The Daily Forecaster: AUDUSD

Daily Forex Technicals | Written by FX-Forecaster | Dec 18 08 03:47 GMT |

Price: 0.7041 Bias: The short term is mixed but I still see the larger risk as higher Daily Bullish Gains were seen as expected to the 0.7038 target but also above to 0.7078. This does tend to argue for additional gains but the wave structure is not too clear. For this to develop directly we should ideally see the 0.6980-10 area support and also a break above 0.7082. If seen it should spur price higher to 0.7141 at least and then 0.7192. Take care in this broad 0.7141-92 area as a pullback is possible before it can rise to the next target at 0.7246. Medium Term Bullish 18th December: The 0.7038 target has been achieved and more and really this should now mean that we see a move to 0.7246 at least. Wait for break of 0.7082 first. Much larger resistance is at 0.7466. Daily Bearish Price broke above 0.7038 briefly and we are currently seeing a pullback. While not confirmed we should note that the hourly chart is showing a potential bearish divergence and this may lengthen the correction. For us to see any downward progress we shall require a break below 0.6980-10 which should then imply losses to 0.6920 at least. Below there would look for a deeper pullback to 0.6748-73 but should support. Next support is then found at 0.6680. Medium Term Bearish 18th December: I feel the greater risk is still directly higher but there is a minor chance that we see a correction to the 0.6748-73 area - max 0.6680. Only below this lower support suggests a total reversal. Resistance 0.7312 0.7204-46 0.7192 0.7141 0.7110 0.7082 Support 0.7010 0.6980 0.6962 0.6920 0.6860-82 0.6748-73 ELLIOTT WAVE COMMENTS 4-Hour Momentum Trailing Stop Bullish trend RSI Overbought Long Term Cycles and Momentum After much stronger losses than expected I feel the time has come for a correction higher at least… This should last into February/March at the very least. Cycles and Momentum Cycles Momentum Daily Higher Overbought Weekly Higher Oversold Monthly Lower Oversold 18th December: Yesterday's direct gains suggest we are in Wave -c- of Wave -iii- and a 176.4% projection in Wave -iii- lies at 0.7038 while a 176.4% projection in Wave -c- also lies at the same level. Thus I feel this should be tested at a minimum but then cause a correction lower. The wave equality projection in the larger Wave -c- lies at 0.7081 and the 138.2% projection at 0.7466. The problem I have here is that the lower level seems to close to 0.7038 while the 0.7466 target is too high for a Wave -v- to achieve. Thus I feel we must look at this with care. For now a cap at 0.7038 will provide a correction lower and only breach maintains a more aggressive rally to 0.7246 at least which is a the 176.4% projection in Wave -iii- . 18th December: The break above the 138.2% projection in Wave –iii- at 0.7038 does suggest that we should proceed to the next projection being 176.4% at 0.7246. The only concern I have is whether we’re seeing an impulsive move or a series of ABC moves in a correction. This latter case would allow a dip to the 0.6680-0.6748 area first. Ian Copsey FX-Forecaster Legal disclaimer and risk disclosure The Daily Forecaster is an analytical tool only and is not intended to replace individual research. The service is offered as an opinion on the current state of the market with anticipated trading signals but not recommendations. The information provided in The Daily Forecaster should not be relied on as a substitute for extensive independent research before making your trading/investment decisions. Ian Copsey is merely providing this service for your general information. No representation is being made that any view or opinion will guarantee profits or not result in losses from trading. In addition any projections or views of the market provided may not prove to be accurate. The opinions are subject to change without notice. Opinions or views expressed in The Daily Forecaster are not meant to be either investment advice or a solicitation or recommendation to establish market positions. Ian Copsey will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this service. The information contained is private and may not be distributed or shared.

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Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Dec 18 08 03:17 GMT |

EURUSD Outlook As I had expected, yesterday the EURUSD continued it's bullish momentum. On my daily chart with the Fibonacci retracement projections, we can see how the current strong bullish momentum can easily break all resistance levels. The pair is now chasing 1.4609 as the next bullish target. CCI just cross the 100 line down on hourly chart suggesting a potential minor downside pressures testing 1.4350 and 1.4280 support levels. EURUSD Daily Supports and Resistances: S1= 1.4127 S2= 1.3853 S3= 1.3698 R1= 1.4556 R2= 1.4711 R3= 1.4985 GBPUSD Outlook Yesterday the GBPUSD further bullish momentum was rejected. The pair attempted to push higher, topped at 1.5722 but whipsawed to the downside, bottomed at 1.5247 and closed higher at 1.5514. The bias should remains very bullish. On 4h chart, 1.5506 resistance seem to be an important level at this phase. A consistent movement above that level would trigger further bullish momentum. A cross of the CCI 100 line up on 4h chart should support the bullish view and could provide us with good long trade opportunities. GBPUSD Daily Supports and Resistances: S1= 1.5266 S2= 1.5019 S3= 1.4791 R1= 1.5741 R2= 1.5969 R3= 1.6216 USDJPY Outlook After break the double bottom formation on hourly chart, yesterday the USDJPY continued it's bearish momentum. The pair bottomed at 87.13 and closed at 87.33. The bias remains very bearish targeting 86.15 area. CCI just cross -100 line up on hourly chart suggesting a potential minor upside pressures testing 88.11 and 88.60 resistance levels. USDJPY Daily Supports and Resistances: S1= 86.57 S2= 85.81 S3= 84.49 R1= 88.65 R2= 89.97 R3= 90.73 USDCHF Outlook The USDCHF continued it's bearish momentum yesterday. The pair hit my bearish target at 1.0898 even further, bottomed at 1.0712. On daily chart, looks like we have a double bottom formation at 1.0690 level, the huge downside pressures we have seen lately could break the formation easily. Once the formation break to the downside, the pair will strongly gain further bearish momentum targeting 1.0016 area. CCI just cross the -100 line up on hourly chart suggesting a minor upside pressures testing 1.0816 and 1.0898 resistance levels. USDCHF Daily Supports and Resistances: S1= 1.0550 S2= 1.0365 S3= 1.0019 R1= 1.1081 R2= 1.1427 R3= 1.1612 FX Instructor LLC www.fxinstructor.com The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

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N.Z. Sees Wider Budget Deficit as Recession Deepens

By Tracy Withers

Dec. 18 (Bloomberg) -- The New Zealand government’s budget deficit will be wider than it previously forecast as the economy’s longest recession in 18 years erodes tax revenue and increases welfare payments.

The cash deficit will be NZ$6.63 billion ($3.6 billion) in the year ending June 30, 2009, up from NZ$5.9 billion predicted in October, the government said in its economic and fiscal update released in Wellington today. The shortfall will increase to NZ$11.38 billion by the 2013 fiscal year.

Prime Minister John Key, who won power in a Nov. 8 election, will cut income taxes in April to kick-start consumer spending and steer the economy out of a recession that began in the first quarter of 2008. New Zealand’s Treasury said today there’s a risk the economy will not begin expanding until 2010 as exports of milk, timber and wool subside and unemployment climbs.

“The fiscal position is deteriorating but it’s not that bad relative to what we’re seeing around the world,” said Stephen Toplis, head of research at Bank of New Zealand Ltd. in Wellington. “At least the fiscal stimulus is going toward boosting activity rather than into a black hole to bail out banks.”

The U.S. posted a record $401.6 billion deficit for the first two months of fiscal 2009, which began Oct. 1, as the government purchased stakes in banks. Britain’s 37 billion-pound shortfall ($57 billion) in the first seven months of the fiscal year starting April was the largest since records began in 1993.

Government Stimulus

Stimulus from tax cuts will total about NZ$9 billion, or 5 percent of gross domestic product, over 2009 and 2010, Finance Minister Bill English said. The government is bringing forward capital-spending plans and will increase its allowance for new projects in next year’s budget to NZ$1.45 billion from NZ$900 million.

“We can’t roll back this recession but we can cushion people from the worst effects of it,” English said in Wellington. “We are determined to put more money into the economy.”

New Zealand’s dollar traded at 59.29 U.S. cents at 3 p.m. in Wellington from 59.24 cents before the budget update was released. The three-year government bond yield was unchanged at 4.57 percent. The NZX 50 index fell 0.1 percent to 2,693.07.

The economy will probably grow 0.3 percent in the year ending March 31 and 0.8 percent in the 12 months through March 2010, the government forecasts. Were the global economy to slow more sharply than expected, New Zealand’s economy would contract in both years and the fiscal deficits would be wider, the Treasury said in its so-called downside scenario.

Worst Case

“The economy will probably look more like the Treasury’s low-case scenario,” BNZ’s Toplis said. “Treasury has been trapped by the rapid movement in global economic conditions. All the risks to their growth, inflation and fiscal profiles are to the downside.”

New Zealand’s fiscal 2009 deficit is equivalent to 3.7 percent of GDP and the first shortfall since 2000. The surplus was NZ$2.06 billion in the year to June 30.

To fund the deficit, the government will boost its bond sales to NZ$4.5 billion in fiscal 2009 from the NZ$4 billion announced in October. The government estimates the bond-sales program will rise to NZ$7.5 billion in the year ending June 2010.

Central Bank Governor Alan Bollard has cut interest rates 3.25 percentage points since July to try and revive an economy that contracted in each of the first two quarters of 2008.

“Despite the supportive nature of fiscal policy, the Reserve Bank has considerably more work to do in 2009,” said Su-Lin Ong, a senior economist at RBC Capital Markets in Sydney. The cash rate will be cut to 3.5 percent by the second quarter, with further reductions likely, she said.

Rising Unemployment

The jobless rate will increase to 4.7 percent by March and 6.5 percent by mid-2010, the government forecast. Unemployment rose to a five-year high of 4.2 percent last quarter.

Air New Zealand Ltd., the nation’s largest airline, plans to fire 200 workers, half of whom are long-haul cabin crew. Griffin’s Foods Ltd., New Zealand’s biggest maker of cookies, this week closed a plant in Wellington at a cost of 228 jobs.

Tax revenue will be about NZ$2.5 billion a year lower over the next three years, according to the Treasury forecasts. The government’s gross debt will rise to 33.1 percent of GDP by 2013 from 19.2 percent in the current year.

“The forecasts and projections of debt are outside the range that the government considers prudent,” English said. “The government will have to take action to bring debt levels back under control.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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Philippines May Cut Interest Rate for First Time in 11 Months

By Francisco Alcuaz Jr. and Clarissa Batino

Dec. 18 (Bloomberg) -- The Philippine central bank may cut its benchmark interest rate for the first time since January to boost economic growth amid a global recession.

Bangko Sentral ng Pilipinas will reduce the rate it pays banks for overnight deposits to 5.75 percent from 6 percent today, according to six of 13 economists in a Bloomberg News survey. Four predict the bank will cut the benchmark to 5.5 percent, one expects a reduction to 5.25 percent, and two expect the rate to be left unchanged.

The central bank has refrained from lowering borrowing costs even as inflation began to slow in September, on concern the peso’s drop to a two-year low last month may stoke prices anew by making imports more expensive. The currency has recovered more than 5 percent since then, giving the Philippines room to join the U.S. in cutting interest rates this week.

“Now is a good time to cut rates while the peso is strong,” said Rafael Algarra, treasurer at Security Banking Corp. in Manila. “A 25 basis-point cut sends a signal to the market, which needs to know that the cycle has started.”

The peso has gained as the 8 million Filipinos overseas sent more money home for the year-end holidays. Remittances, which amount to about a tenth of the $144 billion economy, peaked in December in four of the last five years.

Policy makers from the U.K. to India have cut interest rates in recent months as a global credit crunch pushed the U.S., Europe and Japan into a recession, and slowing demand caused commodity prices to fall from records reached earlier this year.

Eight-Year Low

The U.S. Federal Reserve cut the country’s main interest rate to as low as zero for the first time and said it would “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”

The Philippine government says economic growth may dwindle to as little as 3.7 percent next year, the slowest pace in eight years. Inflation slowed to 9.9 percent last month from a 16-year high of 12.5 percent in August after rice and oil prices fell.

“Given the space offered to us by lower commodity prices, better inflation and outlook, an easing bias defines our direction in the future,” the central bank’s Deputy Governor Diwa Guinigundo said this week. Still, the bank “can’t be indifferent” to the inflationary risks of “excessive” easing and a weaker peso, he said.

The peso weakened to 50.19 a dollar on Nov. 21 as the global recession and financial crunch prompted investors to sell emerging-market assets for safer assets including U.S. Treasuries. It’s headed for its first decline in four years and its biggest drop since 2000.

The central bank raised its key interest rate by 1 percentage point in three successive meetings from June to August and held it steady at the following two meetings. It holds its last rate-setting meeting for 2008 today and is expected to announce the decision after 4 p.m.

Table of forecasts:
--------------------------------------------
Policy Meeting           Dec.   Jan.   Mar.
Dates                      18     29      5
--------------------------------------------
Median                  5.75%  5.38%  5.00%
% forecasts at Median     46%     0%    50%
High                    6.00%  5.75%  5.75%
Low                     5.25%  4.75%  4.25%
Number of Estimates        13      6      6
--------------------------------------------
Action Economics        5.75%  5.50%  5.00%
ATR-Kim Eng Capital     5.75%  5.25%  5.00%
BDO Unibank             6.00%  5.75%  5.75%
Capital Economics       5.50%     --     --
Citi                    6.00%     --     --
Credit Suisse           5.50%     --     --
DBS Group               5.75%  5.50%  5.25%
HSBC                    5.75%     --     --
Ideaglobal              5.50%     --     --
Nomura International    5.75%     --     --
Royal Bank of Scotland  5.75%     --     --
Standard Chartered      5.50%  5.25%  5.00%
Westpac Banking         5.25%  4.75%  4.25%
--------------------------------------------

To contact the reporters on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.

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World Confidence Drops as Slump Deepens, Bloomberg Survey Shows

By Brian Swint

Dec. 18 (Bloomberg) -- Confidence in the world economy fell in December as a recession spread beyond the U.S. and growth weakened in China and Latin America, a survey of Bloomberg users on six continents showed.

The Bloomberg Professional Global Confidence Index slipped to 6.1 from 6.6 in November. A reading below 50 means pessimists outnumber optimists. The index, which is a year old, reached an all-time low of 4 in October.

“Confidence is still very shaky,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore, who took part in the survey. “Some countries are already in recession and 2009 will be even more challenging.

Shrinking economies in the U.S., Europe and Japan are forcing policy makers to push interest rates toward zero and try to resuscitate consumer and business spending by buying bonds directly and guaranteeing loans. In China and Brazil, a collapse in exports and commodity prices is undermining economies once considered a bulwark against a global downturn.

The U.S. Federal Reserve yesterday cut the main U.S. interest rate to between zero and 0.25 percent and said it “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.”

A measure of confidence in the U.S. increased to 7 from 6.9, the survey showed. Sentiment worsened in most other surveyed economies, with the index for Japan halving to 3.9 from 8. The gauge for Western Europe fell to 6.5 from 9.2 and the reading for the U.K. slipped to 4.1 from 4.8.

‘Bad News’

The survey of 2,991 Bloomberg users in 10 countries was conducted between Dec. 8 and Dec. 12. Since the November survey, U.S. jobless claims surged to a 26-year high, recessions were confirmed in Japan and the euro region, and Chinese exports fell for the first time in seven years.

“It’s bad news on top of bad news,” said Lindsey Piegza, an economist at FTN Financial in New York. “People are wondering who’s going to fail next, who’s going to lie to us, and there’s just a lot of mistrust and skepticism. Confidence in the banking and financial system has been eroded.”

The global crisis has cost banks almost $1 trillion so far in writedowns and losses. Citigroup Inc. announced plans to eliminate 52,000 jobs and accepted a $45 billion bailout from the U.S. government. Bernard Madoff was arrested last week for allegedly defrauding investors of $50 billion in a Ponzi scheme.

The International Monetary Fund on Nov. 6 forecast that global growth will slow to 2.2 percent in 2009 from 3.7 percent this year.

Emerging Markets Hit

“Economies previously regarded as doing well have taken a dive,” said Dominic Bryant, an economist at BNP Paribas SA in London and a regular participant in the survey. “It’s going to get very bad before it gets better.”

The Bloomberg confidence index for Brazil, where economic growth accelerated in the third quarter, slipped to 16.6 from 30.2.

“People are scared,” said Roberto Padovani, a senior strategist at Banco WestLB do Brazil SA in Sao Paulo who took part in this month’s survey. “The dive in the U.S. is much bigger than expected and good fundamentals in Brazil and China aren’t enough to offset pressure in the other direction.”

Bloomberg users in all surveyed countries expect short-term and central bank interest rates to fall further, the survey showed. The U.K. has already cut borrowing costs to the lowest since 1951 and the European Central Bank last month cut its benchmark rate the most in its 10-year history.

Views were almost evenly divided on whether the U.S. dollar will rise or fall in the next six months against the world’s most active currencies, with the index at 50.2 compared with 60 in November. The majority of users in the U.K. expect the pound to depreciate further.

U.K. unemployment rose at the fastest pace since 1991 in November, the country’s statistics office said today.

“We are in the weakest spot,” said Aurelio Maccario, chief euro-area economist at UniCredit SpA in Milan and a participant in the survey. “We are bound to experience the current weakness until after the first quarter of 2009.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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Xstrata, Japan Utilities Agree Coal Price Cut, Citigroup Says

By Angela Macdonald-Smith

Dec. 18 (Bloomberg) -- Xstrata Plc, the world’s biggest exporter of coal burned in power plants, agreed annual calendar- year contracts for the fuel with Japanese utilities at lower prices, Citigroup Inc. said.

Contracts for coal to be delivered in the year starting Jan. 1, 2009, have been settled at $80 a metric ton, lower than existing contracts of $125 a ton for the Japanese financial year that started April 1, Citigroup said in a Dec. 17 report. The price is also below Citigroup’s forecast of $100 for contracts that start next Japanese financial year, the firm said.

The weekly index for thermal coal prices at Australia’s Newcastle, a benchmark for Asia, has dropped 60 percent since a July 4 record amid declining demand and lower crude-oil prices and was $78.25 a ton in the week ended Dec. 12, according to the globalCOAL NEWC Index. Most coal imported into Japan is based on contracts for the year starting April 1, rather than Jan. 1.

The calendar year contract settlement, which are with utilities including Tokyo Electric Power Co., Asia’s biggest utility, “is broadly in line with current spot prices,” Citigroup said in the report. “However, the volumes sold on mid- year contracts are typically smaller than the Japanese financial year-based contracts.”

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

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Dec 18 08 01:31 GMT |

News And Views The market's reassessment of individual currencies continued, the USD clearly in the dog-box for now, falling 2% (DXY index). Sentiment towards risk improved, the VIX (US equity volatility index) at a 6-week low. Major global equity indices were approximately unchanged. NYMEX oil fell to $42 despite OPEC agreeing to cut production. Norway topped the 'largest rate cut' list, with 175bp. After yesterday's exceptional intraday rally to 0.58, the NZD corrected only marginally to 0.5770 during Europe, and followed EUR higher to around 0.5950 during the US session. Today's half-year fiscal statement will tell us about the size of future deficits, and therefore, funding requirements. The AUD found it difficult to establish higher ground, sticky around 0.70. As a consequence, the AUD/NZD cross continued to give back the month's gains, and touched 1.18. EUR rested between 1.40 and 1.42 until late Europe, when it jumped to almost 1.45 on no particular news. GBP was unloved after BoE's pessimistic comments and record-weak jobless and sales data, falling from 1.57 area to 1.5250, partially recovering to 1.55. JPY marches on, flirting with 87 (vs USD) overnight, but, ever cautious of the BoJ, back at 88. No US data to report. Euroland CPI confirmed at 2.1% yr in Nov, in line with the flash estimate. The core CPI was steady at 1.9% yr. UK jobs and retail data very weak. The number of unemployment benefit recipients jumped 76k in Nov, the biggest one month gain since the early 1990s recession. In the three months to Oct, employment fell 115k, its second consecutive quarter of decline. The household labour force survey jobless rate jumped from 5.8% to 6.0%, its highest yet this decade. In Dec, the Confederation of British Industry reported its weakest ever sales, with a net balance of -55%, down from -46% in Nov. Bank of England considered bigger rate cut on Dec 4. The 100bp rate cut to 2.0% was unanimous, but there was discussion about possibly cutting by an even larger amount - which suggests that rates will be cut further at the January meeting. Norway cuts rates 175bp to 3.0%. Yet another central bank surprising us with aggressive rate cuts. Norges signalled more cuts to come next year. Outlook NZD strength should continue until early January. The latest rally from 0.54 (10 December) looks stretched here, and we would expect a correction today, taking it towards the bottom of a 0.58 - 0.5970 daily range. Date Country Release Last Forecast 18 Dec NZ Half Year Economic and Fiscal Update Dec NBNZ Business Confidence –43.0% Aus Q4 WBC-ACCI Surv of Indust Trends 50.8 – Dec RBA Bulletin US Initial Jobless Claims w/e 13/12 573k 590k Dec Philadelphia Fed Index –39.3 –45.0 Nov Leading Index –0.8% –0.8% Fedspeak Jpn BoJ Policy Meeting Nov Department Store Sales –6.8% – Eur Oct Trade Balance €bn sa –5.7 –5.5 Ger Dec IFO Business Climate Index 85.8 83 UK Nov Retail Sales –0.1% –1.0% Nov Public Finances £bn –4.9 11 Nov Money Supply M4 %yr 15.30% 16.80% Can Nov Leading Index –0.4% –0.8% Oct Retail Sales 1.10% –1.5% 19 Dec NZ Nov External Migration ann. 4,300 4,300 Nov Credit Card Transactions –1.1% – Jpn Oct All Industries Index %mth –0.1% –0.8% BoJ Target Announcement 0.30% 0.30% Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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China to Lower Fuel-Oil Import Tax to 1% Next Year

By Winnie Zhu

Dec. 18 (Bloomberg) -- China, the world's second-biggest energy consumer after the U.S., will cut its fuel-oil import tax to 1 percent next year, potentially reducing costs for users based in the southern manufacturing hub of Guangdong.

The Ministry of Finance announced the tariff change in a statement on its Web site dated yesterday, without elaborating. A 3 percent tax is currently imposed on fuel-oil imports.

China halved the import tax in July last year to the present rate to lower costs for power generators and so-called ``teapot'' refineries facing shrinking profits. The country's small, privately run refineries, mostly in Guangdong province, use fuel oil as a raw material to make gasoline and diesel.

``We still cannot decide on the business strategy for next year, as the import-tariff cut only saves us about 50 yuan ($7.32) a metric ton while a potential increase in the consumption tax may boost purchase costs by about 800 yuan a ton,'' Bizer Tang, chief analyst at Guangzhou Twinace Petroleum & Chemical Corp, said by telephone from Guangzhou, capital of Guangdong.

China announced earlier this month a plan to raise gasoline and diesel consumption taxes by as much as ninefold from 2009 to conserve energy use. Taxes on other oil products will rise too, the government said on Dec. 5, without providing more details.

``We expect the consumption tax for fuel oil to rise to 0.8 yuan a liter from 0.1 yuan now,'' said Tang of Guangzhou Twinace Petroleum, the nation's largest private fuel-oil importer.

China's fuel-oil imports fell 15 percent to 22.5 million tons in 2007 on increased costs.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net;

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Caltex Australia May Have Net Loss on Oil Price Drop

By Angela Macdonald-Smith

Dec. 18 (Bloomberg) -- Caltex Australia Ltd., the nation’s biggest oil refiner, may record a full-year net loss because slumping crude oil prices have cut the value of its stockpiles.

The result may range between a loss of A$40 million ($28 million) to net income of A$10 million in the year ending Dec. 31, Sydney-based Caltex said today in a statement. The forecast compares with a Nov. 3 estimate for net income of as much as A$185 million and with last year’s profit of A$646 million.

Crude oil prices traded in New York have dropped by more than 70 percent from a record $147.27 a barrel on July 11 as weakening economic growth curbed fuel demand. Caltex’s net income takes into account the effect of changes in oil prices on the value of its inventories. The company raised its forecast for operating profit.

“Subsequent to 3 November, the crude-oil price has been extremely volatile, falling from an average of $80 per barrel in October to approximately $40 per barrel today,” Caltex said in the statement. The forecast range may be changed again should oil prices, foreign exchange rates and refining margins “materially” change by the end of the year, it said.

Caltex Australia, half-owned by Chevron Corp., fell as much as 2.4 percent to A$6.79 in Sydney at 10:03 a.m. local time.

Full-year operating profit is now expected to be between A$135 million and A$155 million, up from a Nov. 3 forecast of A$115 million to A$145 million, Caltex Australia said. That’s down from A$444 million last year.

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

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Australian Dollar May Surge 12% in 2009 on RBA Policy, NAB Says

By Candice Zachariahs

Dec. 18 (Bloomberg) -- Australia’s dollar may advance 12 percent against the U.S. currency next year as the central bank stops cutting interest rates and global economic growth rebounds, National Australia Bank Ltd. said.

The so-called Aussie in 2009 may recover to 79 U.S. cents, jump 19 percent versus the yen and gain 13 percent against the euro, Sydney-based John Kyriakopoulos, head of currency strategy at the nation’s biggest lender by assets, wrote in a note dated yesterday. His forecast for the Aussie versus the U.S. dollar was the most bullish of 42 firms surveyed by Bloomberg News.

“There are good reasons to believe that the Australian dollar hit a cyclical trough of 60 U.S. cents in October,” Kyriakopoulos wrote. The currency will “outperform but not until China sentiment bottoms.”

Investors should buy the Aussie below 70 cents, targeting 79 cents, and exit if it weakens to 67.20 cents, National Australia Bank said. It traded at 70.56 cents at 1:02 p.m. in Sydney and has lost 20 percent this year versus the greenback.

National Australia Bank also recommends buying the local dollar when it is below 60 yen as the Aussie may rise to 73 yen by end 2009. The stop-loss on the trade is 58.20 yen, Kyriakopoulos said. The Australian dollar traded at 61.53 yen after having dropped 37 percent this year.

Australia’s dollar may advance toward 55 euro cents by the end of next year and should be bought below 50 euro cents, the bank said. Traders should sell the Aussie if it falls to 48.50 euro cents. It traded at 48.89 euro cents from 49.21 yesterday.

Growth, Interest Rates

The Australian dollar has dropped this year as the collapse of Lehman Brothers Holdings Inc. in September caused credit markets to collapse and pushed the world’s biggest economies into recession. The World Bank said Dec. 9 that international trade will shrink in 2009 for the first time in 25 years as global growth slows and commodity prices slide.

Demand for commodities influence the Aussie since raw materials account for 60 percent of Australia’s exports.

Commodity prices will recover in 2009 on the back of “a massive spending boost and rapid interest-rate cuts” in China, wrote Kyriakopoulos. The Australian dollar will “outperform” once expectation of a slowdown in China bottom, he wrote.

The Reserve Bank of Australia, which has lowered interest rates 3 percentage points since September, will end its most aggressive rate-cutting cycle since 1991 in the March quarter, according to National Australia Bank. “Historically, the Australian dollar has troughed once the RBA has finished cutting interest rates,” wrote Kyriakopoulos.

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

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Australian, New Zealand Dollars Gain on Interest-Rate Advantage

By Candice Zachariahs

Dec. 18 (Bloomberg) -- The Australian and New Zealand dollars gained for a fourth day against the U.S. currency on speculation investors sought higher-yielding assets after the Federal Reserve cut interest rates to as low as zero this week.

The currencies rose for a second day versus the yen as Japanese Finance Minister Shoichi Nakagawa said his government is ready to take action in the market “if needed,” sending the yen down from near a 13-year high against the U.S. dollar. The difference in yield between 10-year Australian and U.S. government debt widened to the most since September while the spread in New Zealand was the biggest since April.

“Even with sharp falls in interest rates in Australia and New Zealand, both countries still enjoy positive rate differentials compared to the U.S.,” said Mike Symonds, head of currency trading at Bank of New Zealand Ltd. in Wellington. “The U.S. dollar is markedly weaker again and that’s helped support currencies like the Aussie and kiwi.”

Australia’s currency advanced 1.4 percent to 70.48 U.S. cents as of 1:30 p.m. in Sydney from 69.54 cents late in Asia yesterday. It touched 70.79, the highest since Oct. 15. The currency rose 0.6 percent to 61.85 yen.

New Zealand’s dollar gained 2.1 percent to 59.35 U.S. cents from 58.18 in Asia yesterday. It touched 59.57 U.S. cents, the highest since Nov. 11 and bought 52.03 yen.

Annual Losses

The Australian dollar dropped 20 percent against the U.S. dollar in 2008 and 37 percent versus the yen as slumping commodities and a global recession prompted investors to pare holdings of the nation’s assets. New Zealand’s currency declined 23 percent versus its U.S. counterpart and 40 percent against the yen.

Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.3 percent in Japan and as low as zero percent in the U.S.

The Fed lowered its target rate yesterday to a range of zero to 0.25 percent, from 1 percent, and reiterated plans to purchase agency debt and mortgage-backed securities.

The Reserve Bank of Australia has reduced borrowing costs by three percentage points since early September and said monetary policy is at an “expansionary setting” in the minutes to its last meeting released Dec. 16.

National Bank of Australia Ltd., the nation’s biggest bank by assets, raised its forecasts for the Australian dollar and recommended investors buy the currency as it may strengthen against the greenback, yen and euro.

Aussie Outlook

The Aussie, as it’s called, will gain to 79 U.S. cents, 73 yen and 55 euro cents by the end of 2009, wrote Sydney-based John Kyriakopoulos, head of currency strategy at National Australia Bank, in a research note dated Dec. 17. Australia’s dollar bought 48.91 euro cents from 49.21 yesterday.

The Reserve Bank of Australia bought A$134 million ($95 million) of its own currency in November, the second straight month of net purchases, according to the central bank’s monthly bulletin today.

The interventions weren’t “designed to defend any particular level,” the RBA said last month after purchasing A$3.15 billion in October, the biggest amount on record. The central bank hasn’t been a net buyer of the Australian dollar in the market since 2001, according to RBA data.

In New Zealand, the government said its budget deficit will be wider than previously forecast as the economy’s longest recession in 18 years erodes tax revenue and increases welfare payments. The cash deficit will be NZ$6.63 billion ($3.6 billion) in the year ending June 30, 2009, up from NZ$5.9 billion predicted in October, the government said in its economic and fiscal update released in Wellington today. The shortfall will increase to NZ$11.38 billion by the 2013 fiscal year.

Australian government bonds rose for a third day with the yield on the 10-year note falling four basis points to 4.10 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.339, or A$3.39 per A$1,000 face amount, to 109.539.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 4.65 percent.

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

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Yen Declines as Nakagawa Says Japan May Take Currency Action

By Stanley White

Dec. 18 (Bloomberg) -- The yen fell from near a 13-year high against the dollar after Japanese Finance Minister Shoichi Nakagawa signaled the nation is ready to sell the currency.

The yen also declined against the euro after Nakagawa told reporters that “we will take necessary steps if needed” to limit the currency’s advance and protect the overseas earnings of Japanese exporters. The dollar fell to an 11-week low against the euro on speculation the Federal Reserve’s near-zero interest rate policy will reduce the appeal of U.S. assets.

“We are at such low levels now that yen intervention becomes a possibility, and that’s making some people nervous,” said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. in Tokyo.

Japan’s currency fell to 87.77 per dollar as of 11:31 a.m. in Tokyo from 87.24 yen yesterday in New York, when it reached 87.14, the highest level since July 1995. It declined to 126.41 per euro from 125.80 yesterday. The dollar was at $1.4418 per euro from $1.4419 after reaching an 11-week low of $1.4456. The yen may decline to 88 per dollar today, Matsumoto said.

Japan may intervene in foreign-exchange markets as the yen’s recent gains are abnormal, Chief Cabinet Secretary Takeo Kawamura also said today in Tokyo. The government expects the Bank of Japan to respond appropriately to the yen, he said. Central banks intervene when they buy or sell currencies to influence their exchange rates.

Against the Australian dollar, the yen fell to 61.84 from 61.40 late yesterday in New York. It also declined to 52.11 per New Zealand dollar from 51.70, and to 8.9355 versus the South African rand from 8.8879.

Japanese Stocks

The yen also declined toward a five-week low against the euro as gains in local stocks gave investors more confidence to purchase higher-yielding assets. The Nikkei 225 Stock Average advanced 0.9 percent, after earlier falling by the same amount. Japan’s benchmark interest rate of 0.3 percent compares with 4.25 percent in Australia, 5 percent in New Zealand and 11.5 percent in South Africa.

Honda Motor Co., Japan’s second-largest automaker, yesterday cut its operating profit forecast for a third time for the year ending March 31 to 180 billion yen ($2.05 billion) from a prior estimate of 550 billion yen as the currency’s gains pushed up prices for overseas customers.

Previous Intervention

The last time Japan intervened on its own, it sold a record 20.4 trillion yen in 2003 and 14.8 trillion yen in the first quarter of 2004, when the yen rose as high as 103.42 per dollar. Japan hasn’t bought yen since 1998, when it spent 3.05 trillion yen as the currency reached as low as 147.66.

The Group of Seven, which comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada, propped up the dollar in 1995, when it declined to a post-World War II low of 79.75 yen.

The greenback declined against the euro as longer-term Treasury yields fell and U.S. stocks declined on speculation the Fed has few tools left to combat a recession.

The yield on 10-year Treasuries fell two basis points, or 0.02 percentage point, today to 2.19 percent. It touched 2.0711 percent yesterday, the lowest level since the Fed’s daily data on the securities began in 1962. The Standard & Poor’s 500 Index fell 1 percent.

Near Zero

The Fed lowered its target rate on Dec. 16 to a range of zero to 0.25 percent, from 1 percent, the lowest rate among major economies. The central bank reiterated plans to buy agency debt and mortgage-backed securities and said it will study buying Treasuries.

“The next step is for the Fed to start buying Treasuries, which will depress yields further and lead the dollar lower,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan’s largest brokerage. “The U.S. stock market shows few signs of life. I don’t think people are waiting to buy the dollar on the cheap.”

The dollar may fall to 85 yen next week, he said.

Investors should sell the U.S. dollar at 89 yen as it may decline as to 83 yen, National Australia Bank Ltd. said. They should exit the trade if the greenback strengthens to 91 yen and watch for intervention in February and March if the currencies trade at 80 yen or below, wrote a team led by Sydney-based John Kyriakopoulos, head of currency strategy at the bank, in a note yesterday.

The U.S. federal budget deficit widened last month to $164.4 billion compared with a gap of $98.2 billion in November a year earlier, the Treasury Department reported last week.

“The U.S. dollar will find 2009 a tougher year thanks to the U.S. budget deficit climbing to at least $1 trillion at the same time that interest rates fall close to zero and the Federal Reserve ramps up quantitative easing,” Kyriakopoulos said.

The U.S. currency will trade at 93 yen and $1.45 per euro by the end of 2009, the bank forecast.

The U.S. currency depreciated 22 percent against the yen this year, the most since 1987, as more than $1 trillion of credit-market losses sparked a seizure in money markets and threw the world’s largest economy into a recession.

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

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Korean Won Gains a 4th Day as Stocks May Lure Funds; Bonds Drop

By Kim Kyoungwha

Dec. 18 (Bloomberg) -- South Korea’s won strengthened for a fourth day on speculation a stock market rally will draw overseas investors. Bonds fell.

The currency, Asia’s worst performer this year, reached a six-week high as global funds bought 533 billion won ($411 million) more Korean shares than they sold this month. The Kospi stock index rose as much as 1.7 percent, set for its highest close since Oct. 21.

The won rose 2 percent to 1,299.15 per dollar as of 11:49 a.m. local time, according to Seoul Money Brokerage Services Ltd. It earlier touched 1,288.95, the strongest since Nov. 5. It still weakened 29 percent this year.

“The market is watching whether the key 1,300 level can be broken through as the won’s recent uptrend is supported by rallying stocks,” said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. “Importers may emerge on the dollar’s dips, blocking any further advance in the won.”

South Korea should use interest-rate cuts and fiscal stimulus to cushion the economy from a global recession and avoid depleting its foreign-currency reserves to prop up the won, the Organization for Economic Cooperation and Development said yesterday.

“Intervention is likely to be costly and ineffective in the face of global financial turbulence that is driving the won’s depreciation and should therefore be limited to smoothing operations,” the OECD said yesterday. “This would also limit any further decline in foreign-exchange reserves, which provide a cushion against Korea’s short-term foreign debt.”

Bonds Decline

Bonds fell, snapping a five-day advance, as yields near the lowest since 2005 prompted some investors to sell.

The yield on five-year government bonds has slid 1.68 percentage points this quarter as the Bank of Korea delivered four interest-rate cuts, taking the seven-day repo rate to a record low of 3 percent to support the economy.

The yield on the benchmark bond due September 2013 climbed seven basis points to 4.19 percent, according to the Korea Exchange. The price fell, 0.30 or 30 won per 10,000 won face amount, to 108.18. A basis point is 0.01 percentage point.

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

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Gold Declines From 10-Week High as Oil Tumbles to Four-Year Low

By Feiwen Rong

Dec. 18 (Bloomberg) -- Gold fell from a 10-week high, ending an eight-day rally, as crude oil’s slump to the lowest in more than four years reduced the appeal of bullion as a hedge against inflation.

Oil fell as low as $39.19 a barrel, extending yesterday’s 8.1 percent decline, on rising U.S. stockpiles and skepticism the Organization of Petroleum Exporting Countries will achieve a 2.46 million barrel-a-day production cut agreed in Algeria. Gold gained 15 percent the previous eight days, as oil fell 1.8 percent and the dollar fell 9.4 percent over the same time.

“Oil’s fall below $40 a barrel led to a bit of a correction in the gold prices,” Ronald Leung, director, Lee Cheong Gold Dealers (Hong Kong) Ltd., said by phone from Hong Kong today. “Gold has been ignoring crude oil’s weakness and has rallied too much, too fast.”

Bullion for immediate delivery fell as low as $861.85 an ounce and was at $862.50 at 9:50 a.m. in Hong Kong. It reached $882.09 yesterday, the highest since Oct. 10, as the Federal Reserve’s near-zero interest rate policy led the dollar’s tumble against the euro and yen and boosted the appeal of the precious metal as an alternative asset.

Silver for immediate delivery fell 0.5 percent to $11.34 an ounce and platinum was little changed at $864.50 an ounce.

Gold’s gain yesterday, in the face of declining oil prices, showed the boost it received from the Fed’s “aggressive” rate cut, Darren Heathcote, head of trading at Investec Bank Ltd. in Sydney, said in a report today.

Gold has jumped 17.2 percent in the past month while the dollar has dropped 12.5 percent to a three-month low of $1.4456 against the euro and a 13-year low versus the yen today. The ICE Futures Exchange’s dollar Index, which tracks the dollar against six major currencies, fell 0.5 percent, its seventh straight decline.

February-delivery gold fell 0.4 percent to $864.80 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Gold for October delivery in Tokyo was little changed at 2,438 yen a gram ($865 an ounce) at the 11 a.m. local time break.

To contact the reporter on this story: Feiwen Rong in Singapore at frong2@bloomberg.net

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Oil Trades Near Four-Year Low as OPEC Cut Seen as Insufficient

By Christian Schmollinger

Dec. 18 (Bloomberg) -- Crude oil traded near the lowest in more than four years on skepticism that OPEC’s larger-than- expected supply cut will be enough to boost prices as fuel demand drops.

Oil extended yesterday’s 8.1 percent decline after OPEC agreed that the group’s 11 members with quotas will trim current production by 2.46 million barrels a day to 24.845 million barrels a day. U.S. fuel consumption in November declined 7.4 percent from a year earlier to the lowest for the month since 1998, the American Petroleum Institute said yesterday.

“Worldwide demand for fuels is falling more than expectations,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Japan. “The OPEC cut was much bigger than expected but it won’t be supportive for this market. This market can go down to $30.”

Crude oil for January delivery was at $40.08 a barrel, up 2 cents, at 10:34 a.m. Singapore time on the New York Mercantile Exchange. The contract earlier fell as much as 87 cents, or 2.2 percent, to $39.19 a barrel, the lowest since July 13, 2004.

The January contract expires tomorrow. The more active February contract was at $44.90 a barrel, up 29 cents.

Prices have tumbled 73 percent from a record $147.27 on July 11. Yesterday, futures declined $3.54 to $40.06 a barrel.

“OPEC will be seen as having done the sensible thing,” said Tony Regan, a Singapore-based independent oil and gas consultant in an interview on Bloomberg Television. “However, they are the supply-side equation and no one is looking at the supply side. People are more focused on declining demand.”

The Organization of Petroleum Exporting Countries’s cut, agreed to yesterday at a meeting in Oran, Algeria, is larger than a 2 million-barrel reduction indicated Dec. 16 by Saudi Arabian Oil Minister Ali al-Naimi.

OPEC Compliance

OPEC’s rate of compliance with a previous output cut is more than 85 percent, al-Naimi told reporters yesterday before the ministerial meeting that decided production targets. Analysts and traders are skeptical of the ability of the group to enact the output reduction.

“I don’t think OPEC can keep this production cut at the level they decided,” said Newedge’s Hasegawa. “They have to make money. Cheating will begin and the market knows that.”

The group will next meet on March 15 in Vienna and has chosen Angolan Oil Minister Jose Maris Botelho de Vasconcelos as its president for 2009.

Brent crude oil for February settlement was at $45.66 a barrel, up 13 cents, at 10:32 a.m. Singapore time on London’s ICE Futures Europe exchange.

Oil also dropped after the U.S. government said supplies climbed for the 11th time in 12 weeks.

Inventories rose 525,000 barrels to 321.3 million barrels last week, the U.S. Energy Department said yesterday in a weekly report. Supplies have climbed 11 percent since Sept. 19.

U.S. gasoline inventories gained 1.3 million barrels to 204 million barrels in the week ended Dec. 12, the Energy Department report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, climbed 2.94 million barrels to 133.5 million barrels, the highest since November 2007.

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

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Australia Stocks: Centro Retail, Macquarie Office Trust, Orica

By Shani Raja

Dec. 18 (Bloomberg) -- The S&P/ASX 200 Index slipped 8.90 points, or 0.3 percent, to 3,561.70 at 10:35 a.m. in Sydney.

Australian Agricultural Co. (AAC AU) rallied 9 cents, or 5.4 percent, to A$1.77, the highest since Nov. 17. The nation’s largest cattle rancher is in talks to sell four stations in Queensland state for A$220 million ($155 million) to reduce debt, the Australian Financial Review reported, citing the company’s chief executive officer.

Centro Retail Group (CER AU) tumbled 1 cent, or 15 percent, to 7 cents, the benchmark index’s biggest decline. Centro MCS Manager Ltd., the responsible entity for Centro Retail Trust and Centro Retail Group, said it won’t pay a distribution to ordinary shareholders for the six months to Dec. 31.

IOOF Holdings Ltd. (IFL AU), an Australian pension funds firm, surged 33 cents, or 11 percent, to A$3.36, the most since Dec. 10 and the index’s best performance. The company said it became a substantial holder in OneSteel Ltd., gaining a 5.2 percent voting stake.

Macquarie Office Trust (MOF AU), Australia’s largest publicly traded office property trust, rallied 2 cents, or 8.9 percent, the benchmark’s second-biggest gain. The company announced an institutional and retail entitlement offer aimed at raising A$408 million.

Orica Ltd. (ORI AU) fell 43 cents, or 2.6 percent, to A$15.96, the lowest since Dec. 9. The company’s rating was downgraded to “neutral” from “buy” by analyst Simon Mitchell at UBS. The 12-month price target is A$17.00 per share.

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

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Japan Stocks Advance, Led by Developers on Lending Speculation

By Masaki Kondo and Shani Raja

Dec. 18 (Bloomberg) -- Japan stocks reversed an early drop as real estate shares led gains on speculation central bank interest-rate cuts will ease lending.

Mitsui Fudosan Co., the nation’s biggest developer, jumped 8.2 percent as traders bet the Bank of Japan will reduce rates this week, following a record cut by the Federal Reserve. Sumitomo Realty & Development Co., the nation’s No. 3 real estate company, climbed 7.6 percent. Honda Motor Co. slumped 4.1 percent after the carmaker cut its annual earnings forecast by two-thirds.

The Nikkei 225 Stock Average rose 102.50, or 1.2 percent, to 8,715.02 as of 9:50 a.m. in Tokyo, reversing a 0.9 percent drop. The broader Topix index lost 6.85, or 0.8 percent, to 845.31, with three stocks advancing for every two that fell.

There is a 54 percent chance the central bank will lower borrowing costs from 0.3 percent after concluding its two-day meeting tomorrow, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The Fed on Dec. 17 cut its benchmark rate to between zero and 0.25 percent for the first time and said it will do whatever is needed to end the longest recession in a quarter-century.

The collapse of the U.S. mortgage market has prompted banks to tighten lending, stripping businesses of cash. On Dec. 15, Matsumoto Kenko Co. became the 24th listed Japanese property- related company to file for bankruptcy this year.

Mitsui Fudosan climbed 8.2 percent to 1,452 yen, while closest rival Mitsubishi Estate Co. rose 5.7 percent to 1,532 yen, extending yesterday’s 10 percent surge. Sumitomo Realty advanced 7.6 percent to 1,375 yen. A gauge of real-estate companies was the biggest winner among 33 industry groups on the Topix.

The Topix Real Estate Index has risen 12 percent in the past two days, and it led gains among the broader gauge’s 33 industry groups today.

Honda Slumps

Honda dived 4.1 percent to 1,814 yen, while market leader Toyota Motor Corp. slid 1.3 percent to 2,990 yen. Canon Inc., which gets a third of its sales from the Americas, sank 1.5 percent to 2,705 yen.

Honda chopped its annual operating-profit target by 67 percent to 180 billion yen ($2.06 billion) and halved its third- quarter dividend, citing the surging yen and dwindling demand. Every 1 yen gain against the dollar cuts Honda’s full-year earnings by 18 billion yen.

“Honda’s earnings revision is likely to affect shares throughout the auto sector,” Mitsushige Akino, who oversees about $468 million at Tokyo-based Ichiyoshi Investment Management, said in an interview with Bloomberg Television.

The yen appreciated against the dollar to as much as 87.14, the strongest level since July 1995, from 88.76 at the close of stock trading in Tokyo yesterday. The Japanese currency traded at 111.76 against the dollar at the beginning of this year.

Nikkei futures expiring in March added 0.9 percent to 8,730 in Osaka and rose 0.6 percent to 8,725 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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Asian Stocks Rise to Six-Week High; Developers, Banks Climb

By Patrick Rial and Ian Sayson

Dec. 18 (Bloomberg) -- Asian stocks rose to a six-week high, led by developers and financial companies, on speculation the region’s central banks will reduce interest rates to revive economic growth.

Sumitomo Mitsui Financial Group Inc. and Mitsui Fudosan Co., Japan’s biggest developer, gained more than 6 percent in Tokyo as traders increased bets the Bank of Japan will lower borrowing costs tomorrow. A drop in oil below $40 a barrel spurred a 4.4 percent gain in Qantas Airways Ltd. Honda Motor Co. sank 3.5 percent, helping trim the market’s losses, after cutting its earnings forecast by 62 percent amid slumping global sales.

“Investors are looking forward to the cut in interest rates,” said Kenji Tomida, chief fund manager at T&D Asset Management Co. in Tokyo, which has about $16 billion in assets. “This is providing the market some relief and stability.”

The MSCI Asia Pacific Index gained 0.6 percent to 90.81 as of 11:38 a.m. in Tokyo. The gauge has rallied 21 percent since reaching a five-year low on Nov. 20 as governments from China to India took steps to bolster their economies from the worst financial crisis since the Great Depression.

The Nikkei 225 Stock Average gained 0.8 percent to 8,679.

Sumitomo Mitsui advanced 6.2 percent to 376,000 yen. Mitsui Fudosan rose 6.6 percent to 1,430 yen.

Investors see a 54 percent chance that the BOJ’s policy board will reduce the overnight call rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading, up from 20 percent on Dec. 16. The meeting ends tomorrow.

Mitsubishi UFJ Financial Group Inc., Japan’s largest listed bank, rose 2.1 percent to 530 yen. The lender is likely to see increased loan volumes, Nana Otsuki, an analyst at UBS said. Otsuki upgraded the stock to “buy” from “neutral.”

Hana Gains

Hana Financial Group Inc., operator of South Korea’s fourth- largest bank, surged 5.9 percent to 23,200 won, bringing this week’s advance to 22 percent. Deutsche Bank AG boosted its price estimate on the shares, arguing the stock was undervalued after dropping as much as 75 percent this year.

Qantas rose 4.4 percent to A$2.36, as the declining oil price slashes the cost of jet-fuel for airlines.

Crude oil futures tumbled 8.1 percent to $40.06 a barrel in New York yesterday, the lowest settlement since July 2004, after touching $39.88. Prices have plunged 73 percent from a record on July 11.

Honda, Japan’s second-largest automaker, slid 3.5 percent to 1,825 yen. The company slashed its net income forecast for the year ending in March by 62 percent and chopped its third-quarter dividend in half, as the stronger yen crimped profits.

Koichi Sugimoto, an analyst at Merrill Lynch & Co. in Tokyo, cut his recommendation to “underperform” from “neutral.”

Chrysler Production

Aisin Seiki Co., the world’s biggest maker of automatic transmissions, tumbled 7.2 percent to 1,133 yen. JTEKT Corp., which makes power steering, lost 3.1 percent to 618 yen.

Chrysler LLC said yesterday it will shut all 30 of its plants for at least a month starting Dec. 19 as unsold cars and trucks pile up at showrooms.

Ford Motor Co. said it will idle most of its North American assembly plants for the first week of January, while General Motors Corp. said a new factory making engines for the Chevrolet Volt electric car is being delayed to conserve cash.

Commonwealth Bank of Australia, the nation’s biggest mortgage lender, slumped by a record 9.5 percent to A$26.39 as the nation’s biggest mortgage lender sold stock at a steeper discount than planned.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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Brazilian Stocks Slip on Growth Concern; Bolsa, Ipsa Advance

By Alexander Ragir

Dec. 17 (Bloomberg) -- Brazilian stocks fell for a second day this week on concern that earnings forecasts may need to be reduced further as the economy weakens and the currency slumps.

Net Servicos de Comunicacao SA, the biggest cable-TV company, slid 4.6 percent after JPMorgan Chase & Co. said its fourth-quarter profit may be hurt by the weaker real. Vivo Participacoes SA and Tim Participacoes SA led declines for phone stocks as Brascan Corretora said they lost market share last month. Cosan SA Industria e Comercio and Cia Siderurgica Nacional SA advanced more than 3 percent as sugar and metals gained on the dollar’s plunge against the euro.

“The market has been pretty light, with a lot of rotation between sectors but not much flows in and out of the market,” said Julio Martins, who oversees $173 million as investment director at Banco Prosper in Rio de Janeiro. “This fight between sectors is what you’re seeing in the market.”

The Bovespa Index bounced between gains and losses, dropping 0.1 percent to 39,947.43. More than two stocks fell for every one that rose. Mexico’s Bolsa index jumped 2.1 percent to the highest in 10 weeks. Chile’s Ipsa gained 0.5 percent.

Net slid 49 centavos to 14.31 reais after JPMorgan said the company may report a foreign exchange loss of 166 million reais because of unhedged debt. Deutsche Bank AG cut its forecast for the American depositary receipts to $9 from $11.

The Brazilian real slipped 2.1 percent to 2.3623 reais per dollar. The real, which has lost 19.5 percent in the last three months, is the worst performing of the 16 most-traded currencies tracked by Bloomberg.

The dollar declined the most against the euro since the 15- nation currency’s 1999 debut and sank to a 13-year low versus the yen after the Federal Reserve cut its target lending rate to as low as zero.

Commodities Gain

Cosan, the world’s second-biggest sugarcane processor, rose 3.7 percent to 11.20 reais. CSN, as Brazil’s third-largest steelmaker is known, climbed 3.4 percent to 31.43 reais. Sugar prices rose for the second straight day. The Bloomberg Base Metals 3-Month Price Commodity Index advanced 0.7 percent.

Brazil earnings may slide 23 percent in 2009 as growth in the region’s largest economy slows to a forecast 2.2 percent from the previous 3 percent estimate, Citigroup Inc. said Dec. 11.

Deutsche Bank today cut its growth estimate for Brazil to 2.2 percent in 2009 from the previous estimate of 2.9 percent.

Phone stocks fell the most in the MSCI Brazil Index, losing 3.7 percent. Vivo, Brazil’s biggest mobile-phone company, and Tim, the third-largest, retreated after losing market share in November, Anatel data showed.

‘Tougher’ Competition

The increase in customer additions for the industry as a whole signals that competition for customers “is even tougher” and could lead to lower profitability in the fourth quarter, Brascan analyst Beatriz Battelli wrote in a note to clients.

Vivo slid 5.9 percent to 31.70 reais and Tim fell 3.6 percent to 3.75 reais.

Positivo Informatica SA, Brazil’s biggest computer maker, fell the most since shares began trading in 2006 on a report that Lenovo Group Ltd. won’t pursue a bid for the company.

Lenovo has decided not to pursue its bid for Positivo “for now” after considering a possible purchase, the Wall Street Journal reported, citing an unidentified person. An opportunity had previously existed for Lenovo to buy the Brazilian company, the Journal quoted the person as saying.

“The stock rose sharply and now it’s suffering from people questioning whether a deal will going to go through, and if it does, how long it will take,” said Martins.

Positivo tumbled 26 percent to 8.14 reais.

Bolsa Gains

In Mexico, the Bolsa gained for a second day.

Telefonos de Mexico SAB rose to a 15-year high as Banco Santander SA said the phone company’s forecast for capital spending reflects an “optimistic view” of its business next year.

Telmex, as the country’s biggest land-line phone company is known, advanced 4.7 percent to 14.65 pesos.

Homebuilders surged on bets Mexico’s central bank may cut rates, following the Federal Reserve’s interest-rate cut. Consorcio Ara SAB, the country’s fourth-largest homebuilder, increased 12 percent to 5.50 pesos on speculation rate reductions in Mexico could spur home sales on credit.

Elsewhere in Latin America, Argentina’s Merval rose 0.4 percent, Peru’s Lima General slipped 0.5 percent and Colombia’s IGBC declined 0.8 percent.

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

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