Asian Stocks Rise as Olympus, Nissan Forecasts Stoke Optimism

By Patrick Rial and Masaki Kondo

May 13 (Bloomberg) -- Asian stocks rose, resuming a two- month rally, as forecasts from Olympus Corp. and Nissan Motor Co. boosted confidence corporate earnings are recovering from the global recession.

Olympus, the world’s biggest maker of endoscopes, soared 11 percent in Tokyo after unexpectedly forecasting a return to profit this year. Nissan, Japan’s third-largest automaker, rallied 7.1 percent after predicting a narrower loss than analysts estimated. Cnooc Ltd., China’s biggest offshore oil producer, gained 6.9 percent as crude oil rose for a second day. Toyota Motor Corp., the world’s biggest automaker, fell 2.4 percent after saying it expects to cut vehicle production.

“We’ll see a difference in the pace of recovery between businesses that are carrying out deeper cost reduction and those that don’t,” said Naoki Fujiwara, chief fund manager at Tokyo- based Shinkin Asset Management Co., which oversees about $6.1 billion. “A possible earnings rebound is already fully reflected in current valuations.”

The MSCI Asia Pacific Index rose 0.7 percent to 98.57 as of 1:01 p.m. in Tokyo. The benchmark dropped yesterday, ending a six-day winning streak. The gauge has climbed 40 percent from a five-year low on March 9 on speculation the worst of the financial crisis is over.

Japan’s Nikkei 225 Stock Average added 0.6 percent to 9,353.96, while Hong Kong’s Hang Seng Index climbed 0.7 percent. All markets in Asia advanced except Australia and Vietnam.

Hitachi Ltd., Japan’s third-largest chipmaker, sank 9.7 percent on a loss forecast. Santos Ltd., Australia’s third- biggest oil and gas producer, slumped 7.5 percent in Sydney on concern a share sale will dilute the value of existing holdings. China Construction Bank Corp., the nation’s second largest, lost 1.8 percent after an investor sold stock in the company.

Record Loss

Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent even as David Walker, the former U.S. comptroller general, wrote in the Financial Times that the government should rein in the country’s finances because its AAA debt rating may be cut. The S&P 500 lost 0.1 percent yesterday.

The dollar weakened against Asian currencies today after the FT report. The yen strengthened to as much as 95.79 against the U.S. currency, the strongest level since April 28. A stronger local currency cuts the value of repatriated sales for Japanese exporters.

Olympus jumped 11 percent to 1,919 yen. The company forecast net income of 40 billion yen ($416 million) for the year ending March 2010, the company said yesterday after markets in Japan closed. Analysts expected a net loss of 9.3 billion yen, based on the median of 10 estimates compiled by Bloomberg.

Toyota Production

Nissan rose 7.1 percent to 546 yen after projecting a net loss for fiscal 2009 that was almost half the amount analysts had expected. The carmaker plans to slash 20,000 jobs in response to an industry wide slump in the U.S., traditionally Nissan’s most profitable market.

The rally in stocks in the past two months has driven the average valuation of companies on the MSCI Asia Pacific Index to 31 times reported profit, the highest level since March 30, 2004, according to data compiled by Bloomberg. Analyst estimates for earnings of companies on the stock gauge climbed in April after declining the previous year, the data show.

Toyota slumped 2.4 percent to 3,650 yen. The company expects to cut global vehicle production by 28 percent this year as the recession hammers demand, according to figures provided by Hideaki Homma, a company spokesman.

Cnooc gained 6.9 percent to HK$10.36 in Hong Kong. PetroChina Co., Asia’s biggest crude producer, gained 5.1 percent to HK$8.52. Inpex Corp., Japan’s No. 1 oil company, rose 2.8 percent to 740,000 yen.

South Korea Housing

Crude oil futures rose 0.6 percent to $58.85 a barrel in New York yesterday, after earlier climbing above $60 for the first time since Nov. 11. Oil prices climbed 1.4 percent in after-hours trading.

Hitachi lost 9.7 percent to 344 yen, the biggest slide since Feb. 2, after forecasting a net loss of 270 billion yen for this fiscal year. That was worse than the median loss predicted by analysts in a Bloomberg survey.

Santos slumped 7.5 percent to A$14.59 following a two-day trading halt. The company raised A$3 billion ($2.3 billion) in Australia’s largest share sale since November to help fund a liquefied natural gas project.

Construction Bank lost 1.8 percent to HK$4.89 after an unidentified institution sold shares worth HK$3.6 billion ($465 million), according to a document sent to fund managers. The notice came a day after news that Bank of America Corp. sold part of its stake in the Chinese bank for $7.3 billion to a group of investors.

South Korea’s GS Engineering & Construction Corp. climbed 4.6 percent to 78,100 won. Hyundai Engineering & Construction Co. added 1.9 percent to 69,400 won. BNP Paribas boosted its view on builders to “positive” from “neutral” on optimism for a recovery in South Korea’s housing market.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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BlueGold, Galena Beat Competing Hedge Funds, Commodity Indexes

By Chanyaporn Chanjaroen

May 13 (Bloomberg) -- BlueGold Capital Management LLP and Galena Asset Management Ltd. extended their winning streak in the first four months, outpacing competing hedge funds and commodities.

Pierre Andurand’s $1.1 billion BlueGold energy fund rose 35 percent through April, two people with direct knowledge of the returns said, declining to be named because the data are confidential. Galena’s $430 million metals fund added 8.6 percent, according to David Mimra, London-based head of sales and marketing.

The Reuters/Jefferies CRB Index of 19 raw materials rose 6.1 percent this year, rebounding from its worst year in a half century, led by a 65 percent gain in gasoline. Assets in commodity-related indexes and exchange-traded funds advanced $18 billion to $172 billion in the first quarter, according to Barclays Capital.

“As commodity prices now appear to be bottoming, we are seeing an increase in investor interest” in funds not governed by index weightings, said Adam De Chiara, fund manager for Jefferies Asset Management’s commodities unit in Stamford, Connecticut.

BlueGold and Galena’s gains compare with an average four- month advance of 4.2 percent for all hedge funds monitored by Chicago-based Hedge Fund Research Inc. Hedge funds returned an average of 3.2 percent in April, the best performance in more than three years, according to Eurekahedge Pte.

The BlueGold fund was started by Andurand, a 32-year-old amateur Thai kickboxer, and Dennis Crema, 49, in February 2008. Both previously worked at commodity trader Vitol Group. BlueGold returned 209 percent last year. Andurand declined to comment.

Commodity Trader

Galena Asset Management, managed by Jeremy Weir, is the investment unit of Trafigura Beheer BV, the third-largest independent oil trader. The company started an energy hedge fund last month, headed by Claude Lixi, who traded oil options at Morgan Stanley.

Clive Capital LLP made 3.4 percent in the first four months, according to investors. The London-based hedge fund, managing about $2.3 billion, returned 44 percent last year. The company declined to comment.

The $1.3 billion Merchant Commodity Fund, run by Singapore- based Aisling Analytics Pte Ltd., returned 2 percent in the first four months, according to investors. The fund was founded by former Cargill Inc. traders Michael Coleman and Doug King.

The rebound in commodities is attracting investors again, on optimism that the worst global recession since World War II is improving. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record of almost 1,128 metric tons last month, overtaking Switzerland as the world’s sixth-largest gold holding.

‘Recession is Over’

“We think the recession is over,” said Jan Loeys, head of global market strategy at JPMorgan Chase & Co., in an interview in Hong Kong. “Commodities, materials in particular, are going to be benefiting right now as investors actually start to get worried about future inflation.”

U.S. consumer prices will advance 0.9 percent in the fourth quarter and 1.7 percent in 2010, according to as many as 77 economists surveyed by Bloomberg.

Most of the funds outpaced returns from the CRB index. Copper has been the second-biggest gainer after gasoline, rising 50 percent, as China increased imports to bolster stockpiles.

Paul Touradji’s Global Resources fund returned 0.4 percent in the first four months, according to two people familiar with the matter. Armel Leslie, an outside spokesman for New York- based Touradji Capital Management LP, which manages $2.6 billion, declined to comment.

Vermillion Asset

Vermillion Asset Management LLC’s $850 million Viridian commodity fund lost about 3.5 percent in the period, according to a person with knowledge of the result. The fund, founded by New York-based Drew Gilbert and Chris Nygaard, started trading in June 2005.

The Krom River Commodity Fund retreated 8.1 percent in the first four months, investors said, citing preliminary estimates from the company. The $550 million fund, started by Chris Brodie in 2006, returned almost 37 percent last year. The Baar, Switzerland-based fund manager declined to comment.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising prices and participate substantially in profits from money invested.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

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The Euro Gains Against The Dollar As Investors Believe The ECB Will Not Cut Gain

Daily Forex Fundamentals | Written by Finotec Group | May 12 09 09:18 GMT |

The euro approached a seven-week high against the dollar on speculation European Central Bank officials will signal they plan to keep interest rates on hold, maintaining the allure of assets region. 'As far as growth is concerned, we're around the inflection point in the cycle, that's the sentiment,' Trichet said at a press conference at the Bank for International Settlements in Basel, Switzerland. Europe's single currency also gained after a Chinese government report showed urban fixed-asset investment rose at the fastest pace in more than two years, spurring demand for higher-yielding assets. Central banks will keep using the dollar as the world's reserve currency, Reuters cited Chinese ambassador to the U.S. Zhou Wenzhong as saying last week. He described views the dollar could be replaced with a basket of other currencies as a 'scholarly exploration,' according to Reuters. The EUR/USD is currently trading at $1.3640 as of 8:40am, London Time. Britain's housing slump eased in April as more prospective homebuyers helped to make price declines the least widespread in more than a year, the Royal Institution of Chartered Surveyors said. The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 59.9 percentage points, the strongest result since January 2008, the lobby group said today in London. Enquiries from new buyers rose to the highest since 1999. 'There are tentative signs that the market is starting to pick up,' Jeremy Leaf, a spokesman for RICS, said in the statement today. 'We are unlikely to see significant improvement while money remains in short supply and the employment picture is uncertain.' The GBP/USD is currently trading at $1.5205 as of 8:58am, London Time. The yen rose broadly on Tuesday to extend gains made the previous day as regional stocks fell after a slide on Wall Street, prompting investors to further reduce investments in risky assets. The dollar edged down against a basket of currencies towards Monday's four-month low but held firm versus the euro, with investors taking profits from gains in other riskier currencies that had been lifted by optimism about the U.S. banking system. The yen drew some support after news that China's exports in April fell more than expected, denting expectations that the worst of the contraction in trade flows triggered by the global financial crisis is moderating. The USD/JPY is currently trading at 97.60 as of 9:05am, London time. Economic Calendar Time (GMT) E Event Currency Period Previous Previous Significance 23:50 Current Account JPY Mar 0.67T 0.51T 12:30 Trade Balance CAD Mar 0.1B 0.5B *** 12:30 Trade Balance USD Mar -26.0B -29.3B *** 08:30 Manufacturing Production m/m GBP Mar -0.9% -0.8% *** 08:30 Trade Balance GBP Mar -7.3B -7.2B ** 05:00 Leading Indicators m/m JPY Mar 75.0% 77.1% Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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European Market Update

Daily Forex Fundamentals | Written by Trade The News | May 12 09 10:03 GMT |

European Equity markets shake off weak Chinese exports and lower Indian industrial production ECONOMIC DATA (IN) Indian March Industrial Production -2.3% v -0.7%e; largest decline in 16 years (BE) Belgium Apr Unemployment Rate: % v 7.3% prior (JP) Japan Apr Prelim Machine Tool Orders: -80.4% v -85.2% prior (GE) German Apr Final CPI M/M: 0.0% v 0.0%e; Y/Y: 0.7% v 0.7%e (GE) German CPI - EU Harmonized M/M: 0.1% v 0.0%e; Y/Y: 0.8% v 0.7%e (GE) Apr Wholesale Price Index M/M: 0.1% v 0.0%e; Y/Y: -8.1% v -8.2%e (FR) Apr Bank of France Bus Sentiment: 75 v 75e (FR) France March Central Govt Balance: -€43.7B v -€29.9B prior (SP) Spain Mar House Transactions Y/Y: -24.3% v -38.6% prior (CZ) Czech April CPI M/M: -0.1% v 0.1%e; Y/Y: 1.8% v 2.0%e (CZ) Czech Apr Unemployment Rate: 7.9% v 7.8%e (CZ) Czech Mar Industrial Output Y/Y: -17.0% v -17.5%e (HU) Hungarian Apr Consumer Prices M/M: 0.8% v 0.3%e; Y/Y: 3.4% v 2.9%e (NE) Dutch Mar Industrial Production M/M: 0.1% v -2.2% prior; Y/Y: -12.1% v -12.6% prior; Industrial Sales Y/Y: -19.5% v -27.2% prior (SW) Swedish Apr CPI- Headline Rate M/M; 0.2% v 0.2%e; Y/Y: -0.1% v -0.1%e (SW) Swedish Apr CPI - Underlying Inflation M/M: 0.3% v 0.4%e; Y/Y: 1.4% v 1.5%e; CPI Level: 299.3 v 299.4e (UK) March Visible Trade Balance: -£6.6B v -£7.2Be; Trade Balance Non EU: -£3.3B v -£4.2Be; Total Trade Balance: -£2.5B v -£3.0Be (UK) DCLG UK House Prices Y/Y: -13.6% v -13.0%e (UK) Mar Industrial Production M/M: -0.6% v -0.9%e; Y/Y: -12.4% v -12.9%e (UK) Mar Manufacturing Production M/M: -0.1% v -0.8%e; Y/Y: -12.9% v -14.0%e SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM In equities: Equity markets opened convincingly to the downside following bearish pre-market trading. In themes continuing through from yesterday, risk aversion conversations have made a strong comeback. WSJ stories indicating the potential risk in the European banking sector as compared to the US sector, based on the lack of a comparable 'stress tests' and the failure of European banks to raise capital to the extent seen in the US have added weight to Tier 1 financial names on all three exchanges. Disappointing earnings out of EAD's [EAD.FR], Q-Cells [QCE.GE], Fraport [FRA.GE] and comments regarding debt concerns out of VW [VOW.GE] added to the downside momentum in early equity trading. Better than expected April BRC retail numbers provided lightness to that sector, with Marks and Spencer [MKS.UK] trading higher, but gains remained localized. Bourses dropped to the -1% level by 3:15EST before making a bounce. Markets continued that upward movement with the CAC and DAX recovering all their losses and turning positive by 3:40EST. In that move, banking and financial names recovered, while automotive names in the CAC [UG.FR], [RNO.FR] followed strength out of Fiat [F.IT] in Milan and pushed higher. In the DAX, market chatter regarding Deutsche Telecom [DTE.GE] and continued strength following earnings out of Deutsche Bourse [DB1.GE] rallied that market. European bourses continued their enthusiasm through the first half of 4:00EST, then being aided by better than expected Industrial and Manufacturing data out of the UK past 4:30EST sent markets to their then session highs. Enthusiasm showed some waning past 4:45EST with a slow drift off those post UK data highs. Results in line out of Australia regarding its 2009 budget deficits and GDP forecasts provided little new momentum to European equity markets with a gradually selling continuing through the bourses. By 5:30 the FTSE and CAC had returned to effectively flat on the session with only the DAX holding on to wider gains. In individual stocks: EAD's [EAD.FR] Reports Q1 Net €170.0M v €158.0Me, Rev €8.5B v €9.5Be, Backlog €413B v €400B q/q, Expects Airbus to capture up to 300 new gross orders in 2009. Revised industrial plans to complete A400M program could lead to substantial charges in H1 of 2009. || Babcock Intl [BAB.UK] Reports FY09 Op Profit £147.3M v £137Me, Rev £1.9B v £1.9Be, raises FY08 dividend 25% to 14.4p. Order book at £5.7B. Chairman: We anticipate increasing pressure for improved efficiency in public-sector spend will further increase the opportunities available to us. || VW [VOW.GE] Peich: Porsche group must lower debt burden before integrating with VW. CEO: Expect combined group to be world's largest automaker. VW-Porsche combination should not include 3rd party investors. Porsche becoming brand of VW is only 1 option open to the firm. See Fiat's moves to combine Chrysler and OPEL as 'unhealthy,' to fail globally. || Speakers: Australia's Swan released the details to the 2009 budget with the deficit to be A$57.6B (in line with press speculation). Swan saw GDP contracting by 0.5% in 2009-2010 period. Unemployment seen at 8.25 and rising toward 8.5% by 2011 || S&P stated that Australia's sovereign rating unaffected by budget details of higher deficit and higher debt issuance. In Currencies: A degree of risk appetite resurfaced during the European morning as traders seemed impressed by US banks' ability to raise capital following the stress test results. Also contributing to the USD's and JPY's soft tone were lingering concerns over the revised US deficit projections issued by the US budget office on Monday. Despite some optimistic economic growth outlook, the Administration widened its deficit projections. Dealers noting that Fed's Bernanke talked up USD presumably to help funding the massive budget deficits following the US budget office revisions. GBP sentiment helped by its April RICS house price data. GBP/USD held the 1.5075 level for the second day in a row and probed back above the 1.52 handle during the morning. The production data also provided some upward momentum for the pound. GBP/USD tested the 1.5300 level and EUR/GBP cross dipped towards 0.8930 level during the morning. Both CAD and AUD related pairs were higher in the session aided by higer energy prices and metals. NYMEX Jun crude futures tested $59.50 and Spot Gold rose back towards the $920/oz area. The AUD did retrace from session highs following the release of the 2009 budget details from Aussy Treasurer official Swan. In Fixed Income: With equities and commodities catching a bid, a weaker USD and JPY, Government bonds have been offered in Europe this morning, completing the risk appetite scenario. Dealers noted that the belly bearishly leading the way in the session. The UK sold £2.2B in 2030 Gilts with strong results, and the Netherlands successfully sold €3.3B in 2012 DSL. For debt investors hungry for yield, Australian Government Bond markets are set to re-apprear in a big way with today's budget forecasting total issuance of A$60B in the upcoming fiscal year. ||U.K. government's latest gilt auction attractedsolid demand and the June Gilts recovered from session lows as a result. The bid-to-cover ratio came in at 2.24 times, up from 1.37 at the previous auction of this bond. June Gilts near its best levels for the session at 119.00, but still off 11 ticks from Monday's close. In Energy: IEA's Tanaka reiterated his view that it was unlikely to again cut demand forecast for crude further. Comments are in line with his April 25th view. || Iran first nuclear power plant to commence generating electricity by October according to the Iranian press reports. Etemaad reports the plant in the southern city of Bushehr will start producing power by Oct. 23rd and cites Gholam Reza Aghazadeh, head of the Iran's Atomic Energy Organization. Article noted that Iran started test operations at the 1,000-megawatt plant in late February. Tests at the Russian-built site were expected to last between four and seven months || NOTES China exports decline by larger amount expected. India Mar Industrial production declines by its largest amount in 16 years. Bank of America raises funds by selling stake in China Construction Bank Reportedly EU to stress test European banking system by September and tests reportedly not to test individual banks, but rather the systemic nature of system Equity markets seem to be the main driver in the session with commodities and currencies following their lead. Looking Ahead: 7:00 (SA) South African Mar Manufacturing Production: M/M: % v -0.6%e; Y/Y: % v -12.3%e 8:20 (US) Fed's Lockhart to speak at conference in Atlanta 8:30 (CA) Canadian March International Merchandise Trade: C$0.5B expected v C$0.1B prior 8:30 (US) March Trade Balance (last -$26B) 8:30 (US) Fed;'s Rosengen to speak in Atlanta 8:30 (EU) ECB's Tumpell-Gugerell to speak in Brussels 10:00 (US) May IBD/TIPP Economic Optimism: 51.0 expected v 49.1 prior 11:00 (EU) ECB's Weber to speak in Munich 11:00 (US) NY Fed to repurchase T-Notes maturing between 05/31/2012 - 08/31/2013 Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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Comments Help Risk Appitite

Daily Forex Fundamentals | Written by AC-Markets | May 12 09 10:41 GMT |

News and Events: The EUR continues to be helped by recent risk-appetite, supported by equity market rallies and declining VIX and growing credibility to the 'green shoots' theory. In addition, as the market discounts the probability of a 'black swan' event in the financial sector, the flight to safety trades becomes less relevant. With focus being put back on the Fed's massively bloated balance sheet, timing of recovery and clean break of 200d ma, we expect traders are looking to build long position in the EUR. Comments by Bernanke and Trichet have added to the growing optimism surrounding the global recovery. Bernanke attempted to talk up the USD yesterday, stating that 'the USD will be strong because the US economy is strong'. On the comment both EUR and GBP sold off dropping to intraday lows but then quickly recovering, as trader focused/ believing the 'US economy is strong portion' of more than the rational of a strong USD. In addition, Bernanke acknowledged the market's uncertainty with the bank stress test results, yet argued that overall the tests serve a significant purpose of reducing uncertainty in the markets and boosting confidence in the financial system. Jean-Claude Trichet commented yesterday that the global downturn had bottomed with some large economies already on the path to recovery. Overnight, UK released the RICS house price balance, which showed the slowest decline since Jan 2008 at -59.9 vs last month's reading of -72.1. UK BRC retail sales monitor was also positive at 4.6 % y/y, the largest jump since April 2006. With liquidity conditions improving in Sterling and positive economic readings, the GBP traded up to 1.5294 against the USD. With risk appetite improving, risk-correlated assets have seen a large rally in the past few weeks and look to continue to outperform. Specifically, we see EM Asia as a beneficiary, as a large improvement in terms of trade will provide the currencies with a tangible fundamental rational for buying. Speaking of Asia, China's exports fell on an annual basis by much more than we and the market expected, down -22.6% y/y in April vs. -15.3% exp. after -17.1% in March. After the initial disappointment a closer look into the details suggests that the underlying momentum is still supportive of the global recovery. Today Key Issues: 08:30 GBP Trade Balance £bn mar -7.2 exp,-7.3 prior 08:30 GBP Industrial Production mar -0.8,-12.8 exp, -1.0,-12.5 prior 08:30 GBP Manufacturing Output mar -0.9,-14.0 exp, -0.9,13.8 prior 11:00 ZAR Manuf. Production mar -15.0 prior 12:30 CAD Trade Balance C$ 0.5 exp,0.1 prior 12:30 USD Trade Balance $bn -29.4 exp, -26.0 prior 18:00 USD Budget Balance $bn apr -63.0 exp, 159.3 prior The Risk Today: EurUsd Constructive under immediate resistance (Piercing line on daily chart) at 1.3669 (Yesterday's high), consolidation subsides as we head higher, we continue to aim for 1.3740 area, a break past this level would set our sights on 1.3971 within the week. The bias really is for the upside here as the retracement only managed a 38.20% counter. On the downside 1.3557 serves as initial support but real test for bearish bias comes at 1.3507. GbpUsd dollar weakness continues to shine through as bullish channel persists. Strong double top resistance at 1.5246, decisive push past this level would set sights on 1.5456 via 1.5352 (100% move after 50% retracement). On the downside 1.5180 (50% retracement) holds as soft support for a constructive bearish reversal with a floor on today's moves at 1.5074. UsdJpy Yen gained against the dollar yesterday as other pairs retraced. We are currently trading particular range, with a double top head and shoulders about to confirm, initial resistance at 97.99 proves crucial, a push past would allow for 98.35 and 99.56 (50% and 100% respectively). A failure to break 98.00 with enough panache would focus morning lows of 97.14 – via 96.35. UsdChf pair is trading a perfect mirror image to the EURUSD pair, EURCHF holding steady in 1.5080 – 1.5160 range with a bias for the downside would indicate USDCHF is set for further declines (strong recommendation for 3 graph comparison). Yesterday's support at 1.1022 was respected in early hours, we are set to test it again, eyes on 1.0670 (for monthly forecast) via 1.0960. On the upside (while a significant move up is countered by clear rounded top culminating at 1.1109) we see resistance at 1.1133 (38.20%) then 50.00% level at 1.1167. EURUSD GBPUSD USDJPY USDCHF 1.3971 1.5456 99.56 1.1167 1.3741 1.5352 98.35 1.1133 1.3669 1.5300 97.99 1.1109 1.3658 1.5277 97.68 1.1048 1.3557 1.5186 97.14 1.1022 1.3507 1.5117 96.35 1.1096 1.3469 1.5074 95.64 1.0670 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | May 12 09 10:43 GMT |

Strong buying pressure chased cable all the way to the USD1.5300 level this morning, from an open in the 1.5100 area and EUR/GBP tested the water below the EUR/GBP 0.8940 level. Buyers' appetite for sterling was increased by a round of better than expected UK economic data. The overnight publication of the BRC April retail sales monitor reported a stunning 4.6% y/y increase - though like the recently published CBI retail survey, some of this strength may be related to the timing of the Easter break. On the heels of this data was an improvement in the RICS house price balance. However, like most of the rest of recent housing market data, this can only be construed as indicating a levelling off in the downturn. This morning, UK trade and production data for March all came in better than expected. While the -0.6% m/m fall in total production does not represent overly good news, the improvement from the -1.0% m/m decline in Feb is consistent with the idea that the UK economy may have reached an inflexion point. The total UK trade balance registered a deficit of -GBP2.5 bln in Mar, continuing the improvement in the trend in evidence since July 2008. The next key focus for the UK market will be the publication of the BoE's Inflation Report tomorrow. Insofar as the Bank last week announced an extension of its asset buying plan it seems likely that a dovish tone on the economy will be projected tomorrow suggesting that the pound may be inclined to pare its gains into the release. Bernanke chose to talk up the USD overnight. The Fed Chairman reported that the Fed will contribute to a strong USD. Bernanke also remarked that the banks now appear to have better access to private capital. In the recent spirit of the risk trade, these latter comments are consistent with a move out of USDs. EUR/USD edged progressively higher during early London hours; moving back towards EUR/USD1.3675. However, in the past hour USD buyers have emerged. Bernanke's comments on the banks have also softened sentiment in stock markets. The Australian Treasurer has forecast a record budget deficit of AUD53.1 bln during today's budget speech. The news is not significantly different from market forecasts; although this morning's upside momentum in the AUD has been hindered and AUD/USD is giving back some of its gains. The AUD had maintained a softer tone overnight in Asia on concerns over the budget speech. The publication of the US trade report will be a focus this afternoon. In view of gains in oil prices, the market is expecting the deficit to deteriorate in March to -USD29.0 bln. A weaker number combined with a positive open in US stocks could lend EUR/USD renewed support. Upcoming Economic Data Releases (US Session). Prior, Expected 5/12/2009 12:30 CA Int'l Merchandise Trade MAR 0.1B 0.5B 5/12/2009 12:30 US Trade Balance MAR -$26.0B -$29.2B 5/12/2009 12:30 EC ECB's Tumpel-Gugerell Speaks in Brussels 12-May 5/12/2009 14:00 US IBD/TIPP Economic Optimism MAY 49.1 - - 5/12/2009 15:00 EC ECB's Weber Holds Speech at Conference in Munich 12-May 5/12/2009 21:00 US ABC Consumer Confidence 10-May -43 - - Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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New Zealand’s April House Prices Fall 9.2% From Year Earlier

By Tracy Withers

May 11 (Bloomberg) -- New Zealand house prices fell for the 10th straight month in April as a deepening recession and falling employment deterred buyers from the market.

Average prices dropped 9.2 percent from the year earlier month, Quotable Value New Zealand Ltd., the government valuation agency, said in an e-mailed report.

Employment slumped 1 percent in the first quarter, the most in almost a decade, adding to signs that New Zealand’s recession is likely to extend for at least a sixth quarter. As job losses mount, consumers and investors have become unwilling to borrow to buy homes.

“The threat of rising unemployment may affect an increasing number of home owners and potential home buyers,” said Blue Hancock, a spokesman for Quotable Value. “We expect values to remain relatively flat over the winter months.”

Property values have fallen about 9.6 percent since their peak in January 2008, Hancock said.

Reserve Bank Governor Alan Bollard has cut the official cash rate by 5.25 percentage points to a record-low 2.5 percent since July to bolster demand. Last month, he said he was unlikely to raise the rate until late 2010.

Lower borrowing costs and cheaper properties have encouraged some buyers into the market, said Hancock. House sales rose in March to a 16-month high, the Real Estate Institute said last month.

Home prices fell 9 percent in Auckland and 8.5 percent in Wellington. Prices across the nation’s 17 main urban centers dropped an average 9 percent.

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

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China’s Consumer Prices Fall for Third Month on Food

By Paul Panckhurst and Nipa Piboontanasawat

May 11 (Bloomberg) -- China’s consumer prices fell for a third month on food and commodities, aiding government efforts to boost spending in the world’s third-biggest economy.

Prices dropped 1.5 percent in April from a year earlier, after falling 1.2 percent in March, the statistics bureau said today. The median estimate in a Bloomberg News survey of 21 economists was for a 1.4 percent decline. Producer prices fell 6.6 percent, the most since Bloomberg data began in 1999.

Falling prices may lower costs for businesses and encourage consumers to spend, helping the economy to recover after exports collapsed. The absence of inflation makes it easier for the central bank to maintain its “moderately loose” monetary policy after five interest-rate cuts last year.

“Prices are declining largely because of commodity and food costs and in both cases that’s more positive than negative for the economy,” said Wang Tao, an economist at UBS AG in Beijing. She said easing prices would give consumers extra spending power and lower costs for producers.

The yuan traded at 6.8214 against the dollar as of 11:03 a.m. in Shanghai, from 6.8209 before the number was released.

In April 2008, inflation was 8.5 percent as pork prices soared because of a shortage of the meat, a Chinese staple. The gains encouraged farmers to raise more pigs, leading to an oversupply.

Meat Costs

Now, pork has tumbled close to a level that may trigger purchases by the state to buoy farm incomes, the government says.

Food, which makes up the biggest part of the index, fell 1.3 percent from a year earlier, the statistics bureau said. Pork declined 28.6 percent.

McDonald’s Corp. is among companies to have cut prices in China this year.

“The sharp rise in food prices in early 2008, particularly for pork, poultry and vegetables, and subsequent declines explain much of the year-on-year fall,” said Jing Ulrich, Hong Kong-based chairwoman of China equities at JPMorgan Chase & Co. “Deflationary concerns appear to be subsiding as the economy shows signs of recovery.”

An exception among the declines for food was grain, which climbed 5.5 percent.

Non-food prices fell 1.5 percent, including a decline of the same size for consumer goods. Garments fell 2.5 percent. Services costs dropped 1.4 percent and utilities declined 2.2 percent.

Energy Costs

Producer prices plunged on lower raw-material and energy costs. Crude oil fell 53.6 percent, the government said.

The central bank is on guard against the risk that consumers, expecting prices to decline, will delay purchases, choking off demand and stifling economic growth. The government’s options include raising state-controlled prices of resources and purchasing farmers’ products to stabilize prices.

The flood of money into the economy from record new lending and a 4 trillion yuan ($586 billion) stimulus package makes protracted price declines less likely.

Around the globe, the worst economic slump since World War II has added to the risk of deflation, while the response to the crisis -- governments pumping cash into their financial systems -- may fuel inflation as economies revive.

Global Inflation Threat

The People’s Bank of China said last week that a recovering economy and strong lending growth are limiting price declines and a global economic revival may also help. It also highlighted risks that monetary easing by major central banks could lead to inflation risks for “the whole world.”

Ben Simpfendorfer, an economist at Royal Bank of Scotland in Hong Kong, expects prices to fall 1.5 percent in 2009, “a positive development” because of the extra spending power it will give consumers.

China has “some breathing space” before inflation makes a comeback, he said, predicting consumer prices will rise 2 percent in 2010, 5 percent in 2011 and 8 percent in 2012 because of shortages of labor, raw materials and land as the economy grows.

China may be the first economy in Asia to face inflationary risks as extra money in the financial system spurs gains in asset prices and then consumer prices, Chris Leung, a senior economist at DBS Bank Ltd. in Hong Kong, said last week.

To contact the reporters on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net; Kevin Hamlin in Beijing at khamlin@bloomberg.net

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Australia May Face Debt Crisis From Grants to Young Home Buyers

By Jacob Greber

May 11 (Bloomberg) -- Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis.

Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

These buyers may be vulnerable when interest rates begin rising, potentially triggering a jump in foreclosures that will drive down property prices, cut profits at banks and damp household spending, which accounts for half the economy. A surge in defaults in America was a key trigger for the financial crisis that pushed the global economy into its worst recession since World War II.

“We’re mirroring what happened to the U.S. three years ago, when people who shouldn’t have been in the market bought houses,” said Martin North, managing director of Fujitsu Australia, a Sydney-based property-consulting company. “It’s a strategy set for an unfortunate outcome.”

As Australia slides into its first recession since 1991, Rudd’s payments have been criticized by economists and newspapers for fueling a property boom that may burst once the grants are reduced, possibly as soon as July 1.

No Subprime Crisis

While the central bank says Australia doesn’t have a subprime crisis because banks have tightened lending standards, recent reports show first-time buyers are driving a residential construction industry that employs 5 percent of the workforce. New home sales have surged 22 percent this year, and building approvals climbed 12 percent in February and March.

“March was the busiest month I’ve ever had,” said Peita Jackson, a real-estate agent at Bradfield & Prichard, who specializes in selling homes in Sydney’s eastern suburbs. “I sold six properties, and four were to first-time buyers.”

Former Prime Minister John Howard introduced the grants in 2000 to boost a slumping housing market. Last year Rudd tripled the payments for new homes to A$21,000 and doubled handouts for existing houses to A$14,000 to support the economy.

The increases coincided with record interest-rate cuts by Reserve Bank Governor Glenn Stevens, who has reduced the overnight cash rate target by 4.25 percentage points since September to a 49-year low of 3 percent.

Tax-Free Boost

The rate cuts have lowered payments on an average A$250,000 mortgage to A$1,470 from A$2,120. The Reserve Bank says that equals an 8 percent tax-free boost to family incomes. About 90 percent of Australians hold variable-rate loans that are adjusted when the central bank changes its benchmark rate.

“All these things have increased the demand side of property and not the supply side, which always results in increased prices,” said John Lindeman, head of research at property-information company Residex Pty in Sydney.

The 10 suburbs with the biggest prices gains in Sydney during the six months through March were all in locations where homes cost less than the city’s median price of A$564,500, according to Lindeman. The biggest jump was in Greenfield Park, 36 kilometers (22 miles) west of the city center, where the median price rose by A$23,700 to A$420,000.

“We’re setting up a whole generation of people for grief,” Lindeman said. “Interest rates will go up, and that’s when they will feel the pain.”

Prospective Owners

The government grants and interest-rate cuts have prompted first-time buyers, who accounted for a record 27 percent of dwellings financed in February, to borrow more than other prospective home owners. Lending to these consumers surged 6.1 percent between October and February to an average of A$280,600, the Statistics Bureau said. By contrast, home loans to all borrowers fell 1.1 percent to A$253,200.

“For many buyers, the grant was critical,” said Fujitsu’s North. “Over 30 percent had loan-to-valuation ratios on their properties of 95 percent or higher.”

This may eventually leave some new buyers with so-called upside-down loans, as they owe more on their mortgage than the market price of their home. That threat will be heightened if unemployment climbs above 7 percent from the current rate of 5.4 percent, as forecast by the government.

Rudd, Stevens and the International Monetary Fund have all said Australia is in a recession as companies such as BHP Billiton Ltd. and Qantas Airways Ltd. fire workers. Gross domestic product declined 0.5 percent in the quarter ended December 2008 from the previous three months.

Disappearing Jobs

While supporters of the grants say they have created 20,000 construction jobs, many of these jobs may disappear later this year. Rudd signaled last month that the increased handouts may not be extended beyond June 30, reverting to A$7,000 for new and existing homes.

“All good things must come to an end,” Rudd said April 23. The government will announce any changes to the grants when it releases its budget tomorrow.

Some prospective home buyers hope the grants will be cut.

Ludmila Soboleva, a 40-year-old drugs researcher, has been looking for an apartment in Sydney’s eastern suburbs since November, without success.

“Everyone told me this is the best time to buy something but for properties I can afford, it’s a nightmare,” she said. “I wish they would cut this grant so maybe there will be fewer people” trying to buy.

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

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | May 11 09 01:18 GMT |

News And Views Optimism intact. The US payrolls report was better than expected, but pointed to a still weak labour market. Nevertheless, risk aversion barometer VIX, at 32, is now convincingly in risk seeking territory (under 40), and is poised to head into its 20-30 range of calmer times. The S&P500 gained 2.4%, banks 12.1%, relieved that banks appeared sound post-stress test results. Oil gained 3.4% to $59, a break of the technical $60 looking ominous. US 3mth Libor fell 2bp to 0.94%, and 10 year treasuries had a good day, rallying 4bp. G20 sovereign credit spreads continued to contract, by 5 to 15 bp on Friday. Bank of America managed to sell $3 billion of 5yr notes without any FDIC guarantee, injecting confidence into credit markets. Bullish US equities gave chartists license to propel the US dollar (DXY) lower to 82.39 as it broke some important technical levels, namely the 200 day moving average (83.13) and rising trendline support. The EUR rallied accordingly from 1.3500 to 1.3650, in the process breaking upwards through its own 200 day m.a. at 1.3465. It was a similar story for USD/JPY, falling from 99.50 to 98.50. AUD/USD followed the script, accelerating from 0.7550 to 0.7700. A weekend McCrann article was not market related. NZD/USD was a tad less bullish, from 0.5950 to just above 0.6050, helping AUD/NZD firm slightly from 1.2700 to 1.2780. US non-farm payrolls down 539k in April. Although payroll jobs' 539k fall in April was the smallest contraction in employment for six months - in line with the less weak business surveys and slightly slower pace of initial jobless claims recently, most of the detail in the report remained consistent with a chronically weak labour market. Once again, revisions to the prior two months left them looking weaker (this month, by 66k fairly evenly spread between Feb and Mar). Private payrolls posted their sixth straight monthly loss of over 600k; the jobless rate surged another 0.4 pts to 8.9%, its highest since 1983; hours worked fell a steep 0.6% in April (in March they were flat); and hourly earnings grew by less than 0.1%. These last two factors will tend to weigh against household spending power this month. US wholesale inventories down 1.6% in March. The wholesale inventories decline in March was very steep and mostly volume driven, but as the Commerce Dept had already assumed a weak number, there are no obvious implications for revisions to the Q1 GDP report. The German factory sector did not shrink any further in March, (i.e. industrial production was flat) and with orders picking up that month, we might be starting to see a base form in this sector. Still, with IP down by a fifth compared to a year ago, that is still a very weak picture. UK producer prices subdued in April. Input prices fell last month and the core output measure continued to drift lower. Canadian employment posted its first rise for six months, of 36k, most unexpectedly. The gain was entirely due to full-time self employed service sector workers. With the economy now believed to be in a deepening recession - as evidenced by the renewed steep fall in housing starts, April's jobs growth is likely to be reversed next month. Outlook Global optimism remains intact, supporting the NZD. Today should see support at 0.5990, while a break of 0.6055 points to 0.6160. Today's card spending report for April will add insight to consumer sentiment. Events Today Date Country Release Last Forecast 11 May NZ Apr Electronic Card Transactions –0.5% – Apr REINZ House Prices %yr –4.0% – Aus Apr NAB Business Confidence –16.8 – US Fedspeak: Bernanke Jpn Apr Machinery Tools Orders %yr –85.2% – Can Mar New House Prices –0.7% –0.5% 12 May NZ Apr Food Prices 0.50% – Aus Mar Housing Finance 0.40% 5.50% Federal Budget, 2009/10 AUDbn – –55.0 US Mar Trade Balance $bn –26.0 –28.0 May IBD/TIPP Economic Optimism 49.1 51 Apr Federal Budget $bn 159 –20 Westpac Institutional Bank http://www.wib.westpac.co.nz/ Disclaimer All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

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USD Crumbles As Non Farm Sparks Euro Rally

Daily Forex Fundamentals | Written by Easy Forex | May 11 09 01:08 GMT |

U.S. Dollar Trading (USD) finished the week at multi-month lows against the Euro as better than expected US Job Data allowed risk appetite to jump another notch higher. April Non-Farm Payrolls were down -539K vs. -590K forecast. The Unemployment Rate leaped to 8.9% vs. 8.5% previously. Crude Oil was up $1.92 ending the New York session at $58.63 per barrel. In US share markets, the Nasdaq was up 22 points or 1.33% and the Dow Jones was up 164 points or 1.96%. The Euro (EUR) held to the 1.3400 area before the US data prompted a rally that did not stop until above 1.3600. The catch-up of the Euro post ECB allowed most of the crosses to gain led by the EUR/GBP and EUR/JPY. March German Industrial Production remained flat vs. -1.3% expected. Overall the EUR/USD traded with a low of 1.3342 and a high of 1.3629 before closing at 1.3621. The Japanese Yen (JPY) even the relentless rise in risk appetite couldn’t stop the USD/JPY sliding on the back of USD weakness. Losses were limited however as crosses providing plenty of support. Overall the USDJPY traded with a low of 98.32 and a high of 99.60 before closing the day around 98.50 in the New York session. The Sterling (GBP) support at 1.5000 was tested with the market still worried about the expansion of the BOE’s Quantitative Easing program. The Key support held and the subsequent rally helped the Pound close above 1.5200 at its highest level since January. Overall the GBP/USD traded with a low of 1.4980 and a high of 1.5220 before closing the day at 1.5216 in the New York session. The Australian Dollar (AUD) continued to behave like a fast Euro shooting to above 0.7700 or 8 Month Highs. AUD/JPY buying and support from commodities underpinned the move higher. Resistance is thin at these levels and could see 0.8000 tested if stocks can continue to gain. Overall the AUD/USD traded with a low of 0.7509 and a high of 0.7707 before closing the US session at 0.7697. Looking ahead, April Nab Business Confidence previously at -13. Gold (XAU) struggled to take advantage of the USD weakness as demand for gold eased. Overall trading with a low of USD$905 and high of USD$920 before ending the New York session at USD$916 an ounce. Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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FX Technical Commentary

Daily Forex Technicals | Written by Easy Forex | May 11 09 01:12 GMT |

Euro 1.3620 Initial support at 1.3247 (May 6 low) followed by 1.3212 (38.2% retrace 1.2889-1.3736). Initial resistance is now located at 1.3628 (May 8 high) followed by 1.3739 (Mar 19 high) Yen 98.75 Initial support is located at 97.94 (May 6 low) followed by 97.15 (Apr 30 low). Initial resistance is now at 99.75 (Apr 17 high) followed by 100.43 (Apr 14 high). Pound 1.5210 Initial support at 1.4836 (May 4 low) followed by 1.4704 (Apr 30 low). Initial resistance is now at 1.5231 (May 8 high) followed by 1.5373 (Jan 8 high). Australian Dollar 0.7685 Initial support at 0.7337 (May 6 low) followed by the 0.7233 (Apr 30 low). Initial resistance is now at 0.7738 (Oct 6 high) followed by 0.8097 (Sept 30 high). Gold 917 Initial support at 895 (May 6 low) followed by 878 (Apr 21 low). Initial resistance is now at 933 (Apr 1 high) followed by 945 (Mar 26 high). Currency Sup 2 Sup 1 Spot Res 1 Res 2 EUR/USD 1.3212 1.3247 1.3620 1.3628 1.3739 USD/JPY 97.15 97.94 98.75 99.75 100.43 GBP/USD 1.4704 1.4836 1.5210 1.5231 1.5373 AUD/USD 0.7233 0.7337 0.7685 0.7738 0.8097 XAU/USD 878.00 895.00 917.00 933.00 845.00 Easy Forex http://www.easy-forex.com Easy-Forex makes no recommendations as to the merits of any financial product referred to in this website, emails or its related websites and the information contained does not take into account your personal objectives, financial situation and needs. Therefore you should consider whether these products are appropriate in view of your objectives, financial situation and needs as well as considering the risks associated in dealing with those products

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Oil Falls From Six-Month High as Global Supplies to Increase

By Gavin Evans and Christian Schmollinger

May 11 (Bloomberg) -- Crude oil fell from a six-month high on speculation last week’s 10 percent advance won’t be sustained as global output increases.

Exports from Iraq’s Kurdistan region will begin June 1 after the state oil ministry agreed to “expedite” shipments, the provincial government said on its Web site yesterday. Venezuela, OPEC’s fifth-largest producer, seized the assets of 60 oil-field service companies on May 8 to restore operations shut over contract disputes.

“At some point you do have to be asking the question as to just how far this can go,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “The supply side really isn’t the focus of the market at the moment.”

Crude oil for June delivery fell as much as 68 cents, or 1.2 percent, to $57.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $57.99 at 11:58 a.m. in Singapore.

The contract rose 3.4 percent to $58.63 a barrel on May 8, the highest settlement since Nov. 11, as slowing job losses in the U.S. increased investor confidence and a drop in the dollar boosted the appeal of commodity investments.

Brent crude oil for June settlement declined as much as 54 cents, or 0.9 percent, to $57.60 a barrel on London’s ICE Futures Europe exchange.

U.S. Economy

Last week’s jobs report in the U.S., the world’s largest oil consumer, added to investor confidence that the worst of the recession there may be over, boosting demand expectations, Hassall said.

Ongoing weakness in the dollar will support commodities and oil may resume its rally if U.S. summer fuel demand is sufficient to start drawing down stockpiles there, he said.

Today, the euro has surged to a six-week high against the dollar as the gains in global equities has increased investors’ risk appetite.

Hedge-fund managers and other large speculators changed their bets on the direction of oil prices for a second time last week, according to U.S. Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 11,285 contracts on the New York Mercantile Exchange on May 5, the commission said May 8. A week earlier, traders had bet on rising prices.

New York oil futures plunged to a four-year low of $32.40 on Dec. 19 as global recession slashed demand and producers cut production to slow rising stockpiles. Prices have gained 39 percent in the past two months as measures to restore global credit markets lifted global equity markets.

OPEC Meeting

The Organization of Petroleum Exporting Countries will review its output levels on May 28. Iran, the group’s second- largest member, will seek a price of $70 a barrel, the nation’s oil ministry said May 9, citing OPEC governor, Mohammad Ali Khatibi.

“I don’t believe OPEC is going to cut again, especially with what’s happened to prices the last couple of weeks,” Commodity Warrants’ Hassall said.

China Petroleum & Chemical Corp., Kuwait Petroleum Corp. and an overseas oil producer plan to build a $9 billion refining and petrochemical plant in southern China’s Guangdong province, according to the head of China’s energy authority.

The third company is either BP Plc or Royal Dutch Shell Plc, Zhang Guobao, head of China’s National Energy Administration, said in Beijing yesterday. Zhang spoke to reporters in Beijing after the Chinese and Kuwaiti governments signed trade accords.

The project’s location may be moved to Zhanjiang from an earlier plan of Guangzhou, Zhang said, adding that talks between the companies are still continuing. The plant will include an oil refinery and an ethylene plant, he said.

China Petroleum, also known as Sinopec, will have the “biggest” stake in the project, Huang Wensheng, Beijing-based spokesman for the company, said by telephone today.

To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net

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China April Crude-Steel Output Falls 3.1% From March

By Lee Spears and Nerys Avery

May 11 (Bloomberg) -- Crude steel output in China, the world’s largest producer, fell 3.1 percent in the first 20 days of April compared with the daily average in March, the Ministry of Industry and Information Technology said.

The daily average production dropped to 1.41 million tons, the ministry said on its Web site today. Still, output was higher than the daily average of 1.37 million tons for the whole of last year, the ministry said.

Chinese steelmakers, which posted a first-quarter aggregate loss of 3.3 billion yuan ($484 million), need to rein in output to prevent an oversupply from depressing prices, according to the China Iron and Steel Association. China’s benchmark prices gained 2.3 percent last week.

“Recent gains in steel-product prices are mainly the result of a seasonal pickup in construction in the north, increasing demand and restocking,” the ministry’s statement said. “The outlook for the market is still sober as overcapacity persists and there’s yet to be a clear recovery in demand.”

The average spot price of Chinese hot-rolled steel, the benchmark, rose to 3,514 yuan on May 8 from 3,460 yuan a week earlier. The benchmark has fallen 11 percent this year.

Commercial stockpiles of steel products in major cities declined 8.1 percent from March to 9.96 million tons, led by the destocking of wires and reinforcement bars used in construction, the ministry said. The price of wiring rose to 3,387 yuan a ton, 82 yuan above this year’s lowest price, it said.

Rebar rose to 3,441 yuan a ton, or 74 yuan above 2009’s lowest level, the statement said. Hot-rolled plates increased to 3,319 yuan, or 87 yuan above the year’s lowest price, it said.

To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net.

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Zinc Prices May Fall as Plants Restart, Zhongjin Lingnan Says

By William Bi

May 11 (Bloomberg) -- Prices of zinc in China, the world’s largest consumer and producer, will probably drop as a recent surge led plants to resume production, according to Shenzhen Zhongjin Lingnan Nonfemet Co.

Smelters are restarting as much as 500,000 metric tons of annual capacity, Li Xialin, chief engineer at the country’s third-biggest producer said in an interview yesterday. Companies are also starting 700,000 tons of new annual capacity, he said.

Zinc, used to galvanize steel, has gained almost 30 percent this year in Shanghai and London trading after the Chinese government bought the metal to support producers and on optimism its $585 billion stimulus package will revive metal demand.

“Chinese prices cannot be sustained at recent highs of 13,000 yuan ($1,906) a ton, which should be the top end,” Li said. “London prices should also have a rapid decline.”

Zinc dropped 2 percent to 12,830 yuan a ton in Shanghai trading at 10:15 a.m. local time.

“The government’s stimulus plans can’t sustain demand for durable consumer goods in future months,” Li said. “China’s zinc imports will slow after the country restarts idled and new capacity.”

Stockpiles of the metal gained 6 percent, or 4,640 tons, to 80,074 tons last week, the Shanghai Futures Exchange said in a report on its Web site on May 8. China’s imports of refined zinc jumped 876% to 210,730 tons in the first quarter from a year earlier, according to customs data.

Li didn’t elaborate on his comment about consumer demand.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

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