Babcock Infrastructure Resumes Australia Coal Loading

By Angela Macdonald-Smith

March 12 (Bloomberg) -- Babcock & Brown Infrastructure Group, owner of Australia’s second-biggest coal-export terminal, resumed loading ships today at the Dalrymple Bay port in Queensland after a stoppage caused by a tropical cyclone.

“The first vessel has berthed this morning, with the second about to berth, so we are back to loading ships,” Greg Smith, general manager of operations at the unit of Babcock Infrastructure that owns the port, said today by e-mail. BHP Billiton Mitsubishi Alliance, which owns the neighboring Hay Point terminal, is yet to restart loading, BHP said.

Australian authorities evacuated resort islands off Queensland’s coast during the weekend and put emergency services on alert as Tropical Cyclone Hamish brought damaging winds and high seas. The storm has since abated to a low weather system and is continuing to weaken as it moves northwest back up the Queensland coast, the Bureau of Meteorology said.

Rail deliveries of coal to both Dalrymple Bay and Hay Point, south of Mackay, remain disrupted after a train accident earlier in the week.

Coal rail deliveries, halted March 10 after a train derailment at rail company QR’s Coppabella yard in central Queensland, resumed yesterday afternoon before being stopped again, Smith said in an earlier telephone interview. The rail system supplying the port may be out of action until about 10 p.m. local time tonight, Smith said.

Damaged Locomotives

Rail deliveries to Hay Point are “restricted,” Samantha Evans, a spokeswoman for Melbourne-based BHP, said in an e-mail.

The Coppabella yard was open from about 7 p.m. until midnight yesterday to allow some trains to pass through, and was closed again for the removal of damaged locomotives and wagons, QR spokesman Garry West said in e-mailed comments today.

Work at the yard, the main staging point for coal trains in the regional rail system, may continue after it reopens, potentially causing further delays, West said.

At Gladstone, further to the south of Queensland, coal shipping is back to normal and rail deliveries are continuing, Evans said.

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

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Oil Rises as Traders Close Bets on Decline, Possible OPEC Cut

By Christian Schmollinger

March 12 (Bloomberg) -- Crude oil rose for the first day in three as traders closed out bets that prices would fall amid speculation OPEC may cut output for a fourth time.

Investors purchased contracts to profit from so-called short sales after crude dropped 7.4 percent yesterday as U.S. inventories showed a bigger-than-expected gain. Algerian Energy Minister Chakib Khelil said yesterday OPEC is likely to reduce output again at this weekend’s meeting. Other ministers have called for the group to halt reductions.

“Crude has sold off quite a bit so people are covering their positions,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. Traders are also buying “as insurance if there is an OPEC announcement of a cut. But if OPEC continues saying they want to see how compliance is, we going to see it drift lower.”

Crude oil for April delivery rose as much as 83 cents, or 2 percent, to $43.16 a barrel in electronic trading on the New York Mercantile Exchange. It was at $42.93 a barrel at 3:34 p.m. Singapore time. Yesterday, April futures fell $3.38 to settle at $42.33 a barrel, the lowest since March 3. Prices are down 3.7 percent this year.

U.S. supplies increased 749,000 barrels to 351.3 million barrels last week, the Energy Department said yesterday. Stockpiles were forecast to rise by 250,000 barrels, according to the median of analyst estimates in a Bloomberg News survey. Refineries ran at 82.7 percent of capacity, down from 85 percent a year earlier, as demand slipped.

Gasoline Supplies

Gasoline inventories declined 2.99 million barrels to 212.5 million barrels in the week ended March 6, the department said. Stockpiles were forecast to fall by 1 million barrels, according to the median of analyst estimates in the Bloomberg survey.

Distillate stockpiles rose 2.1 million barrels to 145.4 million, the report showed. A 200,000-barrel gain was forecast.

OPEC has reduced daily production targets by 4.2 million barrels since September. Ministers will meet in Vienna on March 15 to discuss whether to make further cuts.

“The market expects a reduction and we have to reduce, otherwise prices will fall,” Algerian Minister Khelil said in Algiers yesterday. “There will be a debate in Vienna, but I think the consensus will be to seek stability of prices through a reduction.”

Algeria’s call for further cuts differs from the view of Qatari Oil Minister Abdullah bin Hamad al-Attiyah, who said in an interview in Doha this week that “we cannot discuss another cut until we see the compliance at 100 percent,” for previous pledged reductions.

OPEC Output

The 11 OPEC members with quotas, all except Iraq, produced 25.39 million barrels a day in February, down from 29.22 million barrels a day in September, according to a Bloomberg News survey of oil companies, producers and analysts. The group agreed to pump 24.845 million barrels a day starting Jan. 1.

“The market had priced in a cut so if they don’t cut they will be slightly bearish,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “But overall, I think they’ll be successful at defending the oil price floor. So far the cuts have been quick and deep.”

Brent crude oil for April settlement rose as much as 90 cents, or 2.2 percent, to $42.30 a barrel on London’s ICE Futures Europe exchange. It was at $42.09 a barrel at 3:33 p.m. Singapore time. The contract yesterday declined $2.56, or 5.8 percent, to end the session at $41.40 a barrel.

Economic Impact

The continued economic contraction in consuming countries is weighing on oil prices.

Japan’s gross domestic product shrank an annualized 12.1 percent in the three months ended Dec. 31, less than the 12.7 percent reported last month, the Cabinet Office said today in Tokyo. The median estimate of economists was for a 13.4 percent decline. The country is the third-largest oil consumer.

U.S. Energy Secretary Steven Chu said he’ll caution OPEC ministers about higher oil prices when he talks with them before their next meeting.

“If the cost of petroleum increases, that will create a huge strain on the ability of the world’s economy to recover,” Chu said after testifying at a Senate hearing in Washington yesterday.

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

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Yen May Weaken to 110 Per Dollar by Year-End, FX Shonan Says

By Kazumi Miura

March 12 (Bloomberg) -- Japan’s yen may weaken to 110 per dollar in 2009, after recording the biggest monthly drop in 13 years in February, said Masamichi Nomura, director at FX Shonan Investment Group.

The currency depreciated as much as 10.11 yen per greenback in February, the most since August 1995, when Japan bought dollars on the market to weaken the yen. This year’s drop indicates a “dramatic change” in supply and demand, because it happened without intervention and as Japanese companies brought home profits toward the fiscal year’s end, Nomura said.

With the global recession intensifying, “Japanese companies can’t expect overseas subsidiaries, which may be posting losses, to send much profit back home,” Nomura said. Japan also recorded a trade deficit every month since October, leaving companies with less cash to invest abroad, he said.

Japanese authorities stepped into the market to sell 817.4 billion yen ($8.5 billion) in August 1995, according to finance ministry data.

The world’s second-biggest economy posted its first current-account deficit in 13 years in January, while the trade shortfall widened to the most in more than two decades.

More large-scale funds have been set up in Japan this year to invest in foreign bonds, which may also accelerate yen sales, Nomura said.

Nomura Asset Management Co. started the U.S. High Yield Bond Funds in January with 128.7 billion yen in assets, the biggest since 2007.

The yen is also set to weaken further due to Japan’s shrinking economy and rising political turmoil, FX Shonan’s Nomura said.

The economy contracted at the fastest pace since 1974 last quarter, the government said today in Tokyo. Gross domestic product shrank an annualized 12.1 percent in the three months ended Dec. 31, the Cabinet Office said.

To contact the reporter on this story: Kazumi Miura in Tokyo at Kmiura1@bloomberg.net

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Global Confidence Drops as Economies Crumble, Bailouts Needed

By Shamim Adam

March 12 (Bloomberg) -- Confidence in the world economy dropped in March as the slump proved deeper than forecast and the Obama administration launched new rescues of financial institutions, a survey of Bloomberg users on six continents showed.

The Bloomberg Professional Global Confidence Index fell to 5.95 this month from 8.5 in February. A reading below 50 means pessimists outnumber optimists. Sentiment about Europe and the U.S. slid, while respondents in Asia were less pessimistic about their region, the survey showed.

The global economy may shrink for the first time since World War II, with trade collapsing by the most since the Great Depression, the World Bank said this month. The erosion of confidence is exacerbating the decline; U.S. banking stocks are down 26 percent since the last survey despite a third effort by the government to help Citigroup Inc.

“The financial crisis and the economic recession are feeding on each other, and that’s adding to pessimism,” said Martin van Vliet, an economist at ING Bank in Amsterdam who took part in the survey. “We’re still in no man’s land waiting for stimulus packages to take effect. The light at the end of the tunnel is still far away.”

Reports this week indicate the global economy is weakening further. German factory orders fell 38 percent in January from a year earlier, the government said yesterday, while orders for Japanese machinery retreated for a fourth month.

A measure of U.S. participants’ confidence in the world’s largest economy dropped to 5.2 from 8.6, the survey showed. Sentiment declined in most other markets, with the index for Italy dropping to 5.5 from 9.3. The gauge for Western Europe fell to 8.2 from 9.1.

Obama’s Stimulus Plan

The survey of more than 3,600 Bloomberg users was conducted between March 2 and March 6. Since the previous survey, President Barack Obama signed into law a $787 billion stimulus package, the European Central Bank and the Bank of England cut rates to record lows and more Americans filed for jobless benefits than at any time since 1982.

European governments have committed more than 1.2 trillion euros ($1.5 trillion) to protect their banking systems and leaders pledged to spend a combined 200 billion euros to try to lift their economies out of the worsening slump. Asia-Pacific nations have announced more than $700 billion in such plans.

The measures have failed to boost confidence that they will spur a recovery in growth. Global stock markets have lost $5.9 trillion this year, after about $28.7 trillion was wiped from the value of world equities in 2008.

Citigroup Shares

The U.S. government, which has channeled $45 billion into Citigroup, agreed to a third rescue on Feb. 27 that will give it a 36 percent stake in the lender. Once the world’s biggest bank by market value, Citigroup fell below $1 in New York trading last week for the first time.

Citigroup shares jumped 38 percent in New York on March 10 after Chief Executive Officer Vikram Pandit said the bank was profitable in January and February and is having its best quarter since the third quarter of 2007.

Bank of America Corp. has also received $45 billion of bailout funds, while the government committed more money to avoid a collapse of American International Group Inc.

“There’s still concern about failures” of banks, said Jonathan Basile, an economist at Credit Suisse Holdings USA Inc. in New York, a survey participant. “If any of these policy actions don’t work, given the environment, we have to expect more to be done in any way, shape or form.”

Job Cuts

Confidence also worsened in the U.S. as employers eliminated 651,000 jobs last month and the unemployment rate rose to 8.1 percent, the highest level in more than a quarter century. More than 103,000 individuals and companies in the U.S. filed for bankruptcy in February, according to a private report.

“The same old pressures of lacking corporate demand, waning consumer demand are really driving the bus in the U.S. downturn,” said Guy LeBas, chief economist at Janney Montgomery Scott LLC in Philadelphia, and a survey participant. “Most of the world is following suit.”

The situation isn’t better in Western Europe. Manufacturing orders in Germany, its biggest economy, collapsed in January as exports plunged. They dropped almost two fifths from a year earlier and 8 percent on the month, four times as much as economists forecast.

“The annual slump is absolutely catastrophic,” said Alexander Koch, an economist at UniCredit MIB in Munich. “The extent of declines is terrifying.”

ECB Outlook

The ECB last week said the euro-region’s economy may shrink as much 3.2 percent this year, three times worse than expected. It lowered its main refinancing rate by 50 basis points to 1.5 percent on March 5 and wouldn’t rule out more reductions.

In Latin America, confidence rose to 11.6 in March from 10.4 percent last month, while the index for Asia increased to 12.7 from 11.6. The reading for Japan fell to 4.5 from 5.

Respondents around the world still expect short-term interest rates to fall, the survey showed.

The majority of Bloomberg users from Mexico City to Madrid became more pessimistic on stocks, the survey showed. The MSCI World Index has dropped 14 percent in the past month.

The U.S. dollar may rise in the next six months against the world’s most active currencies, with the index climbing to 53.4 compared with 50.2 in February, the survey showed.

Users in Japan are now almost evenly divided on the direction of the yen against the dollar compared with February, when the majority expected an appreciation. U.K. participants expect the pound to weaken against its U.S. counterpart.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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Yen Will Weaken to Five-Month Low Against Dollar, Goldman Says

By Candice Zachariahs

March 12 (Bloomberg) -- The yen will fall to a five-month low versus the dollar and weaken against the euro as Japan’s currency loses its appeal as a refuge and the economy contracts 6.1 percent, Goldman Sachs Group Inc. said.

The currency will decline 7.2 percent to 105 per U.S. dollar and weaken by 8.5 percent to 136.5 per euro, the bank said, revising earlier three-month forecasts for 90 and 117, respectively. The yen rose to 87.13 per dollar on Jan. 21, the strongest since 1995, as pressure to repay low-cost loans in Japan that had funded higher-yielding investments escalated after the collapse of Lehman Brothers Holdings Inc. in September.

“In the near-term, the risks are still skewed towards further yen weakness beyond our new three-month forecast of dollar-yen,” a team of Goldman Sachs analysts led by Thomas Stolper in London wrote in a note yesterday. “In conjunction with doubts about whether or not the correlation between the yen and equity markets would be maintained, the macro data has provided evidence that the Japanese economy contracted sharply at the end of last year.”

The yen will trade at 100 per dollar in six and 12 months versus earlier expectations for it to strengthen to 90, Goldman Sachs said. Against the euro, the currency will trade at 140 yen and 145 yen in six months and one year, the analysts wrote.

The yen fell 0.1 percent to 97.37 per dollar as of 8:21 a.m. in Tokyo and was little changed at 124.85 per euro, compared with late yesterday in New York. It last traded at weaker than 105 against the dollar on Oct. 6.

Japan’s currency was the best performing of the 16 most- traded currencies against the greenback last year. It has fallen against eight of the 16 since the start of 2009.

Economy Shrinking

The world’s second-largest economy shrank at an annual 12.7 percent pace in the fourth quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.

Expectations for the yen to strengthen in the next six months plunged after Japan’s economy contracted last quarter, a survey of Bloomberg users showed.

“Given the macro backdrop, there is little doubt that a 14 percent overvalued yen versus the dollar is a challenge for exporters in particular,” the Goldman analysts wrote. “Purely on the basis of financial conditions, therefore, we see a risk that the yen converges faster to fair value,” in the area of 115 yen per dollar, the bank said.

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

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Philippine Peso May Rise 3%, AIG’s Son Keng Po Says

By Lilian Karunungan

March 12 (Bloomberg) -- The Philippine peso may gain 3 percent in the “near term” as central bank data will probably show remittances from overseas held up in January, said Wilfred Son Keng Po, a managing director of AIG Global Investment Corp.

The currency, the second-worst performer in the past month among Asia’s 10 most-active currencies outside Japan, may advance to 47 against the U.S. dollar, said Son Keng Po, a regional stock portfolio manager at AIG Global, which oversees $574 billion in assets worldwide as of end-2008. The peso fell to a three-month low last week on speculation the March 16 report will show falling inflows from workers abroad.

“Personally, I surveyed a lot of the banks,” Son Keng Po said in an interview from Manila. “Most of the banks are actually reporting very strong January remittance numbers. My thinking is that the January numbers might be a blip. February should set the tone of how remittances would be for the rest of the year.”

The peso, which lost 2.3 percent in the past month, rose 0.1 percent to 48.393 as of 10:27 a.m. in Manila, according to Tullett Prebon Plc. Remittances account for about 10 percent of the Philippines’ gross domestic product and help fuel consumer spending, the source of 64 percent of the $144 billion economy.

The central bank reported on Feb. 16 that money sent home by Filipinos abroad grew 0.8 percent in December from a year earlier, the least since April 2006. Banks were closed in the Philippines between Dec. 24 and Jan. 5, which may affect the data, Son Keng Po said.

“The peso might still strengthen near term,” Son Keng Po said. “There might be some pent-up remittances that were given in January instead.”

Stronger Domestic Economy

Barclays Capital, the world’s third-largest foreign- exchange trader, expects the peso will fall to 49 in the next three months before rising to 47.50 by the end of the year as falling import costs bolster the trade balance.

“Exports are weakening this year and we’re also looking for remittances to fall but the decline is going to be more than offset by the impact of weaker commodity prices,” said Nicholas Bibby, an economist in Singapore at Barclays.

More than 8 million Filipinos living abroad sent home a record $16.4 billion in 2008, 14 percent more than the previous year, according to the central bank. That amount may grow at a slower pace of 10 percent or fall 10 percent this year as global economies slump, said Son Keng Po. The last time remittances shrank was in 2001.

Son Keng Po is currently “overweight” on Philippine stocks relative to their weighting on a regional benchmark index and holds telephone and utility companies. He said the peso will also be supported by the nation’s “stronger domestic economy.”

The International Monetary Fund forecasts Philippine economic growth will slow to 2.25 percent this year. Singapore, Taiwan, Hong Kong and Japan are already in recession. AIG Global is a unit of New York-based American International Group Inc.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net

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Korea Won Falls, Ending 4-Day Decline, on Importers; Bonds Gain

By Kim Kyoungwha

March 12 (Bloomberg) -- South Korea’s won fell for the first time in five days on speculation importers are taking advantage of this week’s gains to pay bills. Bonds rose on optimism that the central bank will buy debt from the market.

The won extended its decline after the Bank of Korea left its seven-day repurchase rate at a record-low 2 percent, following six cuts since early October. The currency climbed 6.6 percent against the dollar over the last four trading days, paring this year’s loss to 15 percent, as a rally in global stocks helped revive demand for emerging-market assets.

“There are some dollar purchases by banks and companies after the won’s recent rally,” said Jo Hyun Suk, a currency dealer with Korea Exchange Bank in Seoul. “The central bank’s move had little impact on the foreign-exchange market and the undercurrent is still cautious.”

The won weakened 1.7 percent to 1,496.50 per dollar as of 3 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Kospi stock index was 0.1 percent higher and global funds sold more local shares than they bought after two days of net purchases, according to Korea Exchange.

“There seems to be buying of dollars by importers but the drop in the won may be limited, depending on the performance of stocks and foreign purchases,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul.

The currency’s drop today was also linked to Royal Philips Electronics NV’s sale of its stake in LG Display Co., which increased demand for dollars, Cho of Korea Exchange said. Philips sold its remaining 13.2 percent stake in Seoul-based LG Display at 25,500 won a share yesterday.

Economic Forecast

Twelve of 15 economists surveyed by Bloomberg News before today’s interest-rate decision forecast the central bank would announce a reduction of at least of quarter of a percentage point to help the economy.

South Korea will probably “remain in recession due to the persistent weakness of both domestic and overseas demand,” the central bank said today. It estimated that the current account swung to a surplus in February after a shortfall in January.

Trade Minister Lee Youn Ho called the won at 1,500 “absurd” given the improving trade balance in a meeting with business leaders in Seoul, MoneyToday reported today.

The Korean currency will strengthen to 1,300 won a dollar by the end of 2009, according to the median forecast of 28 strategists surveyed by Bloomberg. It reached an 11-year low of 1,597 on March 6.

Tourism Boom

The currency’s weakness is helping draw tourists, notably from Japan after the yen rose 61 percent versus the won in the past year. Almost a quarter of a million Japanese visited in January, 55 percent more than a year earlier, according to the Korea Tourism Organization.

Bank of America Corp., the largest U.S. bank by assets, forecast the won will jump to 13.8 against the yen in three months. Standard Chartered Bank Plc, a London-based bank that makes most of its profit in Asia, predicted 13.07 by Dec. 31. The won reached a record low of 16.42 on March 3 and recently traded at 15.31.

Local-currency bonds rose as investors bet the central bank will step in to buy debt as the government increases public spending.

Bank of Korea Governor Lee Seong Tae said he expects the government to propose “a significant” extra spending package, financed through bond sales. The central bank will watch the effect of debt sales on financial markets as it decides whether to purchase bonds, he added.

The yield on three-year government bonds fell seven basis points to 3.62 percent and the five-year yield fell 13 basis points to 4.40 percent, according to Korea Financial Investment Association.

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

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Dollar May Fall to 95 Yen, $1.33 per Euro: Technical Analysis

By Yasuhiko Seki

March 12 (Bloomberg) -- The dollar may weaken to 95 yen and $1.33 per euro as momentum charts show “sell” signals for the greenback, Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo.

The dollar may extend its decline to 95 yen, or 38.2 percent below the peak of its rally from this year’s low in January, said Osamu Takashima, chief foreign-exchange analyst at Bank of Tokyo-Mitsubishi, citing a so-called Fibonacci chart. Fibonacci analysis indicates the dollar will drop to $1.33 per euro, Takashima said.

“The dollar finished below its opening level against the yen for a second day and below the five-day moving average, suggesting a short-term downward trend,” Tokyo-based Takashima wrote in a research report today.

The dollar traded at 96.23 yen as of 1:01 p.m. in Tokyo, from 97.27 late yesterday in New York. It touched 95.96, the weakest level since Feb. 24. The greenback was at $1.2832 per euro from $1.2837 late yesterday.

Daily momentum charts such as the stochastic oscillator and moving average convergence/divergence are also now showing sell signals for the dollar, Takashima said.

A stochastic oscillator chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall. MACD charts can indicate whether a price shift is a change in trend or a short-term deviation by comparing moving averages based on nine-, 12- and 26-day periods.

The greenback climbed to 99.68 yen on March 5, the strongest in almost four months, after touching its lowest in more than 13 years at 87.13 yen on Jan. 21.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net.

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Asia Currencies: Rupiah, Singapore Dollar Advance; Won Drops

By Kim Kyoungwha and Patricia Lui

March 12 (Bloomberg) -- Indonesia’s rupiah and Singapore’s dollar led Asian currencies higher on speculation improving finances at U.S. banks will bolster demand for emerging-market assets. South Korea’s won slid for the first time in five days as recent gains prompted importers to pay bills.

Seven of Asia’s 10 most-traded currencies excluding the yen strengthened versus the U.S. dollar after JPMorgan Chase & Co. and Citigroup Inc. in the past two days said they were profitable in January and February. The ICE’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, declined for a third day.

“We can expect dollar-Asians to trade lower this morning due to better risk appetite,” said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore. “The dollar was weaker against major currencies on improved risk appetite and dollar-Asians will follow.”

The rupiah advanced 0.4 percent to 11,983 per dollar as of 11:04 a.m. in Jakarta, according to data compiled by Bloomberg. The Singapore dollar climbed 0.6 percent to S$1.5292 and Malaysia’s ringgit was up 0.1 percent at 3.6895.

The yen strengthened to 96.30 per dollar in Tokyo from 97.27 late yesterday in New York after a government report showed Japan’s economy shrank less than analysts expected, easing concern the recession will worsen.

The Cabinet Office said gross domestic product shrank an annualized 12.1 percent in the three months ended Dec. 31, less than the 12.7 percent reported last month. The median estimate of economists surveyed by Bloomberg was for a 13.4 percent contraction.

‘Capital Flows’

The rupiah, which has dropped 9 percent versus the dollar so far this year, strengthened this week as global funds bought more Indonesian shares than they sold in the last four trading days. Overseas investors added to their holdings of local- currency government bonds at a March 10 auction of 1.83 trillion rupiah ($153 million) of notes, according to Rully Nova, a currency trader and analyst at PT Bank Himpunan Saudara.

“There are capital inflows to buy government bonds,” said Nova, who is based in Jakarta. “The gains in the rupiah are going to be short-lived. Dollar liquidity is still tight in Indonesia.”

Gains in the Taiwan dollar may be limited amid speculation policy makers will intervene to protect exporters. Central bank Governor Perng Fai-nan said today that order will be maintained in the market when there are trading irregularities. The currency has dropped 7 percent against the U.S. dollar in the past six months, compared with a 25 percent plunge in the won.

Taiwan’s dollar rose 0.1 percent to NT$34.467 versus the greenback today in Taipei, while the won slid 1.2 percent to 1,488.20 in Seoul.

No Rate Cut

The won climbed 6.6 percent against the dollar over the last four trading days, paring this year’s loss to 15 percent, as a rally in global stocks bolstered risk appetite.

The Bank of Korea unexpectedly left its benchmark interest rate at a record-low 2 percent today, following six cuts since early October. Twelve of 15 economists surveyed by Bloomberg News before today’s decision forecast the bank would announce a reduction of at least a quarter of a percentage point to help the economy.

Elsewhere, the Philippine peso rose 0.2 percent to 48.33 per dollar and the Indian rupee added 0.6 percent to 51.5625. India’s financial markets were closed the last two days for public holidays. China’s yuan and the Vietnamese dong were both little changed at 6.8393 and 17,484.5 respectively.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net. Bob Chen in Hong Kong at bchen45@bloomberg.net

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Yen, Dollar Rise as Global Recession Spurs Demand for Safety

By Yasuhiko Seki and Ron Harui

March 12 (Bloomberg) -- The yen and the dollar strengthened against the euro on speculation the deepening global recession will increase demand for the two currencies as a refuge.

The yen and the greenback both gained versus higher- yielding currencies such as the Australian and New Zealand dollars after a Japanese report confirmed the world’s second biggest economy shrank at the fastest pace since 1974. The euro fell for the first time in three days against the dollar before a German report that economists say will show industrial production dropped for a fifth month, giving the European Central Bank more room to cut interest rates.

“The Japanese report was certainly bad, with some of the data suggesting the economy will keep deteriorating this quarter,” said Yuji Saito, head of the currency group in Tokyo at Societe Generale SA, France’s third-largest bank. “Investors are still risk-averse. This has led to buying of the yen.”

The yen climbed to 122.87 versus the euro as of 7:41 a.m. in London from 124.86 late yesterday in New York. The dollar rose to $1.2780 per euro from $1.2837. The yen advanced to 96.22 per dollar from 97.27.

Japan’s currency gained 2.6 percent to 62.08 against the Australian dollar and rose 1.6 percent to 49.16 versus the New Zealand dollar.

Economy Shrinks

The yen gained versus all 16 of the most-traded currencies after the Cabinet Office said Japan’s gross domestic product shrank an annualized 12.1 percent last quarter. Japanese factory output and exports slumped by records in January and Toyota Motor Corp., the nation’s biggest automaker, said it will cut production by more than half this quarter.

Demand for the safety of the yen and the dollar increased as Japan’s Nikkei 225 Stock Average fell 2.4 percent and the MSCI Asia Pacific Index of regional shares lost 1.1 percent. Stocks in the U.S. and Europe rose yesterday after JPMorgan Chase & Co. joined Citigroup Inc. in saying it was profitable in January and February.

“While recent news flows about U.S. banks may signal a potential bottoming out of the banking crisis, it is still premature to judge that the financial crisis is over,” said Shinya Furue, an economist at Norinchukin Research Institute Ltd. in Tokyo. “It is difficult to expect increased buying of stocks or rising capital inflows into emerging-market currencies.”

Sell Signals

The dollar may weaken to 95 yen and $1.33 per euro as momentum charts show “sell” signals for the greenback, according to Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo.

The dollar may extend losses to 95 yen, a 38.2 percent Fibonacci retracement of its rally to the March 5 high of 99.68 from the January low of 87.13, said Osamu Takashima, chief foreign-exchange analyst in Tokyo at Bank of Tokyo-Mitsubishi.

Fibonacci analysis also indicates the dollar will drop to $1.33 per euro, Takashima wrote in a research note today.

New Zealand’s dollar ended two days of gains versus the yen after the central bank cut its benchmark rate by half a percentage point to 3 percent, weakening the appeal of the currency. New Zealand’s policy rate compares with 0.1 percent in Japan and a 3.25 percent in Australia.

‘Deteriorating Economy’

The euro fell for a second day against the yen on speculation a German report today will show industrial output declined in January.

The European Central Bank still has “room to move” after reducing the benchmark interest rate to 1.5 percent last week, ECB council member Erkki Liikanen said yesterday in Helsinki.

“Additional rate cuts by the ECB and weaker euro-region economic data could trigger the euro-yen to head lower,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group in Tokyo and a former Bank of Japan currency trader. The yen will rise to 120 per euro in coming months, he said.

Industrial output in Germany fell a seasonally adjusted 3 percent in January from the previous month, according to a Bloomberg News survey of economists. The Economy Ministry will release the report at 12 p.m. in Berlin.

Overseas Earnings

Losses in the dollar against the yen may be limited on speculation U.S. investors will bring back earnings from overseas assets on concern the global recession will worsen.

Sales at U.S. retailers dropped 0.5 percent in February, the seventh decline in eight months, a separate Bloomberg survey of economists showed before the Commerce Department report today.

“Retail sales are likely to signal a further deterioration of the U.S. economy, which may spark renewed repatriation of the dollar by U.S. investors,” said Takashi Matsumura, a Tokyo- based economist at Mizuho Research Institute, a unit of Japan’s second-largest banking group.

The Dollar Index, which the ICE uses to track the greenback performance against the currencies of six major U.S. trading partners, fell 0.2 percent to 87.713. The index touched 89.624 on March 4, the highest level since April 2006.

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

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Iraq Wants More Wheat Supply Agreement With Australia

By Madelene Pearson

March 12 (Bloomberg) -- Iraq wants to buy more wheat from Australia, the world’s fourth-largest exporter of the grain, potentially securing long-term supplies.

The Middle Eastern nation may want to buy about 1 million metric tons of Australian wheat a year in the future, Australia’s Trade Minister Simon Crean said in an e-mail after meeting with Iraq’s Trade Minister Abd al-Falah al-Sudani. Iraq imported 348,000 metric tons of Australian wheat last year, he said.

Australia last year ended AWB Ltd.’s monopoly over the nation’s wheat exports because of illegal payments made to the former regime of Saddam Hussein. Iraq was once Australia’s third- biggest wheat buyer and bought A$142 million ($92 million) worth of the grain last year.

“We had discussions that showed the Iraqi government wants to enter into agreements for the long-term supply of Australian wheat,” Crean said.

Australia and Iraq have also agreed to an agricultural partnership to boost the Middle Eastern nation’s productivity and food security, Prime Minister Kevin Rudd told reporters today in Canberra after meeting with Iraqi Prime Minister Nuri al-Maliki.

Tony Burke, Australia’s agriculture minister, will lead a delegation to Iraq this year to discuss further cooperation, Rudd said.

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

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Corn, Soybeans Rise After U.S. Boosts Ethanol Demand Estimate

By Sungwoo Park

March 12 (Bloomberg) -- Corn advanced after the U.S. government unexpectedly increased its estimate of the amount of grain that will be used to make ethanol. Soybeans and wheat also gained.

Increased biofuels production will more than offset falling export demand, reducing domestic supplies on Aug. 31 to 1.74 billion bushels, from 1.79 billion forecast last month, the U.S. Department of Agriculture said yesterday in a report. Traders surveyed by Bloomberg News expected an increase to 1.81 billion.

“The prospects for corn are quite bright down the road, given increasing use of the grain in ethanol blending as well as improving ethanol margins,” said Han Sung Min, a manager at the international marketing team of Korea Exchange Bank Futures Inc. in Seoul. “Soybeans are also gaining along with corn on the optimism.”

Corn for May delivery was up 0.4 percent at $3.66 a bushel on the Chicago Board of Trade at 10:48 a.m. Seoul time. The most-active contract yesterday fell 2.9 percent, the biggest loss since Feb. 27. Futures reached a record $7.9925 in June.

About 3.7 billion bushels will be used to make ethanol in the marketing year that began Sept. 1, up from an estimated 3.6 billion forecast in February, the USDA said. A year earlier, 3.026 billion bushels were used for the biofuel.

Soybeans for May delivery added 0.7 percent to $8.6825 a bushel at 10:49 a.m. Seoul time. Futures reached a record $16.3675 in July. Wheat for May delivery gained 0.7 percent to $5.1175 a bushel at 10:50 a.m. Seoul time.

To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.net

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Posco Hires Banks for Investor Talks, Plans Bond Sale

By Sungwoo Park and Patricia Kuo

March 12 (Bloomberg) -- Posco, Asia’s third-largest steelmaker, hired five banks to arrange meetings with investors that may lead to a bond sale for working capital.

Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc and Merrill Lynch & Co. will organize the meetings between March 16 and March 18, according to an e-mail sent to investors today. A bond sale will follow “subject to market conditions,” it said.

“Posco has a strong credit profile, but is operating in the commodity sector and its product prices are falling due to the global economic slowdown, so it would be difficult to gauge how successful this transaction will be,” said Scott Bennett, a fund manager with Aberdeen Asset Management Asia Ltd. who oversees $800 million of Asian debt.

Pohang, South Korea-based Posco slashed production in December for the first time in its 40-year history, joining moves by ArcelorMittal and Nippon Steel Corp., the world’s biggest steelmakers, as the global recession cooled demand. The company may cut production by 6 percent this year should the demand slump continue until June, Chief Executive Officer Chung Joon Yang said last month.

Posco plans to meet investors in Singapore on March 16, Hong Kong on March 17 and London on March 18, with simultaneous talks in Los Angeles, Boston and New York, said two people familiar with the schedule, who asked not to be identified because the meetings are private.

Firm Plans

While Posco is considering bond sales at home and overseas it hasn’t yet made firm plans, spokesman Choi Doo Jin said in a phone interview today. Korean-language Edaily today said the steelmaker aims to sell as much as $700 million of bonds next week, without saying where it got the information.

Posco’s $300 million in 5.875 percent bonds maturing 2016 were quoted at 631 basis points above U.S. Treasuries today, down from 636 yesterday, according to Royal Bank of Scotland Group Plc prices. A basis point is 0.01 percentage point.

Standard & Poor’s, which rates Posco’s debt A, the sixth- highest investment grade, said in December that the company benefits from strong cash flow, although capital expenditure and other investment outlays are rising.

“Even if Posco increases its level of debt, the company should face no significant difficulties in accessing local or overseas debt markets,” S&P said on Dec. 22.

Posco had a net profit of 721 billion won ($485 million) in the fourth quarter ended Dec. 31, compared with 713 billion won a year earlier.

To contact the reporters on this story: Sungwoo Park in Seoul at spark47@bloomberg.netPatricia Kuo in Hong Kong at pkuo2@bloomberg.net.

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Posco to Raise March Utilization Rate to About 85%

By Sungwoo Park

March 12 (Bloomberg) -- Posco, Asia’s third-largest steelmaker, will raise its overall plant utilization rate to about 85 percent this month from January and February levels because of a seasonal pickup in demand and falling inventories.

Still, the rate will rise “only slightly,” Choi Doo Jin, a spokesman for the Pohang, South Korea-based company, said by phone today, without giving comparative levels.

Posco slashed production in December for the first time in its 40-year history, joining moves by ArcelorMittal and Nippon Steel Corp., the world’s biggest steelmakers, as the global recession cooled demand. Posco’s utilization rate is superior to its peers, JPMorgan Chase & Co. said.

“We only hope this trend will lead to a recovery in the economy ultimately,” Posco’s Choi said.

Posco declined 1.1 percent to 345,000 won at 12:33 p.m. in Seoul trading today, matching the 1.2 percent loss in the benchmark Kospi index.

The company today also said it is considering a bond sale. Chief Executive Officer Chung Joon Yang said on Feb. 27 Posco will cut output by as much as 800,000 tons between January and March.

Posco’s higher utilization rate may help it post “superior and stable” earnings in the first quarter, JPMorgan analysts including Park Wan Sun said in a report dated March 11.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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South Korea Plans to Boost Aluminum, Copper Reserves

By Sungwoo Park

March 12 (Bloomberg) -- South Korea, Asia’s third-biggest metals buyer, will boost stockpiles of aluminum and copper by as much as 46 percent this year, joining China in building inventories as commodity prices drop to seven-year lows.

Aluminum reserves will rise 46 percent from a year earlier to 114,000 metric tons, while copper will gain 23 percent to 55,000 tons, the Public Procurement Service said in an e-mailed statement today. The agency last month said it will boost metals reserves by 37 percent this year to 205,507 metric tons.

Commodity prices dropped to the lowest since June 2002 this year as the global recession crimped demand from builders and automakers. China, the world’s largest metals consumer this year has bought aluminum and zinc for its stockpiles, and also agreed last month to invest $22 billion in mining companies.

“The crisis of today is actually an opportunity,” Kwon Tae Kyun, administrator of the state agency, said in the statement. “This year is the best time to build up stockpiles as much as possible at lower costs.”

Copper futures on the London Metal Exchange slumped 54 percent last year, while aluminum dropped 36 percent. South Korea relies on imports for 97 percent of its raw material needs, and the state procurement agency meets about 8 percent of demand and often sets domestic benchmark prices.

The agency will also boost stockpiles for minor metals by more than seven times to 17,500 tons this year, the statement said. Reserves for zinc and lead will be cut by 28 percent and 21 percent, respectively, to 9,000 tons and 7,000 tons, it said, without elaborating. Tin and nickel stockpiles will also decline, it said.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

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Minmetals Seeks Metal Assets in South America, Southern Africa

By Xiao Yu

March 12 (Bloomberg) -- China Minmetals Corp., buying OZ Minerals Ltd. for A$2.6 billion ($1.7 billion), is seeking metal assets in South America and southern Africa, taking advantage of seven-year low commodity prices to secure supplies.

China’s largest metals trader may also “do some domestic acquisitions” this year, President Zhou Zhongshu said today in Beijing. It is still waiting for approval from the Chinese government for its planned takeover of Australia’s OZ Minerals, he also said.

Chinese state-owned companies agreed to invest $22 billion in commodity producers last month, securing iron ore, zinc and copper mines. The global financial crisis has dried up funding options for indebted companies including OZ Minerals.

“We’re also looking at other areas such as in South America and southern Africa where we can purchase nonferrous metal assets,” Zhou said while attending Chinese People’s Political Consultative Conference.

State-owned Minmetals has applied for permission to buy Melbourne-based OZ Minerals through China’s National Development Reform Commission, the country’s top planner, Zhou said. It plans to use OZ Minerals as a base for its overseas business and will “inject assets” into the company should the takeover be successful, he said.

Minmetals will also need approval from the Australian government, which can block the deal on national interest ground.

OZ Minerals fell 0.8 percent to 60.5 Australian cents on the Australian exchange at 1:06 p.m. local time. Minmetals had offered 82.5 cents a share for the takeover.

To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net;

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GEA Group, K+S AG, Medion, HanseYachts: German Equity Preview

By Joseph Mapother

March 12 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.

The X-DAX Index rose 0.9 percent to 3,900.70 as of 9:45 p.m. in Frankfurt. The measure is derived from trading in DAX Index futures and provides an outlook for Germany’s benchmark index. The DAX increased 0.7 percent to 3,914.10.

K+S AG (SDF GY): Europe’s largest producer of potash used in fertilizers will report fourth-quarter earnings. The company is likely to report net income of 211.5 million euros ($271.7 million), based on the average of four analyst estimates compiled by Bloomberg. The stock fell 0.3 percent to 34.02 euros.

GEA Group AG (G1A GY): The engineer whose machines milk about one third of the world’s cows may report fourth-quarter net income of 28.5 million euros, the average of four analyst estimates compiled by Bloomberg. The stock fell 3.5 percent to 7.44 euros.

Medion AG (MDN GY): The distributor of personal computers and flat-screen televisions sold at the Aldi discount supermarket chain proposed an unchanged dividend of 15 cents for 2008 in a statement after markets closed yesterday. The stock rose 6.4 percent to 6.12 euros.

HanseYachts AG (H9Y GY): Germany’s largest publicly traded yacht maker said it expects “negative results” for the fiscal year ending July 31. Sales will decline roughly as much as through the first half, when sales dropped 58 percent to 21 million euros ($27 million), the company said in a statement after markets closed. The stock was unchanged at 4 euros.

To contact the reporters on this story: Joseph Mapother in Frankfurt at jmapother1@bloomberg.net;

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Standard Life, Inmarsat, Morrison: U.K., Irish Equity Preview

By Kevin Crowley

March 12 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.

The benchmark FTSE 100 Index dropped 21.42 points, or 0.6 percent, to 3,693.81. The FTSE All-Share Index fell 0.4 percent, and Ireland’s ISEQ Index declined 1.9 percent.

AMEC Plc (AMEC LN): The energy engineering firm with 23,000 employees worldwide is scheduled to report earnings. AMEC fell 6 pence, or 1.1 percent, to 534.5 pence.

Cineworld Group Plc (CINE LN): The second-largest U.K. movie theatre operator is expected to report earnings. Cineworld increased 4.5 pence, or 3.9 percent, to 120.5 pence.

Climate Exchange Plc (CLE LN): The owner of emissions markets in London and Chicago is expected to report earnings. The share climbed 59.5 pence, or 7.9 percent, to 809.5 pence.

Dignity Plc (DTY LN): The U.K.’s second-largest undertaker is due to issue an earnings statement. The stock gained 9.5 pence, or 1.5 percent, to 624.5 pence.

Home Retail Group Plc (HOME LN): The owner of Britain’s second-largest do-it-yourself chain is expected to report earnings. Home Retail climbed 6.7 pence, or 3.4 percent, to 204 pence.

Inmarsat Plc (ISAT LN): The U.K. satellite company that provides communications services is expected to report earnings. Inmarsat gained 6 pence, or 1.4 percent, to 430 pence.

RCG Holdings Ltd. (RCG LN): The Hong Kong-based maker of the i-Series fingerprint-recognition products said 2008 profit rose 38 percent to HK$622.3 million ($80 million) after sales grew in China. RCG fell 2.5 pence, or 3.5 percent, to 69.5 pence.

Standard Life Plc (SL/ LN): Scotland’s largest insurer is expected to report full-year earnings. Standard Life gained 3.4 pence, or 2.2 percent, to 161.3 pence.

Thomas Cook Group Plc (TCG LN): Europe’s second-biggest travel company expects the tourism market to worsen through 2010, according to the head of its German business. The share advanced 7.25 pence, or 3.3 percent, to 229.75 pence.

Vodafone Group Plc (VOD LN): The world’s biggest mobile- phone company and Telefonica SA’s O2 unit plan to pool their networks in a major shakeup of the U.K.’s mobile phone industry, the Guardian reported, without attribution. The shares fell 4.6 pence, or 3.8 percent, to 115.75 pence.

William Morrison Supermarkets Plc (MRW LN): The smallest of the four main U.K. food retailers is scheduled to report earnings. Morrison fell 5.75 pence, or 2.3 percent, to 245.75 pence.

To contact the reporter on this story: Kevin Crowley in London kcrowley1@bloomberg.net

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Bongrain, Carrefour, Lagardere, Touax: French Stocks Preview

By Jeff Kearns

March 12 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 climbed 0.2 percent to 166.24. The Dow Jones Stoxx 50 Index increased 0.1 point to 1,702.60. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, added 0.7 percent to 1,932.79.

Banco Popular SA (POP SM): Spain’s third-largest bank has rejected merger proposals in “recent times” as it strived to remain independent, Chairman Angel Ron said in a letter to branch managers. The Madrid-based lender had 73.5 million euros ($92.6 million) in profit in January, excluding one-time gains, Ron said in the letter. Popular shares rose 7 cents, or 1.9 percent, to 3.75 euros.

Enel SpA (ENEL IM): Italy’s biggest utility is scheduled to report 2008 earnings and present its strategy. Morgan Stanley analysts say the company may reduce its dividend, raise cash through a share sale, and eventually sell assets. The company is likely to post a 33 percent increase in 2008 net income to 5.3 billion euros, according to the median estimate of analysts surveyed by Bloomberg. Enel fell 3 percent to 3.37 euros.

GEA Group AG (G1A GY): The engineer whose machines milk about one third of the world’s cows may report fourth-quarter net income of 28.5 million euros, the average of four analyst estimates compiled by Bloomberg. The stock fell 3.5 percent to 7.44 euros.

Nordea Bank AB (NDA SS): The Nordic region’s largest bank is holding an extraordinary general shareholders meeting. The stock climbed 9.6 percent to 52.7 kronor.

Telefonica SA (TEF SM): Spain’s largest telephone operator may be active as rival Grupo Corporativo Ono SA presents 2008 results. Telefonica shares rose 5 cents, or 0.4 percent, to 14.25 euros.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net

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Hong Kong Stocks Decline, Erasing Gains; Oil Producers Drop

By Hanny Wan

March 12 (Bloomberg) -- Hong Kong stocks fell, reversing gains, on concern the global recession will erode corporate earnings and damp demand for raw materials.

Sun Hung Kai Properties Ltd. declined 0.8 percent after saying first-half profit excluding property revaluations tumbled a more-than-estimated 27 percent. Bank of East Asia Ltd. dropped 3.9 percent. Cnooc Ltd., China’s biggest offshore oil explorer, dropped 2.9 percent and PetroChina Co. slipped 3.3 percent, after crude prices dropped yesterday.

“A risk is if the financial sector spirals down further. If it doesn’t stabilize, Asian banks may no longer extend loans,” said Arnout van Rijn, chief investment officer at Robeco Hong Kong Ltd., which manages $1.2 billion in Asia. “Sentiment is not as bad as in Europe here in Hong Kong because of China.” He said his fund is “underweight” financials in Asia, although it has been buying Japanese and Chinese stocks.

The Hang Seng Index fell 56.78, or 0.5 percent, to 11,873.88 at the 12:30 p.m. break, after climbing as much as 0.9 percent.

The benchmark index has lost 17 percent this year, dragging its valuation to 10 times estimated earnings, down from 18.6 times at the beginning of 2008.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, lost 1.5 percent to 6,899.64.

Cnooc dropped 2.9 percent to HK$6.65. PetroChina, the nation’s No. 1 oil producer, slid 3.3 percent to HK$5.27.

Crude oil futures plunged 7.4 percent to $42.33 a barrel in New York yesterday, the lowest since March 3. The contract was at $43.04 in after-hours trading as of 12:40 p.m. in Hong Kong.

Sun Hung Kai

Sun Hung Kai declined 0.8 percent to HK$58.70. The world’s biggest builder by market value said yesterday first-half profit excluding property revaluations fell to HK$4.54 billion ($585 million) as Hong Kong’s economic slump reduced home sales.

Bank of East Asia, which last month reported its first loss in four decades, retreated 3.9 percent to HK$12.70. The bank announced yesterday several senior management changes including the appointment of William Cheng as chief financial officer, replacing Daniel Wan.

Twenty-two stocks on the 42-member Hang Seng Index declined while 19 climbed. March futures slipped 1.2 percent to 11,788.

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

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Japanese Stocks Fall on Concern Economy Worsening; NTT Slumps

By Patrick Rial

March 12 (Bloomberg) -- Japanese stocks fell, sending the Topix to a 25-year low, as data on the economic contraction and a surging yen fueled concern earnings will deteriorate.

Nippon Telegraph & Telephone Corp. lost 5.8 percent after Mizuho Securities Co. lowered its rating, citing the risk to earnings from the recession. East Japan Railway Co., Japan’s No. 1 rail operator, sank 3.8 percent after Nikko Citigroup Ltd. cut its profit forecast. Toshiba Corp. tumbled 4.6 percent after the yen jumped to a two-week high.

Gross domestic product in the last quarter of 2008 fell the most since 1974, revised figures confirmed today. A coming inventory correction will cause the current quarter’s figure to be even worse, according to Daiwa Institute of Research Ltd.

The Nikkei 225 Stock Average lost 177.87, or 2.4 percent, to 7,198.25 at the close of trading in Tokyo. The broader Topix index declined 21.35, or 3 percent, to 700.93. The gauge earlier fell below 700 and finished at the lowest since December 1983.

“Unless we get some real evidence that the economy is on a path to recovery, there’s no reason for the market to start climbing,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion of assets. “The talk these days is that the January to March quarter is going to be the worst yet.”

The Nikkei surged the most in six weeks yesterday, joining a global stocks rally after Citigroup Inc. said it had a profit in the first two months of this year. The gauge is down 19 percent so far in 2009, extending last year’s record drop as the global economy slipped into recession.

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

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Asian Stocks Fall on Renewed Recession Concern; Honda Slumps

By Jonathan Burgos and Shani Raja

March 12 (Bloomberg) -- Asian stocks dropped for the first time in three days, led by finance companies and automakers, as the Japanese government confirmed the country’s economy shrank at the fastest pace since 1974.

Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, slumped 4.4 percent as the economy contracted 12.1 percent in the fourth quarter. Woolworths Ltd., Australia’s biggest retailer, fell 2.3 percent after the nation’s jobless rate jumped to a four-year high. Honda Motor Co., which makes half of its sales in North America, sank 7 percent as the yen rose against the dollar.

“The global economy is weakening in such a highly synchronized way that everybody is affected,” said Stephen Halmarick, Sydney-based Head of Investment Markets Research Colonial First State Global Management, which manages about $84 billion. “I’d still be cautious on the Asian economies.”

The MSCI Asia Pacific Index fell 1 percent to 72.72 as of 1:07 p.m. in Tokyo, snapping a two-day, 4.1 percent advance. The gauge has slumped 19 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from Honda to BHP Billiton Ltd., the world’s largest mining company.

Japan’s Nikkei 225 Stock Average fell 1.6 percent to 7,257.16. South Korea’s Kospi index lost 1.5 percent after the central bank unexpectedly left interest rates unchanged. All markets in Asia declined except Taiwan.

Economic Contraction

Toyota Motor Corp., the world’s No. 1 carmaker, lost 3.4 percent in Tokyo after saying it was concerned suppliers may run short of cash. Nippon Telegraph and Telephone Corp., Japan’s largest fixed-line phone company, slumped 4.4 percent after an analyst downgrade. Inpex Corp., the country’s largest oil explorer, retreated 4.5 percent after oil prices tumbled.

Futures on the Standard & Poor’s 500 Index fell 0.8 percent The gauge added 0.2 percent in New York yesterday as JPMorgan Chase & Co. joined Citigroup Inc. in saying it was profitable in January and February.

“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”

Gross domestic product in Japan shrank an annualized 12.1 percent in the three months ended Dec. 31, government figures today showed, as exports, output and business spending collapsed. The figure was less than the 12.7 percent reported last month. Australia’s jobless rate rose to 5.2 percent in February from 4.8 percent in January, the country’s statistics bureau said.

Rate Cut

Mitsubishi UFJ slumped 4.4 percent to 393 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, fell 2.8 percent to 171 yen. Woolworths dropped 2.3 percent to A$24.92 in Sydney. Westpac Banking Corp., Australia’s largest bank by market value, lost 1.7 percent to A$16.59.

New Zealand’s central bank today reduced its benchmark interest rate to a record low to help steer the economy out of its worst recession in 30 years. The Bank of Korea, meanwhile, unexpectedly left its interest rate as policy makers struggled between the need to stimulate the economy and prevent a further slide in the won, the worst performing Asian currency against the dollar this year.

Governments have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. U.S. Treasury Secretary Timothy Geithner yesterday urged the Group of 20 nations to take “forceful” actions to end the financial crisis.

Yen Strengthens

Honda Motor slumped 7 percent to 2,055 yen after the yen rose 2.2 percent to 96.26 to the dollar, its biggest gain since March 6. Sony Corp., which gets a quarter of sales from the U.S., declined 2.6 percent to 1,755 yen.

A stronger yen lowers the value of Japanese exporters’ overseas sales when converted back into the local currency.

Toyota sank 3.4 percent to 2,810 yen in Tokyo. Jim Lentz, president of the company’s U.S. sales unit, told the U.S. government’s auto task force yesterday it has “real concerns” suppliers may run short of cash and any failures could disrupt production.

Nippon Telegraph slid 4.4 percent to 3,480 yen. Mizuho Securities downgraded the stock to “buy” from “strong buy.”

Inpex Corp., Japan’s largest oil explorer, dropped 4.5 percent to 655,000 yen in Tokyo after crude-oil prices slumped. Woodside Petroleum Ltd., Australia’s second-largest oil producer, slipped 3.2 percent to A$35.80 in Sydney.

Crude oil for April delivery plunged 7.4 percent yesterday to $42.33 in New York as U.S. inventories climbed and fuel consumption retreated to a two-month low.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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