Philippine Exports Fall for Second Straight Month

By Francisco Alcuaz Jr.

Jan. 13 (Bloomberg) -- Philippine exports fell for a second consecutive month in November as the global recession damped demand for disk drives and mobile-phone chips made by Intel Corp. and other manufacturers in the country.

Overseas sales dropped 11.9 percent to $3.49 billion from a year earlier, the National Statistics Office said in Manila today. The median estimate of eight economists in a Bloomberg News survey was for a 16.6 percent decline. Exports slumped 14.8 percent in October, the biggest drop in seven years.

Philippines stocks and the peso fell on concern the decline in exports will hurt growth in the Southeast Asian economy, forecast to expand in 2009 at the slowest pace in eight years by President Gloria Arroyo’s government. The global slowdown may also hurt remittances from the nation’s overseas workers.

“We’re just beginning to feel the downdraft,” said Song Seng Wun, an economist at CIMB GK Securities Ltd. in Singapore. “The contraction will probably continue well into 2009. As demand slumps, we can only guess about the size of the impact” on exports and overseas jobs.

The Philippine peso declined a fourth day against the U.S. dollar, losing 0.4 percent to 47.725 as of 9:25 a.m. in Manila, according to Tullett Prebon Plc.

Philippine merchandise exports may fall as much as 3 percent in 2009 and electronics shipments may contract 10 percent, BusinessWorld newspaper cited the Export Development Council as saying last week.

Accelerate Spending

Arroyo plans to accelerate spending of this year’s infrastructure budget in the first half to limit the effects of the global slump, Economic Planning Secretary Ralph Recto said Jan. 7.

The central bank cut its key interest rate for the first time in 11 months in December to spur growth, and Governor Amando Tetangco said last week slowing inflation gives policy makers “additional room to find opportunities for monetary easing this year.”

Shipments of electronics products fell 17 percent to $2.02 billion in November. Worldwide semiconductor sales fell 9.8 percent that month from a year earlier, according to the San Jose, California-based Semiconductor Industry Association.

Sales of clothing by manufacturers supplying The Gap Inc. and Polo Ralph Lauren Corp. declined 16 percent to $133 million.

Exports to the U.S., the Philippines’ biggest overseas market, dropped 19 percent to $609 million. Shipments to Japan, the No. 2 destination, fell 3.8 percent to $573 million. Exports to China declined 27 percent.

To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net

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Japan Bank Loans Accelerate Amid Frozen Corporate Bond Market

By Finbarr Flynn and Jason Clenfield

Jan. 13 (Bloomberg) -- Lending by Japan’s banks accelerated at the fastest pace in 16 years in December as the global credit crisis forced companies out of the corporate debt market.

Loans, excluding those by credit associations, rose 4.1 percent last month from a year earlier after jumping 3.6 percent in November, the Bank of Japan said. The growth rate was the fastest since February 1992 and the third straight monthly gain.

Banks boosted lending to Japan’s biggest companies after interest rates for firms issuing commercial paper surged following the September collapse of Lehman Brothers Holdings Inc. Lending by Japan’s 10 so-called city banks, including Mitsubishi UFJ Financial Group Inc., rose 4.2 percent after climbing 3.4 percent in November.

“It’s positive for banks in the short term as lending to blue-chip companies is increasing,” said Naoko Nemoto, an analyst at Standard & Poor’s in Tokyo. “Yet the increase shows companies are having difficulty issuing commercial paper and corporate bonds, illustrating the deterioration of the nation’s economy and financial markets.”

Mitsubishi UFJ, Japan’s biggest bank, fell 6.2 percent as of 9:58 a.m. on the Tokyo Stock Exchange while Mizuho Financial Group Inc., the second-largest by revenue, lost 5.5 percent. An 84-stock index tracking the nation’s lenders dropped 5.2 percent, extending its decline to 43 percent during the past 12 months.

The shrinking global economy and strengthening yen have caused a record decline in exports by Japanese companies, which plunged 27 percent in November from a year earlier. Toyota Motor Corp. has announced an 11-day closure of domestic plants.

Regional banks expanded lending 4 percent in December, compared with 3.8 percent a month earlier.

‘Taking Risks’

“Given the state of the economy and its outlook, banks may be taking risks beyond their capacity by increasing lending,” said Mitsushige Akino, who oversees about $430 million as chief investment officer at Tokyo-based Ichiyoshi Investment Management Co. “More lending potentially means more non-performing loans.”

The Bank of Japan has cut interest rates twice since October, lowering the key lending rate to 0.1 percent from 0.5 percent, and pledged to buy commercial paper for the first time to help companies get funding.

Japanese firms borrow about a fifth of needed funds by selling debt in the market and the rest comes from bank loans, central bank Governor Masaaki Shirakawa said last month.

Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo, said the increase in lending belies the funding crunch faced by smaller companies.

‘Shut Out’

“Banks choose to lend to the most creditworthy customers, so if larger companies that normally would have issued commercial paper shift to bank loans, it creates a situation in which smaller, relatively less creditworthy companies find it hard to borrow,” she said. “Those companies are getting shut out of the market.”

Japan’s economy probably shrank at an annual 12.1 percent pace in the quarter ended Dec. 31, the sharpest drop since 1974, Barclays Capital has said. Gross domestic product contracted at an annual 1.8 percent pace in the three months ended Sept. 30, the government said Dec. 9.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net; Jason Clenfield in Tokyo at jclenfield@bloomberg.net

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N.Z. Business Confidence Slumps on Global Outlook

By Tracy Withers

Jan. 13 (Bloomberg) -- New Zealand businesses grew more pessimistic about the economic outlook and their own earnings as the world’s largest economies slumped into recession, curbing exports and consumer spending.

A net 64 percent of companies surveyed last quarter expect the economy will worsen over the next six months, the New Zealand Institute of Economic Research said today in Wellington. That is more than three times the 19 percent that forecast a deterioration in the third quarter. The net figure is calculated by subtracting the pessimists from optimists.

New Zealand is in its first recession in 10 years as a global economic slowdown curbs business investment and consumer spending. The government, which last month said the economy may not start expanding steadily until 2010, plans to cut income taxes and spend more on roads and schools to spark demand.

“The economy had negative momentum throughout last year and in the first half it will feel the full brunt of the global slowdown,” said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington. “Profit expectations have fallen very sharply. There are signs of real stress in corporate New Zealand.”

The New Zealand dollar fell to 57.33 U.S. cents at 11:45 a.m. in Wellington from 57.73 cents immediately before the report was released. The benchmark NZX 50 index dropped 1.3 percent to 2,733.54.

Profit Outlook

Highlighting the economy’s weakness, businesses reported a slump in activity in the fourth quarter, while the outlook for profits was the worst in 26 years, according to today’s survey.

Warehouse Group Ltd., the nation’s biggest discount retailer, said sales in the 10 weeks to Jan. 4 fell 2.5 percent and the company will probably show nil profit growth in the six months ending Jan. 25.

“The sheer scale and sharpness of the deterioration is difficult to ignore,” the institute said in today’s report. “Marked declines in employment and investment intentions in particular suggest that economic growth may be softer for longer than previously expected.”

The U.S. is entering a second year of recession while the U.K., Germany and Japan are also contracting, prompting central banks to cut borrowing costs and governments to spend heavily to stimulate their economies.

Interest Rates

Reserve Bank of New Zealand Governor Alan Bollard has reduced the benchmark interest rate by 3.25 percentage points since July and will cut by at least another half point on Jan. 29, according to all 14 economists surveyed by Bloomberg News.

The economy has been contracting since the first quarter of last year and probably shrank in the fourth quarter as well, the institute said.

The economy will contract in the first quarter as well, said Craig Ebert, senior markets economist at Bank of New Zealand Ltd. in Wellington.

New Zealand is facing an aggressive slowdown “in which people will be losing their jobs and firms won’t invest enough,” he said.

A net 44 percent of companies said trading fell in the three months ended Dec. 31, the most since records began in 1970. The net figure, which is seasonally adjusted, is calculated by subtracting those reporting an increase in activity from those seeing a drop.

Job Losses

A net 43 percent expect trading will slow in the first quarter, also the most pessimistic reading on record. A net 49 percent say profits will decline.

Companies are firing workers as consumers rein in spending and as the deepening global financial crisis threatens to damp demand for the nation’s exports.

The jobless rate rose to a five-year high of 4.2 percent in the third quarter and will increase to at least 6 percent this year, the government forecasts.

A net 32 percent of companies expect to fire workers in the next year, the most since 1991, today’s survey showed. A net 20 percent said it is easier to find skilled workers, the highest in 17 years.

A shrinking economy, falling fuel prices and lower interest rates are reducing costs and fewer companies expect to raise prices, which will ease inflation, the institute said.

Capacity utilization, a measure of factory usage, decreased to 88.8 percent in the fourth quarter, the lowest since mid-1999, from 90.8 percent in the previous three months.

For the first time since 1998, more firms expect to lower prices than raise them, the institute said.

For Related News:

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

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U.K. Slumps Most Since 1989 as Home Sales Drop, Surveys Show

By Brian Swint

Jan. 13 (Bloomberg) -- The British economy slumped the most in at least two decades during the fourth quarter and home sales dropped to the lowest since the measure began in 1978 as the recession deepened, reports by lobby groups showed.

The British Chambers of Commerce’s survey of almost 6,000 companies showed the weakest results since it started in 1989, the London-based group said today. The average number of home sales per surveyor slipped and retail sales had the worst December in 14 years, reports by the Royal Institution of Chartered Surveyors and British Retail Consortium showed.

The Bank of England reduced the benchmark interest rate to 1.5 percent last week, the lowest in the bank’s history. Prime Minister Gordon Brown yesterday promised 500 million pounds ($745 million) to encourage hiring and pledged to help thaw lending as Britain faces its first recession since 1991.

“This recession is worse than in the 1990s,” David Frost, managing director of the BCC, told journalists at a briefing yesterday. “The situation is dire, and the Monetary Policy Committee is running out of bullets.”

The central bank said last week that further measures will be needed to return the economy to growth as interest rates approach zero. That may include purchasing bonds or other assets after the U.S. Federal Reserve this month started buying up securities backed by mortgages.

Fathom Financial Consulting suggested last week that the government should start buying homes in danger of repossession. Property values dropped 15.9 percent last year, the most since at least 1991, Nationwide Building Society said Jan. 6.

Property Market

The average number of home sales per surveyor slipped to 10.1, the lowest in at least three decades, from 10.6 in the quarter through November, RICS said.

The RICS report still suggested that the property bust may have started to bottom out. The index for house prices, which is the percentage difference between the surveyors reporting higher prices and those reporting price declines, rose to minus 73 last month. That’s the highest since February.

Retail sales fell 3.3 percent from a year ago last month, the worst December number in the past 14 years, led by clothing and furniture, according to the BRC. The group represents 80 percent of U.K. retailers.

“These are truly dreadful numbers,” Stephen Robertson, director general of the BRC, said in a statement. “Retailers had a torrid December despite a blizzard of promotions and deals, which would have hit margins.”

Recession Deepens

The economy shrank 1.5 percent in the fourth quarter, the most since 1980, the National Institute for Economic and Social Research said Jan. 10. The statistics office reported a 0.6 percent contraction in the third quarter.

“We hope that the speed of the decline is matched by the speed of the recovery,” BCC’s Frost said. The group, which represents 100,000 companies, said its index of manufacturing sales at home fell to minus 38 from minus 13. The service index fell to minus 31 from minus seven.

Export sales fell services and manufacturers plunged in the quarter even as the pound fell 19 percent against the country’s main trading partners in the period, suggesting the collapse in demand overseas is preventing the weaker currency from helping the economy.

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

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Japan Current-Account Surplus Narrows 66% on Exports

By Keiko Ujikane

Jan. 13 (Bloomberg) -- Japan’s current-account surplus narrowed for a ninth month in November as exports slumped by a record in the wake of the global recession.

The surplus shrank 65.9 percent to 581.2 billion yen ($65 billion) from a year earlier, the Ministry of Finance said in Tokyo today. The median estimate of 24 economists surveyed by Bloomberg News was for the gap to narrow to 600 billion yen.

Japan’s recession is deepening as the worldwide financial crisis chokes off demand for the nation’s cars and electronics, prompting companies to cut production and investment. Toyota Motor Corp., which is forecasting its first operating loss in seven decades, said last week that it will suspend manufacturing at a dozen domestic factories for 11 days in February and March.

“There’s no doubt that Japan’s recession is deepening,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. “Demand for automobiles and semiconductors is declining considerably amid the global economic turmoil.”

Exports fell 26.5 percent in November from a year earlier, the most since comparable data were first made available in 1985, today’s report showed. Imports slid 13.7 percent.

The yen’s 22 percent gain against the dollar in the past year is compounding exporters’ woes and eroding the value of investments Japanese have overseas. Japan’s currency traded at 89.49 per dollar as of 10:38 a.m. in Tokyo and surged to a 13- year high of 87.14 on Dec. 17.

Every 1 yen gain against the dollar and euro trims Toyota’s annual operating profit by 40 billion yen and 6 billion yen, according to the company.

Record Plunge

Exports plunged a record 26.7 percent in November from a year earlier on a customs-cleared basis, the Finance Ministry said last month.

Crude oil traded at $58 a barrel in November on average, 61 percent less than the record $147.27 reached on July 11. Japan gets virtually all of its oil from abroad.

“Japan’s economic downturn may be considerably deep,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Exports will probably drop further in the coming months, worsening corporate profits and investment.”

Mounting evidence of a weakening economy last month prompted the Bank of Japan to cut interest rates to 0.1 percent, increase purchases of government debt and announce plans to buy commercial paper to ease companies’ borrowing costs.

The income surplus, the difference between money earned abroad and payments made to foreign investors in Japan, narrowed 15.5 percent to 844.7 billion yen from a year earlier.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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New Zealand’s AA+ Credit Rating May Be Cut, S&P Says

By Tracy Withers

Jan. 13 (Bloomberg) -- New Zealand’s AA+ foreign-currency credit rating may be cut if the nation’s current account deficit and overseas debt begin to curb growth and investment, Standard & Poor’s said.

The rating company affirmed the rating, though revised the outlook to negative from stable, according to a statement today. The AAA local-currency rating is affirmed with a stable outlook.

New Zealand’s dollar fell to a four-week low after the statement, which adds to signs that investors may turn away from an economy that is in a prolonged recession. A report earlier today showed business confidence has slumped to a 34-year low and the government last month forecast widening budget deficits over the next five years.

“It’s not going to be easy for New Zealand,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “They have a massive current account deficit and a sizeable budget deficit. These are two things that aren’t good to have in an environment when it’s a struggle to raise capital.”

New Zealand’s dollar fell to 56.45 U.S. cents at 2:40 p.m. in Wellington from 57.17 cents immediately before the S&P report and from 57.93 cents in late Asian trading yesterday.

Standard & Poor’s yesterday said it may cut Spain’s AAA sovereign rating, citing challenges facing the economy. On Jan. 9, S&P put Greece’s credit rating on watch for a possible downgrade and reduced the outlook on Ireland’s rating to negative from stable.

Australian Rating

Nations that have been downgraded from AAA previously include Japan, Sweden, Finland and Denmark. The rating company today affirmed Australia’s AAA rating.

“The negative outlook on the New Zealand foreign currency rating reflects the likelihood of a rating downgrade if external imbalances begin to pressure the country’s investment, growth, and fiscal performance,” S&P said.

New Zealand’s current account gap widened to 8.6 percent of gross domestic product in the year ended Sept. 30 as some of the world’s largest economies slumped into recession, driving down commodity prices and curbing exports.

The government last month forecast the deficit may start to narrow later this year as the recession crimps demand for imports.

“While the current account deficit is large and has been growing, it is likely to narrow somewhat in the next few years,” Finance Minister Bill English said in an e-mailed statement today. “While New Zealand’s credit rating remains very high, the position is not as comfortable as we would like.”

Business Confidence

The currency extended a decline sparked by a report that showed business confidence plummeted in the fourth quarter, matching a 34-year low seen in the second quarter last year.

A net 64 percent of companies surveyed last quarter expect the economy will worsen over the next six months, the New Zealand Institute of Economic Research said. The net figure is calculated by subtracting the pessimists from optimists.

The report added to signs that New Zealand’s first recession in 10 years, which began in the first quarter of 2008, may extend into the first half of 2009.

A net 43 percent of companies surveyed last month expect trading will slow in the first quarter, the most pessimistic since records began in 1970, the institute said. A net 49 percent say profits will decline in the next three months and a net 32 percent expect to fire workers.

The slump in spending and company earnings has curbed tax revenue and boosted welfare payments, pushing the government’s budget into deficits that are forecast to persist until at least 2013, English said last month. The budget cash deficit is forecast to be NZ$10.9 billion, or 5.6 percent of GDP, by 2011.

‘Market Confidence’

“Although we view such deficits as not uncommon given the cyclical weakening of tax revenue, market confidence may wane until policy makers articulate a plan for medium-term fiscal consolidation, given country’s external position,” S&P said.

“A credible medium-term fiscal plan combined with an easing of New Zealand’s external imbalances could, in our view, result in the ratings stabilizing at the existing levels,” S&P said. “Absent such developments, the foreign-currency rating could be lowered.”

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

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Go Short Has New Meaning in Sarkozy’s World: Michael R. Sesit

Commentary by Michael R. Sesit

Jan. 13 (Bloomberg) -- Nicolas Sarkozy is a small man, about an inch shorter than Napoleon, with an ego as large as an empire. He also travels the world with a famous wife and a penchant for inserting himself into the center of international crises.

The most recent is the Israeli-Hamas conflict in Gaza, where the peripatetic French president, uninvited by the participants, shuttled between Jerusalem; the West Bank town of Ramallah; Beirut, Lebanon; Damascus; and Sharm al-Shaykh, the Egyptian resort on the Red Sea; attempting to negotiate a cease-fire.

It’s hard to fault a man for wanting to end fighting that has cost the lives of more than 900 people and injured more than 3,700. Yet Sarkozy’s insistence on playing the hero sows confusion about who represents the 27-nation European Union.

Remember former U.S. Secretary of State Henry Kissinger’s comment, “Who do I call, if I want to call Europe?” With Sarkozy running around holding press conferences while a parallel official EU delegation also tries to negotiate a cease-fire, it really makes one wonder.

If it persists, the resulting muddle over the long run isn’t good news for European financial assets. That’s especially the case when Sarkozy’s go-it-alone antics reach into the realm of finance, as they did last year when the French president set up a multibillion-euro sovereign-wealth fund to protect “strategic” French companies from “foreign predators.”

Sarkozy’s Summit

He again ruffled diplomatic feathers when, following a late- November meeting of the Group of 20 countries on the global financial crisis, Sarkozy said he would hold his own summit in Paris that would compete with a second one scheduled by the G-20. He also angered U.S. officials with claims that they had agreed to negotiate regulatory changes when they hadn’t.

Many investors focus on geopolitical issues only when they are obvious, such as the Sept. 11 terrorist attacks on New York and Washington. Yet politics form an important backdrop to markets, particularly if policy makers are perceived as being unclear or divided.

Sarkozy’s tendency to freelance and his disregard for protocol raise doubts about the cohesiveness of EU policy. That will diminish the relative appeal of European stock, bond and currency markets to international investors.

The French president initially began to strut his stuff when France held the rotating six-month presidency of the EU. That offered him a platform from which to broker a cease-fire to the Russian-Georgian War and a partial Russian withdrawal.

Too Small

France ceased to hold the EU presidency on Dec. 31. The country is too small to challenge the U.S.’s traditional role in the Middle East. While France was the colonial power in Lebanon, it wasn’t in Palestine, where the U.K. was the imperial ruler.

What’s more, Sarkozy’s Middle East tour overlaps with an EU mission led by Czech Foreign Minister Karel Schwarzenberg and includes EU foreign policy chief Javier Solana. The Czech Republic took over the EU presidency from France on Jan. 1.

The French initiative raises the question of who represents Europe and is a signal to the rest of the world not to regard the Czech effort as serious. Taking the high road, Czech Prime Minister Mirek Topolanek said he “welcomes” Sarkozy’s participation.

Not the Italians. Franco Frattini, Italy’s foreign minister essentially told the Frenchman to bug out.

“When everyone conducts his own mission, it weakens the strategic position,” he said. “Now there’s a new president” of the EU, Frattini said, adding: “We must coordinate our action.”

Along with being criticized by Italy, Sarkozy’s calls for a cease-fire have been rebuffed by Israel, ignored by the U.S., snubbed by Hamas and dismissed by Syria.

Economic Leader

He apparently had so much fun holding the EU presidency that he’s having a hard time letting go. In October, Sarkozy said he would like to extend France’s influence in the EU past Dec. 31, figuring he can be the economic head of an inner council of leaders from the 16 nations that use the euro -- at least until 2010 when Spain, a euro-area country, assumes the EU presidency. Neither the Czech Republic nor Sweden, which will succeed the Czechs as EU president, is in the euro bloc.

The proposal is a non-starter. It’s an insult to the Czechs and Swedes. Germany objects to the idea of an economic government for Europe and to Sarkozy’s attempts to harness the independence of the European Central Bank. The U.K. is naturally suspicious of anything French. And Luxembourg Prime Minister Jean-Claude Juncker is already the current chairman of the Eurogroup of euro- area finance ministers.

To be sure, Europe should be represented by a strong leader. But that will have to wait for another day. Meanwhile, France’s president has pulled the rug out from under the Czech mission, debased the EU’s influence and left the world puzzled as to who speaks for the EU.

If he wants to do something useful, Sarkozy should offer the 7,700-man Foreign Legion as peacekeepers in Gaza. Until he does, it’s wise to be wary about owning European assets.

(Michael R. Sesit is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Michael R. Sesit in Paris at at msesit@bloomberg.net

Last Updated: January 12, 2009 18:01 EST



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Russia, Ukraine Sign EU Gas Monitoring Deal; Flows to Resume

By Eduard Gismatullin and Stephen Bierman

Jan. 13 (Bloomberg) -- Russia and Ukraine signed a natural- gas monitoring deal to allow supplies of the fuel to resume to the European Union later today after a six-day halt.

Jose Barroso, president of the European Commission, said an agreement allowing shipments to be measured was approved by all sides. OAO Gazprom, supplier of a quarter of the region’s gas, said transit flows could start at 8 a.m. central European time. Deliveries may reach European consumers between 14 and 16 hours later, Ukraine’s Deputy Prime Minister Hryhoriy Nemyria said.

Gas prices in the U.K., Europe’s biggest market, slid 10 percent yesterday as Gazprom pledged to restore supplies once independent monitors are in place at pumping stations. Prices surged 24 percent last week after Gazprom turned off the taps following a disagreement with Ukraine over prices and debt.

It’s “not the end of the saga,” said Alfa Bank Chief Strategist Ronald Smith by telephone from Moscow yesterday. “What you’re going to see now is Russia and Ukraine talking again about gas prices, with Ukraine in a materially weaker bargaining position.”

The cutoff had disrupted supplies to at least 20 European countries, with the Balkans the hardest hit. It also renewed calls for the EU to diversify its sources of energy away from Russia. Gazprom suspended transit flows through Ukraine on Jan. 7 after accusing Ukraine of taking gas for its own use, a charge the country denies.

‘May Decline’

“Gazprom’s share of the European energy market may decline,” Victor Mishnyakov, an analyst at UralSib Financial Corp. in Moscow, said in an investor note.

Ukrainian President Viktor Yushchenko ordered his government to ensure the transit of Russian gas to Europe, according to a statement on his Web site. Prime Minister Yulia Timoshenko said the former Soviet republic will pay for so- called “technical gas” as soon as both sides sign an agreement for this year’s supplies.

Gazprom is “eager” to resume supplies to the 27-nation bloc, a spokesman for Prime Minister Vladimir Putin said yesterday, after last-minute wrangling threatened to scupper a deal.

Ukraine had wanted Gazprom to supply the 21 million cubic meters of gas a day it takes to power the pipeline network, Dmitry Peskov said. The cost of these flows should be met by Ukraine, he said.

Supplies Suspended

“We are about to end a six-day war between Gazprom and European customers,” Ukraine’s Nemyria told reporters in Brussels, adding that it would take some time after the resumption of flows for supplies to reach European nations.

Gazprom’s European customers receive 80 percent of supplies through pipelines that cross Ukraine. Gazprom’s overall deliveries to Europe fell by about 60 percent when it halted transit flows via Ukraine and supplies to Ukraine’s domestic market were suspended Jan. 1.

Russian Deputy Prime Minister Igor Sechin told reporters in Moscow that the dispute had cost Gazprom $800 million. The Russian company plans to expand its underground storage capacity in Europe to secure future European supplies.

Day-ahead U.K. gas fell 9.7 percent to 56 pence a therm yesterday. That’s equal to $8.33 a million British thermal units. A therm is 100,000 Btus. Within-day prices surged 24 percent last week.

EU gas-monitoring teams have already started arriving at Ukrainian border gas stations, NAK Naftogaz Ukrainy, the state energy company, said yesterday.

Monitoring Mission

Observers from Austria, Hungary, Italy, France and the Czech Republic started work at the Drozdovychi, Uzhgorod, Beregovo and Tekovo metering stations near Ukraine’s western border and at Orlovka in the south, Naftogaz said.

Once gas starts to flow in Ukraine, it may take about 36 hours for it to reach EU states, Czech Prime Minister Mirek Topolanek, whose country currently holds the EU’s rotating presidency, said on Jan. 11.

Supply shortfalls across the continent continued for a sixth day. Slovakia warned it’s “on the brink of blackout” while Hungary halted deliveries to Serbia and Bulgarian gas imports were halted because of “technical reasons.”

Slovakia was planning to restart a nuclear power generator, in violation of EU rules, unless gas supplies resumed “within several hours,” Prime Minister Robert Fico said yesterday. The country depends solely on gas flowing through Ukraine.

Slovak Reactor

Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s largest gas company, didn’t order fuel via Ukraine for yesterday. It said it can change the order as soon as it hears that supplies are going to be restored. Hungary has sufficient gas to cover the expected consumption yesterday.

Oleh Dubina, the chief executive officer of Naftogaz, said on the weekend that talks on a price for supplies of gas to Ukraine from Russia this year had failed to produce a result. Gazprom offered a price of $450 per 1,000 cubic meters after it said Ukraine rejected an offer, subsequently withdrawn, of $250.

Gazprom is “open to discussions” to find a solution to the pricing issue, Deputy Chief Executive Officer Alexander Medvedev said in an interview with Bloomberg Television yesterday.

Gazprom’s prices to European customers under long-term contracts typically lag behind prices for crude and oil products by about six to nine months. Crude has fallen by more than 70 percent since reaching a record in July. Ukraine paid Russia $179.50 per 1,000 cubic meters for gas last year under a separate arrangement.

Relations between Ukraine and Russia have become strained over efforts by the former Soviet republic to join the EU and the North Atlantic Treaty Organization. The gas dispute has come as Timoshenko and Yushchenko, who have clashed over economic policy, are facing a financial crisis that has forced them to seek a $16.4 billion International Monetary Fund bailout.

In 2006, Russia turned off all gas exports to Ukraine for three days, causing volumes to fall in the EU, and also cut shipments by 50 percent last March during a debt spat.

To contact the reporters on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net;

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Taiwan Dollar May Slide in First Half on Economy, Barclays Says

By Yu-huay Sun

Jan. 13 (Bloomberg) -- Taiwan’s dollar may fall against the U.S. currency in the first six months of the year as the island’s economy slumps, Barclays Capital said.

Falling interest rates around the world will also support the U.S. dollar, said David Woo, global head of foreign-exchange strategy at Barclays Capital, the third-biggest currency trader. The Taiwan currency fell 0.2 percent to NT$33.235 per dollar yesterday in Taipei.

“We’re looking for the currency to do worse than the dollar in the first half,” Woo told reporters in Taipei yesterday. “We expect further slowdown in emerging-market economies.”

The global recession is damping demand for computers and handsets made by Taiwanese companies, reducing their overseas earnings. Exports plunged by a record 42 percent from a year earlier in December, the Ministry of Finance said last week. The Taiwan dollar has weakened 1.1 percent so far this year, after declining 1.3 percent in 2008.

The gap between benchmark interest rates in the U.S. and those elsewhere is expected to narrow, bolstering the greenback, as monetary authorities worldwide lower borrowing costs to help their economies, Woo said.

The Federal Reserve last month reduced its benchmark to as low as zero, ruling out the prospect of further cuts.

Rate Cuts

The Central Bank of the Republic of China (Taiwan) on Jan. 7 cut the discount rate on 10-day loans to banks by half a percentage point to 1.5 percent at an unscheduled policy meeting, eroding the yield advantage of the island’s currency versus the U.S. dollar. Central banks in Chile, India, Indonesia, South Korea and the U.K. have also trimmed borrowing costs this month to help combat a global recession.

Taiwan’s economy probably contracted for a second straight quarter in the three months through December and may shrink in the January-March period, the statistics bureau said in November. Fourth-quarter economic data and revised projections for 2009 are scheduled for release in February.

The economy grew 1.87 percent last year and will expand 2.12 percent in 2009, according to official estimates.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

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Korean Won Slips 4th Day, Longest in 2 Months, on Stock Sales

By Kim Kyoungwha

Jan. 13 (Bloomberg) -- South Korea’s won fell for a fourth day, the longest losing streak in almost two months, as concern the economy is headed for a recession prompted global funds to sell the nation’s shares.

The Korean currency, Asia’s worst performer last year, weakened to the lowest in a month as foreign investors sold more shares than they bought for a fourth day, driving the Kospi index 1.9 percent lower. The Korean economy faces a difficult first half, Vice Finance Minister Kim Dong Soo said at a government meeting in Gwacheon today.

“With the economy cooling, there are worries about corporate earnings, which will hit the stock markets and then affect the foreign exchange moves,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “A rapid drop in the won may be limited as exporters are willing to sell dollars on highs.”

The won fell 1.1 percent to 1,374.35 per dollar as of 9:28 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency lost 26 percent last year, the worst performance among the 10 most-traded Asian currencies outside of Japan.

Exports slumped for a second straight month in December, industrial production fell by the most on record in November and confidence among manufacturers tumbled to the lowest level ever. The Bank of Korea cut its benchmark interest rate by a half- point to a record low of 2.5 percent on Jan. 9.

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

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Australia, New Zealand Dollars Fall on Worsening Global Outlook

By Ron Harui and Tracy Withers

Jan. 13 (Bloomberg) -- The Australian and New Zealand dollars fell for a second day against the U.S. currency as a deepening global slowdown and a decline in commodity prices tempered demand for higher-yielding assets.

New Zealand’s dollar dropped to the lowest level in almost four weeks after Standard & Poor’s revised the nation’s foreign currency credit rating outlook to negative from stable. Australia’s dollar touched the lowest in more than three weeks versus Japan’s currency as gold, the country’s third-most valuable export, fell the most in 1 1/2 months.

“Renewed concern about the global outlook has seen investors sell growth-sensitive currencies in favor of the relative safety of the U.S. dollar,” said Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. “The New Year’s optimism has well and truly worn off.”

Australia’s dollar declined to 67.48 U.S. cents as of 12:06 p.m. in Sydney from 68.65 cents late in Asia yesterday. It reached 67.44 cents, the lowest level since Dec. 17. The currency fell to 60.36 yen from 61.80 yen after touching 60.32 yen, the weakest since Dec. 17.

New Zealand’s dollar fell to 56.27 U.S. cents, the lowest since Dec. 17, from 57.93 cents late in Asia yesterday. The currency dropped to 50.42 yen from 52.14 yen. It touched 50.36 yen, the weakest since Dec. 17.

New Zealand’s AA+ foreign currency credit rating may be cut if the nation’s current-account deficit and overseas debt begin to curb growth and investment, Standard & Poor’s said. The rating company affirmed the rating but revised the outlook to negative from stable. The outlook on the AAA local-currency debt remains stable.

New Zealand ‘Bearish’

The currency also fell as the New Zealand Institute of Economic Research said today in Wellington a net 64 percent of companies surveyed last quarter expected the economy would worsen over the next six months.

“There is enough in this survey to encourage a rate cut of at least 100 basis points” this month, Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets, wrote in a research note today. The survey is “bearish the New Zealand dollar,” she said.

The Reserve Bank of New Zealand will lower its benchmark interest rate by at least a half-percentage point to 4.50 percent at its Jan. 29 meeting, according to a Bloomberg News survey of economists. A basis point is 0.01 percentage point.

The Bloomberg UBS Constant Maturity Index of 26 raw materials dropped 4.4 percent yesterday, the most since Dec. 5, while the price of gold fell 3.9 percent, the largest decline since Dec. 1.

Implied Volatility

Commodities including coal, iron ore, gold and oil account for 60 percent of Australia’s export revenue. New Zealand relies on raw materials including milk and timber for 70 percent of its overseas shipments.

Implied volatility on one-month Australian dollar options against the yen rose to 34.37 percent from 33.79 percent late in Asia yesterday, indicating a greater risk of exchange-rate fluctuations that can erode profit on so-called carry trades.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits. Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S.

Australian government bonds advanced, pushing the two-year yield down 11 basis points, or 0.11 percentage point, to 2.64 percent, according to data compiled by Bloomberg. The price of the 5.25 percent note due August 2010 rose 0.170, or A$1.70 per A$1,000 face amount, to 104.011.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 4.06 percent from 4.23 percent late in Asia yesterday.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.

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Kokusai Keeps Bet Against Yen After Biggest Loss Since 1999

By Wes Goodman

Jan. 13 (Bloomberg) -- Kokusai Global Sovereign Open Fund, Asia’s biggest bond fund, is sticking to the strategy that made last year its worst since 1999: betting against Japan’s currency.

“We underweighted the yen, which turned out to be the strongest currency,” said Masataka Horii, one of four investors for the $51 billion fund in Tokyo. Global Sovereign, which invests in bonds denominated in various currencies, doesn’t hedge its foreign-exchange positions.

Interest rates near zero percent in Japan and the U.S. will encourage investors to borrow in those nations and seek higher returns in Europe and Australia, Horii, 42, said. Bloomberg surveys of banks and securities firms project the yen and the dollar will fall this year as the world’s largest economies recover from a recession and risk aversion abates.

The opposite happened in 2008. The yen strengthened 10 percent or more against all of some 170 currencies tracked by Bloomberg, rallying 23 percent versus the greenback, as slowing economic growth led traders to reverse bets made with money borrowed in Japan. Global Sovereign handed investors a 14.6 percent loss, after accounting for reinvested interest.

The benchmark Kokusai uses to gauge performance, the Citigroup World Government Bond Index, fell 10 percent. In the past five years, the fund beat the measure three times and underperformed twice. The fund’s 1999 loss totaled 20 percent, according to data compiled by Bloomberg.

Boosting Yen

Global Sovereign boosted its yen investments to 18 percent of assets from 10 percent at the start of 2008. The figure is still about half of what the Citigroup index allocates to the Japanese currency, Horii said.

The fund cut its U.S. Treasury holdings to 27 percent of assets from 28 percent in December. Its biggest bet is euro- denominated bonds, which comprise about 38 percent of holdings.

The yen will weaken to 100 per dollar this year from 89.26 in recent trading, according to the median estimate of analysts surveyed by Bloomberg News. It will fall to 124 per euro from 119.30, a separate poll showed.

“Countries with high yields such as Australia and New Zealand may be attractive” to Japanese investors, said Kenichiro Ikezawa, who oversees about $3 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo. The company is part of Daiwa Securities Group Inc., Japan’s second-largest brokerage after Nomura Holdings Inc.

Last month, the Federal Reserve cut its target rate for overnight loans between banks to a range of zero to 0.25 percent from 1 percent and the Bank of Japan trimmed its benchmark to 0.1 percent in December from 0.3 percent.

The European Central Bank will lower its benchmark to 2 percent from 2.5 percent at a Jan. 15 policy meeting, according to most of the 59 economists surveyed by Bloomberg News before the decision. Australia’s central bank rate is 4.25 percent and New Zealand’s is 5 percent.

Volatility to Decline

A global credit crisis last year triggered recessions in the U.S., Europe and Japan, prompting investors to shun higher- yielding assets.

The Australian dollar tumbled 36 percent against the yen, while New Zealand’s currency plunged 39 percent. In the past month, they’ve advanced 2.8 percent and 3 percent, respectively.

“The market had huge volatility in 2008 and investors cut their positions,” said Horii.

Horii helped make Global Sovereign the world’s second- biggest managed bond fund after Newport Beach, California-based Pacific Investment Management Co.’s Total Return Fund, which has $132 billion in assets.

“Volatility is still high, but it will decline by year-end, he said. “Investors will build confidence again. They will sell dollars and Japanese yen and buy euros and Australian dollars.”

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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Euro Falls Toward One-Month Low on ECB Outlook, Spain’s Rating

By Stanley White

Jan. 13 (Bloomberg) -- The euro traded near a one-month low versus the dollar as traders raised bets the European Central Bank will reduce interest rates, decreasing the appeal of the region’s assets to overseas investors.

The 16-nation currency was also close to the weakest in a month against the yen after Standard & Poor’s said it may cut Spain’s top AAA long-term sovereign rating. The New Zealand dollar declined for a second day after S&P said it may lower the Southern Hemisphere country’s foreign-currency credit rating because of its current-account deficit.

“There is more than enough room for the euro to fall further,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “The focus of the currency market is how far rates will fall in Europe, because the ECB is behind the curve compared to other central banks.”

The euro traded at $1.3317 as of 10:27 a.m. in Tokyo from $1.3362 yesterday in New York, when it touched $1.3289, the lowest level since Dec. 12. The euro was at 119.16 yen from 119.19 yen yesterday, when it reached 118.66, also the lowest since Dec. 12. The dollar traded at 89.49 yen from 89.22 yen. It fell to 88.88 yen yesterday, the weakest level since Dec. 19. The euro may decline to $1.25 by next week, Amikura said.

The New Zealand dollar fell to 56.52 U.S. cents from 57.57 cents late yesterday in New York after S&P revised its outlook for New Zealand’s AA+ foreign currency credit rating to negative from stable. The Australian dollar slid to 67.73 U.S. cents from 68.19 cents after prices of oil and other commodities the country exports fell.

European Rates

A Credit Suisse Group AG gauge of probability based on an overnight index-swap index indicated the ECB will cut its 2.5 percent main refinancing rate by as much as 0.75 percentage point this week. The index fell to minus 207.7 from minus 165.6 on Jan. 5. A reading of minus 100 indicates a 0.25 percentage point cut. The median forecast of 59 economists surveyed by Bloomberg News was for a 0.5 percentage point reduction.

The Federal Reserve cut its target lending rate in December to a range of zero to 0.25 percent, while the Bank of England lowered its main rate last week by a half-percentage point to 1.5 percent.

‘Lagging Behind’

“The ECB’s lagging behind the other global central banks in cutting rates will certainly continue to exert downward pressure upon the euro,” Greg Salvaggio, vice president of capital markets in Washington at Tempus Consulting Inc., said in a Bloomberg Television interview. “We are very bullish on the dollar against the euro this year. We’re looking for a year-end target of $1.10.”

Europe’s currency lost 5.9 percent against the yen, 4.6 percent against the dollar and 5.8 percent against the pound this year as reports showed services and manufacturing shrank in December by the most in at least a decade and inflation fell below the ECB’s ceiling of 2 percent for the first time since August 2007.

The yield advantage of two-year German government securities over comparable Japanese debt fell to 1.11 percentage points yesterday, the narrowest in 18 years, reducing demand for euro-denominated assets.

S&P cited “significant challenges” facing the Spanish economy, which has been hit by the combined impact of the global credit crunch and the collapse of a debt-fueled domestic housing boom. The company said it would probably decide on the rating for the nation’s sovereign debt this month.

Fiscal Stimulus

German Chancellor Angela Merkel’s coalition said yesterday the government will spend an extra 50 billion euros ($66.6 billion) in the next two years to stem the worst recession since World War II in Europe’s largest economy.

The coalition parties agreed on a package of measures including about 36 billion euros in infrastructure investment and lower taxes. These measures are the second German stimulus program in the past two months.

“The latest German stimulus package probably won’t be enough to turn back the tide of euro selling,” said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. “It will take time for these measures to kick in, and other European countries will need to join Germany and announce similar policies. During this time, the ECB is sure to lower rates.”

The euro may fall to $1.30 this week, he said.

Obama’s Ammunition

U.S. President-elect Barack Obama said yesterday he wants the second half of a $700 billion financial bailout fund available to him as “ammunition” in the event of an economic emergency and promised to direct more of the money to small businesses and homeowners. Obama, who takes office on Jan. 20, asked President George W. Bush to request the funds from Congress on his behalf after the outgoing president said he was willing to do so.

Treasury Secretary Henry Paulson allocated most of the first $350 billion of the fund for buying stakes in banks, with other distributions for propping up Citigroup Inc., American International Group Inc. and automakers General Motors Corp. and Chrysler LLC.

“Additional fiscal stimulus may support the dollar marginally,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Expectations for the incoming Obama administration are very high. We have to be careful not to get too far ahead of ourselves.”

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

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Crude Oil Extends Slump to Sixth Day on Demand-Drop Concern

By Mark Shenk and Samantha Zee

Jan. 13 (Bloomberg) -- Crude oil fell for a sixth day in New York, extending yesterday’s 7.9 percent slump on concern OPEC output cuts won’t be enough to counter weaker demand.

Oil consumption will drop by 1 million barrels a day this year as the U.S., Europe and Japan face their first simultaneous recessions since the Second World War, Deutsche Bank AG said last week. OPEC members have signaled they will curb sales to refiners in February.

“The market will remain under pressure because almost all of the news about the economy is awful,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “It appears that OPEC is making a concerted effort to cut output but it’s unclear whether this will be enough.”

Crude oil for February delivery fell 40 cents, or 1.1 percent, to $37.19 a barrel at 8:24 a.m. Singapore time on the New York Mercantile Exchange

In New York yesterday, futures fell $3.24 to $37.59 a barrel, the lowest settlement since Dec. 24. Oil is down 59 percent from a year ago.

Goldman Sachs Group Inc. said that “weak underlying economic fundamentals” will dominate the oil market. The bank maintained a forecast in a Jan. 9 report that oil will fall to $30 a barrel this quarter.

High Inventories

Oil inventories in Organization for Economic Cooperation and Development nations will probably rise to a 10-year high in the next two months, Goldman analysts Giovanni Serio and Jeffrey Currie said in the report.

“The health of the global economy is the dominant consideration in the short term, and that is weighing down on prices,” said Harry Tchilinguirian, senior market analyst at BNP Paribas SA in London. “OPEC cuts may prove to be supportive in future but it’ll take time for them to take effect.”

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, agreed last month to slash production quotas by 9 percent to revive prices as the global recession erodes demand. Oil has plunged more than $100 a barrel in the past six months.

Saudi Arabian Oil Co., the world’s biggest state oil company, sent notices to refiners in Asia on Jan. 9 that it would lower crude supplies to the region by about 10 percent in February. This was the third straight month that the company reduced sales.

‘Strong Compliance’

“The numbers coming out of OPEC show that there is strong compliance,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “When the economy and demand start to turn during the second half of the year, we might be in for a nasty shock. There won’t be a lot of oil on hand because of the OPEC cuts.”

OPEC may trim production further should crude prices continue to decline, Iran’s OPEC governor, Mohammad Ali Khatabi, said Jan. 11. OPEC is scheduled to meet next in Vienna on March 15. Iran is the group’s second-largest producer, after Saudi Arabia.

“Something in the $30-to-$34 area is probably where we are going,” Charles Maxwell, senior energy analyst at Weeden & Co. in Greenwich, Connecticut, said in a Bloomberg television interview. “I think it’s not a sustainable price. We have a lot of pressures, including the OPEC cuts.”

Most commodities fell yesterday because of lower demand for raw materials. The Reuters/Jefferies CRB Index of 19 prices slid as much as 4 percent. Corn, soybeans and wheat fell the most allowed by the Chicago Board of Trade and gold slumped the most in six weeks.

U.S. Supplies

Brent crude oil for February settlement declined $1.51, or 3.4 percent, to settle at $42.91 a barrel on London’s ICE Futures Europe exchange yesterday.

U.S. crude-oil supplies rose 6.68 million barrels to 325.4 million barrels in the week ended Jan. 2, the highest since May, the Energy Department reported on Jan. 7. It was the 13th gain in 15 weeks.

Inventories at Cushing, Oklahoma, the delivery point for crude oil traded at Nymex, climbed to 32.2 million barrels, the highest since the Energy Department started tracking the supplies in 2004.

Gasoline futures for February delivery dropped 2.71 cents, or 2.4 percent, to settle at $1.0841 a gallon in New York yesterday. Heating oil for February fell 1.53 cents, or 1 percent, to end the session at $1.4724 a gallon.

Regular gasoline at the pump, averaged nationwide, declined 0.2 cent to $1.79 a gallon, AAA, the largest U.S. motorist organization, said on its Web site yesterday. Prices have dropped 56 percent from the record $4.114 a gallon reached on July 17.

Oil prices also fell on speculation that OAO Gazprom, Russia’s natural-gas exporter, will resume fuel shipments to Europe. The European Union said Russia and Ukraine signed a natural-gas monitoring deal that may pave the way for the resumption of flows as early as this morning.

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.

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Arrow, Eugene, Fubon, SAIC, Hynix: Asia Ex-Japan Equity Preview

By Berni Moestafa

Jan. 13 (Bloomberg) -- The following companies may have unusual price changes today in Asia trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise.

China automakers: China vehicles sales may rise about 5 percent this year, the slowest pace since 1998, as a slowing economy damps demand, the China Association of Automobile Manufacturers said yesterday. Sales of cars, trucks and busses rose 6.7 percent last year to 9.38 million, it said. A year earlier, sales jumped 22 percent.

SAIC Motor Co. (600104 CH), China’s largest carmaker, rose 0.08 yuan, or 1.4 percent, to 5.91. Dongfeng Automobile Co. (600006 CH), which makes light trucks in China with Nissan Motor Co., added 0.05 yuan, or 1.6 percent, to 3.09.

Arrow Energy Ltd. (AOE AU): The Brisbane-based company said it has begun exploration drilling in northern Vietnam, aiming to become the first company to produce natural gas in the Southeast Asian country from deposits found in coal seams. Arrow Energy fell 10 cents, or 4.2 percent, to A$2.30.

Atlas Consolidated Mining & Development Corp. (AT PM): The nation’s second-largest metals producer by market value said its Carmen mine will be paid $7,612.50 a metric ton for the first 30,000 tons of copper concentrates it shipped to China. The second delivery of 30,000 tons will be priced at market at the time of sale, it said. The stock was unchanged at 3.85 pesos.

China Southern Airlines Co. (1055 HK): Asia’s biggest carrier by passenger numbers named Si Xian Min as its new chairman. Si was previously the carrier’s general manager, it said. China Southern fell 9 cents, or 6.7 percent, to HK$1.25.

Eugene Corp. (001200 KS): The South Korean maker of construction materials said it scrapped talks to sell its brokerage unit to a private equity fund. The talks with Renaissance PEF ended over differences on price and other terms, the Bucheon, the company said. Eugene lost 35 won, or 3.2 percent, to 1,070.

Fubon Financial Holding Co. (2881 TT): Taiwan’s second- largest financial services company by market expects net income this year may be worse than 2008, President Victor Kung said in Taipei. Fubon Financial dropped 85 cents, or 4 percent, to NT$20.65.

Hynix Semiconductor Inc. (000660 KS): The world’s second- largest maker of computer-memory chips said the industry may recover in the second half as production cutbacks by manufacturers help ease a glut. The stock fell 420 won, or 5.7 percent, to 6,920 won.

LCL Corp. (LCL MK): The interior-design company said it hasn’t backed out on any existing projects in Dubai, after the Edge Financial Daily cited an OSK Research Sdn. report which said LCL withdrew from a project because a letter of acceptance had been delayed. LCL fell 0.5 sen, or 0.7 percent, to 71.5 sen.

Macquarie Group Ltd. (MQG AU): Australia’s largest investment bank hired Barclays Capital, JPMorgan Chase & Co. and Merrill Lynch & Co. to manage an Australian government- guaranteed bond sale, two people involved in the matter said. Macquarie fell 66 cents, or 2.1 percent, to A$30.72.

Posco (005490 KS): Asia’s third-biggest steelmaker said it may need to maintain its current output cut through the first quarter, and will supply its products to Toyota Motor Corp. Posco Chief Executive Officer Lee Ku Taek forecast the world’s steel demand will hit a bottom in the first half of this year. Posco fell 12,000 won, or 3 percent, to 383,000.

SapuraCrest Petroleum Bhd. (SCRES MK): The oil and gas services provider said it extended by a month a deadline to complete terms of a shareholders agreement related to a joint- venture with AP Prakash Shipping Co. to build and finance a vessel. The stock dropped 1.5 sen, or 1.7 percent, to 86.5 sen.

-With reporting by Ian C. Sayson in Manila, Zhang Shidong in Shanghai and Chan Tien Hin in Kuala Lumpur. Editor: Stephen Kleege.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

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Japan Stocks Fall a Third Day on Sony, Toshiba Earnings Concerns

By Masaki Kondo

Jan. 13 (Bloomberg) -- Japanese stocks dropped for a third day as media reports Sony Corp. and Toshiba Corp. will post losses stoked concern other companies will have disappointing earnings.

Sony, which gets a quarter of its sales from the U.S., was set to drop on a newspaper report it will likely post its first annual operating loss in 14 years. Toshiba Corp. was poised to slump after public broadcaster NHK said the company will record an operating loss. Mitsubishi Motors Corp. lost 3.6 percent after the yen appreciated to the strongest level in almost a month yesterday. Inpex Corp., Japan’s largest oil and gas explorer, was set to slump after oil prices dropped to the lowest level in a month.

“Investor sentiment is swinging from optimism to pessimism as the earnings season kicks in,” Mamoru Shimode, chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. “With the yen strengthening and people getting bearish about the economic outlook, the media report on Sony will weigh on sentiment.”

The Nikkei 225 Stock Average declined 108.94, or 1.2 percent, to 8,727.86 as of 9:05 a.m. in Tokyo. The broader Topix index fell 19.01, or 2.2 percent, to 836.01. The gauges slumped for a third day, headed for the longest losing streak since Nov. 20.

The yen appreciated against the dollar to as much as 88.88, the strongest level since Dec. 19, from 91.15 at the close of stock trading in Tokyo on Jan. 9. Sony Corp., which expects the U.S. currency to trade at an average of 100 yen in the second half, said in October that every 1 yen change against the dollar alters its annual operating profit by 4 billion yen ($45 million).

Crude oil for February delivery fell 7.9 percent to $37.59 a barrel in New York yesterday, the lowest settlement price since Dec. 24, on concern production cuts by the Organization of Petroleum Exporting Countries will fail to curb a slump in demand. A measure of six metals traded in London dived 4.9 percent, the most in more than a month.

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

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