German Economy Shrank at Record Pace in First Quarter

By Jana Randow

May 15 (Bloomberg) -- The German economy contracted more than forecast in the first quarter, slumping the most in at least four decades after the global financial crisis crippled exports and investment.

Gross domestic product plunged a seasonally adjusted 3.8 percent from the fourth quarter, when it fell 2.2 percent, the Federal Statistics Office in Wiesbaden said today. That’s the steepest drop since quarterly data were first compiled in 1970 and compares with the 3 percent decline predicted by economists in a Bloomberg News survey. It also marks an unprecedented fourth successive quarterly contraction.

The euro fell a quarter of a cent on the news to $1.3592.

Chancellor Angela Merkel’s government, which predicts the economy will contract 6 percent this year, is spending 82 billion euros ($112 billion) to haul Germany out of its worst recession since World War II. Some indicators have shown first signs of stabilization, with manufacturing orders rising for the first time in seven months in March and business confidence rebounding from a 26-year low in April.

Today’s report “was dramatically worse than expected,” said Joerg Lueschow, an economist at WestLB in Duesseldorf. “We can only hope that the improvement in sentiment wasn’t a mirage but a sign of stabilization and recovery.”

Exports, Investment

The first-quarter slump was led by a decline in exports and investment, the statistics office said. Consumer and government spending rose “slightly” in the quarter, it said. In the year, the economy shrank 6.9 percent when adjusted for the number of working days.

“The main pillars of the economy have continued to weaken,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “It could mean that GDP will be weaker than expected in other countries. The risk for euro-region GDP figures is pointing significantly downward.”

Spain’s economy contracted 1.8 percent in the first three months of the year, the country’s statistics office said yesterday. In France, the economy shrank 1.2 percent. Eurostat, the European Union’s statistics arm in Luxembourg, publishes first-quarter data for the entire 16-nation euro region at 11 a.m. Economists forecast a 2 percent contraction.

Grounds for Optimism?

“I believe there are some grounds for being optimistic that the pace of decline in economic activity will decelerate markedly in the months ahead,” Bundesbank President Axel Weber said this week. “However, it is certainly not advisable to be overly optimistic that the recovery process is safely on track. This will most likely be a gradual process.”

European confidence in the economic outlook increased for the first time in 11 months in April and the recession in the region’s manufacturing industry eased for a second month. German exports unexpectedly rose in March and industrial production held steady, ending a six-month slump and adding to signs that the worst may be over.

Still, Siemens Chief Executive Officer Peter Loescher said on April 29 he sees no sign of the economic recovery needed to spur manufacturing demand. Orders declined 11 percent to 20.9 billion euros, the company said. Europe’s largest engineering company reported a bigger-than-expected jump in earnings after accelerating its cost-cutting program.

Job Losses

Linde AG, the world’s second-biggest maker of industrial gases, said on May 5 it will cut about 3,000 jobs this year and it’s no longer counting on increasing 2009 profit and sales. At BASF SE, the world’s biggest chemical company, job cuts are being extended to 2,000 and a total 7,000 workers are being put on shorter hours.

German unemployment rose for a sixth straight month in April, pushing the jobless rate to a 16-month high of 8.3 percent.

The European Central Bank cut its benchmark interest rate to a record-low 1 percent last week and said that’s not necessarily its lowest level. President Jean-Claude Trichet also announced the ECB will buy 60 billion euros of covered bonds, securities backed by mortgages and public-sector loans, in an attempt to free up credit.

The International Monetary Fund expects the euro-area economy to shrink 4.2 percent this year and 0.4 percent in 2010.

“It will probably take several years before we completely make up for the contraction of the past quarters,” said Simon Junker, an economist at Commerzbank AG in Frankfurt. “We tend to reach for signs of hope. They’re there, but that doesn’t mean that we’ll immediately begin to grow strongly.”

The statistics office revised the fourth-quarter contraction to 2.2 percent from 2.1 percent. It will publish a detailed breakdown for the first quarter on May 26.

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

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Crude Oil Is Little Changed on Concern Fuel Demand May Decline

By Christian Schmollinger

May 15 (Bloomberg) -- Crude oil was little changed after retreating from a six-month high of $60 a barrel this week on concern the global economic recovery may falter.

Oil gave back its earlier gains after a report on May 13 showed a weaker-than-expected drop in U.S. retail sales, raising concern that the recession may be prolonged. Crude also slid as the International Energy Agency yesterday forecast the biggest contraction in world oil use since 1981.

“We’re definitely not out of the woods yet on this economic recession,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “Fuel demand is bad and the IEA report really drove that home.”

Crude oil for June delivery was at $58.65 a barrel, up 3 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:16 p.m. in Singapore. Oil reached $60.08 on May 12, the highest intraday price since Nov. 11.

Prices fell to $56.55 yesterday, a four-day low, after the IEA report and rebounded to close at $58.62 a barrel as U.S. stocks advanced on a decline in bank borrowing and better-than- estimated earnings at computer software maker CA Inc.

Oil futures are little changed this week after falling on May 13 as weaker-than-expected retail data in the U.S. caused investors to sell equities. The same day, an Energy Department report showed U.S. crude-oil supplies fell 4.63 million barrels to 370.6 million in the week ended May 8, the first drop since February. The decline left inventories 18 percent higher than the five-year average for the week.

Fuel Consumption

Total U.S. daily fuel demand averaged 18.2 million barrels in the four weeks ended May 8, down 7.9 percent from a year earlier, the Energy Department report showed. Gasoline demand averaged 9 million barrels in the same period, down 1.2 percent from a year earlier.

The IEA cut its 2009 demand estimate to 83.2 million barrels a day this year, down 3 percent from 2008. That’s 230,000 barrels a day lower than last month’s forecast. OPEC and the U.S. Energy Department reduced their 2009 outlooks this week.

Brent crude oil for July settlement was at $58.50 a barrel, down 9 cents, on London’s ICE Futures Europe exchange at 2:12 p.m. Singapore time. It rose 47 cents, or 0.8 percent, to $58.59 a barrel yesterday. The June contract, which expired yesterday, fell 65 cents, or 1.1 percent, to $56.69 a barrel.

Crude oil futures may decline next week as the global recession saps fuel demand and bolsters U.S. inventories that are near the highest since 1990.

Eighteen of 30 analysts surveyed by Bloomberg News, or 60 percent, said futures will fall through May 22. It was the most bearish response since June 2008. Six respondents, or 20 percent, forecast that oil prices will rise and six said the market will be little changed. Last week, 43 percent of analysts said prices would decline.

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

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Copper in Shanghai on Track for First Weekly Decline in Three

By Glenys Sim

May 15 (Bloomberg) -- Copper futures in Shanghai headed for the first weekly loss in three after weaker-than-expected economic data in the U.S. and China, the largest users of the metal, spurred concern the global recession may be protracted.

Futures are down 6.6 percent this week as China’s industrial production and U.S. retail sales came in below forecasts. China’s copper imports reached a record last month even as the country’s export slump deepened, raising concern supply may outpace consumption.

“The data showed that the tug-of-war between the slowdown of China’s exports and the increase in fixed asset investment continued to drag the Chinese economy in opposite directions,” Na Liu, analyst at Scotia Capital, wrote in a report e-mailed today.

Copper for August delivery on the Shanghai Futures Exchange, the most active contract, rose as much as 2.2 percent to 36,280 yuan ($5,316) a metric ton, and traded at 35,820 yuan at 11:12 a.m. in Singapore.

Copper for three-month delivery on the London Metal Exchange gained as much as 0.9 percent to $4,484 a ton, before trading 0.1 percent lower at $4,440. That’s a 5.2 percent decline for the week.

“As the two forces offset each other, China’s industrial production growth remained stalled, but at the same time, China’s commodity imports surged,” said Liu. “This is partially because economic growth driven by investment is a lot more commodity-intensive than growth driven by exports.”

Among other LME-traded metals, aluminum and zinc were little changed at $1,533 a ton and $1,503 a ton respectively. Nickel fell 1.1 percent to $12,410 a ton, while tin gained 0.4 percent to $13,650. Lead hadn’t traded as of 11:15 a.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Copper Base Signals Rise, StanChart Says: Technical Analysis

By Glenys Sim

May 15 (Bloomberg) -- Copper may rise to levels not seen since October in the month ahead, as the metal forms a U-shaped base, Standard Chartered Bank said, citing trading patterns.

The 50-week momentum indicator continues to turn higher and supports a rising copper market, as does the sustained push above the 13-week moving average, London-based David Barclay, the bank’s commodity strategist, wrote in a report yesterday. The 14-day stochastic indicator and MACD lines are also signaling a “buy,” he said.

Copper for delivery in three months on the London Metal Exchange has jumped 45 percent this year, and traded at $4,460 at 8:31 a.m. Singapore time.

“Copper prices are still struggling to clear resistance at $4,925 a ton, but a climb to $5,156 a ton remains favored over the coming month,” wrote Barclay. This is a 38.2 percent retracement of the fall from the 2008 high, he said, based on a series of numbers known as the Fibonacci sequence. After this, copper may target the 50 percent retracement objective of $5,878 a ton, he added.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break of a so-called ‘level of resistance’ indicates a price may move to the next level, while a failure indicates a trend may stall. Sell orders may be clustered at resistance levels.

A long term pullback to the 50-week moving average of $5,247.31 a ton is still expected on this bull cycle, said Barclay. Holding above support at $4,158 a ton is now “critical” to avoid a slump to the March 30 low of $3,886.25 a ton and lower, he added.

“Resistance to watch above $4,925 a ton is placed at $5,615 a ton, the 14 October 2008 high,” wrote Barclay. “Pressure below $3,886 a ton would call this into question though, making chart support important to hold on this current pullback.”

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Platinum Heads for Weekly Drop as Auto Industry Slump Persists

By Glenys Sim

May 15 (Bloomberg) -- Platinum headed for a weekly drop as a continued slump in the auto industry cuts demand for the metal used to make catalytic converters.

General Motors Corp. Chief Executive Officer Fritz Henderson said in a Bloomberg Television interview that bankruptcy is “probable.” Chrysler LLC is seeking to cancel 789 car-dealership agreements, according to its bankruptcy proceeding filing.

“The poor outlook for U.S. auto demand has been a significant factor in platinum group metal price weakness,” said James Steel, an analyst at HSBC Securities in New York.

Platinum for immediate delivery gained 0.7 percent to $1,122.75 an ounce at 9:09 a.m. Singapore time, paring the weekly drop to 2.4 percent. Palladium fell 0.6 percent to $224.50 an ounce. About half of platinum and palladium use is for auto parts, according to Johnson Matthey Plc, a London-based researcher and metal refiner.

“Although platinum group metal producers have responded to poor auto catalyst and industrial demand by cutting production, it may be difficult for them to rally until global auto demand stabilizes,” said Steel.

Still, platinum increased today alongside gains in equities. The benchmark MSCI Asia Pacific Index rose 1.1 percent at 9:21 a.m. Singapore time after Sony Corp. forecast a smaller loss than analysts expected, borrowing costs for banks plunged, and U.S. insurers were said to receive government funds. Some investors follow equity market moves as a gauge of economic growth.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Soybeans Head for Third Weekly Gain as Demand Cuts U.S. Supply

By Jae Hur

May 15 (Bloomberg) -- Soybeans climbed, heading for a third weekly gain, on speculation that increased global demand may further reduce inventories in the U.S., the world’s biggest grower and exporter of the crop.

Soybean-export sales in the four weeks ended May 7 were more than double the year-earlier period, the U.S. Department of Agriculture said yesterday. Sales of soybean meal, an animal feed, jumped 92 percent last week, it said. The oilseed has advanced 3.8 percent this week in Chicago.

“The rally in beans is providing spillover strength to both wheat and corn prices,” said Toby Hassall, an analyst at Commodity Warrants Australia Pty in Sydney. “The price mechanism is rationing dwindling supplies of beans to hungry importers.”

Soybeans for July delivery gained 0.2 percent to $11.4975 a bushel in electronic trading on the Chicago Board of Trade at 10:07 a.m. in Seoul. The price yesterday touched $11.48, the highest since Sept. 29.

Inventories of soybeans on Aug. 31, before this year’s harvest, will drop to 130 million bushels from 205 million bushels a year earlier, the USDA said May 12. Corn reserves on Aug. 31, 2010, will fall to 1.145 billion bushels, down 28 percent from a revised 1.6 billion projected for this year.

Corn for July delivery declined 0.2 percent to $4.275 a bushel. The grain is still on track to rise for a third week, gaining 1.7 percent before today. The price reached $4.34 on May 13, the highest since Oct. 9.

“A window of more favourable weather in the Midwest next week would take some of the yield-premium out of corn prices,” Hassall said.

July-delivery wheat was little changed at $5.9325 a bushel. The price has dropped 2.9 percent this year on increased global production and declining demand for U.S. grain.

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

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Gold on Track for Second Weekly Rise on Dollar, Equity Decline

By Glenys Sim

May 15 (Bloomberg) -- Gold headed for a second weekly gain as the dollar extended its decline and global stocks were poised for their first weekly slump in ten, boosting demand for haven investments.

Bullion, little changed today, is up 1.1 percent this week as the Dollar Index, which tracks the greenback against six major currencies, headed for a fourth weekly loss. The MSCI World Index rose 0.4 percent today, taking its loss for the week to 3 percent.

“Investor sentiment remains positive,” Barclays Capital analysts led by Gayle Berry said in an e-mailed report today. “Beyond short-term corrections, a weaker dollar and expectations for a build in inflation are likely to spur investors to increase their exposure to gold.”

Gold for immediate delivery was at $926.92 an ounce at 2:18 p.m. in Singapore. The metal climbed to $930.90 an ounce May 13, the highest since April 1. Silver was unchanged at $14.06 an ounce, a gain of 0.4 percent this week.

The dollar traded at $1.3595 to the euro, from $1.3639 yesterday. A report later today may show the European Union’s economy shrank 2 percent in the first quarter, the fastest contraction in at least 13 years, according to a Bloomberg News survey of economists.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, stood unchanged at 1,105.62 metric tons yesterday. They rose the day before for the first time since April 9, according to the company’s Web site.

“In the near term, a lack of fresh investor interest is likely to stem upward momentum” and gold will likely average $925 an ounce for the second quarter, Berry said.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Japan Stocks Advance on Sony Forecast, Bank Borrowing Costs

By Masaki Kondo

May 15 (Bloomberg) -- Japanese stocks climbed, paring a decline on the week, after Sony Corp. forecast a smaller loss than analysts had expected and borrowing costs for banks dropped the most in eight weeks.

Sony, the world’s No. 2 electronics maker, jumped 7.1 percent after saying it will more close factories as part of its restructuring. Sumitomo Mitsui Financial Group Inc. added 6.8 percent as the London Interbank Offer Rate fell three basis points, the most since March 19. Mitsui O.S.K. Lines Ltd., Japan’s second-largest shipping line, advanced 2.7 percent as commodity-shipping fees rose to a seven-month high.

“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Like a drunkard waking up with a hangover, investors will eventually be hit with the reality that things haven’t improved overnight.”

The Nikkei 225 Stock Average climbed 171.29, or 1.9 percent, to close at 9,265.02 in Tokyo. The broader Topix index rose 18.99, or 2.2 percent, to 881.65. For the week, the Nikkei lost 1.8 percent, while the Topix declined 1.5 percent.

The Topix has risen 26 percent from a 25-year low on March 12 on signs government and central bank efforts to ease the global recession are taking effect. Orders for Japanese machinery, which unexpectedly gained in February, dropped 1.3 percent in March from the previous month, the Cabinet Office said today. Economists had predicted a 4.6 percent decline.

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

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Barclays, Irish Life, ITV, Rio: U.K., Irish Equity Preview

By Jonathan Browning

May 15 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.

The benchmark FTSE 100 Index rose 31.21, or 0.7 percent, to 4,362.58. The FTSE All-Share Index rose 0.7 percent, and Ireland’s ISEQ Index rose 2.6. percent.

Barclays Plc (BARC LN): The U.K.’s third-biggest bank is in talks to sell its Barclays Global Investors asset management unit to potential buyers including BlackRock Inc. and Bank of New York Mellon Corp., according to people with knowledge of the matter. The shares rose 10.25 pence, or 4.2 percent, to 253 pence.

Clipper Windpower Plc (CWP LN): The U.K. turbine maker and operator is scheduled to publish earnings. The shares rose 7.5 pence, or 6.3 percent, to 126 pence.

Irish Life & Permanent Plc (IPM ID): Ireland’s biggest mortgage lender is scheduled to publish a trading statement. The shares rose 24.8 cents, or 11.3 percent, to 2.448 euros.

ITV Plc (ITV LN): The U.K.’s biggest commercial broadcaster hired U.S. executive search firm Russell Reynolds Associates to find a replacement for Executive Chairman Michael Grade, the Financial Times reported. The shares fell 1.5 pence, or 4.6 percent, to 31 pence.

Ladbrokes Plc (LAD LN): The owner of more than 2,300 U.K. and Irish betting shops is scheduled to publish a trading statement. The stock rose 4.75 pence, or 2.2 percent, to 224.75 pence.

Lancashire Holdings Ltd. (LRE LN): The marine and energy insurer founded in 2005 is scheduled to report first-quarter results. The shares rose 2.25 pence, or 0.5 percent, to 473.25 pence.

Rio Tinto Plc (RIO LN): The world’s third-largest mining company said it remains committed to a proposed $19.5 billion investment accord with Aluminum Corp. of China. The shares rose 91 pence, or 3.64 percent, to 2,594 pence.

UTV Media Plc (UTV LN): Northern Ireland’s biggest broadcaster is scheduled to publish a trading statement. The shares fell 3 pence, or 5.6 percent, to 56.5 pence.

To contact the reporters on this story: Jonathan Browning in London jbrowning9@bloomberg.net

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Arcandor, Beate Uhse, Linde, Volkswagen: German Equity Preview

By Tony Czuczka

May 15 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.

The X-DAX Index rose 0.3 percent to 4,738.42. The measure, derived from trading in DAX Index futures, provides an estimate of Germany’s benchmark index. The DAX rose 0.2 percent to 4,738.47.

Arcandor AG (ARO GY): The retailer’s banks plan to ask the German government for as much as 700 million euros ($954 million) in loan guarantees, a person with knowledge of the situation said. The shares fell 0.5 percent to 1.93 euros.

Beate Uhse AG (USE GY): The operator of Europe’s largest chain of sex shops is scheduled to release first-quarter results. The share rose 1.3 percent to 78 euro cents.

Linde AG (LIN GY): The world’s second-biggest maker of industrial gases plans to cut about 3,000 jobs this year and is no longer counting on increasing 2009 profit and sales. Linde is holding its annual shareholder meeting. The shares rose 0.73 percent to 59.42 euros.

Medion AG (MDN GY): The consumer electronics company that makes two thirds of its revenue in Germany plans to announce first-quarter results. The company forecast in March that revenue will fell in the first half of 2009 as the recession hurts demand for televisions and DVD players. The shares fell 0.2 percent to 6.54 euros.

MVV Energie AG (MVV1 GY): The operator of seven local German utilities plans to release second-quarter results. Mannheim-based MVV said in January it expected revenue to rise this fiscal year. The shares rose 0.42 percent to 31.15 euros.

SMA Solar Technology AG (S92 GY): The German company that supplied solar power equipment to the Vatican is due to release first-quarter results. Sales fell by as much as 35 percent in the first quarter, board member Pierre-Pascal Urbon said on March 31. The shares were unchanged at 50 euros.

Volkswagen AG (VOW GY): Volkswagen AG, Europe’s largest carmaker, aims to double its U.S. market share in three to five years by targeting consumers seeking cars that use less fuel, the company’s U.S. chief executive officer said today. The shares fell 0.9 percent to 222.49 euros.

To contact the reporter on this story: Tony Czuczka in Berlin at at aczuczka@bloomberg.net

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Asian Stocks Advance on Sony, Borrowing Costs; Komatsu Gains

By Patrick Rial and Masaki Kondo

May 15 (Bloomberg) -- Asian stocks climbed, paring the MSCI Asia Pacific Index’s first weekly decline in three weeks, after Sony Corp. forecast a smaller loss than analysts expected and Japanese machine orders fell less than estimated.

Sony, the world’s No. 2 maker of consumer electronics, jumped 6 percent after saying it will close factories as part of restructuring efforts. Komatsu Ltd., Asia’s biggest maker of earthmovers, jumped 3.2 percent in Tokyo as machine orders from abroad surged the most on record. HSBC Holdings Plc, Europe’s largest lender by market value, rose 3.9 percent and Tokio Marine Holdings Inc., gained 5 percent on optimism a government bailout of U.S. insurers will ease the credit crunch.

The MSCI Asia Pacific Index rose 1.8 percent to 97.00 as of 2:34 p.m. in Tokyo. It declined 1 percent in the past five days, the first weekly drop since the period ended April 24, as the most expensive valuations since 2004 raised concern a two-month stock rally had outpaced earnings prospects.

“Optimism lifts the market, and the gain in equities further lifts optimism,” said Kiyoshi Ishigane, a senior strategist a Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion in Tokyo. “Investors will eventually be hit with the reality that things haven’t improved overnight.”

Japan’s Nikkei 225 Stock Average gained 1.7 percent to 9,249.86. All markets in Asia rose except China.

Tokyo Electron Ltd. climbed 7.1 percent after saying orders for semiconductor equipment will rise this quarter. Rio Tinto Group, the world’s third-largest mining company, surged 7.6 percent in Sydney after saying it remains committed to a $19.5 billion investment from Aluminum Corp. of China. Singapore Airlines Ltd., the world’s second-biggest carrier by market value, gained 2.1 percent on plans to spin off a unit.

Sony Earnings

Futures on the Standard & Poor’s 500 Index added 0.1 percent. The benchmark rose 1 percent yesterday, snapping a three-day losing streak, as declining funding costs boosted bank shares. CA Inc., the world’s second-largest maker of software for mainframe computers, led gains by technology companies after reporting earnings that beat analyst estimates.

The MSCI Asia Pacific Index has climbed 37 percent from a five-year low on March 9 amid speculation the worst of the financial crisis has passed. Shares on the gauge are valued at 32 times trailing earnings, the highest level since 2004, according to data compiled by Bloomberg.

Sony jumped 6 percent to 2,545. The company forecast yesterday it will post a 110 billion yen ($1.1 billion) operating loss this year, better than the median 135.6 billion yen loss estimate in a Bloomberg survey of nine analysts.

The company also said it will close a further five factories in addition to three that have already been announced as part of the company’s restructuring plan.

Borrowing Costs

Hitoshi Kuriyama, an analyst at Merrill Lynch & Co., lifted his price target on Sony by 200 yen to 2,800 because the company “is making steady progress with structural changes and ramping up new business models,” according to a report.

Komatsu jumped 3.2 percent to 1,346 yen, while rival Hitachi Construction Machinery Co. added 1.3 percent to 1,497 yen. Daikin Industries Ltd., a maker of industrial air conditioners, jumped 2.4 percent to 2,840 yen.

Machine orders, an indicator of capital investment in the next three to six months, fell 1.3 percent from February, when they gained a revised 0.6 percent, Japan’s Cabinet Office said today. Economists surveyed predicted a 4.6 percent drop. Bookings from abroad jumped 46.4 percent, the biggest monthly gain on record.

Tokyo Electron

Tokyo Electron, the world’s second-largest supplier of semiconductor production equipment, rallied 7.1 percent to 4,370 yen after saying orders are likely to rise this quarter.

HSBC added 3.9 percent to HK$64.80 on optimism central bank efforts to unlock credit markets are bearing fruit. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded lender by value, added 5.1 percent to 618 yen. Tokio Marine gained 5 percent to 2,950 yen.

The three-month London interbank offered rate, or Libor, for dollar-denominated loans fell almost three basis points to 0.85 percent yesterday, according to the British Bankers’ Association.

The rate surged as high as 4.8 percent in October in the aftermath of the collapse of Lehman Brothers Holdings Inc. as banks became reluctant to lend to each other amid collapsing financial markets.

Policies ‘Mobilized’

“The drop in Libor is an indication that government policies are being effectively mobilized, and are fueling expectations for a rebound in financial shares,” said Takero Inaizumi, a manager at Mizuho Investors Securities Co. in Tokyo.

The U.S. government approved six insurers for bailout funds from the Troubled Asset Relief Program after investment declines eroded capital across the industry, according to the companies and Andrew Williams, a spokesman for the Treasury.

The bailouts are part of a series of global efforts to alleviate the credit crisis, which has caused losses of more than $1.4 trillion at the biggest banks, insurers and brokerages.

Rio surged 7.6 percent to A$61.95. The company has agreed to sell $7.2 billion of convertible bonds and stakes in projects worth $12.3 billion to Aluminum Corp. and said it remains committed to the deal in a response to a query from the Australian Stock Exchange. The statement helped quell speculation Rio will be forced to boost its capital base with a share sale that would dilute the value of existing stock.

Singapore Air Divestiture

Singapore Airlines gained 2.1 percent to S$11.84 after saying it plans to divest its Singapore Airport Terminal Services Ltd. unit in a stock distribution to shareholders.

“Focusing on their core business is the right thing to do now,” said Christopher Wong, a fund manager at Aberdeen Asset Management Asia Ltd. in Singapore, which oversees $20 billion. “The whole aviation business is going through a very tough period.”

Sumitomo Electric Industries Ltd., which makes electrical wires and cables, soared 11 percent to 1,005. Net income for the year ended in March beat its forecast by 72 percent as a tax code change on overseas dividends lifted profits.

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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New York, London Exchanges See Rebound in Listings After Crisis

By Chua Kong Ho

May 15 (Bloomberg) -- Corporate listings are set to rebound as financial markets stabilize and companies seek funding, the heads of the New York and London exchanges said.

“You feel there’s a pretty big pipeline and a lot of pent- up demand,” NYSE Euronext Chief Executive Officer Duncan Niederauer said in an interview today. The supply of companies looking to list looks “very good” and will restart as financial markets stabilize, London Stock Exchange Group Plc CEO Clara Furse said. Neither CEO gave details.

NYSE Euronext, the world’s largest owner of stock exchanges, and rivals including the LSE, Nasdaq OMX Group Inc., Deutsche Boerse AG are confronting lower share volume as the worst financial crisis since the Great Depression drives traders out of the market. Trading on the Lisbon, Paris, Brussels and Amsterdam stock markets slowed 15.9 percent in the first quarter from a year earlier.

Both Niederauer and Furse spoke in interviews in Shanghai, where they are attending the Lujiazui Forum. NYSE Euronext has the support of Chinese regulators to list in Shanghai though there is “no timetable yet,” Niederauer said.

NYSE Euronext was formed in 2007, bringing together bourses including the New York Stock Exchange, London International Financial Futures & Options Exchange and markets in Paris, Brussels and Amsterdam.

The company last year asked Chinese regulators to consider relaxing rules barring companies from listing shares on both the Shanghai Stock Exchange and overseas markets. The company is seeking to meet demand from issuers who want multiple stock listings and investors interested in overseas companies.

Chinese Listings

“If the market tone improves and Chinese companies are looking to the public markets in the U.S., I would expect we would win the majority of the listings,” said Niederauer.

Nasdaq OMX Group, the operator of the Nasdaq Stock market, expects 20 Chinese companies to list in U.S. exchanges over the next 12 months, the Wall Street Journal reported today, citing Robert McCooey, Nasdaq OMX’s senior vice president of new listings and capital markets.

PetroChina Co., the nation’s largest oil producer, and China Mobile Ltd., the world’s biggest telephone company by value, are among Chinese companies listed on the NYSE.

To contact the reporter on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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U.S. Regulators Seek Trace-like Reporting for OTC Derivatives

By Matthew Leising

May 14 (Bloomberg) -- U.S. regulators may impose the same price reporting and transparency requirements on over-the- counter derivatives that reduced bank profits by almost half in the corporate bond market when the Trace system was adopted seven years ago.

“I think it’s something we’ll look at very closely as a potential model,” Securities and Exchange Chairwoman Mary Schapiro said yesterday at a news conference in Washington, in which regulators laid out potential structural changes to improve policing of the $684 trillion OTC derivatives market.

Trace, the bond-price reporting system of the Financial Industry Regulatory Authority, gives anyone with an Internet connection access to trading data for corporate bonds. The system, in full operation since February 2005, reduced the difference in prices that banks charge to buy and sell bonds by almost half.

Treasury Secretary Timothy Geithner, Schapiro and Michael Dunn, the acting chairman of the Commodity Futures Trading Commission, called for increased oversight of over-the-counter derivatives to reduce risk to the financial system. Lax regulation contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc., leading to the seizure of credit markets and causing more than $1.4 trillion in writedowns amid the worst financial crisis since the Great Depression.

‘Accept the Reality’

“Dealers have to accept the reality that this business -- where margins were compressing already -- is getting less profitable,” said Stephen Bruel, research director for securities and capital markets for Tower Group, a research and advisory firm in Needham, Massachusetts. “A lot of the action you’ll see is to contain the size and scope and profitability of this market.”

The bid-ask spread on investment-grade corporate bonds was about seven basis points before Trace was implemented and about four basis points immediately after, according to a study by Kumar Venkataraman, an associate finance professor at Southern Methodist University’s Cox School of Business in Dallas, published in the Journal of Financial Economics. A basis point is 0.01 percentage point.

Schapiro helped developed the Trace system in 2002 when she was president of the NASD, which was consolidated into Finra. Schapiro, Geithner and Dunn pledged at the news conference to work together on changes in the market.

‘Significant Gaps’

“Significant gaps in the basic framework of oversight over critical institutions” helped cause the financial crisis, Geithner told reporters. “A series of comprehensive reforms to create a stronger system, less vulnerable to crisis, with stronger protections for consumers and investors” will be hashed out with Congress, he said.

Part of his plan is to push banks to increase price transparency by adopting electronic trading systems for over- the-counter derivatives. Over-the-counter derivatives transactions are now typically conducted over the phone between banks and customers.

Geithner sent a proposal to Congressional leaders listing four main objectives: to protect against systemic risk by creating a more resilient market, improve efficiency and transparency, prevent manipulation and fraud and reduce risks to less-sophisticated investors, Geithner said.

“Some of the U.S. authorities have said we were pretty close to a meltdown and I actually think listed marketplaces with multilateral clearing are part of the answer to that question,” said Thomas Kloet, chief executive officer of TMX Group Inc., owner of Canada’s main equities and derivatives market. “I hope authorities don’t let go of that. I think they have to address that.”

Shares Rise

Shares of CME Group Inc. and Intercontinental Exchange Inc. rose yesterday after Bloomberg News reported Geithner’s plan. Chicago-based CME Group, the world’s largest futures exchange, soared $15.62, or 6 percent, to $274.10 as of 4 p.m. in Nasdaq Stock Market trading. Intercontinental of Atlanta, the second- largest U.S. futures market, rose as much as 5.2 percent, before closing up 9 cents to $96.59 on the New York Stock Exchange.

“This is the best Wall Street can hope for,” said James Cox, a securities law professor at Duke University in Durham, North Carolina. “This will allow them to stay in business and still make money. It also cuts off what potentially would have been more regulation.”

Once a Day

Only about 10 percent of bank customers use electronic systems to trade over-the-counter derivatives, according to Paul Zubulake, a senior analyst with Boston-based Aite Group. That compares with about 90 percent of inter-bank trades that are done electronically through inter-dealer brokers such as London- based ICAP Plc or Dealerweb, according to Zubulake.

Prices for indexes of credit-default swaps, contracts used to hedge against or speculate on corporate debt, have been made public once a day since March by Markit Group Ltd. and Intercontinental Exchange, the first company to guarantee the contracts with a clearinghouse. Prices for other over-the- counter contracts, such as interest-rate swaps, are not widely available.

The need for transparency in the over-the-counter derivatives market was stressed by Theo Lubke, a senior vice president at the Federal Reserve Bank of New York, last month at a derivatives industry conference in Beijing.

More Information

Lubke, who was appointed in 2007 to oversee OTC derivatives by Geithner when he was president of the New York Fed, said the credit swap prices now available are not sufficient, according to a transcript of his comments.

Because investors don’t know when trades took place or how many occurred, more information is needed, he said April 23 at the International Swaps and Derivatives Association general meeting in Beijing.

“That window of opportunity to make changes as opposed to having those changes brought to the market by external forces is narrowing,” he said. “It is in market participants’ interest as well as the interest of regulators to see continued rapid movement.”

Derivatives are contracts whose values are tied to assets including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

“ISDA welcomes the recognition of industry measures to safeguard smooth functioning of privately negotiated derivatives,” Robert Pickel, chief executive officer of ISDA, said in an e-mailed statement.

Lubke said at the ISDA conference that the major banks’ control of the over-the-counter derivatives market must end by allowing hedge funds and other investors more input into how market decisions are made.

“It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers,” Lubke said. “There is opacity in the OTC market that doesn’t have commensurate public policy benefits,” he said. “This is not something that can continue.”

To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net

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TMX Says Derivatives on Exchanges May Align Buffett, Greenspan

By Doug Alexander

May 14 (Bloomberg) -- Over-the-counter derivatives contracts should clear on exchanges to improve transparency and reduce risk in the financial system, the head of Canada’s main bourse said.

“Almost all of the problems that relate to the economic crisis” stem from OTC derivatives, TMX Group Inc. Chief Executive Officer Thomas Kloet said in an interview yesterday in New York. “Listed derivatives are actually part of the solution, not part of the crisis.”

Kloet joins U.S. Treasury Secretary Timothy Geithner in calling for over-the-counter derivatives markets to be moved onto regulated exchanges and trading platforms. Transactions in this $684 trillion market are now typically conducted over the phone between banks and customers. Toronto-based TMX gets about 16 percent of its revenue from derivatives trading.

The shift may also create common ground between Warren Buffett and Alan Greenspan, Kloet, 51, said. Buffett, Berkshire Hathaway Inc.’s chairman and CEO, once called derivatives “financial weapons of mass destruction.”

In his annual letter to shareholders released in February he said that increased transparency won’t solve the problems derivatives pose. Carrie Kizer, Buffett’s assistant, didn’t immediately respond to an e-mail seeking comment.

“We think the derivative markets as they evolved have done more public damage than public benefit,” said Berkshire Vice Chairman Charles Munger, in a Bloomberg Television interview earlier this month.

Greenspan, the former U.S. Federal Reserve chairman, said for years that derivatives -- contracts used to bet on everything from bond prices to weather patterns -- reduce risk.

Closes Gap

“I actually do” think it bridges the gap in the views held by Buffett and Greenspan because over-the-counter derivatives cleared through exchanges are less risky, said Kloet.

Bank trading in unregulated markets such as over-the- counter derivatives was singled out by Geithner yesterday as he promised a more conservative oversight regime.

“The regulatory authorities have a unique window of opportunity to clean this mess up,” Kloet said. “I think the U.S. Fed very quietly gets it.”

TMX is in talks with the Bank of Canada to allow it to clear over-the-counter contracts such as interest-rate repurchase agreements and interest-rate swaps on its own platform, Kloet said. TMX operates the Toronto Stock Exchange, Canada’s main equities market, and the country’s derivatives market in Montreal.

Rates Swaps

“It’s a natural edge onto our fixed-income derivative markets,” Kloet said.

TMX may provide clearing of repurchase agreements within the year, followed by interest-rate swap contracts by 2011, he said. TMX is unveiling a new clearing system by the end of this month, which will allow it to handle these contracts, Kloet said.

The move to exchange-traded contracts would add transparency, increase liquidity and may help avoid the problems sparked by the subprime-mortgage collapse in the U.S., said John Aiken, a financial services analyst at Dundee Securities Corp. in Toronto.

“From a TMX standpoint, it’s definitely a positive because you’re putting one more product through the system,” Aiken said.

U.S. Expansion

TMX may also develop a new exchange in the U.S., modeled after the Toronto-based TSX Venture Exchange, a junior marketplace for 2,269 companies. This would allow TMX to attract more listings from U.S. companies, while adding more trading from foreign investors, he said.

“That kind of approach would make sense in an American exchange,” Kloet said. “That’s something we’ll continue to look at.”

Kloet expects to see more consolidation among global stock exchanges and that his bourse may expand through acquisitions.

“We would consider anything that adds a strategic niche to the organization and helps us with our overall strategy,” Kloet said in an interview on Bloomberg Television.

TMX has diversified from equity trading in the past year after buying a 20 percent stake in London Stock Exchange Group Plc’s derivatives market, acquiring majority ownership in Boston Options Exchange and spending about C$1.1 billion ($940 million) for the Montreal Exchange.

Kloet, who took over as CEO 10 months ago, said the investment with the London bourse isn’t necessarily the first step toward a merger of the two companies.

“We’re going to walk before we run,” he said. “Getting big just to get big doesn’t make a whole lot of sense.”

“The institution’s not for sale and not actively on the prowl” for mergers, he said.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net.

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Harvard Buys Korea, Brazil ETFs as Emerging Markets Beat U.S.

By Gillian Wee

May 14 (Bloomberg) -- Harvard University, the richest U.S. college, raised its holdings of exchange-traded funds that track stocks in Brazil, China and Mexico in the first quarter as emerging markets outperformed U.S. equities.

The biggest new purchase reported by Harvard Management Co., which oversees the school’s $28.8 billion endowment, was 1.74 million shares of iShares MSCI South Korea Index Fund valued at $49 million, according to a filing yesterday with the U.S. Securities and Exchange Commission. Its largest stake was 8.28 million shares of iShares MSCI Emerging Markets Index valued at $205 million.

The quarterly 13F filing, which doesn’t reflect all of Harvard’s equities, offers a glimpse of how the Cambridge, Massachusetts, school is navigating the worst financial crisis since the Great Depression. The MSCI Emerging Market Index rose 0.52 percent in the quarter, while the Standard & Poor’s 500 Index, a benchmark of U.S. stocks, fell 12 percent.

Harvard Management Co. reported buying 61 U.S. listed securities in the quarter and selling off 28, leaving 90 issues. The value of its holdings rose 35 percent to $771 million.

Harvard’s endowment fell 22 percent from July 1 through Oct. 31, and is headed for its worst performance in at least four decades. The fund has been run since July by Jane Mendillo, former chief investment officer of nearby Wellesley College.

The report doesn’t show the school’s investments in stocks outside of the U.S. or in hedge funds, private equity, commodities and real estate. In addition, more than half of the endowment is overseen by outside firms. John Longbrake, a Harvard spokesman, didn’t respond to an e-mail seeking comment.

Vanguard Emerging Markets

Harvard added to its ETF holdings in the quarter by buying 2.27 million shares of Vanguard Emerging Markets, as well as 1.5 million shares of iShares MSCI Brazil Index Fund and 1.14 million iShares FTSE/Xinhua China 25 Index Fund.

Exchange-traded funds typically are designed to mimic the performance of market indexes. Unlike mutual funds, whose shares are priced once daily after the end of each trading session, ETFs are listed on an exchange where shares are bought and sold throughout the day like stocks.

Harvard’s new purchases during the quarter include 1.47 million Class A shares of News Corp., the media company run by Rupert Murdoch, and 1 million shares of wireless phone company Sprint Nextel Corp. The school sold all 722,000 shares of GenCorp Inc., a manufacturer of aerospace and defense products; 605,000 shares of Heckmann Corp., which sells bottled water in China; and 575,000 shares of Columbus Acquisition Corp., a company set up to make acquisitions.

Harvard, projecting an endowment loss of as much as 30 percent, has frozen hiring and salaries and fired staff. Harvard raised cash by issuing $2.5 billion in bonds in December after failing to sell $1.5 billion in private-equity stakes.

Harvard Management in February said it planned to fire as many as 50 workers, including investment professionals, as part of an effort by Mendillo to “rebalance and reengineer the organization,” Longbrake said at the time.

To contact the reporter on this story: Gillian Wee in New York at gwee3@bloomberg.net;

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MSCI Boosts Taiwan Companies; Argentina Downgraded

By Patrick Rial and Reinie Booysen

May 14 (Bloomberg) -- MSCI Inc. boosted the number of Taiwanese companies in its indexes, while Argentina’s equities were downgraded following a semi-annual review. Maxim Integrated Products Inc. is among the three largest additions to the MSCI World Index.

The MSCI Taiwan Index will see 22 companies added and one deleted. The additions will result in $687 million in capital inflows to Taiwan, according to estimates by Merrill Lynch & Co., the most of any country. Argentina was downgraded from the Emerging Markets Indices to the Frontier Markets Index.

“The only real surprise was the magnitude of changes and additions for Taiwan,” said Chris Lobello, a risk and trading strategist at CLSA Ltd. Argentina’s cut is “a message from MSCI that the trading environment is just too difficult.”

Taiwan’s Taiex index has soared 39 percent this year, the second-best performance in Asia behind China, on optimism improved relations between the two countries will boost investments.

MSCI’s changes may trigger $687 million of inflows from fund managers who use the indexes, according to Merrill Lynch & Co. estimates. The Merval Index has climbed 35 percent in Argentina this year, following a 50 percent slide in 2008 after the South American nation’s government nationalized pension funds with stock investments.

Weight Increase

The weighting of Taiwan stocks in the MSCI Asia ex-Japan Index will likely rise to 17.9 percent from 16.9 percent, Lobello wrote in a report. He said stocks getting added to the benchmarks typically rise in the period up to the change and fall afterward.

U.S. companies Maxim, Crown Holdings Inc. and Myriad Genetics Inc. will be the three largest additions in the MSCI World, a dollar-based, free-float market weighted benchmark of stocks in 23 developed nations, MSCI said in a statement dated yesterday. The changes will occur after the May 29 close.

Maxim, a maker of microchips for laptop computers, has climbed 19 percent this year, outpacing a 2.1 percent decline by the Standard & Poor’s 500 Index. Aluminum can producer Crown has added 18 percent, while cancer test-maker Myriad lost 0.7 percent.

Global Contraction

The gauge has slumped 40 percent in the past year amid what the International Monetary Fund is predicting to be the first contraction in global growth since the end of World War II.

MSCI provides a variety of indexes divided into countries, industry groups, value metrics and other categories. The company estimates more than $3 trillion in funds are benchmarked against their indexes globally.

Changes to the MSCI indexes can cause shares that are chosen for inclusion to advance and those slated for deletion to drop as passively managed funds designed to mirror the benchmarks buy and sell stocks in accordance with those changes.

Hong Kong-listed Kingboard Chemical Holdings Ltd. and Renhe Commercial Holdings Co. and South Korea’s NCSoft Corp. are the three largest inclusions to the MSCI Emerging Markets Index.

Wintek Corp., a supplier of flat-panel displays for Apple Inc., and Farglory Land Development Co., Taiwan’s largest developer, both rose by their daily limit of 6.9 percent in Taipei after being added to MSCI’s indexes. Argentina’s Banco Macro SA, which appointed a government director to its board in April, climbed 38 percent this month prior to the announcement it will be deleted from MSCI’s gauges.

Trinidad and Tobago was added to the Frontier Markets Index.

Noble Energy Inc., TD Ameritrade Holding Corp. and Autozone Inc. were the biggest additions to the MSCI U.S. Large Cap 300 Index.

To contact the reporters on this story: Reinie Booysen at rbooysen@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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CommVault, Forest City, MBIA, Whole Foods: U.S. Equity Preview

By Lu Wang

May 14 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Clearwire Corp. (CLWR US): The U.S. provider of high-speed WiMax mobile services reported a narrower first-quarter loss after adding customers in new markets.

Coca-Cola Enterprises Inc. (CCE US): The world’s largest soft-drink bottler was added to Goldman Sachs Group Inc.’s “conviction buy list” on expectation growing soda demand and falling commodity prices will bolster earnings.

CommVault Systems Inc. (CVLT US): The supplier of data- management software reported earnings of 9 cents a share in the fiscal fourth quarter, missing the average analyst estimate by 40 percent.

Forest City Enterprises Inc. (FCE/A US): The developer of New York’s $4.2 billion Atlantic Yards project said it plans to sell 40 million shares in a public offering and it’s in talks with lenders to extend its $750 million revolving credit line, which matures next March.

MBIA Inc. (MBI US): The biggest bond insurer was sued by Bank of America Corp., JPMorgan Chas & Co., UBS AG and 15 more of the world’s largest financial companies, which said the split of MBIA’s guarantee business illegally cut their odds of getting paid on policies.

Whole Foods Markets Inc. (WFMI US): The largest natural- goods grocer in the U.S. posted an adjusted second-quarter profit of 25 cents a share, exceeding the average analyst estimate by 34 percent.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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Japanese Stocks Slump on U.S. Retail Sales, Yen; Inpex Drops

By Masaki Kondo

May 14 (Bloomberg) -- Japanese stocks fell the most this month after U.S. retail sales unexpectedly dropped in April, clouding the earnings outlook for makers of cars and electronics.

Toyota Motor Corp., the world’s biggest automaker by market value, retreated 3 percent. Sony Corp., which gets a quarter of its sales from the U.S., declined 4.9 percent after the yen strengthened. Inpex Corp., Japan’s largest oil and gas explorer, sank 5.1 percent after it forecast a drop in full-year profit and oil prices slid. Nippon Telegraph & Telephone Corp. surged 4.1 percent after saying it will raise its dividend.

The Nikkei 225 Stock Average declined 208.02, or 2.2 percent, to 9,132.47 as of 9:42 a.m. in Tokyo, the steepest drop since April 28. The broader Topix index fell 19.47, or 2.2 percent, to 869.28. The Nikkei traded at 130 times estimated profit for its member companies yesterday.

“The U.S. retail report stole confidence from investors that the global economy was headed for a recovery,” said Mitsushige Akino, who oversees about $629 million at Ichiyoshi Investment Management Co. in Tokyo. “Current valuations are prohibitive unless you believe companies will raise annual forecasts later this year.”

The Nikkei gained 5.4 percent this year through yesterday, and companies on the measure are estimated to pay dividends equivalent to 1.68 percent of average share prices, according to gauge compiler Nikkei Inc. That compares to the 1.45 percent return on 10-year Japanese government bonds.

In New York, the Standard & Poor’s 500 Index slid 2.7 percent as the Commerce Department reported a 0.4 percent decline in retail sales last month. Economists had estimated the number would be unchanged.

Yen, Oil

Toyota lost 3 percent to 3,550 yen, while closest rival Honda Motor Co. dropped 3.4 percent to 2,730 yen. Sony, the world’s No. 2 electronics maker, sank 4.9 percent to 2,450 yen.

The yen appreciated against the dollar to as much as 95.14 today, the strongest level since March 20, from 96.47 at the close of stock trading in Tokyo yesterday. Japanese businesses expect the currency to average 97.18 this fiscal year, according the Bank of Japan’s quarterly Tankan survey.

The U.S. sales report fanned concern falling consumer spending will curb demand for resources. Crude oil for June delivery lost 1.4 percent to $58.02 a barrel in New York, the steepest drop since April 27. Copper futures fell 2.6 percent.

Lower crude prices prompted Inpex to forecast a 61 percent tumble in net income this fiscal year, a filing with the exchange showed yesterday. Inpex fell 5.1 percent to 689,000 yen.

MSCI Index

Mitsubishi Corp., Japan’s biggest trading company by value, declined 4.9 percent to 1,642 yen, and rival Mitsui & Co. lost 4.5 percent to 1,126 yen. Both companies derive more than half their earnings from commodities.

NEC Electronics Corp., the fourth-largest chipmaker in Japan, decreased 11 percent to 921 yen. Rinnai Corp., which makes gas appliances, soared 6.6 percent to 4,190 yen.

MSCI Inc. said yesterday NEC Electronics, Takefuji Corp., Alps Electric Co. and Haseko Corp. will be removed from its MSCI Japan Index as of the close on May 29. Rinnai, GS Yuasa Corp. and McDonald’s Holdings Co. Japan Ltd. will be added, MSCI said. Changes to indexes can alter share prices as passively managed funds buy and sell stocks to mirror the benchmarks.

NTT, Japan’s largest telecommunications provider, surged 4.1 percent to 4,050 yen after saying it plans to raise its dividend by 9.1 percent to 120 yen ($1.26). That will bring the stock’s dividend yield to 3.1 percent based on yesterday’s close.

Nikkei futures expiring in June retreated 2.4 percent to 9,140 in Osaka and slumped 2.3 percent to 9,145 in Singapore.

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

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Maxim Added to MSCI World Index; Argentina Downgraded

By Reinie Booysen and Patrick Rial

May 14 (Bloomberg) -- MSCI Inc. said shares of U.S.-based Maxim Integrated Products Inc. are among the three largest additions to the MSCI World Index, while Argentina’s equities were downgraded.

Maxim, Crown Holdings Inc. and Myriad Genetics Inc. will be the three largest additions in the MSCI World, a dollar-based benchmark of stocks in 23 developed nations, MSCI said in a statement today. The changes will occur after the May 29 close.

The gauge has slumped 40 percent in the past year amid what the International Monetary Fund is predicting to be the first contraction in global growth since the end of World War II.

MSCI provides a variety of indexes divided into countries, industry groups, value metrics and other categories. The company estimates over $3 trillion in funds are benchmarked against their indexes globally.

Changes to the MSCI indexes can cause shares that are chosen for inclusion to advance, while those slated for deletion to drop as passively managed funds designed to mirror the benchmarks buy and sell stocks in accordance with those changes.

Hong Kong-listed Kingboard Chemical Holdings Ltd. and Renhe Commercial Holdings Co. and South Korea’s NCSoft Corp. are the three largest inclusions to the MSCI Emerging Markets Index. NCSoft gained 1.4 percent even as the nation’s benchmark Kospi index lost 1.3 percent.

Argentina was downgraded from the Emerging Markets Indices to the Frontier Markets Index. Trinidad and Tobago was added to the Frontier Markets Index.

Noble Energy Inc., TD Ameritrade Holding Corp. and Autozone Inc. were the biggest additions to the MSCI U.S. Large Cap 300 Index.

To contact the reporters on this story: Reinie Booysen at rbooysen@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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U.S.: Consumer Spending Disappoints, Again

Daily Forex Fundamentals | Written by TD Bank Financial Group | May 13 09 14:11 GMT |

U.S. retail sales declined by 0.4% M/M in April. Excluding autos, sales were also weak, falling by 0.5% M/M. On balance, the report was fairly disappointing and suggests that U.S. consumers are shying away from malls. U.S. retail sales declined for the second straight month in April, falling by 0.4% M/M, following the 1.3% M/M drop the month before (previously reported as -1.1% M/ M). This was noticeably worse than the market consensus for a flat print on the month. Excluding autos, sales were down 0.5% M/M, and were also softer than the market expectations for a 0.3% M/M rise. Core retail sales, which net out sales of autos and gasoline, declined by a more modest 0.3% M/M during the month. On a year ago basis, sales continue to be quite poor, as total retail sales have declined by a fairly big 10.1% since April last year. This is the eighth straight month in which sales have fallen below their year-ago level. The details of the report were quite weak, as the declines in sales were fairly broadly-based, with 8 of 13 spending categories down. There were big drops in the sale of electronics (down 2.8% M/M), gasoline (down 2.3% M/M), food (down 1.0% M/M) and at department stores (down 0.2% M/M). On the other hand, sales of health and personal care products (up 0.4% M/M), building materials (up 0.3% M/M), and motor vehicles (up 0.2% M/M) were higher. The crux of this report appears to be that the positive momentum seen in U.S. consumer spending in the first few months of this year has stalled. Indeed, despite the resurgence in the level of consumer confidence over the past few months, U.S. consumer spending seems to be buckling under the weight of the worsening labour market conditions and weakening economy. Nevertheless, we remain hopeful that the impact of rising equity markets plus the massive fiscal stimulus package, which is likely to start kicking in this quarter, will breathe new life into personal expenditures in the near term, thereby providing some much needed boost to U.S. economic activity. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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