Oil Rises as U.S. May Bail Out Automakers, OPEC May Cut Output

By Gavin Evans and Christian Schmollinger

Dec. 15 (Bloomberg) -- Crude oil rose in New York on speculation the Bush administration will rescue U.S. automakers and OPEC may make the biggest supply cut in a decade.

U.S. President George W. Bush may consider using funds for rescuing Wall Street banks to aid automakers. The Organization of Petroleum Exporting Countries, which pumps 42 percent of the world’s oil, will lower output targets by 7.3 percent at a Dec. 17 meeting, according to a Bloomberg survey.

“Oil futures are reacting to some of those government efforts and the expectations that the U.S. will bail out the automakers,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “OPEC is also building sufficient expectations that they will do something drastic so prices are also creeping up because of that.”

Crude oil for January delivery rose as much as $1.21, or 2.6 percent, to $47.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $47.44 at 10:28 a.m. in Singapore.

Carmaking “is a fairly key sector for the U.S. economy,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. “I do expect a rescue package in some form to go through quite soon.”

Production, Confidence

The White House said it would consider using its $700 billion bank bailout fund to help General Motors Corp. and Chrysler LLC following the Senate’s rejection of an aid package.

A report today will probably show industrial production in the U.S., the world’s largest oil consumer, contracted 0.9 percent last month as automakers cut output, according to a survey of economists. Sentiment among the largest manufacturers in Japan, the third-largest oil user, fell the most in 34 years according to the nation’s quarterly Tankan survey today.

“The whole macro picture is key,” Commodity Warrants’ Hassall said.

China aims to increase its money supply 17 percent in 2009 and encourage lending to boost domestic consumption and buoy growth in the world’s fourth-largest economy.

Brent oil for January settlement rose as much as 84 cents, or 1.8 percent, to $47.25 a barrel on London’s ICE Futures Europe exchange. The contract expires tomorrow. The more actively traded February futures rose 1.7 percent to $49.92 at 10:29 a.m. Singapore time.

OPEC Output

New York futures are down 68 percent from a record of $147.27 a barrel and touched a four-year low of $40.50 Dec. 5.

Oil prices will fall further if OPEC nations don’t cut daily output by at least 1.5 million barrels at this week’s meeting, Iranian Oil Minister Gholamhossein Nozari said yesterday.

“There is fairly strong support” for oil around current levels, Commodity Warrants’ Hassall said. “OPEC is going to make a supply-side response quite soon” while government stimulus packages will also start being felt, he said.

The global slump may reduce daily oil use to 85.8 million barrels in 2008, the first decline since 1983, the International Energy Agency said Dec. 11. A forecast 0.5 percent increase in fuel use next year may be wiped out if the recession deepens, the Paris-based agency said.

Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended Dec. 9, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 10,807 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 8,558 contracts, or 381 percent, from a week earlier.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net

Read more...

Get Ready for ‘Toyota Shock’ With Dollar’s Slump: William Pesek

Commentary by William Pesek

Dec. 15 (Bloomberg) -- First came the “Sony Shock.”

No, not news last week that the consumer-electronics giant is cutting 16,000 jobs -- the other shock. For investors, the big one came in April 2003, when shares fell 27 percent in two days.

Sony Corp.’s woes may pale in comparison with the still developing ones at Toyota Motor Corp. A “Toyota Shock” may be on the way as the dollar trades around 90 yen and questions abound about a U.S. bailout for Detroit automakers.

The difference this time is that the tough 2009 facing Toyota will be shared by Japan’s $4.4 trillion economy. It’s anything but pretty.

Those who argue Japan is better positioned than peers to weather the global crisis have a point. Japan’s roughly $15 trillion of household savings offers a cushion the U.S., Europe and China lack. Japan also has demonstrated a remarkable ability to live without much growth.

Yet the yen’s powerful rally is knocking down one of the three pillars supporting the country, the others being ultra-low interest rates and super-loose fiscal policy. Its gains fly in the face of conditions in an economy that shrank at an annual 1.8 percent pace in the three months ended Sept. 30. That’s where the world’s second-biggest economy finds itself.

Rising and Falling

It’s often said that Japan is a nation of first-rate companies and third-rate politicians. The trouble is, corporate Japan is more reliant on weak exchange rates than the government admits. Germany’s manufacturers often thrive regardless of the euro’s value; Japan’s often rise and fall with the yen.

The problem for companies such as Toyota, Sony and Canon Inc. runs deeper. They are facing the additional obstacle of sinking confidence. Consumers are now the most pessimistic in at least 26 years. Japan’s confidence index dropped to 28.4 last month from 29.4 in October.

Prime Minister Taro Aso’s popularity is declining as fast as the Nikkei 225 Stock Average. His support rate dropped by almost half to 20.9 percent in a Yomiuri newspaper poll published last week, from 40.5 percent a month ago.

Aso’s falling fortunes are getting round-the-clock news coverage, reminding voters the nation is becoming rudderless at the worst time possible. It’s remarkable how quickly Japan has gone from believing it was immune from the U.S.’s woes to staving off a domestic crisis of its own.

‘Falling Apart’

“We need to implement policies to prevent the economy from falling apart,” Economic and Fiscal Policy Minister Kaoru Yosano told reporters on Dec. 9. “It’s going to be a tough year for the economy next year.”

It will get even tougher as the yen bears the brunt of investors’ fleeing risky assets. It is already at a 13-year high against the dollar. While governments in Jakarta and Seoul grapple with plunging currencies, Japanese policy makers are at a loss over how to stop the yen from approaching its postwar high of about 79 to the dollar.

What can Japan really do here? The Bank of Japan is far more likely to cut its benchmark interest rate to zero from 0.3 percent than raise it. The Finance Ministry can sell yen, yet the risk of failure may be too great. If Japan intervened and markets shrugged, the yen’s surge could accelerate.

That’s when newspaper headlines will be dominated by phrases such as “Deflation Is Back” and “Recession Deepens,” further hurting confidence at home. Abroad, a key market for Japanese cars and electronics is in even greater disarray following the U.S. Senate’s rejection of a $14 billion rescue for automakers.

U.S. Disarray

Even if the Bush administration moves to tap a bank-bailout fund to help automakers, it’s not clear Detroit would get as much money as it needs to avoid massive job losses.

If not for the millions of U.S. jobs hanging in the balance, the potential demise of General Motors Corp. or Chrysler LLC might suit Toyota, Honda Motor Co. and Nissan Motor Co. just fine. Not so when the nation in which they traditionally earn more than half of their operating profit is sliding.

The U.S.’s problems are taking their toll Asia-wide. The MSCI Asia Pacific Index lost 3.7 percent on Dec. 12. Australia unveiled plans to spend an extra A$4.7 billion ($3.2 billion) on infrastructure to prevent a recession. And economists say China’s economic slowdown is worsening.

Governments were depending on China to pick up the slack as the U.S. edged toward recession. Japan thought Chinese demand would be a stabilizing force in the world’s fastest-growing economic region. We can forget that.

The question is what will happen if the yen continues to strengthen, which is likely. The yen seems to win demand either way, whether it’s from investors fleeing risky assets, or the falling dollar. A move toward 85 yen can’t be ruled out.

That isn’t good news for Toyota or the rest of corporate Japan. Investors may have to get used to being shocked.

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

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

Read more...

Australia Aims to Cut Carbon Emissions 5-15% by 2020

By Gemma Daley and Angela Macdonald-Smith

Dec. 15 (Bloomberg) -- Australia will aim to reduce carbon emissions by between five and 15 percent from 2000 levels by 2020 to tackle global warming and protect its A$1 trillion ($662 billion) economy, Climate Change Minister Penny Wong said.

The reduction would help Australia meet its goal of cutting emissions 60 percent by 2050, Wong said. The plan would trim economic growth by 0.1 percentage point a year between 2010 and 2050, assuming an initial price of A$25 a metric ton of carbon when emissions trading starts in 2010.

“These targets are hard for Australia,” Wong told reporters in Canberra. The objectives are “underpinned by the most comprehensive and robust emissions trading system anywhere in the world.”

The 5-15 percent reduction compares with a European Union target to cut greenhouse gases by a fifth in 2020 from 1990 levels. The U.S., Canada and Japan, at United Nations-led climate talks last week in Poznan, Poland, rebuffed demands by developing countries for pledges to cut greenhouse gas emissions.

The government will provide A$3.9 billion of free permits to coal-fired power generators over five years starting 2010 to compensate them for the added expense of introducing a cost on carbon. That assistance will be reviewed after five years.

LNG, Smelters

It will also provide permits to emissions-intensive trade- exposed industry at two rates. Activities including aluminum smelting, iron and steel manufacturing are likely to get 90 percent of their permits free. Liquefied natural gas producers and petroleum and alumina refiners will probably be among those gaining 60 percent of their permits free.

The government will release a guide on eligibility for the two rates at the start of 2009.

Prime Minister Kevin Rudd, 51, ratified the Kyoto Protocol on his first day in office in November last year. The G-8 countries on July 8 pledged to reduce output of heat-trapping pollution by at least 50 percent by 2050.

“To delay any further would be reckless for our economy and our environment,” Rudd told the National Press Club in Canberra after the white paper was release. A climate-change protester was removed from the room after she heckled Rudd.

2009 Climate Deal

One hundred and eight-nine nations agreed on Dec. 13 to negotiate a climate deal through 2009, overseen by the United Nations. World carbon dioxide emissions from energy use rose 2.8 percent last year as coal consumption outpaced crude oil and cleaner-burning natural gas, BP Plc said.

Australia’s emissions from fuel combustion rose 31 percent in the decade through 2000 and jumped 45 percent in the 15 years through 2005, International Energy Agency data show.

The nation’s annual economic growth rate will be little affected in the 40 years following the start of an emissions trading system, the Treasury Department said in October.

Gross domestic product per capita will grow at an average annual rate of 1.2 percent to 1.3 percent between 2010 and 2050 as Australia moves to reduce greenhouse gas emissions, it said. By comparison, growth will be 1.4 percent if no action is taken.

Australia’s proposed cap-and-trade system is similar to that used in the European Union.

Companies may leave Australia because of increased costs under the carbon plan, the nation’s Business Council said on Aug. 21. BHP Billiton Ltd. Chairman Don Argus in September urged the government to rethink the cap-and-trade system and consider a carbon tax instead.

The plan includes A$11.5 billion in assistance for families and businesses in 2010-11. That will help households, especially pensioners and those on low incomes, cope with the system.

To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.netAngela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

Read more...

Newcastle Coal Price Snaps 4-Week Losing Streak, Gains 2.8%

By Jesse Riseborough

Dec. 15 (Bloomberg) -- Power-station coal prices at Australia’s Newcastle port, a benchmark for Asia, snapped a four- week losing streak, gaining amid forecasts for demand to continue to rise next year.

The weekly index for thermal coal prices at the New South Wales port rose A$2.16, or 2.8 percent, to $78.25 a metric ton in the week ended Dec. 12, according to the globalCOAL NEWC Index. The index fell to its lowest in almost 14 months last week.

The value of Australian coal exports may more than double to A$18 billion for the 2009 fiscal year amid higher contract prices for the fuel and an estimated 4.6 percent rise in output, the Australian government forecaster said today. Demand from Korea, India and China is expected to rise on new coal-fired electricity capacity, it said.

Xstrata Plc, the world’s largest exporter of power-station coal, BHP Billiton Ltd. and Rio Tinto Group are among mining companies that ship coal through Newcastle.

The price has slumped 60 percent since trading at a record on July 4. The monthly globalCOAL index fell 15 percent to $91.36 a ton in November, from $106.92 the previous month.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

Read more...

Singapore Petroleum Drops Most in Month on Outlook for Earnings

By Chen Shiyin

Dec. 15 (Bloomberg) -- Singapore Petroleum Co., the only oil refiner traded on the city state’s stock exchange, dropped the most in a month after saying its profit this year will be “severely weakened” amid a slump in crude prices.

The stock fell as much as 6.3 percent to S$2.09, the most since Nov. 13, and traded at S$2.12 as of 9:08 a.m. local time. Earnings have declined because of a “drastic slowdown” in demand for refined products and a “sharp drop” in refining margins, the company said in a statement to the Singapore Exchange on Dec. 12.

Crude oil prices have dropped 68 percent since rising to a record high of $147.27 on July 11. They touched a four-year low of $40.50 on Dec. 5. Singapore Petroleum, which posted a 99 percent drop in third-quarter profit, will release its annual earnings on Jan. 20.

“This is SPC’s first profit warning in recent years,” Goldman Sachs Group Inc. analysts Chris Shiu and Jason Jin said in a report today. “In addition to lower refining margins, we believe inventory losses would also likely contribute to poor fourth-quarter results.”

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.

Read more...

Australia Cuts Commodity Sales Forecast 10% on Crisis

By Madelene Pearson

Dec. 15 (Bloomberg) -- Australia, the world’s largest shipper of coal, iron ore and wool, cut its commodity exports forecast by 10 percent because of the global financial crisis that may continue to hinder any recovery until the second half next year.

Overseas sales are estimated at A$192 billion ($127 billion) in the year ending June 30, 2009, the Canberra-based Australian Bureau of Agricultural and Resource Economics said today in an e- mailed statement. That compares with its September forecast of A$214 billion and revised sales of A$148 billion a year earlier.

Mining companies including Rio Tinto Group are cutting output as the global recession and credit crunch limit demand, driving prices down. A recovery in demand for energy and minerals commodities is expected in late 2009, bolstered by China’s 4 trillion yuan ($584 billion) stimulus package, the bureau said.

China is “going to be quite critical to any recovery,” said Gerard Burg, minerals and energy economist at National Australia Bank Ltd., who expects “modest” recovery in the second half of 2009 and into 2010. “For commodities, it’s going to be dependent on growth in the construction and manufacturing sectors and also their infrastructure construction.”

Australia’s exports of minerals and energy are forecast at A$159 billion, from about A$180 billion in September, the bureau said. That’s still 37 percent higher than a year earlier. China, the world’s biggest buyer of raw materials and Australia’s biggest customer for minerals, may grow 8 percent next year from an estimated 9.6 percent this year, it said.

Copper Drops

The Reuters/Jeffries CRB Index of 19 materials has slumped 52 percent from a July record and Rio Tinto has said the global outlook is “uncertain” in the short term. Copper is down 52 percent this year, nickel has fallen 60 percent, while zinc has lost 55 percent and oil 51 percent.

“The main adverse effect of the global financial crisis has been the sharply lower world prices for minerals and energy commodities,” Phillip Glyde, the bureau’s executive director, said in the statement.

Earnings from energy commodities are estimated at A$80.8 billion, while sales of metals and minerals are predicted to be A$78.3 billion.

The price of West Texas Intermediate crude oil may average $99 a barrel in calendar 2008, compared with an earlier estimate of $107, the bureau said. Crude reached a record $147.27 on July 11. Prices are tipped to fall further to average $59 a barrel in 2009, lower than the $98 forecast in September.

Australian Dollar

Prices for steelmaking materials iron ore and coking coal, Australia’s top two export earners, are expected to fall in the year starting April 2009, the bureau said. Earnings from iron ore, coal and liquefied natural gas account for most of the growth in energy and minerals sales forecast this fiscal year.

The price of gold may fall 7 percent to $810 an ounce in 2009, the bureau said. Bullion may average around $870 an ounce this year, it said.

To be sure, recent falls in the Australian dollar will support export earnings should they be sustained, the bureau said. The local currency has slumped 30 percent so far this fiscal year against its U.S. counterpart. The bureau cut its average Australian dollar forecast to 70 U.S. cents in 2008-2009, from a previous estimate of 85 cents.

“The change in the exchange rate has really masked some of the falls,” National Australia’s Burg said.

Earnings from farm exports are forecast at A$29.4 billion in fiscal 2009, compared with the A$30 billion September forecast and 7 percent higher than a year earlier.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

Read more...

OPEC Clashes With Goldman on $75 Oil as Demand Slumps

By Ayesha Daya and Maher Chmaytelli

Dec. 15 (Bloomberg) -- OPEC, the producer of 42 percent of the world’s oil, may make the biggest supply cut in a decade to halt the plunge in crude prices as demand drops for the first time since 1983.

The Organization of Petroleum Exporting Countries will probably lower output targets by at least 2 million barrels a day, or 7.3 percent, when its members meet Dec. 17, according to 18 of 33 analysts surveyed by Bloomberg. While Saudi Arabia’s King Abdullah said last month that his country needs oil priced at $75 a barrel to spur development, Goldman Sachs Group Inc. predicts crude may slide to $30 from $46.28 today.

Oil’s $100 a barrel collapse since July ended a windfall that quadrupled OPEC export revenue in five years, instead creating government budget shortfalls. Ecuador, a member of the group, said last week it will default on foreign debt. The U.A.E., Kuwait and Qatar need crude above $55 to balance their current accounts and fiscal spending, Citigroup Inc. estimated.

“There is a real danger of oil going down to $30 a barrel unless OPEC acts boldly and decisively,” said David Hufton, managing director of PVM Oil Associates Ltd. in London, the world’s largest broker of over-the-counter crude trading between banks, hedge funds and oil companies.

Prices tumbled from a record $147.27 on the New York Mercantile Exchange in July to a four-year low of $40.50 just five months later. Crude for January delivery rose as much as $1.13, or 2.4 percent, to $47.41 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $47.41 at 10:38 a.m. in Singapore.

‘Severe’ Cut

OPEC President Chakib Khelil said Dec. 11 ministers had reached a consensus that a “severe” cut is needed at the meeting this week in Oran, Algeria. Qatari minister Abdullah bin Hamad al-Attiyah, Venezuela’s Rafael Ramirez and Libya’s Shokri Ghanem also said they are prepared to reduce supplies. The group agreed in October to reduce production by 1.5 million barrels a day, starting Nov. 1.

“With oil having dropped to sub-$50, the Algeria meeting puts them under pressure to cut again,” said Mike Rothman, oil research head at International Strategy & Investment Group in New York, and former chief energy strategist at Merrill Lynch & Co.

OPEC’s struggle to revive prices follows six years of gains as global growth accelerated, led by China. Rising prices led investors and pension funds to pour more than $200 billion into commodities, seeking greater returns than those offered from stocks and bonds.

Bubble Burst

The resulting bubble in oil, grains and metals burst in July, as the collapse in the U.S. subprime-mortgage market saddled financial companies with almost $1 trillion of losses and writedowns and led to the failure of Lehman Brothers Holdings Inc.

As investors fled commodity markets, outstanding oil futures contracts, called open interest, tumbled 23 percent in New York to 1.16 million.

Oil could fall below $25 next year as the recession limits demand, Merrill Lynch commodity strategist Francisco Blanch in London said Dec. 4. Benjamin Dell, an oil analyst at Sanford C. Bernstein & Co. in New York, said it may take a year for prices to rebound.

The U.S. recession threatens to become the longest of the postwar era as companies cut workers and investment, with real gross domestic product forecast to contract 0.8 percent in 2009, according to estimates compiled by Bloomberg.

Weakness in the world’s largest economy is leading this year’s 200,000 barrel-a-day decline in global oil demand to 85.8 million a day, according to the International Energy Agency in Paris. Oil use hasn’t fallen since 1983, when U.S. interest rates of more than 9.25 percent stifled growth.

Wait a Year

“Investors should focus on three signals, a recovery in U.S. gross domestic product, a return to positive global oil consumption and a stabilization in the U.S. dollar,” Dell wrote Dec. 10. “We expect all three by late 2009.”

PVM’s Hufton said the 13-nation OPEC needs to lower supply 1.5 million barrels a day, with Russia, which isn’t a member, idling 500,000 barrels a day, to avoid oil falling to $30 later this month. That would remove 2.3 percent of global production, based on the IEA’s third-quarter supply figures.

After agreeing to trim output in September and October, members have yet to fully deliver on their promises, pumping 932,000 barrels a day more than the target of 27.3 million a day in November, according to estimates compiled by Bloomberg. Compliance is “not good enough,” OPEC Secretary-General Abdalla El-Badri said on Nov. 30.

Saudi Revenue Falls

As OPEC stalled, New York oil futures plummeted, touching $40.05 on Dec. 5. Futures prices exceed $75 a barrel for delivery after 2013, indicating traders doubt $40 crude is sustainable.

Saudi Arabian Oil Minister Ali al-Naimi said Dec. 11 that the world’s largest exporter pumped 8.493 million barrels a day in November, which would be close to its OPEC quota and about 290,000 barrels a day less than the IEA has estimated.

The drop in prices means Saudi Arabia’s daily oil revenue has plunged about 66 percent, or $800 million a day, based on a 1.1 million barrel-a-day reduction in output through November, from July’s peak.

Venezuela’s economy probably will contract next year as lower oil revenue forces the government to trim spending, Morgan Stanley said last week. Iran’s Central Bank said last month that the country will face “big trouble” with oil below $60.

Khalid al-Falih, who will become chief executive officer of Saudi Aramco, the world’s biggest oil supplier, warned on Dec. 11 that falling oil prices will hurt investment in new fields, hampering the ability of producing nations to meet growing demand in future.

Brazilian Oil Fields

Goldman Sachs analysts Giovanni Serio and Jeffrey Currie identified 30 oil projects that require a price of $55 to break even, according to a Dec. 10 research note. Those ventures include Petroleo Brasileiro SA’s Tupi field, the biggest oil discovery in the Americas since 1976, and deepwater concessions in Angola belonging to BP Plc and Total SA.

Oslo-based StatoilHydro ASA and Royal Dutch Shell Plc of The Hague postponed investments in Canada’s oil sands this year after tumbling prices reduced potential profits.

OPEC will struggle to raise prices for now, said David Kirsch, a Kansas City-based industry consultant with PFC Energy.

“Even if OPEC tightens up crude, you’re probably not going to see a dramatic increase in prices, because refiners still won’t want to process it,” he said. “What OPEC needs to do is prevent a glut from forming in global inventories. That’s what led you to $9 a barrel in 1998.”

To contact the reporters on this story: Ayesha Daya in Oran, Algeria at adaya1@bloomberg.net; Maher Chmaytelli in Oran, Algeria at mchmaytelli@bloomberg.net

Read more...

Australian LNG Producers Win Concessions on Emissions Costs

By Angela Macdonald-Smith

Dec. 15 (Bloomberg) -- Woodside Petroleum Ltd., Chevron Corp. and other liquefied natural gas producers in Australia won concessions that may reduce the cost to their businesses of Australia’s planned carbon trading system.

The LNG industry was included among emissions-intensive trade-exposed businesses that will probably qualify for some free permits under the design of the system announced today by Climate Change Minister Penny Wong. It wasn’t eligible for any free permits under the government’s draft proposal, causing companies to warn investments in new projects were at risk.

“This is a major step forward,” Belinda Robinson, chief executive of the Australian Petroleum Production & Exploration Association, said in a telephone interview. Concerns that the effect of the carbon trading system would threaten investment in new LNG projects “have been alleviated quite considerably,” she said.

Australia will aim to reduce carbon emissions by between five and 15 percent from the 2000 level by 2020, Wong said today. Australia’s LNG producers, alumina and oil refiners “appear likely” to be eligible for 60 percent free permits under the plan, while aluminum smelters and steelmakers may get 90 percent of their permits free, the government said.

Final decisions on the eligibility of industries for free permits will be made next year after a “thorough assessment,” the government said. Activities in the pulp and paper manufacturing industry, the iron and steel industry and plastics, chemicals and glass manufacturing may also be eligible for some free permits, it said.

Activities that emit more than 2,000 tons of carbon dioxide-equivalent per million dollars of revenue will get 90 percent of their permits free, while those that emit between 1,000 and 1,999 tons per million dollars of sales will get 60 percent free, according to the White Paper. The eligibility for free permits may also be assessed in terms of millions of dollars of valued-added, it said.

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

Read more...

Malaysian Ringgit Gains as Asian Stocks Rise on Bailout Talks

By Bob Chen

Dec. 15 (Bloomberg) -- Malaysia’s ringgit rose, following its biggest weekly gain since a fixed rate to the dollar was scrapped in 2005, as Asian stocks advanced on speculation U.S. automakers will get government money to avoid bankruptcy.

The ringgit traded near the strongest level in a month after the administration of George W. Bush said Dec. 12 it may tap a bank bailout fund for financing General Motors Corp. and Chrysler LLC. Bush said en route to Afghanistan today that he wasn’t ready to announce any decision on a plan for automakers.

“There’s some improvement in sentiment,” said Thomas Harr, a senior foreign-exchange strategist at Standard Chartered Plc in Singapore. “The market has been very long dollars and is cutting some of these positions now,” he said, referring to a strategy where investors were betting on gains in the U.S. currency.

The ringgit rose as much as 0.8 percent to 3.5555 per dollar in Kuala Lumpur, according to data compiled by Bloomberg. It was at 3.5615 as of 9:38 a.m. local time.

GM Chief Executive Officer Rick Wagoner spoke with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term plan to keep the automaker solvent, a person familiar with the talks said. The talks followed a statement by the White House that it would consider using the Troubled Asset Relief Program to help GM and Chrysler LLC following the Senate’s rejection of an aid package the night before.

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

Read more...

Australian, N.Z. Dollars Advance on Outlook for Fed Rate Cut

By Candice Zachariahs

Dec. 15 (Bloomberg) -- The Australian and New Zealand dollars rose on speculation the Federal Reserve will cut interest rates at least half a percentage point tomorrow, increasing demand for higher-yielding assets.

The two currencies also extended last week’s gain as regional stocks climbed on optimism U.S. automakers will be rescued by the Bush administration, preventing bankruptcies that may deepen the global recession. Fed Chairman Ben S. Bernanke will lower the benchmark rate for the seventh time this year to 0.5 percent, according to a Bloomberg News survey of economists.

“Interest rates in the U.S. continue to fall and are weighing on the U.S. dollar,” said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group in Sydney. “If the U.S. weakness continues, the Aussie could reach 68 cents over the next few days,” he said referring to the currency by its nickname.

Australia’s currency advanced 0.4 percent to 66.73 U.S. cents as of 12:43 p.m. in Sydney, from 66.44 cents late last week in New York. The currency rose 0.3 percent to 60.67 yen. New Zealand’s dollar gained 0.6 percent to 54.98 U.S. cents and 0.1 percent to 49.96 yen.

The Fed will “likely say that interest rates will remain low for a long time, which has the potential to trigger a fall in the U.S. dollar,” John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney, wrote in a note to clients today. The Australian dollar “looks solid” between 64.90 and 65 cents, he said.

Rate Advantage

Benchmark rates are 4.25 percent in Australia and 5 percent in New Zealand, attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency-market moves will erase profits.

The Reserve Bank of Australia will tomorrow release minutes of its Dec. 2 board meeting, when it lowered its benchmark rate a greater-than-expected one percentage point and policy makers signaled they may slow the pace of the country’s most aggressive cycle of cuts since 1991.

Gains in the currencies may be limited after the Australian Bureau of Agricultural and Resource Economics said today commodity exports may be 10 percent less than previously forecast as growth slows due to the global financial crisis.

Commodity export earnings may be A$192 billion ($128 billion) for the year ending June 30, the bureau said, cutting a September projection of A$214 billion. Prices for steelmaking materials iron ore and coking coal, Australia’s top two export earners, are expected to fall in the year starting April 2009, the bureau said.

Stock Gains

The currencies also strengthened as regional equities advanced on optimism President George W. Bush may tap funds set aside for banks to provide short-term aid to the auto industry after a $14 billion bailout package was rejected by the Senate.

Bush said today he is “not quite ready” to announce his decision on a rescue plan. The president, traveling on Air Force One from Iraq to Afghanistan, told reporters “it won’t be a long process” because of the “fragility” of the industry

The Australian and New Zealand currencies advanced against the yen after Bank of Japan said an index of confidence among large manufacturers fell the most in 34 years. The Tankan index dropped to minus 24 from minus 3, the quarterly survey showed today. A negative number means pessimists outnumber optimists.

Australian government bonds declined. The yield on the benchmark 10-year note rose 18 basis points, or 0.18 percentage point, to 4.48 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slid 1.535, or A$15.35 per A$1,000 face amount, at 106.262.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.71 percent.

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

Read more...

Dollar Declines to 8-Week Low Versus Euro on Auto Bailout Costs

By Stanley White

Dec. 15 (Bloomberg) -- The dollar fell to an eight-week low versus the euro on speculation a U.S. government rescue for the country’s automakers will leave less money to protect the financial system.

The greenback approached the weakest level in 13 years against the yen and declined versus the British pound after U.S. President George W. Bush’s administration said it may use funds originally set aside for banks to prevent General Motors Corp. and Chrysler LLC from “collapsing.” The South Korean won rose on speculation an increase in currency swaps with Japan and China will ease a shortage of foreign exchange.

“There’s no meaningful obstacle to further declines in the dollar against the yen,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “Diverting government funds intended for the financial sector to carmakers may mean there’s simply less money to go around.”

The dollar fell to $1.3447 per euro as of 11:26 a.m. in Tokyo from $1.3369 on Dec. 12, after touching an eight-week low of $1.3462. The dollar slid to 90.88 yen from 91.21. It dropped to 88.53 yen on Dec. 12, the weakest level since August 1995. Against the British pound, the dollar declined to $1.5009 from $1.4944. The euro rose to 122.22 yen from 121.83. The dollar may fall to 90 per dollar today, Amikura said.

South Korea’s won rose 1.9 percent to 1,346.45 per dollar. South Korea expanded currency swap deals with China and Japan to $28 billion and $20 billion respectively on Dec. 12. The won has fallen 30 percent against the dollar this year, the worst performer among Asian currencies.

Auto Bailout

Bush told reporters today he’s not quite ready to announce his decision on automakers. His administration said on Dec. 12 it will consider using money from its $700 billion bank-bailout fund to provide short-term loans to GM and Chrysler after the U.S. Senate last week rejected a $14 billion bailout for the country’s carmakers. A bankruptcy filing by either company would worsen the longest recession since the early 1980s.

Citigroup Inc., Goldman Sachs Group Inc., BNP Paribas SA and Bank of America Corp. predict further weakness in the dollar after a four-month, 24 percent rally. Last week was the first time in almost a month that consensus estimates for the dollar against the euro through 2009 fell, according to the median forecast of 47 strategists surveyed by Bloomberg News.

The U.S. currency weakened 5.9 percent measured by the trade-weighted Dollar Index from a two-year high on Nov. 21 after strengthening between July and November as investors bought the greenback to flee riskier assets and repay dollar- denominated loans from lenders reining in credit. Since peaking on Nov. 21, the dollar fell against all 16 of the most-widely traded currencies, according to data compiled by Bloomberg.

Debt Sales

U.S. policy makers are flooding the world with an extra $8.5 trillion through 23 different plans designed to bail out the financial system and pump up the economy. The decline shows the increased supply of money may be overwhelming investors just as the government steps up debt sales, the trade and budget deficits grow and de-leveraging by investors slows.

“The dollar will go to new lows as the U.S. attacks its currency,” said John Taylor, chairman of New York-based FX Concepts Inc., which manages about $14.5 billion of currencies.

Futures traders increased their bets that the yen will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show.

Currency Futures

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop against the dollar -- so-called net longs -- was 43,259 on Dec. 9, compared with net longs of 42,903 a week earlier.

The dollar fell 19 percent against the yen this year, the most since 1987, as almost $990 billion of credit-market losses sparked a seizure in money markets.

The yen advanced 61 percent against the Australian dollar and 80 percent against the South African rand this year on speculation the global recession prompted investors to unwind carry trades, in which they get funds in a country with low borrowing costs and buy higher-yielding assets. Japan’s 0.3 percent target lending rate is the lowest among major economies.

Japan may intervene in the currency market for the first time in five years to slow the yen’s advance against the dollar and other currencies, Nikkei English News reported on Dec. 13, citing finance officials it didn’t identify.

Any move by the government would be unilateral, Nikkei said, citing a senior Finance Ministry official.

Unilateral Intervention

“While intervention is possible, any unilateral action wouldn’t be enough to stop the yen appreciating against the dollar,” said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan’s second-largest publicly traded lender. “People are more focused on the state of the U.S. economy and monetary policy there.”

The yen may advance to 90 per dollar today, he said.

Japan last intervened on its own when it sold a record 20.4 trillion yen ($224 billion) in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen rose as high as 103.42 per dollar. Central banks intervene when they buy or sell currencies to influence exchange rates.

The yen was little changed after the Bank of Japan said today its Tankan index of business sentiment plunged the most in 34 years. The Tankan index of confidence among large makers of cars and electronics slid to minus 24 from minus 3, the BOJ said. A negative number means pessimists outnumber optimists. Economists expected minus 23, according to a Bloomberg survey.

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

Read more...

Asia Commodities Day Ahead: Platinum Trades Near Par With Gold

Dec. 15 (Bloomberg) -- Platinum prices fell, trading almost on par with gold for the first time since 1996. Goldcorp Inc. Chief Executive Officer Kevin McArthur will retire and be replaced by Charles “Chuck” Jeannes, a vice president in charge of development. Steel Dynamics Inc. said it will post a fourth- quarter loss of 35 to 40 cents a share and cut its 2008 earnings forecast. Copper tumbled. U.S. farmers will plant 4.2 percent fewer acres with corn in 2009 and increase the area seeded with soybeans by 7.3 percent, Informa Economics forecast. Corn and wheat rose, and soybeans fell.

PRECIOUS METALS, GEMS

Platinum Falls, Trades Near Parity With Gold, as Demand Slumps

Platinum prices fell, trading almost on par with gold for the first time since 1996, on concern that the near-collapse of the U.S. auto industry will erode demand for the white metal used in pollution-control devices in cars. Platinum dropped $23.40, or 2.8 percent, to $822.10 an ounce in New York. Gold slipped $6.10, or 0.7 percent, to $820.50 an ounce. Silver declined 19.5 cents, or 1.9 percent, to $10.23 an ounce. Palladium tumbled $9.20, or 5 percent, to $175 an ounce.

Goldcorp Chief McArthur to Retire, Replaced by Jeannes

Goldcorp Inc., the world’s second-largest gold producer by market value, said Chief Executive Officer Kevin McArthur will retire and be replaced by Charles “Chuck” Jeannes, a vice president in charge of development.

STEEL, IRON ORE, COAL & URANIUM

Steel Dynamics Expects Fourth-Quarter Loss, Cuts 2008 Forecast

Steel Dynamics Inc., the third-largest U.S.-based steelmaker by market value, said it will post a fourth-quarter loss of 35 to 40 cents a share and lowered its 2008 earnings forecast because demand fell.

INDUSTRIAL METALS, MINING

Copper Prices Tumble Most in a Week After Auto Bailout Fails

Copper tumbled the most in a week after the U.S. Senate failed to pass a $14 billion bailout plan last night for the country’s automakers. Copper fell 8.35 cents, or 5.5 percent, to $1.4285 a pound in New York.

AGRICULTURAL COMMODITIES

Farmers to Switch Corn Acres to Soybeans, Informa Says

U.S. farmers will plant 4.2 percent fewer acres with corn in 2009 and increase the area seeded with soybeans by 7.3 percent on expectations of higher returns, Informa Economics forecast.

Corn Caps Record Week, Soybeans Drop on Shifts in U.S. Planting

Corn rose, capping a record weekly gain, and soybeans fell on speculation that U.S. farmers will plant less of the grain next year, favoring more profitable oilseeds. Corn gained 22 cents, or 6.3 percent, to $3.735 a bushel in Chicago. Soybeans fell 4.25 cents, or 0.5 percent, to $8.5625 a bushel.

Wheat Rebounds as U.S. Northwest Freeze May Hurt Winter Crops

Wheat rebounded on speculation that frigid weather in Washington, Idaho and Montana may damage winter crops. Wheat rose 5.5 cents, or 1.1 percent, to $5.13 a bushel in Chicago.

Cattle Drop on Signs U.S. Beef Demand to Dwindle; Hogs Decline

Cattle prices fell the most in a week on speculation that U.S. demand for beef is waning as more people lose their jobs and have less money to spend. Cattle dropped 1.025 cents, or 1.2 percent, to 82.8 cents a pound in Chicago. Feeder cattle slipped 0.875 cent to 86.45 cents a pound. Hogs declined 0.1 cent, or 0.2 percent, to 62.275 cents a pound.

CHEMICALS

H.B. Fuller’s Profit, Revenue Decline on Lower Demand

H.B. Fuller Co., the world’s third-largest adhesives maker, said profit and revenue fell in the fourth-quarter because the global financial crisis cut demand.

FORESTRY PRODUCTS

Papermakers Face ‘Bleak’ 2009 as Demand Plunges, Fitch Says

Paper and wood-pulp makers in North America face a “bleak” 2009 as slowing economic growth and the loss of demand to the Internet erode the industry’s financial health, according to Fitch Ratings.

SOFT COMMODITIES

Cotton Drops as Commodities Slump After Auto-Rescue Vote Fails

Cotton prices fell as commodities slumped after the U.S. Senate rejected a bailout plan for automakers, spurring concern a prolonged recession will damp demand for raw materials. Cotton dropped 1.03 cents, or 2.3 percent, to 43.43 cents a pound. Orange juice slipped 0.55 cent, or 0.7 percent, to 76.55 cents a pound.

Sugar Falls as Commodities, Equities Drop on Auto-Bailout Vote

Sugar slumped as commodities and equities dropped after the Senate failed to pass a bailout for U.S. automakers, threatening to deepen the recession. Raw sugar declined 0.25 cent, or 2.1 percent, to 11.64 cents a pound in New York.

Coffee Price Falls as Recession May Spur Commodity Sell-Off

Coffee prices fell for the first time this week in New York on concern investors may sell off commodity futures amid a deepening U.S. recession and threat of an auto-industry collapse. Arabica coffee dropped 0.55 cent, or 0.5 percent, to $1.1215 a pound in New York. In London, robusta coffee slid $3, or 0.2 percent, to $1,902 a metric ton.

Cocoa Price Falls on Bets Auto Job Losses Will Extend Recession

Cocoa fell in New York for the first time in three days on concern that an auto-industry collapse may deepen the U.S. recession and reduce consumption of commodities. Cocoa dropped $4, or 0.2 percent, to $2,396 a metric ton.

Read more...

Mitsui O.S.K., Shipping Lines Advance on Baltic Index

By Chris Cooper

Dec. 15 (Bloomberg) -- Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, rose to the highest in two months in Tokyo and led domestic shippers higher, as rates for carrying commodities had their biggest daily gain on record.

The shipping line advanced as much as 11 percent to 607 yen and traded at 597 yen as of 9:54 a.m. on the Tokyo Stock Exchange. Nippon Yusen K.K., Japan's biggest shipping line by sales, gained as much as 8.4 percent and Kawasaki Kisen Kaisha Ltd., the third-largest, increased as much as 9.3 percent.

The Baltic Dry Index, a measure of commodity-shipping rates, gained 7.5 percent on Dec. 12 and had its first weekly gain in four on rebounding demand for shipments of iron ore to make steel. China imported 32.5 million metric tons of iron ore last month, up from 30.6 million tons in October, according to customs data.

The index is down 94 percent from its all-time high in May after a credit freeze made it tougher to finance cargoes and the global economy slowed.

Hanjin Shipping Co., South Korea's largest sea-cargo carrier, gained as much as 12 percent to 20,800 won in Seoul trading.

To contact the reporter on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

Read more...

Australia’s 2008-2009 Commodity Production Forecast (Table)

By Daniel Petrie

Dec. 15 (Bloomberg) -- The Australian Bureau of Agricultural & Resource Economics in Canberra released its latest forecast for Australia’s commodity production.

The table below compares the bureau’s forecasts for production in the years ending June 30, 2008, and June 30, 2009, as well as the bureau’s September forecast for the year ending June 30, 2009.

All figures are in thousands of metric tons unless stated otherwise.

===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
Grains and oilseeds
Wheat                    13,039  19,969    53.1%       22,460    -11.1%
Barley                    5,920   6,361     7.5%        7,836    -18.8%
Oats                        843   1,184    40.5%        1,370    -13.6%
Canola                    1,065   1,325    24.4%        1,647    -19.6%
===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
-------------------------------------------------------------------------------
Industrial crops
Cotton lint                 133     281   111.9%          272      3.4%
Sugar cane               35,011  32,500    -7.2%       34,668     -6.3%
Sugar                     4,763   4,568    -4.1%        4,907     -6.9%
-------------------------------------------------------------------------------
Livestock slaughterings
Number slaughtered (’000 head)
Cattle and calves          8,799   8,700    -1.1%        8,700      0.0%
-------------------------------------------------------------------------------
Livestock products
Wool                        441     401    -8.9%          424     -5.3%
Milk (mln liters)         9,223   9,360     1.5%        9,375     -0.2%
Butter                      128     130     1.9%          130      0.1%
Cheese                      359     365     1.6%          365      0.0%
Casein                       10      11     5.0%           11     -3.2%
Skim milk powder            164     167     1.6%          167     -0.1%
===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
Wholemilk powder            142     144     1.4%          144     -0.2%
Buttermilk powder            13      16    26.8%           16      0.0%
-------------------------------------------------------------------------------
Energy
Coal (mln tons)
 Black, salable             325     340     4.7%          347     -1.9%
 Black, raw                 417     436     4.7%          431      1.2%
 Brown                       72      73     0.7%           73      0.0%
Petroleum
 Crude oil, condensate   25,537  26,998     5.7%       26,732      1.0%
  (mln liters)
 Petroleum products      44,086  44,360     0.6%       44,215      0.3%
  (mln liters)
 Natural gas                 44      49    11.5%           48      1.1%
  (bln cubic feet)
 LPG (mln liters)         3,971   4,252     7.1%        4,400     -3.4%
Uranium (tons)           10,151  10,589     4.3%       10,380      2.0%
===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
-------------------------------------------------------------------------------
Metalliferous minerals and metals
Aluminium
 Bauxite                     63      64     0.2%           63      1.6%
 Alumina                 19,359  20,312     4.9%       20,167      0.7%
 Aluminium (ingot metal)  1,964   1,960    -0.2%        1,966     -0.3%
Copper
 Mine production            863     924     7.2%        1,027    -10.0%
 Refined, primary           444     508    14.2%          526     -3.6%
Gold (tons)
 Mine production            227     224    -1.4%          236     -5.0%
 Refined, Australian        195     327    67.7%          375    -13.0%
 Refined, overseas          169     152   -10.0%          152      0.0%
Iron and steel
 Ore and concentrate        325     327     0.7%          387    -15.5%
 Iron and steel               8       8    -3.0%            8     -6.3%

===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
Lead
 Mine production            641     574   -10.5%          600     -4.3%
 Refined                    203     206     1.4%          200      2.9%
 Bullion                    152     164     8.4%          160      2.8%
Manganese
 Ore, metallurgical grad  5,436   4,433   -18.5%        5,340    -17.0%
Nickel
 Mine production            190     219    14.9%          236     -7.5%
 Total ore processed        223     257    15.3%          268     -4.4%
Silver (tons)
 Mine production          1,867   1,866     0.0%        1,975     -5.5%
 Refined                    605     663     9.5%          663      0.0%
Tin (tons)
 Mine production          1,631   1,802    10.5%        9,500    -81.0%
 Refined                      0      50      n/a           50      0.0%


===============================================================================
                           2007-   2008-     %   Previous 2009     %
                            2008    2009   change    forecast    change
===============================================================================
Zinc
 Mine production          1,571   1,425    -9.3%        1,491     -4.4%
 Refined                    507     500    -1.5%          499      0.2%
===============================================================================

Source: Australian Bureau of Agricultural and Resource Economics

To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net

Read more...

Gold May Rise for 2nd Week as Interest-Rate Cuts Weaken Dollar

By Pham-Duy Nguyen

Dec. 15 (Bloomberg) -- Gold may rise for the second straight week on speculation the Federal Reserve will cut its benchmark bank-lending rate, weakening the dollar and boosting the appeal of the precious metal.

Twenty-one of 27 traders, investors and analysts surveyed from Mumbai to Chicago on Dec. 11 and Dec. 12 advised buying gold, which rose 9.1 percent last week to $820.50 an ounce in New York. Three said to sell, and three were neutral.

Last week’s gain was the biggest since Sept. 19. Gold reached a record $1,033.90 in March as Fed rate cuts sent the dollar to an all-time low against the euro in July.

Gold’s gains last week surprised most analysts surveyed on Dec. 4 and Dec. 5. The survey has forecast prices accurately in 142 of 241 weeks, or 59 percent of the time.

Last week’s survey results: Bullish: 21 Bearish: 3 Neutral: 3

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

Read more...

Oil Rises as U.S. May Bail Out Automakers, OPEC May Cut Output

By Gavin Evans and Christian Schmollinger

Dec. 15 (Bloomberg) -- Crude oil rose in New York on speculation the Bush administration will rescue U.S. automakers and OPEC may make the biggest supply cut in a decade.

U.S. President George W. Bush may consider using funds for rescuing Wall Street banks to aid automakers. The Organization of Petroleum Exporting Countries, which pumps 42 percent of the world’s oil, will lower output targets by 7.3 percent at a Dec. 17 meeting, according to a Bloomberg survey.

“Oil futures are reacting to some of those government efforts and the expectations that the U.S. will bail out the automakers,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “OPEC is also building sufficient expectations that they will do something drastic so prices are also creeping up because of that.”

Crude oil for January delivery rose as much as $1.21, or 2.6 percent, to $47.49 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $47.44 at 10:28 a.m. in Singapore.

Carmaking “is a fairly key sector for the U.S. economy,” said Toby Hassall, research analyst with Commodity Warrants Australia Pty in Sydney. “I do expect a rescue package in some form to go through quite soon.”

Production, Confidence

The White House said it would consider using its $700 billion bank bailout fund to help General Motors Corp. and Chrysler LLC following the Senate’s rejection of an aid package.

A report today will probably show industrial production in the U.S., the world’s largest oil consumer, contracted 0.9 percent last month as automakers cut output, according to a survey of economists. Sentiment among the largest manufacturers in Japan, the third-largest oil user, fell the most in 34 years according to the nation’s quarterly Tankan survey today.

“The whole macro picture is key,” Commodity Warrants’ Hassall said.

China aims to increase its money supply 17 percent in 2009 and encourage lending to boost domestic consumption and buoy growth in the world’s fourth-largest economy.

Brent oil for January settlement rose as much as 84 cents, or 1.8 percent, to $47.25 a barrel on London’s ICE Futures Europe exchange. The contract expires tomorrow. The more actively traded February futures rose 1.7 percent to $49.92 at 10:29 a.m. Singapore time.

OPEC Output

New York futures are down 68 percent from a record of $147.27 a barrel and touched a four-year low of $40.50 Dec. 5.

Oil prices will fall further if OPEC nations don’t cut daily output by at least 1.5 million barrels at this week’s meeting, Iranian Oil Minister Gholamhossein Nozari said yesterday.

“There is fairly strong support” for oil around current levels, Commodity Warrants’ Hassall said. “OPEC is going to make a supply-side response quite soon” while government stimulus packages will also start being felt, he said.

The global slump may reduce daily oil use to 85.8 million barrels in 2008, the first decline since 1983, the International Energy Agency said Dec. 11. A forecast 0.5 percent increase in fuel use next year may be wiped out if the recession deepens, the Paris-based agency said.

Hedge-fund managers and other large speculators increased their net-long positions in New York crude-oil futures in the week ended Dec. 9, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 10,807 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 8,558 contracts, or 381 percent, from a week earlier.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Gavin Evans in Wellington at gavinevans@bloomberg.net

Read more...

Hong Kong Stocks Gain on China Support, U.S Auto Rescue Hopes

By Chua Kong Ho

Dec. 15 (Bloomberg) -- Hong Kong’s stocks rose, after China said it will increase its money supply next year to bolster growth and on speculation the U.S. will rescue its automakers.

Industrial & Commercial Bank of China Ltd., the nation’s largest bank, gained 2.1 percent. China Cosco Holdings Co., the world’s largest operator of iron-ore and coal ships, and China Shipping Development Co., the nation’s largest oil carrier, climbed more than 8 percent after rates for carrying commodities rose by a record.

The Hang Seng Index gained 534.54, or 3.6 percent, to 15,292.93 as of 10:03 a.m. in Hong Kong. All but one of the measure’s 42 constituents rose. The gauge tumbled 5.5 percent Dec. 12, the biggest decline since Nov. 6, on concern a global recession will deepen after the U.S. Senate failed to agree on an automaker bailout and China’s retail sales grew at the slowest pace in nine months.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, advanced 4.4 percent to 8,260.14.

The White House said it would consider using its $700 billion bank bailout fund to help General Motors Corp. and Chrysler LLC following the Senate’s rejection of an aid package.

China’s M2, the broadest measure of liquidity, including cash and all deposits, will increase 17 percent, the State Council said in a statement yesterday. The government also said it will suspend the issue of three-year central-bank notes and aims to increase lending by banks and other financial companies by 4 trillion yuan in 2009.

The Baltic Dry Index, a measure of commodity shipping rates, advanced for a fifth day, surging 7.5 percent on Dec. 12, the steepest gain on record. The gauge has slumped 91 percent this year as a global recession reduced demand for shipments of goods and commodities.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

Read more...

Japan Stocks Rise on U.S. Auto Rescue Hopes; Shippers Jump

By Masaki Kondo

Dec. 15 (Bloomberg) -- Japanese stocks rose as speculation the U.S. will prevent automakers from going bankrupt outweighed the biggest drop in domestic manufacturers’ confidence in 34 years.

Honda Motor Co., Japan’s second-largest carmaker, jumped 6.7 percent, while smaller rival Suzuki Motor Corp. advanced 8.6 percent. Mitsui O.S.K. Lines Ltd. led a gain by shipping companies after transport fees for commodities surged the most on record. Sony Corp., which gets a quarter of its sales from the U.S., gained 4 percent after the yen retreated from the strongest level in 13 years against the dollar.

The Nikkei 225 Stock Average climbed 353.18, or 4.3 percent, to 8,589.05 as of 9:48 a.m. in Tokyo, bouncing back from a 5.6 percent loss on Dec. 12. The broader Topix index rose 30.46, or 3.7 percent, to 843.83, with 90 percent of its members advancing.

“All the bad news has been more or less priced in,” Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion, said in an interview with Bloomberg Television. “What should be noted is that governments globally have prepared economic stimulus plans. I expect these measures to significantly alleviate the slowdown in economies.”

The Bush administration will consider using a bank-bailout fund to finance General Motors Corp. and Chrysler LLC, the White House said in a statement. GM Chief Executive Officer Rick Wagoner spoke with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term plan to keep the automaker solvent, a person familiar with the talks said.

An index that measures confidence among large makers of cars and electronics fell to minus 24 from minus 3, the Bank of Japan’s quarterly Tankan survey showed today. The median estimate of economists surveyed by Bloomberg was for a decline to minus 23. A negative number means pessimists outnumber optimists.

Friday Tumble

The Nikkei dived on Dec. 12, breaking a four-day winning streak, after the U.S. Senate rejected a $14 billion rescue plan for the automakers. Congress’s failure to agree on the plan sent the dollar as low as 88.53 against the Japanese currency on Dec. 12, its weakest level since August 1995.

Honda jumped 6.7 percent to 2,050 yen, while Suzuki, Japan’s second-largest minicar maker, climbed 8.6 percent to 1,194 yen. Market leader Toyota Motor Corp. added 4.2 percent to 2,875 yen.

Stronger Dollar

The yen weakened against the dollar to as much as 91.98 today, boosting the value of overseas sales of Japanese companies when converted back to local currency.

Sony, the world’s second-biggest maker of consumer electronics, rose 4 percent to 1,934 yen, while digital-camera maker Canon Inc. advanced 4.3 percent to 2,700 yen. Nintendo Co., the world’s biggest maker of handheld game players, climbed 3.6 percent to 34,200 yen in Osaka trading.

Mitsui O.S.K., Japan’s second-biggest shipping line, climbed 9.5 percent to 601 yen, while larger rival Nippon Yusen K.K. jumped 6.1 percent to 557 yen. Kawasaki Kisen Kaisha Ltd. gained 8.2 percent to 408 yen. A gauge of shipping companies rose the most among 33 industry groups on the Topix.

The Baltic Dry Index, a measure of shipping costs for commodities, soared 7.5 percent on Dec. 12, extending its advance to a fifth day. The benchmark is down 94 percent from its all-time high in May.

Nikkei futures expiring in March added 3.9 percent to 8,610 in Osaka and gained 4.2 percent to 8,605 in Singapore.

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

Read more...

Asian Stocks Advance as U.S. Automakers Move Close to Bailout

oBy Patrick Rial and Masaki Kondo

Dec. 15 (Bloomberg) -- Asian stocks rose on speculation U.S. automakers will be rescued by the Bush administration, preventing bankruptcies that threatened to deepen the global recession.

Toyota Motor Corp. advanced 3.4 percent in Tokyo and Posco, Asia’s third-largest steelmaker, jumped 4.3 percent in Seoul. Hanjin Shipping Co. gained 11 percent after rates for carrying commodities had their biggest daily gain on record.

“Though the economy won’t recover for some time, optimism about policy responses will shore up the stock market,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. “Investors’ appetite for risk will likely recover today after falling sharply on Friday.”

The MSCI Asia Pacific Index climbed 3.1 percent to 86.95 as of 9:57 a.m. in Tokyo. About fifty stocks gained for each that declined, and all industry groups advanced, led by material producers.

Japan’s Nikkei 225 Stock Average added 4.1 percent to 8,574.92, even as sentiment among Japan’s largest manufacturers fell the most in 34 years. South Korea’s Kospi index rose 4.3 percent.

The Standard & Poor’s 500 Index gained 0.7 percent, reversing a 2.6 percent drop, on Dec. 12 after the White House said it would consider using its $700 billion bank bailout fund to help General Motors Corp. and Chrysler LLC following the Senate’s rejection of an aid package. The failure of the bill’s passage sparked a 4.2 percent plunge on MSCI’s Asian index on Dec. 12 and sent the yen to a 13-year high against the dollar.

The Treasury also said it will work to prevent a failure of the automakers, while GM Chief Executive Officer Rick Wagoner spoke with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term plan to keep the automaker solvent, a person familiar with the talks said.

The MXAP Asia benchmark has rebounded 18 percent since falling to a five-year low on Oct. 27 amid confidence government measures to revive flagging growth will work. Shares trade at 12 times estimated earnings, a third cheaper than at the start of 2008.

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

Read more...

Madoff Fraud Ensnares Boston Philanthropist Shapiro, Globe Says

By Dan Hart

Dec. 14 (Bloomberg) -- Boston philanthropist Carl Shapiro’s charitable foundation lost at least $145 million to Bernard Madoff’s alleged Ponzi scheme that cost investors $50 billion, the Boston Globe reported, without citing its source.

Shapiro’s wealth had come from the sale of his Kay Windsor Inc. women’s clothing business to VF Corp., then Vanity Fair Corp., in 1971, the newspaper said. He had invested millions of dollars over the years with Bernard L. Madoff Securities, the newspaper said.

Shapiro got involved with Madoff’s investment firm through a son-in-law, Robert Jaffe, who worked for Cohmad Securities Corp., the newspaper said. Jaffe wasn’t able to comment to the Globe, his wife told the newspaper.

Madoff’s attorney, Daniel Horwitz, told the Globe that they were “cooperating fully” with the government investigations. The Shapiros declined to be interviewed by the newspaper.

To contact the reporter on this story: Dan Hart in Washington at dahart@bloomberg.net.

Read more...