N.Z. Manufacturing, Credit-Card Spending Decline Amid Recession

By Tracy Withers

Jan. 22 (Bloomberg) -- New Zealand’s manufacturing industry shrank for the eighth month and spending on credit and debit cards fell in December, adding to signs the economy remained mired in a recession in the fourth quarter.

The performance of manufacturing index was 42.5, compared with 35.2 in November, Bank of New Zealand Ltd. and Business New Zealand said in Wellington today. A score below 50 shows manufacturing is contracting. Card spending dropped 0.5 percent from the previous month, a Statistics New Zealand report showed.

New Zealand’s economy has been in a recession since the first quarter of 2008 as a drought and a housing slump stalled domestic demand before the global credit crisis exacerbated the decline. Prime Minister John Key last week said the economy will be at a stand-still in 2009 as the world recession reduces exports and prompts companies to fire workers.

“Spending may have held up better than we thought but construction, manufacturing, distribution are all contracting,” said Craig Ebert, a senior markets economist at Bank of New Zealand in Wellington. “We are going to have another negative quarter” for gross domestic product in the final three months of 2008, he said.

New Zealand’s currency fell to 53.10 U.S. cents at 12:46 p.m. in Wellington from 53.46 cents before the reports were released. The NZX 50 stock index rose 0.8 percent to 2,727.83.

The latest forecast for the economies of New Zealand’s 12 largest trading partners is that they will be unchanged in 2009, Ebert said. In 1991 and 1998, when New Zealand was last in a recession, trading-partner growth stayed positive, he added.

Record Low

The manufacturing index’s level in December was the second- lowest score since the series began in 2002. November’s index reading was the record low.

“The upswing in the December result shouldn’t be interpreted as a potential path for recovery in manufacturing,” said Phil O’Reilly, chief executive officer at Business New Zealand, a Wellington-based employer group.

Consumer spending on credit and debit cards fell for a second month as fuel purchases dropped, the statistics agency said. Transactions excluding fuel, workshop and vehicle sales gained 0.2 percent from November.

Economists use the report as a leading indicator of retail sales, which were unchanged in November after falling 1.3 percent in October.

Both the retail sales and card spending figures aren’t adjusted for price movements. Retail sales excluding inflation probably fell for a fourth consecutive quarter in the three months ended Dec. 31, Bank of New Zealand’s Ebert said.

Income-tax cuts, cheaper gasoline and lower interest rates have provided some relief for consumers, though the prospect of rising unemployment will damp spending in the months ahead, he said. “There’s nothing out there to prompt people to go on a spending binge.”

Key last week said New Zealand’s unemployment rate may climb to 7 percent this year as the economy stalls. The jobless rate was 4.2 percent in the third quarter.

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

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Hildebrand Says SNB Can Intervene in Franc Market at Fixed Rate

By Joshua Gallu and Simone Meier

Jan. 22 (Bloomberg) -- Swiss National Bank Vice-President Philipp Hildebrand said policy makers are prepared to intervene in currency markets at fixed exchange rates if necessary to prevent a “renewed appreciation” of the franc.

“There’s a good chance they’ll follow through with these measures,” said Reto Huenerwadel, senior economist at UBS AG in Zurich. “With concerns about deflation and rates already near zero, they have limited options.”

The franc has risen around 6 percent against the euro since October as the global financial crisis forced the Swiss central bank to cut its benchmark rate by 225 basis points, taking it to 0.5 percent. That’s smothering inflation and hurting exports, which make up more than half of Swiss gross domestic product.

“With short-term rates of practically zero, the SNB can’t prevent a further appreciation in the Swiss franc through a rate cut,” Hildebrand said in a speech in St. Gallen, Switzerland late yesterday. “The SNB is able to sell unlimited Swiss francs versus another currency. In an extreme case, it can commit itself at the same time to buying unlimited currencies at a fixed- exchange rate.”

The franc dropped after the remarks, to 1.5009 per euro from 1.4793 the previous day. It reached a record high of 1.4315 versus the euro on Oct. 27. Against the dollar, the franc fell to 1.1616, the weakest since Dec. 15.

‘Strong Franc’

“The strong franc is certainly a burden for exports given waning global demand,” said Fabian Heller, an economist at Credit Suisse Group in Zurich. “Words are not enough to weaken the franc. But the longer the situation lasts, the higher the chance of the SNB intervening” in currency markets.

SNB comments on the strength of the franc will probably discourage bets that it will keep rising, Ashley Davies, a currency strategist at UBS, the world’s second-largest foreign- exchange trader, said in a Jan. 19 note. The franc will trade between 1.47 and 1.54 versus the euro throughout 2009, Davies said.

“A central bank is always able to increase the absolute amount of its own currency in circulation,” said Hildebrand. “Further options” for policy makers include purchasing government bonds on the secondary markets, he said, conceding that using unconventional tools “isn’t without risks.”

“The SNB will assess very carefully whether and to what extent it will use them,” said Hildebrand.

Deflation

A sustained period of falling prices would make fighting the economic crisis harder, Hildebrand said. Swiss inflation, which slowed to 0.7 last month, may turn negative as soon this summer, the central bank estimates.

“Deflation is just as undesirable as inflation,” he said. “This doesn’t mean that we concretely are counting on deflation from today’s point of view, rather the point is that the uncertainty is enormously high.”

Switzerland’s economy will probably shrink between 0.5 percent and 1 percent this year, according to the SNB. As soon as the economy regains its footing, the SNB should raise rates to ensure price stability, Hildebrand said.

“The central bank can and will continue to provide liquidity, as much and for as long as needed,” Hildebrand said. “The SNB will continue to act in a decisive way in order to counter the effects of the economic contraction.”

To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.

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Bank of Japan May Expand Corporate Debt Buying, Keep 0.1% Rate

By Mayumi Otsuma

Jan. 22 (Bloomberg) -- The Bank of Japan may today offer to expand corporate debt purchases to prevent a credit shortage from deepening the recession.

Governor Masaaki Shirakawa and his colleagues may pledge to start buying corporate bonds and other types of securities from banks at a meeting concluding today, economists say. Policy makers will keep the benchmark overnight lending rate at 0.1 percent, according to all 27 economists surveyed by Bloomberg.

Japanese companies are struggling to raise funds as the global recession erodes sales and profits, reducing investors’ appetite for corporate securities. Central banks around the world are broadening the range of assets they buy to thaw credit markets that remain frozen even as interest rates approach zero.

“The Bank of Japan’s key question is what kind of assets it will buy, rather than the level of the benchmark rate or the amount of liquidity to add,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo.

The policy board cut the key rate from 0.3 percent last month, authorized the purchase of commercial paper, and extended government bond-buying operations, the details of which it will probably reveal today, along with revisions to its growth and inflation forecasts.

“It’s becoming harder for companies to raise funds through commercial paper and corporate bond markets,” Shirakawa said last week. The governor instructed his staff to investigate additional measures to improve corporate financing at last month’s meeting.

Sony, Kobe Steel

Sony Corp. scaled back bond sales by a quarter from the planned amount to 37.5 billion yen ($417 million) last month as the recession worsened its earnings prospects. Kobe Steel Ltd., Japan’s fourth-largest steelmaker, also reduced its offerings.

About 1.3 trillion yen in corporate bonds will be due by March 31, according to central bank estimates, putting pressure on businesses to find new sources of funding. A dozen Japanese companies, including Nippon Telegraph & Telephone Corp. and TDK Corp., plan to sell new bonds this month.

Central banks and governments globally are stepping up efforts to assist lenders and companies.

The Bank of England this week won unprecedented powers from the British government to start buying assets as part of a plan to revive lending. The U.S. Federal Reserve plans to buy as much as $600 billion of bonds and mortgage-backed securities sold by federally chartered mortgage finance companies, and is considering purchases of longer-term Treasury securities.

Some economists say Japan’s central bank may want to keep the option of buying corporate bonds up its sleeve in case the recession worsens in coming quarters.

‘Exhausting Its Toolkit’

“The bank is exhausting its toolkit pretty rapidly,” said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. “It probably prefers to save the operation of corporate-bond purchases for the next big crisis.”

Even if they pursue the purchases, policy makers may need time to hammer out the details of the plan, such as the ratings and maturity of debt that would qualify, given that the securities would remain as risk assets on its balance sheet.

“It’s highly probable the BOJ will limit its purchases to corporate bonds with maturity of up to one year, and at least A- grade,” said Naka Matsuzawa, chief strategist at Nomura Securities Co. in Tokyo.

The central bank will probably offer to buy about 2 trillion yen in commercial paper, the same amount the government-backed Development Bank of Japan last month offered to purchase. The bank will also limit transactions to paper rated at least A1, economists said.

Buying Commercial Paper

Costs of issuing short-term debt have eased since the Dec. 19 announcement. The spread on three-month paper issued by companies rated higher than A1 against three-month government financing bills yesterday narrowed to 35 basis points from 56 before the central bank unveiled the purchase plan.

Policy makers will probably cut their forecasts for growth and signal a return to deflation in a quarterly review of the economic outlook.

The board may say the economy will contract 1.5 percent in the year ending March 31 and 1.7 percent next year before recovering to expand 1 percent in the period through March 2011, according to the median estimate of 14 economists. Consumer prices excluding fresh food will drop 0.8 percent next fiscal year and rise 0.1 percent in the year to March 2011, they said.

Reports last month showed exports, production and machinery orders all fell at a record pace in November. The recession may linger for three years to become the worst in the postwar era, Hiroshi Yoshikawa, head of the government committee that charts the economic cycle, said in an interview this week.

The bank is likely to announce its policy decisions and revised economic forecasts by early afternoon in Tokyo. Shirakawa will speak at a press briefing at 3:30 p.m.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

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Japan Exports Plummet Record 35%, Signaling Job Cuts

By Jason Clenfield

Jan. 22 (Bloomberg) -- Japan’s exports plunged by a record in December, signaling companies will be forced to shut factory lines and fire more workers, driving the economy deeper into recession.

Exports plummeted 35 percent from a year earlier, the sharpest decline since 1980, the earliest year for which there is comparable data, the Finance Ministry said today in Tokyo. The December drop eclipsed a record 26.7 percent decline set the previous month. Economists predicted a 30.3 percent contraction.

Shipments to the U.S., China and Europe plunged the most ever, as the global recession dried up demand for Japanese cars and electronics. Toyota Motor Corp., Sony Corp. and Honda Motor Co. are shedding thousands of workers and closing production lines as profits and sales dwindle.

“This recession will be deep and widespread,” said Kyohei Morita, chief Japan economist at Barclays Capital in Tokyo. “Given today’s numbers, households should prepare for more job and wage cuts.”

The yen traded at 89.78 per dollar as of 9:49 a.m. in Tokyo from 89.14 before the report. Japan’s currency has gained 19 percent in the past year, further eroding exporters’ profits.

Imports fell 21.5 percent from a year earlier, not enough to prevent a trade deficit of 320.7 billion yen ($3.6 billion), the third in a row.

Emerging Markets

The global recession is spreading to the emerging markets that propped up sales for Japanese manufacturers as demand from the U.S. and Europe faltered. Exports to Asia, which make up about half of Japan’s total shipments, fell 36.4 percent last month.

Shipments to China slid 35.5 percent. Asia’s second-largest economy probably expanded 6.8 percent last quarter, the slowest pace in seven years, economists estimate a government report will show today. Exports to the U.S. dropped 36.9 percent and to Europe tumbled 41.8 percent.

The world’s second-largest economy may have shrunk as much as 12 percent on an annualized basis last quarter, Barclays Capital predicts, which would be the sharpest contraction since 1974. Factory output dropped 8.5 percent in November, the most in more than a half century, and machinery orders, an indicator of future capital spending, fell by the most ever.

Toyota, which is forecasting its first operating loss in seven decades, may cut all 4,500 temporary workers because of sluggish demand, the Yomiuri newspaper said this week, without citing where it obtained the information.

Fire Workers

Honda, Japan’s second-largest carmaker, said last week it plans to fire all of its 3,100 temporary workers by the end of April. President Takeo Fukui said last month the automaker may be forced to shift more of its production overseas if the yen strengthens further.

Every 1 yen gain against the dollar cuts the automaker’s operating profit by 18 billion yen, according to the company. A stronger currency eats into the value of repatriated earnings and makes exported products more expensive overseas.

Mounting evidence the economy is in crisis prompted the Bank of Japan last month to cut interest rates to 0.1 percent. Governor Masaaki Shirakawa and his colleagues at the end of a meeting today will likely announce the details of a plan to buy commercial paper, short-term debt companies use to fund daily operations.

The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Prime Minister Taro Aso, who has called the recession a “once in a 100 year” crisis, is struggling to get approval from the opposition-led upper house to spend 10 trillion yen ($111 billion) to aid companies and households, whose sentiment fell to a record low this month.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

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South Korean Economy Shrinks More-Than-Expected 5.6%

By William Sim

Jan. 22 (Bloomberg) -- South Korea’s economy shrank a larger-than-expected 5.6 percent last quarter, the biggest decline since the Asian financial crisis a decade ago as exports, business investment and consumer spending plunged.

The contraction followed growth of 0.5 percent in the third quarter and was more than twice the 2.1 percent drop forecast in a Bloomberg News survey of 10 economists. The economy shrank 3.4 percent from a year ago, the central bank said in Seoul today.

Signs of looming recession add pressure on President Lee Myung Bak to expand his 51 trillion won ($37 billion) stimulus program and on the central bank to cut interest rates from a record low. Lee, whose popularity has dropped by more than half since he took office early in 2008, this week replaced four top members of his economic team as he works to revive confidence and combat the deepest slump since 1998.

“Today’s figures are shocking,” said Chun Chong Woo, an economist at Standard Chartered First Bank Korea Ltd. in Seoul. “Policy makers certainly have to cut rates further and take more stimulus measures.”

The country’s 10-year expansion has floundered as China’s slowdown exacerbates a plunge in European and U.S. demand for Korean-made cars, electronics, ships and semiconductors. Overseas shipments are equivalent to about 50 percent of gross domestic product.

Goods exports tumbled 11.9 percent last quarter from the previous three months, the biggest decline since 1979.

Stocks, Currency

The Korean won, the region’s worst performing currency last year, rose 0.2 percent to 1,370.10 per dollar at 9:57 a.m. in Seoul. The Kospi stock index gained 0.5 percent to 1,109.56.

Hyundai Motor Co. and Kia Motors Corp. cut working hours and GM Daewoo Auto & Technology Co. and Renault Samsung Motors Co. idled plants in December. Samsung Electronics Co., Asia’s biggest maker of chips, this week combined its four major businesses into two and reduced the number of executives in one of its biggest restructurings in a decade.

South Korea’s contraction is being echoed across Asia’s export-dependent nations.

Singapore’s GDP declined an annualized 16.9 percent in the fourth quarter, the biggest drop on record. Its government may announce record budget spending today.

Asia Slowdown

China’s economy grew 6.8 percent last quarter from a year earlier, the weakest in seven years, according to economists surveyed before today’s GDP report.

“The region’s high vulnerability to the ongoing external- demand shock calls for further decisive policy action,” Goldman Sachs Group Inc. economists Michael Buchanan and Eva Yi wrote in a report. “Korea is in a recession and further contraction is likely ahead.”

South Korea has allocated about 140 trillion won, or 15 percent of GDP, in extra liquidity, tax cuts and stimulus spending. The central bank this month cut its key interest rate to 2.5 percent, the fifth reduction since October.

“The economy is worsening faster than expected,” new Vice Finance Minister Hur Kyung Wook told reporters today. “We will try to speedily implement announced measures for the economy.”

Domestic demand, which includes private and corporate spending, slipped 5 percent, the biggest drop since 1998. Construction investment fell 4 percent and factory investment plunged 16.1 percent. Household spending declined 4.8 percent.

Purchasing Power

Consumers are losing confidence amid rising unemployment, while falling stock and property prices have reduced the wealth of households.

Real gross domestic income, a measure of purchasing power, declined 2.9 percent from the previous quarter.

The Kospi index has plunged 40 percent since the start of 2008, and apartment prices in some parts of the capital Seoul fell about 30 percent last year. Employment dropped last month for the first time since October 2003.

“The central bank should cut rates further, while the government can allocate extra spending and trim taxes more,” said Kim Jae Eun, an economist at Hana Daetoo Securities Co. in Seoul. “The incoming finance minister will also have a bigger load to help Korea overcome this economic slump.”

President Lee named Yoon Jeung Hyun, 62, as finance minister on Jan. 19, replacing Kang Man Soo, who was voted the worst economic minister in a December poll of 82 professionals by Citizens’ Coalition for Economic Justice, a civic group.

The economy advanced 2.5 percent in 2008, the weakest pace since 1998. The Bank of Korea likely will cut its 2009 growth forecast of 2 percent, said Choi Chun Shin, head of the bank’s statistics department.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.

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Petrobras Says It May Build Refinery Without PDVSA

By Jeb Blount and Steven Bodzin

Jan. 21 (Bloomberg) -- Petroleo Brasileiro SA, Brazil´s state-owned oil company, said it may complete a planned oil refinery in northeast Brazil on its own if it fails to agree on a fuel-supply contract with partner Petroleos de Venezuela SA.

PDVSA, as the Venezuelan oil producer is known, wants above-market prices for heavy crude to supply the 200,000 barrel-a-day Abreu e Lima refinery near Recife, Paulo Roberto da Costa, head of refining at Petrobras, told reporters today.

“Petrobras very much wants to build the refinery with PDVSA,” da Costa said at the event in Sao Goncalo, Rio de Janeiro state. “But it will build it on its own if it has to.”

The refinery, planned for completion next year at a cost of $4 billion, would receive half its oil from Venezuela´s Orinoco belt. Venezuela is forming joint ventures to exploit billions of barrels in the Orinoco belt, located in the country´s east.

The two companies have an agreement under which PDVSA would take a 40 percent stake in the project, da Costa said. PDVSA hasn’t yet contributed any funds to construction, he said.

The refinery has been the subject of talks at quarterly meetings between Brazilian President Luiz Inacio Lula da Silva and President Hugo Chavez of Venezuela. Chavez said the refinery was a topic at their March 26 meeting after a preliminary agreement was reached in December 2007.

Petrobras also wants to renegotiate some contracts to get lower prices given the falling price of raw materials and declining demand for construction, da Costa said.

“The price of steel and other products is falling,” he said. “If the prices don’t come down we’ll probably cancel some contracts.” He declined to say which companies or products would be the subject of cancellations.

To contact the reporters on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net; Steven Bodzin in Caracas at sbodzin@bloomberg.net.

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Antarctic Warming Detected by Scientists Dashes Crichton Theory

By Alex Morales

Jan. 22 (Bloomberg) -- Antarctica has warmed over the past half-century, scientists said, dashing a key argument by skeptics who say climate change is overstated.

Temperatures rose an average 0.12 degrees Celsius (0.22 Fahrenheit) per decade since 1957, researchers led by Eric Steig, a professor of glaciology at the University of Washington in Seattle, said in the journal Nature. Using new measurement methods, they discovered warming in the continent’s interior, which United Nations-sponsored scientists theorized was cooling.

The findings may help puncture arguments by global-warming skeptics such as the late author Michael Crichton who have pointed to cooling in parts of Antarctica as an indicator that climate change is exaggerated.

“This has put the last pieces of the jigsaw in place,” Gareth Marshall, a British Antarctic Survey climatologist in Cambridge who wasn’t involved in the research, said yesterday in a telephone interview. “If you consider Antarctica as a whole, it shows a significant warming of similar levels to the rest of the Southern Hemisphere.”

Temperatures in the frigid continent, bigger than the U.S. and Mexico combined, are important because its ice sheets hold enough water to raise sea levels by 57 meters (187 feet) if they ever melted. The desolate mass of ice holds the record-low temperature, measured at minus 89 Celsius by the U.S. National Climatic Data Center. Winds of 200 miles per hour (124 kilometers per hour) are frequently measured.

Antarctica had represented the biggest gap in United Nations knowledge about the recent evolution of the Earth’s temperatures and extent of global warming, a phenomenon that has been widely found in the Arctic at the earth’s other extreme.

Ice Shelves Breaking

The UN has supervised climate research for decades and has led negotiations that produced the only international treaties to stem global warming.

The study indicates that the breakup of ice shelves already seen in the Antarctic Peninsula, a spit of land reaching toward South America, may “eventually” extend to other parts of the continent, Steig said in a telephone interview.

“The fact that the warming that is appearing on the peninsula extends way down into West Antarctica would suggest that eventually, if that trend continues, ice shelves in West Antarctica are also going to similarly be affected,” Steig said, pointing to a timeframe of “hundreds of years.”

Ice shelves rest on the ocean and don’t raise sea levels when they break up. Even so, their loss removes a barrier to the flow of melting land-based ice sheets toward the sea.

Most ground-based temperature measurements from Antarctica began in 1957, and the data is largely from coastal areas. Gauging the vast interior by satellite didn’t begin until 1979. Steig’s team used mathematical models to establish the relationship between the ground and satellite measurements between 1979 and 2006 and then used the correlation they found to calculate temperatures for the interior going back to 1957.

Cooling Controversy

The UN in 2007 produced its largest assessment ever of climate change, pointing to planet-wide warming while signaling “a cooling over most of interior Antarctica,” a phenomenon emphasized by Crichton, who died in November, in his novel “State of Fear” (HarperCollins, 2004.)

The book, one of many in the last decade that stirred popular debate over climate change, prompted rebuttals by scientists.

“Readers may understandably take away some misconceptions from his book,” the Cambridge, Massachusetts-based Union of Concerned Scientists writes on its Web site about Crichton’s novel. Cooling trends in some parts of the world, “including the Antarctic interior, which Crichton makes much of,” is “fully compatible with the physics on which climate models are based,” the union says.

500 Billion Tons

The UN’s 2007 report included temperature-change maps that showed the bulk of Antarctica colored gray, an indication of insufficient data. “Significant warming” was taking place in the Antarctic Peninsula, it said.

The effects of warming in the Antarctic Peninsula have been dramatic. In 2002, the Larsen B ice shelf collapsed, with 500 billion tons of ice breaking up into icebergs in less than a month. The larger Wilkins ice sheet, which is further south, lost 1,000 square kilometers (386 square miles) in 1998 and began to break up further last February.

Over the past 50 years the Antarctic Peninsula warmed an average of 0.11 degrees Celsius a decade, West Antarctica gained 0.17 degrees every 10 years and temperatures in East Antarctica rose by 0.1 degrees, Steig’s team found. The data from the east had a margin of error of 0.07 degrees, meaning the actual warming may be close to zero.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.

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Petrobras Says It May Build Refinery Without PDVSA

By Jeb Blount and Steven Bodzin

Jan. 21 (Bloomberg) -- Petroleo Brasileiro SA, Brazil´s state-owned oil company, said it may complete a planned oil refinery in northeast Brazil on its own if it fails to agree on a fuel-supply contract with partner Petroleos de Venezuela SA.

PDVSA, as the Venezuelan oil producer is known, wants above-market prices for heavy crude to supply the 200,000 barrel-a-day Abreu e Lima refinery near Recife, Paulo Roberto da Costa, head of refining at Petrobras, told reporters today.

“Petrobras very much wants to build the refinery with PDVSA,” da Costa said at the event in Sao Goncalo, Rio de Janeiro state. “But it will build it on its own if it has to.”

The refinery, planned for completion next year at a cost of $4 billion, would receive half its oil from Venezuela´s Orinoco belt. Venezuela is forming joint ventures to exploit billions of barrels in the Orinoco belt, located in the country´s east.

The two companies have an agreement under which PDVSA would take a 40 percent stake in the project, da Costa said. PDVSA hasn’t yet contributed any funds to construction, he said.

The refinery has been the subject of talks at quarterly meetings between Brazilian President Luiz Inacio Lula da Silva and President Hugo Chavez of Venezuela. Chavez said the refinery was a topic at their March 26 meeting after a preliminary agreement was reached in December 2007.

Petrobras also wants to renegotiate some contracts to get lower prices given the falling price of raw materials and declining demand for construction, da Costa said.

“The price of steel and other products is falling,” he said. “If the prices don’t come down we’ll probably cancel some contracts.” He declined to say which companies or products would be the subject of cancellations.

To contact the reporters on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net; Steven Bodzin in Caracas at sbodzin@bloomberg.net.

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Woodside Says Full-Year Profit to Be Cut by Charges

By Angela Macdonald-Smith

Jan. 22 (Bloomberg) -- Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, said full-year profit will be cut by about A$430 million ($283 million) of charges for foreign exchange losses, a suspended project and a tax provision.

Net profit was probably between A$1.75 billion ($1.2 billion) and A$1.8 billion in the year ended Dec. 31, the Perth- based company said today in a statement. That’s as much as 24 percent lower than the A$2.3 billion median estimate from 11 analysts, according to data compiled by Bloomberg.

Woodside last week suspended a plan to import liquefied natural gas into California because of weaker market conditions and said today it will take a charge to write down the venture. Foreign exchange losses, which have cut the value of U.S. dollar liabilities, and an impairment charge on U.S. assets will reduce second-half profit by about A$260 million, it said. Fourth- quarter sales rose 40 percent as new projects lifted output.

“It’s a bit of a surprise with the one-offs; there will be some question marks over that,” said Luke Maffei, a resources analyst at Shaw Stockbroking Ltd. in Melbourne. “Production- wise and sales it all looks in line” with expectations, he said.

The oil producer, 34 percent owned by Royal Dutch Shell Plc, dropped as much as 80 cents, or 2.3 percent, to A$33.61 in Sydney trading, lagging behind a decline of as much as 1.4 percent in the Australian Stock exchange’s benchmark energy index. The stock was at A$33.88 at 11:16 a.m. local time.

Condensates Tax

The writedown of the OceanWay LNG venture will contribute to one-time charges that will cut full-year net income by about A$50 million, Woodside said. The company also said it had to make a provision of about A$120 million in its 2008 accounts to cover the government’s removal of an exemption on excise tax on the A$25 billion North West Shelf venture’s condensates output.

Woodside can’t provide further details of the charges, said Roger Martin, a spokesman in Perth.

The reported profit, which is yet to be audited, will still be between 70 percent and 75 percent higher than in 2007, Woodside said. The company is due to report earnings on Feb. 18.

Woodside said it reached an agreement with banks in January for debt of $800 million and is considering further debt, with the expectation that it will raise as much as $1.5 billion this half. The company said in November its capital investment may jump 33 percent in 2009 to A$7.3 billion as spending increases on the construction of the Pluto LNG project in Western Australia.

Sales rose to A$1.64 billion in the three months ended Dec. 31, from A$1.17 billion a year earlier on production that advanced 28 percent to 23.1 million barrels of oil equivalent.

Neptune, Vincent

Chief Executive Officer Don Voelte has started up new fields in Australia and the U.S., helping buoy production. The $1.1 billion Neptune oil project in the U.S. began output in July, while the $720 million Vincent venture in Western Australia pumped its first oil in August, followed by the startup of an expansion of the North West Shelf venture’s LNG output.

“Increased production and higher commodity prices led to record revenues over the last six- and 12-month periods,” Woodside said in the statement, sent to the Australian stock exchange. Second-half sales were boosted by a weaker Australian dollar, it said.

Full-year sales advanced 50 percent to A$5.99 billion on output that rose 15 percent to 81.3 million barrels of oil equivalent, which was at the lower end of the company’s October forecast of 81 million to 84 million barrels.

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

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Yen Rises Toward Record High Against Pound on U.K. Bank Concern

By Ron Harui

Jan. 22 (Bloomberg) -- The yen rose toward a record high against the pound as speculation the deepening financial crisis will force the U.K. government to nationalize banks boosted the appeal of Japan’s currency.

Sterling also approached a 23-year low versus the dollar before a U.K. government report tomorrow that may show the economy shrank the most since 1990 last quarter, supporting the case for the Bank of England to cut interest rates next month. The euro dropped to near the weakest in more than six years against the yen before a French report that may indicate consumer spending fell in December, damping appetite for higher- yielding assets.

“The market dynamics suggest that the pound’s sell-off is going to continue,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., part of the world’s largest interbank broker. “The U.K. economy is a basket case. We’re seeing the yen benefit from the fundamental side of things.”

The yen rose to 123.24 per pound as of 10:37 a.m. in Tokyo from 124.88 late in New York yesterday when it reached an all- time high of 119.42. Japan’s currency climbed to 115.11 per euro from 116.54 yesterday when it touched 112.12, the strongest since March 2002. The yen rose to 88.83 per dollar from 89.49 yesterday when it reached 87.13, the highest since July 1995.

The pound fell to $1.3875 from $1.3955 in New York yesterday, when it reached $1.3622, the lowest since September 1985. Against the euro, the pound declined to 93.40 pence from 93.27 pence yesterday, when it touched 94.30 pence, the weakest since Jan. 5.

Financial Crisis

Sterling lost 3.7 percent versus the dollar and 3.1 percent against the euro this week as the U.K. government’s plan for a second bank bailout in three months raised concern the financial crisis is deepening. Shares of Barclays Plc fell for a seventh day yesterday on concern the bank will take more writedowns and be nationalized.

The U.K.’s gross domestic product probably contracted 1.2 percent in the fourth quarter from the prior three months, according to a Bloomberg News survey of economists before tomorrow’s report from the Office for National Statistics.

The Bank of England will lower its benchmark rate by a half-percentage point to 1 percent at its Feb. 5 meeting, a separate Bloomberg survey shows.

Gains in the yen may be tempered on speculation Japanese officials will signal they may intervene in the foreign-exchange market for the first time in five years.

Finance Minister Shoichi Nakagawa said Jan. 13 that abrupt movements in currencies “aren’t good.”

‘Really Hurting’

“The yen at current levels is really hurting Japan’s business,” John Richards, head debt market strategist for the Asia-Pacific region at Royal Bank of Scotland Plc in Tokyo, said in an interview with Bloomberg Television. “Exchange-rate intervention might be the last arrow in their quiver.”

The last time Japan intervened in the currency markets on its own, it sold a record 20.4 trillion yen ($230 billion) in 2003 and 14.8 trillion yen in the first quarter of 2004. Central banks buy or sell currencies when they seek to influence exchange rates.

Timothy Geithner, U.S. President Barack Obama’s nominee for Treasury Secretary, said at his confirmation hearing yesterday that it’s important for America’s biggest trading partners to refrain from setting or manipulating exchange rates.

The euro approached a six-week low against the dollar on speculation the French government will say consumer spending dropped in December for the second time in three months.

“The euro-area economy is in the doldrums and may deteriorate further,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The bias for the euro is to the downside.”

Europe’s single currency may weaken to $1.2913 and 114 yen today, Soma said.

Spending by consumers, which accounts for about 15 percent of France’s economy, fell 0.2 percent in December from the previous month, according to a Bloomberg News survey of economists. Insee, the national statistics office, will release the report at 8:45 a.m. in Paris.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Indian Rupee to Extend Losses as Volatility Rebounds, BNP Says

By Anil Varma

Jan. 22 (Bloomberg) -- Volatility in India’s rupee will rebound from a four-month low as the currency declines on sales of the nation’s assets by overseas funds, BNP Paribas SA said.

A measure of India’s exchange-rate swings fell to the lowest since September this week, approaching levels before Lehman Brothers Holdings Inc. filed for bankruptcy, even as the rupee headed for a monthly loss. The deepening global economic slump will prompt foreigners to dump riskier emerging-market assets, increasing rupee volatility and losses, said Thio Chin Loo, a senior currency strategist at BNP.

“The spot rupee market is showing the way for options,” Singapore-based Thio said in an interview. “Asian currencies including the rupee are set to decline against the dollar as investors remain risk averse amid the deteriorating global economic situation.”

The rupee has lost 0.7 percent this month, adding to the 19 percent slump last year, as global funds sold $728 million more Indian stocks than they bought. All of the 10 most-active Asian currencies outside of Japan fell against the dollar this month.

The rupee, which closed at 49.13 per dollar in Mumbai yesterday, will weaken to 50 in the coming weeks, Thio said.

Implied volatility on one-month dollar-rupee options was at 14.75 percent yesterday, the lowest since Sept. 26, Bloomberg data show. The gauge of fluctuations touched 33 percent on Oct. 27, the highest in at least nine years. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.

Currency Options

“The currency options market has been quiet of late, but I expect volatility to pick up in time,” Thio said.

India’s Sensitive Index, or Sensex, fell 6 percent in two days after Royal Bank of Scotland Group Plc forecast on Jan. 19 the biggest loss in U.K. corporate history, fueling concerns that mounting bank losses will renew risk aversion among global investors.

Non-deliverable forward contracts showed traders increased bets for further weakness in the Indian rupee. Offshore contracts indicated yesterday the rupee may trade at 50.12 to the dollar in three months, compared with expectations of 49.79 on Dec. 31.

Forwards are agreements in which assets are bought and sold at current prices for future delivery. Non-deliverable contracts are settled in dollars rather than the local currency.

To contact the reporters on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

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Iron Ore Prices May Fall 50% on China Slowdown, Rinehart Says

By Rebecca Keenan and Stephen Engle

Jan. 22 (Bloomberg) -- Iron ore contract prices may fall as much as 50 percent this year amid a slowdown in China, the world’s biggest consumer of the raw material, according to Australia’s richest woman and mining magnate Gina Rinehart.

“We’re hearing 30 percent, 40 percent, 50 percent discounts to last year’s contract price,” Rinehart, who controls closely held Hancock Prospecting Pty, said in an interview with Bloomberg Television. That compares with the average forecast of a 30 percent cut in a Bloomberg survey of 11 analysts last week.

Chinese steelmakers are likely to win their first cut in contract prices in seven years as a global recession curbs demand for commodities. Rinehart’s partner, Rio Tinto Group, the world’s second-biggest exporter of the ore, and Baosteel Group Corp. began talks this month to set prices from April 1, according to two company executives who asked not to be identified.

“The economy in China is very sad right now,” Rinehart said. China’s economy may rebound soon and “ultimately, prices will rise,” she said. Hancock isn’t party to the talks.

Hancock Prospecting is partner with Rio in the Hope Downs iron ore project in Western Australia. Hancock is also seeking to develop the Roy Hill iron ore mine in Western Australia.

Rio, BHP Billiton Ltd., and Brazil’s Cia. Vale do Rio Doce, which handle three-quarters of traded iron ore, sell the steelmaking material under long-term contracts to China’s 20 biggest mills and traders at agreed annual prices.

China may be asking for a price cut of between 40 percent and 45 percent, Macquarie Group Ltd. analysts led by London-based Jim Lennon said in a Jan. 12 report. UBS AG analysts have forecast a decline of 40 percent. A 30 percent cut would still be the second- highest price on record.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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South Korea’s Won Advances for Second Day as Local Stocks Climb

By Judy Chen

Jan. 22 (Bloomberg) -- South Korea’s won rose for a second day as stocks advanced on speculation foreign investors will regain their appetite for emerging-market assets.

Asian currencies open for trading climbed against the greenback after the Standard & Poor’s 500 Index rallied 4.4 percent. A central bank report today showed that South Korea’s economy shrank a larger-than-expected 5.6 percent in the fourth quarter, the biggest decline since the Asian financial crisis a decade ago.

“The weak data had already been discounted in the won’s movements,” said Kim Yule, a currency dealer with BNP Paribas in Seoul. “The won’s rise today is driven by the U.S. and the local stock markets.”

The won rose 0.2 percent to 1,370.75 per dollar as of 9:35 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has declined 8.1 percent this month, after a 26 percent slump in 2008, which was the worst year in more than a decade. The benchmark Kospi index gained 1.2 percent.

The economic contraction followed growth of 0.5 percent in the third quarter and was more than twice as much the 2.1 percent decline forecast in a Bloomberg News survey of economists. The economy shrank 3.4 percent from a year earlier, the central bank said in Seoul.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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Keppel, Daewoo, Iluka, SK Energy: Asia Ex-Japan Equity Preview

By Berni Moestafa

Jan. 22 (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.

Indonesian palm oil producers: The Indonesian government may waive value-added tax on sales of vegetable-derived fuels to help demand for palm oil, said Bayu Krisnamurthi, a deputy for Coordinating Minister for Economic Affairs Sri Mulyani Indrawati.

PT Astra Agro Lestari (AALI IJ), the nation’s largest publicly listed plantation company, rose 50 rupiah, or 0.4 percent, to 11,300. PT Bakrie Sumatera Plantations (UNSP IJ), the No. 3, lost 10 rupiah, or 3.9 percent, to 245.

Philippine mining stocks: The country may miss its $1 billion investment goal for mining this year by 20 percent, after falling 24 percent below its $850 million target in 2009, Mines and Geosciences Bureau Director Horacio Ramos said.

Atlas Consolidated Mining & Development Corp. (AT PM), the second-largest metals producer by value, fell 15 centavos, or 4.7 percent, to 3.05 pesos. Apex Mining Corp. Class B shares (APXB PM), equity without ownership restrictions in the local unit of Crew Gold Corp., fell 16 centavos, or 8.6 percent, to 1.70 pesos.

BHP Billiton Ltd. (BHP AU): The world’s largest mining company said it may take $1.7 billion in one-time charges after closing a nickel min in Australia and slashing 6,000 jobs. Separately, BHP suspended sales of cobalt through its “cobalt open sales system” Web site. The Melbourne-based company, in a notice on the site, said it would now “direct market” all its cobalt products. BHP slid 29 cents, or 1 percent, to A$28.66.

Cnooc Ltd. (883 HK): The company’s parent, China National Offshore Oil Corp., said profit rose by “a big margin” last year as sales jumped 22 percent to 198.3 billion yuan ($29 billion). Cnooc, China’s biggest offshore oil producer, declined 17 cents, or 2.6 percent, to HK$6.43.

Daewoo Shipbuilding & Marine Engineering Co. (042660 KS): The company’s 6.3 trillion won ($4.6 billion) sale to Hanwha Group was scrapped by Korea Development Bank, a person familiar with the transaction said. Executives at Korea Development, owner of the biggest stake in Daewoo, discussed the cancellation and will announce it to reporters today, said the person, who didn’t want to be identified. Daewoo Shipbuilding retreated 150 won, or 0.7 percent, to 20,250.

Hyundai Motor Co. (005380 KS): South Korea’s largest automaker and affiliate Kia Motors Corp. (000270 KS) may have their debt ratings cut by Moody’s Investors Service, which placed on review the two car makers’ Baa3 ratings, the lowest investment grade. Hyundai gained 550 won, or 1.3 percent, to 43,500. Kia rose 170 won, or 2.4 percent, to 7,200.

Iluka Resources Ltd. (ILU AU): The world’s biggest zircon producer will close two mines in Western Australia because they don’t make enough profit. The Waroona and Wagerup mines will be closed ahead of schedule in line with “Iluka’s focus on generating acceptable returns from its operations,” the company said. Iluka slipped 15 cents, or 3.3 percent, to A$4.45.

International Container Terminal Services Inc. (ICT PM): The largest Philippine port operator said it won tax breaks from the Board of Investments for its container terminal in the southern island of Mindanao. ICTSI, as the stock is called, fell 50 centavos, or 3.6 percent, to 13.25 pesos.

Keppel Land Ltd. (KPLD SP): The developer controlled by the world’s largest oil-rig builder said fourth-quarter profit dropped 88 percent to S$68.5 million ($46 million) as home sales slowed in Singapore and overseas markets. Singapore-based Keppel fell 1 cent, or 0.7 percent, to S$1.50.

SK Energy Co. (096770 KS): South Korea’s largest oil refiner said it will participate in developing an oil field in Kazakhstan. The refiner together with other South Korean companies, including LG International Corp. (001120 KS) and Hyundai Hysco (010520 KS), will own 27 percent of the venture, SK said. SK Energy fell 1,500 won, or 2.1 percent, to 71,100. LG gained 900 won, or 5.3 percent, to 18,000. Hysco dropped 340 won, or 5.1 percent, to 6,320.

Tenaga Nasional Bhd. (TNB MK): The Malaysian state-owned power utility and Sarawak Energy Bhd. (SRWE MK) won government approval to take over the operation of the Bakun hydroelectric dam project through a leasing agreement. The two companies will take over the operation from Sarawak Hidro Sdn. and also develop the power transmission system from Sarawak state to Peninsular Malaysia, Tenaga said in a statement. Tenaga rose 5 sen, or 0.8 percent, to 6 ringgit.

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

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Japan Stocks Fall, Led by Automakers on Yen; Banks Advance

By Masaki Kondo

Jan. 22 (Bloomberg) -- Japanese stocks fell, reversing early gains, as the stronger yen and a record drop in exports clouded the profit outlook for makers of cars and electronics.

Honda Motor Co., which gets more than half of its profit from North America, lost 4.8 percent, while market leader Toyota Motor Corp. slumped 3.2 percent. Sony Corp., the No. 2 electronics maker globally, lost 3.3 percent. Daiwa Securities Group Inc. jumped 5.5 percent as speculation grew the Bank of Japan will act to ease a credit shortage and Credit Suisse Group raised Japan’s securities industry.

The Nikkei 225 Stock Average declined 39.31, or 0.5 percent, to 7,862.33 as of 10 a.m. in Tokyo. The broader Topix index fell 1.40, or 0.2 percent, to 785.75, with almost the same number of shares falling and rising.

“There’s a tug-of-war between expectations for Obama’s stimulus measures and pessimism about the worsening global economy,” Mitsushige Akino, who oversees the equivalent of $615 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “The market is held in this very tenuous balance.”

The Nikkei plunged by a record 42 percent last year as credit losses and asset writedowns have amounted to more than $1 trillion at global financial companies. Japan’s exports tumbled 35 percent in December from a year earlier, the most on record, the Finance Ministry said today, pointing to wider losses and more job cuts among Japanese manufacturers.

Stronger Yen

The Japanese currency appreciated against the dollar to 88.79 today from 89.88 at the close of stock trading yesterday. The yen strengthened to as much as 87.13 yesterday, a level not seen since July 1995. A stronger local currency reduces the value of overseas sales for Japanese companies.

Honda sank 4.8 percent to 1,985 yen, and Toyota slid 3.2 percent to 2,885 yen. Mazda Motor Corp., which exports 80 percent of domestic production, dived 4.6 percent to 145 yen after KBC Securities cut it to “negative” from “neutral.” Automakers posted the sharpest decline among 33 industry groups on the Topix.

Sony lost 3.2 percent to 1,926 yen. The company said today it’s considering stopping production at one of its two television factories in Japan to cut costs. Sharp Corp., Japan’s largest maker of liquid-crystal display television, lost 2.2 percent to 714 yen, reversing a gain of as much as 1.8 percent.

Daiwa, Japan’s second-biggest brokerage, jumped 5.5 percent to 478 yen, while Nomura Holdings Inc., the largest, gained 5.1 percent to 644 yen. Credit Suisse Group boosted its rating on Japan’s securities industry to “overweight” from “market weight,” saying the sector will rebound.

The Bank of Japan is scheduled to conclude its two-day meeting today. Governor Masaaki Shirakawa and his colleagues may pledge purchases of corporate bonds and other types of securities from banks to help businesses raise funds, according to economists.

Obama Plan

Mizuho Financial Group Inc., Japan’s No. 2 listed bank, jumped 4.2 percent to 226 yen, and market leader Mitsubishi UFJ Financial Group Inc. added 2.7 percent to 496 yen. Shinsei Bank Ltd., part-owned by private equity investor Christopher Flowers, rose 3.5 percent to 117 yen. Banks were the biggest contributors to the Topix’s gain.

U.S. President Barack Obama’s economic package is likely to include fresh injections of capital into banks and will deal with toxic assets clogging lenders’ balance sheets, people familiar with the deliberations said. Treasury Secretary-nominee Timothy Geithner yesterday told Congress that Obama will propose a “comprehensive plan” within the next few weeks for responding to the economic and financial crises.

Nikkei futures expiring in March edged up 0.1 percent to 7,880 in Osaka and gained 0.2 percent to 7,885 in Singapore.

--Motoko Kakizaki and Yuichi Kato in Tokyo. Editors: Rocky Swift, Nicolas Johnson

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

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Australia Stocks, Japan Futures Gain on Policy Expectations

By Masaki Kondo

Jan. 22 (Bloomberg) -- Australia shares and Japan’s stock futures rose on renewed optimism government and central bank measures will ease turmoil in global financial markets.

Commonwealth Bank of Australia climbed 2.8 percent in Sydney after U.S. Treasury Secretary-nominee Timothy Geithner said President Barack Obama will announce his economic and financial plan within the next weeks. U.S.-traded receipts of brokerage Nomura Holdings Inc. advanced 6 percent from the closing price in Tokyo as speculation grew the Bank of Japan will act to ease a credit shortage. Those of Mitsubishi Corp., a Japanese trading company that gets more than half its profit from commodities, gained 5.7 percent after oil prices jumped the most this year.

Australia’s S&P/ASX 200 Index rose 0.5 percent to 3,460.80 as of 10:04 a.m. in Sydney. New Zealand’s NZX 50 Index added 0.8 percent to 2,727.43 in Wellington. In New York, the Standard & Poor’s 500 Index climbed 4.4 percent, led by financial shares.

“There’s a tug-of-war between expectations for Obama’s stimulus measures and pessimism about the worsening global economy,” Mitsushige Akino, who oversees the equivalent of $615 million at Tokyo-based Ichiyoshi Investment Management Co., said in an interview with Bloomberg Television. “The market is held in this very tenuous balance.”

Nikkei 225 Stock Average futures expiring in March closed at 8,100 in Chicago, 2.9 percent higher than 7,870 in Osaka and Singapore. The Bank of New York Mellon Asia ADR Price Index, which tracks American depositary receipts of the region’s companies, gained 4.5 percent.

‘Comprehensive Plan’

The MSCI Asia Pacific Index plunged by a record 43 percent last year as the deepening credit crisis dragged the U.S., Japan and Europe into their first simultaneous recessions since World War II. Credit losses and asset writedowns have amounted to more than $1 trillion at global financial companies, according to counts by Bloomberg.

Geithner yesterday told Congress that Obama will propose a “comprehensive plan” within the next few weeks for responding to the economic and financial crises. The plan will tackle the tightening credit, the collapse of the housing market and global economic conditions that require a coordinated international response, Geithner said.

“An improvement in the U.S. banking system would have a global influence,” said Jason Teh, who helps manage $3.5 billion at Investors Mutual Ltd. in Sydney. “The cost of banks lending to each other would begin to come down and that would help revive spending.”

BOJ Meeting

In Japan, the central bank is scheduled to conclude its two- day meeting today. Governor Masaaki Shirakawa and his colleagues may pledge purchases of corporate bonds and other types of securities from banks to help businesses raise funds, according to economists.

Expectations government stimulus measures will help revive global demand for commodities boosted oil prices yesterday. Crude oil for March delivery leapt 6.6 percent to $43.55 a barrel in New York, the biggest gain since Dec. 31.

Meanwhile, the Japanese currency appreciated against the dollar to as much as 87.13 yesterday, the strongest level since July 1995, from 89.88 at the 3 p.m. close of Tokyo stock trading yesterday. A stronger local currency reduces the value of repatriated overseas sales for Japanese companies. The yen weakened to as much as 89.49 today.

Sony Corp. will announce the closing of one of two domestic television factories and the cutting of more than 2,000 jobs in Japan by the end of fiscal 2009, the Nikkei newspaper said, without citing any sources. Chairman Howard Stringer will also lower the company’s fiscal 2008 earnings outlook, Nikkei said. The company is scheduled to disclose its latest projections and details of a reorganization plan by next week.

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

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Canada: Wholesale Sales Fall in Line with Expectations

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jan 21 09 15:39 GMT |

Canadian wholesale trade slips 1.6% M/M in November. The rise in inventories push the I/S ratio to its highest level since early 2001. The slowdown in sales was broad based, as was the expansion in inventories. Canadian wholesale trade fell 1.6% M/M in November, which was basically in line with expectations. This is not only the first back-to-back drop since 2006 but also the third decline in four months, and sets up a weak backdrop for Canada’s November GDP. In real terms, wholesale trade fell 3.0%. Wholesale sales excluding autos were down 1.5% M/M in November. The cross section of industries that posted losses was broad, as four of seven industries declining. Evidence of weakening global demand was seen everywhere. But particularly large declines were recorded in the “other products” category, which fell 6.0%, automotives which fell 2.2% M/M and machinery and equipment which fell 1.6% M/M. Not only was the cross sector of industries broadly depressed, but the pace of sales using a provincial cross section was also down, as nine provinces posted declines. Inventory levels also rose in November with a 1.0% M/M gain, following the 0.9% M/M gain in October. Inventories were higher in 10 of 15 sectors which suggests that wholesalers now have to contend with a growing inventory overhang at a time when sales are slowing. In November, the inventory to sales ratio was at its highest since February 2001 at 1.32. On balance this reports adds to the growing body of evidence that points to a weak November GDP number, which will subsequently translated into a weak fourth quarter GDP report. Moreover, this report corroborates the view that the Bank of Canada presented recently that the Canadian economy is in recession. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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