Global Confidence Rises to 11-Month High as Credit Markets Thaw

By Shamim Adam

April 16 (Bloomberg) -- Confidence in the global economy rose to an 11-month high as officials stepped up efforts to thaw credit markets, stocks rallied and some banks returned to profit, a Bloomberg survey of users on six continents showed.

The Bloomberg Professional Global Confidence Index climbed to 21.2 in April from 5.95 in March, the biggest increase since the survey began in November 2007. A reading below 50 means pessimists outnumber optimists. Sentiment climbed the fastest in Asia and the U.S. as respondents around the world became more confident the worst may be over for their economies.

“The outlook was completely hopeless a month ago and now there’s a slight ray of hope that a recovery in financial markets will lead to a recovery in the broader economy,” said Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York, and a survey participant. “Things are not as gloomy as before. We will improve slowly, probably in fits and starts.”

Lenders from Citigroup Inc. to JPMorgan Chase & Co. said they made money in the first two months of the year as zero interest rates and central bank purchases of government debt led to a jump in home loans. At the same time, manufacturing is declining and unemployment rising amid a drop in global demand that may see world trade shrink as much as 9 percent this year.

The survey of more than 1,300 Bloomberg users was conducted between April 6 and April 10. Since the previous survey, Federal Reserve Chairman Ben S. Bernanke said the “sharp decline” in the U.S. economy is easing, and the Group of 20 nations increased the resources of the International Monetary Fund.

Largest Economy

A measure of U.S. participants’ confidence in the world’s largest economy rose to 23.9 from 5.2, the survey showed. Sentiment jumped in all other markets, with the index for Japan climbing to 22.2 from 4.5. The gauge for Western Europe advanced to 14.2 from 8.2.

Bloomberg users from Milan to Mexico City became more confident in stock markets, the survey showed. The MSCI World Index has climbed 12.6 percent in the past month, and U.S. banking stocks are up 31 percent in the same period.

“While the worst of the recession may be behind us, the path out of it will take many years,” said Guy LeBas, chief economist at Janney Montgomery Scott LLC in Philadelphia, who is a regular survey participant. “The financial sector is in less bad shape in part because of the policy responses.”

The Fed announced plans in March to acquire as much as $300 billion in U.S. Treasuries over six months and more than double mortgage-debt purchases to $1.45 trillion.

Willing to Lend

Yields show banks are more willing to lend as the gap between what they and the U.S. Treasury pay to borrow money for three months, the so-called TED spread, narrowed to 95 basis points from 2008’s high of 4.64 percentage points in October.

The London interbank offered rate for three-month dollar loans is dropping at the fastest pace since January. The rate was 1.11 percent yesterday, from 1.31 percent a month ago.

“The fiscal stimulus and credit easing have put a floor under confidence,” said Kenneth Broux, an economist at Lloyds TSB Group Plc in London, who takes the survey regularly. “The leading indicators, and the rally in equities, will make people feel slightly less bearish.”

In Latin America, confidence rose to 23.6 in April from 11.6 last month, while the index for Asia increased to 36.6 from 12.7.

Japanese Prime Minister Taro Aso unveiled a record 15.4 trillion-yen ($156 billion) stimulus package on April 10 aimed at creating jobs in an economy heading for the worst recession since 1945.

Japan’s Stimulus

The pledge, which will bring total spending to 25 trillion yen, came after exports plunged an unprecedented 49.4 percent in February. Reports released in the past month show companies plan to increase output after draining inventories, merchant sentiment climbed to an eight-month high in March, and manufacturers expect to be less pessimistic next quarter.

“Production has started to stabilize and, at the same time, the effects of the new fiscal package will start to feed through,” said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo, who predicts the economy will contract at a slower rate this year thanks to Aso’s plan.

The U.S. dollar may weaken in the next six months against the world’s most active currencies, with the index falling to 42.9 compared with 53.4 in March, the survey showed.

Users in Japan are evenly divided on the direction of the yen against the dollar compared with March, while people in Western Europe are confident the euro will strengthen against its U.S. counterpart.

Most respondents around the world still expect short-term interest rates to fall, the survey showed. The European Central Bank lowered its benchmark rate by a quarter-point to 1.25 percent on April 2, while the Bank of Mexico, which cut its rate by 75 basis points last month, may trim it again this week.

“Any indication that central banks or governments are pulling back on policy responses could be perceived as very negative,” said LeBas of Janney Montgomery Scott. “The global economy still needs propping up.”

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

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Philippines May Cut Key Rate to 17-Year Low as Exports Collapse

By Clarissa Batino and Michael J. Munoz

April 16 (Bloomberg) -- The Philippine central bank may cut its benchmark interest rate to a 17-year low to prop up an economy battered by falling exports amid the global recession.

Bangko Sentral ng Pilipinas will lower the rate it pays lenders for overnight deposits a quarter of a percentage point to 4.5 percent, according to 10 of 12 economists in a Bloomberg News survey. One expects a half-point cut and the other predicts no change. The decision is due after 4 p.m. in Manila today.

Government officials meeting today may trim the 2009 growth forecast to the slowest in eight years as shipments by manufacturers such as Texas Instruments Inc. tumble. Inflation has halved from a 16-year high of 12.4 percent in August, allowing the central bank to cut borrowing costs in the past three meetings.

“The central bank will continue to ease and probably step up the rate cuts by mid-year once inflation has dropped significantly,” said Simon Wong, an economist at Standard Chartered Plc in Hong Kong. “With trade collapsing and remittances expected to turn negative soon, the economy is headed for a sharp slowdown in 2009.”

Exports in February shrank 38.5 percent from a year earlier, declining for a fifth month, according to the median estimate of 10 economists in a Bloomberg News survey. Overseas sales, which make up about 38 percent of the economy, plunged a record 40.6 percent in January, according to Bloomberg data going back to 1981. The statistics office will release the data at 9 a.m.

Remittances, or funds sent home by Filipinos working overseas, may not grow this year, the central bank has said. The inflows are equivalent to more than 10 percent of the $144 billion economy.

Economic Targets

Economic managers may cut the 2009 gross domestic product growth target to a range of 3.1 percent to 4.1 percent from the current estimate of 3.7 percent to 4.4 percent when they meet today, Economic Planning Director Dennis Arroyo said April 14.

The government may also trim predictions for exports and widen the budget-deficit forecast from the current 177.2 billion-peso ($3.7 billion) ceiling, Arroyo said. The budget shortfall may reach a record 250 billion pesos this year on higher state spending, Economic Planning Secretary Ralph Recto said yesterday.

Asian policy makers have unveiled stimulus packages worth more than $950 billion and lowered borrowing costs to revive growth as the global slump pushed Japan, Singapore and Taiwan into recession.

Neighboring Indonesia earlier this month reduced its benchmark interest rate to 7.5 percent and said it has scope to ease policy further. Thailand last week reduced borrowing costs to 1.25 percent, the lowest level since July 2004.

Flexibility

The Philippine central bank “has some flexibility in its monetary policy to ensure that financial markets function efficiently so as to create an environment where economic growth is not derailed,” Governor Amando Tetangco said this month.

Lower borrowing costs is enabling SM Investments Corp., owner of the nation’s biggest retailer and largest lender by assets, and San Miguel Brewery Inc. to raise funds amid the global credit crunch that escalated last year after Lehman Brothers Holdings Inc. filed for bankruptcy.

Bangko Sentral has cut its key rate by 1.25 percentage points since mid-December to 4.75 percent. A reduction to 4.5 percent would be the lowest since 4.125 percent in May 1992, according to central bank data.

The following are economists’ estimates for the central bank’s overnight borrowing rate and February exports:

Philippines Overnight Borrowing Rate
-------------------------------------------
Policy Meeting          April    May    End
Dates                      16     28   2009
-------------------------------------------
Median                  4.50%  4.25%  4.00%
% forecasts at Median     83%    67%    57%
High                    4.75%  4.50%  4.25%
Low                     4.25%  4.00%  3.00%
Number of Estimates        12      6      7
-------------------------------------------
Action Economics        4.50%  4.25%  4.25%
Barclays Capital        4.50%  4.25%  4.00%
BDO Unibank             4.75%  4.50%  4.00%
Citi                    4.50%     --     --
Credit Suisse           4.50%     --     --
DBS Group               4.50%  4.25%  4.00%
Forecast Singapore      4.50%     --     --
HSBC                    4.50%     --  4.25%
ING Groep NV            4.50%     --     --
Moody’s Economy.com     4.50%  4.25%  4.00%
Nomura Securities       4.25%     --     --
Standard Chartered      4.50%  4.00%  3.00%
-------------------------------------------

Philippines February Exports Forecasts
-------------------------------------------
Median                               -38.5%
Average                              -37.5%
High                                 -25.0%
Low                                  -45.0%
Number of Estimates                      10
-------------------------------------------
Action Economics                     -39.0%
Barclays Capital                     -35.0%
Citi                                 -43.5%
DBS Group                            -40.0%
Forecast Singapore                   -41.3%
HSBC                                 -32.0%
ING Groep NV                         -38.0%
Nomura Securities                    -45.0%
Standard Chartered                   -36.0%
UBS                                  -25.0%
-------------------------------------------

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.

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New Zealand’s Manufacturing Contracts Amid Recession

By Tracy Withers

April 16 (Bloomberg) -- New Zealand’s manufacturing industry shrank for an 11th month in March as a deepening global recession curbed demand for exports.

The performance of manufacturing index was 40.7 compared with 38.9 in February, Bank of New Zealand Ltd. and Business New Zealand said in Wellington today. A reading below 50 shows manufacturing is contracting.

New Zealand’s recession is likely to extend for six quarters, the worst in more than three decades, as a contraction in the world’s biggest economies curbs exports, the Reserve Bank said last month. Slowing manufacturing adds to signs the jobless rate could surge to a 10-year high as firms cut costs.

“New Zealand’s manufacturing industry remains in clear distress,” said Craig Ebert, senior economist at Bank of New Zealand in Wellington. “Falling activity and sales, along with collapsing profitability, is no doubt why employment is being pruned.”

New Zealand’s jobless rate rose to a five-year high of 4.6 percent in the fourth quarter and could reach 6.8 percent by the first quarter of 2010, the Reserve Bank forecasts. The economy has been contracting since the first quarter of last year.

Business confidence slid to a 35-year low in the first quarter, according to a survey from the New Zealand Institute of Economic Research published April 7. The proportion of firms expecting to fire workers was the highest since 1991.

The manufacturing index in February was at the second- lowest level since the series began in 2002. The low was 35.2 in November 2008.

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

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

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Weber Pushes for ECB Rate Floor as Council Bickers Over Policy

By Jana Randow and Simone Meier

April 16 (Bloomberg) -- European Central Bank council member Axel Weber said the bank should call an end to rate reductions next month, pressuring policy makers to resolve their squabble over a package of new measures to rescue the economy.

“It’s necessary that we announce a refinancing framework that can be relied upon for a certain period of time,” Weber, who heads Germany’s Bundesbank, said in Hamburg yesterday. “That includes the medium-term level for the main refinancing rate,” which shouldn’t be cut below 1 percent, he said.

Weber’s comments suggest he may have won support for his position on rates on the ECB’s 22-member Governing Council, which is divided over not only how low to cut borrowing costs but also whether to purchase debt assets. The bank this month cut its benchmark less than economists had forecast, by a quarter point to 1.25 percent, and delayed a decision on new policy tools until May.

“Weber is an influential member of the Governing Council and wouldn’t go as far if he wasn’t fairly confident about the way the discussion is shaping up,” said Nick Kounis, chief European economist at Fortis in Amsterdam. “It’s more than thinking aloud. I always see his remarks as a very good indication of what happens next.”

Council members George Provopoulos from Greece and Athanasios Orphanides of Cyprus have both indicated they may support cutting the key rate below 1 percent and purchasing debt securities to pump money into the economy. Austria’s Ewald Nowotny said last week debt purchases would be “sensible” and the debate on how low to cut the benchmark is still open.

‘Firm Signal’

Weber said he favors extending the maturities of the ECB’s loans to banks to ease credit concerns. So far, the ECB has provided banks with unlimited amounts of liquidity in its refinancing operations for periods of up to six months.

For longer loans to be effective, the ECB may have to signal that the benchmark rate won’t drop any further. That’s because banks would be reluctant to borrow for longer terms if they thought they could get money cheaper in the future.

“If they’re going to extend the tender operations to one year, there has to be a firm signal that it’s as cheap as it’s going to get,” said James Nixon, an economist at Societe Generale SA in London.

Weber said the ECB will unveil a package of measures next month “with a timeframe of at least the rest of this year and into next year.”

‘Completely Paralyzed’

He said bringing the ECB’s benchmark too close to its overnight deposit rate could reduce the incentive for banks to lend to each other. Instead of trading excess cash at the overnight market rate, currently at 0.9 percent, financial institutions may decide to avoid risk and park it with the central bank at 0.25 percent instead.

There would be “practically no reward” for banks to lend, Weber said. “Therefore, the risk exists that the private interbank market would become completely paralyzed.”

“He made it very clear that he wants to get the refinancing rate to 1 percent, declare that it’s as low as they’re going to go and extend the refinancing operations to one year,” said Nixon, who used to work as a forecaster at the ECB. “Other measures very much take a back seat.”

While not ruling out the purchase of corporate debt, Weber said it shouldn’t be a priority for an economy that is primarily bank-financed. That puts him at odds with Nowotny, Orphanides, Provopoulos and ECB Vice President Lucas Papademos, who have all spoken in support of the measure.

Asset purchases would mark a shift for the ECB, which has stood aside as the Federal Reserve, Bank of England and Bank of Japan pump money into their economies by buying government and corporate debt.

The issue “is clearly one which the Governing Council is finding hard to agree upon,” said Julian Callow, chief European economist at Barclays Capital in London. “As an influential voice in the Governing Council’s debate, opposition by Weber to particular actions can represent a significant, if not ultimately insuperable, hurdle.”

To contact the reporter on this story: Jana Randow in Frankfurt jrandow@bloomberg.net, Simone Meier in Frankfurt smeier@bloomberg.net.

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China’s Economy Expands at the Slowest Pace in Almost a Decade

By Kevin Hamlin

April 16 (Bloomberg) -- China’s gross domestic product, battered by collapsing exports, grew at the slowest pace in almost ten years, probably marking the low point for the world’s third-biggest economy.

GDP expanded 6.1 percent in the first quarter from a year earlier, after a 6.8 percent gain in the previous three months, the statistics bureau said in Beijing today. The figure compares with the 6.2 percent median estimate of 13 economists surveyed by Bloomberg News.

China’s economy shows signs that Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus plan is working, fueling a surge in bank lending and spurring the Shanghai Composite Index to an eight-month high. The State Council said yesterday that it will cut export taxes for some electronics products and offer cheaper credit to manufacturers to spur shipments overseas.

“The recovery is still at a very fragile stage,” said Yu Song, an economist at Goldman Sachs Group Inc. in Hong Kong. “The tug of war between upside risks from domestic investments and downside risks from weaker external demand will continue.”

Today’s report coincides with a statement from U.S. Treasury Secretary Timothy Geithner that China isn’t a currency manipulator. His stance eases pressure on China to allow its currency to rise, hurting efforts to revive exports.

From July 1 to the end of last year, the yuan rose just 0.4 percent against the dollar. Its value has been little changed since the beginning of the year, closing yesterday at 6.8325 per dollar.

Global Recessions

China’s expansion lagged behind its 9 percent growth for all of 2008 and 13 percent gain in 2007. It also contrasted with recessions in economies around the world. The Organization for Economic Cooperation and Development predicts a 6.3 percent expansion for China this year, compared with a 4 percent contraction in the U.S. and a 6.6 percent decline in Japan.

There are signs that other economies may have seen the worst. The Federal Reserve said yesterday the U.S. contraction slowed across several of the nation’s biggest regional economies last month. In Japan, economists from Morgan Stanley and Macquarie Securities Ltd. increased their GDP forecasts, saying the economy would contract less-than-expected after Prime Minister Taro Aso announced a 15.4 trillion yen ($154 billion) stimulus package.

Confidence in the global economy rose to an 11-month high, a Bloomberg survey of users on six continents showed yesterday.

Share Market Rally

The Shanghai Composite Index of stocks has climbed 39 percent this year, making it the second-best performer among 88 indexes tracked by Bloomberg.

Some of the statistics in today’s report pointed to a recovery. Industrial production expanded 8.3 percent in March, compared with 3.8 percent in the first two months. Urban fixed- asset investment climbed 30.3 percent in March.

Spending on real-estate development grew 4.1 percent in the first quarter, up from a 1 percent gain in the first two months, a report showed this week.

Companies are also reporting how the stimulus package is helping. Beijing-based General Steel Holdings Inc. said its main factory in Hancheng city, Shaanxi province, signed contracts to sell 560,000 metric tons of steel for stimulus-related projects by late March, an amount equal to 30 percent of total output last year.

Auto Sales

General Motors Corp., the biggest overseas automaker in China, raised its forecast for the nation’s auto sales this year after the government took steps to spur demand and provided subsidies in rural areas.

China’s GDP in the first quarter was pulled lower by sinking exports as a global recession cut demand for textiles and electronics, prompting thousands of factories to close and leaving more than 20 million migrant laborers without work.

“Exports will continue to drag on growth at least until the final quarter of the year,” said Mark Williams, an economist with Capital Economics in London. If there is a recovery this year, it will “be lackluster at best.”

Today’s report contrasts with a year ago when the economy expanded 10.6 percent and Premier Wen said that inflation running at more than 8 percent was the nation’s biggest problem.

Consumer prices fell 1.2 percent in March from a year earlier, compared with a drop of 1.6 percent in February.

Borrowing Costs

Cooling inflation provided the People’s Bank of China with space to lower the one-year lending rate by 216 basis points to 5.31 percent last year and reserve requirements by 2 percentage points to 15.5 percent for large banks.

The bank also lifted caps on lending toward the end of 2008. As a result, new loans jumped more than six times to 1.89 trillion yuan ($277 billion) in March from a year earlier, raising concern among some economists that the cash flowing into the economy will inflate asset bubbles, and promote wasteful spending.

“The next policy move needs to be taming credit growth and local governments’ investment drive,” said Wang Tao, an economist at UBS AG in Beijing. “This is needed to reduce the risk of massive resource misallocation, asset price bubbles and damage to the banking system.”

To contact the reporter on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net;

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Philippine Peso, Yuan, Ringgit, Rupee: Asian Currency Preview

By Patricia Lui

April 16 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today. Exchange rates are from the previous session.

Japanese yen: Chief Cabinet Secretary Takeo Kawamura will hold media briefings at 11 a.m. and 4 p.m. in Tokyo.

The Ministry of Finance will release at 8:50 a.m. in Tokyo its report on Japanese and foreign investment flows for domestic and overseas securities during the week ended April 11.

The yen was at 99.30 a dollar as of 8:15 a.m. in Sydney.

Philippine peso: February exports may have contracted 38.5 percent from a year earlier after dropping a revised 40.6 percent in January, according to a Bloomberg News survey ahead of the preliminary data due at 9 a.m.

The central bank may trim its benchmark interest rate by 25 basis points to 4.50 percent at its monthly monetary policy meeting today, a separate survey showed.

The Philippine peso was at 47.81.

Chinese yuan: Real gross domestic product may have slowed to 6.2 percent in the first quarter from a year earlier compared with 6.8 percent in the previous three months, according to a Bloomberg survey ahead of the data at 10 a.m. local time.

The government will also release March producer prices, consumer prices, retail sales, industrial production and fixed asset investments at the same time.

The yuan was at 6.8322.

Malaysian ringgit: Manufacturing sales for February are due to be released at 12:01 p.m. local time. January manufacturing sales fell 22.7 percent in value terms from a year ago.

The ringgit was at 3.5990.

Indian rupee: The wholesale price index may have contracted 0.13 percent from a year ago in the week ended April 4, compared with growth of 0.26 percent in the previous period, a Bloomberg survey showed.

The rupee was at 49.66.

To contact the reporters on this story: Patricia Lui at plui4@bloomberg.net

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Korean Won Nears 3-Month High on Signs Global Recession Easing

By Kim Kyoungwha

April 16 (Bloomberg) -- South Korea’s won strengthened, approaching a three-month high, as optimism a global recession is easing bolstered demand for emerging-market assets.

The Korean currency extended its gain for the past month to 7.5 percent and global stocks advanced after the U.S. Federal Reserve said the pace of contraction slowed in several of the nation’s biggest regional economies last month. Overseas investors bought more Korean shares than they sold today, helping lift the Kospi stock index 2.2 percent.

“The movements in the currency market are a simple reflection of stock moves these days,” said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. “Exporters are willing to settle deals on the dollar’s highs, while there’s demand for the greenback from dividend payments.”

The won rose 1.4 percent to 1,320.10 per dollar as of 9:45 a.m. in Seoul, according to data compiled by Bloomberg. It reached 1,298.05 on April 10, the highest since Jan. 8.

Five of 12 Fed district banks “noted a moderation in the pace of decline,” the Fed said yestereday in its Beige Book business survey, published two weeks before officials meet in Washington to set monetary policy. The U.S. is South Korea’s second-largest trading partner, after China.

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

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Australian Dollar Strengthens, N.Z.’s Pares Loss as Stocks Gain

By Patricia Lui and Garfield Reynolds

April 16 (Bloomberg) -- The Australian dollar rose and New Zealand’s currency pared losses as regional stocks gained on signs the U.S. recession may be easing.

Australia’s currency reversed earlier losses against the greenback and the yen as the nation’s S&P/ASX 200 Index headed for its highest close in five months and New Zealand’s NZX 50 Index advanced 1.9 percent. The Standard & Poor’s 500 Index rose 1.3 percent yesterday after a Federal Reserve survey showed that economic contraction slowed in some regions.

“The Aussie and kiwi dollars are regarded as growth currencies and the correlation between stocks and currencies has been very strong,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “It’s no surprise then that with Wall Street up last night, we are seeing both markets higher when Asian trading picked up this morning.”

Australia’s dollar climbed 0.3 percent to 73.09 U.S. cents as of 10:55 a.m. in Sydney, from 72.88 cents yesterday, after falling to as low as 72.61 cents earlier. It rose 0.4 percent to 72.69 yen. New Zealand’s currency fell to as low as 57.67 U.S. cents from 58.12 cents yesterday, before trading at 57.87 cents. It declined 0.4 percent to 57.49 yen.

Stock Gains

U.S. stocks extended gains yesterday after the Fed said in its Beige Book regional business survey that the contraction eased across some of the biggest regional economies last month, with some industries “stabilizing at a low level.”

Industrial production in the U.S. fell in March more than economists forecast, according to a separate Fed report, undermining optimism that the worst of the slump may be ending.

“We may be at the tail end of an optimistic wave, yet the U.S. economy is still in recession and the economic data is still painting a very ugly picture,” said Danica Hampton, currency strategist at Bank of New Zealand Ltd., from Auckland. “A lot of the optimism we’ve been seeing has been driven by a perception the global economy is on the road to recovery.”

The Australian currency may struggle to break through 73.25 U.S. cents today, Hampton said. It will would find support toward 71.80 cents, she said. Support refers to levels where buy orders may be clustered.

New Zealand’s dollar may decline toward 57.40 U.S. cents and is unlikely to advance any higher than 58.50 cents, Hampton said.

New Zealand manufacturing shrank for an 11th month in March as a deepening global recession curbed demand for exports, a report today showed, giving policy makers more scope to reduce interest rates from a record low 3 percent.

New Zealand Risks

“There are downside risks because of the country’s economic situation, there’s not enough monetary easing priced in,” Hampton said. “We expect a 50 basis point cut at the April 30 Reserve Bank meeting and a signal for more cuts.”

The performance of manufacturing index was 40.7 compared with 38.9 in February, Bank of New Zealand Ltd. and Business New Zealand said in Wellington today. A reading below 50 shows manufacturing is contracting.

The Australian dollar rose 0.8 percent against the New Zealand currency to trade at NZ$1.2635, according to data compiled by Bloomberg.

“I’m surprised the cross is not stronger at NZ$1.28 or NZ$1.30,” ICAP’s Carr said. “New Zealand has a bit of dilemma with its massive current account and fiscal deficits. Australia is growing in comparison and has far sounder fundamentals.”

New Zealand’s recession is likely to extend for six quarters, the worst in more than three decades, as a contraction in the world’s biggest economies curbs exports, the Reserve Bank said last month. Slowing manufacturing adds to signs the jobless rate may surge to a 10-year high as firms cut costs.

Australian government bonds rose for a second day, pushing the 10-year yield down by six basis points, or 0.06 percentage point, to 4.52 percent, the lowest since April 3. The price of the 5.25 percent security maturing in March 2019 gained 0.52, or A$5.20 per A$1,000 face value, to 105.81, according to Bloomberg data.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.66 percent from 3.69 percent yesterday.

To contact the reporter on this story: Patricia Lui in Singapore at Plui4@bloomberg.net

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Pound Makes U.K. No ‘Basket Case’ as Brown Gets No Benefit Yet

By Matthew Brown and Gavin Finch

April 16 (Bloomberg) -- The pound’s rally to $1.50 for the first time in three months shows financial markets are growing more confident in Gordon Brown even as he has yet to benefit in the polls during Britain’s worst recession since 1984.

The currency rebounded 2.7 percent versus the dollar this year to as high as $1.5036 yesterday, and strengthened 8.9 percent against the euro. Nationwide polls show Brown’s Labour Party trailed the Conservatives, led by David Cameron, for the past year. Now, investors are betting the U.K.’s $2.7 trillion economy will be among the first to recover from the global slump.

“At the margins, it takes a lot of pressure off Gordon,” said Stewart Robertson, an economist at Aviva Investors in London, which manages about $230 billion in assets. “Getting headlines for plummeting currencies off the front pages is good, as there’s less talk of the U.K. being a basket case.”

The pound was last year’s worst-performing currency except for the South African rand, declining 26 percent against the dollar and 23 percent versus the euro. More than 2 million British citizens are unemployed. House prices have fallen 17 percent in 12 months. Gross domestic product contracted 1.6 percent in the last quarter, ending 63 consecutive quarters of growth.

Voter confidence in Labour, led by Brown, 58, fell to 30 percent, compared with 43 percent for Cameron’s Conservatives, according to a Populus Ltd. survey on April 6. The poll, with a 2.5 point margin of error, showed the Conservatives extended their lead from 1 point in November. U.K. parliamentary rules require Brown to call a general election by June next year.

Home Prices

The pound rose to the highest level against the dollar since Jan. 12 after a report yesterday by the Royal Institution of Chartered Surveyors showed the slump in house prices eased in March. The currency strengthened to 87.867 pence per euro for the first time since Feb. 24.

“There’s so much bad news priced into the pound that any good news gives the market a great reason to buy,” said Daragh Maher, the deputy head of global currency strategy in London at Calyon, the investment-banking arm of Credit Agricole SA. “We’re seeing some green shoots in the U.K. housing market,” which may drive the pound to 83 pence per euro in the coming months, he said.

Speculation in the futures market that the pound will fall against the dollar increased in the last two weeks, with so- called net short positions rising to 34,462 on April 7 from 30,746 March 24, according to data from the Washington-based Commodity Futures Trading Commission.

The pound will fall to $1.45 and to 91 pence versus the euro by the end of the second quarter, according to the median estimates in Bloomberg surveys of at least 35 analysts.

Technical Analysis

Betting on pound gains is “definitely not a crowded trade,” said David Woo, global head of foreign-exchange strategy in London at Barclays Plc, who predicts the currency will strengthen to 80 pence per euro this year. “If you look at the data from the CFTC, the market still doesn’t have the position on sterling.”

Technical analysts, who use historic trading patters to predict future prices, suggest the pound will continue to advance. The currency has been trading above its 100-day moving average against the euro since April 7, the first time it broke through that level since Nov. 3, according to data compiled by Bloomberg.

“Euro-sterling has rammed through all of the technical levels,” said David Powell, a currency strategist in London at Merrill Lynch & Co. “Support was created by the 100-day moving average, but we’ve just gone right through there.”

Fibonacci Sequence

Fibonacci charts show the pound may struggle to hold its gains unless it surpasses $1.5074. It almost reached that level three times since falling to a low of $1.3503 on Jan. 23.

Britain’s economy will shrink less than the U.S. and Europe this year, the Organization for Economic Cooperation and Development said on March 31. The U.K. will contract 3.7 percent, compared with 4.1 percent in the 16-nation euro-region and 4 percent in America, the Paris-based OECD said.

Brown’s government plans to sell at least 147.9 billion pounds ($195 billion) of debt in the fiscal year ending March 2010 to revive the economy, Europe’s second-largest. It sold an unprecedented 146.4 billion pounds of securities last year. The sales are helping finance a 25.6 billion-pound program of tax cuts and spending increases over the next two years. Brown has pledged 40 billion pounds to recapitalize banks and hundreds of billions of pounds in loan guarantees.

‘The Right Measures’

“On the financial sector, he’s put in place the right measures before any other country,” said Nick Kounis, an economist at Fortis Bank NV in Amsterdam and a former U.K. Treasury official. “Where he doesn’t rate highly is fiscal policy. The U.K. was in a very bad state when it entered the recession with a large deficit.”

Britain will have a deficit of 9.5 percent of gross domestic product in 2009, the most in the Group of Seven, according to the International Monetary Fund. The Washington- based lender forecast shortfalls of 7.7 percent in the U.S., 8.1 percent in Japan and 4 percent in Germany, according to estimates last month.

“History will reveal 2009/2010 as the time to buy cheap,” Neil Jones, the head of European hedge fund sales at Mizuho Corporate Bank in London said in a note yesterday. “We will look back on this era and say, ‘I should have loaded up on property, companies and stocks.’”

To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

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Yen Weakens on Speculation Stock Gains Boost Demand for Yield

By Ron Harui

April 16 (Bloomberg) -- The yen weakened for a second day against the euro on speculation gains in stocks will give investors more confidence to buy higher-yielding assets.

Japan’s currency also fell against 14 of the 16 most-traded currencies after a Finance Ministry report today showed the nation’s investors bought 818.3 billion yen ($8.24 billion) more overseas bonds and notes than they sold last week. Asian stocks climbed after a U.S. Federal Reserve survey yesterday showed economic contraction eased in some regions.

“Stocks are up and sentiment has improved,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s buying of the crosses against the yen.”

The yen declined to 131.80 per euro at 10:14 a.m. in Tokyo from 131.44 in New York yesterday. It traded at 99.43 against the dollar from 99.37. The U.S. currency fell to $1.3257 per euro from $1.3227.

The Nikkei 225 Stock Average climbed 3.2 percent and the MSCI Asia-Pacific Index of regional shares rose 2 percent. The Standard & Poor’s 500 Index rose 1.3 percent yesterday.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Zinc in Shanghai Surges 5% Daily Limit to 13,730 Yuan a Ton

By Glenys Sim

April 16 (Bloomberg) -- Zinc futures in Shanghai jumped by the exchange-imposed daily limit on speculation demand may be improving in China, the world’s largest producer and consumer of the metal used to galvanize steel.

Zinc for July delivery on the Shanghai Futures Exchange surged 650 yuan, or 5 percent from the previous settlement, to 13,730 yuan ($2,010) a metric ton, before trading at 13,655 yuan at 9:13 a.m. local time.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

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Crude Oil Rises as U.S. Equity Rally Spurs Demand Expectations

By Christian Schmollinger

April 16 (Bloomberg) -- Crude oil rose for the first time in a week as equities in the U.S., the world’s biggest oil user, rallied and the Federal Reserve said some of the country’s biggest regional economies slowed the pace of their decline.

Oil gained as much as 1.2 percent after stocks climbed in the last hour of trading yesterday. Fed districts reporting a slower economic decline or signs of stabilization include San Francisco, the largest district, New York, Chicago, Kansas City and Dallas, the Fed said in its Beige Book business survey.

“The sentiment is becoming more bullish for all commodities, perhaps prematurely but that is the market,” said David Moore, a commodity strategist with Commonwealth Bank of Australia Ltd. “With the speculation that things aren’t getting as bad as they were previously, it’s providing support to commodity prices.”

Crude oil for May delivery rose as much as $1.05, or 2.1 percent, to $50.30 a barrel on the New York Mercantile Exchange. It was at $50.08 a barrel at 9:52 a.m. Singapore time. Prices are up 12 percent so far this year.

Yesterday, oil fell 16 cents, or 0.3 percent, to $49.25 a barrel, the lowest settlement on the Nymex since April 7, after a government report showed that U.S. stockpiles climbed to the highest level in almost 19 years as demand dropped.

The Dow Jones Industrial Average jumped 109.44 points, or 1.4 percent, to 8,029.62 yesterday.

The trend of higher equity prices continued into Asian trading. The Nikkei 225 Stock Average climbed 1 percent, to 8,832.99 as of 9:05 a.m. in Tokyo, breaking a three-day slide. The broader Topix index rose 10.13, or 1.2 percent, to 845.38.

Commodities, Inventories Gain

Other commodities also gained on the climb in stock prices. Copper climbed for a sixth day, poised for its longest rally since July 2006. Three-month delivery copper on the London Metal Exchange rose 1 percent to $4,869.25 a ton.

Gains in oil inventories have limited future prices to between $43.62 and $54.66 a barrel over the past month.

Oil inventories rose 5.67 million barrels to 366.7 million last week, the highest since September 1990, the Energy Department said yesterday. Supplies were forecast to increase by 1.75 million barrels, according to the median of 14 analyst estimates in a Bloomberg News survey.

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude is delivered, fell 742,000 barrels to 29.2 million last week, the lowest since the week ended Dec. 26.

Gasoline stockpiles declined 944,000 barrels to 216.5 million in the week ended April 10, according to the department. Distillate fuels, a category that includes heating oil and diesel, fell 1.17 million barrels to 139.6 million.

Demand Slows

Daily fuel demand averaged over the past four weeks was 18.7 million barrels, down 5.2 percent from a year earlier, according to the department.

Refineries operated at 80.4 percent of capacity, down 1.5 percentage points from the week before, the lowest since the week ended Sept. 26, when units were shut in the aftermath of Hurricanes Gustav and Ike, the department said. A gain of 0.1 percentage point was forecast.

The International Energy Agency cut its 2009 oil-demand forecast last week for an eighth month, reducing its outlook by 1 million barrels a day to 83.4 million barrels.

Brent crude oil for June settlement rose as much as $1.59, or 3.1 percent, to $53.38 a barrel on London’s ICE Futures Europe exchange. It was at $53.33 a barrel at 9:16 a.m. Singapore time.

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

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AU Optronics, PICC, Tenaga: Asia Ex-Japan Equity Preview

By Berni Moestafa

April 16 (Bloomberg) -- The following companies may have unusual price changes today in Asia trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise.

AU Optronics Corp. (2409 TT): Taiwan’s largest maker of liquid-crystal displays said it paid NT$384 million ($11 million) for a stake in Lighthouse Technology Inc. The stock was bought through a private placement, and AU owns 35 percent of the maker of light-emitting diodes after the transaction, the Hsinchu-based company said. AU Optronics fell 3.3 percent to NT$31.8.

Cahya Mata Sarawak Bhd. (CMS MK): The Malaysian builder said its CMS Land Sdn. unit won a 232 million ringgit ($64 million) contract to build the headquarters of Sarawak Energy Bhd. Cahya Mata was unchanged at 1.33 ringgit.

Chemrez Technologies Inc. (COAT PM): The Philippines’ biggest maker of biodiesel from coconut oil said its profit fell 23 percent to 372 million pesos ($7.78 million) last year as increased competition cut selling prices. The stock was unchanged at 1.70 pesos.

Orient Overseas (International) Ltd. (316 HK): The company said its first-quarter sales fell 31 percent from a year earlier after trade declined because of the global recession. Revenue decreased to $954 million, it said. Orient Overseas, Hong Kong’s largest container liner, was unchanged at HK$26.

PetroVietnam Transportation Corp. (PVT VN): The nation’s biggest shipper of petroleum and petrochemical products by market value expects net income this year to be similar to last year’s 84 billion dong ($4.7 million), according to Chief Executive Officer Pham Viet Anh. Net income this year will be 82.5 billion dong, Anh said at the company’s shareholder meeting in Ho Chi Minh City. PetroVietnam Transportation fell 4.5 percent to 16,900 dong.

PICC Property & Casualty Co. (2328 HK): China’s largest non-life insurer posted its first profit drop since 2005, after a plunge in the nation’s stock market hurt returns and natural disasters pushed up claims. Net income fell 98 percent to 50 million yuan ($7.3 million), from 2.99 billion yuan a year earlier, the Beijing-based company said. PICC rose 4.4 percent to HK$5.24.

San Miguel Corp. (SMC PM): Chief Financial Officer Ferdinand Constantino and four other executives bought 90,000 shares last month in the largest Philippine food and drinks company, a filing to the stock exchange showed. Two other executives sold 50,000 shares, according to the same filing. San Miguel Class A shares, which are reserved for Filipinos, were unchanged at 53 pesos. Its Class B shares (SMCB PM), which have no ownership restrictions, fell 1.9 percent to 52.50 pesos.

Singapore Exchange Ltd. (SGX SP): The operator of the city- state’s securities and derivatives markets said third-quarter profit fell 46 percent as revenue declined on weak trading volumes. Net income dropped to S$55.3 million ($37 million) in the three months ended March 31, it said. Singapore Exchange added 0.5 percent to S$6.21.

Tenaga Nasional Bhd. (TNB MK): Malaysia’s state-controlled electricity provider said fiscal second-quarter profit dropped 36 percent to 674.6 million ringgit ($187 million) as fuel costs increased and power demand shrank in the economic slowdown. Tenaga fell 1.5 percent to 6.50 ringgit.

PT United Tractors (UNTR IJ): The Indonesian company’s mining contracting unit, PT Pamapersada Nusantara, said 2009 profit will be similar to last year, even as it forecasts revenue will climb 20 percent as it mines more coal for its customers. The company projects revenue of 18 trillion rupiah ($1.65 billion), compared with 15 trillion rupiah in 2008. Rising costs will keep net profit near last year’s level of 1.4 trillion rupiah, Dwi Priyadi, Pama’s vice president said. United Tractors added 0.7 percent to 7,600 rupiah.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

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Jhunjhunwala, India’s Buffett, Says Avoid Market Post Election

By Pooja Thakur

April 16 (Bloomberg) -- Rakesh Jhunjhunwala, ranked a billionaire by Forbes magazine last year for his holdings of Indian stocks, says investors should avoid the markets after nationwide elections until a new government is formed.

Voters go to the polls today in a five-stage election across the world’s biggest democracy before counting begins on May 16. The Bombay Stock Exchange Sensitive Index plunged 11 percent on May 17, 2004, the most in more than a decade, as investors feared a government formed by Sonia Gandhi’s Congress Party and communist allies would slow the pace of reforms.

“My advice is to stay away from the markets between May 16 and May 30 as there will be volatility in the markets post elections,” Jhunjhunwala, 48, said in an interview in his Mumbai office yesterday.

The markets more than tripled since 2004, before dropping 52 percent last year after a global credit crisis wiped out more than $30 trillion from the value of global equities.

Prime Minister Manmohan Singh’s Congress Party-led United Progressive Alliance is competing with the main opposition Bharatiya Janata Party-led National Democratic Alliance and a group of communist and regional parties known as the third front.

“It’s a very closely fought election,” Jhunjhunwala said. “It’s a triangular contest and to predict the result would be very difficult.”

Jhunjhunwala said even though some forecasters are predicting a third front-led government, he expects either the Congress or the BJP will get 150 to 170 seats and will lead formation of the government. About 714 million voters are eligible to elect 543 lawmakers to the Lok Sabha, or lower house of parliament.

Bear Market Rally?

Indian stocks, laggards among the world’s biggest emerging- market economies in the first quarter, recovered to post the steepest returns the past month as investors snapped up the cheapest shares in 13 years.

The benchmark index, also known as the Sensex, climbed 38 percent since falling to its lowest level this year on March 9. The advance beat increases among equity benchmark indexes for Brazil, Russia and China, the biggest developing economies.

“The pace, breadth and volume of the market suggest this could be more than a bear market rally,” said Jhunjhunwala, who has pictures of investors including Warren Buffett on the walls of his Mumbai office.

Buffett of India

Forbes named Jhunjhunwala the Buffett of India after he turned a $100 investment into $1 billion over two decades. He predicted Indian stocks would fall two months before the Sensex peaked in January 2008, and the benchmark measure has gained 17 percent since his Dec. 11 prediction of a bull run. The MSCI Asia Pacific Index rose 1 percent during that time.

The Sensex has crossed its 200-day moving average and if it remains above that level over the next 10 to 15 days, the rally may be sustained, he said. Still, he doesn’t see the markets forming new lows. The moving average is a technical tool used by some analysts to predict the direction of the market.

Investments by Indian insurance companies will be the biggest drivers of the equity market, Jhunjhunwala said. Insurers could invest about $50 billion a year in the next two- three years, he said.

“The scope for disappointment is not much,” Jhunjhunwala said. “There are no positive expectations from the election results. Markets may not tank this time round even if the result is something that the market may not like.”

For Related News and Information:

To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net;

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Mobius Says Thai Economy at Risk; Stocks Resume Trade

By Chen Shiyin and Shanthy Nambiar

April 16 (Bloomberg) -- Mark Mobius, whose Templeton Asset Management Ltd. has invested in Thailand for two decades, says the nation’s political turmoil poses a risk to Southeast Asia’s second-largest economy.

“In the near and medium term, Thailand will need to restore consumer confidence and revive investment,” Mobius, who helps oversee $20 billion in emerging-market assets at San Mateo, California-based Templeton, said in an e-mail response to questions. “Failure to do so due to these political conflicts could present a risk to Thailand’s growth.”

Thailand’s stock market resumes trading today after a three-day holiday marred by street clashes and weekend demonstrations that forced the cancellation of the Association of Southeast Asian Nations summit in the resort town of Pattaya on April 10. The protests left two dead and 123 injured.

The benchmark SET index has gained 0.9 percent in 2009, lagging the 13.9 percent increase in MSCI’s developing-nation index. The SET tumbled 48 percent last year, the steepest drop since 1997, when the devaluation of Thailand’s baht triggered an economic crisis in Asia. The index trades for 8.28 times its companies’ projected earnings for 2009, tied with Pakistan’s Karachi Stock Exchange 100 Index for the lowest valuation among equity benchmark gauges in Asia tracked by Bloomberg.

Abhisit

The demonstrations have dealt a blow to Prime Minister Abhisit Vejjajiva, 44, who called off the summit after so-called Red Shirt protesters stormed the meeting venue.

The group supports exiled former Premier Thaksin Shinawatra and says Abhisit came to power illegitimately in December. Opponents of Thaksin, in exile to avoid a two-year jail sentence for corruption, seized airports in the country last year.

The past week of protests forced Abhisit to declare emergency rule April 12 after he failed to curb demonstrations, which have since subsided.

“The current political situation means that less foreigners will invest in the country and that portfolio managers may actually be sellers of equity,” investor Marc Faber, who publishes the Gloom, Boom and Doom report, said in an April 13 interview. “The two parties will not agree on anything for a long time to come and that has a negative impact on business and in particular tourism.”

The country relies on visitors for about 12 percent of its economy, according to the tourism authority.

Tourism Stocks

Minor International Pcl, the Bangkok-based owner of hotels including the JW Marriott Phuket Resort & Spa and Four Seasons in the capital city, was cut to “hold” from “buy” at Deutsche Bank AG yesterday. National carrier Thai Airways International Pcl, also based in Bangkok, was reduced to “sell” from “hold” by the bank on April 9.

“Lingering political uncertainty” may weigh on Thailand’s bank stocks, with slowing spending and economic growth increasing the risks of non-performing loans, Cazenove Asia Ltd. analysts Seeping Tan and Xiushi Cai said in an April 15 report. They advised investors to sell shares of Kasikornbank Pcl and Krung Thai Bank Pcl, both based in Bangkok.

Abhisit today pledged to work closely with the tourism industry, saying that it is an important part of the nation’s economy. He’s seeking agreement on political reforms and plans to call for elections when there is stability, he added in a Bloomberg Television interview.

Consumer confidence fell in March to the lowest level in more than seven years, the University of the Thai Chamber of Commerce said on April 9. Overseas sales, which make up 70 percent of Thailand’s gross domestic product, also dropped for four straight months on weaker demand for Asia’s electronics.

Economic Outlook

Thai Finance Minister Korn Chatikavanij said April 14 the protests were driving off tourists and investors, deepening the worst recession since the Asian financial crisis. The government will lower its forecast for a 3 percent economic contraction this year, he said in a Bloomberg Television interview in Bangkok.

“Even if this comes to a quick resolution, the damage has more of less been done in terms of discouraging investment,” said Martin Hohensee, the Singapore-based head of Asia fixed- income research at Deutsche Bank. “It’s obviously going to be bad for the baht because of a loss from tourism revenues.”

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have said this week they may lower the nation’s foreign- currency debt ratings as continued political instability hurts tourism revenue and spurs capital outflows.

Baht’s Drop

The baht has lost 1.3 percent in the past three months, the second-largest drop among 10 Asian currencies, excluding the Japanese yen. The currency, which traded at 35.38 against the dollar, may retreat to 36 by the end of this quarter as the economy weakens, Nizam Idris, UBS AG’s Singapore-based currency strategist, said yesterday.

Thailand’s natural resources, exports and domestic economy may help the nation overcome the political conflicts, Templeton’s Mobius said. The 21 uprisings since 1932 also mean the nation can cope with political changes, he said.

“As long as the nation’s current monarchy system remains stable, we are optimistic that eventually a resolution will be reached,” Mobius said. “We remain positive with Thailand’s longer-term outlook and fundamentals.”

For now, the nation remains in a state of emergency and protesters are vowing to keep seeking the ouster of Abhisit.

“With no end in sight, the ongoing political situation will weigh on investor sentiment,” said Daphne Roth, the Singapore-based head of Asia equity research at ABN Amro Private Bank, which manages $27 billion of Asian assets. “As markets recover, Thailand will be marginalized.”

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net; Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net.

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Japanese Stocks Climb on Chipmaker Merger Talks, Fed Report

By Patrick Rial

April 16 (Bloomberg) -- Japanese stocks climbed on speculation consolidation will boost profitability in the computer chip industry and after a U.S. Federal Reserve survey showed economic contraction eased in some regions.

Mitsubishi Electric Corp. jumped 4.8 percent after its Renesas Technology Corp. affiliate was said to be in merger talks with NEC Electronics Corp., Japan’s third-biggest chipmaker. Nissan Motor Co., the nation’s No. 3 carmaker, rose 3.4 percent as almost half of the regions surveyed in the Fed’s Beige Book said there’s been a “moderation” in economic decline. Steelmakers and shipping lines gained ahead of reports from China on gross domestic product, production and inflation.

The Nikkei 225 Stock Average rose 258.59, or 3 percent, to 9,001.55 as of 10:21 a.m. in Tokyo, snapping a three-day slide. The broader Topix index gained 18.61, or 2.2 percent, to 853.86.

“It’s natural when the economy turns south to see these kinds of mergers as a strategy for survival. Making money in semiconductors is difficult in any business climate,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “We aren’t on the path to a legitimate recovery, but we are seeing signs that sentiment is improving.”

The Nikkei has rallied by more than a quarter from a 26- year low on March 10. Shares in the gauge trade at an average of 183 times estimated net income for this year, up from 14 times a year ago, according to index compiler Nikkei Inc.

Merger Talks

Mitsubishi Electric, owner of 45 percent of Renesas, advanced 4.4 percent to 525 yen. Hitachi Ltd., which holds the rest of Renesas, rose 2.2 percent to 320 yen. NEC Electronics was poised to climb by its 100 yen trading limit, or 12 percent, to 930 yen. Its majority stakeholder NEC Corp. rallied 4.7 percent to 310 yen.

A merger with Renesas is among options being considered by NEC Electronics to improve its competitiveness, Shino Inokuma, a spokeswoman for NEC Electronics, said by telephone today. Inokuma was responding to a Nikkei newspaper report that NEC Electronics and Renesas seek to reach an agreement this month and merge by April 2010. The combination would create Japan’s biggest chipmaker with annual sales of more than 1.2 trillion yen ($12 billion), Nikkei said.

Nissan gained 4.3 percent to 485 yen. Honda Motor Co., Japan’s second-largest automaker, rose 2.8 percent to 2,800 yen. Sony Corp., the world’s second-largest maker of consumer electronics, climbed 2.9 percent to 2,515 yen.

Beige Book

Five of 12 Fed district banks “noted a moderation in the pace of decline,” the U.S. central bank said yesterday in its Beige Book business survey, published two weeks before officials meet in Washington to set monetary policy. Retail sales showed a “slight improvement” in some regions, and there was a “scattered pickup” in home buying.

“The Beige Book gave some indication that the deterioration of the U.S. economy is easing and shows that there is some positive macroeconomic news starting to emerge,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television.

JFE Holdings Inc., the world’s third-biggest steelmaker by output, jumped 5.5 percent to 2,765 yen. Pacific Metals Co., which produces nickel used for steel, rallied 10 percent to 635 yen. Nippon Yusen K.K., Japan’s largest shipping line, rose 6.8 percent to 477 yen.

China is scheduled to release data at 11 a.m. on gross domestic product for the first quarter, consumer price inflation, industrial production and retail sales. The economy probably expanded at a 6.2 percent pace in the first quarter, according to economists’ estimates.

Aderans Holdings Inc., Japan’s biggest wigmaker, was bid higher by the daily limit of 100 yen, or 11 percent to 1,045. Unison Capital Inc. plans to launch a tender offer for at least 33.4 percent of the company’s shares, the Nikkei newspaper said. The tender price is expected to be around 1,000 yen per share, according to the report.

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

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Asian Stocks Climb as Fed Fuels Growth Optimism; Honda Gains

By Jonathan Burgos and Patrick Rial

April 16 (Bloomberg) -- Asian stocks climbed, lifting the regional benchmark index to the highest in more than three months, as a U.S. Federal Reserve survey stoked optimism that the world’s largest economy is recovering.

Honda Motor Co., which gets 51 percent of sales in North America, gained 2.6 percent as almost half of the regions surveyed in the Fed’s Beige Book said the economic decline is moderating. Hitachi Ltd. rose 3.8 percent after NEC Electronics Corp., Japan’s third-biggest chipmaker, said it’s in talks to merge with Hitachi’s Renesas Technology Corp. affiliate.

The MSCI Asia Pacific Index advanced 2.1 percent 90.83 at 10:30 a.m. in Tokyo, wiping out its losses for 2009. The gauge, which is set to close at the highest level since Jan. 7, has rallied 29 percent from a five-year low reached on March 9.

“The Beige Book gave some indication that the deterioration of the U.S. economy is easing and shows that there is some positive macroeconomic news starting to emerge,” Juichi Wako, a strategist at Tokyo-based Nomura Securities Co., said in an interview with Bloomberg Television.

Japan’s Nikkei 225 Stock Average jumped 3 percent to 9,007.92, while South Korea’s Kospi index climbed 2.8 percent and Australia’s S&P/ASX 200 Index gained 1.2 percent. All markets open for trading advanced.

Futures on the Standard & Poor’s 500 Index added 0.7 percent. The gauge rose 1.3 percent in New York yesterday after credit card provider American Express Co. said bad loans increased at a slower pace in March.

Fed Survey

U.S. stocks accelerated gains after the Fed’s Beige Book said that five of 12 Fed district banks “noted a moderation in the pace of decline.” Retail sales showed a “slight improvement” in some regions, and there was a “scattered pickup” in home buying, the survey said.

Honda rose 2.6 percent to 2,795 yen in Tokyo. Toyota Motor Corp., the world’s largest automaker, added 1.6 percent to 3,860 yen. Japanese carmakers also advanced after Nikkei English News said U.S. inventories for the country’s three largest producers have fallen by about 20 percent in the past month.

The five-week rally in the MSCI Asia Pacific Index has driven the average valuation of companies on the gauge trade to 18 times reported earnings, the highest since November 2007.

Investors in 10 countries grew less concerned that stocks will keep falling, according to Bloomberg’s Professional Global Confidence Survey. It was the first unanimous improvement in the gauge since it began 17 months ago.

Semiconductor Venture

Global stocks rebounded from the lowest levels in more than a decade on speculation government stimulus from the U.S. to Japan will end the global recession. China is scheduled to release data today on gross domestic product for the first quarter, industrial production and retail sales.

Hitachi rose 3.8 percent to 325 yen. Mitsubishi Electric Corp. rose 4.6 percent to 526 yen. Shino Inokuma, a spokeswoman for NEC Electronics, said the company is considering a merger with Renesas, a semiconductor venture between Hitachi and Mitsubishi Electric, to improve competitiveness.

NEC Electronics shares had yet to trade, though were being bid for at 930 yen, 12 percent above yesterday’s close.

Inokuma was responding to a Nikkei newspaper report that NEC Electronics and Renesas seek to reach an agreement this month and merge by April 2010. The merger would create Japan’s biggest chipmaker with annual sales of more than 1.2 trillion yen ($12 billion), Nikkei said.

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

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