Technicals Confront Event Risk For The Fate Of A Clear USDJPY Range

Daily Forex Technicals | Written by DailyFX | Jan 29 09 01:53 GMT |

Why Would USDJPY Hold a Range? Levels to Watch: Range Top: 91.00 (Pivot, Fib, SMA) Range Bottom: 87.15 (Double Bottom, Pivot) There are two key drivers for USDJPY over the coming week: risk sentiment and top tier scheduled event risk. Risk appetite is the more pressing concern for the next 24 to 36 hours as many of the most yen crosses have clawed higher thanks to talk of a massive US stimulus package and the establishment of a ‘bad bank' that can absorb toxic debt. However, come Friday, the docket will take over with the advanced reading of 4Q GDP. There are two very different views of USDJPY that can be derived depending on what time frame you are in. Looking at the past four months and beyond, there is a steady down trend (spot is just off of 13-year lows). However, zooming in on the past two months, we have seen congestion develop with a relatively clear head-and-shoulders formation. Suggested Strategy Short: Half-sized entry orders will be set at 90.75 - above Wednesday's high but below resistance. Stop: An initial stop at 91.75 covers swing highs in the area and potential tails beyond that. To secure profit, move the stop on the second lot to breakeven when the first target hits. Target: The first objective equals risk (100) at 89.75. A second target doubles that at 88.75. Trading Tip - Technicals make the best case for a USDJPY range. A well-developed head-and-shoulders formation has set a strong level of resistance in a market that generally holds a long-term bearish bias. However, will this pattern hold up when the fundamental tides rise? This is a particularly speculative question and presents a risk that we will want to avoid regardless. As such, our strategy will have to reduce the risk for us. Our set up takes the usual steps towards buffering the potential for loss that is developed through high volatility. We have cut our position size to half the norm to lower our notional risk on the trade. What's more, we have widened the stop well above the technical ceiling with enough room to account for any significant tails. At the same time, our range is relatively narrow and established on multi-year lows; so we have made our objectives closer than we would have otherwise. Looking beyond technical setups, we also have to take account of the significant presence of both scheduled and unscheduled event risk. As Friday's 4Q US GDP report represents a top tier market moving candidate, we will close any open orders and tighten stops on live positions before this release. Event Risk US And Japan US - The US dollar is torn by itsfundamental roles in the broader market. On the one hand, deep liquidity and a history as the world's primary reserve currency have imparted the unit with the title of safe haven. However, how influential this driver is a factor of how panicked the markets are. Back in October, investors were concerned only with protecting their capital and only the most liquid markets would do. Today, the market is still cautious but far from panicked; and safety is once again a relative concern with a mind towards potential yield. This allows for greater concern in the more lasting dynamic for any currency - economic health. If the outlook for the economy is dour, there is little expectation of return and capital will naturally seek yield. Come Friday, the market will qualify just how bad a position the US is in with the fourth quarter GDP report. Expected to contract at an annualized 5.5 percent pace, the outlook certainly isn't good. Japan - There is little interest for scheduled event risk when it comes to the Japanese yen. While the health of the economy is tantamount to potential returns, the currency's title as the market's primary safe haven more or less immunizes it to all but the most severe shifts in traditional fundamentals. From the coming week's economic docket, we see little to suggest that scheduled data will make a notable impact on price action - though it will help to define general forecasts for economic growth. One of the key components of the economy, the consumer will see a full checkup with labor earnings figures, household consumption and retail sales figures. Should Japanese citizens boost their savings even further, the Japanese slump will only be prolonged DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Read more...

US Dollar Ends Day Mixed, Japanese Yen Tumbles As Risk Appetite Surge On 'Bad Bank' Initiative

Daily Forex Fundamentals | Written by DailyFX | Jan 29 09 01:48 GMT |

New Zealand Dollar Down as RBNZ Slashes Rates More Than Expected Euro Fails to Break Above Resistance at 1.33 Yet Again US Dollar Ends Day Mixed, Japanese Yen Tumbles as Risk Appetite Surge on ‘Bad Bank' Initiative Risk appetite was strong on Wednesday, leading the S&P 500 to rally 3.36 percent higher and trigger sell-offs in Treasuries. This environment would normally be ripe for sharp US dollar declines, but we're started to see the correlation between risk trends and the currency fall apart. Instead, the greenback ended the day up against the Japanese yen, New Zealand dollar, and euro while falling against the British pound, Australian dollar, and Canadian dollar. Focusing on the weak yen, today's price action showed that the currency continues to move in lockstep with risk aversion, and today's increase in investor confidence led the low-yielding yen to plunge 1.4 percent versus the euro and over 2 percent against the British pound and Australian dollar. What was behind the surge in sentiment? Bad banks. Believe it or not, this is a good thing. According to reports, the Obama administration may be moving toward setting up a 'bad bank' in conjunction with the Federal Deposit Insurance Corp. (FDIC), which would buy toxic assets off the books of financial institutions. This has the potential to go a long way to boost confidence in the financial system and thus, loosen up credit conditions, as there would be fewer concerns about counterparty risk. Though this isn't a silver bullet for all the issues plaguing the financial markets, it is certainly a bit of good news. Meanwhile, the Federal Reserve left the fed funds rate target range unchanged at 0.0 percent - 0.25 percent, as expected, but with little in the way new information revealed in the Federal Open Market Committee's policy statement, this announcement didn't spark much price action. However, the FOMC did appear to be signaling potential for deflation to take hold of the US, as they said 'inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.' Looking ahead to Thursday, there will be a bevy of US economic indicators on hand. At 8:30 ET, durable goods orders are forecasted to fall negative for the third straight month in December at a rate of -2.0 percent. Given the extent of the recession plaguing the US, there is downside risk for this release as both consumer and business demand are relatively non-existent. At the same time, continuing jobless claims for the week ending January 17 are projected to climb to 4620K from 4607K, which is just a stone's throw away from 4713K, the highest level since record keeping began in 1967. At 10:00 ET, new home sales are estimated to fall by 2.5 percent to a nearly 27-year low of 397K, but it will be very interesting to see if the index actually rises in light of Monday's surprise increase in existing home sales. New Zealand Dollar Down as RBNZ Slashes Rates More Than Expected The Reserve Bank of New Zealand (RBNZ) cut their Overnight Cash Rate more than expected by 150 basis points to 3.50 percent, the lowest since the introduction of the mechanism in 1999. This marked the fifth straight meeting where the RBNZ slashed rates, and brings the cumulative total of cuts to a whopping 475 basis points since August 2008. Prior to the release, the markets had only been anticipating a 100 basis point cut, which is part of the reason why the New Zealand dollar fell sharply upon the announcement. Additional bearish pressures were waged on the currency as RBNZ Governor Bollard said that the market may be "correct' to price in further reductions to the OCR, though they likely won't be as aggressive in size. NZD/USD charts showed that the pair plummeted for a test of support at 0.5185/0.5200 before subsequently recovering a bit to end the day near 0.5250. For obvious reasons, this put my analyst pick from this morning in some danger, but with NZD/JPY still well above my noted stop levels, I still think there's potential for the pair to climb higher in the near-term thanks to continued improvements in investor sentiment. Euro Fails to Break Above Resistance at 1.33 Yet Again The euro was not able to break above yesterday's high or falling trendline resistance at 1.33 on Wednesday, and price action overnight may determine whether EUR/USD will break above the noted level, or if the pair is in for a deeper decline. The key level to watch is 1.3120, as a decline below this support level would be a bearish sign. There is some event risk for the euro on hand on Thursday morning, as the German unemployment change and Euro-zone consumer confidence will be release. The former is anticipated to show that the German economy lost jobs for the second month in a row during January while the latter is projected to drop to the lowest since record-keeping began in 1983, adding to evidence that growth in the region is slowing sharply. Such news could add to speculation that the European Central Bank will continue cutting interest rates, but nevertheless, my bias for EUR/USD remains bullish in the near-term. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Read more...

Markets Are Up Ahead of the FOMC Meeting Later Today

Daily Forex Fundamentals | Written by AC-Markets | Jan 29 09 01:41 GMT |

Market Brief The dollar weakened behind a really in risk appetite with most of the majors seeing gains against the greenback. The EurUsd rose 75bps through 1.32, while the UsdJpy picked up 42bps at the low range of 89. The GbpUsd continues to build momentum to the upside, up roughly 140bps trading with a 1.42 handle. Equity markets are positive ahead of the FOMC meeting scheduled for later today, the Dow is up over 100pts or 1.36% and the FTSE picked up 75pts or 3.4%. Bond yields were mixed in the US, but rates in Europe are lower across the curve. Commodities showed gains in the energy sector with oil at $41bbl, but slight drop in precious metals with gold at $896oz. Economic data out of the Eurozone saw a small bright spot in German Gfk consumer confidence this morning. The reading surprised investors coming in marginally better than expected at 2.2 vs. its previous result of 2.1. The better than expected consumer confidence figure accompanies the uptick in German Ifo, creating a much needed optimism in the region. Needless to say, expectations for any economic releases out of the Eurozone are extremely low, and by no means does the recent news mark the beginning of a recovery phase. We should see the Euro and Gbp trade higher against the dollar as long as risk appetite sustains its current strength (higher equities and lower VIX). The Fed meets today in the US to discuss monetary policy, we don’t expect rates to be changed. Investors will be listening keenly for the Fed’s outlook on the economy, and what their expectations within the context of the new administration ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Read more...

USD Strengthens After FOMC

Daily Forex Fundamentals | Written by Easy Forex | Jan 29 09 01:38 GMT |

U.S. Dollar Trading (USD) was sold most the day as equities around the world rallied on news that the Obama Administration would be looking to create a bad bank to hold toxic assets. The losses were reversed after guidance from the FOMC that buying of US treasuries from the FED was not a sure thing. Crude Oil closed up $0.35 ending the New York session at $41.93 per barrel. In US share markets, the Dow Jones gained 200 points or 2.46% and the NASDAQ gained 53 points or 3.55%. Looking ahead, December Durable Goods are expected to drop -2% vs. -1.5% previously. Also released, December New Homes Sales are forecast at 0.4m vs. .407m previously. The Euro (EUR) retested the 1.33 key level but was rejected quite violently as the FOMC statement helped the USD. Weighing intraday was weaker than expected German CPI in January at -0.5% vs. -0.3% forecast. Overall the EUR/USD traded with a low of 1.3104 and a high of 1.3328 before closing the day at 1.3160. Looking ahead, German Unemployment is forecast at 7.7% vs. 7.6% previously in January. Eurozone December Private loans is forecast at 6.5% vs. 7.1%. The Japanese Yen (JPY) was sold across the board as risk sentiment improved and the market bought up high yielding currencies. USD/JPY jumped above 90 as Equities rallied into the US session and extended gains after the FOMC minutes. Overall the USDJPY traded with a low of 88.91 and a high of 90.76 before closing the day around 89.20 in the New York session. UPDATE Japan Retail Sales dropped -2.7% vs. -1.6% forecast. The Sterling (GBP) pushed higher after tripping stops above 1.4250. The market was very bullish and tested supply at 1.4350 that held until the late USD forced some profit taking. Overall the GDP/USD traded with a low of 1.4128 and a high of 1.4374 before closing the day at 1.4240 in the New York session. Looking Ahead, January House Prices are forecast to fall -1.7% vs. -2.5% previously, expecting a -16.7% Y/Y drop. The Australian Dollar (AUD) tracked the Euro higher in a move that has recently seen the AUD dubbed the ‘fast Euro’. Selling interest above 0.6700 proved strong headwind the pair slumped back to low 0.66 after the FOMC statement. AUD/NZD jumped higher to 1.27 as the market Dumped the NZD after the RBNZ cut rates by 1.5% in early Asian trading. Overall the AUD/USD traded with a low of 0.6597 and a high of 0.6730 before closing the US session at 0.6660. Gold (XAU) paused at the $900 an ounce level while the market continued to consolidate the recent rally. Overall trading with a low of USD$883 and high of USD$903 before ending the New York session at USD$888 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

Read more...

Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Jan 29 09 01:32 GMT |

News And Views Government stimulus was the focus last night, investors buying equities on the US Governments plan to mop up toxic assets and centralise them in a newly created ‘bad bank'. Also fuelling the positive tone was an expectation of supportive measures from the Fed's FOMC meeting. The S&P500 is up over 3% as we write, the banks' subindex a massive 20%. European equities were driven by similar expectations, and closed +5%. Commodities followed suit, despite further inventory warnings, WTI oil rallying 3%, copper 2%, and gold, reflecting little need for risk-protection last night, fell 2%. Risk currencies were generally bid, until a few minutes ago, perhaps disappointed by FOMC comments regarding treasury purchases. NZD attempted the upside of the 7-day range pre-FOMC, reaching 0.5375, but then was quickly sold on once the details started emerging. The market is a tad nervy ahead of the RBNZ meeting this morning. AUD/USD also attempted an upside breach at 0.6730, but failed for the same reason as the NZD. AUD/NZD did reach a new 2009 high, at 1.2680, and then pulled back for a breather to 1.25. There is talk of option barriers at 1.26 being triggered. EUR's fall, post FOMC, took it from 1.33 to 1.31in less than an hour. GBP's 3-day rally is slowing, and last night's 1.42 to 1.44 range may have marked a short-term top. Safe-haven JPY unsurprisingly behaved in reverse to the above, weakening from 89 to almost 91. US FOMC maintained rates at 0-0.25%. The statement noted once again that 'economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time'. But it provided a little more colour around that view. They went on to say that 'a gradual recovery in economic activity will begin later this year, but the downside risks to that outlook are significant'. There was no such growth forecast in the last statement on December 16. On inflation, 'the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.' In Dec, the FOMC said that it expected 'inflation to moderate further in coming quarters.' Re long term Treasury purchases, 'the Committee also is prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.' That falls short of a commitment to do so, which markets may have been looking for. German CPI eases from 1.1% yr to 0.9% yr in Jan, the lowest rate for almost five years. That compares to the CPI peak at 3.3% yr just six months ago. Other German data included steady consumer confidence at 2.2 in the GfK survey, labelled Feb but conducted earlier this month. IMF slashes global growth view. In November the IMF was forecasting 2.2% global growth; that has been cut to 0.5%, matching Westpac's latest global growth forecast of 0.5%, published last week. 2009 is shaping up to be the weakest year for global growth in living memory. Outlook Today's RBNZ meeting to announce the new OCR level will likely set the tone for NZD for some time. The 7-day old range of 0.5250 to 0.5370 will likely fail today, given the spread of expectations for the rate cut (100bp to 150bp). Westpac's forecast is a 150bp cut, which would likely see NZD sold once the knee-jerk euphoria has subsided Country Release Last Forecast NZ RBNZ OCR Review 5.00% 3.50% Dec Merchandise Trade NZDm –520 80 US Dec Durable Goods Orders –1.5% –2.0% Initial Jobless Claims w/e 24/1 589k 600k Dec New Home Sales –2.9% –7.0% Eur Dec Retail Trade %mth –0.1% –0.8% Dec Money Supply M3 %yr 7.8% 7.6% Jpn Jan Retail PMI 41.4 – Jan Business Climate Index –3.17 –3.50 Jan Cons/Economic Confidence –30/ 67.1 –29/70.0 Ger Jan Unemployment ch’ 18k 30k Jan CPI Prelim %yr 1.10% 1.10% UK Jan House Prices %yr –15.9% –16.7% Can Dec Industrial Product Prices –2.6% – Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Read more...

Brown Says U.K. Will Invest in Broadband to Curtail Recession

By Gonzalo Vina

Jan. 29 (Bloomberg) -- Prime Minister Gordon Brown will pledge government support for British companies providing digital communications and broadband networks, part of a plan to curb the impact of the recession.

“Our digital networks will be the backbone of our economy in the decades ahead,” Brown will say in a speech in London today, according to his office. “Even at this difficult time for the economy, we will not turn our backs on the future.”

The government says the industry, with revenue of 50 billion pounds ($72 billion) a year, can help revive economic growth by laying down the infrastructure needed to support the next generation of companies that depend on computer technology.

Communications Minister Stephen Carter will give details of the plan in a statement to Parliament later today. The measures may affect broadband providers including BT Group Plc, Cable & Wireless Plc and British Sky Broadcasting Group Plc.

They are the latest in a series of steps aimed at showing voters the government is supporting the economy as it enters its worst slump since World War II. Brown, who must call an election by June 2010, has seen his popularity slump as the economy worsened.

Britain’s economy will shrink 2.8 percent next year, the most since 1946 and the biggest contraction among the world’s leading industrial economies, the International Monetary Fund forecast yesterday.

Bailout Measures

Brown has pledged 50 billion pounds to recapitalize banks including Royal Bank of Scotland Group Plc and hundreds of billions of pounds of further loan guarantees. Earlier this week, he also offered carmakers 2.3 billion pounds of support.

A draft version of Carter’s report suggests the government will introduce a “universal service commitment” to provide a minimum broadband download speed of 2 megabits a second to every household that wants it.

Last year, Brown said the U.K. would invest 300 million pounds over three years to give 1.4 million children access to the internet with free broadband and computers. The U.S. and Britain lead the world in internet use, according to an International Communications Market report published Nov. 20 by the U.K. communications sector watchdog Ofcom.

Americans spend an average of just over 15 hours a week online, compared with just under 14 hours a week in the U.K.

Earlier this month, the Financial Times reported that the task of providing nationwide broadband would fall on a mix of fixed-line and mobile telephone operators because of the costs of rolling out wire-based broadband networks. Carter’s report does not rule out “fiscal relief” or public funding for broadband networks, the paper said.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net;

Read more...

Madoff Red Flags Could Have Been Raised by Santander’s Software

By Tom Cahill

Jan. 29 (Bloomberg) -- Banco Santander SA’s hedge fund unit used risk software that according to its developer may have “waved red flags” about Bernard Madoff investments.

“You definitely would have seen it,” Riskdata SA Chief Executive Officer Ingmar Adlerberg said in a phone interview from Paris. Many of the company’s 80 customers have thanked it for flagging risks linked to Madoff, he said. He refused to name them or comment specifically on Santander.

Santander offered on Jan. 27 to pay 1.38 billion euros ($1.8 billion) to private banking clients hit by Madoff-related losses through the Spanish bank’s Optimal Investment Services hedge fund arm. Geneva-based Optimal said Riskdata’s FOFiX product was key to “quantitative risk analysis” for hedge fund investments in a 30-page due-diligence questionnaire filed last April with the Alternative Investment Management Association.

“Risk profiles are calculated for each hedge fund in order to estimate the systematic factors influencing the returns of the fund,” Optimal said in the document, which was reviewed by Bloomberg News. “Deviation from expected risk profiles need to be explained.”

“Potential breaches of the risk parameters would be immediately notified to the chief operating officer and if appropriate the chief executive officer,” Optimal said in the document. AIMA, based in London, is the hedge fund industry’s largest trade organization, with more than 1,280 members.

A Santander spokesman declined to comment on the risk management software or the hedge fund questionnaire.

Class Action Suit

Santander Chairman Emilio Botin, 74, faced repeated questions over the Madoff investments at a Jan. 26 shareholders meeting. The same day, Cremades & Calvo-Sotelo, a Spanish law firm, and U.S. lawyers Labaton & Sucharow LLP filed a class action suit against Santander in Miami, alleging it didn’t do enough due diligence in relation to the alleged Madoff fraud.

The company “acted at all times with due diligence” and “in accordance with all applicable laws,” Santander said in a statement.

Madoff, 70, was arrested on Dec. 11 and charged with using billions of dollars from new investors to pay off older ones in a Ponzi scheme. He told authorities that investors may have lost $50 billion, prosecutors said.

Riskdata’s FOFiX is a tool for fund of hedge fund investors that compares the performance of products with the same strategy to find aberrations in the pattern of results. It also analyzes returns to help explain how a fund made or lost money. The system costs 50,000 euros to 200,000 euros a year.

‘Due Diligence’

When the software sifted through 2,281 comparable funds, it highlighted 20 with “suspicious” performance, including those linked to Madoff and one run by Samuel Israel, Riskdata said. Israel is the founder of hedge fund firm Bayou Group LLC who is accused of faking his own suicide the day he was due to start serving a 20-year sentence for a $400 million fraud.

Red flags the system would have throw up include “returns smoothing,” as well as performance inconsistent with Madoff’s stated strategy, which he described as “split-strike conversion,” Adlerberg said.

Optimal oversaw about $10.4 billion as of April last year, with 76 percent coming from Santander private clients. The Geneva-based investors said in the AIMA report that its hedge fund risk parameters were made in coordination with Santander and any breaches would be reported to the group’s risk monitoring division in Madrid.

“Optimal failed to do due diligence to ascertain the quality of the underlying funds and who was managing them,” said Fernando Luque, an analyst at Morningstar Inc. in Madrid.

Amaranth Lessons

Santander will close seven Optimal hedge funds after the Madoff scandal triggered a surge in withdrawal requests, the bank said Jan. 27. It didn’t disclose the size of the funds or amounts clients had sought to get back.

Optimal said in the AIMA questionnaire that it was “one of a handful of asset managers in the alternative asset space with dedicated resources” in operation due diligence. Its staff of 73 performed due diligence surveys on about 224 managers it invested with as of last April.

Optimal said it bolstered its controls after getting caught with Amaranth Advisors LLC, the Greenwich, Connecticut-based hedge fund that failed in 2006 after losing $6.6 billion.

“Even managers who have historically demonstrated careful risk management over many years can suffer lapses of judgment,” Optimal said in the April document. “In the future we are more likely to take action to cut risk where we believe positions have become too concentrated rather than trusting management to make this decision.”

To contact the reporter on this story: Tom Cahill in London at tcahill@bloomberg.net

Read more...

Trichet Says ECB’s Next Important Rate Meeting Is In March

By Simone Meier and Francine Lacqua

Jan. 29 (Bloomberg) -- European Central Bank President Jean- Claude Trichet said the bank’s next “important” meeting will be in March, suggesting policy makers will avoid the interest-rate cut some investors expect next week.

“In March we’ll have a lot of new information, we’ll have our own staff projections,” Trichet told Bloomberg Television in an interview in Davos, Switzerland, yesterday. Officials meet Feb. 5 and investors are betting they will lower the key rate by at least half a percentage point, Eonia forward contracts show.

The ECB has been forced into the most aggressive series of rate reductions in its 10-year history after the global financial crisis pushed the euro-region economy into a recession. Still, Trichet has signaled the bank is reluctant to follow the U.S. Federal Reserve in cutting borrowing costs to close to zero.

“Very, very low interest rates have some inconveniences that the Governing Council is trying to avoid,” he said. When asked whether policy makers are designing new tools should rates approach zero, Trichet said “there is nothing that would be imminent.”

The ECB has cut its main interest rate by 2.25 percentage points since early October to 2 percent, matching a record low.

‘Wait-and-See Policy’

“Markets are looking for the risk that data is so dramatically dire that it could force the ECB into cutting rates,” said Matthew Sharratt, an economist at Bank of America Corp. in London. “There’s a great degree of reluctance at the ECB to take rates lower. They’re going to try and do their best not to follow the Fed and the Bank of England.”

Traders may sell the currency because the ECB is delaying a cut in interest rates, Royal Bank of Scotland Group Plc said. The euro fell yesterday, declining 0.4 percent to $1.3105.

“The market will not like the notion of the ECB’s wait-and- see policy,” Dustin Reid, director of currency strategy at RBS Greenwich Capital Markets in Chicago, wrote in an e-mailed note. “I suspect the euro eventually trades lower on this.”

The ECB has the highest rates among the Group of Seven industrialized nations. The Fed, the Bank of England and the Swiss central bank have cut borrowing costs by more as the world’s largest economies slide simultaneously into recession for the first time since World War II.

Fed Purchases

The Bank of England on Jan. 8 reduced its main lending rate to 1.5 percent, the lowest since it was founded in 1694, and the government has given it the power to buy securities as rates near zero. The Fed kept its key rate as low as zero yesterday and said it’s prepared to purchase “longer-term Treasury securities.”

Some European policy makers say the ECB shouldn’t rule out unconventional measures if they need to pump more money into the economy.

“A central bank that has already reduced its policy rate to zero could be incorrectly advised to stop pursuing expansionary measures because these are thought to be ineffective,” council member Athanasios Orphanides said in a speech in Limassol, Cyprus yesterday.

Trichet said the ECB has already shown willingness to take unusual action, noting it had expanded its balance sheet to get more money to banks.

“Already we’re doing things which are not standard,” he said. “We’re in a non-standard world. Whether or not we’ll embark on other non-standard operations, I said already I wasn’t excluding. We’ll see.”

Deepening Recession

As ECB officials debate monetary policy, their 16-nation economy is deteriorating. European manufacturing and service industries contracted for an eighth straight month in January, confidence in the economic outlook dropped to a record low in December and unemployment rose to a two-year high in November.

“We’re very, very carefully observing” all incoming data, Trichet said. “This year is in the negative territory and even more in negative territory than our last projections.”

The International Monetary Fund yesterday cut its forecast for the euro-region economy to predict a contraction of 2 percent this year. The Washington-based fund previously projected the economy would shrink 0.5 percent in 2009.

Euro-region inflation probably slowed to 1.4 percent in January from 1.6 percent in December, a Bloomberg survey shows. That report is due from the European Union’s statistics office in Luxembourg on Jan. 30.

“We do whatever is necessary to permit inflation in the medium term to be in line with our definition of price stability -- less than 2 percent but close to 2 percent,” Trichet said. “We didn’t see a risk of deflation. We shouldn’t confuse disinflation with deflation,” he added.

Trichet is scheduled to speak on a panel discussing European economic governance at 3:45 p.m. later today. He will be joined by Deutsche Bank AG Chairman Josef Ackermann, Italian Finance Minister Giulio Tremonti and European Commission President Jose Manuel Barroso. He sits on a panel with Henry Kravis, founder partner of Kohlberg Kravis Roberts & Co., tomorrow. It’s called “Scenarios for the Future of the Global Financial System.”

To contact the reporters on this story: Simone Meier in Frankfurt at smeier@bloomberg.net; Francine Lacqua in Davos at flacqua@bloomberg.net.

Read more...

New Zealand’s Dollar Drops on Rate Cut, Australia’s Also Falls

By Candice Zachariahs

Jan. 29 (Bloomberg) -- New Zealand’s dollar dropped to the lowest in a week after the central bank cut interest rates by a larger-than-forecast 1.5 percentage point, reducing the appeal of the nation’s assets. The Australian currency also fell.

Australia’s dollar advanced against the yen for a fourth day as equities rose on speculation U.S. President Barack Obama will set up a so-called bad bank to take toxic assets off bank balance sheets. The Reserve Bank of New Zealand slashed rates to a record low 3.5 percent in a decision that was forecast by three of 13 economists surveyed by Bloomberg News.

“It has been a surprise for the market and we’ve seen the currency fall quite dramatically on the back of that,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “The currency will remain under pressure.”

New Zealand’s dollar slid as low as 51.90 U.S. cents from 53.03 cents before the decision and traded at 52.21 U.S. cents as of 11:07 a.m. in Sydney. It bought 47.23 yen from 47.06 yesterday in late Asian trading.

Australia’s currency fell 0.2 percent to 66.48 U.S. cents from 66.62 cents late in Asia yesterday. The currency rose 1.1 percent to 60.15 yen. It reached as high as NZ$1.2748, the highest since August 2008, before trading at NZ$1.2729, up 0.7 percent from yesterday.

Higher interest rates in New Zealand and Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan, attract investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Australian Rates

The Reserve Bank of Australia meets Feb. 3 and traders are betting it will lower its benchmark rate 1 percentage point from 4.25 percent, according to a Credit Suisse Group index based on swaps trading. That would be the lowest since the bank started setting cash rate targets in 1990 and the cheapest benchmark borrowing cost since 1964. Rates in Australia are now higher than in neighboring New Zealand for the first time since January 2004.

The Australian and New Zealand currencies earlier advanced against the dollar as the Standard & Poor’s 500 index rose for a fourth day, its longest stretch of gains since November.

They strengthened against the yen as the U.S. House of Representatives passed President Obama’s $819 billion stimulus package, bolstering investor appetite for higher-yielding assets. The 244-188 vote sends the measure to the Senate, where Obama urged lawmakers to work out their differences in the next few weeks, saying delays would only cost more people their jobs.

Better Sentiment

“We’ve had an improvement in sentiment toward the global economy linked to hopes of more aggressive policy responses, particularly in the U.S.,” said John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. The Australian dollar could “gain modestly” and advance toward 68.5 cents over the next week, he said.

The Federal Open Market Committee said yesterday it is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.”

U.S. policy makers held their target lending rate in a range of zero to 0.25 percent.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped to 3.28 percent from 3.51 yesterday, after the central bank signaled further reductions ahead.

Market participants expect the benchmark rate “will go a little lower then trough and they may be correct in that,” RBNZ Governor Alan Bollard said. “We would expect any further reductions to be smaller than those seen recently.”

Australian government bonds declined. The yield on the 10- year note rose three basis points, or 0.03 percentage point, to 4.08 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.227, or A$2.27 per A$1,000 face amount, to 119.592.

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

Read more...

Yen May Fall, Euro Rise as Risky Trades Revive, Citigroup Says

By Candice Zachariahs

Jan. 29 (Bloomberg) -- The Japanese yen may weaken against the U.S. dollar and eight more of the world’s most-traded currencies as riskier foreign-exchange trades revive, Citigroup Inc. analysts said, citing technical charts.

The U.S. dollar looks to be forming a so-called double bottom, meaning any advance above 94.65 yen probably would be followed by a surge to as high as 102 yen, analysts led by New York-based Tom Fitzpatrick, Citigroup’s chief technical analyst, said in a report dated yesterday. The dollar rose 0.2 percent to 90.43 yen as of 10:10 a.m. in Tokyo.

Yen weakness will be driven by “non-foreign exchange dynamics” said Fitzpatrick in an e-mail today. Higher government bond yields, equities and commodities along with lower volatility could see “a number of 10 percent moves in yen crosses,” he said.

The euro slipped to 118.66 yen from 118.88 yesterday. The 16-nation currency may advance 10 percent to 130 yen, with a break above 131 opening up a target of 150 yen, the analysts said. The currency may benefit from European policy makers’ reluctance to lower interest rates as far as their Japanese and U.S. counterparts.

Yields on German two-year notes rose to the highest in three weeks on Jan. 27 before slipping to 1.61 percent yesterday. U.S. two-year Treasury yields advanced to as much as 0.93 percent yesterday, the highest since Dec. 9.

‘Very, Very’ Low Rates

“Very, very low interest rates have some inconveniences that the Governing Council is trying to avoid,” European Central Bank President Jean-Claude Trichet told Bloomberg Television yesterday. The ECB has cut its main interest rate by 2.25 percentage points since early October to 2 percent, matching a record low. The central bank’s board next meets Feb. 5.

U.S. policy makers yesterday left their benchmark interest rate as low as zero and said the Federal Reserve is prepared to buy Treasury securities to resuscitate lending. Any purchases before the Federal Open Market Committee’s next meeting in March would need a vote to authorize the action.

The yen weakened against the dollar for a second day after the Standard & Poor’s 500 index capped its longest streak of gains since November, advancing for a fourth day. The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes that is used as a measure of risk aversion, slid to its lowest close since Jan. 7.

A double bottom forms when a security makes two consecutive troughs of about the same depth, and indicates potential for a rebound.

Similar patterns are evident for currencies in countries with higher-yielding assets, pointing to possible rallies by the Australian dollar and the euro against the yen and the Swiss franc and for the South African rand against the greenback, the Citigroup analysts said.

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

Read more...

Dollar Gains Versus Euro, Pound on Plans to Revive U.S. Economy

By Stanley White and Ron Harui

Jan. 29 (Bloomberg) -- The dollar rose against the euro and the pound as the Federal Reserve said at a policy meeting it is ready to buy longer-term government bonds to improve credit markets and boost the world’s largest economy.

The greenback may also strengthen against the yen after the U.S. House passed President Barack Obama’s $819 billion stimulus package. The New Zealand dollar touched a one-week low after the country’s central bank cut the official cash rate more than most analysts forecast to a record low of 3.5 percent.

“The dollar can squeeze higher,” said Osao Iizuka, head of currency trading in Tokyo at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank by market value. “The Fed has laid out the framework for future policy, and that’s a relief. We’ll need to see how this benefits the real economy. Risk appetite may improve.”

The dollar advanced to $1.3114 per euro as of 11:22 a.m. in Tokyo from $1.3166 late yesterday in New York. Against the pound, the greenback appreciated to $1.4189 from $1.4247. The dollar traded at 90.21 yen from 90.26 yen yesterday, when it reached a one-week high of 90.75 yen. The euro bought 118.32 yen from 118.88 yen. The dollar may advance to 91 yen today, Iizuka said.

New Zealand’s dollar traded at 52.02 U.S. cents from 52.41 cents late yesterday in New York. The kiwi, as the currency is known, touched 51.90 cents after the Reserve Bank of New Zealand cut its target lending rate by 1.5 percentage points, forecast by only three of 13 economists surveyed by Bloomberg News. The rest predicted a reduction of 1 percentage point.

Fed Policy

The Fed is “prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets,” the Federal Open Market Committee said in a statement after meeting in Washington yesterday. Policy makers maintained the target lending rate in a range of zero to 0.25 percent.

Sterling fell to $1.4185 from $1.4247. The pound plunged to $1.3503 on Jan. 23, the lowest level since September 1985, after the government announced a second bank bailout in three months, sparking concern the U.K. will have to widen its budget deficit.

“I did actually foresee the fall in sterling, and that was one of the positions we carried,” said George Soros, who gained fame more than 16 years ago when he broke the Bank of England’s defense of the currency. Below $1.40, “it seemed to me the risk- reward was no longer clear,” he told reporters yesterday at the World Economic Forum in Davos, Switzerland.

Stimulus Package

Obama’s stimulus bill will go to the Senate, where Republicans who want more tax cuts and less spending have more power to demand changes. The Federal Deposit Insurance Corp., chaired by Sheila Bair, may manage a bad bank that would buy assets clogging banks’ balance sheets, two people familiar with the matter said. The initiative may allow the government to rewrite some of the mortgages that underpin bad debt.

“Obama’s package may result in the U.S. coming out of recession first,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe General SA, France’s third-largest bank by market value. “This is positive for the dollar,” which may rise to 91 yen and $1.30 per euro today, he said.

The ICE’s Dollar Index, which tracks the dollar versus the euro, the yen, the pound, the Canadian dollar, the Swedish krona and the Swiss franc, increased 0.2 percent today to 84.802 after advancing 6 percent in 2008.

The Fed cut its target lending rate on Dec. 16 to as low as zero and shifted its focus to the amount and type of debt it buys, seeking to revive credit markets. The central bank began this month a $500 billion program to buy Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities, pushing down the yields on mortgage bonds relative to Treasuries.

Trichet on Rates

European Central Bank President Jean-Claude Trichet said in an interview on Bloomberg Television at the forum in Davos before the Fed’s announcement that “very, very low” interest rates “have some inconveniences.”

He reiterated that the ECB’s next important meeting is in March, signaling policy makers won’t cut interest rates next week. The central bank lowered its benchmark rate on Jan. 15 by a half- percentage point to 2 percent, matching a record low.

The euro may extend this month’s 5.9 percent loss versus the dollar as the European index of executive and consumer sentiment declined to 65.4 in January, the lowest since the index started in 1985, according to a Bloomberg News survey of economists. The European Commission will release the report at 11 a.m. in Brussels.

“The eurozone economy is slowing sharply and the ECB will have more monetary easing to do,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “The underlying trend will remain to the downside for the euro.”

The odds the ECB will lower its 2 percent main rate by a quarter-percentage point at its Feb. 5 meeting were 68 percent yesterday, compared with 65 percent on Jan. 27, according to a Credit Suisse Group index based on overnight swaps.

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

Read more...

Australia Beef Exports to Reach Record in 2009 on Currency Drop

By Madelene Pearson

Jan. 29 (Bloomberg) -- Beef shipments from Australia, the world’s second-largest exporter of the meat, may rise to a record in 2009 driven by a decline in the local currency.

Total beef and veal exports may rise 3 percent to an all time high of 990,000 tons, up from 957,478 tons in 2008, Sydney- based Meat & Livestock Australia said today in an e-mailed report. The nation’s beef and veal output may gain 2 percent, it said.

The Australian dollar has plunged 25 percent against its U.S. counterpart in the last year making it cheaper for overseas customers to buy Australian products. Declines in the currency are likely to offset uncertainty over global beef demand caused by the global financial crisis, Meat & Livestock Australia said.

“Underpinned by the lower Australian dollar, the Australian industry is forecast to enter a period of stronger export demand and cattle prices, once the current trading and financial uncertainties recede,” the group said.

Exports to Japan, the U.S. and South-east Asia are forecast to rise in 2009, it said. Sales to Japan, the biggest buyer of Australian beef, may increase 3 percent in 2009, while sales to the U.S. and South-east Asia are forecast to gain 38 percent and 13 percent respectively.

Brazil is the world’s top beef exporter.

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

Read more...

Rubber Futures Rise to Six-Day High on U.S. Stimulus Measures

By Rattaphol Onsanit

Jan. 29 (Bloomberg) -- Natural rubber futures advanced to a six-day high in Tokyo, on optimism that U.S. stimulus measures will help ease the global economic recession and boost demand for the raw material used to make car tires.

The commodity rebounded from yesterday’s 1.6 percent slide, gaining as much as 2.7 percent to the highest price since Jan. 21. The gain followed equity market surges in Asia and U.S.

“Rubber is taking cues from investment flows into stock markets,” Navarat Kaewpratarn, a senior marketing official at Bangkok-based Future Agri Trade Ltd., said today by phone.

Rubber for July delivery added 1.8 percent to 148.3 yen a kilogram ($1,644 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. Shanghai markets are closed this week for the Lunar New Year holiday.

Asian shares rallied after the U.S. House passed President Barack Obama’s $819 billion stimulus package, aimed at lifting the economy out of recession through tax cuts and more than a half-trillion dollars in new spending.

The MSCI Asia Pacific Index added 1.4 percent to 84.70 at 11:29 a.m. in Tokyo. The Nikkei 225 Stock Average gained 1.7 percent.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net

Read more...

Gold Declines a Third Day in Asia on Reduced Safe Haven Appeal

By Glenys Sim

Jan. 29 (Bloomberg) -- Gold fell for a third day in Asia as the U.S., the world’s largest economy, took measures to ease a financial crisis, eroding demand for haven investments.

President Barack Obama’s administration prepared a plan to absorb toxic bank assets, sending gold down 1.8 percent in the past two days. The Federal Reserve said yesterday it’s prepared to buy Treasury securities to improve credit markets.

“Safe-haven-related interest in the precious metal waned as President Obama is currently investigating additional measures to support the banking system in the U.S.,” Anne-Laure Tremblay, an analyst at BNP Paribas said in an e-mail.

Bullion for immediate delivery dropped as much as 0.5 percent to $882.90 an ounce, and traded at $885.13 at 10:06 a.m. in Singapore.

Gold for February delivery was down 0.4 percent at $884.50 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange, while gold on the Tokyo Commodity Exchange was little changed at 2,575 yen a gram ($887 an ounce).

“The U.S. dollar should continue to appreciate, which should weigh on gold prices,” said Tremblay.

The dollar rose against the euro, pound and yen on the Federal Reserve’s plan to resuscitate lending, and after the U.S. House passed Obama’s $819 billion stimulus package.

Among other precious metals for immediate delivery, silver fell 0.8 percent to $11.91 an ounce, platinum lost 0.9 percent to $948.25 an ounce, and palladium fell 0.5 percent to $189.50 an ounce as of 10:12 a.m. Singapore time.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Read more...

Oil Is Little Changed as Stockpiles Gain, Refiners Cut Output

By Christian Schmollinger

Jan. 29 (Bloomberg) -- Oil was little changed in New York after U.S. crude inventories gained more than expected last week and refiners reduced output as demand declined.

Crude oil stockpiles for the week ended Jan. 23 climbed by 6.2 million barrels to 338.8 million barrels, the highest since August 2007, the Energy Department said yesterday. Analysts in a Bloomberg survey had expected a 2.9 million barrel increase. Refineries operated at 82.5 percent of capacity last week, down from 83.3 percent.

“That surprise stock build helped to push the front month lower,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. Refinery runs were down “because of maintenance ahead of the summer driving season to prepare to make gasoline, and the second thing is that gasoline margins are so weak that they are just shutting down.”

Crude oil for March delivery was at $42 a barrel, down 16 cents, at 10:15 a.m. Singapore time on the New York Mercantile Exchange. Yesterday, oil rose 58 cents, or 1.4 percent, to settle at $42.16 in New York. Prices are down 5.9 percent this year and are 54 percent lower than a year ago.

Supplies at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 0.9 percent to 33.5 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location. Total capacity there is 47.7 million barrels, according to Lipow Oil Associates LLC.

Plant Shutdowns

Refinery output fell as companies announced shutdowns for maintenance to switch their production from heating oil to gasoline ahead of the peak motor fuel demand period starting May. Analysts had forecast that processors would operate at 82.8 percent of capacity.

ConocoPhillips, the second-largest U.S. refiner, expects refinery operating rates near 80 percent during the first quarter due to planned turnarounds and hydro-skimming economics.

Crude and motor fuel prices rose yesterday after gasoline supplies fell 121,000 barrels to 219.9 million barrels last week, the U.S. Energy Department said. Inventories were forecast to climb 2 million barrels, according to the median estimate in a Bloomberg survey.

The profit margin, or crack spread, for making a barrel of crude into one of gasoline, based on futures prices, climbed 36 percent to $8.475 a barrel yesterday. It was at $8.610 a barrel today.

“Everyone was caught off guard and you can clearly see that in what happened to the gasoline crack,” said Hudson Capital’s Kornafel. “When you see that kind of movement in a derivative of a derivative, then that tells you no one had any advanced inkling.”

Product Imports

Imports of oil products, including gasoline and distillate fuels, fell 3.6 percent last week to 3.6 million barrels, the Energy Department said.

BP Plc, Europe’s second-largest oil company, may shut four U.S. refineries that can process 1.3 million barrels a day of crude oil if United Steelworkers union members target the refineries for a strike. Exxon Mobil Corp., the world’s largest oil company, said its refineries will operate if there’s a work stoppage.

Brent crude oil for March settlement fell 40 cents, or 0.9 percent, to $44.50 a barrel on London’s ICE Futures Europe exchange at 9:37 a.m. Singapore time. The contract yesterday increased $1.17, or 2.7 percent, to settle at $44.90 a barrel.

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

Read more...

Hong Kong, Shanghai Studying Hang Seng Exchange-Traded Fund

By Hanny Wan

Jan. 29 (Bloomberg) -- Hong Kong and Shanghai’s stock exchanges are considering the introduction of an exchange-traded fund in the Chinese city that will be based on members of the Hang Seng Index.

Officials from Shanghai’s exchange will visit Hong Kong in coming weeks to discuss products based on the Hang Seng Index, Paul Chow, chief executive of Hong Kong Exchanges & Clearing Ltd., told reporters.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

Read more...

Hong Kong Stocks Jump as Stimulus Plan Eases Recession Concern

By Hanny Wan and Jonathan Burgos

Jan. 29 (Bloomberg) -- Hong Kong stocks rose on the first trading day of the Lunar New Year on expectations U.S. President Barack Obama’s $819 billion stimulus package will boost consumer spending in the world’s biggest economy.

Yue Yuen Industrial (Holdings) Ltd., the biggest supplier of athletic shoes to Nike Inc. and Adidas AG, climbed 6.7 percent. Li & Fung Ltd., the largest supplier of toys and clothing to Wal- Mart Stores Inc., jumped 6.8 percent.

The Hang Seng Index added 747.28, or 5.9 percent, to 13,325.88 as of 10:10 a.m. local time. The Hang Seng China Enterprises Index, which tracks Chinese companies’ so-called H shares, advanced 6.6 percent to 7,101.69. Markets reopened today after a three-day Lunar New Year holiday.

The Standard & Poor’s 500 Index climbed 3.4 percent in New York after a White House official said President Barack Obama’s team may announce its plan to set up a so-called bad bank to buy toxic financial assets. After the market closed in New York, the U.S. House passed Obama’s $819 billion stimulus package, which now moves on to a vote in the Senate.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

Read more...

Japan Stocks Jump as Financial Concerns Ease; Shippers Advance

By Masaki Kondo

Jan. 29 (Bloomberg) -- Japanese stocks gained, driving the Nikkei 225 Stock Average to its longest winning streak in three weeks, on expectations central bank efforts to unlock credit markets will ease the global financial crisis.

Mitsubishi UFJ Financial Group Inc. jumped 4.4 percent on the U.S. Federal Reserve’s plan to buy longer-term Treasury bonds. Sumitomo Mitsui Financial Group Inc. soared 10 percent even after third-quarter profit almost evaporated on bad-loan costs. Honda Motor Co., which gets more than half its profit in North America, jumped 4.1 percent after the yen fell against the dollar. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping line, gained 4.3 percent as cargo fees for commodities rose to a three-month high.

“The Fed’s resolve to take all possible measures boosted investor confidence in prospects for the global financial market,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co. said in an interview with Bloomberg Television. “With the weakening yen, we’ll see a shift to exporters from domestic-oriented shares.”

The Nikkei 225 gained ground for a third day, climbing 140.75, or 1.7 percent, to 8,247.04 as of 9:53 a.m. in Tokyo, set for its longest winning streak since Jan. 7. The broader Topix index rose 13.61, or 1.7 percent, to 817.94, with almost two stocks advancing for each that slumped.

The Nikkei lost a record 42 percent last year as writedowns and credit losses surpassed $1 trillion at global financial companies, and the gauge has lost another 6.9 percent in 2009. More than two thirds of the measure’s members fell below their net worth, according to data compiled by Bloomberg.

Fed Action

The Fed is ready to buy longer-term Treasury securities to encourage lending, the Federal Open Market Committee said in yesterday after meeting in Washington. The Fed left its benchmark interest rate as low as zero. New Zealand’s central bank today cut its key interest rate by 1.5 percentage points to a record low and said there’s room for further reductions.

Meanwhile, the U.S. House of Representatives passed President Barack Obama’s $819 billion stimulus package, aimed at lifting the economy out of recession. Obama and Japanese Prime Minister Taro Aso agreed to cooperate to solve the financial crisis and will try to meet “soon,” Japan’s government said today.

Mitsubishi UFJ, Japan’s biggest listed bank, jumped 4.4 percent to 525 yen, and closest rival Mizuho Financial Group Inc. surged 5.2 percent to 245 yen. Sumitomo Mitsui, the third largest, gained 10 percent to 3,710 yen, even after reporting more than a 99 percent plunge in third-quarter net income because of losses on stockholdings and mounting non-performing loans.

Currency Effect

The Fed’s announcement helped the dollar strengthen to as much as 90.75 yen in New York from 89.22 at the 3 p.m. close of stock trading in Tokyo yesterday. A weaker yen raises the value of repatriated overseas sales for Japanese companies.

Honda, Japan’s No. 2 automaker, leapt 4.1 percent to 2,285 yen, and Toyota Motor Corp., the biggest automaker globally, jumped 2.4 percent to 3,050 yen. Sony Corp. rose 3.7 percent to 1,903 yen, while Canon Inc., the world’s biggest digital camera maker, added 5.2 percent to 2,725 yen even after forecasting profit will fall to a decade low this year. Makers of electronics and cars were the second- and third-biggest contributors to the Topix’s rally, following banks.

Mitsui O.S.K. added 4.3 percent to 612 yen and market leader Nippon Yusen K.K. rose 2.6 percent to 517 yen. Kawasaki Kisen Kaisha Ltd. climbed 2.4 percent to 388 yen. The Baltic Dry Index, a measure of commodity shipping fees, added 1 percent yesterday to the highest level since Oct. 27.

Nikkei futures expiring in March gained 1.7 percent to 8,250 in Osaka and Singapore.

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

Read more...

Asian Stocks Rise, Led by Banks, on Measures to Unlock Credit

By Shani Raja

Jan. 29 (Bloomberg) -- Asia stocks rallied a third day, led by banks and metals producers, on speculation lower interest rates and U.S. stimulus measures will ease the global financial crisis and boost the region’s exports.

Commonwealth Bank of Australia, the nation’s largest mortgage lender, rose 2.4 percent in Sydney as the U.S. Federal Reserve planned to buy longer-term Treasury bonds and New Zealand’s central bank cut its benchmark rate to a record. Sony Corp. rose 3.8 percent after the yen fell against the dollar. BHP Billiton Ltd., the world’s biggest mining company, jumped 4.8 percent as oil and metals prices rose.

“Banking is all about confidence,” said Hugh Dive, who helps manage about $3 billion at Sydney-based Investors Mutual Ltd. “There’s more confidence that the world hasn’t ended, and that under the new U.S. government the mess may get sorted out. It will still take a while for it all to flow through.”

The MSCI Asia Pacific Index added 0.7 percent to 84.09 as of 9:52 a.m. in Tokyo, with three stocks advancing for each one that declined. The Nikkei 225 Stock Average gained 1.9 percent to 8,257.27, while Australia’s S&P/ASX 200 Index rose 0.6 percent. The NZX 50 Index added 1.4 percent in Wellington as New Zealand cut the benchmark interest rate by 1.5 percentage points to 3.5 percent to steer the economy out of a deepening recession.

The Standard & Poor’s 500 Index climbed 3.4 percent after a White House official said President Barack Obama’s team may announce its plan next week to set up a so-called bad bank to buy toxic financial assets.

Stimulus Advances

After the market closed in New York, the U.S. House passed Obama’s $819 billion stimulus package, aimed at lifting the economy out of recession through tax cuts and more than a half- trillion dollars in new spending.

The MSCI Asia Pacific Index tumbled by a record 43 percent last year as the world’s biggest economies slipped into recession, and has lost another 6.2 percent in 2009.

The Fed is ready to buy longer-term Treasury securities if it’s effective in improving credit markets, the Federal Open Market Committee said yesterday after meeting in Washington. The Fed left its benchmark interest rate as low as zero. New Zealand’s central bank said there’s room for further reductions.

Commonwealth Bank, with almost 15 percent of its sales from New Zealand, gained 2.4 percent to A$26.94. Mizuho Financial Group jumped 6.4 percent to 248 yen. Sumitomo Mitsui Financial Group Inc. soared 10 percent to 3,710 yen, even after third- quarter profit almost evaporated on bad-loan costs.

Weaker Yen

The Fed’s announcement helped the dollar strengthen to as much as 90.75 yen in New York from 89.22 at the 3 p.m. close of stock trading in Tokyo yesterday. A weaker yen raises the value of repatriated overseas sales for Japanese companies, boosting shares in Sony, the world’s second-largest consumer-electronics maker, by 3.8 percent to 1,906 yen.

BHP rallied 4.8 percent to A$31.27. Korea Zinc Co., the world’s second-biggest zinc refiner, gained 4.4 percent to 91,800 won after Daewoo Securities Co. raised its recommendation on the stock to “buy” from “trading buy,” citing signs non- ferrous metals prices are bottoming out. Hyundai Steel Co., South Korea’s second-largest steelmaker, advanced 5.1 percent to 37,000 won.

Crude oil for March delivery rose 1.4 percent in New York yesterday, the first advance in three days. A gauge of six metals traded in London gained 1.1 percent.

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

Read more...

Bahrain Petroleum Exports Drop 11% in 2008 on Refinery Repair

By Abdulla Fardan

Jan. 25 (Bloomberg) -- Bahrain, the smallest oil producer in the Persian Gulf, said exports of petroleum products declined 11 percent last year because of shutdowns and maintenance work at the country’s sole refinery.

Bahrain exported 9.2 million tons of oil products in 2008, compared with 10.3 million tons a year earlier, the National Oil & Gas Authority said in an e-mailed statement today. The products exported include diesel, gasoline, kerosene, naphtha and heavy fuel oil.

Bahrain Petroleum Co., the only oil producer in the country, pumps about 190,000 barrels a day of crude oil, mostly from the offshore Abu Safa’ oilfield that it shares with Saudi Arabia.

To contact the reporter on this story: Abdulla Fardan in Bahrain at afardan@bloomberg.net

Read more...