Hong Kong Richest 1% Keep Michelin Eateries, Priciest Bars Open

By Chia-Peck Wong

Dec. 22 (Bloomberg) -- Hong Kong businessman Dino Sadhwani spends HK$10,000 ($1,290) on a typical, twice-a-week night of dining and partying at the city’s top-end restaurants and clubs. That’s after some belt tightening.

Before the global financial crisis cut the value of his stocks portfolio by 40 percent and reduced his company’s projected sale of hammers and drill bits to the U.S., Sadhwani, 25, would spend up to a third more at exclusive joints like Zuma and China Club. He is also taking one vacation this year, instead of the usual four.

Even with the cutbacks, the dining bill of Hong Kong’s richest 1 percent, such as Sadhwani, remains large enough to keep some of the city’s most expensive eateries going amid the recession, said Nick Debnam, KPMG’s partner in charge of consumer markets in Hong Kong.

“The chunk of the population that eats at these sorts of places once or twice a year is going to disappear,” Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong, said in an interview. Still, the rich are likely to keep returning to their favorites. “They may, instead of having a holiday, go out for a nice restaurant meal instead.”

Government data show Hong Kong’s restaurant receipts rose 14 percent to HK$20 billion in the three months ended Sept. 30, even as the local benchmark Hang Seng Index fell 18 percent from the preceding quarter as the effect of the U.S. slowdown spreads.

HK$16,888 A-Head Dinner

At Gaddi’s, the French restaurant at The Peninsula, about 40 guests paid HK$16,888 each for a Dec. 18 dinner to celebrate the five-star hotel’s 55th anniversary, according to a spokeswoman.

The price tag, excluding a 10 percent service charge, covered six courses, such as Atlantic blue lobster and slow- roasted venison loin. Each course was paired with a wine of the 1953 vintage, including a Chateau Margaux.

Petrus, with one Michelin star from the guide’s inaugural local edition launched last month, is expected by its managers to sell out its eight-course New Year’s Eve dinner at HK$4,088 a head.

Clients don’t mind splashing out as they “don’t want to get caught up in the rut” of bad economic news, said Ilona Yim, director of communications for the Island Shangri-La, where the restaurant is located. “They want to enjoy a good meal.”

‘Gourmet Paradise’

Hong Kong’s tourism board promotes the city as a “Gourmet Paradise” for its diversity of cuisine for every budget. Frequent sightings of movie stars and tycoons at bolthole eateries show the city’s ardor for good food. Hong Kong became the third Asian city after Tokyo and Macau where top Michelin chef Joel Robuchon has opened a restaurant.

“If you get into a Michelin restaurant or into those top trendy places, you will find they are relatively recession- proof,” said Debnam.

Restaurants also have room “to buffer their margins” amid the drop in food costs and removal of wine taxes in Hong Kong, Maguire said.

Recent statistics are more sobering. Revenue of Hong Kong eateries fell an average of 10 percent in November, with upmarket eateries among the worst performers, said Lok Kwok-on, chairman of Hong Kong Federation of Restaurants & Related Trades, earlier this month.

On Nov. 14, the Hong Kong government cut its growth forecast for the city this year to between 3 percent and 3.5 percent from the previous estimate of 4 percent to 5 percent. Chief Executive Donald Tsang warned the city’s 7 million people of a difficult 12 months ahead and called a recession next year “inevitable.”

Dragon-I

That might prompt the less well heeled to hunt for bargains like the HK$1 noodle dish Tasty Congee & Noodle Wantun Shop’s plans to sell in January. Still, places such as Gilbert Yeung’s Dragon-I, one of Hong Kong’s trendiest dining and entertainment spots, will be able to ride out the recession, thanks to clients such as Sadhwani, said Debnam.

“The slowdown is definitely a concern,” said Sadhwani, whose parents own Hong Kong’s Holiday Inn Hotel and who has a penchant for Audemars Piguet watches. “But I want to enjoy life as I’m young and I’m single.”

Yeung, who has hosted Sting and David Beckham at his 6,000- square foot venue, said regulars, including Sadhwani and his posse of models and tycoon’s sons, aren’t spending less.

“I still see a lot of Dom Perignon’s floating around,” Yeung, 42, said in an interview. A 750 milliliter bottle of the champagne costs HK$2,200 at Dragon-I.

Partying Every Night

Michael Chan, a 31-year-old private banker whose annual salary tops HK$1 million, said he’s been out on the town about five nights a week, spending as much as HK$3,000 each time to beat the gloom.

“It’s a choice that I make to continue to go out and enjoy life,” Chan said.

Bonnie Gokson, Hong Kong socialite and former Chanel Inc. executive, said Sevva, her trendy restaurant and bar, is “pretty packed all the time” in the past few months as the rich pursue their “passion for entertaining and dining out nicely.”

Still, Dragon-I isn’t immune to the economic slump. Its turnover since October has fallen at least 10 percent, Yeung said.

Yeung said some clubs in Hong Kong’s central district “are suffering” and may have to close next year unless they buck up.

Until then, owners may have to hope that the economy doesn’t worsen further.

“If the financial situation deteriorates,” Sadhwani said, “This is the first place I’d cut spending.”

To contact the reporter on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.net

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Fischer Says Madoff Shows How Smart Investors Missed Crisis

By Calev Ben-David and Rich Miller

Dec. 22 (Bloomberg) -- Bank of Israel Governor Stanley Fischer likened Bernard Madoff’s alleged $50 billion fraud to the global financial crisis: in both, sophisticated investors missed warning signs that something was awry.

“You get into a way of thinking,” Fischer, who’s been a student of the world economy for the past quarter century as an academic, banker and policy maker, said in an interview at the central bank’s Tel Aviv offices. “You get into a way of accepting things that people do.”

Investors who placed their money with Madoff were lulled into complacency by his consistent returns, while those who piled into mortgage-backed securities were aided by AAA ratings that proved as flawed as forecasts of rising house prices.

Fischer, who advised Federal Reserve Chairman Ben S. Bernanke on his doctoral thesis at the Massachusetts Institute of Technology in 1979, said the U.S. economy has yet to feel the worst from the financial turmoil.

“This is going to be tough,” Fischer, 65, said. “The worst of the real side is yet to come.”

St. Louis-based Macroeconomic Advisers forecasts that the U.S. economy will shrink at a 6.5 percent annual rate this quarter and a further 4.2 percent in the first quarter of next year.

Fischer, who was first deputy managing director at the International Monetary Fund during the 1997-98 Asian financial crisis, saw a risk that today’s turmoil creates a deflationary spiral in the U.S. and world economies, in which prices, wages and demand all fall.

Present Danger

“It’s a danger at the moment,” the central banker said, adding, “We’re not there yet.”

U.S. consumer prices dropped a record 1.7 percent in November, though Fischer pointed out that was mainly due to falling energy prices.

Whether deflation takes hold will depend on how successful Bernanke and other policy makers around the world are in reviving their economies, he added.

Watching his former student from a corner office in the bank’s drab, off-white building in downtown Tel Aviv, Fischer said Bernanke was putting the lessons he learned analyzing the Great Depression to work.

As the crisis deepened, the Fed chairman launched programs aimed at getting credit flowing in the economy, including providing a backstop for the $1.7 trillion commercial-paper market that companies use to finance their day-to-day operations.

Student of Depression

“Bernanke’s work was on the collapse of the credit mechanism during the Great Depression,” Fischer said. “So he’s much more keenly aware of that as a critical factor than almost anyone else.”

The Fed last week cut the main U.S. interest rate to as low as zero and shifted its focus in trying to resuscitate the economy to the amount and type of debt it buys. The moves were reminiscent of those taken by the Bank of Japan in the early part of this decade as it struggled to end the deflation gripping that country’s economy.

Fischer argued that Bernanke stands a better chance of succeeding than did Japan. Not only has the Fed chairman focused his efforts on reviving credit flows, he also moved more quickly to cut rates to near zero.

President-elect Barack Obama also looks likely to be much more aggressive than the Japanese government in using fiscal policy to turn the economy around, Fischer said.

An Obama adviser, who spoke on condition of anonymity, said last week that Obama may ask Congress for a stimulus plan of about $850 billion.

Japan Comparisons

The actions “are on a completely different speed and scope than was attempted in Japan,” Fischer said. “If there’s a critical difference, it’s that.”

He said the Bernanke Fed has also begun to act in a small way as lender of last resort for the world economy by setting up currency swap lines with more than a dozen other central banks to provide them with dollar liquidity.

Following a career as an academic, policy maker and banker in the U.S., Fischer became governor of the Bank of Israel and a citizen of the country in 2005. Born in Zambia, he studied at the London School of Economics and earned his doctorate in economics at MIT.

While Fischer isn’t a native Hebrew speaker, he insists on conducting all public business in his adopted language. While the bank’s headquarters are in Jerusalem, Fischer usually works Thursdays in Tel Aviv, the country’s financial center.

After spending 19 years teaching at the University of Chicago and MIT, Fischer joined the World Bank in 1988 as chief economist. He later went on to the IMF as the second in command before becoming vice chairman of Citigroup in 2002.

Inflation, Peace

Fischer is the author of a variety of books on economics, including “Indexing, Inflation and Economic Policy,” published in 1986. He also edited a number of books, among them “Securing Peace in the Middle East,” which came out in 1994.

As Bank of Israel chief, Fischer has presided over the strongest run of economic growth in Israel’s sixty-year history. The shekel gained as much as a third against the dollar, ending a 30-year tradition among Israelis of linking the prices of homes and services to the U.S. currency.

Outside his office, on Lilienblum Street, black-market money changers openly bought and sold dollars during the 1980s as inflation surged. Consumer prices rose 4.5 percent this November from a year earlier, down from 5.5 percent in October. Inflation reached almost 500 percent in 1984.

Rate Reductions

While Israeli economic growth has outpaced most of the developed world this year, growing at a 2.3 percent annual rate in the third quarter, Fischer has cut the bank’s benchmark rate four times in the past 10 weeks to a record low 2.5 percent to buttress growth.

He said IMF has to assume a bigger role in helping to manage global crisis, though it needs more cash to do so. The fund lent more money last month than it did in the past five years combined, to economies as diverse as Iceland and Pakistan.

“Because global capital flows have increased enormously, its financing looks small relatively to the current needs of the situation,” Fischer said.

He voiced hope that China would follow the lead of Japan and pledge to provide some of its currency reserves to the IMF, perhaps in return for a bigger voting share at the fund.

Editor: Daniel Moss, Brendan Murray

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net;

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New Zealand’s Recession Probably Extended Into a Third Quarter

By Tracy Withers

Dec. 22 (Bloomberg) -- New Zealand’s recession probably extended into a third quarter as consumers and businesses reined in spending and exports of milk, timber and wool eased.

Gross domestic product shrank 0.5 percent last quarter from the previous three months, prolonging the nation’s first recession since 1998, according to the median estimate of 13 economists surveyed by Bloomberg. The GDP report is released tomorrow at 10:45 a.m. in Wellington.

A deepening slump may force central bank Governor Alan Bollard to further reduce interest rates in January to revive domestic demand. Prime Minister John Key’s government, which won a Nov. 8 election on a pledge to cut income taxes by NZ$4.4 billion ($2.6 billion) from April, said last week there’s a risk the economy may not begin expanding again until 2010.

“The Reserve Bank will be surprised by ongoing weakness in the economy into 2009,” said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland. “Despite substantial government and central back action, global credit markets remain disrupted and the economic outlook continues to deteriorate.”

New Zealand joined Japan, Europe, the U.S. and Singapore in sinking into a recession this year as the global credit crisis buffets consumer and business confidence and cools trade.

The World Bank forecasts international trade will shrink in 2009 for the first time in more than 25 years. Exports account for about 30 percent of New Zealand’s NZ$180 billion economy.

Consumer Slowdown

The economy contracted 0.3 percent in the first quarter and declined 0.2 percent in the second quarter as record-high borrowing costs stalled the housing market and a drought crimped farm production. Though the drought has ended and borrowing costs have declined, fallout from the global economic crisis has prolonged New Zealand’s recession.

Warehouse Group Ltd. and Michael Hill International Ltd. are among retailers that have reported sales declines. Air New Zealand Ltd. said it plans to fire workers and cookie maker Griffin’s Foods Ltd. last week closed a factory in Wellington.

“There are compelling arguments for a much lower cash rate in New Zealand,” said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. “New Zealand was already on the back foot as the global credit crisis intensified and its recession is likely to continue for much of 2009.”

Bollard has reduced the Reserve Bank of New Zealand’s official cash rate by 3.25 percentage points since July to a nine-year low of 5 percent. The governor said this month the economy faces a “shallow recovery” in the first half of 2009.

Rate Forecasts

Seven of 14 economists surveyed predict a half-point rate reduction to 4.5 percent on Jan. 29. Three expect three-quarters of a point cut and four tip a one percentage point move.

RBC Capital Market’s Ong forecasts the central bank will lower rates at each of the next four policy meetings, which will push down the benchmark to 3 percent by mid-2009.

The jobless rate rose to a five-year high of 4.2 percent last quarter, and the government forecasts it will climb to 6.5 percent by mid-2010. ANZ National Ltd’s poll of business confidence slumped in December to the lowest level since the series began in 1988.

New Zealand’s retail sales slipped 0.9 percent last quarter, the third straight decrease. The number of homes sold tumbled to a 26-year low in August.

Warehouse Group, New Zealand’s biggest discount retailer, reported a 2.1 percent drop in sales in the quarter ended Oct. 26. Sales at Michael Hill, the nation’s largest specialty jewelry retailer, declined 3.7 percent in the three months ended Sept. 30.

Construction fell 2.1 percent from the second quarter, the third consecutive drop, because fewer homes were built.

Exports slid 2.3 percent in the third quarter. Dairy shipments, the nation’s largest export, slid 4.3 percent.

Manufacturing slumped to the lowest level in five years in the three months through September.

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

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Japan Exports Plunge Record 27% as Recession Deepens

By Toru Fujioka

Dec. 22 (Bloomberg) -- Japan’s exports plunged the most on record in November as global demand for cars and electronics collapsed, signaling more factory shutdowns and job cuts are likely as the recession deepens.

Exports fell 26.7 percent from a year earlier, the Finance Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 22.3 percent decline. The drop was the sharpest since comparable data were made available in 1980.

The Bank of Japan lowered its benchmark interest rate to 0.1 percent last week after business sentiment dropped the most since 1975 and the yen surged to a 13-year high against the dollar. Honda Motor Co. said last week that it may shift manufacturing overseas if the currency strengthens further.

“Japan’s export crash is finally upon us, and this is the worst thing that could happen,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The recession will be very severe as companies adjust investment, production and labor.”

The yen traded at 89.70 per dollar as of 9:35 a.m. in Tokyo from 89.50 before the report was published and 87.14 on Dec. 17, the strongest since 1995. The Nikkei 225 Stock Average edged 0.6 percent higher after the U.S. government agreed to provide General Motors Corp. and Chrysler LLC with emergency loans.

Gross domestic product shrank in the past two quarters, sending the world’s second-largest economy into the first recession since 2001. The government last week forecast zero growth for the year starting April 1.

Toyota, Sony

Honda, Toyota Motor Corp. and Sony Corp. are among the companies that are shedding thousands of workers and closing production lines as profits dwindle. Car exports slid 32 percent last month, the most ever, and semiconductors slumped 29 percent, the ministry said.

Today’s report showed the global recession is spreading to the emerging markets that propped up exports earlier this year as demand from the U.S. and Europe evaporated. Exports to Asia fell 27 percent, the most since 1986, after the first decline in six years in October. Shipments to China, Japan’s largest trading partner, fell 25 percent, the steepest drop in 13 years.

“There are no markets that can make up for the drop in demand for Japanese-made goods,” Dai-Ichi Life’s Shinke said.

Exports to the U.S. tumbled a record 34 percent, and those to Europe slid 31 percent, the second-most ever.

Imports fell 14.4 percent, the first decline in 14 months, as oil costs eased and the yen gained. That wasn’t enough to prevent a trade deficit of 223.4 billion yen (2.5 billion), the third shortfall in four months.

Yen’s Damage

The yen strengthened 25 percent against the dollar this year as the global financial crisis prompted investors to sell riskier assets purchased with money borrowed in the currency.

Honda President Takeo Fukui last week said the government should take action to halt the yen’s rise. Every 1 yen gain against the dollar cuts Honda’s annual operating profit by 18 billion yen ($201 million), according to the automaker. About 90 percent of Honda’s revenue comes from overseas.

Companies are also struggling to obtain funding as the market turmoil dissuades investors from buying corporate debt. To help businesses get financing, the Bank of Japan last week decided to buy commercial paper for the first time.

Sales at home are unlikely to make up for the collapse in demand from abroad. Households, whose confidence is at a record low, pared spending in each of the eight months to October as wage growth stagnated and job prospects worsened.

The Finance Ministry last week submitted an extra budget for the year ending March that includes 2 trillion yen in cash handouts for households as Prime Minister Taro Aso tries to spur spending. That may be too little, too late, economists say.

“Japan’s economy has never weaned itself off of the overbearing reliance on exports, and especially to the U.S.,” said Kirby Daley, senior strategist and head of capital introductions at Newedge Group. “Japan did nothing to prepare itself” for the collapse in demand from abroad.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Asia Energy Day Ahead: Analysts Split on Oil; U.S. Margins Rise

By Todd Zeranski

Dec. 22 (Bloomberg) -- Analysts surveyed by Bloomberg News were split over whether prices will rise or fall this week amid surging U.S. inventories and OPEC production cuts.

The margin earned by U.S. refiners for making fuel rose to its widest in three months as gasoline futures surged on plant shutdowns and the cost of crude plunged.

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Naimi Says OPEC `Determined' to Bring Stability to Oil Market

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's crude, is ``determined to bring stability to the oil market'' after prices plunged more than $100 from a high in July, Saudi Oil Minister Ali al-Naimi said.

Analysts Are Split on Direction of Oil, Survey Shows

Analysts surveyed by Bloomberg News were split over whether prices will rise or fall this week amid surging U.S. inventories and OPEC production cuts.

Refinery Margins Rise to 3-Month High on Operations Cutbacks

The margin earned by U.S. refiners for making fuel rose to its widest in three months as gasoline futures surged on plant shutdowns and the cost of crude plunged.

Natural Gas May Rise on Below-Normal Temperatures, Survey Shows

Natural gas futures may gain in the coming days as below- normal temperatures across the U.S. Midwest and Northeast spark demand, a Bloomberg News survey showed.

European Gasoline Discount Narrows Against Oil on Output Cuts

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N.Y. Residual Fuel Trades at Premium to Crude on Utility Use

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U.S. Electricity Prices Surge as Cold Weather to Boost Demand

Wholesale electricity prices jumped across the U.S. as colder weather was forecast to increase heating needs at the start of this week.

Saudi Arabia's OPEC Quota Set at 8.051 Million Barrels a Day

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Ethanol Little Changed as U.S. Mandates for 2009 Give Support

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U.S. Retail Gasoline Falls to $1.66 a Gallon, Lundberg Says

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Brazil Minister Says Oil Must Rise to $75 for Supply

Oil prices, which more than halved this year, must rebound to about $75 a barrel to maintain new investments in crude output and an adequate supply of energy to world markets, Brazil's Energy Minister Edison Lobao said.

Petrobras Oil Hunter Fights to Keep Finds for Brazil

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U.S. Coal Use May Fall Under Greenhouse-Gas Cap, Bernstein Says

Regulation of carbon-dioxide emissions under the Obama administration may reduce coal use by 10 percent as generators switch to cleaner-burning natural gas, according to a report by analysts at Bernstein Research.

Eagle Bulk Suspends Dividend to Save Cash, Buy Ships

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Oil Exploration Spending May Fall 12% in 2009, Barclays Says

Spending on discovering and developing new sources of oil and natural gas may fall 12 percent in 2009 to $400 billion, according to a survey of 345 companies by Barclays Capital Research.

Spare Oil Capacity Will More Than Double by 2012, CERA Says

Spare production capacity in the oil industry will likely more than double through 2012, because of falling oil demand and new supply from investments already being made, said Cambridge Energy Research Associates.

Enel to Sell Power Lines to Terna for EU1.15 Billion

Enel SpA, Italy's largest utility, agreed to sell its power lines to Terna SpA for 1.15 billion euros ($1.59 billion) as part of a plan to repay debt following last year's takeover of Endesa SA.

Venezuela Calls for `Additional Efforts' From OPEC

Venezuela, the biggest oil exporter in the Americas, wants the Organization of Petroleum Exporting Countries to increase efforts to stem falling oil prices.

Alaska's Palin to Back Shell on Beaufort Sea Project

Alaska Governor Sarah Palin said the state will back a legal petition for rehearing by Europe's Royal Dutch Shell Plc after a federal appeals court ruled the company can't drill a well planned in the Beaufort Sea.

Shell May Revisit Oil-Sand Projects as Procurement Costs Drop

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Noble Plans to Change Incorporation to Switzerland

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Fog May Prolong Halt to Ships to Texas Refineries

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OPEC May Meet in Kuwait Jan. 19 to Consider More Cuts

OPEC may meet in Kuwait City on Jan. 19 to discuss further production cuts, according to Chakib Khelil, the president of the group.

HIGHLIGHTS FROM NEWSPAPERS

Exxon Delays Texas Gas Import Terminal on Hurricane, WSJ Says

Exxon Mobil Corp., the world's largest oil company, said storm surge from Hurricane Ike will delay the startup of a liquefied natural gas import terminal past the middle of next year, the Wall Street Journal reported, citing people briefed on the matter.

Trans-Mediterranean Gas Pipeline Loses Pressure, Ansa Reports

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Citgo Confirms Report That Fire Halted Texas Unit's Production

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To contact the reporter on this story: Todd Zeranski in New York at tzeranski@bloomberg.net

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Babcock Power Says It’s Received Non-Binding Bids for Business

By Jason Scott

Dec. 22 (Bloomberg) -- Babcock & Brown Power, the Australian electricity producer that’s lost 98 percent of its market value this year, said it’s received non-binding bids to acquire the company.

“The BBP board, in conjunction with its advisers, continues to review all submissions made with a view to determining what is in the best interests of Babcock & Brown Power’s security- holders,” the Sydney-based company said today in a statement to the Australian stock exchange. It didn’t name the suitors.

Babcock Power, managed by Babcock & Brown Ltd., said in October it would seek bids after the company was approached by potential buyers to purchase assets or for an outright sale. The company has been selling plants to reduce debt and bolster its balance sheet.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net

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China Has Done ‘Majority’ of Yuan Gains, Market News Reports

By Kim Kyoungwha

Dec. 22 (Bloomberg) -- China has implemented the “majority” of the yuan appreciation needed to address the artificially weak exchange rate brought about by its dollar peg, Market News International reported, citing a central bank official in charge of foreign exchange.

Zheng Hong, director of the exchange rate policy office with the People’s Bank of China, said at a trade conference in Beijing over the weekend that the yuan has shown “a pretty big increase” and China has “corrected the majority of the imbalance of the past,” according to the report.

The yuan has strengthened 21 percent to 6.8432 since a fixed exchange rate ended in July 2005.

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

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Australian, New Zealand Dollars Advance on U.S. Auto Bailout

By Candice Zachariahs

Dec. 22 (Bloomberg) -- The Australian and New Zealand dollars rose on speculation the U.S. government’s bailout of automakers will give investors confidence to purchase higher- yielding assets.

The currencies gained after the U.S. agreed to lend General Motors Corp. and Chrysler LLC $13.4 billion in emergency funds and the Federal Reserve expanded a program to revive consumer credit. New Zealand reports third-quarter gross domestic product data tomorrow, which economists forecast will show the nation’s recession deepened.

“There’s been a stabilization in the market, largely with the U.S. agreeing to the auto bailout and an enhancement of plans to stimulate consumer credit,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp.

Australia’s currency rose 0.3 percent to 68.30 U.S. cents as of 12:05 p.m. in Sydney from 68.09 cents late in New York last week. The currency advanced 1 percent to 61.43 yen. The Australian dollar may rise to 71 cents this week, if it holds above 67.65 cents over the next few days, Speizer said.

New Zealand’s dollar gained 0.6 percent to 57.80 U.S. cents after trading in New York at 57.45 cents on Dec. 19. It bought 51.95 yen from 51.30.

New Zealand’s dollar may rally to 61 cents, if it holds above 57 cents through tomorrow, Speizer said.

Holiday Trading

GDP in New Zealand contracted 0.5 percent in the third quarter from the previous three months, prolonging the nation’s first recession since 1998, according to the median estimate of 13 economists surveyed by Bloomberg News. The report is due at 10:45 a.m. tomorrow in Wellington.

Movements in the currencies may be exaggerated by thin trading leading into the Christmas and New Year holidays, said Speizer.

New Zealand’s current-account deficit widened to a record in the year through September as a weakening currency increased the cost of imports. The deficit expanded to NZ$15.51 billion ($8.9 billion) in the 12 months ended Sept. 30 from a revised NZ$14.98 billion in the year through June 30, Statistics New Zealand said in Wellington today.

Reserve Bank of New Zealand Governor Alan Bollard has cut the nation’s benchmark interest rate by 3.25 percentage points since July to a nine-year low of 5 percent.

Current Account

Investors should buy the Australian dollar versus New Zealand’s currency as “New Zealand is likely to be hugely dependent on dwindling foreign capital to help fund its still sizable current-account deficit,” a team of Citigroup strategists led by Jim McCormick, London-based global head of foreign exchange and local-markets strategy, wrote in a research note dated Dec. 19.

Westpac’s Speizer expects the Australian dollar to strengthen to NZ$1.2000 this week and break through NZ$1.2300 over the next month. The currency bought NZ$1.1807 from NZ$1.1840 on Dec. 19 in New York.

Futures traders decreased bets that the Australian dollar will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed. The difference in the number of wagers by hedge funds and other large speculators on a drop in the currency compared with those on a gain -- so-called net shorts -- was 4,199 on Dec. 16, compared with net shorts of 4,452 a week earlier.

Benchmark interest rates are 4.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.

Australian government bonds declined. The yield on the 10- year note advanced 7 basis points, or 0.07 percentage point, to 4.09 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.579, or A$5.79 per A$1,000 face amount, at 109.596.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped to 4.58 percent from 4.60 on Dec. 19.

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

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Yen Falls as Carmaker Loans Revive Confidence in Carry Trades

By Ron Harui and Stanley White

Dec. 22 (Bloomberg) -- The yen fell to the lowest level in almost a week against the dollar on speculation $13.4 billion in emergency government loans to General Motors Corp. and Chrysler LLC will give investors confidence to buy higher-yielding assets.

The currency also declined versus the euro on the prospect that Bank of Japan Governor Masaaki Shirakawa will express concern over the yen’s gains following a record plunge in exports in November. The dollar weakened against the euro before data this week that may show U.S. consumer spending, home sales and durable goods orders fell as a recession deepened.

“GM and Chrysler have won a reprieve for the remainder of this year,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This is pushing the yen a little bit lower.”

The yen declined to 89.83 against the dollar at 11:06 a.m. in Tokyo from 89.31 late in New York on Dec. 19. It reached 90.04, the lowest level since Dec. 16. The currency also dropped 1.1 percent to 125.55 per euro from 124.22, paring its gain this year to 29 percent. The dollar weakened to $1.3975 per euro from $1.3912. It slid to an 11-week low of $1.4719 on Dec. 18.

Against the greenback, the Australian dollar rose 0.3 percent to 68.30 U.S. cents and the New Zealand dollar climbed 0.6 percent to 57.78 cents from late in New York. The British pound advanced 0.2 percent to $1.4951. The MSCI Asia Pacific Index of regional stocks gained 0.8 percent on optimism the automaker bailout will limit the fallout of a global recession.

Interest Rates

Japan’s benchmark interest rate is 0.1 percent, which compares with 2.5 percent in the 15-nation euro region, 4.25 percent in Australia and 5 percent in New Zealand.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

The yen has appreciated 25 percent against the dollar 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.

A Japanese government report today showed exports fell 26.7 percent in November from a year earlier, the most since comparable data were made available in 1980, as the yen surged to a 13-year high against the dollar. Honda Motor Co. said last week that it may shift manufacturing overseas if the currency strengthens further.

U.S. Economic Reports

The dollar snapped two days of gains against the euro before U.S. reports that economists estimate will show the world’s largest economy is slipping further into recession.

Consumer spending fell 0.7 percent in November and orders for durable goods may show a second straight decline, according to Bloomberg News surveys of economists. The Commerce Department releases both reports on Dec. 24. Combined sales of new and existing homes approached the lowest level in at least nine years, data may show on Dec. 23.

“The bias is for the dollar to go lower,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “U.S. economy data are likely to confirm just how bad the outlook is.”

The dollar may fall to 88.80 yen today, Soma said.

The U.S. currency has gained 4.2 percent against the euro this year, 33 percent versus the British pound and 28 percent against the Australian dollar as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

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

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China November Corn Imports Rise 84%, Coffee Imports Gain

By William Bi

Dec. 22 (Bloomberg) -- China, the world’s biggest grain consumer, imported 18,696 metric tons of corn in November, 84 percent more than a year ago, the Beijing-based customs office said, citing final trade data.

Imports of coffee gained 34 percent from a year ago to 1,783 tons, the agency said today in an e-mail today.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

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Korean Won Trades Near Seven-Week High as Dollar Shortage Eases

By Kim Kyoungwha

Dec. 22 (Bloomberg) -- South Korea’s won traded near a seven-week high on speculation dollar liquidity is improving after a seizure in credit markets helped drag the local currency to a decade-low last month.

The currency, Asia’s worst performer this year, rose in each of the last two weeks, on speculation that policy makers intervened to support the exchange rate. Bank of Korea Governor Lee Seong Tae said last week the central bank will provide dollars when needed to help local lenders operate normally.

“Banks have little zeal for trading for now as the authorities stayed in the market to manage year-end foreign exchange,” said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. “There’s a perception that the dollar funding crisis is over.”

The won traded at 1,288.30 per dollar as of 9:45 a.m. local time, compared with 1,290 at the end of last week, according to Seoul Money Brokerage Services Ltd. The one-year cross currency swap stood at 0.3 percent, having recovered from a record low of minus 0.7 percent on Dec. 4.

The rate, a gauge of the availability of dollar funding, averaged 3.3 percent this year before the collapse of Lehman Brothers Holdings Inc. in mid-September caused credit markets to freeze.

The volume of won trading in the foreign-exchange market has dropped to $2 to $3 billion a day in the past week from more than $10 billion previously this year, Lee said. He forecast the won may reach 1,250 before the end of the year.

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

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Dalian Soybeans, Soybean Oil and Palm Oil Rise by Trading Limit

By Claire Leow

Dec. 22 (Bloomberg) -- Soybeans, soybean oil and palm oil traded on the Dalian Commodity Exchange in China, the largest consumer of vegetable oils, rose by the daily trading limit.

Soybeans gained 5 percent to 3,216 yuan ($470) a metric ton, the highest intra-day level since Nov. 28. Soybeans are crushed for meal for animal feed and oil for cooking.

Soybean oil rose 5 percent to 6,014 yuan a ton and Dalian palm oil rose by the trading limit to 4,906 yuan a ton.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

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Crude Oil Rises on Planned OPEC Production Cut, U.S. Stimulus

By Gavin Evans

Dec. 22 (Bloomberg) -- Crude oil rose in New York on speculation OPEC’s production cuts next month and U.S. economic stimulus plans will reduce global stockpiles.

The Organization of Petroleum Exporting Countries is “determined” to stabilize oil markets, Saudi Oil Minister Ali al-Naimi said in Doha, Qatar, yesterday. U.S. President-elect Barack Obama is broadening a package of measures to create 3 million jobs in the U.S., the world’s largest economy, during the next two years, an aide said Dec. 20.

Oil “is demand and supply driven,” Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said in a Bloomberg Television interview. “As we have more cuts we will see prices stabilize and then move higher.”

Crude oil for February delivery gained as much as 78 cents, or 1.8 percent, to $43.14 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $43.18 at 8:51 a.m. in Singapore.

The January contract, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement since Feb. 10, 2004. It dropped 27 percent last week as stockpiles at Cushing, Oklahoma, jumped to a 19-month high and investors quit the contract before the holiday break.

OPEC and other producers are “desperate to get dollars and they are desperate to get the prices higher,” Commodity Broking’s Barratt said.

Price Plunge

New York oil futures have fallen 71 percent from the record $147.27 a barrel reached on July 11.

Brent crude oil for February settlement rose as much as 65 cents, or 1.5 percent, to $44.65 a barrel on London’s ICE Futures Europe exchange. It rose 1.5 percent to $44 on Dec. 19.

OPEC, which pumps about 40 percent of the world’s oil, agreed this month to cut daily output by 2.46 million barrels starting Jan. 1 to hold up prices and prevent a glut developing in the second quarter of next year.

The group had reduced output by 1.5 million barrels in November and won’t meet again before March to assess the impact of the latest reduction, Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah said in Doha yesterday.

Russia, the biggest producer outside OPEC, cut production by 350,000 barrels a day last month, and may reduce supply by a further 320,000 barrels next year, Deputy Prime Minister Igor Sechin said Dec. 17.

Hedge-fund managers and other large speculators last week increased bets on rising oil prices to the most in seven months, the U.S. Commodity Futures Trading Commission said Dec. 19.

Net-long positions, the difference between orders to buy and sell the commodity, increased more than fivefold to 64,120 contracts on Dec. 16, the commission said.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net

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Gold May Rise for Third Straight Week as Dollar Rally Stalls

By Pham-Duy Nguyen

Dec. 22 (Bloomberg) -- Gold may rise for the third straight week on speculation the dollar’s rally will stall, boosting the appeal of the precious metal.

Thirteen of 25 traders, investors and analysts surveyed from Mumbai to Chicago on Dec. 18 and Dec. 19 advised buying gold, which rose 2.1 percent last week to $837.40 an ounce in New York. Seven said to sell, and five were neutral.

The Federal Reserve on Dec. 16 cut its benchmark interest rate to zero to 0.25 percent from 1 percent, driving the dollar lower. Gold reached a record $1,033.90 in March, partly because of a decline in borrowing costs.

Most analysts surveyed on Dec. 11 and Dec. 12 anticipated gold’s gains last week. The survey has forecast prices accurately in 143 of 242 weeks, or 59 percent of the time.

Last week’s survey results: Bullish: 13 Bearish: 7 Neutral: 5

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

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Copper, Zinc Rise Limit in Shanghai as Plunge Seen Overdone

By Li Xiaowei

Dec. 22 (Bloomberg) -- Copper and zinc futures on the Shanghai Futures Exchange rose the maximum daily limit as some investors may have viewed recent drops as excessive.

Copper for March delivery rose 4 percent from the previous settlement price to 23,350 yuan ($3,411) at 9:25 a.m. local time, after plunging to a five-year low last week.

Zinc for March delivery traded at 9,755 yuan after rising 4 percent from the previous settlement price to 9,785 yuan earlier.

To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

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S. Korea Stocks: GS, Hanjin, Jinsung, Lotte Chilsung, Samsung

By Saeromi Shin

Dec. 22 (Bloomberg) -- South Korea’s Kospi index rose 16.49, or 1.4 percent, to 1,197.46 as of 10:22 a.m. in Seoul. The benchmark stock gauge is set for a 37 percent drop this year, its first annual decline since 2002.

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

Builders: Hyundai Engineering & Construction Co. (000720 KS), the fourth-biggest South Korean builder, rose 1,900 won, or 3.1 percent, to 62,900. GS Engineering & Construction Corp. (006360 KS), the nation’s third-largest builder, added 4,300 won, or 7 percent, to 65,600. The stocks rose as the Ministry of Land, Transportation and Maritime Affairs is scheduled to give a briefing on its operations next year to President Lee Myung Bak at the presidential office today where measures to ease laws on real estate speculation are expected to be announced.

Chipmakers: Samsung Electronics Co. (005930 KS), the world’s largest maker of dynamic random access memory chips, rose 9,000 won, or 1.8 percent, to 498,500. Hynix Semiconductor Inc. (000660 KS), the second-largest maker, climbed 70 won, or 0.8 percent, to 8,590. Prices of the benchmark DRAM chip rose 7.7 percent on Friday, adding to Thursday’s 12 percent gain, according to Dramexchange Technology Inc., Asia’s biggest spot market for chips.

Jinsung T.E.C. (036890 KS), which makes construction machinery components, retreated 1,000 won, or 15 percent, to 5,690, adding to Friday’s 15 percent decline. Woori Investment & Securities Co. cut its recommendation to “hold,” from “buy,” saying the company belatedly included losses from currency derivatives in its third-quarter earnings.

KB Financial Group Inc. (105560 KS), the holding company for the nation’s No. 1 bank, rose 500 won, or 1.4 percent, to 36,300. ING Groep NV, the largest Dutch financial services company, plans to buy back a 15 percent stake in its South Korean unit from Kookmin Bank for 180 million euros ($254 million).

Lotte Chilsung Beverage Co. (005300 KS), the biggest South Korean beverage maker, rose 39,000 won, or 4.9 percent, to 843,000. South Korea’s Lotte Group will acquire Doosan Corp.’s liquor unit for between 500 billion won ($387 million) and 600 billion won, MBN cable business news channel reported, without saying where it obtained the information.

Hanjin Heavy Industries & Construction Co. (097230 KS), South Korea’s first exporter of ships, gained 2,100 won, or 7.5 percent, to 30,100. The company received an order valued at 218.8 billion won ($170 million) to build nine vessels from the Public Procurement Service for the Korea Coast Guard.

Hite Brewery Co. (103150 KS), the nation’s No. 1 brewer, retreated 3,500 won, or 1.9 percent, to 178,500. BNP Paribas SA cut its recommendation to “hold,” from “buy,” in a note, citing slowing volume growth in 2009, higher raw material costs and potential threat to its market share from industry consolidation.

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

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Malaysian Palm Oil Exports Rise 31% Dec. 1-20, Intertek Says

By Soraya Permatasari

Dec. 22 (Bloomberg) -- Malaysia’s palm oil exports rose 31 percent in the first 20 days of December compared with the same period the previous month, according to independent surveyor Intertek.

A total of 1.1 million metric tons of palm oil were tracked Dec. 1-20, Intertek said in a report today. Malaysia exported 836,659 tons of palm oil in the same period in November, the surveyor said.

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net

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Australia Stocks: Babcock Power, Fortescue, Qantas, Rio Tinto

By Shani Raja

Dec. 22 (Bloomberg) -- The S&P/ASX 200 Index slipped 43.50 points, or 1.2 percent, to 3,572.20 at 11:25 a.m. in Sydney. The following shares were among the most active.

Australian Agricultural Co. (AAC AU), the nation’s largest cattle rancher, rallied 25 cents, or 15 percent, to A$1.93, the highest since Nov. 14. The company agreed to sell five cattle properties with a book value of A$250 million ($170 million) to Primary Holdings International to reduce debt.

Babcock & Brown Power (BBP AU), the Australian electricity producer seeking to sell plants to reduce debt, soared 2.7 cents, or 52 percent, to 7.9 cents, the highest since Nov. 7. The company said it’s received non-binding “indicative submissions” for the acquisition of its business.

Fortescue Metals Group Ltd. (FMG AU) slumped 26 cents, or 12 percent, to A$1.90, the lowest since Nov. 27. Australia’s third-biggest producer of iron ore fell 8.5 percent Friday after saying $1.5 million of its cash was frozen in accounts because of legal action relating to changes made to shipping contracts.

Qantas Airways Ltd. (QAN AU) fell 8 cents, or 3 percent, to A$2.56, the most since Dec. 12. Qantas has agreed to an average pay increase of 16 percent over four years for maintenance workers, who this year forced delays during an industrial campaign over wages, the Australian Financial Review said, citing Australian Manufacturing Workers Union national secretary Dave Oliver.

Rio Tinto Group (RIO AU), the world’s third-biggest mining company, dropped A$1.30, or 3.3 percent, to A$37.71, the lowest since Dec. 12. Rio suspended operations at its Hismelt pig iron plant in Western Australia state amid falling global demand for commodities.

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

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Japan Stocks Climb on U.S. Auto Rescue; Hino, Aisin Advance

By Masaki Kondo

Dec. 22 (Bloomberg) -- Japan stocks rose after the U.S. agreed to provide automakers with emergency loans to stay in business, easing concern a recession in the world’s biggest economy will deepen.

Hino Motors Ltd. added 1.7 percent after the White House said on Dec. 19 General Motors Corp. and Chrysler LLC will get $17.4 billion in loans. Aisin Seiki Co., a maker of auto transmissions and a supplier to U.S. carmakers, advanced 3.3 percent. Nidec Corp., the world’s biggest maker of disk- drive motors, declined 2.1 percent after cutting its profit forecast on falling demand and the stronger yen.

The Nikkei 225 Stock Average climbed 14.34, or 0.2 percent, to 8,602.86 as of 9:06 a.m. in Tokyo. The broader Topix index rose 4.43, or 0.5 percent, to 838.86.

“Policy responses from governments will continue to shore up investor sentiment, though the deterioration of the global economy and company earnings won’t end soon,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.

The Nikkei has lost 44 percent this year, poised for its worst annual performance on record, as the global financial crisis dragged the world’s biggest economies into recession. Losses and writedowns tied to the collapse the U.S. subprime- mortgage market rose above $1 trillion last week.

President George W. Bush’s rescue plan for the automakers helped push the Standard & Poor’s 500 Index up 0.3 percent on Dec. 19. GM, the biggest U.S. automaker, and closely held Chrysler would have run out of cash as soon as this month without the loans.

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

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Australia Stocks, Japan Stocks in U.S. Rise on U.S. Auto Rescue

By Masaki Kondo

Dec. 22 (Bloomberg) -- Australia shares and Japan’s stocks traded in New York rose after the U.S. government agreed to provide automakers with emergency loans to stay in business.

BHP Billiton Ltd., the biggest mining company, climbed 0.5 percent in Sydney even after oil had the biggest weekly drop in almost 18 years. U.S.-traded receipts of Honda Motor Co. added 0.5 percent from the closing price in Tokyo after the White House said on Dec. 19 General Motors Corp. and Chrysler LLC will get $17.4 billion in loans, easing concern a failure of the U.S. auto industry will deepen a recession in the world’s largest economy.

Australia’s S&P/ASX 200 Index rose 0.1 percent to 3,617.80 as of 10:09 a.m. in Sydney. New Zealand’s NZX 50 Index added 0.7 percent to 2,673.44 in Wellington.

“Policy responses from governments will continue to shore up investor sentiment, though the deterioration of the global economy and company earnings won’t end soon,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television.

The Bank of New York Mellon Japan ADR Index, which tracks American depositary receipts of the nation’s companies, added 0.4 percent. Nikkei 225 Stock Average futures expiring in March closed at 8,575 in Chicago, lower than 8,600 in Osaka and 8,580 in Singapore.

The MSCI Asia Pacific Index is down 43 percent in 2008, the worst annual performance in the regional benchmark’s two-decade history, as the global financial crisis dragged the world’s biggest economies into recession. Losses and writedowns tied to the collapse the U.S. subprime-mortgage market rose above $1 trillion last week.

Crude oil for January delivery, which expired on Dec. 19, dropped 6.5 percent to $33.87 a barrel in New York, the lowest settlement since February 2004. Futures declined 27 percent since Dec. 12, the steepest weekly tumble since January 1991.

President George W. Bush’s rescue plan for the automakers helped push the Standard & Poor’s 500 Index up 0.3 percent on Dec. 19. GM, the biggest U.S. automaker, and closely held Chrysler would have run out of cash as soon as this month without the loans.

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

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U.S. Stocks Post Second Straight Weekly Gain After Fed Rate Cut

By Lynn Thomasson

Dec. 20 (Bloomberg) -- U.S. stocks posted the first back-to- back weekly gains in three months as the Federal Reserve reduced interest rates to a record low and President George W. Bush granted emergency loans to General Motors Corp.

XL Capital Ltd. and Macy’s Inc. surged more than 24 percent as the central bank cut the main U.S. rate to as low as zero and pledged to “employ all available tools” to end the yearlong recession. GM jumped 23 percent yesterday as Bush gave the automaker and Chrysler LLC up to $17.4 billion and said the companies must restructure.

The Standard & Poor’s 500 Index rose 0.9 percent to 887.88. The measure, which has increased 18 percent since its 11-year low on Nov. 20, is still down 40 percent in 2008. The Dow Jones Industrial Average slipped 0.6 percent to 8,579.11 this week.

“We’re still in a bear market, but right now it should be a good period of time for the market,” said David James of Xenia, Ohio-based James Investment Research, which manages $2 billion. “The market is ready to rally.”

The S&P 500 climbed 5.1 percent to a five-week high on Dec. 16 after the Fed said that it will target a federal funds rate of between zero and 0.25 percent, a reduction from 1 percent. The Fed may also increase asset purchases and lend against lower- quality debt should Treasury provide funding, a senior central bank official said.

“Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Federal Open Market Committee said in a statement.

Decline Protection

The VIX, as the Chicago Board Options Exchange Volatility Index is known, tumbled 17 percent to 44.93, the lowest level since Oct. 1. The index gauges how much investors are paying for insurance against declines in the S&P 500.

The S&P 500 Financials Index climbed 2.7 percent, the most in three weeks. XL Capital, the Bermuda-based insurer seeking a buyer, soared 49 percent to $4, on speculation that billionaire investor Warren Buffett was considering a bid for the company.

Macy’s increased 25 percent to $10.62 after it negotiated a more flexible bank-credit agreement to remove doubts about its ability to pay off $950 million in debt maturing next year.

Goldman Sachs Group Inc. gained 19 percent to $80.73. The New York bank reported a fourth-quarter loss of $4.97 a share, smaller than analysts’ most pessimistic estimates.

Morgan Stanley increased 12 percent to $15.45. The stock rose even after the company posted $2.2 billion fourth-quarter loss, wider than analysts estimated, as investment-banking fees slid and the value of fixed-income securities declined.

‘Bottoming Process’

“I don’t expect that we’re going to be off to the races, but we are in a bottoming process,” Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan, said of the stock market.

The rally spurred by the Fed’s rate cut pushed the S&P 500 above its average level during the prior 50 days, a signal to some traders that the advance will continue. The index exceeded its so-called 50-day moving average for the first time since Sept. 3, breaking the longest stretch below since August 2002, according to data from Bespoke Investment Group LLC.

GM, the biggest U.S. automaker, rallied 14 percent to $4.49 for the week. Under the terms of the rescue plan, the government’s debt would have priority over any other creditors. The automaker also must provide warrants for non-voting stock, accept limits on executive pay, and give the government access to financial records.

1.1 Million Workers

The cost of letting automakers fail would lead to a 1 percent reduction in U.S. economic growth and mean about 1.1 million workers would lose their jobs, including those in the auto-supply business and among dealers, the White House said.

Darden Restaurants Inc. surged 30 percent to $28.55 for the biggest weekly gain since it began trading 13 years ago. The owner of the Olive Garden and Red Lobster chains reported second- quarter profit that exceeded analysts’ estimates after cutting commodity and labor costs.

The biggest weekly decline by oil since 1991 led energy stocks lower and limited the S&P 500’s advance. Exxon Mobil Corp., Chevron Corp. and National Oilwell Varco Inc. dropped more than 5 percent.

Crude tumbled 27 percent to $33.87 a barrel, the lowest price since February 2004. The fuel has lost three-quarters of its value since July.

Newell Rubbermaid Inc. sank 25 percent to $9.50, the biggest loss in at least 28 years, after the maker of Calphalon cookware said 2008 profit would be less than previously forecast because of the weakening economy.

Spending by American consumers fell in November for a record fifth month, while home sales and orders for durable goods also declined as the recession deepened, economists said before reports next week. Walgreen Co. and Micron Technology Inc. are among companies reporting quarterly results.

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

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Congress Will Set Conditions for $350 Billion in Rescue Funds

By Alison Vekshin

Dec. 20 (Bloomberg) -- Congress will use the remaining $350 billion in a U.S. bank-rescue package to force the Bush administration and President-elect Barack Obama into providing foreclosure aid as the pace of people losing their homes soars.

Lawmakers will agree to release the funds in exchange for Treasury Secretary Henry Paulson and Obama agreeing to programs that cut interest rates and forgive a portion of a mortgage’s principal, House Financial Services Committee Chairman Barney Frank said in a telephone interview yesterday.

Frank said legislation is being drafted that will set the conditions on spending the cash after Paulson used almost half the $700 billion Troubled Asset Relief Program to boost bank capital. Paulson resisted calls to support foreclosure relief.

“The Democrats are finally getting it, that this administration is not going to do anything to help homeowners, and they are getting more proactive,” John Taylor, president of the National Community Reinvestment Coalition, said in a telephone interview. “Paulson has had the chance to do something like this all along, but has chosen not to. I think he’ll do it if a quid pro quo is held over him.”

Frank, a Massachusetts Democrat, said in the interview he’s drafting legislation with Senate Banking Committee Chairman Christopher Dodd that would release the remaining $350 billion in exchange for foreclosure help, aid for General Motors Corp. and Chrysler LLC and provisions to hold banks accountable for stepped up lending to consumers.

The measure would adopt a Federal Deposit Insurance Corp. foreclosure plan, revamp the Hope for Homeowners loan-relief program that has attracted few lenders and support a Treasury program to cut rates on some fixed-rate home-loans.

Agreement Sought

“We should have an agreement among Obama, Paulson and the congressional leadership to release the $350 billion with conditions on how it’s spent,” Frank said. “We need the second $350 billion, but it can only be done if there’s an agreement as to how to do it.”

Paulson urged Congress yesterday to release the second half of the rescue funds after the government exhausted $350 billion in less than three months.

“Congress will need to release the remainder of the TARP to support financial market stability,” Paulson said in a statement released in Washington. “I will discuss that process with the congressional leadership and the president-elect’s transition team in the near future.”

Frank said the legislation will include FDIC Chairman Sheila Bair’s foreclosure-prevention plan, which provides a U.S. guarantee for troubled mortgages to spur loan modifications.

FDIC Program

Paulson has declined to adopt the proposal, while Bair has said the law enacted in October gives the Treasury authority to fund a plan she said might prevent 1.5 million foreclosures through next year at a cost of $24 billion. U.S. foreclosure filings climbed 28 percent in November from a year earlier, data provider RealtyTrac Inc. said Dec. 11.

Frank also plans to revise Hope for Homeowners passed by Congress in July. The program, run by the Federal Housing Administration, is aimed at helping about 400,000 homeowners by insuring as much as $300 billion in refinanced loans after servicers forgive part of the loan balance. Few lenders have signed up because banks must cut a large portion of the loan and pay high fees.

Frank said he wants to include a proposal Paulson is considering that would use Fannie Mae and Freddie Mac, the federally chartered mortgage financers the U.S. seized in September, to reduce 30-year, fixed home-loan rates to about 4.5 percent from an average of about 5.54 percent.

Feldstein’s Proposal

He also plans to adapt a plan from Harvard University economist Martin Feldstein to let the government substitute a new loan with a lower interest rate for a portion of an existing troubled mortgage.

“I just view this as Barney with a cattle prod, saying ‘put more emphasis on foreclosure relief,’” Gilbert Schwartz, a former Federal Reserve counsel and now a partner at law firm Schwartz & Ballen in Washington, said in an interview.

Frank said he’s ready to act on the legislation during the final month of the Bush administration, without waiting until Obama’s Jan. 20 inauguration.

“Why wait three weeks? Let’s do it,” Frank said. “We’re in a crisis now. How many people’s homes will be foreclosed?”

Lawmakers will have a chance to vote for a bill to reject Paulson’s request for the funds, “but I think they should also have a chance to vote for a bill that allows it to go forward with these conditions,” Frank said.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

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