Crude Oil Falls as U.S. Stockpiles Gain Amid Slumping Demand

By Christian Schmollinger

April 1 (Bloomberg) -- Oil fell below $49 a barrel, after capping its biggest monthly gain since May, on speculation that a government report today will show U.S. inventories rose from the highest level in more than 15 years as fuel demand slows.

The industry-backed American Petroleum Institute said yesterday that crude oil supplies climbed last week to the highest since July 1993. Figures from the API and the U.S. Energy Department have moved in the same direction 75 percent of the time. The Bank of Japan’s Tankan index of sentiment among manufacturers fell to a record low of minus 58.

“The API numbers will be used as a guide for what the Energy Department numbers will show so the gain there will be viewed as a negative for the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. “The consumption side is still weak and that’s likely to remain the case.”

Crude oil for May delivery fell as much as $1.38, or 2.8 percent, to $48.28 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.69 a barrel at 3:04 p.m. Singapore time. It has slumped 52 percent in the past year.

Oil rose $1.25, or 2.6 percent, to $49.66 a barrel yesterday as equities gained and a weaker dollar enhanced the appeal of commodities. Crude gained 11 percent in the first quarter after tumbling 56 percent in the previous three months. Last month’s 11 percent increase was the biggest on a monthly basis since a 12 percent jump in May.

Oil Stockpiles

The Group of 20 summit will start tomorrow as world leaders attempt to reach an agreement to stabilize their economies in the midst of the global recession.

The API report showed that crude oil supplies climbed to 357.8 million barrels last week. It also said that distillate stocks, including diesel fuel and heating oil, rose 1.78 million barrels, or 1.2 percent, to 144.5 million barrels, the highest since Jan. 12, 2007.

The Energy Department is scheduled to release its weekly supply update at 10:30 a.m. today in Washington. The report is forecast to show that crude-oil stockpiles rose 3 million barrels in the week ended March 27 from 356.6 million the previous week, according to the median of analyst estimates.

Gasoline stockpiles probably dropped 1.5 million barrels from 214.6 million the prior week, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably declined 1.15 million barrels from 143.9 million.

Refineries probably operated at 82.3 percent of capacity, up 0.3 percentage point from the week before, according to the survey. It would be the first gain in four weeks. Refiners often shut units for maintenance as attention shifts away from heating oil and before gasoline use rises with warmer weather.

OPEC Steady

Crude oil supplies have increased as the Organization of Petroleum Exporting Countries agreed on March 15 to keep output quotas unchanged, saying members have to cut a further 800,000 barrels a day to comply with existing targets. OPEC is next scheduled to meet on May 28 in Vienna.

OPEC, the International Energy Agency and the U.S. Energy Department cut their 2009 forecast for oil demand this month. They expect consumption to slump by more than 1 million barrels a day this year.

The price of oil on the Nymex for delivery in June is $1.79 a barrel higher than for May, up from $1.71 premium yesterday and a $1.42 premium on March 25.

The structure in which the future month’s price is higher than the one before it, known as contango, allows buyers to profit from hoarding oil.

Brent crude oil for May settlement fell as much as $1.32, or 2.7 percent, to $47.91 a barrel on London’s ICE Futures Europe exchange. It was at $48.38 a barrel at 3:04 p.m. Singapore time.

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

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Asian Currencies to Fall on G-20, Stocks, Bank of America Says

By David Yong

April 1 (Bloomberg) -- Asian currencies may decline this month as the “global environment becomes more uncertain and less conducive for risk appetite,” according to Bank of America Securities-Merrill Lynch analysts.

A poor response to the international financial crisis from the Group of 20 leaders tomorrow may support “cautious” dollar bids, especially versus South Korea’s won, Taiwan’s dollar, Singapore’s dollar and Malaysia’s ringgit, New York-based Daniel Tenengauzer, head of currency strategy, wrote in a research note yesterday. A rally in U.S. stocks in March will probably reverse course because the gains weren’t accompanied by lower volatility and a reduction in credit risk, he said.

“We are looking for some disappointment in the G-20 outcome and the U.S. equities to support a shift back into the U.S. dollar,” Tenengauzer said. “Key global and economic events” may support the dollar and “another bad U.S. jobs report might accelerate this shift,” he said.

The won may weaken 4.4 percent to 1,450 per dollar by the end of June before recovering to 1,350 in the third quarter, according to the report. The ringgit may drop 0.3 percent to 3.6600, and reach 3.7000 by September, as politics deter the government from focusing on fixing the economy. Prime Minister Abdullah Ahmad Badawi plans to resign tomorrow to be replaced by deputy Najib Razak. The nation in April holds three by-elections.

‘Equity-Market Reversal’

Singapore’s dollar may stay above S$1.51 against the greenback as the monetary authority leans toward a neutral-to- loose policy by re-centering its currency band lower at its semi- annual review this month, the report said.

G-20 leaders will meet in London to discuss plans to restore global demand and resolve the financial and economic crisis, a Japanese Finance Ministry official said last week. Japan’s economic slump deepened as exports and manufacturers’ sentiment plunged to records. The U.S. said it’s prepared to let automakers General Motors and Chrysler LLC enter bankruptcy to revive the industry.

All of Asia’s 10 most-traded currencies weakened against the dollar in the first quarter, led by a 7.2 percent loss in the Korean won. Asian economies excluding Japan will expand 3.4 percent this year, the slowest pace since 1998, the Manila-based Asian Development Bank said in a report yesterday. That’s less than half its September estimate of 7.2 percent.

The Standard & Poor’s 500 Index rallied 8.5 percent in March, the best month since October 2002. Those gains will reverse because it wasn’t confirmed by declines in the volatility index, the so-called TED spread, which measures the difference between what banks and the Treasury pay to borrow money for three months, and corporate bond spreads, the report said.

“We are still looking for equity market reversal to be one driver of the next leg up in the U.S. dollar,” Tenengauzer said.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.

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Western Asset Buys Won on Highly Competitive Exports

By Lilian Karunungan

April 1 (Bloomberg) -- Western Asset Management Co. bought the South Korean won last month, predicting the currency’s 28 percent decline in the past year and China’s stimulus plan will make Korea’s exports “highly competitive.”

“The won is a new position for us in the course of the last month,” said Rajeev De Mello, the head of Asian investments in Singapore for Western Asset, which manages $513 billion globally. The currency “has been extremely weak,” he said in an interview yesterday. “That’s made Korean exports highly competitive.”

While South Korean exports fell for a fifth month in March, extending the longest run of declines since 2002, Hyundai Motor Co. has gained share in the U.S. car market. Its U.S. sales rose 4.9 percent in the first two months, even as overall car sales in America slumped 39 percent.

The 4 trillion yuan ($585 billion) stimulus plan in China, Korea’s biggest international market, will also spur exports, said De Mello. He also holds investments in Indonesian rupiah, Philippine pesos and Taiwan dollars.

South Korea was the biggest loser among Asian currency markets in the past year before strengthening 11.6 percent in the past month. The gains pared its loss this year to 8.4 percent.

All of the region’s 10 most-active currencies outside of Japan weakened this year. Emerging-market bond funds absorbed new money for only the second time in the past 33 weeks during the fourth week of March, according to EPFR Global, a research company based in Cambridge, Massachusetts.

Underweight on Baht

The won may strengthen 5.7 percent to 1,300 against the U.S. dollar by the end of the year, according to the median estimate of 24 analysts in a Bloomberg News survey. The currency rose 0.7 percent to 1,374.50 as of 12:43 p.m. local time, according to Seoul Money Brokerage Services Ltd.

The won may weaken before rebounding because demand for Asia’s exports won’t recover in coming months, said Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore.

“The won will probably return to the 1,500 area in the next couple of months as risk appetite remains cautious and Asian exports continue to remain in the doldrums,” said Ng.

Asian economies will expand at the slowest pace since 1998 as the global recession hurts trade and government stimulus plans take time to revive growth, the Asian Development Bank said yesterday. The region excluding Japan will grow 3.4 percent this year before recovering in 2010 with a 6 percent expansion, the Manila-based institution said in a report.

Contracting Economy

Western Asset cut its holdings of Thai baht because it hasn’t weakened enough to increase earnings for the country’s exporters. The Thai baht rose 1.8 percent in the past month for a decline of 2.3 percent this year.

Thailand’s economy may shrink as much as 3 percent this year, the Finance Ministry forecast last week. Exports, which make up 70 percent of the economy, have fallen for four consecutive months.

“The currency that I’m a little bit worried about is the Thai baht,” said De Mello, who holds $5 billion in Asian bonds. “Thailand’s growth is quite weak and also Thailand depends a lot on exports.”

Indonesia’s currency and bonds should benefit from its currency-swap deals with Japan and China as well as from $5.5 billion of standby loans with multilateral organizations, De Mello said. Indonesia also sold $3 billion of dollar bonds overseas on Feb. 27. The rupiah rose 3.1 percent in the past month, paring its losses this year to 6.2 percent.

Western Asset doesn’t intend to add to its Philippine peso holdings on concern about “lower repatriation by overseas Filipino workers,” De Mello said. The firm, a unit of Legg Mason Inc., has kept a “small exposure” to the Taiwan dollar.

“We’re quite neutral on the Taiwan dollar,” De Mello said. “The Taiwanese are also worried about losing competitiveness especially compared to Korea.”

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

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Australia, N.Z. Dollars Fall on Retail Sales Drop, Bollard Call

By Candice Zachariahs

April 1 (Bloomberg) -- The Australian and New Zealand dollars slid on concern weakening economic growth will lead the two nations’ central banks to lower interest rates, sapping the appeal of their assets.

The currencies weakened against the greenback and the yen as U.S. lawmakers said the Obama administration is prepared to let General Motors Corp. and Chrysler LLC go bankrupt. New Zealand’s dollar dropped as central bank Governor Alan Bollard expressed concern about gains in long-term interest rates. Australian retail sales fell by the most since 2000, spurring speculation the central bank may lower its benchmark April 7.

“The retail spending data shows consumers are extremely cautious and really leaves the door open for a rate cut from the Reserve Bank of Australia next week,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “Bollard’s comments triggered the sell-off in” New Zealand’s dollar which may fall toward 55 U.S. cents, while Australia’s dollar may decline to 68 U.S. cents, she said.

Australia’s dollar weakened 0.4 percent to 68.82 U.S. cents as of 4:01 p.m. in Sydney from 69.13 cents late in New York yesterday. It depreciated 0.8 percent to 67.85 yen.

New Zealand’s dollar fell to 55.62 U.S. cents from 57.08 U.S. cents before Bollard’s comment and 55.95 cents late in New York. It bought 54.84 yen from 55.37 yen yesterday.

Gradual Recovery

“We are projecting interest rates to remain at relatively low levels for an extended period,” Bollard said today. “The economic recovery is expected to be very gradual.”

Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.

“There has been a panic rise in interest rates which stemmed from the view that the RBNZ wasn’t going to cut rates to as low as previously thought and hold them as low as thought,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “This removes the uncertainty around the easing track.”

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.69 percent from 3.93 percent before the comments. It had climbed as high as 4.12 percent on March 30, after the bank cut its benchmark on March 12 by less than some economists forecast.

Interest Rates

Traders raised bets for a 25 basis point cut by the RBNZ when it meets next April 30 to 100 percent from 72 percent at the start of the week, according to a Credit Suisse index based on swaps trading. Economists expect a reduction to 2.5 percent according to the median forecast of 13 economists surveyed by Bloomberg News. The bank has lowered its benchmark 5.25 percentage points since July.

The Australian dollar weakened 30 percent since a 25-year high reached July 15 as the country’s central bank cut interest rates by four percentage points. Four economists forecast the RBA will leave rates unchanged when it meets April 7, two expect a 25 basis point reduction and 10 predict a 50 basis point cut, according to a separate Bloomberg survey.

A decline in New Zealand’s cash rate to 2.5 percent, “further below the 3.25 percent in Australia, would argue for the Australian dollar above NZ$1.25,” wrote John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., in a note to clients today. The so-called Aussie advanced as high as NZ$1.2388, the most since March 25.

Retail Sales, Manufacturing

Australian retail sales declined 2 percent in February, the first drop in five months, the Bureau of Statistics said in Sydney today. The median forecast of 18 economists surveyed by Bloomberg News was for a 0.5 percent drop. Manufacturing contracted for a 10th month in March as new orders fell, the Australian Industry Group and PricewaterhouseCoopers said today.

Australia today sold A$600 million ($414 million) of bonds maturing February 2017 at a weighted average yield of 4.29 percent. The government received bids for 3.7 times the securities on offer.

Australian government bonds advanced for a third day. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 4.39 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.31, or A$3.10 per A$1,000 face amount, to 106.91.

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

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Indonesian Rupiah Leads Asian Currencies Lower on Risk Aversion

By Bob Chen

April 1 (Bloomberg) -- Asia currencies weakened, led by Indonesia’s rupiah, on concern a deepening global recession will curb investor demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, declined lower after reports showed U.S. consumer confidence and business sentiment in Japan are at or near record lows, while China’s manufacturing shrank for an eighth straight month. The rupiah today dropped as much as 1.5 percent before paring its losses on speculation Bank Indonesia intervened by buying the currency.

“The rupiah is seen as one of the more risky currencies and any risk aversion will certainly drive it down more than the rest,” said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. “It’s quite possible that Bank Indonesia intervened although it’s usually in small amounts.”

The rupiah was 0.6 percent lower at 11,620 per dollar as of 11:26 a.m. in Jakarta, after earlier weakening to 11,730, according to data compiled by Bloomberg. The Korean won slid 0.4 percent to 1,388.75 and the Singapore dollar fell 0.2 percent to S$1.5231. The Asia Dollar Index declined 0.3 percent, after gaining 2.7 percent last month.

The Bank of Japan today said its Tankan index of sentiment among large makers of cars, electronics and other goods slid to the lowest level since the survey began in 1974. The CLSA China Purchasing Managers’ Index dropped to 44.8 last month, CLSA Asia-Pacific Markets said today in an e-mailed statement. A reading below 50 shows a contraction.

The World Bank, the Organization for Economic Cooperation and Development and the Asian Development Bank all cut economic growth projections yesterday. The ADB cut its estimate for Asia excluding Japan to 3.4 percent from 5.8 percent.

Korea Trade Surplus

The won earlier climbed as much as 2.2 percent after the government reported a record trade surplus for March, easing a shortage of foreign exchange needed to pay overseas debt. It jumped 11 percent last month, the best performance in the region.

“There is some fundamental change in sentiment towards the won as a swing to a current-account surplus helps cement the belief that the worst is over,” said Park Sang Bae, a currency dealer with Industrial Bank of Korea in Seoul. “There may be ups and downs as market players are swayed by the outside world.”

The nation’s exports exceeded imports by $4.6 billion last month, the government announced today. South Korea’s current- account balance showed a surplus of $3.68 billion for February, following a $1.64 billion deficit in January, the Bank of Korea said this week. The indicator, which tracks the flow of goods, services and investment income, may show a record $5 billion surplus for March, the bank said.

Taiwan-China Ties

Taiwan’s dollar climbed 0.4 percent to NT$33.775, after last month strengthening the most in a year, on optimism improving relations with mainland China will help stem a slide in exports. The island’s overseas sales dropped 29 percent from a year earlier in February, sliding for a sixth straight month.

“We’ve been seeing some positive risk appetite for emerging-market assets for the past few weeks, but this time the talks about stronger ties between Taiwan and China are justifying appetite for the currency,” said Sebastien Barbe, Hong Kong-based head of emerging-market strategy at Calyon, the investment-banking unit of France’s Credit Agricole SA.

Chinese and Taiwanese military officials will meet for the first time in August at a military exchange seminar in Hawaii organized by the U.S. Asia-Pacific Center for Security Studies under the U.S. Pacific Command, the Beijing-based China Daily said yesterday, citing an unidentified China defense official.

Elsewhere, the Philippine peso was little changed at 48.335 per dollar. The Thai baht dropped 0.1 percent to 35.50, Malaysia’s ringgit declined 0.1 percent to 3.6490 and India’s rupee gained 0.1 percent to 50.6650.

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

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Gold Price ‘Probably at Peak,’ Westpac’s Smirk Says

By Jason Scott

April 1 (Bloomberg) -- Prices for gold are “probably at their peak” and may decline relative to other commodities, Westpac Banking Corp.

“The world deflationary spiral has and is currently keeping gold below $1,000 an ounce and I don’t expect it to get back above that, or not by much, for about two years,” Westpac Senior Economist Justin Smirk told a conference in Perth today.

Gold mining companies are looking to increase production as prices climb on investor demand for the precious metal as a store of value. Precious metals have benefited as some investors sought to protect their wealth and hedge against inflation as governments pumped more money into economies.

Gold is trading about 10 percent below last year’s all-time high of $1,032.70 an ounce. It gained 4.6 percent in the quarter ended March 31.

A weaker dollar is positive for gold prices, Smirk said.

Gold “will be outperformed by other rebounding commodities, which will move faster as economies recover,” he said. “Risk conditions have past their most extreme.”

To contact the reporter on this story: Jason Scott in Perth at jscott14@bloomberg.net

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Palm Oil Gains on Speculation Sales to Gain as Users Seek Value

By Luzi Ann Javier

April 1 (Bloomberg) -- Palm oil futures rose for a second day in Malaysia on investors’ speculation that demand for the tropical commodity may increase as consumers seek to use cheaper vegetable oils amid the global recession.

“We’re seeing some downgrading from people who usually use extra virgin olive oil, corn oil or soybean oil,” Carey Wong, an analyst at Oversea-Chinese Banking Corp., said today by phone. “Palm oil is still among the cheapest vegetable oils.”

The Organization of Economic Cooperation and Development said yesterday that the economy of its 30 members will contract 4.3 percent this year, while the World Bank cut its 2009 growth forecast for developing countries by more than half.

The June-delivery contract for palm oil, which is used in foods, cosmetics and biofuel, rose 1.4 percent to 2,028 ringgit ($556) a metric ton on the Malaysia Derivatives Exchange at 11:50 a.m. in Kuala Lumpur. The price has risen about 20 percent since the start of the year.

Demand for cheaper food commodities may increase during the global recession as consumers rein in spending and try so-called trading down. Rice demand may gain as more people eat the grain in place of meat, Robert Ziegler, director-general of the International Rice Research Institute, said last month.

Companies that make soaps and margarine from chemicals derived from vegetable oils may switch to palm oil to cut costs, Wong said from Singapore. “If you’re a company facing falling demand and tighter margins, obviously you’ll switch for a lower priced raw material,” he said.

Palm oil exports from Malaysia, the second-largest producer after Indonesia, gained 5.4 percent to 1.22 million tons in March, according an estimate yesterday from cargo surveyor Societe Generale de Surveillance. Shipments to Europe gained 47 percent to 216,780 tons, while exports to China fell.

The bulk of palm oil exports to Europe go to companies that process the tropical oil into chemicals that are used for making soaps and margarine, Wong said.

Soybean oil for May delivery fell 0.7 percent to 33.38 cents a pound in after-hours trade on the Chicago Board of Trade at 11:39 a.m. in Singapore. Soybean oil is a rival product to palm oil.

To contact the reporter for this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Corn Drops as Gain to 10-Week High Seen Excessive, Oil Declines

By Jae Hur

April 1 (Bloomberg) -- Corn declined on speculation that a rally to a 10-week high was excessive and a drop in crude oil prices may reduce demand for the crop as a source of alternative fuel. Wheat also slumped, while Soybeans extended gains.

Crude oil lost as much as 2.8 percent to trade at less than $49 a barrel. Corn gained 4.8 percent yesterday after touching $4.06 a bushel, the highest since Jan. 20. Soybeans added 5.3 percent, the biggest advance since Oct. 29. Wheat jumped 4 percent, the most in almost two weeks.

“Both Wall Street futures and oil prices are sharply lower, while the dollar has recovered yesterday’s decline,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “This is encouraging profit-taking across the grains following Tuesday’s post-report rally in the complex.”

Corn for May delivery fell as much as 1.4 percent to $3.99 a bushel in electronic trading on the Chicago Board of Trade and was at $3.9925 at 2:25 p.m. Singapore time. The most-active contract, which rose 13 percent in March, declined 0.6 percent in the first quarter, the third straight drop.

Soybeans for May delivery was up 0.3 percent $9.5525 a bushel after losing as low as $9.43 earlier. The oilseed climbed 9.2 percent in March. In the quarter, the price fell 2.9 percent, the third straight drop.

Corn jumped yesterday after a U.S. government report showed demand for the grain used in livestock feed was higher than forecast in the three months ended Feb. 28.

Stockpiles as of March 1 increased 1.5 percent to 6.958 billion bushels from a year ago, the Department of Agriculture said yesterday. Analysts surveyed by Bloomberg News forecast an average 7.012 billion.

Soybean Planting

Soybeans climbed yesterday as the U.S. Department of Agriculture report showed farmers intend to plant fewer acres of the oilseed than analysts expected.

Soybean acres will rise 0.4 percent to a record 76.024 million from a year ago, the USDA said. Analysts in a Bloomberg News survey forecast a 4.5 percent gain.

U.S. farmers will pare corn acreage by 1.2 percent to 84.986 million from a year ago, the USDA said. Analysts in the Bloomberg survey expected 1.5 percent decline in corn plantings as record fertilizer costs spurred a shift to less-costly soybeans.

Argentine farm groups failed to reach an agreement with the government over farm taxes after the two sides met to resolve a year-long conflict. The government reiterated its decision to maintain soybean taxes at 35 percent, said Interior Minister Florencio Randazzo. Farmers will lobby lawmakers to reach a quorum required to debate the issue in Congress.

Farmers went on strike last week, blocking highways in a year-long protest over taxes and overseas export restrictions. They are limiting sales of their produce as part of the protest.

May-delivery wheat fell as much as 1.7 percent to $5.235 a bushel and was at $5.265 at 2:30 P.m. Singapore time. The price fell 13 percent in the first quarter, the fourth straight drop.

U.S. farmers intend to plant the grain on 58.638 million acres this year, down 7.1 percent from 2008, the USDA said yesterday. Rain and snow in the northern Great Plains has caused flooding and muddied fields, possibly delaying the start of spring-wheat seeding next month.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

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Xstrata May Seek Copper Acquisitions After Equities ‘Collapse’

By Heather Walsh

April 1 (Bloomberg) -- Xstrata Plc, the world’s fourth- largest copper miner, said it may buy other producers after a ”collapse” in equities slashed the cost of potential targets.

A lack of financing for small- and mid-sized companies is creating opportunities for Xstrata that were previously “closed off” when equities were soaring, Xstrata Copper Chief Executive Officer Charlie Sartain said yesterday in an interview.

Acquisitions may help Xstrata double copper output and take advantage of stronger demand once a financial crisis ends. The Zug, Switzerland-based company raised 4.1 billion pounds ($5.9 billion) in a share sale last month and may use those funds to help finance purchases in copper or other commodities, he said.

“We’d certainly be looking at acquisitions as part of growth,” he said. “We’re looking at shifting our focus.”

Xstrata’s copper production will be little changed this year at about 950,000 tons, while the company wants to increase output to about 2 million tons. Unlike larger competitors such as BHP Billiton Ltd. and Freeport-McMoRan Copper & Gold Inc., Xstrata hasn’t cut output of the metal this year after a 57 percent drop in copper prices from a May record.

The “long-term” outlook for copper hasn’t fallen as much as the share prices of some companies, making assets “more attractive,” Sartain said in Santiago.

There are “small- to mid-sized companies that will be substantially constrained in their capacity to grow,” he said.

U.S. Demand

U.S. demand for copper may have hit bottom amid the global economic crisis, Jose Pablo Arellano, chief executive officer of Codelco, the world’s biggest copper-mining company, said yesterday in Santiago. There are signs that demand may stop falling in the U.S. as government spending helps to boost use of the metal. China, the world’s largest consumer, is showing a ”dynamism” in its demand for copper, he said.

Copper has gained 31 percent in three months, the second- best performer after gasoline among 19 raw materials tracked by the RJ/CRB commodity index. The metal, used in copper and wiring, has proved to be “resilient” compared with other metals during the global economic crisis, Sartain said.

Xstrata’s output slid 3 percent to 952,426 tons of copper in 2008 from the year earlier, according to its Web site.

Copper Futures

Copper futures for delivery in May yesterday rose 7.85 cents, or 4.4 percent, to $1.8445 a pound on the Comex division of the New York Mercantile Exchange. The metal marked its largest quarterly jump since 2006.

While there has been a “significant” drop in copper supplies, supply will outpace demand this year, Sartain said. Recent gains won’t be enough to encourage companies to resume production that was cut as prices slumped, he said.

To contact the reporter on this story: Heather Walsh in Santiago at hlwalsh@bloomberg.net

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Sumitomo Metal to Cut Nickel Output 23% to September

By Jae Hur and Yoshifumi Takemoto

April 1 (Bloomberg) -- Sumitomo Metal Mining Co., Japan’s top nickel producer and second-largest copper smelter, will cut refined nickel output by 23 percent in April to September compared with a year earlier on slumping demand from steelmakers.

The Tokyo-based company forecast refined nickel output will drop to 13,700 metric tons in the first half starting today from 17,734 tons produced in the year-earlier period, it said in a statement. It will also cut ferronickel output in the period by 20 percent to 8,900 tons, it said.

Sumitomo Metal is reducing production of nickel, used in electronics and stainless steel, as Japan heads for its worst recession since 1945, slashing demand from customers. The Organization for Economic Cooperation and Development yesterday projected the country’s economy will shrink 6.6 percent in 2009.

Sumitomo Metal plans to produce 33,200 tons of refined nickel and 16,800 tons of ferronickel in the year to March 31. The company, which last fiscal year planned to produce 36,000 tons of nickel and 22,400 tons of ferronickel, has yet to release output figures for the second half ended yesterday.

The smelter forecast copper production of 200,000 tons for the first six-months, up from 165,884 tons a year earlier, it said. This year’s copper output will total 401,000 tons versus last year’s plan of 394,000 tons, it said.

Sumitomo Metal Mining plans to shut its Toyo copper smelter, in Ehime prefecture, western Japan, for maintenance for 30 days between September and October, it said.

Last year’s copper output was reduced because of lower grade ore and maintenance at Toyo smelter, company spokesman Hiromasa Ooba said.

The following table summarizes the company’s metals output. Figures are in metric tons, except for gold and silver, which are in kilograms.

===============================================================
Metal                      2009                    2008
                      H1         H2          H1         H2
===============================================================
Copper               200,000    201,000     179,000    215,000
                                          (165,884)

Electrolytic Nickel   13,700     19,500      17,900     18,100
                                           (17,734)

Ferronickel            8,900      7,900      11,500     10,900
                                           (11,157)

Zinc                  35,300     32,800      42,700     42,500
                                           (43,526)

Electrolytic Lead     11,500     12,100      12,700     14,700
                                           (12,742)

Gold (kg)             17,000     18,000      18,000     22,000
                                           (18,618)

Silver (kg)          135,000    135,000     151,000    153,000
                                          (166,282)

Note: 2008 figures give planned output. Actual production in the
first half of 2008 is in parentheses. Output plans in the second
half did not include the company’s Jan. 5 announcement of cuts
for January to March.
===============================================================


To contact the reporters on this story:
Jae Hur in Tokyo at
jhur1@bloomberg.net;
Yoshifumi Takemoto in Tokyo at
ytakemoto@bloomberg.net

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Mitsubishi Materials to Cut Copper Output by 9.3%

By Jae Hur and Yoshifumi Takemoto

April 1 (Bloomberg) -- Mitsubishi Materials Corp., Japan’s third-largest copper producer, said it will cut output by 9.3 percent at its Japanese smelters in April to September compared with a year earlier.

The Tokyo-based company is planning to produce 24,259 metric tons of copper each month for the fiscal first-half to Sept. 30, compared with its monthly output of 26,735 tons in the same period a year earlier, it said in a statement today.

The company will reduce refined lead production by 13 percent to 1,930 tons a month during the six-month period following slumping demand, it said.

The following table details monthly production plans:

(metric tons) =============================================================== Metal H1 2009 H2 2008 H1 2008 =============================================================== Copper 24,259 23,615 26,735 Lead 1,930 1,950 2,222 Zinc 654 854 653 Gold (kg) 2,867 2,067 2,277 Silver (kg) 29,500 31,000 30,933

* Note: The increase in gold output is due to higher grade of ore, while the drop in silver production is due to lower imports of raw material. ===============================================================

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Yoshifumi Takemoto in Tokyo at ytakemoto@bloomberg.net

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China’s Stocks Rise to 7-Month High; Zijin, Jiangxi Copper Gain

By Zhang Shidong

April 1 (Bloomberg) -- China’s stocks rose, driving the benchmark index to a seven-month high. Zijin Mining Group Co. and Jiangxi Copper Co. led gains on expectations rising metals prices will boost the earnings outlook for commodity producers.

Jiangxi Copper jumped 2.6 percent, while Zijin Mining, the nation’s biggest gold producer, advanced 1.1 percent. China Shenhua Energy Co. advanced 5.8 percent after a newspaper report said the government may raise coal prices. Aluminum Corp. of China Ltd. added 3.1 percent.

“The risk of inflation is looming and investors are seeking a hedge in commodities, which will help to boost the earnings of raw-material companies,” said Yan Ji, an investment manager at HSBC Jintrust Fund Management Co. in Shanghai, which manages the equivalent of about $850 million.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 34.80, or 1.5 percent, to 2,408.02 at the close, the highest since Aug. 25. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, gained 1.6 percent to 2,548.22.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net

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Japanese Stocks Snap 3-Day Slide on Weaker Yen, Profit Optimism

By Masaki Kondo

April 1 (Bloomberg) -- Japanese stocks snapped a three-day slide after the weaker yen lifted earnings prospects for automakers and a government report fanned optimism profit declines won’t accelerate.

Honda Motor Co., Japan’s No. 2 automaker, added 6.7 percent after the yen fell and on speculation market share will expand if U.S. automakers go bankrupt. Sony Corp., an electronics maker planning job cuts to cope with a record loss, rose 6.4 percent after a central bank survey showed businesses expect a narrower profit drop this year. Chuo Mitsui Trust Holdings Inc., Japan’s sixth-largest listed bank by assets, soared 11 percent after reducing stockholdings to preserve capital.

The Nikkei 225 Stock Average jumped 242.38, or 3 percent, to close at 8,351.91 in Tokyo, rebounding a three-day, 6.1 percent decline. The broader Topix index rose 20.16, or 2.6 percent, to 793.82, with three stocks gaining for each that fell.

“Businesses are getting out of the worst period in terms of earnings,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “As the new fiscal year begins, fund managers are starting to buy into the market. Their purchases encompass a wide range of shares so as to track index performance.”

The Topix tumbled 36 percent in the fiscal year ended yesterday, the steepest tumble on record going back to 1969, as the global economy slipped into recession. The gauge’s constituents have traded at below their corporate net worth since Nov. 10.

‘Competitive’ Industry

Honda, Japan’s No. 2 automaker, surged 6.7 percent to 2,470 yen, and smaller rival Nissan Motor Co. jumped 10 percent to 385 yen. Market leader Toyota Motor Corp. rose 4.8 percent to 3,270 yen even after the Nikkei newspaper said the company will cut its second-half dividend for the first time since 1995. Automakers as a group contributed the most to the Topix advance.

U.S. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for General Motors Corp. to restructure and is prepared to let Chrysler LLC go bankrupt, people familiar with the matter said.

“Globally, the Japanese auto industry is the most competitive, and because of concern about the outlook and about the U.S., these companies are trading on very attractive valuations,” Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion, said in an interview with Bloomberg Television.

The Japanese currency depreciated to as much as 99.47 yen per dollar from 97.96 at the close of stock trading in Tokyo yesterday. The yen fell versus the euro to 131.89 from 129.55. A weaker Japanese currency boosts the value of overseas sales.

Job Cuts

Sony, the world’s second-biggest maker of consumer electronics, jumped 6.4 percent to 2,125 yen, while Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, leapt 4.4 percent to 1,117 yen. Sony has planned to eliminate more than 16,000 jobs by March 2010 as its operating loss is estimated to reach a record 260 billion yen in fiscal 2008. Komatsu said in January it’s eliminating 2,100 non-regular domestic jobs.

The Tankan index of sentiment among large manufacturers slid more than forecast in the quarter ended in March to the lowest since the survey began in 1974, the Bank of Japan said today. Pretax profit at large enterprises is expected to drop by 11 percent this business year, smaller than a 29 percent decline in fiscal 2008, according to the report.

Shinichi Ichikawa, chief strategist for Japanese equities at Credit Suisse Group AG, wrote in a report today the Tankan forecast for profit decline was narrower than the brokerage’s estimate for a 25 percent slump. Companies have to carry out deeper cost cuts to support earnings as sales continue to fall, he said.

‘Crisis’ Response

Chuo Mitsui soared 11 percent to 332 yen, the steepest jump since Jan. 27. The company yesterday said it sold shareholdings worth 248.2 billion yen ($2.51 billion) to prevent the volatility of the equity market from affecting its capital.

Japanese Prime Minister Taro Aso’s administration will compile a third stimulus package by mid-April to address the “economic crisis,” Aso said yesterday. His Liberal Democratic Party recommended buying shares to shore up the stock market and to preserve banks’ capital, while aiming to create 2 million jobs in three years.

Nikkei futures expiring in June added 3.2 percent to 8,380 in Osaka and jumped 2.7 percent to 8,350 in Singapore.

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

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Asian Stocks Rise Amid Speculation of U.S. Auto Bankruptcies

By Patrick Rial

April 1 (Bloomberg) -- Asian stocks rose for the first time in three days on speculation Japanese and South Korean automakers will benefit from the possible bankruptcies of General Motors Corp. and Chrysler LLC.

Honda Motor Co., which generates 51 percent of its sales in North America, climbed 6.7 percent in Tokyo and Hyundai Motor Co. added 4.7 percent in Seoul. U.S. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and is prepared to let Chrysler go bankrupt, people familiar with the matter said. Elpida Memory Inc., Japan’s largest computer memory chipmaker, soared 15 percent after being chosen to join Taiwan Memory Corp. in reorganizing the industry.

“Less competition should help automakers expand market share, not just in the U.S., but all around the world,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages $53 billion. “I expect the rally will continue for another month or two. Many economic figures are showing signs of improvement.”

The MSCI Asia Pacific Index gained 1.4 percent to 82.02 as of 2:51 p.m. in Tokyo, following a two-day, 5.3 percent slump. The gauge rose 7.6 percent last month, its first advance in 2009, as some investors bet governments worldwide will succeed in reviving global growth. Consumer-related shares, including carmakers, accounted for 38 percent of the measure’s climb.

China Unicom, OneSteel

Japan’s Nikkei 225 Stock Average rose 2.8 percent to 8,337.67. South Korea’s Kospi Index climbed 2.2 percent. Markets in the region advanced except in Australia, New Zealand, Singapore, Hong Kong, Thailand, the Philippines and India.

China Unicom (Hong Kong) Ltd. plunged 8.9 percent after the company’s earnings missed analyst estimates, prompting Citigroup Inc. to recommend selling the shares. Santos Ltd., Australia’s No. 3 oil producer, jumped 2.6 percent following gains in oil prices. OneSteel Ltd., the country’s No. 2 steelmaker, slumped 5.3 percent after extending production cuts.

Futures on the Standard & Poor’s 500 Index slumped 1.6 percent, following the gauge’s 1.3 percent rally yesterday. Futures accelerated declines as news of the U.S. government’s plans for the automakers emerged.

Obama will let Chrysler go bankrupt and be sold off piecemeal if the third-largest U.S. automaker can’t form an alliance with Fiat SpA, said members of Congress who have been briefed on the subject and two other people familiar with the administration’s deliberations.

Automaker Bankruptcies

Honda climbed 6.7 percent to 2,470 yen. Toyota Motor Corp., the world’s largest automaker, jumped 5.1 percent to 3,280 yen. Hyundai Motor rose 4.7 percent to 58,100 won.

“People here are expecting GM and Chrysler won’t survive long,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “The initial impact is probably big if they really go bankrupt.”

U.S. March auto sales data due later today are expected to come in at an annualized rate of 8.8 million vehicles, which would be the lowest since December 1981, according to analysts in a Bloomberg News survey. Japan’s auto sales slumped 32 percent in March, the Japan Automobile Dealers Association said in a statement today.

Companies on the MSCI Asia Pacific Index are valued at an average 25 times estimated earnings. Analysts have lowered their profit projections by two-thirds in the last 12 months, according to data compiled by Bloomberg.

Tankan Survey

The gauge declined 9.7 percent last quarter amid growing signs the global recession is hurting corporate earnings. Stocks today shrugged off a report showing South Korean exports slumped for a fifth month in March and the Bank of Japan’s quarterly Tankan survey, which was worse than economists predicted.

The Tankan, which tracks sentiment among large manufacturers, fell to a record low of minus 58. Capital spending plans only dropped by half as much as economists had forecast and managers expect a rebound in profits later this year. Prime Minister Taro Aso said yesterday his administration will compile a third stimulus package by mid-April.

“Though the Tankan report is awful, businesses are getting out of the worst period in terms of earnings,” said Mitsubishi UFJ’s Ishigane. “Governments including Japan are introducing a series of stimulus packages and what’s important is not the quality of the plan but the quantity of money spent.”

Aso will join leaders from the Group of 20 nations at a London summit starting tomorrow. Obama will be hoping to devise a coordinated response to the financial crisis at the meeting, according to Mike Froman, the president’s deputy national security adviser for economic affairs.

Chipmakers Climb

Elpida soared 15 percent, the equivalent of its daily limit, to 780 yen, the second-biggest gain in the MSCI World Index, after it beat U.S. rival Micron Technology Inc. for the partnership with Taiwan Memory, the memory-chip company set up by the government.

Powerchip Semiconductor Corp., Taiwan’s largest memory-chip maker, climbed by its daily 6.8 percent limit to NT$4.71. ProMOS Technologies Inc., the most unprofitable Taiwan memory-chip supplier, surged 6.8 percent to NT$1.41.

China Unicom slumped 8.9 percent to HK$7.54. Sales from continuing operations fell in 2008, while net income jumped 58 percent due to a one-time gain from the sale of a unit. Michael Meng, an analyst at Citigroup in Hong Kong, cut the shares to “sell” from “hold,” as margins are likely to deteriorate as competition intensifies.

Santos climbed 2.6 percent to A$17.29. Inpex Corp., Japan’s largest oil explorer, rose 3.8 percent to 709,000 yen. Cnooc Ltd., China’s largest offshore oil producer, added 1 percent to HK$7.76.

Crude oil for May delivery rose 2.6 percent to $49.66 a barrel in New York yesterday, capping an 11 percent gain over three months. A measure of six primary metals traded in London advanced 2.1 percent.

OneSteel slumped 5.3 percent to A$2.13 after saying output from its Sydney and Laverton electric-arc furnaces will be cut to 725,000 metric tons. That’s deeper than the previously announced cut to 850,000 tons. BlueScope Steel Ltd., Australia’s largest producer, dropped 3.5 percent to A$2.48.

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

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Nigeria Becomes World’s Worst Stock Market as Bank Losses Swell

By Janice Kew and Michael Patterson

April 1 (Bloomberg) -- Nigeria’s stock market, Africa’s best performer during the past decade, posted the biggest declines worldwide in the first quarter as bad loans to speculators pushed bank valuations to an all-time low.

The Nigerian Stock Exchange All Share Index fell 37 percent this year, the steepest quarterly decline in more than a decade and the worst of 89 benchmark indexes tracked by Bloomberg. Stocks in Africa’s largest oil-producing nation reached a five- year low last week, even as a rebound in crude spurred gains in commodity-exporting countries from Russia and Norway to Brazil.

Investors have been fleeing “the good, the bad and the ugly” of the financial industry since Nigerian regulators allowed banks to delay booking losses on so-called margin loans backed by shares, emerging-markets brokerage Renaissance Capital says. The lack of disclosure left investors unable to identify potential losses. The All Share Index may fall another 9 percent, according to Moscow-based Renaissance and London-based Exotix Holding Ltd.

“Without meaningful disclosure investors will be hesitant to come back, especially in the financials,” said Christopher Hartland-Peel, an equity analyst at Exotix. “No one can really tell how the companies are faring.”

Lenders may be holding as much as $10 billion of toxic assets, equal to about half of their capital, according to Eurasia Group, the New York-based research firm that publishes the Global Political Risk Index with Citigroup Inc. Banks have provided at least 1 trillion naira ($6.8 billion) of margin loans to allow investors to buy shares, Bank of America Corp. said in a report last week.

Slowing Economy

Growth of Nigeria’s economy may slow to 1.5 percent this year because of lower revenue from oil, which accounts for 20 percent of gross domestic product, according to Standard & Poor’s. The naira weakened 20 percent against the dollar since Nov. 26, when the Central Bank of Nigeria began limiting the supply of foreign exchange to banks to protect foreign reserves.

Renaissance and Exotix expect the All Share Index to drop to 18,000 from yesterday’s closing level of 19,851.89.

The market has a daily turnover of between $10 million and $20 million and a total capitalization of $30.1 billion, according to Renaissance and UBA Capital, the brokerage unit of Lagos-based United Bank for Africa Plc. That compares with an average turnover of $30.2 billion a day this year on the New York Stock Exchange and a U.S. market capitalization of $9.26 trillion, Bloomberg data show.

No Bank Failures

Lenders make up about two-thirds of the Nigerian stock market, the largest proportion among the 50 equity indexes worldwide that are grouped in industries by Bloomberg and MSCI Inc. Banks accounted for four of the five worst performers this year among the 20 biggest Nigerian stocks by market value.

Wema Bank Plc, the lender whose chief executive was replaced by the central bank in September, dropped 67 percent, while Stanbic IBTC Plc, the Nigerian unit of Standard Bank Group Ltd., and Intercontinental Bank Plc, the country’s fourth- biggest lender, lost 51 percent. Zenith Bank Plc, the second- largest, retreated 47 percent. African Petroleum Plc, Nigeria’s second-biggest fuel retailer by market value, was the worst performer with a 79 percent drop. All are based in Lagos.

Central bank Governor Chukwuma Soludo said Nigeria won’t allow any lenders to fail. Banks in distress may be given loans, have their management restructured or be forced to merge with another lender, he said in a speech in Lagos on March 30.

Bank Reserves

Nigeria’s lenders have among the biggest cushions against losses in the world, according to the central bank. Their average capital adequacy ratio, a measure of capital against risk-weighted assets, stands at about 22 percent, compared with 18.4 percent on average for financial companies in the S&P 500 Index, according to Bloomberg data.

Festus Odoko, spokesman for the central bank, couldn’t be reached to comment.

UBA Capital says the retreat in stocks creates buying opportunities, including Nigerian Breweries Plc, the nation’s biggest beer maker by volume, and Lafarge WAPCO Plc, a unit of the world’s largest cement company. Nigerian Breweries lost 9 percent this year after falling 16 percent in 2008. Lafarge dropped 42 percent after a 68 percent slide last year.

“It’s a time to be increasing exposure with a long-term horizon,” said Jonathan Harrison, the London-based global head of research at UBA.

Niger Delta

Nigeria’s All Share index surged 454 percent from 1998 through last year, as investors poured money into lenders, brewers and construction companies to gain from an economy that grew at an average annual rate of 7.8 percent.

Stocks began falling a year ago as attacks by militants in the Niger River delta cut oil production. A 68 percent tumble in crude prices triggered by the global economic slowdown spurred more equity losses, prompting the stock exchange to temporarily restrict share-price declines to 1 percent a day in August.

Stocks dropped for 23 straight days in October after the Nigerian Central Bank said lenders have the option to restructure margin loans until December 2009.

The six-month decline extended to 57 percent through yesterday, pushing prices for Nigeria’s biggest lenders to below their breakup value, at about 0.75 times net assets, down from a peak of 4.36 in February 2008, according to Exotix. That compares with a ratio of 1.3 for the MSCI Emerging Markets Financials Index, according to Bloomberg data.

“It’s a very opaque market,” said Francis Beddington, co- founder of London-based Insparo Asset Management, which oversees $140 million in Africa and the Middle East. “There are very good companies, but you don’t know what’s going on with the banks.”

To contact the reporters on this story: Janice Kew in Johannesburg at jkew1@bloomberg.net; Michael Patterson in London at mpatterson10@bloomberg.net.

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Germany Stocks Update: DAX Index Falls 20.52 to 4,064.24

By Daniel Hauck

April 1 (Bloomberg) -- Germany's benchmark stock index, the DAX Index, fell 0.50 percent at 9:05 a.m.

The index of 30 companies traded on the Frankfurt Stock Exchange fell 20.52 to 4,064.24. Among the stocks in the index, 10 rose and 20 fell.

Declines in the DAX were led by Siemens Ag, Volkswagen Ag and Sap Ag. About 3.58 million shares traded in the DAX.

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U.K. Stocks Update: FTSE 100 Falls 18.27 to 3,907.87

By Daniel Hauck

April 1 (Bloomberg) -- The U.K.'s benchmark stock index, the FTSE 100, fell 0.47 percent at 8:05 a.m.

The index of 102 stocks traded on the London Stock Exchange fell 18.27 to 3,907.87. Among the stocks in the index, 27 rose, 68 fell and 7 were unchanged.

Declines in the FTSE 100 were led by Bp Plc (Bp/ Ln), Royal Dutch Shell Plc (Rdsa Ln) and Hsbc Holdings Plc (Hsba Ln). About 28.74 million shares traded in the FTSE 100.

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U.S. Futures, Europe Stocks Fall; GM Tumbles, Toyota Advances

By Sarah Jones

April 1 (Bloomberg) -- U.S. stock futures and European shares slid after people familiar with the matter said the U.S. government believes bankruptcy is the most likely option for General Motors Corp. and Chrysler LLC. Asian indexes gained.

GM slumped 4.1 percent in Germany. President Barack Obama believes a quick, negotiated bankruptcy is the most likely way for the automaker to restructure, according to members of Congress who were briefed on the situation. Honda Motor Co. and Toyota Motor Corp. climbed more than 5 percent on speculation Japanese automakers will benefit if GM and Chrysler go bankrupt. BP Plc slid 1.9 percent as Goldman Sachs Group Inc. recommended selling the shares.

Standard & Poor’s 500 Index futures dropped 0.8 percent at 8:14 a.m. in London, indicating the benchmark index for U.S. equities will retreat after its biggest monthly gain since 2002. The S&P 500 has climbed 18 percent since March 9 as banks from Citigroup Inc. to Bank of America Corp. said they made money in the first two months of 2009 and U.S. Treasury Secretary Timothy Geithner unveiled plans to rid lenders of toxic assets.

Obama is also prepared to let Chrysler go bankrupt and be sold off piecemeal if the automaker can’t form an alliance with Fiat SpA, said members of Congress who were briefed on the situation. The Institute for Supply Management’s factory index will probably show today that U.S. manufacturing shrank further in March.

Europe’s Dow Jones Stoxx 600 Index slipped 0.7 percent following its first monthly gain since August. Europe’s regional gauge still lost 11 percent last quarter.

GM, Obama

GM tumbled 4.1 percent to $1.86 in Germany. The “quick and surgical” bankruptcy Obama’s administration said was an option for GM and Chrysler appears to be inevitable, said the members of Congress and two other people familiar with the matter.

Obama arrived in London last night for a summit among leaders of the biggest economies with the aim of overcoming signs of discord in dealing with the global financial crisis.

The president’s agenda for the Group of 20 meetings is to coordinate a response to the recession by spurring growth and coming up with an overhaul of market regulations to include hedge funds, derivatives trading, executive pay and excessive risk-taking by financial firms.

BP slid 1.9 percent to 462.75 pence. Goldman Sachs downgraded Europe’s second-largest oil company to “sell” from “neutral,” citing “structural production decline” in 2010.

BHP Billiton Ltd. declined 1.7 percent to 1,361 pence. Morgan Stanley downgraded the world’s biggest mining company to “underweight” from “equal-weight.” Morgan Stanley also lowered its recommendation for Antofagasta Plc to “equal- weight” from “overweight.”

Asian Shares Rally

Asian stocks rose for the first time in three days today as investors speculated Japanese and South Korean automakers will benefit from the possible bankruptcy of GM and Chrysler.

Honda, which generates 51 percent of its sales in North America, climbed 6.7 percent to 2,470 yen. Toyota, the world’s largest automaker, jumped 5.1 percent to 3,280 yen.

The ouster of GM and Citigroup from News Corp.’s global stock index is leading to calls for Rupert Murdoch’s company to also remove them from the 112-year-old Dow Jones Industrial Average.

GM and Citigroup were dropped from the 150-stock Global Dow today after “extraordinary market conditions” pushed down the shares more than 88 percent in the past year, News Corp. said in a March 27 press release. They are among five stocks in the 30- company Dow industrials that closed below $10 this year.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Petrobras, Globex, Industrias Penoles: Latin Equity Preview

By Hugh Collins

April 1 (Bloomberg) -- The following companies may have unusual price changes today in Latin American trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index gained 1.9 percent to 2,171.40. In Brazil, preferred shares usually are the most- traded class of stock.

Brazil

Petroleo Brasileiro SA (PETR4 BS): Brazil’s state- controlled oil company said its fuel sales climbed in March from a year earlier, a sign that Brazil’s economy is starting to recover, O Globo cited Chief Executive Officer Jose Sergio Gabrielli as saying. Petrobras fell 0.8 percent to 28.55 reais.

Globex Utilidades SA (GLOB3 BS): Grupo Silvio Santos, the Brazilian conglomerate controlled by media magnate Silvio Santos, said it’s interested in buying Ponto Frio, a chain of electronics and home-appliance stores, from Globex. Globex rose 0.5 percent to 6.45 reais.

Chile

Distribucion y Servicio D&S SA (DYS CC): Chile’s largest grocer may not begin operations in Peru in 2009 as previously planned, Reuters cited D&S Chairman Felipe Ibanez as saying. D&S fell 0.4 percent to 225 pesos.

Peru

Banco de Credito del Peru (BCP/C PE): Peru’s largest bank said Dionisio Romero Seminario will step down after 30 years as chairman of the board. Romero will be replaced by his son, Dionisio Romero Paoletti. Banco de Credito del Peru fell 0.3 percent to 8.04 soles on March 30, the last time it traded.

Mexico

Industrias Penoles SAB (PE&OLES MM): Mexico’s January silver output rose 37 percent to 221,180 kilograms, the National Statistics Agency said yesterday. Penoles, the world’s largest dedicated silver producer, rose 0.2 percent to 148.17 pesos.

To contact the reporter on this story: Hugh Collins in Mexico City at Hcollins8@bloomberg.net

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Celgene, Google, GM, Salesforce, VMware: U.S. Equity Preview

By Rita Nazareth

April 1 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

3M Co. (MMM US): The maker of more than 55,000 products from Post-it Notes to electronic road signs said it cut 1,200 jobs, or about 1.5 percent of its workforce, in the first quarter.

Boeing Co. (BA US): The second-largest commercial-plane maker was cut to “market perform” at Wachovia Corp., which said Boeing may announce cuts in 2010 jet production.

Celgene Corp. (CELG US): The maker of cancer drug Revlimid said it expects 2009 profit at the lower end of its previously forecast range of $2.05 to $2.15 a share.

General Motors Corp. (GM US): President Barack Obama has determined that a prepackaged bankruptcy is the best way for GM to restructure and become a competitive automaker, people familiar with the matter said.

Google Inc. (GOOG US): The world’s largest Internet search engine had its first-quarter revenue estimate cut at Goldman Sachs Group Inc. to a decline of 3 percent versus the October- to-December period because of declines in the euro and pound. Analyst James Mitchell said the reduction doesn’t change his “broadly positive view of Google’s stock.”

Oshkosh Corp. (OSK US): The maker of scissor lifts and military trucks said it expects as much as $1.5 billion in charges to write down goodwill and other intangible assets in its fiscal second quarter.

Salesforce.com Inc. (CRM US): The biggest seller of online customer-management software was added to the “conviction sell” list at Goldman Sachs Group Inc., which said slowing technology spending may drag down earnings.

VMware Inc. (VMW US): The biggest maker of programs that let computers run multiple operating systems was added to the “conviction buy” list at Goldman Sachs Group Inc., which said the stock may rise 23 percent as sales increase.

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

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