Wednesday, March 4, 2009

EURUSD, AUDUSD, EURCHF Daily Outlook

Daily Forex Technicals | Written by E-Forex | Mar 04 09 07:41 GMT |

EURUSD

Fresh intra-day lows have been reached after the short-lived recovery to 1.2675 on yesterday. The decline to 1.2450 brings last year's lows under pressure and a potential break below 1.2420 may extend losses towards long-term support at 1.2330. Daily sentiment is bearish and no change is expected while trading below the 1.2890-1.2990 resistance region. Intra-day resistance is seen at 1.2540 and 1.2590 followed by a minor barrier at 1.2630 and yesterday's high at 1.2675. Above 1.2540, hourly momentum will turn bullish but extended rallies are likely to be limited within the 1.2630-1.2675 zone. Current quote is 1.2530 @07:30 GMT

Support levels: 1.2450, 1.2400/15 and 1.2330.
Resistance levels: 1.2540, 1.2590, 1.2630 and 1.2675.
Market sentiment: long-term : bearish, mid-term : bearish, short-term : bearish

AUDUSD

Support at .6280/90 holds after three attempts on breaking towards the downside. However, the daily studies remain bearish and strong near-term resistance levels are formed at .6450, .6550 and .6650. Above .6550, daily momentum will turn positive. Support backs .6280/90 at .6245 - last month's low. Minor interim resistance into the .6370-.6390 region is on focus as the Aussie Dollar is currently recovering overnight's losses. Current quote is .6361 @07:30 GMT

Support levels: .6330 .6280/90 and .6245.
Resistance levels: .6370/90, .6450, .6550 and .6650.
Market sentiment: long-term : bearish, mid-term : bearish , short-term : bearish

EURCHF

Sentiment is mixed as the pair lacks the strength to break the range on either side. Important resistance is formed into the 1.4875-1.4930 region and a potential break will turn daily momentum on the positive side. On the other side, important support is formed into the 1.4655-1.4695 zone. Minor resistance is being tested at 1.4800 at the time of this writing. Above the 1.48 mark, intra-day momentum will favor further climbing to 1.4900/30. Current quote is 1.4796 @07:30 GMT

Support levels: 1.4750/60, 1.4700 and 1.4650.
Resistance levels: 1.4800, 1.4875, 1.4930 and 1.5010.
Market sentiment: long-term : bearish, mid-term : bearish, short-term : slightly bearish

E-Forex

Legal disclaimer and risk disclosure

Past performance does not guarantee similar performance in the future. Our forecasts do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any foreign exchange transaction. E-Forex.ro accepts no responsibility or liability whatsoever for any expense. We do not warrant or guarantee the accuracy, timelines or completeness to the service or informations you find here.

Technical Analysis for Major Currencies

Daily Forex Technicals | Written by Crown Forex | Mar 04 09 07:37 GMT |

EURO

The pair declined to breach the key support at 1.2555 - 1.2540 just as we expected to near our initial targets at 1.2415. After successfully breaching the fibonacci correction, this has opened the way for the pair to extend its losses within a descending channel that is targeting 1.2375. On the intraday basis, we may witness an upside correction to retest the 1.2555 level before reversing to the downside to the above mentioned target and then 1.2220 and 1.2120 respectively. The trading range for today is among the key support at 1.2220 and the key resistance at 1.2865 The general trend is to the downside as far as 1.4710 remains intact with targets at 1.2220 and 1.2120

Support: 1.2430, 1.2375, 1.2325, 1.2265, 1.2220
Resistance: 1.2555, 1.2615, 1.2660, 1.2700, 1.2770

Recommendation: According to our analysis, we see that its good to sell the pair below 1.2555 with targets at 1.2430 and stop loss with a four hour close above 1.2660

GBP

The downside movements continued as the pair remained below the 1.4140 level. We see on the intraday basis the formation of a bearish technical pattern near a critical support level at 1.3980. Expectations are still to the downside as the pair will attempt to breach the above mentioned support level to target 1.3820. This remains valid as far as 1.4140 remains intact. The trading range for today is among the key support at 1.3750 and the key resistance at 1.4425 The general trend is to the downside as far as 1.5270 remains intact with targets at 1.3500 and 1.2960

Support: 1.3980, 1.3950, 1.3910, 1.3880, 1.3820
Resistance: 1.4095, 1.4140, 1.4170, 1.4205, 1.4265

Recommendation: According to our analysis, we see that its good to sell the pair with the breach of 1.3980 with targets at 1.3820 and stop loss with a four hour close above 1.4095

JPY

The pair was able to incline yesterday to reach the initial target at 98.15 and extended towards the key resistance for the ascending channel at 99.45. Our expectations on the intraday remain to the upside where if the pair breaches 98.70, this will open the way for further gains. Momentum indicators show the pair being overbought which may result in volatility around the 97.95 level before retesting 99.45 The trading range for today is among the key support at 95.30 and the key resistance at 99.45 The general trend is to the downside as far as 102.10 remains intact with targets at 84.95 and 82.60

Support: 97.95, 97.65, 97.05, 96.85, 96.55
Resistance: 98.70, 99.45, 99.75, 100.20, 100.55

Recommendation: According to our analysis, we see that its good to buy the pair above 97.95 with targets at 99.45 and stop loss with a four hour close below 97.05

CHF

During the early morning session, the pair inclined in an attempt to breach the resistance level which has shifted today to 1.1800. Trading is currently near this level and a four hour close above it will support our outlook as the pair targets 1.1970 and 1.2055 as far as 1.1675 remains intact. The trading range for today is among the key support at 1.1390 and the key resistance at 1.2055 The general trend is to the upside as far as 1.0570 remains intact with targets at 1.1970 and 1.2055

Support: 1.1800, 1.1760, 1.1730, 1.1675, 1.1625
Resistance: 1.1885, 1.1925, 1.1975, 1.2055, 1.2085

Recommendation: According to our analysis, we see that its good to buy the pair above 1.1805 with targets at 1.1925 and stop loss with a four hour close below 1.1730

CAD

A gradual incline is being witnessed within a minor ascending channel where we expect the pair to reach 1.3065 and 1.3260. Momentum indicators show overbought signals as the pair nears the key support for the channel at 1.2925 which may result in a downside correction to 1.2895 - 1.2880 before rebounding to the upside. It is important to note that a four hour close below the 1.2925 level may change the intraday trend to the downside with targets at 1.2825 and 1.2740. The trading range for today is among the key support at 1.2605 and the key resistance at 1.3265 The general trend is to the upside as far as 1.1780 remains intact with targets at 1.3065 and 1.3260

Support: 1.2895, 1.2810, 1.2760, 1.2760, 1.2740
Resistance: 1.2965, 1.3015, 1.3065, 1.3115, 1.3195

Recommendation: According to our analysis, we see thta its good to buy the pair above 1.2925 with targets at 1.3065 and stop loss with a four hour close below 1.2850

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Mar 04 09 05:40 GMT |

EUR/USD closed higher on Tuesday due to short covering as it consolidates some of Monday's decline. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. If it renews this year's decline, November's low crossing is the next downside target. Closes above last Monday's high crossing are needed to confirm that a short-term low has been posted.

USD/JPY closed higher on Tuesday ending a two-day short covering decline. March remains above the 50% retracement level of the August-January decline crossing and the high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are oversold but remain neutral to bullish signalling that sideways to higher prices are possible near-term. If it extends this year's rally, the 62% retracement level of the August-January decline crossing is the next upside target. Closes below the 20-day moving average crossing are needed to confirm that a short-term high has been posted.

GBP/USD posted an inside day with a higher close on Tuesday as it consolidated some of Monday's decline. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. If it extends this week's decline, January's low crossing is the next downside target. Closes above the reaction high crossing are needed to confirm that a bottom and trend change has taken place.

USD/CHF closed lower due to short covering on Tuesday as it consolidated some of Monday's rally but remains above the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signalling that sideways to higher prices are possible near-term. Closes above February's high crossing are needed to renew this year's rally. Closes below the 20-day moving average crossing would temper the near-term bullish outlook.

HY Markets
http://www.hymarkets.com

A Drop In The ADP Employment Report Would Contradict Bearish Dollar Outlook

Daily Forex Technicals | Written by DailyFX | Mar 04 09 05:32 GMT |

Fundamental Outlook

The February ADP employment report is expected to show that the economy lost another 630,000 non-farm private jobs. The report has improved as an indicator for the U.S. Non-farm payroll report due out on Friday and thus may have a greater impact on price action. The mounting job losses have been a main source of risk aversion in addition to the banking troubles. Once traders see past the issues of the financial system, weaker earnings lie ahead as the U.S. consumer continues to retrench. Therefore, another month of massive job losses could add the prevailing risk aversion in the market place and fuel bullish dollar sentiment. Of course there is the risk that the greenback trades on the fundamental impact of the weak labor market on the U.S. economy which would validate the bullish Euro/US dollar technical outlook.

The EURUSD is marking time but there are signs of strength such as today's outside day that suggest the EURUSD is preparing for a significant rally. The best count treats the consolidation since late January as a triangle, which would place the drop from that triangle as wave 5 in the 5 wave decline from the December high. Under this count, a low is in at 1.25 and price is headed higher in order to more fully correct the decline from 1.47. If 1.25 is broken, then there is the possibility that the decline from 1.33 is an ending diagonal as wave 5. Reward to relative risk is high for bulls at this point, irrespective of which count is correct.

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.

Forex Technical Update

Daily Forex Technicals | Written by India Forex | Mar 04 09 05:34 GMT |

Euro: Euro remained weak yesterday as it hit a low of 1.2521, almost 150 pips lower that the days' high. In the early trade today, Euro further weakened to the lows of 1.2456 and further downside upto 1.2330 (previous low) could be probable. ECB rate decision is due to release tomorrow. The major charts are still indicating a selling bias though they are nearing the oversold region. Initiate shorts around 1.26 for 80 pips. (Eur/Usd: 1.2488).

Pound: Cable traded sideways within 170 pips yesterday with a low of 1.3984. The sentiment for Cable remains weak with the major charts yet to correct in the oversold region. The bias is bearish below 1.4295 (21 Daily EMA & 100 4-hourly EMA). On the downside 1.3503 is the initial support (low as on 18.01.2009). Initiate shorts around 1.4130 for 70-80 pips. Further shorts could be initiated around 1.43. (Gbp/Usd: 1.4098).

Yen: The Usd/Jpy pair surged almost 160 pips from 96.99 levels and made a bullish divergence reversal bar. It is currently pressing against its crucial 98.50 resistance which if broken decisively can take the pair to the next resistance of 100.45 (55 Weekly EMA).The charts have flattened in the overbought region, thus, shorts in the pair should be targeted only above 100 levels. (Usd/Jpy: 98.45)

Rupee: The local unit traded lower yesterday making a newer all time low of 52.19 against the greenback. It depreciated almost 6.7% in 2009 due to weak stocks (Sensex closed at its 40 month low yesterday) and continuous FII outflows. The rupee proves to be the third worst performer amongst the Asian currencies. The arbitragers in the NDF market continue to give negative clues for the rupee and breaking of 52.40 can lead it to 54 against the US Dollar. No sellers were seen in the market except the RBI which came in around 52.20 levels to curb the sharp rupee fall. (USD/INR: 51.96).

Swiss Franc: The Usd/Chf pair traded sideways yesterday moving within 105 pips below 1.18 levels. It closed the session at 1.1770 levels after it touched the day's high of 1.1786. Today the major charts continue to give buying pressure. Support comes in at 1.1730(21 4-hourly EMA) around which longs can be initiated. Resistance comes in at 1.1840 (200 Weekly EMA) which if broken can lead the pair to 1.1980 (55 Monthly EMA). (Usd/Chf: 1.1810)

Australian Dollar: Aussie witnessed a fall of almost 180 pips in yesterday's session after it took ressitance from the 21 Daily EMA & 38.2% Retracement around 0.6460 levels. The charts continue to indicate further downside and a break below 0.6290 (horizontal trendline) can bring a deeper pull-back upto 0.6009 levels (27th Oct. low). Shorts can be considered around 0.64 (cluster resistance) for intraday 90 pips. (Aud/Usd : 0.6325).

Gold: Gold has fallen sharply against the greenback in the past few trading sessions. Yesterday again, Gold fell $27 from the highs of $932 (21 Daily EMA). The daily stochastic has flattened in the oversold region while the 4-hourly charts indicate further selling pressure. The initial support is now traced at $897 (55 Daily EMA & 50% Retracement of the rise) breaking which Gold may test $874 (rising trendline & 100 Daily EMA). Initiate longs at those levels for $15 - $20. (Gold: $912.00)

Dollar index: Dollar Index is trading strongly near it previous (Nov '08) highs at 89.51 with stochastic overbought at 93.20 levels.

India Forex
http://www.indiaforex.in

DISCLAIMER

These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

US Housing Data Still Weakening

Daily Forex Fundamentals | Written by Easy Forex | Mar 04 09 03:14 GMT |

U.S. Dollar Trading (USD) weakened in Asia as traders covered shorts and stocks rallied off lows. The losses proved short lived though as US economic data continued to surprise to the downside. January Pending Home Sales fell -7.7% vs. -3% forecast. Fed Chief Bernanke also spoke to senators and painted a bleak picture of the US banking industry. Crude Oil closed up $1.50 ending the New York session at $41.65 per barrel. In US share markets, the Nasdaq was down -1.84 points or -0.15% whilst the Dow Jones fell -37 points or -0.55%. Looking ahead, January Non-Manufacturing for February expected at 41 vs. 42.9. Also released, February ADP National Employment expected at -610K vs. -522k previously.

The Euro (EUR) bounced back above 1.2600 level as EUR/JPY buying emerged on the back of AUD/JPY buying after the RBA meeting. Gains topped out in Europe and fell back as US stocks reversed early positive sentiment. German January WPI fell -0.4% vs. -3% forecast. Overall the EUR/USD traded with a low of 1.2524 and a high of 1.2676 before closing the day at 1.2560. Looking ahead, February PMI forecast at 38.9 vs. 42.2.

The Japanese Yen (JPY) broke back above 98 Yen as the market shrugged off weak stocks and resumed its march upward. AUD/JPY was especially buoyant and helped to pull all the crosses higher. The deterioration of the Japanese Export market is hurting Yen sentiment. Overall the USDJPY traded with a low of 97.05 and a high of 98.58 before closing the day around 98.30 in the New York session.

The Sterling (GBP) tested 1.400 again as reports emerged that the BOE was considering Quantitative Easing as early as this month. The rebound from Heavy GBP/JPY buying was capped in Europe as February Construction PMI fell to a record low 27.8. The market is pricing in a 0.5% rate cut. Overall the GBP/USD traded with a low of 1.3987 and a high of 1.4157 before closing the day at 1.4040 in the New York session. Looking ahead, PMI Services forecast at 41.8 vs. 42.5 previously.

The Australian Dollar (AUD) jumped off 0.6300 as retail sales beat forecasts at 0.2% in January vs. -0.5% previously. With stocks rallying off lows in Asia the upside came back into focus ahead of the RBA meeting. The RBA held at 3.25% in a surprise to many analysts and caused the AUD to rally past 0.6400 and test 0.6450 in the European session. Weak US stocks took the shine off Aussie and is now awaiting the Q4 GDP Wednesday . Overall the AUD/USD traded with a low of 0.6295 and a high of 0.6462 before closing the US session at 0.6380. Looking ahead, Q4 GDP forecast at 0.2% vs. 0.1% previously. UPDATE Q4 shocks market -0.5%

Gold (XAU) tested the downside but fell short of the $900 target as ETF demand continued to slump. Overall trading with a low of USD$906 and high of USD$932 before ending the New York session at USD$916 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

Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Mar 04 09 02:22 GMT |

EURUSD Outlook

The EURUSD didn't make a significant movement yesterday. The 1.2500 seems to be an important key support level at this phase. We have a descending triangle on daily chart indicating a potential bearish scenario. I believe the Euro should remains under pressure this week so short on rallies is still the best strategy. Break below 1.2500 would trigger further bearish scenario targeting 1.2300 area. Immediate resistance is seen at 1.2580 followed by 1.2650. CCI just cross the -100 line down on 4h chart suggesting a potential downside pressure.

EURUSD Daily Supports and Resistances:

S1= 1.2495
S2= 1.2430
S3= 1.2340
R1= 1.2650
R2= 1.2740
R3= 1.2805

GBPUSD Outlook

The GBPUSD made indecisive movement yesterday by opened and closed at almost the same price (1.4052 and 1.4047). However we still have bearish channel on 4h chart and weekly outlook also should be bearish for the pair. The bias is neutral in nearest term but remains bearish in medium and long term. Immediate support is seen at 1.3950. Break below that level could trigger further bearish scenario targeting 1.3800 area. Initial resistance at 1.4070 followed by 1.4150. CCI about to cross -100 line down on both hourly and 4h chart suggesting a potential downside pressure.

GBPUSD Daily Supports and Resistances:

S1= 1.3967
S2= 1.3888
S3= 1.3794
R1= 1.4140
R2= 1.4234
R3= 1.4313

USDJPY Outlook

The USDJPY had a bullish momentum yesterday. On hourly chart we can see that the bearish correction attempt was rejected around 23.6% Fibo retracement area. The bias is bullish in nearest term but watch out for a potential double top resistance at 98.69. Break above that level could trigger further bullish momentum targeting 99.50 area. CCI about to cross the 100 line up on hourly chart suggesting a potential upside pressure.

USDJPY Daily Supports and Resistances:

S1= 97.22
S2= 96.31
S3= 95.63
R1= 98.81
R2= 99.49
R3= 100.40

USDCHF Outlook

The USDCHF made indecisive movement by opened and closed at almost the same price yesterday (1.1753 and 1.1755), formed a Doji formation on daily chart. We have triangle formation on hourly chart indicating a consolidation phase. The bias is neutral in nearest term but remains bullish in medium and long term. Immediate support is seen at 1.1682 (yesterday's low). Initial resistance at 1.1800 followed by 1.1880. CCI just cross the 100 line up on 4h chart suggesting a potential upside pressure.

USDCHF Daily Supports and Resistances:

S1= 1.1696
S2= 1.1637
S3= 1.1592
R1= 1.1800
R2= 1.1845
R3= 1.1904

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | Mar 04 09 03:16 GMT |

Euro 1.2490

Initial support at 1.2425 (Nov 21 low) followed by 1.2389 (Nov 13 low). Initial resistance is now located at 1.2679 (Mar 3 low) at followed by 1.2751 (Feb 27 high)

Yen 98.50

Initial support is located at 96.86 (Feb 27 low) followed by 96.36 (Feb 25 low). Initial resistance is now at 98.71 (Feb 26 high) followed by 99.47 (Nov 10 high).

Pound 1.4025

Initial support at 1.3959 (Mar 2 low) followed by 1.3929 (Jan 27 low). Initial resistance is now at 1.4157 (Mar 3 high) followed by 1.4385 (Feb 26 high).

Australian Dollar 0.6325

Initial support at 0.6281 (Mar 3 low) followed by the 0.6249 (Feb 2 low). Initial resistance is now at 0.6463 (Mar 3 high) followed by 0.6482 (Feb 27 high).

Gold 915

Initial support at 922 (Mar 2 low) followed by 911 (Feb 11 low). Initial resistance is now at 963 (Feb 27 high) followed by 978 (Feb 25 high).

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.2389	1.2425	1.2490	1.2679	1.2751
USD/JPY	96.36	96.86	98.50	98.71	99.47
GBP/USD	1.3929	1.3957	1.4025	1.4157	1.4385
AUD/USD	0.6249	0.6281	0.6325	0.6463	0.6482
XAU/USD	911.00	922.00	915.00	963.00	978.00

Easy Forex
http://www.easy-forex.com

U.K. Consumer Confidence Stays Close to Lowest Since 2004

By Jennifer Ryan

March 4 (Bloomberg) -- U.K. consumer confidence stayed close to the lowest level in at least four years in February as the recession persisted and companies cut jobs, Nationwide Building Society said.

An index of sentiment rose to 43 from 41 the previous month, which was the worst result since data began in 2004, the mortgage lender said in a statement today. The reading was taken from a survey of 1,000 people from Jan. 19 to Feb. 15.

The Bank of England may cut the key interest rate to a record low of 0.5 percent tomorrow and take steps to start printing money to ease the flow of credit. Prime Minister Gordon Brown has also given banks loan guarantees and pushed them to make more finance available to help the economy weather its worst slump in three decades.

“Consumers’ views about the current economic and labor market conditions are in line with the recessionary climate in the U.K,” Fionnuala Earley, chief economist at Nationwide, said in the statement.

The confidence gauge still rose on the month for the first time since October, Nationwide said. A measure of attitudes on buying household goods and making major purchases rose seven points to 92, the highest since October 2006, while an index on expectations for the future increased 5 points to 57. The gauge of attitudes on the present situation fell 2 points to 22.

Job Placements

The number of U.K. workers placed in permanent jobs fell at close to the fastest pace since 1997 last month, the Recruitment and Employment Confederation and KPMG said. An index of permanent placements fell to 30.3 from 32.5 in January, the groups said in an e-mailed statement today.

Meggitt Plc, the U.K. maker of engine monitors for Airbus SAS and Boeing Co. planes, said yesterday it may cut as many as 750 jobs to help generate savings of 50 million pounds ($70 million) amid the global economic slump.

The U.K. economy contracted 1.5 percent in the fourth quarter, the most since 1980, as consumers cut spending. Brown’s government last month ordered Northern Rock Plc, the nationalized bank, to expand lending to help the economy. Ministers also agreed to guarantee 325 billion pounds of Royal Bank of Scotland Group Plc’s investments.

Chancellor of the Exchequer Alistair Darling suggested in a newspaper interview published yesterday that the Bank of England could start printing money as soon as this week, as interest rates lose their ability to revive growth.

Policy makers may lower the key rate by a half point to the lowest since the bank was founded in 1694, according to the median forecast of 60 economists in a Bloomberg News survey.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

BOJ Offers to Buy 150 Billion Yen in Corporate Bonds

By Mayumi Otsuma

March 4 (Bloomberg) -- The Bank of Japan offered to buy 150 billion yen ($1.5 billion) in corporate bonds from lenders as part of a program unveiled last month to channel funds to companies as the recession deepens.

The central bank plans to buy as much as 1 trillion yen in corporate bonds from financial institutions through the end of September, it said on Feb. 19. It will buy debt rated at least A and with a maturity of up to a year. The bank has also purchased commercial paper, or short-term debt, since January.

Bank of Japan Governor Masaaki Shirakawa told lawmakers yesterday that the debt purchases are an “exceptional step” to make it easier for companies to borrow.

Miyako Suda, the only member of the policy board to oppose the decision to buy corporate bonds, today said the market isn’t deteriorating enough to warrant the purchases.

Companies can raise funds by selling commercial paper market instead of bonds, Suda said in a speech in Kyoto, western Japan. She added that purchases of bonds that mature in a year or less would only have a limited effect.

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

China Lawmakers Prioritize Welfare as Slowdown Threatens Unrest

By Dune Lawrence and Li Yanping

March 4 (Bloomberg) -- China’s parliament convenes its annual meeting tomorrow, seeking solutions to an economic slump that is fueling pockets of social unrest after 20 million workers lost their jobs.

Premier Wen Jiabao, who’ll kick off proceedings with China’s equivalent of the U.S. State of the Union address, may shed more light on a 4 trillion yuan ($585 billion) stimulus package and a campaign to expand health and welfare coverage.

“Circumstances this year are so different from any other year,” said Zhao Linzhong, 55, a National People’s Congress delegate from eastern Zhejiang province, an export hub where economic growth dropped by a third last year. “Despite the stimulus measures, most companies have to prepare to endure a long economic winter.”

Wen and President Hu Jintao, who are both 66, have called 2009 the toughest of the new millennium. Economic expansion in the world’s fastest-growing major economy has slid from 13 percent in 2007 to 6.8 percent last quarter, below the minimum 8 percent the government estimates is needed to create jobs.

The slowdown has rattled the Communist Party, which has ruled China since 1949 and bolstered its legitimacy in the past two decades by delivering greater prosperity. The global economy, mired in the biggest recession since the Great Depression, is also counting on China meeting the 8 percent growth target to help stoke a worldwide recovery.

“If you have one major economy, which is the third largest, that can hold up, that’s an achievement, that’s confidence boosting for the rest of the world,” said Bo Zhiyue, senior research fellow at the National University of Singapore’s East Asian Institute. “It is quite significant to look at China, because the worst scenario is that China’s economy collapses.”

Politburo Priorities

The Politburo, the party’s top decision-making body, said last week that China would counter the slowdown by “massively” increasing government investment and “greatly enhancing” social security in confronting an “austere and complicated” year.

Growth is collapsing as the fastest contraction in the U.S. since 1982 takes its toll on Chinese exporters including Lenovo Group Ltd., the world’s fourth-biggest personal-computer maker, which reported its first quarterly loss in three years and announced thousands of layoffs. Profit at the publicly traded unit of textile maker Furun Group, which NPC delegate Zhao chairs, plunged 80 percent last year.

With 20 million rural laborers who previously found jobs in cities now unemployed, and 7.1 million college graduates seeking work, authorities are alert to the danger of social unrest.

‘Mass Incidents’

“Mass incidents” may jump this year, the official Xinhua News Agency’s Outlook Magazine reported in January, employing communist code for riots and civil disorder. Politburo member and former head of public security Zhou Yongkang last month called on authorities to do “everything possible” to solve employment problems, in a speech published in the party journal Seeking Truth.

Last month, a clash between police and about 1,000 protesting workers from a textile factory in Zigong City, Sichuan province, left six demonstrators injured, rights group Chinese Human Rights Defenders reported. In November, police arrested 30 people in northwestern Gansu Province after rioters destroyed government property, Xinhua said. Labor dispute lawsuits surged 95 percent last year, the executive vice president of China’s highest court, Shen Deyong, said this week.

Wen on Feb. 28 strove to put a positive spin on the economic situation in his first online chat with citizens, saying government measures to tackle the financial crisis “have shown preliminary results.” Still, “we must be ready to take more forceful measures at any time,” he added.

Improved Disclosure

The nation’s leaders may choose to boost confidence by releasing more details of stimulus spending, or announcing a higher projection for the total outlay during the 10-day legislative session, Stephen Green, Shanghai-based head of research for China at Standard Chartered Plc, said in a note on Feb. 26. He cited unnamed officials as saying that stimulus spending may reach 8 trillion to 10 trillion yuan in the next two years.

“The attention now is on whether Wen will announce another package,” said Willy Wo-Lap Lam, an adjunct professor of history at the Chinese University of Hong Kong. “They need to keep up the momentum.”

Wen’s annual work report will also outline government efforts to expand welfare payments and coverage. The legislature will consider a draft social insurance law, which incorporates rural laborers who move from place to place into the pension system. The government in January said it would invest 850 billion yuan over three years to ensure that at least 90 percent of China’s more than 1.3 billion citizens have basic health insurance by 2011.

Deficit Spending

The government may need to run an unprecedented 950 billion yuan budget deficit to fund its efforts, according to the China Business Journal and Wen Wei Po newspapers. China’s shortfall this year will be 3.1 percent of gross domestic product, according to the median estimate of 12 economists surveyed by Bloomberg News. That compares with 12 percent in the U.S.

Improved social security is key to bolstering consumer confidence and boosting China’s domestic consumption, propping up growth after the global recession capsized exports, which slid 17.5 percent in January.

“Money spent on protecting the economic-growth rate is not necessarily producing new jobs, and that’s why the government needs to spend directly on those unemployed and on social security,” said Fan Jianping, chief economist at the Beijing- based State Information Center.

Zhao, one of 3,000 delegates to parliament, has come armed with 57 proposals, including additional export rebates on textiles, and said he’s eager to hear more from Wen.

“The premier’s work report will be focused on the bigger picture issues,” he said. “That big picture affects us all.”

To contact the reporters on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net; Li Yanping in Beijing at yli16@bloomberg.net

China to Announce New Stimulus Plan, Ex-Official Says

By Yidi Zhao

March 4 (Bloomberg) -- Chinese Premier Wen Jiabao will announce a new stimulus package at the opening of the annual meeting of lawmakers tomorrow, former statistics bureau head Li Deshui said.

Li spoke outside a meeting of the economic group of the Chinese People’s Political Consultative Conference in Beijing today. He didn’t say whether spending could be more than the 4 trillion yuan ($585 billion) announced in November.

The government may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc. China will “massively” increase government investment in 2009, expand social-security coverage and target stability, the Communist Party’s Politburo said Feb. 23.

“The government should expand its 4 trillion yuan package to sustain an economic recovery,” Zheng Xinli, a deputy director at the policy research office of the ruling Communist Party said today.

While China’s economy is the only one of the world’s five biggest still expanding, the pace has slowed for six straight quarters. Growth in the three months through December was 6.8 percent from a year earlier, the smallest gain in seven years. That compares with a 13 percent expansion for all of 2007.

The official manufacturing index climbed for a third month in February, signaling that the world’s third-biggest economy may be edging closer to a recovery.

Output and new orders expanded for the first time in five months, evidence that the stimulus package may be taking effect.

To contact the reporter on this story: Yidi Zhao in Beijing at yzhao7@bloomberg.net

Darling Says U.K. Endorses European Union Financial Regulator

By Reed V. Landberg

March 4 (Bloomberg) -- Britain’s Chancellor of the Exchequer Alistair Darling said the European Union needs a single financial regulator to draw up rules governing banks and insurance companies and to prevent turmoil in markets.

“We need much greater cooperation,” Darling wrote in a letter to EU finance ministers. “We should consider fundamental reforms to the system of regulation and supervision. We should not shy away from radical options.”

The comments are aimed at finding a common EU position on how to rework banking rules before Prime Minister Gordon Brown hosts a summit of leaders from the Group of 20 nations in London next month.

Darling’s proposal mostly endorses an EU plan scheduled to be released today that would give new agencies the authority to monitor economic risks and set standards for national bank regulators. The U.K. proposal suggests the authority should be held by a new regulator and not the European Commission, the administrative arm of the EU.

“Over time, this body should become the source of technical financial rules rather than national authorities or the commission,” Darling wrote. “It would not supervise individual banks, insurers or investment firms, leaving that to national authorities. It would not have powers over national supervisors.”

Resistance Dropped

Britain has dropped its resistance to a single regional regulator following the collapse of Lehman Brothers Holdings Inc. in September. With the failure of that U.S. investment bank, the world economy lurched into recession, and credit markets, which had begun to recover from the meltdown in the subprime mortgage market in 2007, froze up again.

Brown yesterday pressed U.S. President Barack Obama to support global financial regulations, saying that worldwide money flows mean the rules that restrain the industry have to cross national borders.

“We’ve had a global banking failure,” Brown said at a news conference with Obama in Washington. “We’ve got to rebuild the system. A bad bank anywhere can affect good banks everywhere.”

The EU proposal, drawn up following advice from a panel led by Jacque de Larosiere, envisages the European Commission retaining the power to write rules implemented by national regulators. Darling suggests a new body replacing the role of the commission. Former FSA Chairman Callum McCarthy served on Larosiere’s panel.

National Powers

Under the Darling plan, national banking regulators including the Financial Services Authority in the U.K. would keep the power to oversee banks in their home countries, implementing rules and guidelines agreed to by the new pan-European regulator.

British officials also are continuing to press their case for an “early-warning system” that would diagnose threats to the world economy, working with the International Monetary Fund and the Basel-based Financial Stability Forum.

In addition, Darling wants a review of cross-border banking supervision, addressing how national regulators oversee a branch of an overseas bank working in their country. Those concerns stem from a $1.3 billion bailout Darling granted to Icelandic banks after customers of Reykjavik-based banks in the U.K. lost money last year.

“We need to be clear about what is and should be dealt with supra-nationally and what needs to be dealt with on a national basis,” Darling wrote. “We all recognize the problems that can arise in one country and very quickly affect others.”

For Related News and Information:

To contact the reporter on this story: Reed Landberg in London at landberg@bloomberg.net.

Bank of England Plan Fails Companies Needing Cash, Analysts Say

By Neil Unmack and Brian Swint

March 4 (Bloomberg) -- The Bank of England’s $70 billion plan to spur lending by purchasing corporate bonds is aiming at the wrong targets because it won’t help borrowers that are shut out of debt markets, according to analysts.

“Buying investment-grade, non-financial corporate debt in the secondary market helps out investment funds and bank trading desks, but not the companies that actually need liquidity,” said Simon Surtees, who manages more than 18 billion pounds ($25 billion) at Gartmore Investment Ltd. in London. “I can’t honestly see what the Bank of England is trying to achieve.”

Governor Mervyn King said in February he’ll buy up to 50 billion pounds of debt “as soon as possible,” after cutting interest rates to a record failed to open debt capital markets to the companies that need cash most. The last borrower with non-investment grade ratings to sell bonds in pounds was Dutch electric-generation company Intergen NV in July 2007, when credit markets froze for all but the safest borrowers.

The bond-buying program comes after the central bank started to purchase commercial paper last month, and is the next stage toward so-called quantitative easing, where governments increase money supply to reduce its cost and stoke the economy. Policy makers are trying to ease access to funding after banks worldwide lost or wrote down $1.2 trillion since the start of the credit crisis.

A Bank of England spokesman, who declined to be identified citing policy, wouldn’t comment on the debt-buying plan. A spokesman for the U.K. Treasury referred inquiries about the bond purchases to the bank.

Speculative-Grade Bonds

The central bank should focus on purchasing the debt of speculative-grade companies, those rated lower than Baa3 by Moody’s Investors Services and BBB- by Standard & Poor’s, because investment-grade borrowers can sell bonds directly to investors, analysts said.

“If the Bank of England buys the exact same debt that everyone else is fighting frenetically to get their hands on, liquidity won’t return to the market,” said Lucette Yvernault, a global credit analyst at Schroder Investment Management Ltd. in London.

Investment-grade companies including Tesco Plc, the U.K.’s biggest supermarket operator, and Imperial Tobacco Group Plc, the maker of West and JPS cigarettes, have sold 27.9 billion pounds of bonds in Britain’s currency this year, according to data compiled by Bloomberg. That’s almost three times the amount issued in the same period of 2008.

Record-High Yield

Investors demand a record-high 25.4 percentage points over similar-maturity government bonds to hold speculative-grade U.K. borrowers’ debt, according to Merrill Lynch & Co.’s Sterling High-Yield Index. The benchmark includes 56 bonds issued by companies including British Airways Plc and drinks maker Allied Domecq Plc. That compares with the 6.15 percentage-point spread on investment-grade bonds, Merrill data show.

Buying just high-grade bonds “could exacerbate the current situation, where good companies that have non-cyclical earnings get even more highly bid, and those that don’t are still excluded” from debt markets, said Tim Barker, the London-based head of credit research at Aviva Investors.

The central bank announced in a statement on Feb. 6 that it plans to buy corporate debt to “reduce liquidity premia on high-quality corporate bonds” and “remove obstacles” to companies seeking cash. The bank hasn’t published details of all the assets it plans to buy.

Interest-Rate Cuts

Policy makers have reduced the U.K.’s main interest rate from 5.75 percent to an all-time low of 1 percent since the end of 2007, and will cut it to 0.5 percent on March 5, according to the median forecast of 60 economists surveyed by Bloomberg News. Britain’s economy shrank 1.5 percent in the fourth quarter of last year, the biggest contraction since 1980, as consumer spending declined.

Chancellor of the Exchequer Alistair Darling suggested in an interview in the Daily Telegraph yesterday that the central bank could start quantitative easing, or printing money to buy bonds, as soon as this week.

“If the BOE’s plan doesn’t work, the funk we’re in will last considerably longer,” said Richard McGuire, senior fixed- income strategist at Royal Bank of Canada in London. “What’s at stake here is whether recession turns into depression.”

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

Suda Says BOJ Must Show Readiness to Take Bold Steps

By Lily Nonomiya

March 4 (Bloomberg) -- Bank of Japan board member Miyako Suda said the central bank should signal that it’s prepared to take “bold” measures to counter the deepening recession.

“When uncertainty is high, it’s important to gain the trust of markets by strongly pledging a readiness to take bold policy steps that may even stray from conventional rules,” Suda said today in a speech in Kyoto, western Japan. “Japan’s economy has fallen from a cliff into a deep, foggy valley.”

At the same time, Suda said she opposed the central bank’s decision last month to buy corporate bonds from lenders because market hasn’t deteriorated enough to warrant taking on the risk of holding the securities. With the key interest rate near zero, economists say the bank may expand its asset purchases to help companies get access to funds as credit becomes more scarce.

“The BOJ appears to be ready to gear up, but only at a gradual pace,” said Jan Lambregts, head of Asian research at Rabobank International in Hong Kong. “The problem is not so much the framework itself, but the limited size of these measures, in particular when compared to the scale of the downturn.”

Bank of Japan Governor Masaaki Shirakawa said yesterday that the bank’s purchases of corporate bonds and commercial paper are an “exceptional step” to make it easier for companies to borrow as credit markets dry up and banks grow reluctant to lend. The country’s stock market slump is depleting the value of banks’ share holdings, reducing their ability to meet an increase in demand for loans.

Market Tensions

“Should stocks decline further, we could see market tensions increase toward the end of the fiscal year,” said Suda, 60, the longest-serving board member. “We can’t make any assumptions about our financial markets amid the ongoing unstable movements in stocks.”

The Nikkei 225 Stock Average rose 0.4 percent as of 1:25 p.m. in Tokyo, reversing declines of as much as 1.7 percent. The Nikkei has lost 18 percent this year, a drop that Finance Minister Kaoru Yosano said the government can’t ignore. Last week he ordered a study into ways to boost the share market.

Shirakawa said yesterday that the world’s second-largest economy is worsening faster than the bank expected and the policy board will keep looking for ways to counter the slump.

Reports last week showed output and exports plunged at a record pace in January, adding to evidence that Japan is heading for its worst recession in 60 years. Companies including Toyota Motor Corp. have fired thousands of workers and cut production to cope with falling sales.

Corporate Bonds

The central bank today offered to buy 150 billion yen ($1.5 billion) in corporate bonds from lenders as part of a program unveiled last month to purchase 1 trillion yen of securities that mature in a year or less. Suda was the only board member to oppose the move.

“I don’t think the state of the corporate bond market fulfills conditions that warrant bond purchases,” she said today, adding that purchasing debt of up to one year of maturity will only have a “limited effect on smoothing out corporate financing.”

Companies can raise funds by selling commercial paper instead of bonds, Suda said. Policy makers need to be mindful about the amount of risk they are shouldering by buying such assets, the former economics professor said, adding that excessive intervention in markets by central banks could distort the allocation of resources in the economy.

‘Thinking Hard’

The central bank last month extended programs to buy commercial paper and provide unlimited collateral-backed loans to financial institutions and said it will start purchasing shares owned by banks.

“The BOJ must be thinking hard on the next easing move,” said Takuji Okubo, a senior economist at Merrill Lynch & Co. in Tokyo. The policy board is likely to “modestly expand the scope of its private credit purchase program,” he said.

Okubo said there’s a “high possibility” the bank will increase its monthly purchases of government bonds and may buy a wider range of commercial paper and corporate bonds.

In anticipation companies will demand more funds before they close their books on March 31, Finance Minister Yosano yesterday said the government will use some of its foreign reserves to help funnel low-interest loans to companies.

Toyota’s financial-services unit is in talks to receive aid from the state-run Japan Bank for International Cooperation, the company said yesterday. Honda Motor Co. may also seek loans from JBIC, spokeswoman Akemi Ando said today.

To contact the reporter on this story: Lily Nonomiya in Kyoto at lnonomiya@bloomberg.net

Australian Economy Shrinks for First Time in 8 Years

By Jacob Greber

March 4 (Bloomberg) -- Australia’s economy unexpectedly shrank in the fourth quarter for the first time in eight years as exports and housing slumped, increasing pressure on the central bank to resume cutting interest rates.

Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for 0.2 percent growth.

The nation’s currency dropped on concern Australia is now in its first recession in two decades. Central bank Assistant Governor Malcolm Edey, part of a board that slashed the benchmark interest rate by a record four percentage points to a 45-year low of 3.25 percent before pausing this week, said today the economy faces more “short-term weakness.”

“The downturn has arrived,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney. “The global recession will bear down on Australia’s economy in 2009. There will be more Reserve Bank rate cuts later in the year.”

The Australian dollar dropped to 63.32 U.S. cents at 1:40 p.m. in Sydney from 63.78 cents before today’s report, taking the currency’s decline in the past 12 months to 32 percent. The benchmark S&P/ASX 200 stock index slid 1.4 percent, and is now down 15 percent this year after slumping 41 percent in 2008.

The Australian economy grew 0.3 percent in the fourth quarter from a year earlier to complete 17 years of expansion, today’s report showed. Economists tipped 1.2 percent growth.

Housing, Exports

Housing investment fell 1.2 percent, detracting 0.1 percentage points from growth in the quarter. Exports dropped 0.8 percent, cutting 0.2 percentage points from GDP. A rundown in inventories detracted 1.4 percentage points. Consumer spending made no contribution to growth, today’s report showed.

“There are no quick fixes to the global recession, and many of its effects are yet to be fully felt,” Treasurer Wayne Swan said in Canberra today.

To stoke household spending, the government distributed A$8.9 billion ($5.6 billion) in cash handouts in December, helping fuel a 3.8 percent surge in retail sales in that month. Prime Minister Kevin Rudd said last month he will spend another A$42 billion on infrastructure and bonuses to families.

The U.S. economy shrank at a 6.2 percent annual pace in the fourth quarter, the biggest contraction since 1982. Japan’s economy contracted at the fastest pace since the 1974 oil shock. Exports from China, Australia’s biggest trading partner, slumped 17.5 percent in January, the most in almost 13 years.

Economies in the U.K., Germany, France, Italy and Canada also contracted during the December quarter.

Global Rates

Central banks around the world have slashed borrowing costs to try to protect their economies.

The U.S. Federal Reserve’s benchmark rate is close to zero, the Bank of England’s is the lowest since its creation in 1694 and the European Central Bank will probably trim its main rate on March 5 to 1.5 percent, the lowest level in 10 years of setting policy, according to economists.

“The Australian economy has not experienced the sort of large contraction seen elsewhere,” central bank Governor Glenn Stevens said yesterday after keeping the overnight cash rate target unchanged for the first time in seven months. The bank’s earlier rate cuts and government spending will provide “significant support” to growth, he said.

That boost will be needed as mining companies Rio Tinto Group and BHP Billiton Ltd. renegotiate contracts for iron ore destined for China amid expectations prices will fall. The world’s biggest miners secured price increases last year of as much as 97 percent.

Commodity Prices

Commodity exports from Australia, the world’s biggest shipper of iron ore, coal and wool, are forecast to decline in fiscal 2010 for the first time in six years, the Australian Bureau of Agricultural and Resource Economics said yesterday.

Sales may drop 17 percent from a record to A$162 billion in the 12 months ending June 30, 2010, the bureau said.

“The international deterioration has been so abrupt that it won’t be possible to avoid some short-term weakness here,” Assistant Governor Edey said today. This year “is shaping up as a very difficult year for the global economy.”

Traders forecast a 72 percent chance of a half-point reduction in the central bank’s benchmark rate when policy makers meet next on April 7, a Credit Suisse Index based on swaps trading showed at 1:36 p.m. in Sydney today.

Car Sales Drop

“Policy makers still have a lot more work to do,” said Ben Dinte, an economist at Macquarie Group Ltd. “The Australian economy is by no means immune from the sharp downturn globally. Investor and consumer confidence remain very fragile.”

Manufacturing contracted at a record pace last month as companies received fewer orders, fired workers and cut production, a report showed this week. Separate reports today showed demand for services shrank last month and sales of new cars slumped 21.9 percent from a year earlier.

The chain price index, a measure of retail prices, climbed 8.5 percent in the fourth quarter from a year earlier, today’s report showed.

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

China Manufacturing Index Rises on Stimulus Spending

By Li Yanping and Nipa Piboontanasawat

March 4 (Bloomberg) -- A Chinese manufacturing index climbed for a third month, adding to evidence that a 4 trillion yuan ($585 billion) stimulus package is pushing the world’s third-biggest economy closer to a recovery.

The Purchasing Manager’s Index rose to a seasonally adjusted 49 in February from 45.3 in January, the China Federation of Logistics and Purchasing said today in an e-mailed statement. A reading below 50 indicates a contraction.

Stocks rose after output and new orders expanded for the first time in five months. Chinese Premier Wen Jiabao may announce extra measures to reverse the nation’s economic slide at the annual meeting of the National People’s Congress starting in Beijing tomorrow.

“There are more noticeable signs that China’s economy is bottoming out,” said Zhang Liqun, an economist at the State Council Development and Research Center.

The Shanghai Composite Index rose 2.4 percent as of 10:47 a.m. local time.

While manufacturing contracted for a fifth straight month as the worst financial crisis since the Great Depression cut exports, the PMI is up from a record low of 38.8 in November.

Surging loans, growth in retail sales in January, and an increase in electricity output and consumption from the middle of last month are signs that government measures have shown “preliminary results,” according to Premier Wen.

Recovery ‘Very Likely’

A recovery in the first half is “very likely,” central bank Vice Governor Su Ning said yesterday.

Industrial-output growth in January and February may be higher than in November and December, Zhang forecast. Still, he cautioned that “seasonal factors” may have boosted the output and new-order indexes, which could fall again.

“The government’s stimulus investment has finally started to take effect,” said Xing Ziqiang, an economist at China International Capital Corp. in Beijing. “However, a recovery may be short-lived as export demand may get worse in the second half and the outlook for consumption is uncertain.”

The manufacturing index likely got a boost from factories resuming production after a Chinese Lunar New Year holiday in January, Xing said.

The output index jumped to 51.2 from 45.5 in January and the new-order index climbed to 50.4 from 45.

Export Orders

A measure of export orders rose to 43.4 from 33.7. The employment index rose to 46.1 from 43, the first increase in six months.

The premier may unveil a record 950 billion yuan budget deficit for this year to cover government spending on the economy and welfare, according to the China Business Journal and Wen Wei Po newspapers.

The slowdown has triggered speculation that the government will increase the stimulus package announced in November. An unidentified planning-agency official said today that more will be spent, Reuters reported.

Officials have indicated 8-10 trillion yuan of “government-sponsored investment” is possible, Stephen Green, Shanghai-based head of China research at Standard Chartered Bank Plc said yesterday.

A separate purchasing managers’ index, released on March 2 by CLSA Asia-Pacific Markets, showed manufacturing contracted for a seventh month in February.

“Manufacturing activities may only start to recover from March after more projects break ground in spring,” said Sun Mingchun, an economist at Nomura Holdings Ltd. in Hong Kong. “Economic growth may start to pick up from the second quarter onwards.”

Steel Glut

A glut of steel at ports in China, the world’s biggest maker of the alloy, shows mills were too quick to boost output on expectations the stimulus package unveiled in November would spur demand, according to Bank of Nova Scotia.

Steel stockpiles at Shanghai’s main port have jumped 44 percent this year to 2.1 million metric tons on Feb. 27, the highest since Bloomberg began compiling the data in June 2006.

Tongling Nonferrous Metals Group Co., China’s second- biggest copper smelter by output, said Feb. 27 that profit tumbled last year after prices slumped in the fourth quarter.

Lenovo Group Ltd., the world’s fourth-biggest personal- computer maker, said Feb. 25 that it will cut 450 jobs in China to reduce costs after demand fell in the U.S. and China.

20 Million Jobs

China’s government said last month that 20 million migrant workers had lost their jobs because of the slowdown.

Jia Qinglin, a member of the Communist Party’s Politburo, urged a “vigorous employment policy” in his speech yesterday at the opening meeting of the Chinese People’s Political Consultative Conference.

“China will pick up in the second half of this year as the stimulus package” begins working, Vivek Tulpule, the chief economist at London-based Rio Tinto Group, said yesterday in Canberra, Australia. Rio is the world’s third-biggest mining company.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net; Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net