Commodity Pay Falls Faster Than Oil as Goldman, Funds Retrench

By Lars Paulsson and Chanyaporn Chanjaroen

Dec. 2 (Bloomberg) -- Investment banks may reduce compensation for commodity traders as much as 75 percent as prices of oil and copper fall the most in at least two decades.

The best paid metals and energy traders may earn $1 million to $1.5 million in salary, bonus and related pay this year, down from $5 million to $8 million in 2007, according to estimates by London- based recruitment company Kennedy Associates. Bonuses at Goldman Sachs Group Inc. and Morgan Stanley, the biggest oil-trading banks on Wall Street, may fall 60 percent, according to Armstrong International, another London-based recruiter.

“At the end of the day, the commodity industry is not bullet- proof,” said Jason Kennedy, 38, chief executive officer of Kennedy Associates, whose clients include Merrill Lynch & Co. “It’s following the trend.”

Banks and hedge funds that piled into raw materials as crude, copper and gold rallied for seven straight years, cut jobs during the second half as the Reuters/Jefferies CRB Index tracking prices of grains, fuels and metals declined, heading for its biggest annual drop ever. Goldman Sachs dismissed 10 percent of its employees in November, including cuts in commodities. Zurich-based UBS AG, Switzerland’s biggest bank, said in October it will end over-the-counter trading in industrial metals and energy.

“The manic scramble in commodities in 2007 and early 2008 has calmed down,” said Shaun Springer, 52, chief executive officer of Napier Scott Executive Search Ltd., which has recruited for banks since 1992. “It has moved from a frenzy to nigh on dormant.”

Safer Haven

Banks, brokerages, trading companies and hedge funds have about 5,000 employees in commodities and energy, according to Kennedy Associates.

The firms grew as oil rose to a record $147.27 a barrel on July 11 and gold surpassed $1,000 an ounce in March.

Until July, raw materials markets were among the only bright spots for the financial industry, where losses and writedowns increased to almost $1 trillion since the start of 2007 in the worst financial crisis since the Great Depression. Financial institutions slashed more than 190,000 jobs since June 2007.

Benchmark copper for three-month delivery lost 46 percent this year on the London Metal Exchange and front-month crude oil slipped 47 percent on the New York Mercantile Exchange. Both are heading for the biggest annual decline since at least 1987, while the CRB Index of 19 commodities has declined 33 percent this year.

Spokespeople in London for New York-based Goldman Sachs, Morgan Stanley and Merrill Lynch declined to comment on salary and bonuses.

Executive Pay

Barclays Capital spokesman Will Bowen in London said the bank’s pay decisions “have always been determined on a meritocratic basis across the firm, and this continues to be the case.”

Barclays is bucking the trend by expanding its team by a third this year to more than 300 through hiring and its purchase of Lehman Brothers Holdings Inc.’s North American businesses, Benoit de Vitry, 46, head of commodities, said Nov. 13 in a telephone interview from New York.

Some refugees from Wall Street banks are taking safer positions at utilities and companies such as Amsterdam-based Trafigura Beheer BV, the world’s third-largest independent oil trader and E.ON AG, Germany’s biggest power producer.

Energy traders and risk managers at banks are being paid about 7 percent more than their peers at energy companies, according to Brighton, England-based recruiter Global Resource Solutions Group Ltd. A year ago, the gap was 18 percent.

Oil, gas and power companies pay middle-ranking trading staff average salaries of about 90,000 pounds ($135,000) a year, with senior positions commanding 380,000 pounds, said Global Resource.

‘Best Career Options’

Nuon NV, the second-biggest Dutch utility, hired Gregor McDonald from Dresdner Kleinwort Group as its head of natural gas trading. Matthew Nicholas and Erik Hokmark joined Swiss utility Energie Ouest Suisse from Lehman Brothers.

“For the first time in the past five years utilities and producers are seen as the best career options due to their commitment to the markets coupled with the more aggressive compensation structures that they have adopted,” said Elliot Pickering, a consultant at London-based Human Capital Search, which specializes in recruitment for metals and energy markets.

“We are certainly attracting high calibre candidates from investment banks and hedge funds,” Pierre Lorinet, the chief financial officer at Trafigura, said in an e-mailed statement.

E.ON earned three times as much from buying and selling energy in the third quarter as it did in the first six months of the year.

Dusseldorf, Abu Dhabi

“We have seen increased interest from individuals in the financial sector looking to come over to us, and it’s possible there could be some correlation with the current situation,” Dusseldorf-based E.ON Energy Trading AG Chief Commercial Officer Gareth Griffiths said in an e-mailed response to questions.

Masdar, the Abu Dhabi state renewable-fuels company, hired Itaru Shiraishi from Fortis in Amsterdam as lead carbon finance specialist in November.

RWE Supply and Trading GmbH, a unit of Essen-based RWE AG, Germany’s second-biggest utility, hired Paul Dawson in July from Citigroup Inc. in London as head of market design and regulatory affairs.

Energy and commodity funds will probably lose 40 percent of their employees in a year as returns slide and investors withdraw record amounts of money, said Zug, Switzerland-based Gardner Finance AG, which tracks the performance of 630 funds that invest in natural resources companies and markets.

According to Gardner Chief Executive Officer Michael Laznicka, “there’s no way that some of these managers can sustain their current performances and survive.”

To contact the reporters on this story: Lars Paulsson in London at lpaulsson@bloomberg.net or; Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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Shell, Anglo Put A$5 Billion Coal-to-Liquids Project on Hold

By Angela Macdonald-Smith

Dec. 2 (Bloomberg) -- Royal Dutch Shell Plc and Anglo American Plc put on hold plans to develop a A$5 billion ($3.2 billion) coal-to-liquids project in Australia, citing a rise in capital spending estimates and “escalated” construction costs.

The partners will extend studies into the proposed project rather than move forward with development, Roger Bounds, project director at the venture company Monash Energy Holdings Ltd., said in an e-mail. The project was the first to be nominated for development under a clean coal energy alliance formed in May 2006 between Europe’s biggest oil company and the world’s fourth-biggest diversified mining company.

Australia’s Resources Minister Martin Ferguson has been promoting the development of an industry for the conversion of coal and natural gas into cleaner transport fuels to improve security of supply. Australia’s trade deficit in oil and refined fuels reached a record A$12.5 billion in the year ended Sept. 30, EnergyQuest, an Adelaide-based consulting firm, said yesterday.

“Monash Energy and its owners Shell and Anglo American believe that, in the long term, coal-to-liquids may provide an opportunity for Victoria to provide domestically produced clean liquid fuels for Australia and international markets,” Bounds said in an e-mailed response to questions that were relayed by Shell. “However, at this stage, critical requirements for the project are not yet in place.”

Bounds couldn’t be reached for further detail. Peter Batchelor, energy and resources minister in Victoria state, in August last year put the cost of developing the project at A$5 billion.

Carbon Capture

The partners planned to invest almost A$20 million in the two years from September 2006 on technical and commercial studies to identify the best way to set up the plant, according to a June 2008 information sheet on the Monash Energy Web site.

Michael Bradley, a spokesman for Ferguson, declined to comment. Emma Tyner, a spokeswoman for Batchelor, said she couldn’t immediately comment.

The Monash project involves converting brown coal from Anglo’s deposits in the Latrobe Valley 160 kilometers (99 miles) east of Melbourne into synthetic gas for processing into zero- sulfur synthetic diesel. Carbon dioxide emitted during the process would be extracted in a concentrated stream for transport to underground injection wells using a carbon capture and storage technology.

In submissions to government policy reviews, Monash has been calling for greater funding from the Australian government for carbon capture and storage projects and for exemption from the nation’s proposed carbon trading system to help boost project economics.

Shell and Anglo are among eight companies that last week joined as founding members of Australia’s A$100 million carbon capture and storage institute aimed at accelerating low- emissions power generation. Brown coal, the primary energy source in Victoria state for electricity production, emits more greenhouse pollution when burnt than the black variety.

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

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Crude Oil Falls on Signs of Further Contraction in U.S. Economy

By Christian Schmollinger

Dec. 2 (Bloomberg) -- Crude oil fell to the lowest in three years in New York on signs that the economy in the U.S., the world’s largest energy consumer, is in a more severe economic downturn than expected.

The U.S. first entered a recession in December 2007, the panel of economists that dates American business cycles said yesterday. The country’s manufacturing output in November also contracted at the fastest pace in 26 years, a report showed. Oil also declined after OPEC deferred a decision to cut supplies until a Dec. 17 meeting.

“What we’re seeing right now is a once-in-a-generation type of economic collapse,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “There is general agreement that the market has a bottom in the $40s so it’s difficult to get really short but at the same time there is no reason for this market to rally.”

Crude oil for January delivery dropped as much as 73 cents, or 1.5 percent, to $48.55 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $48.61 at 9:16 a.m. in Singapore. The contract fell $5.15, or 9.5 percent, to $49.28 a barrel yesterday, the lowest settlement since May 23, 2005.

Oil prices have tumbled 67 percent since reaching a record $147.27 on July 11 as the U.S., Europe and Japan face their first simultaneous recession since World War II.

Crude led a collapse in all commodity prices. Gold tumbled the most in eight months, dropping 5.2 percent to $776.80 an ounce yesterday. Futures were at $777.10 an ounce at 8:56 a.m. Singapore time on the Comex division of the New York Mercantile Exchange. Silver futures fell more than 8 percent yesterday. Sugar, wheat, platinum and palladium also declined.

December Recession

The declaration on the U.S. recession was made by the National Bureau of Economic Research, a private, non-profit group of economists based in Cambridge, Massachusetts. The last time the U.S. was in a recession was from March through November 2001, according to the agency.

The Institute for Supply Management’s factory index dropped to 36.2, the lowest level since 1982, the Tempe, Arizona-based group reported. A reading of 50 is the dividing line between expansion and contraction.

Ministers from the Organization of Petroleum Exporting Countries put off debate on a second cut in output in as many months during the Nov. 29 meeting in Cairo. The group will reduce crude production when it meets in Oran, Algeria, this month, OPEC Secretary General Abdalla el-Badri said. Oil demand is likely to drop further next year, he said.

“For sure there will be action” at the meeting, el-Badri told reporters in Tehran yesterday, declining to specify the amount of output that may be curbed.

‘Perfect Storm’

“It was a bit of a perfect storm yesterday,” said Hudson Capital’s Kornafel. “There was a good amount of premium built into the market going into the weekend on the belief that OPEC would cut. Then you started to see that premium bleed out in Asia time. Once the Western markets opened you saw a lot of bad economic data.”

U.S. crude-oil inventories probably rose for a 10th week as imports rebounded, a Bloomberg News survey of analysts showed.

Crude-oil stockpiles probably climbed 850,000 barrels in the week ended Nov. 28 from 320.8 million the week before, according to the median of six analyst estimates before an Energy Department report this week.

Refineries probably operated at 86.5 percent of capacity, up 0.3 percentage point from the week before, the survey showed.

Stockpiles Rise

Gasoline stockpiles probably increased 1.5 million barrels from 200.5 million the week before, according to the survey. Seven analysts gave product-supply estimates.

Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 126.7 million barrels the week before, according to the survey.

The Energy Department is scheduled to release its weekly report on Dec. 3 at 10:35 a.m. in Washington.

Brent crude oil for January settlement fell as much as 33 cents, or 0.7 percent, to $47.64 a barrel, on London’s ICE Futures Europe exchange. It was at $47.65 a barrel at 9:02 a.m. Singapore time. The contract yesterday declined $5.52, or 10 percent, to settle at $47.97 a barrel. It was the lowest settlement since May 19, 2005.

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

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South Korean Won Declines Most in a Week as Funds Sell Stocks

By Kim Kyoungwha

Dec. 2 (Bloomberg) -- South Korea’s won fell the most in a week as overseas investors sold the nation’s stocks after U.S. shares tumbled yesterday on speculation the global economic slump is worsening.

Korea’s currency erased half the gains it made during the past five days as global funds cut their local stock holdings after four days of net purchases, according to Korea Exchange Inc. South Korea’s economy grew less than initially estimated last quarter due to weaker exports and domestic demand, the central bank said today in Seoul.

“The tumble in stocks set a bearish tone for the won,” said Lee Myung Hoon, a currency dealer at Industrial Bank of Korea in Seoul. “Recent foreign buying failed to create a pattern that could lend support to the currency market and they have now turned to net selling.”

The won declined 1.7 percent to 1,465.00 per dollar as of 9:30 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has weakened 36 percent this year, the worst performer of the 10 most-traded Asian currencies outside Japan.

The Kospi stock index fell 3.7 percent, losing ground for a second day. Asia’s fourth-largest economy expanded a revised 0.5 percent in the three months to Sept. 30 from the prior quarter, the weakest pace since 2004, the central bank said. Growth for the quarter was estimated to be 0.6 percent on Oct. 24.

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

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Australian, New Zealand Dollars Slide on Equities, Rate Cuts

By Candice Zachariahs

Dec. 2 (Bloomberg) -- The Australian and New Zealand dollars declined after Asian and U.S. equities tumbled as a panel said the world’s largest economy entered a recession a year ago, reducing demand for higher-yielding assets.

The currencies slid as the two nations’ central banks are forecast to cut borrowing costs this week to boost growth amid a global recession. Lower interest rates reduce the appeal of Australian and New Zealand assets for investors seeking higher returns on funds borrowed in low-cost countries such as the U.S. and Japan. Australia’s central bank announces its rate decision at 2:30 p.m. Sydney time.

“There’s a lot of nervousness out there at the moment ahead of the RBA meeting today and also on the back of the weak performance in equities,” said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. “The Aussie is going to come under some pretty intense selling pressure and could see a move back toward 63 cents,” he said, referring to the currency by its nickname.

Australia’s currency declined 0.6 percent to 63.67 U.S. cents as of 11:20 a.m. in Sydney from 64.07 cents late in Asia yesterday. The currency fell 1 percent to 59.51 yen.

New Zealand’s dollar slid 1 percent to 52.99 U.S. cents from 53.54 cents in Asia yesterday. It bought 49.53 yen from 50.22.

The currencies slipped as Australian and Japanese equities followed U.S. stocks lower after declines in American and European manufacturing pointed to a deepening global recession. The National Bureau of Economic Research, the panel that dates U.S. business cycles, said the U.S. is in its longest recession since 1982.

Australian Rates

The Reserve Bank of Australia is forecast by economists to lower its benchmark rate to a six-year low today. Governor Glenn Stevens will cut interest rates 75 basis points according to 15 of 21 economists surveyed by Bloomberg News. A basis point is 0.01 percentage point.

“If the RBA goes less than 100, we’ll see the Aussie dollar rally a little and we should see the rally across the bond curve, particularly at the short end, unwind,” said Joshua Williamson, senior strategist at TD Securities in Sydney.

TD Securities is among four institutions forecasting a 100 basis point cut.

Current Account

Australia’s current-account deficit narrowed for a second quarter in the three months through September as exports of coal and iron ore rose. The shortfall on goods, services and investment shrank to A$9.74 billion ($6.2 billion) from a revised A$14 billion in the second quarter, the Bureau of Statistics said in Sydney today.

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 advanced. The yield on the 10- year note fell 16 basis points, or 0.16 percentage point, to 4.368 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 1.35, or A$13.5 per A$1,000 face amount, to 107.233.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.89 percent from 4.97 yesterday.

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

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Yen Falls on Speculation Importers Are Selling Before Year-End

By Ron Harui and Stanley White

Dec. 2 (Bloomberg) -- The yen fell against the dollar, retreating from a five-week high, on speculation Japanese importers are buying foreign currencies to meet their year-end funding needs.

The yen also erased gains and declined versus the euro before the Bank of Japan holds an emergency meeting today to consider ways to help companies obtain funds after the world’s second-largest economy slipped into a recession. The Australian dollar dropped against the greenback and the yen as economists forecast the country’s central bank will cut interest rates today in response to a global economic slump.

“Japanese importers are likely to find these levels attractive to buy dollars to meet their year-end financing needs,” said Katsunori Kitakura, chief treasury dealer in Tokyo at Chuo Mitsui Trust & Banking Co., Japan’s seventh-largest publicly listed lender. “Even though the BOJ lowered rates, that still hasn’t reduced companies’ funding costs.”

The yen fell to 93.68 per dollar as of 10:48 a.m. in Tokyo from 93.19 late yesterday in New York. It earlier rose to 92.89, the highest level since Oct. 28. Japan’s currency declined to 118.38 versus the euro from 117.52, erasing a gain to 117.24, the strongest level since Nov. 21. The euro traded at $1.2634 versus $1.2611.

Against the yen, the British pound rose 0.9 percent to 139.90 yen, the Norwegian krone advanced 0.8 percent to 13.1803 and the Canadian dollar gained 0.7 percent to 75.20.

Australian Rates

Australia’s dollar fell 0.3 percent to 63.86 U.S. cents and 0.4 percent to 59.85 yen from late in Asia yesterday as economists forecast the Reserve Bank of Australia will cut rates by 75 basis points from 5.25 percent today. The monetary policy decision is due at 2:30 p.m. in Sydney. A basis point is 0.01 percentage point.

Policy makers will also lower interest rates this week to 5 percent from 6.5 percent in New Zealand, to 2 percent from 3 percent in the U.K. and to 2.75 percent from 3.25 percent in the euro region as central banks move to stem the economic slowdown, according to separate surveys carried out by Bloomberg.

Japan’s currency earlier gained versus the dollar on speculation declines in global manufacturing and stocks will prompt investors to buy back the yen at the expense of higher- yielding assets.

The Nikkei 225 Stock Average slid 4.6 percent and the MSCI Asia-Pacific Index of regional shares slumped 3.4 percent after the Standard & Poor’s 500 Index tumbled 8.9 percent yesterday.

Risk Aversion

“Sliding global equities are likely to increase risk aversion among investors, putting upward pressure on the yen,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Plc in Tokyo and a former Bank of Japan currency trader. “We may see the yen re-test this year’s high of 90.93 against the dollar in the near term.”

The yen touched 90.93 to the U.S. currency on Oct. 24, the highest level since August 1995.

The Institute for Supply Management said yesterday its U.S. factory index fell to 36.2 in November, the lowest level since 1982. A reading of 50 is the dividing line between expansion and contraction. Similar gauges for the euro zone and the U.K. dropped to records.

The National Bureau of Economic Research also yesterday said the U.S. economy entered a recession in December 2007, the first since 2001.

Japan’s target rate of 0.3 percent compares with 3.25 percent in the euro zone and 5.25 percent in Australia. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.

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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South Korea Stocks: Hyundai Motor, Mirae Asset, Ssangyong

By Saeromi Shin

Dec. 2 (Bloomberg) -- South Korea’s Kospi index fell 38.99, or 3.7 percent, to 1,019.63 as of 9:49 a.m. in Seoul.

The following are among the most-active stocks in South Korean markets.

Automakers: Hyundai Motor Co. (005380 KS), South Korea’s biggest carmaker, fell 2,750 won, or 6.7 percent, to 38,250. Kia Motors Corp. (000270 KS), an affiliate, lost 510 won, or 7.5 percent, to 6,260. Ssangyong Motor Co. (003620 KS), the South Korean unit of China’s biggest automaker, slid 60 won, or 5.9 percent, to 960.

Goldman, Sachs & Co. said November sales were among the “weakest” since the 1998 financial crisis, and it remains “negative” on the Korean automakers as the slowdown in sales has just begun to be felt in the domestic market.

Brokerages: Samsung Securities Co. (016360 KS) fell 3,100 won, or 5 percent, to 59,000. Korea Investment Holdings Co. (071050 KS) retreated 1,500 won, or 6 percent, to 23,400. Mirae Asset Securities Co. (037620 KS) retreated 3,800 won, or 5.9 percent, to 60,200. Morgan Stanley cut its view on the industry in Korea to “cautious,” from “in-line,” in a note, saying the fund sale commission is being “pressured.” It cut its recommendation on Samsung Securities to “underweight,” from “equal-weight,” saying it has outperformed “significantly.” The brokerage also cut its rating on Korea Investment Holdings to “underweight,” from “equal-weight,” citing concerns over its mutual savings bank.

Ssangyong Engineering & Construction Co. (012650 KS) tumbled 940 won, or 14 percent, to 5,710. Dongkuk Steel Mill Co. (001230 KS), the third-biggest South Korean steelmaker, will scrap a plan to acquire the builder after failing to win an agreement to cut the purchase price, a company spokesman confirmed Chairman Chang Sae Joo as saying. Dongkuk will make a final decision at a board meeting today.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

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Australia Stocks: Macquarie, Minara, Newcrest, Rio, Woodside

By Shani Raja

Dec. 2 (Bloomberg) -- The S&P/ASX 200 Index fell 130.20 points, or 3.5 percent, to 3,551 at 11:10 a.m. in Sydney, the most since Nov. 20. The broader All Ordinaries Index lost 124.60 points, or 3.4 percent, to 3,494.40, while the futures contract expiring in December dropped 3.4 percent to 3,556.

Mining shares: BHP Billiton Ltd. (BHP AU), the world's largest mining company, plunged A$2.32, or 7.8 percent, to A$27.58, extending yesterday's 3.6 percent loss. Rio Tinto Group (RIO AU), the world's third-biggest mining company, slipped to its lowest price since Jan. 13, 2005, slumping A$2.77, or 6.5 percent, to A$39.93.

Minara Resources Ltd. (MRE AU), an Australian nickel producer controlled by Glencore International AG, fell 5 cents, or 11 percent, to 35 cents, the index's fourth-biggest loser.

A measure of six metals traded in London dropped 1.6 percent. Zinc lost 3.6 percent, copper 0.8 percent, and nickel 3.9 percent. Separately, Rio's rating was downgraded to “neutral” from “overweight” at JPMorgan Chase & Co.

Gold producers: Newcrest Mining Ltd. (NCM AU), Australia's largest gold producer, slumped A$1.44, or 5.6 percent, to A$24.40, the most since Nov. 18. Sino Gold Mining Ltd. (SGX AU), operator of China's second-largest bullion producer, dived 28 cents, or 7.8 percent, to A$3.33.

Gold tumbled the most in eight months on speculation the slumping global economy will damp demand for commodities. Bullion for February delivery fell 5.2 percent to $776.80 an ounce in New York, the biggest percentage decline for a most-active contract since March 19.

Oil companies: Woodside Petroleum Ltd. (WPL AU) slumped A$2.45, or 6.8 percent, to A$33.75, the most since Nov. 20. Santos Ltd. (STO AU) declined 61 cents, or 4.2 percent, to A$13.78, the lowest since Nov. 24.

Crude oil fell to the lowest close in more than three years after the Organization of Petroleum Exporting Countries deferred a decision to reduce output until its next meeting on Dec. 17. Crude for January delivery declined 9.5 percent to $49.28 a barrel at 2:47 p.m. on the New York Mercantile Exchange.

Financial stocks: Macquarie Group Ltd. (MQG AU) fell A$2.41, or 8 percent, to A$27.71, the most since Nov. 17. National Australia Bank Ltd. (NAB AU), the nation's biggest lender by assets, dropped 58 cents, or 3 percent, to A$18.85, the most since Nov. 20.

U.S. stocks slid the most since October on concern the global economic slump is deepening and consumers' access to credit is shrinking. The S&P 500 sank 8.9 percent to 816.19, with financial stocks in the index tumbling a record 17 percent as a group.

Albidon Ltd. (ALB AU), an Australian company developing a nickel mine in Zambia, tumbled 5 cents, or 22 percent, to a record low 17 cents. The company said Managing Director Dale Rogers quit. Directors Alasdair Cooke and Paul Chapman have been appointed joint managing directors until a replacement for Rogers is found, a statement said.

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

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Japan Stocks Drop on Deepening Slowdown, Yen; Panasonic Slumps

By Masaki Kondo

Dec. 2 (Bloomberg) -- Japan’s stocks tumbled as a drop in U.S. and European manufacturing added to evidence the global recession will deepen.

Panasonic Corp., the world’s No. 1 maker of consumer electronics, slumped 6.4 percent, while Canon Inc., which gets 80 percent of its revenue overseas, slid 6 percent after the yen rose against the dollar and euro. Inpex Corp., Japan’s largest oil explorer, fell 8.9 percent after oil prices plunged. U.S. manufacturing shrank last month at the fastest pace since 1982, the Institute for Supply Management said yesterday, while that in Europe contracted the most since the tally began in 1998, according to Markit Economics.

The Nikkei 225 Stock Average declined 468.29, or 5.6 percent, to 7,928.93 as of 9:39 a.m. in Tokyo. The broader Topix index fell 39.86, or 4.8 percent, to 787.61, set for the lowest close since Nov. 20. More than nine out of 10 stocks fell on the Topix.

“The U.S. manufacturing report made it clear it’s going to take a while before we get out of this recession,” Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. “The stronger yen will directly hit Japanese manufacturers’ earnings.”

Credit losses and writedowns have reached nearly $1 trillion at global financial companies, causing lending to businesses and consumers to dry up. Falling demand pushed manufacturers to cut output worldwide, threatening to a prolong recession that started in the U.S. a year ago, according to the National Bureau of Economic Research, a private, nonprofit group of economists based in Massachusetts.

Global Cuts

The U.S. and European production reports came after the China Federation of Logistics and Purchasing said the nation’s manufacturing shrank the most on record.

Panasonic slumped 6.4 percent to 1,075 yen, headed for the lowest level since May 2003. Canon, the world’s biggest camera maker, slid 6 percent to 2,645 yen, while Honda Motor Co., which gets more than half its profit from North America, sank 7.8 percent to 1,867 yen. Olympus Corp., an endoscope maker that derives the biggest portion of overseas earnings from Europe, lost 8.6 percent to 1,765 yen.

The yen appreciated to as much as 92.89 from 95.24 at the close of stock trading in Tokyo yesterday, while strengthening versus the euro to as much as 117.24 from 120.88. A 1 yen change against the dollar alters Canon’s annual operating profit by 2.6 billion yen ($28 million), the company said in October.

Oil Slump

Inpex fell 8.9 percent to 533,000 yen, while closest competitor Japan Petroleum Exploration Co. slid 6.9 percent to 3,350 yen. Mitsubishi Corp., a trading company getting more than half its profit from commodities, lost 10 percent to 1,074 yen.

Crude oil for January delivery sank 9.5 percent to $49.28 a barrel in New York yesterday, the lowest settlement since May 2005 and the biggest one-day drop since Oct. 10. A $1 price change in a barrel of oil alters Inpex’s annual net income by 2.2 billion yen, the company said in May.

Nomura Holdings Inc., Japan’s biggest brokerage, retreated 7.8 percent to 625 yen, set for the lowest close since August 1984. The company yesterday said it will sell 100 billion yen in subordinated convertible bonds to Dai-ichi Mutual Life Insurance Co. Convertible bonds contain a provision that gives buyers the issuer’s stock at a fixed exchange ratio.

Nikkei futures expiring in December retreated 5.6 percent to 7,930 in Osaka and slumped 5.5 percent to 7,930 in Singapore.

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

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Asian Stocks Fall as Manufacturing Declines; Woodside, JFE Drop

By Patrick Rial and Masaki Kondo

Dec. 2 (Bloomberg) -- Asian stocks tumbled, extending a global rout, as signs the global recession is deepening drove down oil prices and heightened concerns over company earnings.

Woodside Petroleum Ltd. retreated 6.9 percent in Sydney after crude declined to the lowest level in more than three years. JFE Holdings Inc., the world's third-largest steelmaker, slumped 8 percent on declines in U.S. and European manufacturing. Honda Motor Co. lost 7.8 percent as domestic sales fell and Credit Suisse Group said the carmaker will likely cut its profit forecast for the second time this year.

``The U.S. manufacturing report made it clear it's going to take a while before we get out of this recession,'' Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television.

The MSCI Asia Pacific Index dropped 3.1 percent to 80.06 as of 9:51 a.m. in Tokyo. About 15 stocks fell for each that rose.

Japan's Nikkei 225 Stock Average lost 4.3 percent to 8,033.60. Sony Corp., the maker of the PlayStation 3 game console, slid 3.8 percent as the yen's strength against the dollar reduces the value of repatriated overseas sales. All other benchmark indexes open for trading fell.

In New York, the Standard & Poor's 500 Index dived 8.9 percent yesterday, breaking a five-day winning streak, the longest since July 2007. In Europe, the Dow Jones Stoxx 600 Index declined 6 percent, its steepest slide since Oct. 15.

U.S.-traded receipts of Tata Motors Ltd., India's biggest truckmaker, plummeted 18 percent in New York after the company said it will pay as much as 11 percent to refinance loans used to acquire the Jaguar and Land Rover brands.

Indian S&P CNX Nifty Index futures for December delivery dropped 4.5 percent as of 9 a.m. in Singapore today, the biggest drop in three weeks. The contract is derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd.

Falling Output

Credit losses and writedowns have reached almost $1 trillion at global financial companies, causing lending to businesses and consumers to dry up. Falling demand pushed manufacturers to cut output and workforce across the globe, threatening to a prolong a recession that started in the U.S. a year ago, according to the National Bureau of Economic Research, a private, nonprofit group of economists based in Massachusetts.

U.S. manufacturing shrank last month at the fastest pace since 1982, the Institute for Supply Management said yesterday, while production in Europe contracted the most since the tally began in 1998, according to Markit Economics. The reports came after the China Federation of Logistics and Purchasing said the nation's manufacturing shrank the most on record.

Crude oil for January delivery sank 9.5 percent to $49.28 a barrel in New York yesterday, the lowest settlement since May 2005 and the biggest one-day drop since Oct. 10.

The yen appreciated to as much as 92.89 against the dollar, the strongest in a month, from 95.24 at the close of stock trading in Tokyo yesterday.

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

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Brazil Stocks Drop Most in Week on Profit Outlook; Bolsa Falls

By Alexander Ragir and William Freebairn

Dec. 1 (Bloomberg) -- Brazilian stocks dropped the most in a week on speculation the global economic slowdown and decline in commodity prices will reduce earnings for the country’s biggest raw-materials producers next year.

Gerdau SA led a retreat in metal producers after U.S. manufacturing contracted in November at the steepest rate in 26 years and factory indexes in China and Europe fell to records. Cosan SA Industria e Comercio, the biggest ethanol producer, slid 9.8 percent as JPMorgan Chase & Co. said lower oil prices and export barriers will slow demand for the sugar-based alternative fuel. Homebuiler Rossi Residencial SA led declines on the Bovespa as economists raised their interest-rate forecasts for next year.

“The market wants to recover but we keep getting weak economic numbers,” said Eduardo Favrin, who oversees $2 billion in Brazilian stocks as head of equities at HSBC Investments Brasil in Sao Paulo. “The market can’t forget about the principal problems and the economic indicators are going to stay really bad for a while longer.”

The Bovespa fell 5.1 percent to 34,740.50. The BM&FBovespa Small Cap index sank 4.7 percent. The BM&FBovespa MidLarge Cap index declined 5.4 percent. Mexico’s Bolsa retreated 4.9 percent and Chile’s Ipsa slipped 3 percent. The MSCI Emerging Markets Index dropped 2.7 percent.

In the U.S., the world’s biggest economy, manufacturing contracted in November at the fastest pace in 26 years, putting American factories at the forefront of a global industrial slump emanating from the lack of credit. Chinese manufacturing shrank the most on record and export orders plunged, according to two indexes of purchasing managers.

Earnings Decline

Banco Santander SA said earnings for Latin companies will drop 8.1 percent next year because of the decline in commodity prices and weak currencies. The UBS Bloomberg Constant Maturity Commodity Index slid 3.8 percent and has fallen 48 percent since the July 2 high.

Gerdau SA, Latin America’s biggest steelmaker, fell 7.6 percent to 13.44 reais.

Brazil’s economic growth will probably be between 5 percent and 5.2 percent this year, Finance Minister Guido Mantega said. The “challenge” will be to grow 4 percent in 2009, he said.

While the worst of the global crisis is over, Brazilian companies haven’t been able to obtain foreign credit yet, Mantega said. Petroleo Brasileiro SA, the state-controlled oil company, is being forced to step up local borrowing and local companies in general haven’t been able to meet 25 percent to 30 percent of their financing needs, he said.

Petrobras slid 8.3 percent to 18.40 reais. Crude oil fell below $50 a barrel after the Organization of Petroleum Exporting Countries deferred a decision to reduce output until its next meeting on Dec. 17.

Sector Caution

Cosan sank 1.10 reais to 10.10 reais after JPMorgan began coverage of the world’s second-biggest sugar-cane processor with an “underweight” rating.

“The sector has some interesting short-term drivers, but we worry about the long-term outlook,” wrote JPMorgan analysts Debbie Bobovnikova and Diogo Miura in a note. “Protectionism in key export markets for both sugar and ethanol, along with the possibility of falling gasoline prices in the domestic market, makes us cautious on the sector in the long term.”

Rossi, Brazil’s third-biggest homebuilder, fell 9.9 percent to 3.10 reais. Cyrela Brazil Realty SA Empreendimentos e Participacoes, the largest homebuilder, dropped 5.9 percent to 7.38 reais. Uniao de Bancos Brasileiros SA, Brazil’s third- largest non-government bank, dropped 2.9 percent to 14.32 reais. Banco Bradesco SA fell 4.7 percent to 23.47 reais.

Brazil’s inflation rate will end 2009 at 5.25 percent, up from a 5.20 percent forecast a week earlier, according to the central bank survey of about 100 economists. The central bank targets inflation of 4.5 percent.

Bolsa Drops

Mexico’s Bolsa fell for the first time in four sessions, led by raw-material producers, as drops in global manufacturing raised concern about economic growth and commodity demand.

Cemex SAB, North America’s biggest cement producer, fell for the first time since Nov. 21 as U.S. manufacturing shrank. Cemex gets about a quarter of its revenue from the U.S. Grupo Mexico SAB, the country’s biggest copper miner, dropped 7.3 percent as prices of the metal declined. Industrias Penoles SAB, the world’s biggest primary silver producer, fell the most in over a week as prices of the precious metal tumbled.

Cemex declined 13 percent to 8.37 pesos. Penoles slid 13 percent to 100.73.

Argentina’s Merval fell 6.9 percent, the most in five weeks. Colombia’s IGBC dropped 1.9 percent and Peru’s Lima General Index declined 3.7 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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Intrepid Potash, Medicis, Mosaic, Tessera: U.S. Equity Preview

By Eric Martin

Dec. 1 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading tomorrow. Stock symbols are in parentheses, and share prices are as of 5:45 p.m. in New York.

Standard & Poor’s 500 Index futures expiring in December lost 1.3, or 0.2 percent, to 814.5. Dow Jones Industrial Average futures added 9, or 0.1 percent, to 8,148.

Medicis Pharmaceutical Corp. (MRX US) climbed 26 percent to $14. The maker of skin treatments reached an agreement allowing Impax Laboratories Inc. to license a generic version of the Solodyn acne drug, the companies said. The deal settles a patent dispute over the treatment, Medicis and Impax said.

Mosaic Co. (MOS US) lost 8.5 percent to $23.25. The world’s largest producer of phosphates said sales volumes of the crop nutrient dropped 38 percent in the quarter ended Nov. 30 because of “soft market conditions.”

Intrepid Potash Inc. (IPI US) the largest producer of the crop nutrient in the U.S., lost 2.6 percent to $16.10.

Tessera Technologies Inc. (TSRA US) plunged 44 percent to $9.26. The company lost a patent-infringement ruling in its bid to strike licensing agreements with Qualcomm Inc. and other makers of chips for wireless devices.

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

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U.S. Stocks Drop, Ending 5-Day Rally; GE, JPMorgan Shares Fall

By Lynn Thomasson

Dec. 1 (Bloomberg) -- U.S. stocks slid the most since October, wiping out more than half of last week’s rally, on growing concern the global economic slump is deepening and consumers’ access to credit is shrinking.

General Electric Co. and Caterpillar Inc. lost more than 9.7 percent following a report that manufacturing contracted at the fastest pace in 26 years. American Express Co. and JPMorgan Chase & Co. fell more than 15 percent on Oppenheimer & Co. analyst Meredith Whitney’s prediction that credit-card companies will cut available lending by 45 percent, or more than $2 trillion. Treasuries rose, sending yields to record lows, as Federal Reserve Chairman Ben S. Bernanke said the central bank may buy bonds to combat the worsening recession.

“The economic news is going to continue to get worse before it gets better,” Leo Grohowski, the New York-based chief investment officer for the wealth management unit of Bank of New York Mellon Corp., which oversees $158 billion, told Bloomberg Radio. “The biggest single challenge in terms of the economy is the state of housing and it still remains precarious.”

The S&P 500 sank 8.9 percent to 816.21, with financial stocks in the index tumbling a record 17 percent as a group. The Dow Jones Industrial Average plunged 679.95 points, or 7.7 percent, to 8,149.09 with all 30 companies declining. The Nasdaq Composite Index declined 9 percent to 1,398.07. Almost 38 stocks retreated for each that rose on the New York Stock Exchange.

The five consecutive advances in the S&P 500 before today marked the benchmark gauge’s longest streak of gains since July 2007 and sent it up 19 percent from an 11-year low on Nov. 20, the most over five days since 1933.

Recession Since ‘07

The U.S. economy entered a recession last December, the panel at the National Bureau of Economic Research that dates American business cycles said today.

The S&P 500 rises an average of 10 percent in the second year following a peak in the U.S. business cycle, based on the start of 13 prior recessions in the index’s 80-year history. The biggest advance, 52 percent, occurred between 1982 and 1983, while the steepest loss, 35 percent, was between 1930 and 1931. The S&P 500 gained eight times and fell five, according to data compiled by Bloomberg.

The S&P 500 has tumbled 44 percent this year as credit losses and writedowns at the world’s largest financial firms approach $1 trillion and analysts forecast the economic slump will be one of the most severe in the post-World War II era.

Stock indexes from London to Tokyo tumbled today on reports showing record declines in European and Asian manufacturing.

Manufacturing Shrinks

GE, the world’s biggest maker of power-generation equipment, slid $1.67 to $15.50. GE may give lower projections for the company’s performance next year during a webcast tomorrow to detail finance unit GE Capital’s 2009 outlook, Citigroup Inc. analyst Jeffrey Sprague said in a note to clients. Merrill Lynch & Co. analysts cut their profit forecasts for the company through 2010, citing a deteriorating environment for industrial and financial companies.

Caterpillar, the largest maker of bulldozers, retreated $4.41 to $36.58.

The Institute for Supply Management’s manufacturing index dropped more than forecast to 36.2, the lowest since 1982, the Tempe, Arizona-based group said. A reading of 50 is the dividing line between expansion and contraction.

‘Front and Center’

“The bad news is still very clearly front and center on the radar screen,” Jeffrey Palma, head of global equity strategy at UBS Securities LLC, told Bloomberg Television. “Anyone who is looking for good news on the economy is going to have to wait a while longer.”

Bernanke said he has “obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy. The Federal funds target, the central bank’s benchmark interest rate, is at 1 percent.

The economy “will probably remain weak for a time,” even if the credit crisis eases, Bernanke said in a speech in Austin, Texas.

The S&P 500 Financials Index sank 17 percent for the biggest decline in the 19-year history of the index. The group surged 31 percent last week.

American Express, the largest U.S. credit-card company by purchases, slid $3.67 to $19.64. JPMorgan lost $5.54 to $26.12.

Card companies will reduce lending by more than $2 trillion over the next 18 months in a “dangerous and unprecedented” move for U.S. consumer spending, Oppenheimer’s Whitney said in research report. There are signs of “broad-based declines” in consumer access to capital, Whitney said.

Goldman, Morgan Stanley Tumble

Goldman Sachs Group Inc. and Morgan Stanley plunged 17 percent and 23 percent respectively after Credit Suisse Group AG said the slowdown in investment banking and trading will force the New York firms to report fourth-quarter losses and weaker results for 2009.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, posted the biggest gain in five weeks, climbing 24 percent to 68.51. The gauge measures the cost of using options as insurance against further declines in the S&P 500.

The S&P 500 rose the most since 1974 last week, soaring 12 percent, after tumbling 8.4 percent the previous week.

‘Capital Preservation’

“We don’t like our net asset value bouncing around every single day in a violent fashion,” said Doug Cliggott, chief investment officer of Dover Management LLC in Greenwich, Connecticut. “It’s all about capital preservation right now.”

Energy producers in the S&P 500 slid 10 percent today as oil tumbled more than $5 a barrel and the Organization of Petroleum Exporting Countries said slowing global growth means demand will be “much lower” than expected a month ago.

Crude oil for January delivery declined 9.5 percent to $49.28 a barrel in New York, the lowest closing level in more than three years. OPEC deferred a decision to reduce output until its next meeting on Dec. 17.

Hess Corp., the fifth-biggest U.S. oil company, dropped 19 percent to $43.71. Anadarko Petroleum Corp., the nation’s second-largest independent oil producer, lost 8.4 percent to $37.60.

Merrill Lynch cut its recommendation on 11 energy stocks, including Schlumberger Ltd., whose shares lost 17 percent to $42.08. The company, the world’s largest oilfield-services provider, was downgraded to “neutral.”

‘Unrelentingly Negative’

“It’s hard to not be concerned about the prospects for a multi-year global economic contraction,” wrote Calgary-based Alan Laws of Merrill Lynch. “The daily flow of news is unrelentingly negative and comprised of many issues that should take quite some time to resolve.”

Raw-material producers in the S&P 500 lost 9.8 percent collectively as commodity prices fell on worsening economic reports around the world. Manufacturing in China, the world’s biggest consumer of copper, shrank by the most on record and export orders plunged, according to the China Federation of Logistics and Purchasing and CLSA Asia-Pacific Markets. A European manufacturing index dropped to the lowest level since the survey began in 1998.

Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded producer of copper, retreated 13 percent to $20.91. U.S. Steel Corp., the biggest U.S.-based steelmaker by 2007 sales, dropped 16 percent to $25.64.

The Reuters/Jefferies CRB Index of 19 raw materials slumped 3.6 percent, led by silver and oil.

Pilgrim’s Pride Bankruptcy

Pilgrim’s Pride Corp., the largest U.S. chicken producer, filed for Chapter 11 bankruptcy protection after rising grain costs and surplus caused it to post four consecutive quarterly losses. The stock, which plunged 98 percent this year, was halted at 62 cents in NYSE trading.

Limited Brands Inc. had the biggest drop in at least 26 years, tumbling 19 percent to $7.57. Citigroup Inc. analysts cut the owner of the Victoria’s Secret lingerie chain to “hold” from “buy,” citing a 31 percent rise in the stock from Nov. 20 to Nov. 28.

S&P 500 retailers slumped 9.3 percent, the most since 1998.

Just two stocks in the S&P 500, AutoNation Inc. and Rohm and Haas Co., rose today.

Mentor Corp. soared 89 percent to $30.58. Johnson & Johnson, the world’s largest health-care company, said it will acquire the breast-implant maker for $1.07 billion in cash. Holders of Mentor will get $31 a share, almost double the $16.15 close from Nov. 28. J&J slipped 5.6 percent to $55.33.

The plunge in U.S. stocks that pushed the S&P 500 to an 11- year low last month is over, according to Laszlo Birinyi, who predicted the rout in financial shares.

“The market will not again visit 750 on the S&P,” Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, wrote in a report today.

Swiss industrial companies, Texas oil drillers and Japanese robot makers are too cheap to pass up, according to the best- performing money managers this year. Fund managers Phillip Davidson, Stephen Docherty and Eric Cinnamond say they are all taking advantage by buying shares they say were unfairly punished.

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

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Market-Beating Managers Buy ABB, Fanuc as Stocks Fall

By Eric Martin and Michael Patterson

Dec. 1 (Bloomberg) -- In the worst year for global equities, the best money managers say Swiss industrial companies, Texas oil drillers and Japanese robot makers are too cheap to pass up.

Phillip Davidson, whose American Century Equity Income Fund is outperforming the MSCI World Index by 20 percentage points, snapped up Switzerland’s ABB Ltd. as the stock fell to its cheapest level since at least 2002. Stephen Docherty is counting on Japan’s Fanuc Ltd. to help his Aberdeen World Equity Fund top its benchmark index for a fifth year. Intrepid Capital Management Inc.’s Eric Cinnamond, who beat 99 percent of his peers, bought Patterson-UTI Energy Inc. as it dropped to a seven-year low.

Since the MSCI World peaked on Oct. 31, 2007, its 47 percent slide through last week erased $32 trillion of market value, leaving shares trading at an average 11.4 times earnings, the lowest since at least 1995, according to monthly data compiled by Bloomberg. Now that all 68 industries and 96 percent of the index’s 1,697 companies dropped, investors are buying shares they say were unfairly punished.

“I’m catching them as they fall,” said Cinnamond, who helps manage about $350 million at Intrepid. His small-cap fund, which is down 12 percent this year, outperformed the Russell 2000 Index by 25 percentage points. “People are selling regardless of valuation.”

Falling Profits

The money managers don’t expect equity markets to surge next year after almost $1 trillion in financial-company losses and writedowns froze credit and pushed the U.S., Europe and Japan into recessions. Davidson predicts a “throwaway year” for most stocks and says analysts’ consensus forecast for Standard & Poor’s 500 Index profit growth of 9 percent is “too high by some magnitude.”

The economic slump dragged down earnings at companies in the MSCI World by 16 percent last quarter and profits for companies in the S&P 500 dropped 17 percent, the fifth straight quarterly retreat. Global growth will slow to 2.2 percent next year from 3.7 percent in 2008, the Washington-based International Monetary Fund said in its World Economic Outlook report last month.

Even after an 8.5 percent rally from an 11-year low on Nov. 20, the S&P 500 is poised for its worst annual drop since 1931. The index fell 7.5 percent last month and retreated 17 percent in October, after credit market losses drove New York-based securities firm Lehman Brothers Holdings Inc. into bankruptcy.

The S&P 500 lost 8.9 percent to 816.21 today, while the MSCI World dropped 7 percent.

Infrastructure Bet

“Everything has fallen,” said Brian Shepardson, who helps manage $2 billion at Xenia, Ohio-based James Investment Research. The firm’s James Balanced Golden Rainbow Fund and James Advantage Market Neutral Fund beat more than 90 percent of their peers this year.

Shepardson says he’s buying Oak Brook, Illinois-based McDonald’s Corp. and Bentonville, Arkansas-based Wal-Mart Stores Inc. even as he braces for “more trouble” in stock markets during the first half of 2009.

McDonald’s, the world’s biggest restaurant company, trades for 15.9 times reported profit, down 30 percent from a six-year peak of 22.6 in December 2007. Wal-Mart, the largest retailer, fetches 15.5 times earnings, compared with its weekly average of 28.4 during the past decade. McDonald’s dropped 4.7 percent this year and Wal-Mart advanced 12 percent, making them the best performers in the Dow Jones Industrial Average.

McDonald’s dropped 4.4 percent to $56.17 and Wal-Mart declined 5.1 percent to $53.01 today.

‘Indiscriminate Selling’

American Century Investments’ Davidson snapped up Zurich- based ABB, the world’s largest builder of electricity grids, as the shares tumbled 56 percent this year on concern infrastructure projects will be delayed. The stock trades for 6.7 times reported profit, 82 percent cheaper than the Swiss Market Index, according to data compiled by Bloomberg. ABB dropped 8.7 percent to 14.32 francs today.

During “this last leg down in October there was indiscriminate selling in some of these names,” said Davidson, who oversees about $17 billion as chief investment officer for value equities at American Century in Kansas City, Missouri. His Equity Income Fund beat 98 percent of similar funds this year and 94 percent in the past five years. “Security selection has really been key,” he said.

Aberdeen Asset Management’s Docherty said he’s buying Japan’s Fanuc because the robot maker’s 577 billion yen ($6.04 billion) of cash will help it weather the credit crunch while rivals may be unable to raise money. The company, based in Japan’s Yamanashi prefecture, trades for 1.4 times net assets, close to the cheapest level since at least 2001, Bloomberg data show. Fanuc shares lost 2 percent to 5,770 yen today, bringing the 2008 decline to 47 percent.

‘Best Companies’

“Next year economically is going to look very poor and earnings expectations are probably still too high,” Docherty said in an interview from Edinburgh. “It comes down to valuation. You can find some of the best companies in the world now, which are normally too expensive, looking quite attractive.”

Cinnamond of Intrepid Capital said about 27 percent of his fund’s holdings were in cash before a two-month collapse in U.S. small-cap stocks that dragged the Russell 2000 to the lowest level since 2003. He’s now fully invested in stocks such as Snyder, Texas-based Patterson-UTI, a driller that traded for 0.9 times the company’s net assets at the end of last week.

Patterson-UTI has tumbled 73 percent from its peak this year to $9.72 as the S&P SmallCap Energy Index lost 66 percent from a June record. Cinnamond says Patterson-UTI may be worth $20 a share. Patterson-UTI tumbled today, losing 22 percent to $9.72 and ending a five-day advance.

‘Unload On Us’

“You had to own energy earlier this year or you got smoked relatively, so people piled into this stuff,” Cinnamond said in an interview from Jacksonville Beach, Florida. “Now it all implodes and there’s no one left to buy. Fortunately we didn’t own it, and we were happy to let these people unload on us.”

Neil Hennessy, whose Focus 30 Fund has beaten 96 percent of its competitors this year, is buying Corinthian Colleges Inc., the Santa Ana, California-based operator of North American colleges and trade schools. The stock was priced at 1.23 times sales at the end of last week, a 49 percent discount to the weekly average since 1999, according to Bloomberg data. Corinthian retreated 7.5 percent to $14.87 today, giving the stock a 3.4 percent decline in 2008.

Corinthian will benefit from increased demand as accelerating job losses force workers to go back to school, Novato, California-based Hennessy said.

“The perception among investors is that companies are losing money, and that’s so far from the truth,” said Hennessy, who oversees about $600 million as president of Hennessy Advisors Inc. “There’s a lot of value out there.”

To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

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Canada Stocks Fall Most in 21 Years Led by EnCana, Financials

By Whitney Kisling

Dec. 1 (Bloomberg) -- Canadian stocks fell the most in 21 years, led by energy producers and financial companies, as a six day rally ended on sliding oil prices and a newspaper report that banks may announce more writedowns helped.

EnCana Corp., led a decline in energy shares, after the Organization of Petroleum Exporting Countries deferred a production cut decision two weeks, triggering a drop in crude.

Insurer Manulife Financial Corp. and Royal Bank of Canada led financials lower. Barrick Gold Corp. slid with the price of bullion. Northbridge Financial Corp. surged after Fairfax Financial Holdings Ltd. agreed to buy the rest of it.

The Standard & Poor’s/TSX Composite Index slid 9.3 percent to 8,406.21 in Toronto, the steepest drop since October 1987 and the biggest move today of any market included in global benchmarks. The country’s main stock index gets three-fourths of its value from energy, mining and finance shares.

“It’s the economy again,” said John Kinsey, who helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto. “People are worried about the world economic picture and that backs up into the financials, and the commodities, and as such, stocks are down. Obviously a recession isn’t good for the banks.”

Oil fell below $50 after OPEC postponed a decision until Dec. 17 to assess the impact of a 1.5 million-barrel-a-day reduction agreed to in October, and said it will trim output at its next meeting.

Energy Producers

EnCana, the country’s biggest energy company by market value, dropped 13 percent to C$52.32, helping to lead an index of energy stocks down 11 percent, the second-biggest decline among 10 industry benchmarks in Canada. Canadian Natural Resources Ltd., the country’s third-largest energy company, fell 15 percent to C$44.44. Suncor Energy Inc., the world’s second- largest oil-sands mining company, slipped 16 percent to C$23.90.

Oil prices have fallen 66 percent since hitting a record $147.27 a barrel on July 11.

An index of financial stocks fell 8.6 percent. Canada’s financial shares have dropped 38 percent this year as the global economy slowed and credit-related losses and writedowns amounted to almost $1 trillion worldwide.

The U.S. economy entered a recession a year ago this month, a panel that dates American business expansions at the National Bureau of Economic Research said today. The S&P/TSX has declined 39 percent this year on concern the U.S.-led recession will hurt demand for Canada’s commodity exports.

U.S. Market

The Standard & Poor’s 500 Index fell 8.9 percent to 816.21, the first decline since Nov. 20, after climbing for five days, the longest streak of gains since July 2007. U.S. trading was shortened Nov. 28 after the Thanksgiving holiday Nov. 27.

Several of Canada’s banks may announce big writedowns for the fiscal year ended Oct. 31, the Financial Times reported, without saying where it got the information. Royal Bank, Toronto-Dominion Bank and Bank of Nova Scotia gave fourth- quarter results in advance because of writedowns. Canadian Imperial Bank of Commerce, which didn’t give pre-announced results, is scheduled to release fourth-quarter results Dec. 4.

Manulife, Canada’s biggest insurance company, slid 15 percent to C$20.46. Royal Bank, the nation’s largest bank, slid 8.7 percent to C$39.44. Toronto-Dominion Bank, the second- largest Canadian lender, fell 8.2 percent to C$42.25.

The S&P/TSX posted its best week in 33 years last week as banks and insurers gained on speculation the government’s actions to add liquidity to the financial markets are helping soften the worst year since 1931 for Canadian equities. During the six-day rally, the index gained 20 percent, meeting the definition of a bull market.

“It was a pretty exceptional week last week, and in Canada, a pretty exceptional Friday afternoon,” said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto. “I think we were destined to give a lot of that back today.”

Gold prices fell the most in eight months, sending Barrick down 13 percent to C$32.65. Goldcorp Inc., the second-biggest gold producer, fell 17 percent to C$29.15. A gauge of materials producers fell 14 percent.

Northbridge, a property and casualty insurer, rallied 19 percent to C$38.27, the most on the S&P/TSX Index. Fairfax, which owns 63.1 percent of Northridge, offered C$39 a share for the remaining stake. Once the deal is complete, Northbridge will become a unit of Fairfax, the best-performing Canadian financial stock this year

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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Cotton Prices Fall as Equity Indexes Decline, Dollar Gains

By Shruti Date Singh

Dec. 1 (Bloomberg) -- Cotton futures fell the most in almost a week after U.S. equities declined and the U.S. Dollar Index gained, renewing concern demand for commodities will drop.

The Dow Jones Industrial Average, which some traders consider an indicator of commodity demand, fell as much as 7.8 percent today after gaining 9.7 percent last week. The Reuters/ Jefferies CRB Index dropped as much as 3.7 percent as an index measuring the dollar against six other currencies gained as much as 0.9 percent. A stronger dollar makes commodities more expensive for buyers holding other currencies.

“The stronger dollar, weaker crude and lower grain prices may be playing a part and the lower equities,” said Hibbie Barrier, a director at Avondale Partners in Nashville, Tennessee.

Cotton futures for March delivery fell 0.88 cent, or 1.8 percent, to 47.03 cents a pound on ICE Futures U.S. in New York, the biggest drop for a most-active contract since Nov. 25.

The price has fallen 31 percent this year on concern the global recession is eroding demand for textiles and clothing.

Crude oil in New York dropped more than 9 percent today. Corn fell 4.7 percent in Chicago, wheat dropped 6 percent and soybeans slid 4.2 percent.

Merchants and producers also may have been selling futures today after buying back bales from the government loan program, Barrier said. The federal program allows farmers to take out a 52-cent per pound loan on upland cotton, which can be paid back at a lower rate when market prices are below the loan level.

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

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