Australian Employers Unexpectedly Add 1,200 Workers

By Jacob Greber and Gemma Daley

Feb. 12 (Bloomberg) -- Australian employers unexpectedly added workers in January, a sign the economy may avoid a recession that is gripping the U.S., U.K., Europe and Japan.

The number of people in employed gained 1,200 from December, the statistics bureau said in Sydney today. The median of 17 economists surveyed by Bloomberg was for a drop of 18,000.

The currency rose as traders bet rising employment may ease pressure on central bank Governor Glenn Stevens to extend four percentage points of reductions to the benchmark interest rate, which was cut last week to a 45-year low of 3.25 percent. The jobless rate rose to 4.8 percent from 4.5 percent, the highest since June 2006, as more people looked for work.

“We haven’t seen jobs shedding take hold yet, and that’s fantastic news,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Things aren’t as bad as some of the rhetoric and press is telling us and companies are saying ‘our bottom lines are okay, and we’re unwilling to give up labor’.”

Even so, “we can’t sit here and delude ourselves that things will be okay,” he added. “Jobs destruction will kick in.”

The Australian dollar rose to 65.70 U.S. cents at 12:36 p.m. in Sydney from 65.20 cents immediately before the report. The yield on the benchmark two-year government bond rose 1 basis points to 2.61 percent. A basis point is 0.01 percentage point. The benchmark S&P/ASX 200 stock index rose 2 percent to 3,545.40.

Full-Time Jobs

The number of full-time jobs surged 33,700 in January and part-time employment decreased 32,600, today’s report showed. Some 10.7 million people were employed last month, equal to about half the nation’s population.

Unemployment is rising around the world. The U.S. jobless rate soared last month to 7.6 percent, the highest level since 1992, while U.K. unemployment rose to the highest reading in almost a decade. Japan’s rate climbed in December to 4.4 percent from 3.9 percent.

“The labor market shake-out in the U.S. and U.K. is not evident in Australia, not least because the economic downturn remains mild,” said John Edwards, chief economist at HSBC Bank Australia Ltd. in Sydney. “It will contribute to the case for the Reserve Bank to pause in March.”

The central bank has reduced borrowing costs five times in the last six months, helping fuel a surge in home-loan approvals which jumped in December by the most in almost nine years, a report showed yesterday.

Cash Handouts

Prime Minister Kevin Rudd is also trying to stoke growth by pledging to spend A$12.7 billion ($8.3 billion) on cash handouts to low and middle income earners from next month and A$28.8 billion on infrastructure.

“It underscores that with a well-capitalized banking system, a functioning monetary policy, a loose fiscal policy and a floating currency, Australia doesn’t have to endure the extent of deleveraging seen in other countries,” said Ashley Davies, a UBS AG currency strategist in Singapore.

Still, the “general sense in the market is that Australia will at some stage endure a significant downturn,” Davies added.

Recent reports show business confidence tumbled in January to a record low, consumer confidence declined this month and advertisements for job vacancies slumped for a ninth month in January.

The central bank last week said Australia’s jobless rate will “increase materially over the year ahead” as falling prices for resources, including coal and iron ore, trigger a 20 percent drop in earnings from exports.

Global Demand

“There’s no doubt, given what’s happened in the global economy, that unemployment is moving upwards in the world and we’re not immune from that,” Treasurer Wayne Swan told Australian Broadcasting Corp. radio today.

“We can see the drop in global demand and we can see that being transmitted to this country.”

BHP Billiton Ltd., the world’s largest mining company, said last month it will cut 3,400 jobs in Australia as it shuts a nickel mine, closes part of a refinery and reduces coking coal output by as much as 15 percent amid slowing demand from China, Australia’s largest trading partner.

China’s exports fell last month by the most in almost 13 years, tumbling 17.5 percent, as demand dried up in the U.S. and Europe, a report showed yesterday.

Macquarie Group Ltd., Australia’s largest investment bank, shed about 1,000 employees since September, and furniture and electronics retailer Harvey Norman Holdings Ltd. has said it will close five stores before the end of June.

Participation Rate

Economic growth in almost all of Australia’s major trading partners, including China, Japan and the U.S., will be at least 2 percentage points below trend rates in 2009, the Reserve Bank said on Feb. 6.

“This would represent the most synchronized downturn in Australia’s trading partners since the mid-1970s,” the bank said.

The participation rate, which measures the labor force as a percentage of the population aged over 15, rose to 65.1 percent in January from 65 percent, today’s report showed.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.netGemma Daley in Canberra at gdaley@bloomberg.net

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Babcock Infrastructure Delays Coal Port Expansion Three Months

By Jesse Riseborough

Feb. 12 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of Australia’s biggest coking coal export harbor, said a planned expansion of the port has been delayed by three months because of adverse weather conditions.

The expansion to a capacity of 85 million metric tons a year, from 72 million tons, is expected to be completed by June, Sydney-based Babcock said today in a statement to the Australian stock exchange. The previous schedule was for completion by March, it said.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

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Japan’s Economy Probably Shrank by Most Since 1974

By Jason Clenfield

Feb. 12 (Bloomberg) -- Japan’s economy shrank at an annual pace of more than 10 percent last quarter amid an unprecedented collapse in exports and production, a report next week may show.

Gross domestic product for the three months ended Dec. 31 contracted an annualized 11.7 percent, the sharpest slowdown since the 1974 oil crisis, according to the median estimate of 24 economists surveyed by Bloomberg News. The Cabinet Office will release the report on Feb. 16 at 8:50 a.m. in Tokyo.

Exports plunged a record 23.1 percent in the fourth quarter as global credit markets seized up and world growth sputtered. Toyota Motor Corp., Toshiba Corp. and Hitachi Ltd. -- all of which are forecasting losses for the current fiscal year -- have fired thousands of workers, heightening the risk a slump in household spending will prolong the recession.

“External demand has collapsed,” said Takahide Kiuchi, chief economist at Nomura Securities in Tokyo. “The fourth and first quarters will be the worst, but even after passing through this period the economy will stay in a recession for quite a while.”

The Nikkei 225 Stock Average, which has lost 32 percent of its value since September, fell for a third day on concern that U.S. President Barack Obama’s bank-rescue plan won’t fix the financial crisis. The benchmark slumped 3.1 percent to 7,697.21 at the 12:47 p.m. in Tokyo.

Lehman’s Collapse

Japan’s economy probably shrank 3.1 percent from the third quarter in the first set of GDP data made available for the period following the collapse of Lehman Brothers Holdings Inc., economists said. That would be almost triple the pace of contractions in other major economies -- the U.S. shrank 1 percent quarter-on-quarter and a report out this week is expected to show the Euro-zone GDP fell 1.3 percent.

Lehman’s collapse triggered a credit crisis that erased more than $10 trillion from global equity markets, hobbled U.S. consumers and paralyzed global trade. The meltdown also spurred a 15 percent surge in the yen against the dollar, reducing earnings for Japanese exporters already coping with weak demand.

Net exports -- the difference between exports and imports -- accounted for 2.3 percentage points of Japan’s contraction last quarter, according to economist forecasts. Domestic demand, which includes household spending and capital investment, probably subtracted 0.9 percentage points from growth, they said.

Stimulus Spending

In contrast with the U.S. and China, where governments are moving forward with a combined $1.4 trillion in stimulus spending, policy makers in Japan are providing little help.

Parliamentary gridlock has blocked the passage of a 10 trillion yen ($111 billion) stimulus package intended to encourage consumer spending. The Bank of Japan, which in December cut its key rate to 0.1 percent and has started to purchase shares and corporate debt from banks in order to spur lending, has little means to address what analysts say is the economy’s central problem: a lack of overseas demand.

“Most of what ails the economy is something out of their control, namely that exports have gone down by a third,” said Richard Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. “Given that they can’t even agree on what color curtains to hang up in the Diet, it seems pretty unlikely they’re going to be able to agree on any meaningful policy stimulus.”

The global fallout has started to ripple through Japan’s economy as exporters from Toyota to Sony Corp. fire workers. The jobless rate surged to 4.4 percent in December from 3.9 percent, the biggest jump in four decades.

Firings Intensify

The firings have intensified in the last two weeks, with Nissan Motor Co., NEC Corp. and Panasonic Corp. announcing a combined 55,000 job cuts. The reductions may have pushed the recession into a “new phase” in which consumers become more defensive and spend less, according to Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo.

“You’re getting mass unemployment,” said Schulz. “It’s really scaring the households.”

Household sentiment is close to the lowest level in at least 26 years. Their spending accounts for more than half of the economy.

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

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Meralco Climbs for 9th Day, Longest Streak Since 1992

By Ian C. Sayson

Feb. 12 (Bloomberg) -- Manila Electric Co. shares rose for a ninth day in their longest winning streak in 17 years after First Philippine Holdings Corp. said it’s keeping its “options open” on raising its stake in the largest Philippine power retailer.

Meralco, as the company is also called, added 6.4 percent to 83 pesos as of 10:53 a.m. in Manila, set for its highest close since Feb. 4, 2008. It was the No. 3 gainer in the main Philippine Stock Exchange Index, which advanced 1.2 percent. First Holdings was the biggest gainer in the measure.

Meralco has surged 35 percent in nine days, its longest winning streak since January 1992, on speculation First Holdings and San Miguel Corp. are raising their stakes to gain control of the utility. First Holdings controls 33.4 percent of Meralco while San Miguel is estimated to own 34 percent.

“The stock is in play,” said Jonathan Ravelas, strategist at Manila-based Banco de Oro Unibank Inc., which has more than $6 billion in trust assets. “The market is in deep speculation that either First Holdings or San Miguel is solidifying its stake.”

First Holdings hasn’t decided against increasing its stake in the power distributor and will keep its “options open” on such a possibility, even though it’s not a priority, President Elpidio Ibanez said yesterday in an interview with Bloomberg. Separately, San Miguel President Ramon Ang said in a text message that buying Meralco shares isn’t a “priority” after he was asked if the company is interested in raising its stake.

First Holdings, which also owns the nation’s biggest non- state power producer, rose 12 percent to 24 pesos, set for its highest close since Feb. 24.

“You have to be Jack-be-nimble if you chase these stocks, given the volatility,” Ravelas said. “It’s not certain that these movements are fundamentally driven.”

San Miguel Class A shares, equity reserved for Filipinos in the nation’s biggest food and drinks company, climbed 2.4 percent to 42.50 pesos, set for their highest close since Nov. 19. Its Class B shares, which have no ownership restrictions, were unchanged at 43 pesos.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net

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Tenaga Rises as Cut in Gas Costs Offsets Power Price

By Chan Tien Hin

Feb. 12 (Bloomberg) -- Tenaga Nasional Bhd., Malaysia’s state-controlled power utility, rose the most in more than a month after analysts upgraded the stock, saying a cut in gas costs will more than offset a drop in electricity prices.

Shares of the Kuala Lumpur-based company gained 20 sen, or 3.5 percent, to 6 ringgit as of 10:23 a.m. local time, heading for the largest gain since Jan. 9 and outpacing the benchmark Composite Index’s 0.3 percent advance. The stock earlier climbed as much as 6 percent.

Tenaga was raised to “neutral” from “underweight” at JPMorgan Chase & Co. The stock’s rating was boosted to “trading buy” from “hold” by Maybank Investment Bank Bhd., which said the power price cuts are “net positive” for earnings in the year ending Aug. 31.

The state utility will cut prices for the first time in more than a decade as part of the Malaysian government’s plan to ease costs for consumers and businesses amid an economic slowdown. The Malaysian economy may contract 0.7 percent this year, according to Maybank Investment Bank Bhd., a unit of the nation’s biggest bank. That compares with the government’s forecast for 3.5 percent growth.

We were “pleasantly surprised that the government has allowed Tenaga to keep some of the cost-savings from the lower gas price,” RHB Research Institute Sdn. said in a report today. This will help Tenaga to partially cover the higher coal cost.”

Coal Cost

The utility said yesterday it will reduce power prices for industrial users by an average 5 percent, for commercial users by 2.7 percent and for households by 2.5 percent, the company said. The price of natural gas that Malaysia sells to power producers was cut by 25 percent.

The changes in power charges also took into account an increase in coal prices to $85 a metric ton from $75 a ton, Tenaga said yesterday.

The “overhang or concerns from the impact of the tariff cuts is over,” Edmond Lee, an analyst at JPMorgan, said in a report today. The impact is “slightly earnings accretive,” he said.

A decline of 3.7 percent in electricity prices would require a 20 percent reduction in gas prices to be “earnings-neutral,” Lee said.

The introduction of a formal “fuel pass-through formula is still key for a sustainable re-rating,” he said.

Tenaga last month posted a second straight quarterly loss as fuel costs climbed and a weaker currency increased foreign debt payments.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net.

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Japex Drops in Tokyo on Profit Outlook, Nomura Rating

By Shigeru Sato

Feb. 12 (Bloomberg) -- Japan Petroleum Exploration Co., the country’s second-biggest oil and gas developer, fell the most in two months in Tokyo after it slashed the outlook for full-year profit and Nomura Securities Co. cut the stock’s rating.

Japan Petroleum, better known as Japex, tumbled 8.1 percent to 3,650 yen a share at the 11 a.m. morning break, the biggest fall since Dec. 2.

The Tokyo-based energy explorer reduced its full-year profit outlook for a second time in four months on Feb. 10 after oil’s 61 percent plunge in a year. Nomura Securities yesterday cut its rating to “neutral” from “buy.”

“The bleak outlook for Japex’s short-term earnings is imperiling the stock’s upward momentum,” Shigeki Matsumoto, an energy analyst at Nomura in Tokyo, said in his Feb. 11 note. “We are looking for Japex to implement cost-cutting measures as it may post lower earnings” in the year starting April.

Nomura estimates Japex’s net income will drop to 4.1 billion yen ($45.5 million) next fiscal year from estimated profit of 11.6 billion yen for the year ending March 31, the note said.

Japex cut its oil import price outlook to $45 a barrel for the quarter ending March 31 from its November projection of $55, the explorer said on Feb. 10.

Crude oil in New York has dropped 76 percent from a record $147.27 a barrel on July 11 as the worst financial crisis since the Great Depression eroded demand. Oil was trading at $36.04 a barrel in electronic trading on the New York Mercantile Exchange at 11:28 a.m. Tokyo time.

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.

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Shell Studies Site in Eastern Australia for LNG Plant

By Angela Macdonald-Smith

Feb. 12 (Bloomberg) -- Royal Dutch Shell Plc, Europe’s largest oil company, is studying a site in northeast Australia for a potential liquefied natural gas project, the fifth venture planning to tap reserves in the region for export to Asia.

The company has started feasibility studies for the site on Curtis Island near Gladstone and is developing a full plan for the project, Shell’s Australian unit said today in an e-mailed statement. The plant would be supplied from coal-seam gas permits jointly owned with Arrow Energy Ltd., it said.

Australia’s industry to extract natural gas from coal seams attracted more than A$17 billion ($11 billion) in investment last year as companies including BG Group Plc and ConocoPhillips tapped into local ventures. Exxon Mobil Corp., the world’s biggest publicly traded oil company, in December reaffirmed its forecast for 4 percent annual growth in LNG demand through 2030 even amid a global economic slowdown.

“Shell is currently working on its initial advice statement for submission to the Queensland Department of Infrastructure & Planning” for the potential LNG project, the company said in the statement.

Shell said it signed an exclusive right to investigate the site on Curtis Island for the project. BG and a rival venture between Santos Ltd. and Malaysia’s Petroliam Nasional Bhd. also plan LNG projects on the island on Queensland’s central coast. ConocoPhillips has a separate LNG project proposed with Origin Energy Ltd., while Brisbane-based Arrow plans a smaller plant with Liquefied Natural Gas Ltd.

Shell also said it completed a transaction to buy 30 percent of Arrow’s coal-seam gas acreage in Queensland and a 10 percent stake in Arrow’s international unit.

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

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Pure Energy Shares Jump After Arrow Increases Offer

By Angela Macdonald-Smith

Feb. 12 (Bloomberg) -- Pure Energy Resources Ltd., an Australian coal-seam gas explorer, jumped as much as 10 percent to a record in Sydney after Arrow Energy Ltd. raised its offer to A$891 million ($582 million), topping a bid from BG Group Plc.

Pure gained as much as 68 cents to A$7.40 on the Australian stock exchange, rising beyond Brisbane-based Arrow’s increased cash and stock offer of A$7.16 a share, based on yesterday’s closing price. Arrow, the Australian partner in coal-seam gas of Royal Dutch Shell Plc, which competes against BG in liquefied natural gas supply, fell as much as 3.8 percent to A$2.55.

Shell, Arrow and BG are among companies seeking more coal- seam gas reserves to feed planned LNG projects in Queensland state. Australia’s industry to extract gas from coal seams attracted more than A$17 billion in investment last year as producers such as ConocoPhillips and Petroliam Nasional Bhd. tapped into ventures that may meet Asian demand for cleaner fuel.

“The Pure acreage looks to be very good quality,” said Mark Greenwood, an energy analyst at JPMorgan Chase & Co. in Sydney. “I think BG could afford to pay a bit more. I wouldn’t be surprised to see them come back with a higher offer, or match Arrow’s offer all in cash.”

BG, the U.K.’s third-biggest gas company, said earlier today it will advise the market by Feb. 18 whether it will raise its own all-cash bid. Pure shareholders should take no action on Arrow’s offer before then, the Reading, England-based company said today in a statement to the exchange.

Condition Dropped

Arrow late yesterday boosted its offer by 21 percent to A$3.00 in cash and 1.57 shares for every share in Brisbane-based Pure. The target’s independent directors and two major shareholders, Tom Fontaine and Karle Meade, intend to accept the revised offer, subject to there being no higher bid, Pure said.

Arrow also dropped a 90 percent minimum acceptance condition. Shell, which owns about 10 percent of Arrow, said earlier this week it will announce its intentions for its stake “in due course.”

BG’s hostile offer is conditional on 50.1 percent minimum acceptances and approval by the Foreign Investment Review Board.

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

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Oil Trades Near $36 After Bigger-Than-Expected Jump in Supplies

By Christian Schmollinger

Feb. 12 (Bloomberg) -- Crude oil traded near $36 a barrel after dropping to the lowest in four weeks yesterday as a U.S. government report showed a bigger-than-expected increase in inventories.

Supplies rose 4.72 million barrels to 350.8 million barrels last week, the Energy Department said. Stockpiles were forecast to climb 2.75 million barrels, according to a Bloomberg News survey. U.S. refiners operated at 81.6 percent of capacity last week, the lowest since the period ended Oct. 3 when the Gulf Coast was recovering from two hurricanes, the report showed.

“You’ve got a lot of plants shut down for maintenance and the crude continues to pile up,” said Jonathan Kornafel, a director for Asia at options traders Hudson Capital Energy in Singapore. “The build has a lot to do with the low refinery usage right now.”

Crude oil for March delivery was at $36.02 a barrel, up 8 cents, at 10:20 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil fell $1.61, or 4.3 percent, to $35.94 a barrel in New York , the lowest settlement since Jan. 15.

Oil has declined 19 percent this year and dropped 61 percent from a year earlier.

U.S. crude oil inventories have gained in 18 of the past 20 weeks, leaving stockpiles 16 percent higher than the five-year average for the period, the department said yesterday.

Contango Deepens

The price of oil for delivery in April is more than $6 a barrel higher than for March, up from $4.59 last week. December futures are more than $17 above the front month, compared with $13.90 last week.

Prices for delivery in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil.

Supplies at Cushing, Oklahoma, where West Texas Intermediate oil traded on Nymex is stored, climbed 1.7 percent to 34.9 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

“WTI seems to be in a world of its own right now with these stock builds and that needs to stop or else you’ll continue to see this sharp contango,” said Hudson Capital’s Kornafel.

U.S. refinery utilization dropped 1.9 percentage points from the prior week, the Energy Department said. Analysts forecast that there would be no change.

Companies often shut refinery units for maintenance in January and February as attention shifts away from heating oil and before gasoline use rises.

Gasoline Stockpiles

Gasoline inventories fell 2.66 million barrels to 217.6 million, the biggest drop since September. A 500,000 barrel increase was forecast, according to the median of 15 analyst responses in the Bloomberg News survey.

Gasoline futures for March delivery climbed 2.59 cents, or 2.1 percent, to $1.2698 a gallon in New York yesterday.

Brent crude oil for March settlement was at $44.65 a barrel, up 37 cents, on London’s ICE Futures Europe exchange at 9:54 a.m. Singapore time. The contract expires today. The more-active April future was at $45.78 a barrel, up 46 cents, at 9:28 a.m. Singapore time.

The International Energy Agency, in its report yesterday, cut its global oil-demand forecast for 2009, projecting consumption will decline by 1 million barrels a day as the global economic slowdown deepens, the biggest drop since 1982.

The IEA, which advises 28 developed nations on energy policy, trimmed its 2009 forecast by 570,000 barrels from last month to 84.7 million a day because of a weaker outlook from the International Monetary Fund.

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

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New Zealand’s Manufacturing Contracts Amid Recession

By Tracy Withers

Feb. 12 (Bloomberg) -- New Zealand’s manufacturing industry shrank for the ninth month in January as a deepening global slowdown curbs demand for exports, keeping the local economy mired in its own recession.

The performance of manufacturing index fell to 42 from with 42.5 in December, Bank of New Zealand Ltd. and Business New Zealand said in Wellington today. A score below 50 shows manufacturing is contracting.

New Zealand’s recession, which began in the first quarter of 2008, is being prolonged by a contraction in the world’s biggest economies that has curbed exports and prompted companies to fire workers and defer expansion. Slowing manufacturing adds to signs the jobless rate could surge to a 10-year high.

“The overall picture is one of ongoing tough times for manufacturers,” said Phil O’Reilly, chief executive of Business New Zealand, a lobby group. “The weakness in production and new orders remains a primary concern.”

New Zealand’s jobless rate rose to a five-year high of 4.6 percent in the fourth quarter. The Treasury Department forecasts the rate could reach 7.2 percent by the first quarter of 2010.

The manufacturing index’s in January was at the second- lowest level since the series began in 2002. November’s index reading was the record low of 35.2.

The index tracks production, new orders, employment, stocks and deliveries.

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

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Korean Won Rises, Erasing Loss, on Speculation Banks Are Buying

By Kim Kyoungwha

Feb. 12 (Bloomberg) -- South Korea’s won rose, erasing a loss, on speculation banks bought the currency near a two-month low after the central bank slashed its benchmark interest rate to a record.

The won strengthened 0.4 percent to 1,387.55 per dollar as of 11:29 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency fell earlier to 1,398.45.

Bank of Korea Governor Lee Seong Tae and his board cut the seven-day repurchase rate by half a percentage point to 2 percent in Seoul today, the sixth reduction since early October. The decision was expected by six of nine economists surveyed by Bloomberg News.

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

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Yen Gains as Stocks Fall on Concern Bank Bailout Plan May Fail

By Yasuhiko Seki and Ron Harui

Feb. 12 (Bloomberg) -- The yen rose against the dollar and the euro as stocks declined on concern U.S. Treasury Secretary Timothy Geithner will fail to revive bank lending, boosting demand for Japan’s currency as a haven.

The euro weakened for a third day against the yen on speculation industrial output in the 16-nation region slid the most in almost 23 years, supporting the case for the central bank to cut interest rates. The Australia and New Zealand dollars advanced after a better-than-expected job report eased concern the Reserve Bank of Australia will keep lowering borrowing costs.

“The latest financial rescue plan lacked details, raising questions about its effectiveness,” said Masashi Hashimoto, a Tokyo-based currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group. “This is positive for safe havens such as the yen.”

The dollar declined to $1.2911 versus the euro as of 11:56 a.m. in Tokyo from $1.2906 late in New York yesterday. The yen climbed to 116.28 per euro from 116.66. The dollar was at 90.07 yen from 90.40.

Nikkei 225 Stock Average declined for a third day, losing 2.3 percent and the MSCI Asia-Pacific Index of regional stocks dropped 1.1 percent.

“The stock market is a barometer of risk aversion, with losses serving as a positive lead for the yen,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., Japan’s largest fixed-line telephone company.

Stimulus Package

Geithner, speaking yesterday before the Senate Budget Committee, defended his strategy of taking time to work out the details of his plan to shore up the financial industry.

“I completely understand the desire for details and commitments,” he said. “But we’re going to do this carefully, consult carefully, so we don’t put ourselves in the position again” where there are “quick departures and changes in strategy.”

Gains in the yen may be limited on speculation the Congress will send the economic stimulus package to President Barack Obama by the end of this week.

U.S. lawmakers are cutting a proposed economic stimulus package to $789 billion and may be able to forward it to Obama by the end of this week, Senate Finance Committee Chairman Max Baucus said yesterday.

The Australian and New Zealand dollars rose against the U.S. currency after a report showed Australian employers unexpectedly added workers in January, a sign that the economy may avoid a recession.

Jobs Data

The number of people in employed rose 1,200 from December, the statistics bureau said in Sydney. The median forecast in a Bloomberg survey was for a drop of 18,000. The result eases pressure on central bank Governor Glenn Stevens to add to four percentage points of reductions in the benchmark interest rate, which was cut last week to a 45-year low of 3.25 percent.

“Active buying of the Australian dollar following the unexpectedly strong data dealt a blow to the safe-haven currencies,” NTT’s Kudo said. “Still, it may be a bit risky to bet on a sustained recovery of the Australian dollar just on a single report.”

Industrial output in the European Union may decline 9.5 percent in December from a year earlier, the most since Bloomberg began compiling the data in January 1986, according to a separate survey of economists. The region’s statistics office releases its industrial production report at 11 a.m. in Luxembourg today.

ECB Rate Cut

“The report may heighten expectations for an ECB rate reduction,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The euro is likely to weaken further” to $1.2830 and 115.90 yen today, he said.

Investors added to bets the ECB will lower borrowing costs from 2 percent at its March 5 meeting. The yield on the three- month Euribor interest rate futures contract due in March fell to 1.715 percent yesterday from 1.745 percent on Feb. 10.

The Group of Seven industrialized nations will meet this weekend to discuss measures to stabilize the financial system. When G-7 finance ministers and central bankers prepare to gather in Rome on Feb. 14, finance chiefs will seek assurances from one another that the global recession won’t spark a wave of protectionism that deepens the slump.

Makoto Utsumi, a former top currency official at Japan’s Finance Ministry, said last week the G-7 may reinstate a call for China to increase the flexibility of its currency. “The yuan may be singled out,” he said.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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Australian Dollar Gains on Jobs Data; New Zealand’s Strengthens

By Candice Zachariahs

Feb. 12 (Bloomberg) -- The Australian dollar rose for the first time in three days after employers unexpectedly added full- time workers last month, signaling the economy may avoid a recession. New Zealand’s currency advanced.

Australia’s currency also gained against Japan’s yen, halting a two-day loss, after the statistics bureau report showed the number of people employed climbed 1,200. The median of 17 economists surveyed by Bloomberg News was for a decline of 18,000.

“What we keep seeing in the monthly data is rising resilience in the economy,” said Ashley Davies, a currency strategist in Singapore at UBS AG, the world’s second-biggest currency trader. The data “makes me more confident in the Australian dollar,” Davies said.

Australia’s currency rose to 65.83 U.S. cents as of 11:56 a.m. in Sydney from 65.20 cents just before the data and 65.35 cents in Asia yesterday. The currency advanced 1.1 percent to 59.38 yen from 58.75 yesterday and 58.81 before the numbers.

New Zealand’s dollar gained 0.1 percent to 52.46 U.S. cents from 52.44 in Asia yesterday. It bought 47.35 yen from 47.15.

UBS forecasts that the currency will trade at 75 U.S. cents in 12 months.

The currencies earlier advanced along with equities as U.S. lawmakers agreed on a $789 billion stimulus plan for the world’s largest economy. House Majority Leader Harry Reid told reporters yesterday that Congress may vote on the plan within days.

“The Aussie and kiwi are closely following equity markets,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington, referring to the currencies by their nicknames.

Goldman Forecast

The currencies are likely to trade in ranges between 64.80 to 65.80 U.S. cents for the Australian dollar and 52.10 and 52.80 cents for New Zealand’s currency, said Allen.

New Zealand’s dollar will decline to 48 U.S. cents in the next 12 months because of concern over the sustainability of the nation’s current-account deficits, Goldman Sachs Group Inc. said in a report dated yesterday. The currency will trade at 52 U.S. cents in three months and 50 cents in six months, the bank said, revising its previous forecasts.

Benchmark interest rates are 3.25 percent in Australia and 3.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Australian government bonds rose for a fourth day. The yield on the 10-year note fell six basis points, or 0.06 percentage point, to 4.2 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 advanced 0.473, or A$4.73 per A$1,000 face amount, to 108.582.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.34 percent from 3.38 yesterday.

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

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China’s A Share Rally Presages Economic Recovery, JPMorgan Says

By Chua Kong Ho

Feb. 12 (Bloomberg) -- This year’s rally in China’s yuan- denominated stocks is a better reflection of the country’s economic prospects than the slump in overseas-listed Chinese shares, according to JPMorgan Chase & Co.

“A-shares more accurately reflect domestic fundamentals and the liquidity situation,” JPMorgan analysts Frank Gong, Peng Chen and Lan Deng wrote in a note published today. Gong’s team was top-ranked for China research by Institutional Investor last year.

The benchmark Shanghai Composite Index has surged 24 percent this year, the world’s best performer. The Hang Seng China Enterprises Index, which tracks 43 Hong Kong-listed Chinese companies, has declined 3.7 percent in the same period, while the MSCI China Index of mostly Hong Kong-traded Chinese shares has slipped 3 percent.

China’s A-shares, limited largely to domestic investors, led the nation’s economic growth by between one to two quarters from the second half of 2005 to the fourth quarter of 2008, the note said.

The domestic stock market has become more correlated with economic performance after the government started a nationwide program in 2005 to convert mostly state-held non-tradable shares into common stock that could be traded on stock exchanges, the note said.

An increase in institutional investor ownership to almost half the total market capitalization from 30 percent in 2005 has led to a “more rational and disciplined investment approach,” the analysts wrote.

The rally in Chinese stocks should improve domestic consumer sentiment and encourage spending on big-ticket items such as cars and stimulate the property market, according to the note.

JPMorgan advised investors to buy shares of Chinese brokerages to benefit from the increase in trading volume in A shares. The Shanghai and Shenzhen stock exchanges handled a combined 32 billion transactions yesterday, the highest since Bloomberg started compiling the data on Jan. 3, 2006.

To contact the reporter responsible for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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Edmond de Rothschild Buys Microsoft, BMW After ‘Nightmare’ Year

By Hanny Wan

Feb. 12 (Bloomberg) -- Edmond de Rothschild Asset Management has been buying shares including Microsoft Corp., Bayerische Motoren Werke AG, and Chinese health-care stocks, betting that the worst of the stock market slump is over.

The potential for further stock market declines is limited because of lower costs and profit expectations, said Bruno Vanier, chief investment officer of global equities at Paris-based Edmond de Rothschild AM, which manages 8.1 billion euros ($10.4 billion). While the global economy is going to be “really bad” this year, he said he expects the situation to improve going into the fourth quarter of this year and the first quarter of 2010.

“It’s very rare to see two very bad years; 2008 was a nightmare,” Vanier said in an interview in Hong Kong yesterday. “The bad stock market performance last year was a reflection of the bad news today. So we should not be too concerned about the very bad news that we have now.”

The MSCI World Index’s 42 percent slump last year was the worst since at least 1970 as the collapse of the U.S. housing market pulled the U.S., Europe and Japan into their first simultaneous recessions since World War II.

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

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Japanese Stocks Fall as Earnings Slump Dims Economic Outlook

By Patrick Rial

Feb. 12 (Bloomberg) -- Japanesestocks fell for a third- straight session as more companies cut earnings forecasts and concern mounted that government rescue plans aren’t enough to foster a rapid economic rebound.

Daikin Industries Ltd., Japan’s biggest air-conditioner maker, dropped 4.3 percent after cutting its profit forecast by more than half. Yokogawa Electric Corp., the world’s top maker of electronic measuring tools, tumbled 14 percent after reporting a nine-month loss. Nomura Holdings Inc., the country’s No. 1 brokerage, tumbled 8.1 percent to a 26-year low on concern U.S. President Barack Obama’s bank-rescue plan doesn’t take concrete steps to fix the financial crisis.

The Nikkei 225 Stock Average slumped 186.27, or 2.3 percent, to 7,759.67 at the 11 a.m. break in Tokyo. The broader Topix index fell 14.61, or 1.9 percent, to 763.49, the lowest since Oct. 27. Japan’s market was closed yesterday for a national holiday.

“I’ve been surprised by the weakness of the manufacturers, I didn’t realize Japan’s business structure was this fragile,” said Masayuki Kubota, a senior fund manager who helps oversee $1.7 billion at Tokyo-based Daiwa SB Investments Ltd. “Many Japanese think expectations for Obama have been over-inflated and disappointment will result in the short term” based on Japan’s own experience with stimulus packages, he said.

Daikin dropped 4.3 percent to 2,135 yen after weakening demand prompted the company to lower its net income forecast by 59 percent on Feb. 10. Sega Sammy Holdings Inc., the nation’s largest maker of pachinko machines, sank 4.6 percent to 1,067 yen after saying it will cut about 560 jobs by March.

Falling Profit

Yokogawa Electric tumbled 14 percent to 360 yen, the lowest level since March 1980 and the worst performer on the MSCI World Index. The company swung to a net loss of 37.2 billion yen ($412 million) in the nine months to Dec. 31 as sales were battered by slumping demand and a stronger yen.

Japanese companies foresee an 83 percent decline in profit this year, according to data compiled by Shinko Research Institute Co. The rapid slide in earnings is one reason Japan’s economy probably shrank at an 11.7 percent annual rate last quarter, economists estimated, the sharpest contraction since the 1974 oil crisis.

On Feb. 10, U.S. Treasury Secretary Timothy Geithner pledged up to $2 trillion in financing for programs aimed at spurring new lending and addressing banks’ illiquid assets. The Standard & Poor’s 500 Index retreated 4.9 percent on concern the plan lacked details. In a second day of Congressional testimony, Geithner yesterday defended the plan, saying it was necessary to move carefully to avoid “quick departures and changes in strategy.”

Stimulus Agreement

U.S. House and Senate lawmakers agreed on a compromise $789 billion stimulus plan late yesterday, a smaller bill than those originally approved by both groups. Congress may conduct a final vote on the plan within days. Japan’s own 10 trillion-yen stimulus package has been held up in parliament.

Nomura declined 8.1 percent to 468 yen to the lowest level since October 1982. Closest domestic rival Daiwa Securities Group Inc. plunged 4.9 percent to 425 yen. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, slid 3.4 percent to 3,410 yen.

Mitsubishi UFJ Financial Group Inc. lost 2.9 percent to 471 yen. Japan’s biggest lender by value may integrate its brokerage unit with Morgan Stanley, the Nikkei newspaper reported yesterday. The company denied the report, according to the Wall Street Journal.

Nikkei futures expiring in March slumped 2.6 percent to 7,740 in Osaka and dropped 3.8 percent to 7,735 in Singapore.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Asian Stocks Fall on Doubts U.S. Stimulus Will Revive Growth

By Jonathan Burgos and Patrick Rial

Feb. 12 (Bloomberg) -- Asian stocks fell for a fourth day, led by financial and consumer-related companies, on concern U.S. measures to alleviate the financial crisis won’t be enough to revive the world’s largest economy.

Mitsubishi UFJ Financial Group Ltd., Japan’s biggest lender, fell 3.1 percent as U.S. Treasury Secretary Timothy Geithner said he needs time to work out details of a bank-rescue plan unveiled on Feb. 10. Daikin Industries Ltd., the biggest Japanese maker of air conditioners, dropped 2.9 percent after cutting its profit forecast. Newcrest Mining Ltd., Australia’s largest gold producer, rose 4.6 percent after gold futures climbed in New York.

“The market had been awaiting the financial bailout plan with high hopes, but what was announced didn’t have much meat on the bone,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television. “It’s unfortunate, but stocks are in for a rough day.”

The MSCI Asia Pacific Index fell 0.8 percent to 82.29 at 10:42 a.m. in Tokyo. More than two stocks advanced for each one that declined. The gauge has lost 8.2 percent this year, furthering a record 43 percent tumble in 2008, as the credit crisis triggered by the collapse of the U.S. housing market spun into a global recession.

The Nikkei 225 Stock Average slumped 1.7 percent, to 7,814.01. The Japanese market resumed trading today following yesterday’s holiday. Australia’s S&P/ASX 200 Index climbed 1.6 percent, while South Korea’s Kospi index slipped 0.8 percent.

Futures on the Standard & Poor’s 500 Index were little changed. The index gained 0.8 percent yesterday as Congress debated a $789 billion spending plan. U.S. House and Senate lawmakers agreed on a compromise late yesterday, a smaller bill than those originally approved by both groups.

Stimulus Agreement

Geithner announced two days ago a financial rescue plan that included as much as $2 trillion in funding for programs aimed at spurring new lending and addressing banks’ illiquid assets. The U.S. government was going to proceed “carefully” on the proposal, Geithner told Congress yesterday.

Governments around the world are stepping up efforts to revive global growth that the International Monetary Fund predicted two weeks ago will grind almost to a halt this year. The Bank of Korea cut its benchmark interest rate today to a record-low 2 percent to revive an economy headed for the first recession in more than a decade.

Mitsubishi UFJ fell 3.1 percent to 470 yen in Tokyo. Toyota Motor Corp., which makes 37 percent of its sales in North America, dropped 2.6 percent to 3,060 yen.

Daikin fell 2.9 percent to 2,165 yen after it cut its profit forecast by 59 percent for the year ending March 31 as the slumping global economy dragged sales.

Newcrest Mining climbed 4.6 percent to A$33.83. Gold futures in New York jumped 3.3 percent yesterday, extending the previous day’s 2.4 percent advance. Silver and platinum jumped to four- month highs.

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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Treasury Secretary Disappoints Markets

Daily Forex Fundamentals | Written by Easy Forex | Feb 11 09 01:15 GMT |

U.S. Dollar Trading (USD) the mood darkened considerably yesterday as the much anticipated speech from Geithner failed to deliver and what started as profit taking turned into a rout. Banking stocks were under pressure as Geithner lacked clarity in the direction the new administration will take. Crude Oil closed down -$2.01 ending the New York session at $37.55 per barrel. In US share markets, the Dow Jones fell 381 points or -4.62% and the NASDAQ dropped -66 or -4.2%. Looking ahead, December Trade Balance forecast to improve to -36Bn vs. -40.44Bn previously. The Euro (EUR) came under selling pressure as EUR/JPY sales and a report out of Japan concerning $400bn Russian Bank Debt took hold. The reports were discounted and the pair rallied back above 1.3000 before risk aversion became the dominate force sending the pair crashing lower. Overall the EUR/USD traded with a low of 1.2812 and a high of 1.3074 before closing the day at 1.2875. Looking ahead, January CPI is forecast to -0.5% vs. 0.3% previously. The Japanese Yen (JPY) tracked equities with crosses steadily falling in Asia before dropping sharply in the US session with those stocks falling over 4%. Household Confidence gained slightly to 26.4 vs. 26.2 previously. Overall the USDJPY traded with a low of 90.14 and a high of 91.66 before closing the day around 90.40 in the New York session. The Sterling (GBP) fell back sharply as the GBP/JPY shunted lower. UK December Trade Balance improved to -7.4Bn vs. -8.1Bn previously. GBP has been very volatile in recent months so the 400 pip drop does not necessarily indicate a resumption of Pound weakness. Overall the GDP/USD traded with a low of 1.4458 and a high of 1.4892 before closing the day at 1.4550 in the New York session. Looking ahead, December ILO Unemployment Rate is forecast to rise to 6.3 vs. 6.1. The Unemployment Change in January is forecast to rise to 90k vs. 77.9K previously. The Australian Dollar (AUD) suffered severely as the sentiment changed and US stocks tanked. The recovery in recent weeks has been impressive but the pair gave up over 4% overnight. NAB Business Confidence fell to a record low of -32 in January. Also lower February Consumer Confidence down -4.6%. Overall the AUD/USD traded with a low of 0.6486 and a high of 0.6754 before closing the US session at 0.6540. Gold (XAU) rallied as Financial Risk flared again on banking concerns. Overall trading with a low of USD$891 and high of USD$918 before ending the New York session at USD$915 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

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Feb 11 09 03:43 GMT |

EUR/USD closed higher on Monday due to short covering as it consolidated some of last week's decline. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are turning bullish signalling that a low is in or is near. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it extends this year's decline, fib support crossing is the next downside target. USD/JPY closed lower on Monday as it extends Thursday's decline below the reaction low crossing. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. If it extends this Monday's decline, January's low crossing is the next downside target. Multiple closes above Monday's high crossing are needed to confirm that a short-term low has been posted. GBP/USD closed higher on Monday as it extends last week's rally. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible near-term. If it extends this rally, January's high crossing is the next upside target. Closes below the 20- day moving average crossing are needed to confirm that short-term top has been posted. USD/CHF closed higher on Monday as it extends last Friday's rally. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. If it extends today's rally, the reaction high crossing is the next upside target. Closes below the 20-day moving average crossing would temper the near-term friendly outlook. HY Markets http://www.hymarkets.com

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Australia’s Westpac February Consumer Confidence (Table)

By Daniel Petrie

Feb. 11 (Bloomberg) -- Following is the table for Australia’s February consumer confidence index from Westpac Banking Corp. and the Melbourne Institute released in Sydney. Beginning February 2007 Westpac has resumed reporting seasonally adjusted figures.

===============================================================================
                               Feb.    Jan.   Dec.   Nov.   Oct.  Sept.  Year
                               2009    2009   2008   2008   2008   2008   Ago
===============================================================================
                              --------------------- MoM% ---------------------
Consumer sentiment             -4.6%   -2.3%   7.6%   4.3% -11.1%   7.0%  -11.9%
Family finances, year ago       1.6%   10.6%   4.6%  -7.8%  -1.0%   3.6%   -8.6%
Family finances, year ahead    -6.2%   -4.8%   5.3%  -0.1%  -5.8%   9.3%  -12.2%
Economy 1 year ahead           -7.6%  -18.3%   5.6%  -1.7% -20.3%  19.5%  -36.6%
Economy 5 years ahead         -16.5%    4.0%  -3.7%  15.8%  -9.1%   8.1%  -17.9%
Buy major household items       5.8%   -3.4%  28.2%  15.8% -19.7%  -3.7%   13.8%
Current conditions              3.9%    2.3%  17.4%   3.5% -11.0%  -0.5%    2.8%
Expectations                  -10.5%   -5.1%   2.1%   4.7% -11.1%  11.7%  -21.0%

===============================================================================
                               Feb.    Jan.   Dec.   Nov.   Oct.  Sept.    Year
                               2009    2009   2008   2008   2008   2008     Ago
===============================================================================
                              --------------------- YoY% ---------------------
Consumer sentiment            -11.9%  -12.8% -18.2% -22.6% -28.9% -20.3%  -12.6%
Family finances, year ago      -8.6%  -23.0% -27.9% -28.0% -24.4% -26.7%   -5.8%
Family finances, year ahead   -12.2%   -7.2%  -1.2% -12.2%  -9.5%  -1.1%   -3.2%
Economy 1 year ahead          -36.6%  -43.6% -42.5% -40.2% -45.0% -30.7%  -28.5%
Economy 5 years ahead         -17.9%    3.8%  -6.6%  -4.5% -19.9% -12.5%    6.5%
Buy major household items      13.8%  -13.0% -10.9% -28.2% -42.6% -28.8%  -25.8%
Current conditions              2.8%  -17.8% -18.7% -28.1% -34.3% -27.9%  -17.2%
Expectations                  -21.0%  -15.6% -17.9% -19.1% -25.4% -15.3%   -9.5%
                              -------------------- Index ---------------------
Consumer sentiment              85.8    89.9   92.0   85.5   82.0   92.2    97.4
Family finances, year ago       83.5    82.2   74.3   71.0   77.0   77.8    91.3
Family finances, year ahead     99.2   105.8  111.1  105.5  105.6  112.1   113.0
Economy 1 year ahead            53.8    58.3   71.4   67.6   68.8   86.3    85.0
Economy 5 years ahead           84.8   101.5   97.6  101.4   87.6   96.4   103.2
Buy major household items      107.6   101.8  105.4   82.2   71.0   88.4    94.6
Current conditions              95.6    92.0   89.9   76.6   74.0   83.1    92.9
===============================================================================
                               Feb.    Jan.   Dec.   Nov.   Oct.  Sept.    Year
                               2009    2009   2008   2008   2008   2008     Ago
===============================================================================
                              -------------------- Index ---------------------
Expectations                    79.3    88.6   93.4   91.5   87.4   98.3   100.4
===============================================================================

Note: Westpac has resumed reporting seasonally adjusted figures, noting that research indicated monthly changes in January were generally significantly larger than monthly changes during the rest of the year. As a result a new methodology has been adopted to filter raw data and is the new consumer sentiment index.

Sources: Westpac Banking Corp., Melbourne Institute

To contact the reporter on this story: Daniel Petrie in Sydney at dpetrie5@bloomberg.net

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Australia’s Home Loans Climb More-Than-Expected 6.4%

By Jacob Greber

Feb. 11 (Bloomberg) -- Australian home-loan approvals rose in December by the most in almost nine years as government handouts and the biggest round of interest-rate cuts in almost two decades spurred first-home buyers.

The number of loans granted to build or buy homes and apartments increased 6.4 percent to 52,974 from November, the biggest gain since May 2000, the statistics bureau said in Sydney today. The gain was almost double the 3.5 percent median estimate of 16 economists surveyed by Bloomberg News.

Approvals rose for a third month as Central bank Governor Glenn Stevens cut the benchmark interest rate to a 45-year low of 3.25 percent to prevent the housing market from collapsing. The construction industry is shrinking, unemployment is rising, business confidence is at a record low, and lenders including Commonwealth Bank of Australia have announced higher provisions for bad debts, adding to signs the nation faces a recession.

“These are the first steps in the right direction,” said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “We need to see these sorts of results for another six months to be confident the construction sector will begin to pick up.”

“Policy makers don’t have the option of failing here,” Redican added. “If they don’t get construction off the ground, the economy will be in for a very sharp slump.”

First-Time Buyers

To spur house building, the government in October tripled a grant to first-time buyers of new homes to A$21,000 ($14,000) and doubled the grant for buyers of existing homes to A$14,000. The increased payments are due to remain available until June 30.

First-home buyers accounted for 25.4 percent of loan approvals in December, up from 18.9 percent a year earlier, today’s report showed.

The Australian dollar traded at 65.44 U.S. cents at 12:27 p.m. in Sydney from 65.79 cents before the report was released. The two-year government bond yield rose 1 basis point, or 0.01 percentage point, to 2.71 percent.

Today’s report reflects similar gains in demand for housing in some property markets around the world where prices have fallen.

An index of U.S. pending home sales climbed 6.3 percent in December, the first increase since August, U.K. banks granted 31,000 loans for house purchase, compared with 27,000 in November, and the value of Hong Kong mortgages jumped 22.8 percent, reports showed in the past two weeks.

Variable Mortgages

Governor Stevens said yesterday commercial lenders have passed on about 375 basis points of the central bank’s 400 basis points of reductions since the start of September.

The interest-rate reductions have saved borrowers with an average A$250,000 home loan about A$600 a month. Around 90 percent of property buyers in Australia have variable-rate mortgages.

“The cash flow channel for indebted households is working quite powerfully in our case,” Stevens told a conference in Kuala Lumpur yesterday.

“The question of how people’s appetite to borrow will be expanded by these things of course is another” matter, he said.

Lending by banks to consumers buying houses rose 7.6 percent last year, the weakest growth since 1983, home-building approvals fell in December for a sixth month and property prices tumbled 3.3 percent in 2008, recent reports showed.

Interest Rates

Investors have a 100 percent expectation the Reserve Bank of Australia will cut the overnight cash rate target by 50 basis points on March 3, according to a Credit Suisse Group index based on swaps trading.

The nation’s jobless rate probably rose last month to 4.7 percent, the highest level in more than two years, from 4.5 percent in January, after companies including Macquarie Group Ltd. fired workers, according to the median estimate of 14 economists surveyed by Bloomberg. Jobs figures will be released tomorrow.

There also signs households may be less willing to take on extra debt after the economy expanded just 0.1 percent in the third quarter from the previous three months, the weakest growth since 2000.

An index of consumer confidence declined 4.6 percent in February, according to a Westpac Banking Corp. survey of 1,200 people conducted between Feb. 2 and Feb. 8, and released in Sydney today.

Australia’s construction industry shrank in January for an 11th month.

Bad Debt

Boral Ltd., Australia’s biggest seller of building materials, said today it expects housing starts to tumble 15 percent this year to 135,000.

Commonwealth Bank, the nation’s second-biggest bank, said today bad debts rose almost five-fold in the first half to A$1.6 billion as loans to failed companies including ABC Learning Centres Ltd. soured.

The total value of lending rose 5.9 percent to A$18.6 billion in December, today’s report showed.

Lending to owner-occupiers gained 7.1 percent, while the value of lending to investors who plan to rent or resell homes advanced 2.9 percent.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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New Zealand Card Spending Fell for a Third Month

By Tracy Withers

Feb. 11 (Bloomberg) -- New Zealand consumer spending on debit, credit and store cards fell for a third straight month in January, adding to signs that job losses and falling consumer confidence may prolong the nation’s recession.

The value of transactions on electronic cards at retailers declined 0.6 percent from December, led by lower fuel prices, Statistics New Zealand said in a statement released today in Wellington. Spending was the lowest since October 2007, seasonally adjusted.

New Zealand’s economy slumped into a recession in the first quarter of last year and may not start growing until the second half of 2009 amid falling exports and rising unemployment, according to the central bank. Retailers such as Hallenstein Glasson Holdings Ltd. and Kirkcaldie & Stains Ltd. are reporting plunging profits as consumers curb their spending.

“Core spending has flat-lined in recent months, volumes are contracting and the outlook for retailing is yet to show any evidence of life,” said Shamubeel Eaqub, economist at Goldman Sachs JBWere Ltd. in Auckland. “The key risk for retail spending is likely to be the labor market.”

New Zealand’s jobless rate rose to a five-year high of 4.6 percent in the fourth quarter, according to a government report last month. Consumers were more pessimistic about the outlook for the economy, according to a survey by Roy Morgan Research in the two weeks ended Feb. 1.

Spending at fuel outlets led the declines, while sales of home appliances, electrical goods and other so-called durable items also fell, the statistics agency said.

Transactions excluding fuel, workshop and vehicle sales dropped 0.2 percent from December when they rose 0.2 percent, the agency said.

Hallenstein this month said profit in the six months ended Feb. 1 fell about 40 percent amid slowing sales and narrower profit margins at its clothing stores.

Kirkcaldie & Stains, which owns an upscale department store in the nation’s capital city Wellington, yesterday said profit in the six months to late February will probably plunge 50 percent as sales are about 6 percent less than a year earlier.

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

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