchange, where 1.6 billion shares changed hands, 8.6 percent more than the three-month average.

The retreat in the U.S. followed declines in Europe and Asia as concern mounted the economic slowdown will cut profits at financial firms and commodity producers. Federal Reserve policy makers last month predicted the U.S. economy will contract through the middle of 2009, with some prepared to cut interest rates further in response, according to a record of their meeting released today.

Stocks Slide, Bonds Gain

Both the Dow and the S&P 500 retreated to their lowest levels since March 2003, while the Nasdaq slid to its lowest since April of that year.

Treasuries rose, led by longer-term securities, as investors sought the relative safety of government debt following the biggest drop in consumer prices on record. The difference between yields on 10-year Treasury Inflation Protected Securities and conventional notes, which reflects the outlook for consumer prices, was 38 basis points, near the least since Bloomberg began tracking the data in 1998.

Citigroup, which was surpassed by U.S. Bancorp today as the nation's fourth-largest bank by market value, retreated to its lowest price since 1995, three years before Citicorp Inc.'s merger with Sanford ``Sandy'' Weill's Travelers Group Inc.

SIV Slump

Citigroup said the value of the assets it agreed to buy from structured investment vehicles it advises fell from $21.5 billion as of Sept. 30, reflecting market declines of $1.1 billion and $3 billion in debt that matured or was sold. SIVs, which Citigroup invented in 1988, emerged 15 months ago as one of the first major strains in credit markets rocked by record high foreclosures on subprime mortgages.

Bank of America Corp., the lender that's buying Merrill Lynch & Co., dropped $2.13, or 14 percent, to $13.06. Goldman Sachs Group Inc. dropped $6.85, or 11 percent, to $55.18, the lowest close since the company's initial public offering in 1999.

The S&P 500 Financials Index tumbled 12 percent to a 13- year low as all 84 of its companies retreated. JPMorgan Chase & Co., the biggest U.S. bank by market value, lost $3.67, or 11 percent, to $28.47, its lowest closing price since 2003.

Lincoln National Corp. plunged 40 percent, the steepest decline in the S&P 500, to $7.31. The Philadelphia-based life insurer said it expects a charge of as much as $300 million because of declining equity markets last month. Insurers in the S&P 500 lost 11 percent collectively.

Even Buffett

Warren Buffett's Berkshire Hathaway Inc., which owns the insurers Geico Corp. and General Re, dropped 12 percent to $84,000 for its steepest plunge since at least 1985.

Homebuilders across S&P indexes tumbled 11 percent as a group, led by a 24 percent plunge in Meritage Homes Corp.

U.S. builders in October broke ground on the fewest new homes and obtained permits for future construction at the lowest levels on record, signs the housing slump may extend into a fourth year.

A bigger-than-forecast 1 percent drop in the consumer price index was triggered by a plunge in fuel costs and discounts on automobiles and clothing to entice consumers amid a weakening economy. Excluding food and energy, so-called core prices unexpectedly fell for the first time since 1982.

Carmakers Make Case

General Motors retreated 30 cents to $2.79. Chief Executive Officer Rick Wagoner and fellow auto-industry leaders are urgently seeking a government bailout package to stem a collapse in the U.S. auto industry.

Ford, the second-biggest U.S. automaker, dropped 42 cents, or 25 percent, to $1.26.

Car company executives made their plea for government aid for a second day as Senate Republican leader Mitch McConnell pressed lawmakers to expedite $25 billion in previously approved auto loans. Support has waned for a Democratic plan to help the automakers with funds from the recently approved $700 billion bank-rescue fund. That idea is opposed by President George W. Bush and Senate Republicans, making it unlikely there are enough votes to overcome a presidential veto.

The cost of protecting corporate bonds from default rose to near a record on concern automakers won't get a bailout in time to prevent them from failing.

`Soap Opera'

``The continuing soap opera that's playing out in Washington with the automobile manufacturing management testifying today before Congress is sowing further uncertainty,'' said Marshall Front, who oversees $700 million as chairman of Front Barnett Associates in Chicago. ``I think it's probably preoccupying most people at this point.''

The S&P 500 has dropped 48 percent from its 2007 record as earnings for companies in the index decreased for five straight quarters and worldwide writedowns and credit losses reached $966 billion in the worst financial crisis since the Great Depression.

Profits fell 17 percent on average at companies in the index that have reported third-quarter results, according to Bloomberg data. Analysts expect a 9.5 percent decline in full- year earnings, based on estimates compiled by Bloomberg.

CA Inc., one of just seven S&P 500 companies to advance, added 3 cents to $15.30. The second-largest maker of software for mainframe computers was boosted to ``strong buy'' from ``outperform'' by Raymond James Financial Inc. analyst Michael Turits, who said the company is ``well positioned'' amid an economic slowdown.

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

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