China Needs Another $2 Trillion of Treasuries: William Pesek

Commentary by William Pesek

March 13 (Bloomberg) -- A record plunge in Chinese exports may be great news for the U.S. Treasury.

It’s simple mathematics. The U.S. economy is more than four times the size of China’s. Growth in China is wildly lopsided toward exports, many of those goods packed on ships bound for America. So, if China wants to stay afloat, it should spend less money building roads, bridges and dams and more on U.S. debt. That would give the U.S. and its consumers the access to easy credit to reignite spending, much of it on Chinese-made goods.

OK, so that’s not about to happen. China is already spooked about its $696 billion of Treasuries. Their value is subject to the whims of Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

You still have to wonder if domestic stimulus is the best way for China to go. It’s only a matter of time before China adds to the 4 trillion-yuan ($585 billion) spending plan unveiled in November. As global demand slides, China’s stimulus needs will grow exponentially. There are few signs it will be enough to ensure China’s projected growth of 8 percent in light of the 26 percent plunge in exports in February.

China, it’s often said, can spend its way out of this crisis. Throwing lots of money at the problem will soften the blow, yet it won’t be enough with the world slump intensifying. The key to China getting back to the all-important 8 percent growth level is a global recovery. Basically, that means the U.S.

$14 Trillion Gorilla

That’s why buying more U.S. debt makes sense. I’m not saying this because I’m American. This isn’t about economic nationalism. It’s just that the sheer size of the U.S. economy makes it a $14 trillion gorilla when officials in Beijing, Tokyo or Singapore grapple with safeguarding growth.

Malaysia, for example, plans to spend 60 billion ringgit ($16 billion) to support its export-dependent economy. Expect fiscal-stimulus packages of similar magnitude to sweep across Asia in the months ahead. Southeast Asia is experiencing this global crisis in slow motion. Even though most economies are still growing, the worst is yet to come.

Savings-rich Asia could almost fund a U.S. budget deficit that is sure to reach previously unthinkable levels over the next two years. And, really, it could be in the region’s best interest to do so.

Hillary Clinton’s visit to China last month dramatized the point. She didn’t exactly arrive with her hat in her hand, yet it was surreal to see the U.S. secretary of State hawking bonds.

China’s Interest

“Our economies are so intertwined,” Clinton told Dragon Television in Beijing. “It would not be in China’s interest” if the U.S. were unable to finance deficit spending to stimulate its stalled economy.

Clinton was referring to the Group of Two, an entity that has eclipsed the Group of Seven nations. The G-7 has been useless in this crisis. The G-2 is the key to restoring global demand.

Japan’s economy may be the second-biggest at $4.4 trillion, but it has its own problems. Germany’s economy is roughly the same size as China’s and it, too, might benefit more from a U.S. snapback than domestic stimulus.

President Barack Obama and Geithner need to get real about the magnitude of U.S. stimulus needs. Getting the U.S. off life- support may require another $2 trillion. Making that case to a disillusioned public and Republican leaders arguing for less public spending won’t be easy. They should begin laying the groundwork immediately.

Paying for It

The next step, of course, is paying for it. That’s where Asia comes in. Rebalancing the global economy will require Americans to become a bit more Asian -- consuming less and saving more -- and for Asians to become a bit more American. It’s not an easy transition, and in the meantime, expect U.S. officials to unleash a massive buy-bonds campaign.

Admittedly, this whole argument is politically incorrect. Asia lending the U.S. even more money would be highly unpopular. The U.S., Asians often point out, was slow to help this region during its 1997 crisis. And why bail out a country that is so successfully exporting its own crisis?

The answer is that Asia is heading into a highly turbulent environment. Governments can spend all they want on stimulus efforts, and they may help at the margin. For better or worse, though, restoring global growth is more of a U.S.-centric exercise than many in Asia and Europe might like to admit.

That inconvenient fact makes it pointless for China to suddenly dump its Treasuries. It’s just not an option for the world’s third-largest economy.

U.S. officials used to fret about the Japanese doing that. Concerns increased after Prime Minister Ryutaro Hashimoto said in June 1997 that “several times in the past, we have been tempted to sell large lots of U.S. Treasuries.” It never happened. The reason: It can’t, and especially now.

China would cannibalize its outlook by curtailing its U.S. debt purchases. It may have more to gain from doing the opposite.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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CFTC Should Have Acted Sooner on Oil Fund Trades, Chilton Says

By Alexander Kwiatkowski and Chanyaporn Chanjaroen

March 13 (Bloomberg) -- The Commodity Futures Trading Commission should have acted sooner to investigate trades done to profit at the expense of the U.S. Oil Fund, the world’s largest exchange-traded fund, Commissioner Bart Chilton said.

The CFTC is investigating “multiple market participants,” including the U.S. Oil Fund, which is managed by Alameda, California-based U.S. Commodity Funds LLC. The review, part of the CFTC’s national oil market probe announced last year, is focused on an increase in the price difference between March and April futures contracts on the New York Mercantile Exchange on Feb. 6.

“I am not so sure that regulators shouldn’t have taken a more pre-emptive action earlier on,” Chilton, a Democrat serving as one of the regulator’s five commissioners, said in a March 10 phone interview. “I was disappointed that we hadn’t worked with Nymex earlier to try and provide greater caution.”

The U.S. Oil Fund holds West Texas Intermediate crude, the grade traded on Nymex since 1983. Last month it owned more than 20 percent of all March contracts, according to data from the exchange and the fund’s Web site.

To maintain its position, the fund sells, or “rolls” its front-month contracts starting from two weeks before they expire and buys second-month futures on specific days. Until this month, the fund rolled its position in one day. It now spreads the transactions over four days.

When the fund was rolling its March holdings on Feb. 6, the contract on Nymex fell as much as 6.2 percent, outpacing the April price, which fell as much as 4.8 percent. March futures closed that day down 2.4 percent, in contrast to the second- month contract, which rose 0.9 percent.

‘Raised Concerns’

“We are looking at all the trades surrounding the roll” on Feb. 6, Chilton said. “There was a spike we saw that day. It raised concerns for us as to what was going on in the market.”

John Hyland, chief investment officer of U.S. Commodity Funds, confirmed the CFTC has inquired about trades surrounding the oil fund’s roll as part of its investigation. The fund is “fully cooperating,” he said.

“The CFTC has not informed the fund or its manager that either were responsible for any wrongdoing,” he said in an e- mailed statement. “The fund’s trading activities are, by design, transparent, and the fund and its manager are unaware of their violation of law or regulations in connection with the roll or its other trading activities.”

The CFTC’s Chilton said he is “not suggesting there was a direct, causal relationship” between the actions of the fund and the movement in prices. “But it is certainly something that is anomalous and curious, and enough for us to want to take a good hard look at what was going on.”

Position Limits

“It raises the question to me whether or not we do need some hard position limits on commodities like oil,” he said. “I think we do.”

The House Agriculture Committee approved legislation last month that would place limits on positions a trader can hold in commodity markets as the government seeks more control over derivatives. Such limits on speculative positions exist now only in agricultural products.

The bill, which would also enhance the CFTC oversight of credit-default swaps, now goes for vetting by other panels. Chilton said he expects it to become law this year, he said.

“There is not a commodity that I can think of right now that we shouldn’t consider putting a hard and fast position limit on,” Chilton said. “I want to make sure regulators have flexibility to assure markets are functioning properly, and that means any hard and fast position limits that we set have to make sense to that market.”

For Related News and Information:

To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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Exxon Brazil Find May Hold 8 Billion Barrels of Oil

By Joe Carroll

March 13 (Bloomberg) -- Exxon Mobil Corp.’s oil discovery off the coast of Brazil may hold enough crude to rival the nearby Tupi prospect as the Western Hemisphere’s largest find in three decades.

Exxon Mobil’s Azulao-1 well tapped a reservoir that could contain 8 billion barrels of recoverable oil, said Luiz Lemos, a partner at TozziniFreire Advogados, a Brazilian law firm that represents foreign energy companies with projects in the South American nation.

The size of the discovery will intensify interest in Brazil’s offshore region among U.S., European and Chinese producers amid a dwindling supply of untapped oil basins outside the Persian Gulf and Russia, said Lemos, a former general counsel for a unit of Brazil’s state oil company, Petroleo Brasileiro SA.

“This is very huge,” Lemos said yesterday in a telephone interview from Rio de Janeiro. His firm’s clients include Irving, Texas-based Exxon Mobil, Norway’s StatoilHydro ASA and Devon Energy Corp. of Oklahoma City.

Exxon Mobil, which pumps more crude than every member of OPEC except Saudi Arabia and Iran, in January announced the discovery of petroleum in the Azulao-1 well in an offshore region designated BM-S-22. The company operates the project on behalf of partners Petroleo Brasileiro, known as Petrobras, and Hess Corp.

Petrobras triggered a flood of interest in Brazil’s offshore crude deposits with the November 2007 announcement that Tupi may hold the equivalent of 8 billion barrels of recoverable oil. That would make it the largest find in the Americas since Mexico’s Cantarell field was discovered in 1976.

Drilling Guarani

A floating drilling rig began boring a second well, called Guarani, into the reservoir in BM-S-22 earlier this week, said Patrick McGinn, a Houston-based spokesman for Exxon Mobil.

“We have no idea how big it is,” McGinn said yesterday in a telephone interview. “We’re nowhere near that yet. It’s premature to speculate until all of the appraisal work has been done.”

Jon Pepper, a spokesman for New York-based Hess, referred inquiries to the field’s operator, Exxon Mobil. Rio de Janeiro- based Petroleo Brasileiro’s investor relations department didn’t respond to an e-mailed message seeking comment. Exxon and Hess each own 40 percent stakes in the field and Petrobras owns the other 20 percent.

Exxon Mobil Chief Executive Officer Rex Tillerson last week said oil from Brazilian fields in the area around Tupi probably won’t begin flowing onto world markets for years because of technical challenges and harsh operating conditions.

‘Huge Potential Resource’

In a March 5 presentation to investors and analysts in New York, Tillerson described his company’s discovery as “a huge potential resource.” He declined to go into more detail, saying too little is known about the geology and characteristics of the formation to make estimates.

Tapping Brazil’s new discoveries will be more challenging than extracting crude from giant onshore fields such as Saudi Arabia’s Ghawar, the world’s biggest, Tillerson told analysts last week.

At current energy prices, 8 billion barrels of oil is worth about $380 billion, which exceeds the economic output of Taiwan, South Africa and Ireland.

The Brazilian prospects cover an area the size of the U.S. state of Florida about 170 miles (274 kilometers) offshore under more than 16,000 feet of water, rock and salt, Lemos said. The region will require $500 billion in investments over the next few decades for pipelines, production platforms, gas-processing plants and other infrastructure, he said.

Tillerson, entering his fourth year as the head of the world’s largest oil company, expects to boost production by 2 percent this year to the equivalent of 4 million barrels of crude a day.

Searching for Oil

Exxon Mobil is spending $79 million a day this year to search for oil fields, construct platforms and renovate refineries. The company had $45.2 billion in profit last year, the highest in U.S. corporate history.

Tillerson, a 56-year-old University of Texas-trained engineer, is expanding the search for untapped reserves after production tumbled last year to the lowest since Exxon Corp.’s 1999 purchase of Mobil Corp.

Exxon Mobil fell 2 cents to $67.13 as of 10:42 a.m. in New York Stock Exchange composite trading. The stock has dropped 16 percent this year.

Hess, the best performer in the 13-company Amex Oil Index this year, rose $1.83, or 3.1 percent, to $60.85. Petrobras rose 1.2 percent to 27.88 reais in Sao Paulo.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

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OPEC, IEA Cut Forecasts for Oil Demand, Supply Amid Recession

By Alexander Kwiatkowski

March 13 (Bloomberg) -- The International Energy Agency and OPEC cut their 2009 forecasts for oil demand for a seventh month and reduced supply estimates as the global economic slump saps consumption as well as investment in new fields.

Both organizations see demand slumping by more than 1 million barrels a day this year. The Paris-based IEA, adviser to 28 nations, reduced its forecast to 84.4 million barrels a day, a decline of 1.25 million barrels from 2008. OPEC’s estimate dropped to 84.6 million barrels, down 1.01 million barrels.

“The demand collapse has been staggering, based on the whirlwind nature of the slump in the global economy,” the IEA said in its monthly oil report today. The Organization of Petroleum Exporting Countries, which also released its monthly market analysis today, said the “dreadful” economic situation is causing the slide. The two groups usually produce their reports on different days.

OPEC will meet in Vienna on March 15 to review production quotas as oil trades nearly $100 a barrel lower than a record high of $147.27 a barrel in July. The front-month March crude futures contract traded at $47.48 a barrel on the New York Mercantile Exchange at 2:45 p.m. London time.

Members are still implementing cuts agreed last year totaling 4.2 million barrels a day. Efforts to increase prices by cutting more production pose a risk to economic recovery, the IEA’s executive director Nobuo Tanaka said last month.

OPEC rejected the IEA’s argument that cheap oil will rejuvenate the world economy. Instead, lower prices may lead to a supply crunch by 2013, the group’s secretary general, Abdalla el-Badri, said last week. Algeria has said OPEC should agree to new curbs in Vienna, while members such as Qatar and Nigeria said there is no need for further action.

‘Pillars’

The revision in the IEA demand forecast was driven by declines in North America, Asia and the former Soviet Union. OPEC said consumption is also slowing in developing countries, which had previously compensated for declines elsewhere.

China, the Middle East and other developing Asian countries “were the pillars behind last year’s oil demand,” the group said. “However, due to the spillover of the economic downturn, these regions are no longer the initiators of high growth.”

Both groups said declining demand would be partially offset by a drop in supply growth from outside the group, as well as OPEC quota cuts.

The IEA trimmed its forecast for supplies from outside OPEC this year to 50.6 million barrels a day. A lack of available credit to fund investment in new projects and production problems in Azerbaijan mean non-OPEC supply will be unchanged this year, it said.

Outside OPEC

OPEC cut its forecast for oil supply from outside the group to 50.7 million barrels a day. That still leaves an increase of 370,000 barrels a day this year over 2008.

The two organizations also agreed on the degree to which OPEC has implemented previous production cuts.

The 11 OPEC nations bound by production quotas pumped 25.7 million barrels a day last month, the IEA said, compared with their official Jan. 1 limit of 24.845 million a day. That implies the group is complying with 80 percent of its production targets.

OPEC estimates February production by its 11 members excluding Iraq at 25.715 million barrels a day, or 870,000 barrels a day more than its target. That implies compliance of about 79 percent.

If the producer group complies completely with its production cuts, it will be pumping 1.6 million barrels a day below demand for its oil, leading to a potential drop in stockpiles, the IEA said.

For Related News and Information:

To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net

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Australian, N.Z. Dollars Climb to One-Month High on Stock Gains

By Candice Zachariahs

March 13 (Bloomberg) -- The Australian and New Zealand dollars rose to the highest in a month as stocks worldwide rallied after Japan and China signaled further stimulus measures, prompting speculation investors will buy higher-yielding assets.

The currencies gained for a second straight week as prices of commodities, which account for more than half of the South Pacific nations’ exports, climbed the most since March 4 yesterday. New Zealand’s dollar strengthened to a two-month high versus the yen after the central bank yesterday said it may slow the pace of interest-rate cuts after this week reducing its benchmark to a record low.

“The acute pessimism that had been priced into the markets is being retracted a little, with commodities drifting up and bank stocks rising,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The Australian dollar may rise toward 66.20 cents and New Zealand’s to 53.40 cents in the next few days, he said.

Australia’s currency rose to 65.23 U.S. cents as of 4:27 p.m. in Sydney from 64.58 cents in Asia yesterday and 64.05 cents in New York last week. It touched 65.79 cents, the highest since Feb. 13. The currency advanced to 63.75 yen from 62.19 late yesterday.

New Zealand’s dollar gained to 51.88 U.S. cents from 51.22 in Asia yesterday and 50.25 cents in New York on March 6. It reached 52.36 cents, also the strongest since Feb. 13. The currency climbed to 50.72 yen from 49.32 yen. It touched 51.11 yen, the most since Jan. 13.

Stocks Rally

The MSCI World Index, a global equity index, headed for its biggest weekly gain since November as China said it can add “at any time” to $585 billion in stimulus spending and Japan’s Prime Minister ordered a third spending plan to help the nation out of recession.

U.S. stocks yesterday completed the biggest three-day gain since November after Bank of America Corp., the biggest U.S. bank, joined competitors JPMorgan Chase & Co. and Citigroup Inc. in saying this week that it made money during the first two months of 2009.

The currencies also rose as the UBS Bloomberg Constant Maturity Commodity index of 26 raw materials strengthened. Commodities account for 60 percent of Australia’s exports and 70 percent of New Zealand’s.

New Zealand’s dollar gained a third day against Australia’s currency, rising to NZ$1.2522, the highest level in three weeks. Reserve Bank of New Zealand Governor Alan Bollard yesterday cut borrowing costs by 0.5 percent to 3 percent and said further reductions will be “much smaller than observed recently.”

‘Back in Kiwi’

“People are happy to be back in kiwi, especially since it looks like we’re going to maintain our rate differential” over other industrialized economies, ANZ’s Allen said, referring to the currency by its nickname.

Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S. attract investors to the South Pacific nations’ higher-yielding assets. Australia’s benchmark is 3.25 percent.

Australia today sold A$600 million ($392 million) of securities maturing August 2010 at a weighted average yield of 2.59 percent. The so-called bid-to-cover ratio at the auction was 2.6.

Australian government bonds fell. The yield on 10-year notes rose one basis points, or 0.01 percentage point, to 4.28 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell to 107.81.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.34 percent from 3.36 yesterday. The spread between that rate and Australia’s two-year swap rate was 22.5 basis points.

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

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Canada’s Dollar Shrugs Off Economic Data, Climbs on Risk Bid

By Chris Fournier

March 13 (Bloomberg) -- The Canadian dollar rose, reversing a decline, as investors ventured into riskier assets even as government reports showed Canada’s businesses lost more jobs than economists forecast and its trade deficit widened to a record.

Gains in global stock markets and the prices of commodities such as crude oil and copper dimmed the appeal of traditional havens such as the dollar, the yen and the Swiss franc, which weakened against most major currencies.

“We are actually seeing some hope on the horizon,” said Steven Butler, director of foreign-exchange trading in Toronto at Scotia Capital, a unit of Canada’s third-largest bank. “The world is looking a lot safer after the rally in equities this week. Economic data is taking a back seat.”

The loonie, as Canada’s dollar is known, strengthened 1.1 percent to C$1.2643 per U.S. dollar at 10:13 a.m. in Toronto, from C$1.2778 yesterday. It earlier slipped to C$1.2843. The currency headed for a 1.8 percent gain this week after falling for four straight weeks. One Canadian dollar buys 79.09 U.S. cents.

The MSCI World Index, a gauge comprising the stocks of 23 developed nations, climbed 2.1 percent, the fourth straight gain. Crude for April delivery rose as much as $1.11, or 2.4 percent, to $48.14 a barrel in New York. Aluminum and copper also advanced. Canada’s currency tends to track fluctuations in equity and commodity prices.

“The Canadian dollar has run out of reasons to depreciate against the U.S. dollar,” said Carl Weinberg, chief economist at Valhalla, New York-based High Frequency Economics. “I’m looking for the loonie to stabilize for the next few quarters.”

‘Horrible Number’

Canada lost a net 82,600 jobs in February, Statistics Canada said today in Ottawa. The median forecast of 19 economists surveyed by Bloomberg News was for a reduction of 55,000. Employers cut 129,000 jobs in January. The unemployment rate increased to 7.7 percent last month.

“It’s a horrible number,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s largest bank. “It’s difficult to find any silver lining in this report.”

Still, Strauss said, “global forces” are the “dominant driver” of the Canadian dollar. He predicted the currency should remain stronger than C$1.30.

Canada posted a record C$993 million ($775 million) trade deficit in January on vanishing trade in automobiles with the U.S., signaling a deepening recession. Economists surveyed by Bloomberg forecast a deficit of C$1 billion.

Major Currencies

The Canadian dollar reached C$1.3064 on March 9, the weakest level since Sept. 2, 2004, on concern the global recession will worsen, crimping demand for commodities, which account for about half of the nation’s export revenue.

The U.S. dollar fell against 11 of the 16 most-actively traded currencies. The dollars of New Zealand and Australia, which like the Canadian currency tend to move in tandem with stocks and commodities, rose 1.2 percent and 0.9 percent, respectively, against the greenback.

The loonie will strengthen to C$1.24 against the U.S. dollar by year-end, according to the median forecast of 42 economists surveyed by Bloomberg News.

“Today’s foreign-exchange response to Canada’s bad economic statistics confirms our assumption that risk perception continues to drive the market,” said Martin Lefebvre, a senior economist at Montreal’s Desjardins Group. “We do not see the Canadian dollar crossing C$1.30 on a sustainable basis.”

The two-year government note’s yield fell one basis point, or 0.01 percentage point, to 0.97 percent. The price of the 2.75 percent security due in December 2010 rose 2 cents to C$103.01.

To contact the reporter on this story: Chris Fournier in Montreal at cfournier3@bloomberg.net

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Chilean Peso Advances After Rate Cut; Colombian Bonds Gain

By Drew Benson

March 13 (Bloomberg) -- Chile’s peso rose to a two-week high after the central bank cut its benchmark interest rate by an unexpected 2.5 percentage points in a bid to shore up the economy.

The currency gained for a fourth straight day, adding 0.5 percent to 594.15 per dollar at 10:02 a.m. New York time, from 597.25 yesterday. It touched 592.45, the strongest since Feb. 24. The peso has risen 2.2 percent this week.

“The monetary policy response has been aggressive as the central bank shows it will do all it can to support economic activity,” said Alberto Ramos, an economist at Goldman Sachs Group Inc., in a telephone interview from New York. “That offsets the fact that the interest-rate differential is less attractive now.”

The peso has been buoyed by government plans to sell $50 million a day in the local spot market to fund an economic stimulus plan, Ramos added. The government plans to draw $4 billion from a $20.2 billion stabilization fund that it stockpiled during a six-year rally in copper, of which the nation is the world’s biggest producer.

Chile’s economy, which shrank 1.4 percent in the 12 months through January, is slowing as demand for exports slumps. Copper prices have dropped more than 40 percent in the past six months.

Two Percentage Points

Lower interest rates can help prompt businesses to invest and consumers to buy on credit. Private lenders have started to pass on lower rates to borrowers, cutting 2 percentage points from the average cost of consumer loans, central bank economists wrote in a report to the policy-making committee.

Central bank policy makers raised rates five times in 2008 to a decade-high of 8.25 percent as climbing commodity prices pushed annual inflation up to a 14-year high of 9.9 percent in October. They have cut 6 percentage points in three months.

The annual rate of inflation slowed to 5.5 percent last month as the cost of fuel and financial services dropped.

The yield for a basket of Chile’s five-year, fixed-rate peso bonds dropped 11 basis points, or 0.11 percentage point, to 3.3 percent, according to Bloomberg prices.

In Colombia, the yield on Colombia’s benchmark 11 percent bonds due in July 2020 slid for a fourth straight day, declining seven basis points, or 0.07 percentage point, to 9.59 percent, according to Colombia’s stock exchange. The yield is down 7 basis points this week.

Central bank policymakers are expected to lower the key lending rate at a slower pace when they next meet on March 20, JPMorgan Chase & Co. said in a report yesterday.

‘Turning more Dovish’

“The Colombian central bank appears to be turning more dovish with a recent 100 basis point cut and two new board members who are close to the Finance Ministry, which has been calling for aggressive easing,” the report said. JPMorgan expects policymakers to cut the overnight rate by 75 basis points next week and by 50 basis points, to 6.75 percent, in April.

Last month, the central bank cut the key lending rate for a third month to 8 percent from 9 percent.

Colombia’s peso climbed 0.9 percent to 2,442.15 per dollar.

Argentina’s peso was little changed at 3.6455 per dollar, from 3.6451 yesterday. The currency is down 0.2 percent this week.

The yield on the country’s inflation-linked peso bonds due in December 2033 climbed one basis point to 20.86 percent, according to Bloomberg data.

To contact the reporters on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net

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Yen Heads for Fourth Weekly Loss on Bets Banking Crisis Ebbing

By Ye Xie and Oliver Biggadike

March 13 (Bloomberg) -- The yen fell against most of the major currencies and headed for a fourth weekly decline versus the euro on speculation the worst of the banking crisis may be over, reducing demand for Japan’s currency as a refuge.

The Swiss franc was poised for its largest weekly loss against the euro since 1999 after the Swiss National Bank started selling the currency yesterday to stem its appreciation. The dollar fell against the euro this week as investors avoided Treasuries and sought higher returns.

“There has been a pickup of risk appetite this week,” said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world’s largest custodial bank, with more than $23 trillion in assets under administration. “The yen obviously suffered even during the time of risk aversion last month. Either way, we are looking for a much weaker yen.”

The yen lost 0.4 percent to 126.65 versus the euro at 11:09 a.m. in New York, from 126.16 yesterday. Japan’s currency declined 0.4 percent to 98.09 per dollar from 97.72. The dollar traded at $1.2912 against the euro, compared with $1.2913. The yen may weaken to 105 in three months, Shankar said.

Japan’s currency was down for a fourth week against the euro, losing 2 percent in its longest stretch of decline since January. Against the dollar, the yen gained 0.3 percent after a six-week losing streak. The euro advanced 2.1 percent versus the dollar this week, the biggest increase since mid-December.

Weakening Yen

The yen dropped 7.9 percent against the dollar in February even as the Standard & Poor’s 500 Index plunged 11 percent. Evidence Japan’s economy was spiraling deeper into a recession eroded demand for the yen as a refuge from financial turmoil. Japan’s government reiterated yesterday that the economy contracted last quarter at the fastest pace since 1974.

The New Zealand dollar, South Korean won and Australian dollar were the biggest gainers against the greenback today as investors sought higher-yielding assets.

The kiwi, as New Zealand’s currency is known, appreciated as much as 1.2 percent to 52.68 U.S. cents and the Aussie gained 0.7 to 66.04 U.S. cents, the highest levels since Feb. 13. The won increased 0.9 percent to 1,483.05 and headed for its biggest weekly advance in almost three months. The currency, Asia’s worst performer against the dollar this year, climbed 4.5 percent since March 6.

Swiss Intervention

The Swiss franc dropped 0.4 percent to 1.5366 per euro after touching 1.54, the weakest level since Dec. 22. The currency plunged yesterday after the Swiss National Bank said it began buying currencies in its first solo intervention in foreign-exchange markets since 1992 and halved the target lending rate to 0.25 percent. It lost 4.6 percent versus the euro this week, the worst performance since the 16-nation currency debuted in 1999.

Against the dollar, the franc dropped 0.4 percent to 1.1897 today and was headed for a 2.7 percent weekly decline.

“The SNB has dramatically reinforced the credibility surrounding its response to Swiss franc strength,” Barclays Capital currency analysts Adarsh Sinha and Koon Chow in London wrote in a report yesterday. “The combination of a credible threat of currency intervention and lower bond yields is likely to weigh significantly on the franc.”

The dollar’s decline versus the euro this week may be tempered by speculation that finance ministers and central bankers in the Group of 20 nations will fail to agree on measures to support the euro area’s economy, analysts said. U.S. Treasury Secretary Timothy Geithner, Bank of England Governor Mervyn King and their counterparts are meeting near London today.

Outlook for Europe

“I don’t think there will be a broad-based plan for stimulus in the euro zone,” said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “The dollar weakness is not likely to last.” The euro may drop to a range of $1.2680 to $1.2650 next week, she said.

The yen declined 1.7 percent to 51.74 per New Zealand dollar and 1.6 percent to 77.73 against Canada’s dollar as the S&P 500 rallied 9.6 percent this week. Bank of America Corp. Chief Executive Officer Kenneth Lewis said the bank had a profit in January and February, joining JPMorgan Chase & Co. and Citigroup Inc. in saying it has recovering from mortgage bond losses last year.

The Nikkei 225 Stock Average rose 5.2 percent after Japan’s Finance Minister Kaoru Yosano said Prime Minister Taro Aso is preparing a third spending plan and China signaled additional measures to bolster its economy.

“Risk appetite and sentiment turned more optimistic this week as markets were able to look past bad news,” said Carl Rajoo, a economist at Forecast Singapore Pte.

Goldman Sachs Group Inc. cut its three-month yen forecast to 105 per dollar from a prior estimate of 90. “Given the macro backdrop, a 14 percent overvalued yen versus the dollar is a challenge for exporters,” Goldman analysts led by London-based Thomas Stolper wrote in a note to clients on March 11.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Oliver Biggadike in New York at obiggadike@bloomberg.net

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Swiss Franc Drops by Record in Week Versus Euro on Intervention

By Lukanyo Mnyanda and Joshua Gallu

March 13 (Bloomberg) -- The Swiss franc posted its biggest weekly decline against the euro since 1999 after the country’s central bank sold the currency to halt a 7.6 percent appreciation in the past six months.

The franc was also near the lowest level versus the dollar in three months after the Swiss National Bank’s first solo intervention in foreign-exchange markets since 1992. The SNB also said it will buy corporate bonds as it cut the benchmark three- month Libor target rate to 0.25 percent from 0.5 percent to revive the economy.

“The franc has hit a brick wall,” said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group AG. “The SNB action clearly took the currency markets by surprise and its appreciation trend is now over.”

The franc weakened 0.3 percent to 1.5345 per euro by 3:45 p.m. in Zurich. It tumbled 4.6 percent this week, the most since the common currency was introduced in 1999. The franc slipped 0.3 percent to 1.1884 versus the dollar, from 1.1577 on March 6.

The Swiss economy will slump by as much as 3 percent this year, the most since at least 1975, the central bank said yesterday. Price pressures have evaporated in recent months as oil prices sank, the franc strengthened and domestic demand dropped. Prices will probably decline this year and inflation will be “very close to zero” in 2010 and 2011, the SNB said.

The franc’s appreciation has made Swiss products less competitive in Europe and the U.S., where deepening recessions were already curbing demand. Lindt & Spruengli AG, the nation’s oldest chocolatier, faces the most challenging period in its 164- year history as franc gains hurt earnings and consumers pare spending, it said Jan. 20.

‘Currency Problem’

“Business isn’t easy right now because of the economic crisis,” said Jean-Daniel Pasche, head of the Federation of the Swiss Watch Industry in Biel. “If on top of that we have a currency problem, that really penalizes us on exports.”

The franc surged 6 percent against the dollar and 11 percent versus the euro in 2008 as investors sought refuge from the global financial crisis.

“Swiss industry cannot afford a euro exchange rate of 1.50,” Luzi Andreas von Bidder, chairman of Acino Holding AG, a generic-drug maker, said yesterday in an interview after the central bank announcement. Acino would lose about 8 percent in revenue due to exchange rates this quarter if the franc remained at the level prior to the SNB’s announcement, he said.

‘Lowers Pressure’

Swiss manufacturing contracted at the fastest pace since at least 1995 last month, helping to push unemployment to a more than two-year high. Sika AG, Europe’s biggest maker of chemicals used in construction, said last month fourth-quarter sales slid 6.5 percent, hurt by the franc’s appreciation and weaker demand in the construction and auto industries.

“Everything the SNB can do to support the euro at 1.60, or lets say 1.55 instead of 1.49, is more than welcome. Of course it’s good news because we sell more to Europe than we buy,” said Philippe Maquelin, chief financial officer of Moutier, Switzerland-based Tornos SA, Europe’s biggest maker of lathes for the watch industry. The company generates more than 50 percent of its sales in the euro area.

“The intervention really lowers the pressure on our industry,” said Rudolf Christen, a spokesman for Swissmem, the biggest association for machinery and engineering companies in the country. “If the rate falls below 1.50 for a few weeks, it’s not a big problem. But if it’s long lasting, which it was, that really raises the pressure.”

UBS AG raised its one- and three-month targets for the euro against the Swiss franc yesterday.

The euro will trade at 1.52 francs in one and three months, Benedikt Germanier, a currency strategist in Stamford, Connecticut, said in a research report. The previous forecast was for 1.49 francs per euro in one month and 1.47 in three months, UBS said.

BOJ Action

The last time policy makers from one of the Group of 10 industrialized nations acted to weaken a currency was when the Bank of Japan sold 35.2 trillion yen ($360 billion) in 2003 and 2004. Instead of falling, the yen strengthened about 6 percent against the dollar in the year after sales ended.

“The local bond market is limited in Switzerland and the capacity for the SNB to increase domestic money supply through buying franc-denominated bonds is going to be low,” Mansoor Mohi-uddin, chief currency strategist in Zurich at UBS, wrote in a note. “In order for them to loosen the market condition further, they will have to intervene aggressively in the currency market.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Joshua Gallu in Zurich jgallu@bloomberg.net

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Indian Sugar Production May Jump 25% on Plantings

By Thomas Kutty Abraham

March 13 (Bloomberg) -- Sugar output in India, the world’s second-biggest producer, may rebound 25 percent next year as farmers boost sugar cane plantings to benefit from a rally in prices, reducing the nation’s reliance on imports.

Production may increase to 20 million metric tons in the year beginning Oct. 1 from 16 million tons this year, S.L. Jain, director general of the Indian Sugar Mills Association, said in a phone interview. The country may still need to import sugar as demand is increasing, he said.

A rebound in Indian output may cool a rally in global prices. Raw sugar has climbed 11 percent this year in New York and refined sugar has advanced 27 percent in London on expectations of a widening shortfall in global supplies.

“Farmers are back to planting sugar cane again, thanks to the good prices they are getting this year,” Jain said from New Delhi. “Increased production will still not be sufficient to meet the rising demand.”

The country’s sugar consumption next year may total 24 million tons compared with 23.5 million this year and stockpiles at the start of next season may be 1.5 million tons, Jain said.

“India will have to import sugar next year,” he said yesterday. “But ‘how much?’ That will depend on prices.”

Raw-sugar futures for May delivery rose as much as 0.5 percent to 13.16 cents a pound in after-hours trading on ICE Futures U.S. in New York today.

Mills including Shree Renuka Sugars Ltd. may import 1.5 million tons of raw sugar in the year to Sept. 30 to fill a gap in output, Managing Director Narendra Murkumbi said yesterday.

Duty-Free Imports

The country last month allowed duty-free imports of raw sugar until September for processing and local sale. Buyers must export a similar quantity of refined sugar in two years. Mills have bought 800,000 tons already, Jain said.

The mills association forecast of a recovery in output echoes comments from India’s Agriculture Secretary T. Nanda Kumar, who said last month farmers may increase the area planted with sugar cane because of higher prices.

Sugar on the National Commodity & Derivatives Exchange Ltd. jumped to a record 2,204 rupees per 100 kilograms on Feb. 20 on lower output this year. April delivery sugar fell as much as 1.8 percent today to 2,076 rupees, the lowest in more than a month. The most active contract has gained 32 percent in the past year.

India’s cane production may drop 17 percent to 290.5 million tons in the year to June as farmers shift to grains, the farm ministry said Feb. 12.

The country’s government should allow mills to sell their entire produce at market prices to enable them to pay farmers a remunerative rate for supplying cane, Jain said.

Welfare Subsidy

Sugar producers can sell 90 percent of their output at market rates, while the government typically fixes the quantity and time of the sale every month. Producers must sell 10 percent to the government at below-market prices for resale to the poor.

“Why should the industry subsidize the government welfare program,” Jain said. “The government should buy the sugar from the open market and encourage more production to achieve sustained self-sufficiency.”

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net.

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Cocoa Jumps to 2-Week High in N.Y. on Equity Gain, Dollar Slump

By Shruti Date Singh

March 13 (Bloomberg) -- Cocoa rose to a two-week high as the appeal of commodities traded in New York increased on a rally in equities and a decline in the dollar.

The Dow Jones Industrial Average of 30 major stocks rose as much as 1 percent, heading for the first weekly gain in five. The U.S. Dollar Index, measuring the greenback against six other currencies, fell as much as 0.5 percent, heading for the first weekly drop since Feb. 6. The Reuters/Jefferies CRB Index of 19 raw materials advanced as much as 0.6 percent today.

“It’s outside markets,” said Hector Galvan, a senior trading consultant for RJO Futures in Chicago. “I am looking at the dollar being down. Yesterday and today have been dedicated to trading off of energy and stocks. It’s helping.”

Cocoa futures for May delivery climbed $86, or 3.7 percent, to $2,426 a metric ton at 10:24 a.m. on ICE Futures U.S. in New York. The price earlier reached $2,445, the highest for a most- active contract since Feb. 26.

Metals and other agricultural commodities traded in New York, including gold, silver, copper, sugar, coffee, cotton and orange juice, all gained. Agricultural futures traded in Chicago also climbed.

Since yesterday, the New York cocoa market has attracted more buying after the most-active contract’s price surpassed the month’s high of $2,378 on March 2, Galvan said.

“It gave people an incentive, another reason,” he said. “People may try to test $2,466.”

Cocoa is the second-best performer on the CRB index today partly on forecasts for a global production deficit, Galvan said.

Output may trail demand by as much as 223,000 tons in the year ending Sept. 30, Macquarie Bank Ltd. in London has forecast.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

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Sugar Heads for Biggest Weekly Gain Since January on Price View

By M. Shankar

March 13 (Bloomberg) -- White sugar headed for its biggest weekly gain since January in London on expectations that the first global supply deficit in three years will push prices higher. Cocoa and robusta coffee climbed.

Lower production will leave a “significant gap” with consumption after two years of surplus, the International Sugar Organization said March 12. Output in India, the second-largest producer of the sweetener and the biggest consumer, may drop 37 percent to 16.5 million metric tons in the year to September, Farm Minister Sharad Pawar said last month.

“The outlook for sugar is strongest from the second half,” said Kona Haque, a commodities strategist at Macquarie Bank Ltd. in London. “I wouldn’t expect people to go short.”

White sugar for May delivery, the most actively traded contract, slipped 70 cents, or 0.2 percent, to $402.30 a ton on the Liffe exchange at 1:09 p.m. local time. A close at that price would equate to a 5 percent weekly gain, the biggest since the week ended Jan. 2.

The sweetener has added 27 percent this year as the UBS CMCI Bloomberg Index of 26 raw materials has lost 3.4 percent. Raw sugar traded on ICE Futures U.S. rose 0.5 percent to 13.15 cents a pound in New York.

Sugar’s rally may slow if production rebounds in India as higher prices induce farmers to plant more cane. Raw sugar has climbed 12 percent this year in New York.

“Farmers are back to planting sugar cane again, thanks to the good prices they are getting this year,” S.L. Jain, director general of the Indian Sugar Mills Association, said in a phone interview from New Delhi. “Increased production will still not be sufficient to meet the rising demand.”

Among other agricultural commodities traded on Liffe, cocoa for May delivery climbed 11 pounds, or 0.6 percent, to 1,889 pounds ($2,638) a ton. The beans have gained 4.5 percent this week and 6.1 percent in 2009.

Robusta coffee for May rose $26, or 1.7 percent, to $1,556 a ton. The contract has added 3.7 percent this week.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net

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Oil Rises a Second Day Before OPEC Meets to Discuss Output Cut

By Mark Shenk

March 13 (Bloomberg) -- Crude oil rose a second day as ministers from the Organization of Petroleum Exporting Countries prepare to meet this weekend to consider a production cut.

The oil market is oversupplied and OPEC will lower output if needed, Shokri Ghanem, who chairs Libya’s state-run National Oil Corp., said yesterday. Other ministers have called for a halt to reductions. Prices also climbed as equities rose after Bank of America Corp. said that it will be profitable this year and Japan and China pledged aid for their economies.

“You are seeing a lot of last-minute positioning before the OPEC meeting,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “There’s not a lot of consensus about what they will do, which is unusual before a meeting. We could come in Monday to a big surprise.”

Crude oil for April delivery rose 19 cents, or 0.4 percent, to $47.22 a barrel at 9:25 a.m. on the New York Mercantile Exchange. Prices are up 3.6 percent this week and down 5.9 percent so far this year.

OPEC has reduced daily output targets by 4.2 million barrels since September. Ministers will meet on March 15 in Vienna.

Nigeria is opposed to further oil-supply reductions by OPEC countries at this month’s meeting, a spokesman for the state oil company said yesterday. Qatari Oil Minister Abdullah bin Hamad al-Attiyah said this week that the group needs to reach full compliance before any new action.

The 11 OPEC nations bound by production quotas, all except Iraq, pumped 25.7 million barrels a day last month, an International Energy Agency report showed today. That compares with their official Jan. 1 limit of 24.845 million a day. The figure implies the group is complying with 80 percent of its production targets, the IEA said.

Demand Forecasts

The IEA cut its 2009 oil demand forecast for a seventh month, a decline that will be matched by lower non-OPEC supply. The Paris-based adviser to 28 nations lowered its consumption forecast by 270,000 barrels a day to 84.4 million barrels a day. That represents a reduction in demand of 1.25 million barrels a day, or 1.5 percent, from 2008.

OPEC also reduced its 2009 oil-demand forecast today as the global economy was in a “dreadful situation.” The group cut its estimate by 520,000 barrels a day to 84.6 million barrels a day.

Brent crude oil for April settlement increased 16 cents, or 0.4 percent, to $45.25 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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Gold Rises for Third Day on Investment Demand; Silver Gains

By Pham-Duy Nguyen

March 13 (Bloomberg) -- Gold rose for a third straight day on speculation the recession will widen, boosting the appeal of the precious metal as a store of value. Silver also gained.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, has risen 33 percent this year to a record 1,041.53 metric tons. Since the second quarter of 2007, banks worldwide have posted more than $1.2 trillion in credit losses and writedowns. Before today, the Standard & Poor’s 500 Index slid 17 percent this year while gold gained 4.5 percent.

“Gold continues to resist any sustained decline, bouncing back quickly from any minor sell off,” said Adrian Day, president of Adrian Day’s Asset Management in Annapolis, Maryland. “The fly in the ointment could be a sustained and strong, broad global stock-market rally which would calm some investors’ fears. There is little prospect of this on more than a short-term basis in my view, so we continue to be buyers on any dips.”

Gold futures for April delivery rose $11.70, or 1.3 percent, to $935.70 an ounce on the New York Mercantile Exchange’s Comex division. The price rose 3.1 percent in the previous two days.

Silver futures for May delivery climbed 23.7 cents, or 1.8 percent, to $13.18 an ounce in New York. Silver increased 15 percent this year through yesterday.

Metal held by the SPDR Gold Trust yesterday surpassed Switzerland, making the ETF the sixth-largest holder of bullion, based on data from the producer-funded World Gold Council.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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Copper Jumps Most in a Week as Stockpiles Fall in London, China

By Millie Munshi

March 13 (Bloomberg) -- Copper rose by the most in a week as global stockpiles fell, signaling demand may be stabilizing for the metal used in pipes and wires.

Inventories monitored by the London Metal Exchange fell 1.3 percent to 497,625 metric tons today. LME supplies are down 9.3 percent from a five-year high on Feb. 25. Stockpiles monitored by the Shanghai Futures Exchange decreased 9.7 percent this week to 34,735 tons. Before today, copper rose 15 percent this year on speculation that demand will rebound.

“Helping sentiment has been the across-the-board decline we are seeing in copper stocks,” Edward Meir, an MF Global Ltd. analyst in Darien, Connecticut, said today in a research note.

Copper futures for May delivery jumped 5.25 cents, or 3.2 percent, to $1.677 a pound at 9:08 a.m. on the New York Mercantile Exchange’s Comex division. A close at that price would mark the biggest one-day gain since March 4.

“Copper prices and inventory have a very high inverse correlation,” Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York, said yesterday. “People really watch the inventories.”

On the LME, copper for delivery in three months climbed $110, or 3.1 percent, to $3,690 a metric ton ($1.67 a pound). The price reached a record $8,940 on July 2.

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.

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Global Stocks Rally; S&P 500 Heads for Best Week Since November

By Rita Nazareth

March 13 (Bloomberg) -- Stocks rose around the world, extending the biggest weekly gain since November for the Standard & Poor’s 500 Index, as China’s premier drove investors out of Treasuries and Japan pledged aid for its economy.

Bank of America Corp. jumped 7.5 percent, following a 19 percent advance yesterday after the largest U.S. bank by assets said it is profitable. Citigroup Inc. and Wells Fargo & Co. increased at least 6 percent, while Europe’s Barclays Plc and Bank of Ireland Plc rose more than 12 percent. Financial shares in the S&P 500 have soared 36 percent this week, the biggest gain since at least 1989. BHP Billiton Ltd. and Rio Tinto Group climbed as copper and oil prices rose and on speculation China may boost its stimulus measures.

The S&P 500 rose 0.3 percent to 752.74 at 10:27 a.m. in New York, extending its weekly gain to more than 10 percent. The Dow Jones Industrial Average climbed 25.01 points, or 0.4 percent, to 7,195.07. Europe’s Dow Jones Stoxx 600 Index rose 1.4 percent and the MSCI Asia Pacific Index added 3.5 percent.

“The bulls seem to be taking the lead for now,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors, which manages $2.1 billion in Rochester, New York. “There’s been a change in tone to more positive comments from financial institutions in addition to the fact that the market had been largely oversold.”

Treasuries fell for the first time in three days after China’s Premier Wen Jiabao said he’s concerned about the safety of U.S. government debt. The yield on the benchmark 10-year note rose 0.07 percentage point to 2.93 percent.

Banks Predict Profits

The S&P 500 yesterday completed the biggest three-day gain since November after General Electric Co. said losing the top credit rating at S&P won’t hurt business. Bank of America joined two of its biggest competitors, JPMorgan Chase & Co. and Citigroup, in saying that it made money during the first two months of the year, rebounding from the worst year for financial institutions since the Great Depression.

The S&P 500 is on course for its biggest weekly increase since a 12 percent rally in the period ended Nov. 28. The measure has increased 12 percent since closing at a 12-year low of 676.53 on March 9.

Bank of America climbed 44 cents to $6.29. Citigroup, the recipient of $45 billion in government rescue funds, rose 9.6 percent to $1.83, while Wells Fargo added 6 percent to $14.78.

Earnings Watch

Earnings at financial companies in the S&P 500 are expected to decline 27 percent in the first quarter of 2009, while rising more than 10-fold for the full year, according to estimates compiled by Bloomberg.

BHP Billiton, the world’s largest mining company, and Rio Tinto, the third-biggest, rallied on speculation that China may boost its stimulus measures.

China is able to add “at any time” to 4 trillion yuan ($585 billion) of stimulus measures to revive the world’s third- biggest economy, Wen told reporters in Beijing. He reaffirmed China’s target for 8 percent growth in 2009.

Japan’s Prime Minister Taro Aso will ask ministers to propose measures and may be ready to announce a package to world leaders at the Group of 20 summit in the U.K. in April, Finance Minister Kaoru Yosano said in Tokyo today.

Copper rose the most in a week and aluminum as the rally in global equities eased concern that the recession will deepen and reduce metals demand. Crude oil traded above $47 a barrel, set for a fourth weekly gain, as OPEC prepared to meet this weekend to consider a cut in output.

Merck & Co. rose 5.7 percent to $25.40. The drugmaker was raised to “outperform” from “market-perform” at Sanford C. Bernstein & Co., which cited the company’s planned acqusition of Schering-Plough Corp.

Technology Shares

Palm Inc. climbed 3.7 percent to $8.15. The maker of the Treo and Centro mobile phones was raised to “outperform” from “sector perform” at RBC Capital Markets, which said the WebOS operating system “has raised Palm’s chances for Smartphone leadership.”

National Semiconductor Corp. lost 3 percent to $10.68, limiting gains in technology shares, after the chipmaker’s credit rating was cut to junk by Standard & Poor’s, which cited “pressure on profitability.”

Confidence among U.S. consumers in March held close to a 28-year low, reflecting mounting job losses amid a deepening recession. The Reuters/University of Michigan preliminary index of consumer sentiment climbed to 56.6 from 56.3 in February. The gauge reached a 28-year low of 55.3 in November.

Goldman Sachs Group Inc. cut its forecast for the global economy for the second time in eight days after predicting a deeper recession in Europe. The bank now estimates a 1 percent contraction after previously saying the world economy may shrink 0.6 percent.

To contact the reporter on this story: Rita Nazareth in New York at nazareth@bloomberg.net.

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Schwab Says Client Trading Increased 7% in February

By Nick Baker

March 13 (Bloomberg) -- Charles Schwab Corp., the largest independent brokerage by client assets, said daily trading by its customers increased 7 percent last month from January.

Schwab, based in San Francisco, said clients added a net $5.5 billion to their accounts in February, even as the Standard & Poor’s 500 Index tumbled 9 percent in its worst start to a year, according to a statement today.

To contact the reporter on this story: Nick Baker in New York at nbaker7@bloomberg.net.

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Brazil Stocks Rise on Commodity Rally, Vale Gains; Bolsa Climbs

By Alexander Ragir

March 13 (Bloomberg) -- Brazilian stocks rose, heading for the biggest weekly gain in a month, after global bank shares advanced and China signaled more measures to bolster its economy, improving the outlook for commodities.

Cia. Vale do Rio Doce and Petroleo Brasileiro SA, the two biggest stocks in the Bovespa index, led gains for commodity producers after China said it can add “at any time” to 4 trillion yuan ($585 billion) of stimulus measures. Banco do Brasil SA rose more than 2 percent, pacing advances for banks after Bank of America Corp. said it will be profitable this year.

“It’s encouraging and is helping the market rally a bit,” said Fernando Aldabalde, whose GS Allocation Dinamico FI Multimercado hedge fund in Rio de Janeiro gained 16 percent last year, beating 90 percent of its peers. “It’s not clear whether this is just an excuse to buy on an over-sold market or if it’s something sustainable. But if these banks are profitable it’ll make the Treasury’s job a lot easier.”

The Bovespa added 0.9 percent to 39,514.16 at 9:38 a.m. New York time. The gauge has risen 6.4 percent this week, paced by retailers after the central bank cut interest rates by the most in five years.

Mexico’s Bolsa gained 1.3 percent, while Chile’s Ipsa climbed 0.4 percent. The MSCI Emerging Markets index gained 2.6 percent.

Banco do Brasil added 2.4 percent to 14.64 reais, the highest intraday price in a month. Banco Itau Holding Financeira SA, Latin America’s biggest financial services company, rose 1.3 percent to 24.17 reais. Uniao de Bancos Brasileiros SA, acquired by Itau, rose 1.5 percent to 13.85 reais.

Commodities

Bank of America joined two of its biggest competitors, JPMorgan Chase & Co. and Citigroup Inc., in saying that it made money during the first two months of the year, rebounding from the worst year for financial institutions since the Great Depression.

Vale added 27 centavos to 27.37 reais. The Bloomberg Base Metals 3-Month Price Commodity Index gained 1.2 percent to 116.29.

Petrobras rose 1 percent to 27.83 reais. Crude headed for a fourth weekly gain as OPEC prepared to meet this weekend to consider a cut in output.

China can add “at any time” to 4 trillion yuan ($585 billion) of stimulus measures to revive the world’s third- biggest economy, Premier Wen Jiabao told reporters in Beijing. He reaffirmed China’s target for 8 percent growth in 2009.

In Japan, Prime Minister Taro Aso will ask ministers to propose measures and may be ready to announce a package to world leaders at the Group of 20 summit in the U.K. in April, Finance Minister Kaoru Yosano said in Tokyo.

The Bovespa has gained 5 percent this year. It touched a high of 42,755.50, a 14 percent rise for the year, on Feb. 6 before paring gains on concern exports in Latin America’s largest economy will slow under the weight of recessions in the U.S., Japan and Europe.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net

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South Korea Procurement Agency Buys Aluminum, Copper

By Sungwoo Park

March 13 (Bloomberg) -- South Korea’s Public Procurement Service, a state-run body that manages strategic commodities, purchased 5,000 metric tons of aluminum ingots and 5,000 tons of copper cathodes at tenders yesterday.

The agency bought the grade A copper from Glencore International AG at a premium of $104 a ton over the London Metal Exchange official cash settlement price, Lee Il Hyung, an official at the agency, said today. In a previous tender last month, they paid a premium of $135 a ton.

At a separate tender, the commodity stockpile manager purchased 1,000 tons of high-grade primary aluminum ingots with Western origins from Daewoo International Corp. at a premium of $77 a ton, said another official at the agency, asking not to be identified because he’s not authorized to talk to media. That was up from a $63-a-ton premium in a previous transaction.

The agency also bought 3,000 tons of aluminum ingots with non-Western origins from Glencore International at a premium of $120 a ton and another 1,000 tons from Daewoo at a $97-a-ton premium, he said. They paid a premium of $57 a ton for the metal with non-Western origins in last month’s tender.

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

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Australia Stocks: ANZ Banking, BHP, NAB, Virgin Blue, Woodside

By Shani Raja

March 13 (Bloomberg) -- Australia’s S&P/ASX 200 Index climbed 2.7 percent to 3,321.50 as of 10:54 a.m. in Sydney, the biggest gain since Jan. 27. The following are among the most active shares in the Australian market. Stock symbols are in parentheses after company names.

Oil companies: Oil rose more than $4 a barrel yesterday, the biggest gain in three weeks, before the Organization of Petroleum Exporting Countries meets this weekend to consider a fourth production reduction. Crude for April delivery rose 11 percent to settle at $47.03 a barrel at yesterday in New York.

BHP Billiton Ltd. (BHP AU), the world’s largest mining company, gained 2.7 percent to A$31.16, the highest since Feb. 17. Woodside Petroleum Ltd. (WPL AU), Australia’s second-largest oil and gas producer, rose 3.2 percent to A$37.13, the highest since Jan. 7.

Financial stocks: U.S. stocks posted the biggest three-day gain since November after Bank of America Corp. said it’s profitable. The S&P 500 Index increased 4.1 percent to 750.74, while the S&P 500 Financial Index jumped 10 percent, giving it a four-day surge of 33 percent.

National Australia Bank Ltd. (NAB AU), the nation’s biggest lender by assets, rallied 3.4 percent to A$17.29. Australia & New Zealand Banking Group Ltd. (ANZ AU) climbed 3.4 percent to A$13.30.

Virgin Blue Holdings Ltd. (VBA AU), Australia’s second- biggest airline, surged 9.1 percent, the most since Feb. 24, to 18 cents. “There is no reason to think that any material abnormal or extraordinary profit will be recorded, other than as previously disclosed,” the company said in response to a stock- exchange price query.

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

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Australia Stocks, Japan Futures Rally as Sentiment Improves

By Patrick Rial

March 13 (Bloomberg) -- Australian shares and Japanese stock futures climbed after crude prices surged and statements from Bank of America Corp. and General Electric Co. eased concern the financial crisis will deepen.

BHP Billiton Ltd., the world’s No. 1 mining company, gained 2.3 percent in Sydney as oil soared 11 percent on speculation countries will cut production. U.S.-traded receipts of Sony Corp. jumped 4.1 percent from the closing share price in Tokyo yesterday after the electronics maker said it will form a partnership with Seiko Epson Corp. on liquid-crystal displays. Mizuho Financial Group Inc. also gained 4.1 percent.

“Nervousness about the stability of the financial system has been behind recent declines, and the retreat of those fears is a definite plus,” Kazuhito Suzuki, a strategist in Tokyo at Shinkin Asset Management Co., which oversees about $6.1 billion, said in an interview with Bloomberg Television. “The outlook today is bullish.”

Australia’s S&P/ASX 200 Index jumped 1 percent to 3,266.80 as of 10:06 a.m. in Sydney. New Zealand’s NZX 50 Index rose 1.1 percent in Wellington. Futures on Japan’s Nikkei 225 Stock Average expiring in March finished at 7,500 in Chicago, up from 7,090 in Osaka and 7,095 in Singapore.

In New York, the Standard & Poor’s 500 Index soared 4.1 percent. The gauge climbed 11 percent during the past three sessions, the biggest three-day gain since November. Bank of America followed Citigroup Inc. and JPMorgan Chase & Co. in saying it was profitable in the first two months of 2009.

GE rallied 13 percent after saying it doesn’t expect any adverse impact stemming from its loss of its AAA rating at Standard & Poor’s.

Oil, Sony

The MSCI Asia Pacific Index has plunged 19 percent this year and is off 58 percent from its peak in September 2007. Analysts’ earnings estimates for companies included in the benchmark have come down by two thirds in the past year.

Crude oil for April delivery rose 11 percent to $47.03 a barrel in New York, the biggest gain since Feb. 19. The contract surged ahead of a meeting by OPEC this weekend where production may be cut for a fourth time.

Sony, the world’s second-largest maker of consumer electronics, will buy equipment for manufacturing LCDs from Seiko Epson as part of an alliance, the companies said yesterday.

Japan’s government is considering using zero-coupon bonds to fund exchange-traded fund purchases as it works to shore up the stock market, the Nikkei newspaper reported. The move would allow retail investors to convert the bonds into stocks should the market rise, according to the report.

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

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