India's Economy Will Likely Withstand Terror Attacks

By Cherian Thomas

Nov. 28 (Bloomberg) -- India's economy will probably withstand the effect of yesterday's terror attacks in Mumbai as rising incomes and record harvests boost consumer spending.

“Mumbai is no stranger” to terrorism, said Sarah Hewin, an economist at Standard Chartered Bank in London. “But each time we have seen a bounce-back and this time will be no exception.”

Finance Minister Palaniappan Chidambaram, who didn't comment yesterday on the shootings and blasts in India's business capital, expects growth to rebound to 9 percent next year from as low as 7 percent this year even as a global recession spreads. Still, the pace of expansion probably slowed last quarter after the central bank raised interest rates earlier this year to cool inflation.

“Things changed starting October, when monetary policy shifted to a softening stance that will continue until the middle of next year,” said Mridul Saggar, chief economist at Kotak Securities Ltd. in Mumbai. “The fundamentals of the economy are positive.”

Governor Duvvuri Subbarao has reduced the central bank's repurchase rate twice in the past five weeks, lowering it to 7.5 percent from a seven-year high of 9 percent. The Reserve Bank of India has been given room to cut borrowing costs as weaker commodity prices reduce risks from inflation, now at a six-month low of 8.84 percent.

'Bounce Back'

Chidambaram expects growth in India's $1.2 trillion economy to slow to between 7 percent and 8 percent in the year to March 31. He says it will “bounce back” on the strength of domestic consumption and investment. Chidambaram said even at 7 percent, India's growth is three times the rate of global expansion and is second only to China.

India's statistics office will release figures for gross domestic product growth in the three months to Sept. 30 at noon in New Delhi today. Economists surveyed by Bloomberg expect an increase in GDP of 7.2 percent, the weakest pace since 2004.

Record crop plantings by India's 400 million farmers will also boost rural incomes, Chidambaram said Nov. 18.

Domestic consumption in the country of 1.2 billion people makes up 55 percent of the economy, compared with 37 percent of GDP in China. Savings account for 30 percent of India's economy, compared with 1 percent of the economy in the U.S.

“There is a lot of money to be reinvested back into the economy,” said Jai Sinha, partner and co-head for India at Booz & Co., a global management consulting firm. “There is no doom and gloom over India.”

Foreigners Targeted

Indian and overseas companies said they aren't changing their business plans after terrorists attacked luxury hotels, a railway station and a hospital in Mumbai. The encounter, which targeted American and Britons, left as many as 125 120 dead.

Targeting foreign nationals at key tourist hotels and restaurants adds a new dimension to a wave of bombings in India this year that has killed more than 300 people.

“The events of the last 24 hours have not affected our longer term business plans in the country,” said Alice Hunt, director for corporate media at GlaxoSmithKline Plc, Europe's largest drugmaker, which is looking at India to boost sales.

Jan Lambregts, head of Asia research at Rabobank International, a subsidiary of the Dutch banking group, said India's “domestic demand component could show some resilience because inflation is coming off.” He forecast economic growth at about 7 percent in 2009, “which is quite decent given that it's a very tough year next year.”

Markets Closed

“In the short term there will be a shock, but in the medium term the investor confidence will come back,” said Venu Srinivasan, chairman of TVS Motor Co., India's third-largest motorcycle maker. “India's long-term growth story is intact.”

India will “go after” individuals and organizations behind the Mumbai terrorist attacks, which were “well-planned with external linkages,” Prime Minister Manmohan Singh said in a televised address to the nation.

India's stock index futures pared losses yesterday. futures for November delivery were trading 2.4 percent lower at 2,685 as of 6:04 p.m. in Singapore after earlier declining as much as 4.9 percent.

India's stock index futures pared losses. S&P CNX Nifty Index futures for November delivery, which expire today, closed yesterday in Singapore down 2.4 percent at 2,685 after earlier declining as much as 4.9 percent. Futures for December delivery traded at 2,652.

The stock, bond, currency and money markets in India were shut yesterday as the government ordered Mumbai residents to stay at home.

Any decline in Indian financial markets in response to the terror attacks may prove to be “temporary” as borne out by Mumbai's experience since 1993, Moody's Economy.com said.

The benchmark Sensitive index rose 3 percent the day after train bombings in Mumbai in July 2006 that killed 187 people and injured more than 800.

“This sort of incident is not new in India,” said Templeton Asset Management Ltd. Chairman Mark Mobius, who oversees more than $24 billion in emerging-market stocks. “Life does go on in India. It's a very vibrant economy.”

To contact the reporter on this story: Cherian Thomas in New Delhi at cthomas1@bloomberg.net

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China May Make ‘Big’ Change to its Yuan Policy, Securities Says

By Judy Chen

Nov. 28 (Bloomberg) -- China may make a “big” change in its yuan policy as the government seeks to avert a slowdown in the world’s fourth-largest economy, Shanghai Securities News reported, citing a researcher.

The authorities may be more “active” in adjusting the yuan’s exchange rate, said Liu Wei, dean of the School of Economics at Peking University, the Chinese-language newspaper reported today.

“The yuan should not appreciate at a faster pace or remain unchanged,” Liu said at an economic forum yesterday, according to the newspaper.

The government should change its exchange-rate policy “fundamentally” to maintain growth and boost employment, the paper reported Liu as saying. Shanghai Securities News is affiliated with the official Xinhua News Agency.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

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Australia, New Zealand Dollars Advance for First Week in Three

By Candice Zachariahs

Nov. 28 (Bloomberg) -- The Australian and New Zealand dollars headed for their first weekly advance in three as traders speculated a fresh round of rate cuts and stimulus packages will prompt investors to buy the nations’ higher-yielding assets.

The currencies rose as equity markets were boosted by an $800-billion Federal Reserve package to revive U.S. lending and China’s biggest rate reduction in 11 years. New Zealand’s dollar pared weekly gains after a report showed home-building approvals fell to a record in October. Australia and New Zealand’s central banks are expected to slash interest rates next week.

“The idea that the governments will pump economies up and China has cut rates aggressively, those things are helping stabilize asset prices,” said Greg Gibbs, a currency strategist at ABN Amro Australia Ltd. in Sydney. “If the Reserve Bank of Australia surprises on the lesser side for the cut that could be a positive for the currency next week.”

Australia’s currency rose 3.9 percent this week to 65.71 U.S. cents as of 9:35 a.m. in Sydney from 63.25 cents in New York on Nov. 21 and 65.65 cents late in Asia yesterday. The currency advanced 3.2 percent to 62.63 yen from 60.68 yen in New York.

New Zealand’s dollar gained 2.7 percent to 55.16 U.S. cents from 53.71 cents in New York Nov. 21. It declined today from 55.29 cents in Asia yesterday. It rose 2.3 percent this week to 52.59 yen.

The currencies rose this week after the U.S. announced a program to support lending to homebuyers, consumers and small businesses, reducing demand for the greenback as a safe haven. China, Australia’s biggest trading partner, cut its key lending rate by 1.08 percentage points to 5.58 percent to boost growth amid its deepest economic slowdown in almost two decades.

The announcements helped bring the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a measure of risk aversion, down to its lowest close since Nov. 5.

Rate Cuts

The kiwi, as New Zealand’s currency is called, declined after Statistics New Zealand said home-building approvals plunged 21.9 percent from September. The 1,121 approvals in October were the lowest since the series began in January 1982.

“Financing is a lot harder to secure and therefore we’re seeing a lot of development projects not going ahead at all,” said Khoon Goh, senior economist at ANZ Bank Ltd. in Wellington. “I suspect that the markets will start to price in a larger chance of a 150 basis point rate cut” at the Reserve Bank of New Zealand’s Dec. 4 meeting.

Traders are betting on a 92 percent chance for a reduction of 125 basis points by New Zealand’s central bank, according to a Credit Suisse index based on overnight swaps trading. The Reserve Bank of Australia will slash rates at least 100 basis points when on Dec. 2, a separate Credit Suisse index shows. The chance of a 125-point cut was 36 percent.

RBA May Disappoint

“Our economists think the RBA will likely disappoint current rate market pricing but expect the RBNZ to exceed the 125 basis points of easing that is priced into New Zealand rate markets,” wrote John Horner, a currency strategist at Deutsche Bank AG in Sydney in a research note dated Nov. 27.

Investors should buy the Australian currency if it dips toward NZ$1.17 prior to the RBA’s Dec. 2 meeting “looking for a move toward NZ$1.22 in coming weeks,” he wrote.

The Aussie, as it’s called, traded at $NZ1.1901 from NZ$1.1793 in New York late last week.

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., attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.

Australian government bonds were little changed with the yield on the 10-year note at 4.635 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.099, or A$0.99 per A$1,000 face amount, to 104.977.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 5.11 percent from 5.13 yesterday.

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

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Dollar Heads for Weekly Drop as Policies Revive Risk Appetite

By Ron Harui and Stanley White

Nov. 28 (Bloomberg) -- The dollar headed for its biggest weekly decline in almost three years against the euro on speculation policy makers' steps to spur growth and lending will reduce demand for the relative safety of U.S. assets.

The greenback was also on course for its fourth weekly loss versus the yen after the Federal Reserve committed $800 billion to ending a seizure in credit markets, the European Union proposed a 200 billion euro ($258 billion) stimulus package and China lowered interest rates by the most in 11 years. The Australian and New Zealand dollars were set for weekly gains as improved risk appetite boosted higher-yielding assets.

``We've seen an end to the panicked repatriation flows that have buoyed the U.S. dollar,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``Countries are working to solve the global economic crisis and their measures will eventually take hold. This is starting to put a floor under market sentiment.''

The dollar traded at $1.2893 per euro as of 9:55 a.m. in Tokyo, little changed from yesterday and down 2.4 percent from Nov. 21, the biggest weekly drop since January 2006. The dollar bought 95.50 yen from 95.19 yesterday and 95.96 a week ago. The euro was quoted at 123.11 yen from 122.89 yesterday, for a 2 percent gain this week. The dollar may decline to $1.2930 versus the euro today, Soma said.

Against the greenback, Australia's dollar rose 3.8 percent to 65.63 U.S. cents from 63.25 cents in New York on Nov. 21. New Zealand's dollar climbed 2.7 percent to 55.18 cents and South Korea's won advanced 2 percent to 1,465.50.

Monthly Dollar Decline

The dollar was also set for a third monthly decline against the yen and its first monthly loss versus the euro since June, as the Fed said on Nov. 25 it will devote $800 billion in new funding to bolster credit flow to homebuyers, consumers and small businesses and will take on credit risk by buying debt.

The EU proposed a stimulus package for its 27 member countries on Nov. 26 after data earlier this month showed the euro region fell into a recession in the third quarter for the first time since the introduction of the common currency in 1999.

The People's Bank of China reduced the one-year lending and deposit rates by 1.08 percentage points on Nov. 26. The lending rate fell to 5.58 percent and the deposit rate to 2.52 percent.

Gains in the euro may be stifled by European reports today that economists predict will show slowing inflation and rising unemployment, supporting the case for the 15-nation region's central bank to cut interest rates.

``The outlook for the euro is quite weak,'' said Stephen Halmarick, co-head of economic and market analysis at Citigroup Inc. in Sydney. ``We've got the European Central Bank easing interest rates much more aggressively in the next few months and further weakness in the European economy.''

ECB Rate Bets

The inflation rate in the euro area fell to a 14-month low of 2.4 percent in November, according to a Bloomberg News survey of economists. The European Union statistics office will release the report at 11 a.m. in Luxembourg. A separate report may show the unemployment rate rose to 7.6 percent in October, the highest since March 2007.

Traders increased bets the ECB will reduce its 3.25 percent benchmark rate. The implied yield on Euribor futures contracts expiring in June declined to 2.440 percent yesterday from 2.445 percent on Nov. 26.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.

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Korean Won Set for First Weekly Advance in a Month; Bonds Rise

By Kim Kyoungwha

Nov. 28 (Bloomberg) -- South Korea’s won headed for the first weekly gain in a month on optimism cheaper oil prices and a fall in overseas travel will keep the nation’s current-account in surplus, easing a shortage of dollars. Bonds rose.

The currency rose today as foreign investors bought more Korean shares than they sold for a third consecutive day, the longest streak since the end of October. Finance Minister Kang Mang Soo said the surplus will top more than $1 billion in November and remain positive in 2009.

“The surplus provides a big psychological boost to the currency market,” said Jeff Kim, a foreign-exchange dealer with Korea Exchange Bank in Seoul. “An uncontrollable surge in the dollar isn’t there anymore but month-end import deals are flowing in.”

The won appreciated 2.5 percent this week to 1,458.70 per dollar as of 10:23 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency fell 11 percent this month, the worst among the world’s 16 most-active currencies.

The central bank yesterday reported a record surplus of $4.91 billion in October after a deficit of $1.35 billion in September. The current account is the broadest measure of trade, tracking goods, services and investment income.

“The current account turning to a surplus provides us a basis to better manage the difficult times,” Finance Minister Kang said at a weekly government meeting in Gwacheon, South Korea, today. “We’re likely to see a November current-account surplus of more than $1 billion and a similar amount next month.”

Bonds Advance

Korean bonds rose for a second week after the government said it will reduce debt sales next month.

The Finance Ministry said after the market closed yesterday that it will sell as much as 3.4 trillion won ($2.3 billion) of bonds in December, less than 5.5 trillion won for November.

The offers include 1.2 trillion won of three-year notes, 1.4 trillion won of five-year bonds, 285 billion won of 10-year securities and 100 billion won of 20-year debt, the ministry said in a statement issued in Gwacheon.

The benchmark three-year note yield fell 15 basis points, or 0.15 percentage point, to 4.85 percent this week, according to Korea Exchange. The price of the 5.5 percent security due in June 2011 rose 0.46, or 46 won per 10,000 won face amount, to 104.13.

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

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Oil Falls Before OPEC Discusses Output Cut to Stem Price Slump

By Reg Curren

Nov. 28 (Bloomberg) -- Crude oil fell in New York trading amid speculation a potential production cut by OPEC to support prices may be trumped by concerns over declining demand amid a worsening U.S. recession.

OPEC members may consider a reduction at their meeting this weekend in Cairo to stabilize the market, Shokri Ghanem, chairman of Libya’s National Oil Corp., said yesterday. Crude oil futures traded in New York have slumped 63 percent since reaching a record $147.27 a barrel on July 11.

“People are waiting to see if there any cuts coming out of this meeting,” said Chris Jarvis, president of Caprock Risk Management LLC in Hampton Falls, New Hampshire. “Though at this point it’s really about economic numbers. OPEC doesn’t really have control over pricing right now.”

Crude oil for January delivery fell 65 cents, or 1.2 percent, to $53.79 a barrel at 8:10 a.m. Singapore time in electronic trading on the New York Mercantile Exchange. Nymex was open for electronic trading only yesterday because of the U.S. Thanksgiving holiday. Futures closed at $54.44 on Nov. 26 after rising 7.2 percent.

Brent crude oil for January settlement yesterday fell 79 cents, or 1.5 percent, to settle at $53.13 a barrel on London’s ICE Futures Europe exchange.

Next Week

Fourteen of 38 analysts surveyed by Bloomberg News, or 36 percent, said oil prices will decline through Dec. 5. Twelve respondents, or 32 percent, said oil will rise and 12 forecast oil will be little changed.

“We doubt OPEC can materially alter either market fundamentals or sentiment near-term,” Merrill Lynch & Co. oil analyst Alastair Syme said in a Nov. 26 report. “In a rapidly falling demand environment we see little that suppliers can do to either reverse sentiment or tighten market fundamentals.”

Ministers from the Organization of Petroleum Exporting Countries, which supply 40 percent of the world’s oil, are meeting tomorrow for the third time in as many months to discuss a further cut in production after crude prices plunged.

OPEC last month agreed to reduce production by 1.5 million barrels a day.

The crude oil market is over-supplied, OPEC Secretary- General Abdalla el-Badri said yesterday in an interview in Cairo. He declined to recommend a course of action, saying any decision concerning production quotas was up to ministers to take.

Global Stockpiles

Global oil stockpiles stand at about 56 days of supply, higher than the five-year average, El-Badri said. That’s more than the 52-days level that OPEC would expect at this time of year, he said.

Economic reports earlier this week in the U.S. showed a deepening recession that may cut fuel demand in the world’s largest oil user.

Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said Nov. 26. Gasoline demand dropped 1.3 percent from last week, the Energy Department said in its weekly report.

U.S. crude-oil supplies rose 7.28 million barrels to 320.8 million barrels last week, the Energy Department said. It was the ninth straight increase, the longest stretch since April 2005.

Gasoline inventories grew by 1.84 million barrels, or 0.9 percent, to 200.5 million barrels, the department said. A 500,000-barrel gain was forecast, according to a Bloomberg survey.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.

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Mobius Still an India Bull on Growth, Valuations After Attacks

By Pooja Thakur

Nov. 28 (Bloomberg) -- India’s first terrorist attack against foreigners has done nothing to dent Mark Mobius’s confidence in the stock market of the world’s second-fastest growing major economy.

While Mobius says stocks may fall when trading resumes in Mumbai, the executive chairman of San Mateo, California-based Templeton Asset Management Ltd. is bullish because the economy is still “vibrant” and the Bombay Stock Exchange Sensitive Index is valued near the cheapest level on record relative to profit. AMP Capital Investors also expects any declines spurred by the attacks on two luxury hotels in India’s financial capital to be short-lived.

Exchanges shut yesterday after militants targeting Americans and Britons stormed into the Taj Mahal Palace and Tower hotel and the Oberoi Trident complex. At least 101 people were killed and 290 injured. India’s stock-index futures fell 2.4 percent yesterday in Singapore.

“It’s a fast-growing economy and we can’t allow this kind of incident to sway our decisions regarding where we want to invest,” Mobius, 72, said in a Bloomberg Television interview from Hong Kong. “India will rise from this and prosper.”

The assaults were the latest blow to investors after the worst global financial crisis since the Great Depression sparked this year’s 56 percent drop in the Sensex stock index, the biggest annual decline on record.

Trading Resumption

The Bombay Stock Exchange and National Stock Exchange may resume trading as early as today, along with bond, foreign exchange, commodities and money markets, bourse officials and the central bank said yesterday.

S&P CNX Nifty Index futures for November delivery slid the most since Nov. 19. Contracts that protect against a default by Mumbai-based State Bank of India Ltd. rose 15 basis points to 412.5 in Hong Kong, according to Morgan Stanley’s prices, the first increase since Nov. 20.

International investors sold a record $13.5 billion in Indian equities this year as of Nov. 24, according to data from the Securities and Exchange Board of India, as the economy grew at the slowest pace since 2004 in the second quarter and global credit losses and writedowns approached $1 trillion. Investors bought a record $17.4 billion in 2007.

“In this environment of extreme risk aversion, the bombing probably will give investors a fright,” said Alistair Thompson, who helps manage Asian and global emerging market assets at First State Investments in Singapore. “India was facing challenges anyway with massive amounts of foreign money leaving in droves.”

‘Hammered to Death’

This year’s slump has left the Sensex index valued at 9 times the earnings of its 30 companies, less than half the four- year average of 19.3, according to data compiled by Bloomberg. The gauge traded at 8.4 times profit last week, the cheapest level since at least 2002.

“Stock prices have been hammered to death,” said Seth Freeman, who overseas $130 million as chief executive officer of EM Capital Management LLC. “I wish we had more capital to deploy at this point.”

India’s Finance Minister Palaniappan Chidambaram predicted last week economic growth will “bounce back” to 9 percent in 2009, from at least 7 percent this year, driven by record crop plantings, public sector pay increases and tax breaks. The International Monetary Fund in Washington said this month that India may expand 6.3 percent in 2009, the fastest after China among the world’s 20 biggest economies.

Global Trading Halts

The Sensex’s drop this year has still been smaller than China’s CSI 300 Index, which fell 65 percent, and Russia’s ruble-denominated Micex Index, which lost 67 percent. Brazil is the only one of the so-called BRIC nations to outperform India, with the Bovespa Index losing 43 percent.

Stock and bond markets in India were last shut in July 2005, after monsoon rains disrupted Mumbai and other areas in the western state of Maharashtra. The last time exchanges were closed because of a terrorist attack was on March 12, 1993, when bomb blasts in the city killed more than 250 people.

The Sensex posted a two-day, 3.5 percent rally following that attack. The gauge rose 3 percent the week after a train bombing on March 13, 2003. It fell 2.9 percent on Aug. 25, 2003, when car bombs left more than 40 dead, before finishing that week up 2.9 percent. Bombings on commuter trains in Mumbai on July 11, 2006, also didn’t prevent the Sensex from climbing 3 percent the next day.

“After these things, you often see a knee-jerk reaction,” said Nader Naeimi, a Sydney-based strategist at AMP Capital, which oversees $85 billion. “I don’t think these attacks will have any lasting impact at all. The market has adjusted to a world with the potential of terrorist attacks.”

To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net

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Australia Stocks: ABB, AWB, BHP, FKP, OM Holdings, Timbercorp

By Shani Raja

Nov. 28 (Bloomberg) -- The S&P/ASX 200 Index rose 59.40 points, or 1.7 percent, to 3,647.40 at 11:10 a.m. in Sydney, the highest since Nov. 17. The broader All Ordinaries Index advanced 57.10 points, or 1.6 percent, to 3,585.30, while the futures index expiring in December gained 2.4 percent to 3,655.

Oil and mining stocks: BHP Billiton Ltd. (BHP AU), the world’s largest mining company, rallied A$1.51, or 5.2 percent, to A$30.31, the highest since Nov. 5. Rio Tinto Group (RIO AU) gained A$2.66, or 6.2 percent, to A$45.51. Woodside Petroleum Ltd. (WPL AU) rose A$1.33, or 3.9 percent, to A$35.33.

China, the biggest user of industrial metals and the world’s second-biggest energy-consuming country, this week cut interest rates the most in 11 years to ward off an economic slump.

AWB Ltd. (AWB AU) rallied 20 cents, or 6.3 percent, to A$3.39, the highest since May 21. Australia’s largest wheat exporter said it’s in talks with ABB Grain Ltd. (ABB AU) for a possible merger to create Australia’s biggest wheat and barley exporter. ABB surged A$1.14, or 18 percent, to A$7.63, the benchmark’s third-best performer.

FKP Property Group (FKP AU), a Brisbane-based retirement village operator, rose 10 cents, or 15 percent, to 75 cents, the most since Oct. 17. The company said it completed an entitlement offer of up to 101 million stapled securities. The proceeds will be used to improve its balance sheet, FKP said in a statement.

Gunns Ltd. (GNS AU), which is planning a A$2 billion ($1.3 billion) wood pulp mill in Australia’s Tasmania state, rose 14 cents, or 17 percent, to 95 cents, the highest since Nov. 18. The move takes its gain over four days to 47 percent after the company agreed to sell some timber assets to repay debt.

OM Holdings Ltd. (OMH AU), an Australian manganese producer, soared 22 cents, or 20 percent, to A$1.35, the highest since Oct. 15. A Consolidated Minerals Ltd. subsidiary, Stratford Sun Ltd., bought more than 10 percent of OM Holdings’ issued capital, the company said in a statement.

Timbercorp Ltd. (TIM AU), an agribusiness investment manager, slumped 3 cents, or 14 percent, to 19 cents, the lowest since May 29, 1997. The company was the biggest loser on the benchmark after reporting that net profit fell 32 percent to A$44.6 million in the year ended Sept. 30.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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Asian Commodity Shares Rise on Stimulus Optimism; Sharp Slumps

By Patrick Rial and Masaki Kondo

Nov. 28 (Bloomberg) -- Asian commodity stocks rose on expectations government steps to pull the global economy out of recession will boost demand for raw materials. Sharp Corp. led electronics companies lower after Panasonic Corp. slashed its profit outlook.

BHP Billiton Ltd., the world’s biggest mining company, gained 5.3 percent, while Komatsu Ltd., the world’s second- largest maker of construction machinery, added 1.4 percent, a second day of gains after China lowered interest rates. Sharp, Japan’s largest maker of liquid-crystal displays, fell 2.7 percent after Nomura Holdings Inc. lowered its recommendation on the shares and larger rival Panasonic cut its profit forecast by 90 percent on weakening demand.

The MSCI Asia Pacific Index was unchanged at 81.46 as of 9:17 a.m. in Tokyo. About the same number of shares climbed as retreated on the gauge.

“Investors have shifted their focus from the current economic slump to authorities’ stimulus measures,” Yoshinori Nagano, a Tokyo-based senior strategist at Daiwa Asset Management Co., which manages about $96 billion, said in an interview with Bloomberg Television.

Japan’s Nikkei 225 Stock Average swung between gains and losses, and was recently down 0.1 percent at 8,362.71. Shares in South Korea, Australia and New Zealand advanced. U.S. markets were closed yesterday for the Thanksgiving holiday.

Writedowns

Credit losses and writedowns at financial companies have neared $1 trillion worldwide, spurring central banks and governments to cut rates and spend more to stimulate economies. The People’s Bank of China on Nov. 26 reduced its benchmark lending rate by the most in 11 years, while the European Union proposed a 200 billion euro ($258 billion) spending package, joining Japan, China and the U.S. in crafting economic plans.

Panasonic, the world’s biggest maker of consumer electronics, yesterday lowered its annual net income forecast by 90 percent, saying demand and prices have fallen as the U.S. financial crisis spread across the globe.

Nomura Securities Co. and HSBC Holdings Plc cut their ratings on Panasonic Corp. Nomura also lowered closest rival Sony Corp. to “neutral” from “buy,” and Sharp to “reduce” from “neutral.”

“Panasonic’s forecast cut will weigh on high-tech shares though the slump in this sector has been somewhat priced in,” said Daiwa Asset’s Nagano.

Japan’s jobless rate fell to 3.7 percent last month from 4 percent in September, the statistics bureau said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg News was for unemployment to rise to 4.2 percent.

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

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Stocks in Europe, Asia, Canada Gain; Brazil’s Index Declines

By Adam Haigh and Alexander Ragir

Nov. 27 (Bloomberg) -- European stocks rose, sending the Dow Jones Stoxx 600 Index to its fourth straight gain, as investors speculated government efforts to shore up banks and the economy will support profits. Shares in Asia and Canada also advanced, while Brazil’s benchmark dropped.

Barclays Plc and Siemens AG rallied more than 4 percent. President-elect Barack Obama yesterday picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” Air Berlin Plc climbed 14 percent after posting a better- than-estimated 43 percent jump in third-quarter profit.

The Stoxx 600 added 2.4 percent to 203.62, extending this week’s advance to 12 percent. The index is still down 44 percent in 2008, headed for its worst year since records began in 1987, as economies from Germany and the U.K. to the U.S. slip into recession.

“Investors see the market as discounting a truly cataclysmic event,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which has about $60 billion. “They are gaining reassurance from governments and central banks who are beginning to understand the severity of the situation.”

Trading may be slower than normal today with U.S. markets closed for the Thanksgiving holiday.

The MSCI Asia Pacific Index rose 1.7 percent, with China Vanke Co., the country’s biggest builder, and Aluminum Corp. of China climbing more than 3 percent.

Mumbai Attacks

India halted trading of stocks, bonds and the rupee for the first time in more than three years after terrorist attacks killed 101 people in Mumbai’s financial hub. Stock-index futures and rupee forwards fell, while credit-default swaps rose.

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today after the measure soared 18 percent in the previous four days. Canada’s S&P/TSX Composite Index gained 1.3 percent as Goldcorp Inc. paced gains among raw-material companies. Brazil’s Bovespa Index retreated 0.7 percent on concern a slowing economy and slumping commodity prices may make it difficult for the nation’s biggest raw-material producers to raise capital.

Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.

Citigroup Inc. has jumped 87 percent since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.

‘Reached a Bottom’

More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.

“We have reached a bottom,” said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris and has been buying shares of Hewlett-Packard Co. and Alstom SA. “There is a slight change of feeling in the newsflow we are getting, relative to what we saw in October. The problems are far from over, but the newsflow is more constructive.”

Barclays gained 4.3 percent to 166,9 pence. Siemens, Europe’s largest engineering company, rose 4.4 percent to 49.12 euros. Daimler AG, the world’s second-biggest luxury-car maker, advanced 3.5 percent to 25.75 euros.

Analysts have slashed earnings estimates this year as the credit turmoil spread. Profit for companies in the Stoxx 600 will slide 12 percent on average in 2008, compared with 11 percent growth forecast at the start of the year, Bloomberg data show.

‘Not That Brave’

“We are not that brave yet” to buy stocks, said Alan Beaney, who manages about $2 billion as head of investments at Principal Investment Management in Leeds, England. “Analysts’ expectations for profit forecasts are too high. We need to see these earnings numbers come down,” he told Bloomberg Television.

Earnings for the 324 companies in the Stoxx 600 that have reported results since Oct. 7 declined 15 percent on average, trailing expectations by 6.4 percent, Bloomberg data show.

Air Berlin surged 14 percent to 3.45 euros. Europe’s third- biggest discount airline reported earnings before interest and taxes of 89.1 million euros ($115 million), beating analysts’ expectations of 71.9 million euros.

In Asia, stocks rallied for a third day on speculation China’s rate cut will boost demand for homes and commodities.

China Vanke climbed 3.1 percent to 7.01 yuan. Aluminum Corp., China’s largest producer of the metal, jumped 3.5 percent to HK$3.30. Inpex Corp., Japan’s biggest oil explorer, soared 10 percent to 573,000 yen.

Under Investigation

Petrobras, as Brazil’s state-controlled oil company is known, lost 2.8 percent to 19.95 reais. Energy Minister Edison Lobao told reporters today that the company was forced to borrow from state-owned discount bank Caixa Economica Federal because it faced a “momentary difficulty” paying taxes.

ALL America Latina Logistica SA declined 6.8 percent to 11 reais. TV Globo reported Brazil’s biggest railroad operator and other companies are under investigation by the country’s Federal Police for misappropriation of government-owned rail wagons and locomotives.

In Toronto, Goldcorp, the world’s second-largest gold producer by market value, added 2.6 percent to C$33.60. Bullion traded near a five-week high in London.

Irish Life & Permanent Plc and Allied Irish Banks Plc rallied after the Irish Association of Investment Managers approached the government about investing in the country’s banks to boost Tier 1 capital ratios. The ratio indicates a bank’s ability to cushion bad debts.

Irish Life & Permanent, the nation’s largest mortgage lender, surged 20 percent to 1.64 euros, while Allied Irish Banks, the biggest bank by value, rose 15 percent to 2.77 euros.

Possible Investment

Separately, the Irish Times reported today that U.S. private equity companies Texas Pacific Group and Kohlberg Kravis Roberts have held talks with Bank of Ireland about a possible investment. The bank was already contacted by a consortium that includes J.C. Flowers & Co, the paper said.

ArcelorMittal added 5.7 percent to 19.87 euros. The world’s largest steelmaker said it may cut as many as 9,000 jobs globally after reducing output on falling demand.

Kingfisher Plc dropped 2.4 percent to 116.6 pence after Europe’s biggest home-improvement retailer said consumer confidence has been “shaken” in all its markets and reported a 4 percent decline in third-quarter profit.

To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net. Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

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France’s CGT Union Suspends Call for Refinery Strikes on Accord

By Tara Patel

Nov. 27 (Bloomberg) -- France’s Confederation Generale du Travail labor union temporarily withdrew a call for strikes at some refineries and airport fueling stations following salary talks with managers at companies including Total SA, a union representative said.

Discussions at the Paris-based Union Francaise des Industries Petrolieres, the main body representing the French oil industry, on salaries for oil and refining workers ended today in an accord signed by other unions, though not the CGT, the labor group’s Emmanuel Lepine said by telephone today from Paris.

“The strike action will be suspended,” Lepine said, even though the agreement to raise the industry’s minimum wage by 3 percent “isn’t enough.”

Work stoppages may still occur in coming weeks as talks get under way on working conditions and salaries at individual companies including Total, Lepine said.

The CGT called for work stoppages to begin as soon as today at some refineries including the Lavera refinery, owned by Ineos Group Holdings Plc, and Petroplus Holdings AG’s Petit Couronne plant as well as the Dunkirk lubricant plant jointly operated by Exxon Mobil Corp. and Total, the union said in an e-mailed statement last night.

Other sites that may be affected by stoppages include oil depots at the port of Le Havre and fueling stations at some airports such as Orly, Lyon and Marseille, the CGT said.

Work Disruption

Production was reduced by labor action at the Ineos plant today and work was disrupted at some airport and port fueling areas, Lepine said.

A CGT call for strikes at Total’s Donges, Gonfreville, Grandpuits and La Mede plants was “suspended” late yesterday pending the outcome of the talks today. The French oil company, Europe’s third-largest, is the biggest employer in the sector in France with six of 12 refineries.

Total will hold talks with unions on Dec. 4 to review its 2008 labor agreement, spokesman Michael Crochet-Vourey said by phone today from Paris. Another round of talks to negotiate 2009 salaries will be held on Dec. 12, he said.

“Management at the oil companies and UFIP bear the entire responsibility for any consequences on production and services at sites due to any work stoppages,” the CGT statement said. An escalation of labor unrest among oil workers due to salary issues may result, the union said.

The CGT had sought a 4.5 percent increase in base salaries and 20 percent bonuses for workers with 20 years of experience.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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Canada Stocks Rise for 5th Day, Led by Nexen, Teck; Telus Drops

By John Kipphoff

Nov. 27 (Bloomberg) -- Canadian stocks rose for a fifth day, sending the main index toward its longest gain in seven months, as merger speculation boosted oil-sands producers and metal producers rallied on the prospect of renewed China demand.

Nexen Inc. surged 17 percent as the co-owner of an oil-sands project in Alberta extended weeklong gains on speculation that it may become the target of a takeover bid. Teck Cominco Ltd. rallied 16 percent after China cut rates yesterday to boost growth. Goldcorp Inc. led bullion producers higher as gold traded close to a five-week high.

“Nexen is moving on takeover rumors,” said Martin Anstee, a fund manager at Stone Asset Management in Toronto, which oversees about $800 million. “There’s some bottom-fishing in the miners. These stocks have come down so far. How much lower can metals prices go?”

The Standard & Poor’s/TSX Composite Index added 1.3 percent to 8,753.77 in Toronto. Trading was below average as stock and bond markets in the U.S. closed for the Thanksgiving holiday.

The S&P/TSX, which gets three-quarters of its value from financial, energy and raw-materials companies, has fallen 37 percent this year, on course for its worst annual drop after global credit losses approached $1 trillion and commodities slumped on concern a recession will destroy demand.

Nexen rose C$3.73 to C$26.01. The co-owner of the Long Lake oil-sands project in Alberta climbed for a fifth day. Nexen reiterated yesterday that it “isn’t for sale” after speculation revived that it may become the target of a takeover bid from an international oil company looking to boost reserves.

Opti Canada Inc., Nexen’s partner in Long Lake, surged 43 percent to C$2.57. Suncor Energy Inc., the world’s second-largest oil-sands producer, added 2.6 percent to C$26.86. Talisman Energy Inc., which like Nexen has oil and gas wells in the U.K. North Sea, gained 9.1 percent to C$11.88.

China Rate Cut

Teck Cominco rose 78 cents to C$6.05, taking a two-day rally to 45 percent.

Canada’s biggest diversified mining company jumped for a second session as copper and other commodities gained yesterday after China, the biggest consumer of the metal, lowered borrowing costs. Teck declined 88 percent this year by Nov. 25 as the global credit crisis reduced demand for metals and on investor concern that the company may have trouble repaying debt it took on to make acquisitions.

Goldcorp, the second-largest miner by market value, rose 2.6 percent to C$33.60. Barrick Gold Corp. added 2.4 percent to C$36.49. Agnico-Eagle Mines Ltd., owner of Canada’s largest gold deposit, gained 4.1 percent to C$46.01. Gold for immediate delivery added 0.3 percent to $813.33 an ounce in London.

Telus fell 3.7 percent to C$36.69. Canada’s second-biggest phone company may revive an attempt to merge with BCE Inc., whose buyout by Ontario Teachers’ Pension Plan is unlikely to be close, Scotia Capital analyst John Henderson said.

Telus Interest

Telus Corp. “remains very interested in entering merger discussions” with BCE, Henderson, based in Toronto, wrote in a note to clients, without saying where he got the information. Shawn Hall, a spokesman for Telus, declined to comment.

BCE, whose C$52 billion ($42 billion) takeover is in doubt after the company’s auditor said yesterday that the transaction would leave the company insolvent, fell 0.2 percent to C$25.20.

Henderson cut BCE to “sector perform” from “sector outperform.” BCE, Canada’s largest phone provider, was also downgraded to “neutral” from “buy” by Jeffrey Fan at UBS AG. A Telus-BCE combination is unlikely to be approved by Canadian regulators, the analyst said in a report.

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

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Stocks in Europe, Asia, Canada Gain; Brazil’s Index Declines

By Adam Haigh and Alexander Ragir

Nov. 27 (Bloomberg) -- European stocks rose, sending the Dow Jones Stoxx 600 Index to its fourth straight gain, as investors speculated government efforts to shore up banks and the economy will support profits. Shares in Asia and Canada also advanced, while Brazil’s benchmark dropped.

Barclays Plc and Siemens AG rallied more than 4 percent. President-elect Barack Obama yesterday picked former Federal Reserve Chairman Paul Volcker to head an economic advisory board and said he will implement a plan to bolster growth on “day one.” Air Berlin Plc climbed 14 percent after posting a better- than-estimated 43 percent jump in third-quarter profit.

The Stoxx 600 added 2.4 percent to 203.62, extending this week’s advance to 12 percent. The index is still down 44 percent in 2008, headed for its worst year since records began in 1987, as economies from Germany and the U.K. to the U.S. slip into recession.

“Investors see the market as discounting a truly cataclysmic event,” said Chirin Gill, a London-based fund manager at Daiwa SB Investments, which has about $60 billion. “They are gaining reassurance from governments and central banks who are beginning to understand the severity of the situation.”

Trading may be slower than normal today with U.S. markets closed for the Thanksgiving holiday.

The MSCI Asia Pacific Index rose 1.7 percent, with China Vanke Co., the country’s biggest builder, and Aluminum Corp. of China climbing more than 3 percent.

Mumbai Attacks

India halted trading of stocks, bonds and the rupee for the first time in more than three years after terrorist attacks killed 101 people in Mumbai’s financial hub. Stock-index futures and rupee forwards fell, while credit-default swaps rose.

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today after the measure soared 18 percent in the previous four days. Canada’s S&P/TSX Composite Index gained 1.3 percent as Goldcorp Inc. paced gains among raw-material companies. Brazil’s Bovespa Index retreated 0.7 percent on concern a slowing economy and slumping commodity prices may make it difficult for the nation’s biggest raw-material producers to raise capital.

Stocks rallied worldwide this week after China cut borrowing costs by the most in 11 years and the Federal Reserve’s pledge to buy $600 billion of debt sent mortgage rates down by the most in at least seven years.

Citigroup Inc. has jumped 87 percent since the U.S. government injected $20 billion of capital into the bank at the start of the week and guaranteed $306 billion of its mortgages and other troubled loans.

‘Reached a Bottom’

More than $30 trillion has been wiped off the value of global equities this year as credit losses and writedowns approached $1 trillion in the worst financial crisis since the Great Depression.

“We have reached a bottom,” said Jacques Porta, who helps manage $180 million at Ofivalmo Patrimoine in Paris and has been buying shares of Hewlett-Packard Co. and Alstom SA. “There is a slight change of feeling in the newsflow we are getting, relative to what we saw in October. The problems are far from over, but the newsflow is more constructive.”

Barclays gained 4.3 percent to 166,9 pence. Siemens, Europe’s largest engineering company, rose 4.4 percent to 49.12 euros. Daimler AG, the world’s second-biggest luxury-car maker, advanced 3.5 percent to 25.75 euros.

Analysts have slashed earnings estimates this year as the credit turmoil spread. Profit for companies in the Stoxx 600 will slide 12 percent on average in 2008, compared with 11 percent growth forecast at the start of the year, Bloomberg data show.

‘Not That Brave’

“We are not that brave yet” to buy stocks, said Alan Beaney, who manages about $2 billion as head of investments at Principal Investment Management in Leeds, England. “Analysts’ expectations for profit forecasts are too high. We need to see these earnings numbers come down,” he told Bloomberg Television.

Earnings for the 324 companies in the Stoxx 600 that have reported results since Oct. 7 declined 15 percent on average, trailing expectations by 6.4 percent, Bloomberg data show.

Air Berlin surged 14 percent to 3.45 euros. Europe’s third- biggest discount airline reported earnings before interest and taxes of 89.1 million euros ($115 million), beating analysts’ expectations of 71.9 million euros.

In Asia, stocks rallied for a third day on speculation China’s rate cut will boost demand for homes and commodities.

China Vanke climbed 3.1 percent to 7.01 yuan. Aluminum Corp., China’s largest producer of the metal, jumped 3.5 percent to HK$3.30. Inpex Corp., Japan’s biggest oil explorer, soared 10 percent to 573,000 yen.

Under Investigation

Petrobras, as Brazil’s state-controlled oil company is known, lost 2.8 percent to 19.95 reais. Energy Minister Edison Lobao told reporters today that the company was forced to borrow from state-owned discount bank Caixa Economica Federal because it faced a “momentary difficulty” paying taxes.

ALL America Latina Logistica SA declined 6.8 percent to 11 reais. TV Globo reported Brazil’s biggest railroad operator and other companies are under investigation by the country’s Federal Police for misappropriation of government-owned rail wagons and locomotives.

In Toronto, Goldcorp, the world’s second-largest gold producer by market value, added 2.6 percent to C$33.60. Bullion traded near a five-week high in London.

Irish Life & Permanent Plc and Allied Irish Banks Plc rallied after the Irish Association of Investment Managers approached the government about investing in the country’s banks to boost Tier 1 capital ratios. The ratio indicates a bank’s ability to cushion bad debts.

Irish Life & Permanent, the nation’s largest mortgage lender, surged 20 percent to 1.64 euros, while Allied Irish Banks, the biggest bank by value, rose 15 percent to 2.77 euros.

Possible Investment

Separately, the Irish Times reported today that U.S. private equity companies Texas Pacific Group and Kohlberg Kravis Roberts have held talks with Bank of Ireland about a possible investment. The bank was already contacted by a consortium that includes J.C. Flowers & Co, the paper said.

ArcelorMittal added 5.7 percent to 19.87 euros. The world’s largest steelmaker said it may cut as many as 9,000 jobs globally after reducing output on falling demand.

Kingfisher Plc dropped 2.4 percent to 116.6 pence after Europe’s biggest home-improvement retailer said consumer confidence has been “shaken” in all its markets and reported a 4 percent decline in third-quarter profit.

To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net. Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

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Brazilian Stocks Slip, Led by Petrobras, ALL; Bolsa Advances

By Alexander Ragir

Nov. 27 (Bloomberg) -- Brazilian stocks declined for the first time in four days, on concern a slowing economy and slumping commodity prices may make it difficult for the nation’s biggest raw-material producers to raise capital.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, fell 2.8 percent after oil prices slipped and the energy minister said the company had to borrow money because it had “momentary difficulty” paying taxes. ALL America Latina Logistica SA lost 6.8 percent as TV Globo reported that Brazil’s biggest railroad operator and other companies are under investigation for misappropriation of government-owned rail wagons and locomotives.

“Commodities are down a bit so investors are taking this into account on a day when markets are calm because of the holiday in the U.S.,” said Guilherme Sand, who helps manage the equivalent of $330 million at Solidus Brokerage in Porto Alegre, Brazil. For Petrobras, “there could be some investors that are worried about the loan and are selling.”

The Bovespa slipped 0.7 percent to 36,212.65. Chile’s Ipsa rose 0.5 percent at 3:23 p.m. New York time and Mexico’s Bolsa gained 0.9 percent. U.S. markets were closed for the Thanksgiving holiday. The MSCI Emerging Markets Index rise 2.4 percent.

Petrobras lost 57 centavos to 19.95 reias. The company was forced to borrow from state-owned discount bank Caixa Economica Federal. It may also receive loans from the sovereign wealth fund of the United Arab Emirates, Energy Minister Edison Lobao said.

Petrobras’s ability to generate cash and borrow may be further hurt by a 60 percent decline in the price of oil since reaching a high in July and the world credit crunch sparked by recent U.S. bank failures, Lucas Brendler, an energy analyst at Banco Geracao Futuro in Porto Alegre, Brazil, said yesterday.

ALL Drops

ALL slid 6.8 percent to 11 reais. The police suspect 3,000 wagons and 210 locomotives were destroyed and used as raw materials by steelmakers such as Luxembourg-based ArcelorMittal and Dedini SA Acucar e Alcool Ltda., Globo said on its Jornal Nacional evening news show. The transactions took place in the past two years, according to the report. ALL didn’t return messages left by Bloomberg.

Tim jumped 5.9 percent to 4.10 reais after Italy’s Il Sole 24 Ore reported that parent company Telecom Italia is considering selling either its fixed-line network or its mobile phone unit in Brazil.

The BM&FBovespa Small Cap index gained 1.3 percent. The BM&FBovespa MidLarge Cap index fell 0.8 percent.

In Mexico, Corporacion Geo SAB rose 2.5 percent to 12.04, adding to a 14 percent advance yesterday. The announcement by Mexico’s second-biggest homebuilder that it sold short-term debt of 200 million pesos ($15.2 million) is “positive given tight credit markets,” Citigroup Inc. said in a report.

Cemex SAB gained 4.8 percent to 9.05 pesos, the highest in three weeks. The biggest cement producer in North America may benefit from a U.S. infrastructure spending plan that is “gaining momentum” in Washington, UBS AG wrote.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net.

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Lead Falls to Two-Year Low as Auto Demand Slumps; Copper Drops

By Claudia Carpenter

Nov. 27 (Bloomberg) -- Lead fell to a two-year low in London as reductions in automobile production erode demand for the metal used mostly in car batteries. Copper declined.

U.S. vehicle sales at the lowest since 1991 prompted cuts at General Motors Corp. and Ford Motor Co. China’s output of lead concentrate, used to make refined metal, climbed 14 percent in the first 10 months, according to Mainland Marketing Research Co.

“Investors and consumers have given up,” said David Thurtell, an analyst at Citigroup Global Markets in London. There is “a sharp rise in Chinese production and a sharp fall in auto demand.”

Lead for delivery in three months declined $81, or 6.8 percent, to $1,105 a metric ton on the London Metal Exchange, the lowest since July 2006. Prices have dropped 57 percent this year. Inventories in warehouses monitored by the LME rose 250 tons, or 0.6 percent, to 41,200 tons, according to the exchange’s daily report.

Copper fell on concern a slumping U.S. economy will crimp consumption of Chinese imports and demand for industrial metals in the Asian economy. Some economic indicators in China showed a “faster decline” this month, National Development and Reform Commission Chairman Zhang Ping said in Beijing today.

Copper usage in the U.S., the largest buyer after China, fell 9 percent in the first eight months and demand in China rose 13 percent, according to the International Copper Study Group.

“Over the last month or so, the perception is that China was slowing down faster than people thought it would,” said William Adams, an analyst at London-based Basemetals.com. “The Western world is putting on the brakes rapidly and therefore China can see their export demand will suffer.”

Copper for delivery in three months declined $59 to $3,696 a ton. Aluminum fell $9 to $1,791 and tin dropped $500 to $12,500 a ton. Copper inventories gained 2,375 tons to 288,725 tons. Zinc slid $40 to $1,220 a ton and nickel dropped $350 to $10,250.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

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Mexico’s Peso and Bonds Rise Amid Gains in Europe, Asia Stocks

By Valerie Rota

Nov. 27 (Bloomberg) -- Mexico’s peso and local-currency bonds advanced as European and Asian stock market gains bolstered demand for higher-yielding, developing-nation assets.

Mexico’s currency has risen 3.8 percent this week, heading for its first gain in three weeks. Investors increased demand for riskier assets on speculation global government efforts to shore up the economy will support consumer demand.

“There is greater sense of calm in the market, and we can see this reflected in yields and the peso,” said Manuel Galvan, a fixed-income strategist at Metanalisis SA in Mexico City.

The peso gained 0.35 percent to 13.2039 per U.S. dollar at 5 p.m. New York time, compared with 13.25 yesterday. The peso was the biggest gainer against the dollar today among the six most-traded currencies in Latin America.

Trading was slower than normal with U.S. markets closed for the Thanksgiving holiday, Galvan said.

The U.S. Federal Reserve said this week it’s committing up to $800 billion to unfreeze credit for homebuyers, consumers and small businesses. The announcement followed the U.S. government guarantee of troubled assets at Citigroup Inc. and President- elect Barack Obama’s pick of New York Fed President Timothy Geithner as Treasury secretary and former Federal Reserve Chairman Paul Volcker to lead an economic advisory board.

The European Union yesterday announced plans to coordinate $258 billion in measures for the economy, while China cut borrowing costs by the most since 11 years.

Europe’s Dow Jones Stoxx 600 Index rose 2.4 percent today, while the MSCI World Index increased 0.9 percent.

Peso Bonds

Mexican peso-denominated bonds advanced for a fifth day, pushing benchmark yields down to an almost three-week low. Mexican bonds have rallied even after the central bank reported this week that inflation surged to a seven-year high of 6.2 percent in the 12 months through mid-November.

Mexico’s central bank will keep its key lending rate at 8.25 percent for a third month, according to 19 of 22 economists surveyed by Bloomberg News. Two economists are forecasting policy makers will lower the rate to 8 percent, while one is expecting a reduction to 7.75 percent.

Yields on the 10 percent bond due December 2024 fell eight basis points, or 0.08 percentage point, to 9.14 percent, the lowest level since Nov. 10. The price of the country’s most- traded security rose 0.72 centavo to 107.24 centavos per peso, according to Banco Santander SA.

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

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Canada’s Dollar Poised for Weekly Gain as Investors Seek Return

By Chris Fournier

Nov. 27 (Bloomberg) -- Canada’s currency headed for its best performance in four weeks as the U.S. dollar fell against most major currencies and equities advanced today.

Canada’s currency, dubbed the loonie for the aquatic bird on the one-dollar coin, has gained 2.8 percent this week as oil climbed back above $50. The U.S. dollar has dropped against all 16 most-actively traded currencies since Nov. 21.

“When you pile up the events of the week, it’s easy to see why there’s been some relief in the market,” said Stephen Gallo, head of market analysis in London at Schneider Foreign Exchange. “Risk aversion has generally been light on the ground and the greenback is broadly weaker. That’s an excuse to pick up the Canadian dollar.”

The Canadian dollar was little changed at C$1.2322 against its U.S. counterpart at 4:14 p.m. in Toronto, from C$1.2321 yesterday. It gained 5.4 percent in the week ended Oct. 31. One Canadian dollar buys 81.15 U.S. cents.

Markets in the U.S. were closed today for the Thanksgiving holiday, making trading today and tomorrow “thin and potentially whippy,” said David Watt, a senior currency strategist at RBC Capital Markets in Toronto.

The U.S. Federal Reserve on Nov. 25 committed $800 billion to unfreeze credit for homebuyers, consumers and small businesses. President-elect Barack Obama yesterday picked former Federal Reserve Chairman Paul Volcker to lead an economic advisory board and said he will implement a plan to bolster growth on “day one.”

Oil Prices

Crude oil accounts for 21 percent of the Bank of Canada’s Commodity Price Index, the largest single component. Oil rose 7.2 percent yesterday and traded at about $54 today.

Europe’s Dow Jones Stoxx 600 Index rose 2.4 percent to 203.62, the fourth consecutive gain. The MSCI World Index added 1 percent to 885.05. The gauge of stocks in 23 developed nations advanced for five sessions.

A “bearish trend reversal” suggests the Canadian dollar will strengthen against the U.S. dollar to C$1.22 in the short term before weakening again, George Davis, chief technical analyst at RBC Capital Markets in Toronto, wrote in a note to clients today. The “support zone” for currency is C$1.2154 to C$1.2024, he said.

Statistics Canada will release data on the nation’s current account, industrial product prices and raw materials prices tomorrow at 8:30 a.m. in Ottawa.

The yield on the two-year government bond fell one basis point, or 0.01 percentage point, to 1.72 percent. The price of the 2.75 percent security due in December 2010 rose 1 cent to C$102.02

The 10-year note’s yield fell two basis points to 3.34 percent. The price of the 4.25 percent security maturing in June 2018 added 15 cents to C$107.32.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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