Bernanke May Explain Fed Exit Strategy in Testimony Next Week

By Craig Torres and Scott Lanman

July 13 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke probably will show how the central bank will exit the biggest monetary expansion in history when he reports to Congress next week, economists said.

The Fed pumped $1 trillion into the banking system over the past year through bond purchases and emergency loans, doubling assets on its balance sheet. Reassuring investors that inflation won’t exceed forecasts once the recession ends will give the Fed more credibility, said Dean Maki, chief U.S. economist at Barclays Capital Inc. While policy makers have spoken about specific tools they may use, they haven’t laid out a strategy.

“Now is the time to articulate the exit strategy,” said Vincent Reinhart, former monetary-affairs director at the Fed and now resident scholar at the American Enterprise Institute in Washington. “The Federal Reserve doesn’t speak with one voice and the testimony is an opportunity to present the consensus view.”

The Federal Open Market Committee will release updated economic forecasts on July 15. At their April meeting, officials anticipated inflation of between 1 percent and 1.6 percent in 2010, up from 0.6 percent to 0.9 percent this year. Their long- run forecast is for price increases of 1.7 percent to 2 percent.

Investor expectations for inflation have increased this year, as measured by the gap between yields on 10-year U.S. government notes and 10-year Treasury Inflation-Protected Securities. The spread widened to 1.52 percentage point at the end of last week from 0.09 percentage point in January.

Unemployment Projection

Unemployment is also surging: The jobless rate will exceed 10 percent early next year and average 9.8 percent for 2010, according to a Bloomberg News survey published last week. The rate was 7.6 percent in January.

Fed officials will begin to lift the benchmark interest rate in the third quarter of next year and take it to 1 percent in the final three months, the Bloomberg survey showed. The previous month’s survey estimated the Fed would hold the rate near zero until the fourth quarter of next year.

“The Fed does not want to trigger market concern about the beginning of policy tightening at this time, an objective I share,” said William Poole, former president of the St. Louis Fed. “That means that the Fed needs to be more explicit about how it will know, or what it will look for, to determine that the ‘‘appropriate’’ time has arrived. This explanation need not, and probably cannot, be very precise; however, there certainly can be some general guidance.”

Semiannual Testimony

Bernanke is scheduled to address the House Financial Services Committee on July 21. The chairman is required by law to testify twice a year on progress toward the Fed’s mandate to achieve stable prices and maximum employment.

“Chairman Bernanke’s semi-annual testimony would be a logical place to lay out these issues in a more detailed discussion,” said Maki at Barclays, who is based in New York. “The more credibility the Fed can cultivate with investors on the exit strategy, the freer it is to pursue stimulative policies in the near-term without leading to sharply higher inflation expectations.”

Bernanke will describe an economy that’s still reeling from the credit crisis that began in 2007 and intensified after Lehman Brothers Holdings Inc. filed for bankruptcy in September. The loss of 6.5 million jobs since the recession began has led the central bank keep pumping money after cutting the benchmark rate to zero.

Credit Expansion

The Fed has expanded credit through increased loans to banks to provide liquidity and rescues of financial companies such as American International Group Inc. It’s also begun market backstops such as the Commercial Paper Funding Facility, which holds $109.2 billion in short-term IOUs issued by corporations, and the Term Asset-Backed Securities Loan Facility, which has lent $24.9 billion to investors to buy securities tied to auto and other consumer and business loans.

The Fed has also pledged to buy $1.75 trillion in mortgage- backed securities, Treasury notes, and federal housing agency bonds. As of July 9, the Fed had bought $200.7 billion of Treasuries.

It may take years for the Fed to sell the securities back to investors, said Lou Crandall, chief U.S. economist at Wrightson ICAP LLC in Jersey City, New Jersey. In the medium term, the Fed would need to sterilize the purchases, or find a way to prevent the increased money supply from fueling inflation, he said.

‘Years’ Before Selling

“It will be years before they can start selling, if ever,” Crandall said. “Can they raise interest rates with an expanded balance sheet? The answer is yes. Can they do it in a tidy way? The answer is, we don’t know.”

U.S. central bankers have mentioned reverse repurchase agreements, interest on reserves, and possibly sales of short- term debt as ways to sterilize reserves in the banking system. There are problems with each tool. Under a reverse repurchase agreement, the Fed would sell bonds to Wall Street dealers with an agreement to buy them back at a later date.

Reverse repurchase agreements could require firms that deal directly with the Fed to hold billions of dollars in mortgage securities. “The dealer community and the investor community does not have the appetite to hold a trillion dollars more in mortgages than they are holding now,” said Stephen Stanley, chief economist at RBS Securities Inc. in Stamford, Connecticut, one of 17 companies that deals directly with the Federal Reserve Bank of New York.

Additional Tool

Fed officials have also proposed selling their own bills to mop up cash. Congress hasn’t shown interest in the idea, which would require legislation. While the Treasury has a program of short-term bill sales to help sterilize excess reserves, it complicates the department’s regular borrowing to finance government spending.

“I am not worried at all that the Federal Reserve’s balance-sheet expansion will generate an inflation problem,” New York Fed President William Dudley said in a speech in Nashville on April 18. “The Federal Reserve has the ability to manage down the size of its balance sheet over time once financial conditions and the economy improve.”

That’s what RBS Securities’ Stanley calls the “trust us” approach. The lack of clarity may not ease inflation concerns, especially if the Fed has to increase its purchases of Treasury and mortgage-debt to provide further stimulus to the economy.

Job losses will continue even after the economy begins growing in the second half of this year, the monthly Bloomberg monthly showed.

Tellabs Inc., the Naperville, Illinois-based maker of networking equipment, said last week it’s scrapping about 150 jobs. Dow Chemical Co., the largest U.S. chemical maker, said July 1 it will permanently close three Louisiana factories and take a second-quarter charge of about $700 million. Midland, Michigan-based Dow’s charge includes the elimination of 2,500 jobs, following the acquisition of Rohm & Haas Co.

The Reuters/University of Michigan preliminary index of consumer sentiment fell by more than forecast in July to 64.6 from 70.8 in the previous month. Consumers in the survey said they are less likely to buy cars or appliances, suggesting the recovery may be weaker than anticipated.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net

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DPJ’s Nakagawa Says Japan Should Diversify Reserves

By Keiko Ujikane and Kyoko Shimodoi

July 13 (Bloomberg) -- Japan’s opposition party, leading in polls ahead of next month’s election, said the nation should consider shifting its $1 trillion of foreign reserves away from the dollar and buying International Monetary Fund bonds.

“In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing,” Masaharu Nakagawa, the shadow finance minister in the Democratic Party of Japan, said in an interview in Tokyo on July 9. “Many countries are starting to diversify their reserves.”

Japanese investors are the biggest foreign holders of Treasuries after China with $685.9 billion of the securities in April, and Finance Minister Kaoru Yosano said last month his trust in the bonds is “unshakable.” The DPJ yesterday beat the ruling Liberal Democratic Party in elections for Tokyo’s city assembly, boosting its prospects ahead of national polls that Prime Minister Taro Aso today called for Aug. 30.

“The current reality of Japan’s foreign-currency reserves is that their heavy weighting toward dollar assets means any fall in the dollar’s value leads to valuation losses,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, the investment banking unit of Credit Agricole SA. “The DPJ is opposed to a foreign-currency reserve policy that is so wholly skewed to the dollar.”

The yen traded at 92.39 per dollar at 2:11 p.m. in Tokyo from 92.54 late July 10. It has gained 4.3 percent this month.

‘Unshakable’ Trust

Nakagawa said Japan should consider purchases of new bonds issued by the International Monetary Fund that will pay an interest rate pegged to the fund’s basket of currencies -- the dollar, euro, yen and pound -- and known as Special Drawing Rights. The dollar is the principal component of SDRs. The IMF said this month it would issue bonds to its 186 members for the first time.

“We should start considering that as an option,” Nakagawa said. “I am not saying we should do it right away. If everyone starts doing it all of sudden, it may sway the dollar.” He didn’t say Japan should sell any of its dollar holdings.

DPJ lawmaker Tsutomu Okubo, a director of the upper house’s financial committee, said there’s no consensus in the party on currency policy. Enhancing trust in the dollar and Treasuries is beneficial for Japan and the country shouldn’t change its currency reserve allocations for the time being, he said in an interview today.

China’s Reserves

China, India, Brazil, Mexico and South Africa last week challenged the U.S. dollar as the primary denomination of world reserves. In China, whose foreign-exchange reserves probably topped $2 trillion for the first time in the three months to June 30, Premier Wen Jiabao this year said he was concerned that his nation’s dollar assets may decline as the U.S. sells record amounts of debt to fund stimulus spending.

Japan holds $1.02 trillion in foreign reserves, also the world’s largest after China’s. Losses on the holdings stood at about 21 trillion yen ($227 billion) at the end of May, according to the Finance Ministry’s estimate.

Shifting reserves away from dollars “may be difficult for Japan” because it would weaken the U.S. currency and reduce the value of the country’s remaining dollar holdings, said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo.

“If Japan and China do that, the impact will be huge,” said Yamamoto, a former Bank of Japan currency trader.

Samurai Bonds

Nakagawa, 59, said Japan’s government should ask the U.S. to sell debt denominated in yen, so-called samurai bonds, as a way to diversify reserves and promote the globalization of the yen. Japan should also aim to strengthen the Chiang Mai Initiative, an Asia-wide foreign-reserve pool, and seek the creation of an Asian Monetary Fund, he said.

Nakagawa said intervening in the currency market to smooth abrupt and volatile moves is an option, though Japan shouldn’t try to push the yen up or down to achieve a prescribed level.

“If the yen were to appreciate or depreciate very steeply and the market becomes volatile, direct government intervention might be understandable,” Nakagawa said. “Intervention shouldn’t be used to strengthen or weaken it to a certain level.”

The yen gained against all 16 of the world’s major currencies in the past year. A stronger yen hurts Japanese exporters by making their products less competitive. It also lowers import costs for companies and consumers. Japan last stepped into the foreign-exchange market to sell yen in 2004.

Parliament will be dissolved July 21 to prepare for the lower-house election, Jun Matsumoto, deputy government spokesman, told reporters in Tokyo today.

A total of 23 percent of voters said they would choose the LDP, less than the 41 percent who favor the DPJ, according to a Yomiuri newspaper poll published July 10. The LDP has governed for all but 10 months since 1955. The DPJ already controls the upper house.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net

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Soybean, Corn Futures Drop in Chicago as Crude Oil Declines

By Luzi Ann Javier

July 13 (Bloomberg) -- Soybean and corn futures fell in Chicago as a drop in crude oil reduced the appeal of alternative fuels made from crops and favorable weather boosted supply prospects in the U.S.

Crude oil fell as much as 1.6 percent to $58.92 a barrel in New York on concern the global recession will sap demand for fuel and increase stockpiles. The Midwest, the largest corn and soybean growing region in the U.S., will have temperatures warming to above-normal levels, Meteorlogix LLC said in its 10- day weather outlook released July 11.

The decline in crude oil was having a “spill-over effect” on the grain and oilseed market, Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney said by phone today. “There’s nothing really too threatening in the longer-term forecast,” he said, referring to the weather outlook for the crop-growing areas.

Soybeans for November delivery, after the U.S. harvest, fell as much as 0.8 percent to $9.095 a bushel in after-hours electronic trading on the Chicago Board of Trade, and traded at $9.0975 a bushel at 2:21 p.m. Singapore time. The contract earlier gained as much as 1.3 percent. Soybean oil, crushed from the oilseed, can be processed into biodiesel.

Concerns that global soybean supplies may decline in the next marketing year have eased after the U.S. Department of Agriculture raised its harvest estimate for the world’s biggest grower and exporter of the oilseed, Hassall said.

Soybean Production

U.S. production was forecast at 3.26 billion bushels in the July 10 report, up 2 percent from the June estimate, as the planted area expanded.

Corn for December delivery fell as much as 1.9 percent to $3.315 a bushel in Chicago before trading at $3.3225. The most- active contract earlier rose as much as 0.5 percent. Corn can be processed into ethanol, used to stretch gasoline supplies.

Wheat for September delivery advanced as much as 1.6 percent to $5.27 a bushel in Chicago before trading at $5.2125 a bushel.

Wheat futures gained as investors bought contracts after prices plunged last week and the U.S. lowered its estimate for 2010 inventories held by the largest exporters.

Stockpiles held by shippers including the U.S. and Canada will total 26.97 million metric tons, the Department of Agriculture estimated, down 12 percent from its June estimate. Hedge-fund managers and other large speculators in the week ended July 7 increased bets prices will fall, boosting their net short positions by 148 percent from a week earlier, the U.S. Commodity Futures Trading Commission said July 10.

“We’re seeing some short covering because the speculators were holding quite a large short position,” Hassall said. Wheat prices may have touched a bottom in the past few weeks, he said.

Wheat rallied 5.1 percent since trading at $4.9575 a bushel on June 30, the lowest since Dec. 12.

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

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Palm Oil Falls on Concern Higher Output to Expand Stockpiles

By Claire Leow

July 13 (Bloomberg) -- Palm oil futures traded in Malaysia dropped, reversing earlier gains, on concern that higher second- half production will swell stockpiles and depress prices.

The price of the world’s most traded vegetable oil may remain below 2,000 ringgit ($558) a metric ton as output climbs faster than demand, according to Maybank Investment Bank Bhd. and OSK Research Sdn.

Palm oil for September delivery on the Malaysia Derivatives Exchange slid as much as 2.3 percent to 1,964 ringgit a ton and last traded at 1,990 ringgit a ton at 5:14 p.m. in Kuala Lumpur. The contract has slumped 19 percent in the past month. Stockpiles in Malaysia, the world’s second-largest producer, grew to 1.41 million tons in June, up 2.5 percent from May, the country’s Palm Oil Board said on July 10. Output climbed 3.6 percent.

“The market is presently worried about rising production and export prospects in the second half,” Ong Chee Ting, an analyst at Maybank, wrote in a report today. “We anticipate China’s and India’s pace of import growth to slow in the second half as these countries have stockpiled sufficiently in recent months.”

Prices may average around 1,800 ringgit a ton in the second half, said Ong. Palm oil averaged 2,192 ringgit in the first six months of this year.

The edible oil also tracked a broader decline in other commodities. Soybeans, crushed to make soybean oil, a direct substitute for palm oil, slid 0.9 percent to $9.09 a bushel on the Chicago Board of Trade. Crude oil for August delivery in New York dropped 0.9 percent to $59.35 a barrel at 4:38 p.m. Singapore time.

Palm oil and other vegetable oils can be used for alternative energy and often track crude oil prices.

To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net

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Singapore Probably Exited Recession on Output Gains

By Shamim Adam

July 13 (Bloomberg) -- Singapore’s economy probably expanded for the first time in five quarters as a rebound in manufacturing helped the Southeast Asian nation emerge from its worst recession since independence in 1965.

Gross domestic product rose an annualized 13.4 percent last quarter from the previous three months, after shrinking 14.6 percent between January and March, according to the median estimate of 12 economists surveyed by Bloomberg News. The trade ministry will release the data at 8 a.m. tomorrow.

Singapore and other economies in the region are forecast to report better second-quarter figures as about $2 trillion in stimulus worldwide helps stabilize overseas sales for companies including Japan’s Nissan Motor Co. and South Korea’s Samsung Electronics Co. The International Monetary Fund last week increased its forecast for emerging Asia’s growth in 2009.

“Much healthier manufacturing-sector numbers in the second quarter are the key drivers” of Singapore’s performance, said Chow Penn Nee, an economist at United Overseas Bank Ltd. in Singapore. We “will also likely see financial services boosting the services sector, with the rally in the stock markets in April, May and June.”

Singapore’s industrial output climbed in the first two months last quarter, while the decline in the island’s exports narrowed in May amid gains in drug shipments. Manufacturing, which slid 26.1 percent in the three months ended March, accounts for about a quarter of the economy.

India, South Korea

Other Asian nations have also reported an improvement in manufacturing. In May, India’s industrial production increased at the fastest pace in eight months, while Malaysia’s posted the smallest decline in six months. South Korea’s output rose more than estimated while China’s accelerated the same month.

Singapore’s $161 billion economy declined 5.4 percent in the three months ended June from a year earlier, compared with a 10.1 percent drop in the first quarter, according to the Bloomberg survey.

The Straits Times Index rose 37.2 percent last quarter, the biggest gain since at least 1999. The volume of stocks traded increased more than 50 percent in that period. The index was 0.3 percent lower as of 9:40 a.m. local time. The Singapore dollar was little changed at S$1.4615 against the U.S. currency.

The government forecasts the economy will shrink between 6 percent and 9 percent this year, the deepest contraction since its independence 44 years ago. Economists at Citigroup Inc., Goldman Sachs and DBS Group Holdings Ltd. are among those that have increased their Singapore economic estimates in recent weeks as manufacturing and export figures showed improvement.

Signs of recovery were also evident in other parts of the economy, Citigroup’s Kit Wei Zheng said.

“Re-stocking driven rebounds in technology, continued growth in construction spending, financial services and a revival in the private housing market contributed to the recovery in the broader economy,” he said.

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

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Sugar Must Drop for Indian Imports to Become Viable

By Thomas Kutty Abraham

July 13 (Bloomberg) -- Global sugar prices must decline at least 13 percent for mills in India’s biggest producing state to make money on imports of the commodity, a producers’ group said.

Raw sugar traded in New York must drop to 15 cents a pound or domestic prices should rise 14 percent to 25,000 rupees ($506) a metric ton for imports to be viable, said Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd.

A slowdown in purchases by India may cool a rally that’s made raw sugar the second best-performing commodity in the UBS Bloomberg CMCI Index in the past 12 months. Prices have gained 46 percent this year on forecasts for a global deficit, driven mainly by the drop in India’s production.

“There’s no point in importing at the current prices as it will be a loss-making proposition,” Naiknavare said in a phone interview in Mumbai. “I don’t see any reason for global prices to be where they are. Brazil and Thailand have bumper output.”

Raw-sugar for October delivery fell as much as 0.7 percent to 17.15 cents a pound in after-hours trading in New York, and white sugar for October delivery declined as much as 0.5 percent to $463.20 a ton in London.

India, the word’s biggest consumer, became a net buyer of sugar for the first time since the 2005-06 season as production is forecast to slump 44 percent to 14.7 million tons in the year ending Sept. 30. Output declined for two consecutive years from a peak in 2006-07 after growers moved to grains and oilseeds.

In comparison, Thailand, the world’s second-largest sugar supplier, expects to raise output as higher prices and adequate rain increase plantings. Production in Brazil’s Center South, the world’s biggest-producing region, has jumped 43 percent to 6.75 million tons this year through June 16.

Shortfall

Mills in Maharashtra require at least 1 million tons of raw sugar in the year starting Oct. 1 to fill a production gap, said Naiknavare, whose group of 190 mills account for a third of the country’s total output.

The government may extend a window for duty-free imports of raw sugar beyond Aug. 1, a government official said on July 10, asking not to be identified as the information is not public. The measure aimed at bolstering supplies will be considered by the Cabinet in 15 days, he said.

Domestic prices may climb starting next month with demand rising ahead of major Hindu festivals, Naiknavare said.

Prices at Vashi, India’s biggest wholesale market for the commodity, fell 0.4 percent to 2,400.20 rupees per 100 kilograms today. Before today’s decline, prices have gained 57 percent in the past year, reaching a three-year high in April.

India’s output may total 17-17.5 million tons next season and any deficit in the monsoon rains may pare harvests further, Naiknavare said.

Rains were 50 percent below normal in the northwest India from June 1 to July 8, the India Meteorological Department said last week. The region includes Uttar Pradesh, the second-biggest grower of sugar cane.

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

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Gold Falls in London as Lower Oil, Stronger Dollar Cut Demand

By Nicholas Larkin

July 13 (Bloomberg) -- Gold fell in London as lower oil prices and a stronger dollar reduced the metal’s appeal as a hedge against rising consumer prices and as an alternative investment. Other precious metals dropped.

Crude oil, used by some investors as an indicator of the outlook for inflation, declined for a second day after last week dropping the most since January. The U.S. Dollar Index, a six- currency measure of the greenback’s value, today added as much as 0.3 percent. Gold tends to move inversely to the currency.

The dollar’s “rise and weak oil prices have heightened concerns about an economic recovery and eroded bullion’s appeal as an inflation hedge,” Pradeep Unni, a Richcomm Global Services analyst in Dubai, wrote today in a report.

Bullion for immediate delivery fell $3.35, or 0.4 percent, to $909.70 an ounce by 10:49 a.m. in London. The metal slid 2.1 percent last week, the biggest drop in five weeks. August gold futures lost 0.4 percent to $909.30 an ounce on the New York Mercantile Exchange’s Comex division.

Spot prices have fallen in five of the past six weeks. Twenty-one of 32 traders, investors and analysts surveyed by Bloomberg News, or 66 percent, said bullion would decline this week as the dollar strengthens. Five people forecast higher prices and six were neutral.

Coin Demand

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was unchanged at 1,109.81 metric tons on July 10, the company’s Web site showed. Gold held in ETF Securities Ltd.’s exchange-traded commodities fell 0.6 percent to 7.598 million ounces on that date, its Web site showed.

There is “little interest from the jewelry industry, modest coin and investment-bar demand, and we have seen no substantial inflows into ETFs,” John Reade, UBS AG’s head metals strategist in London, said today in a note. “A test of $900 an ounce in gold is on the cards in the near future.”

Silver for immediate delivery in London fell for a sixth day, losing as much as 1.7 percent to $12.4738 an ounce, the lowest since May 4. It last traded at $12.525, the longest streak of declines since March. Platinum dropped 1.6 percent to $1,093.25 an ounce, and palladium declined 1 percent to $233 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

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Asian Stocks Slump on Growth, Political Concerns; Samsung Falls

By Jonathan Burgos

July 13 (Bloomberg) -- Asian stocks fell, sending the MSCI Asia Pacific Index to an eight-week low, on speculation a U.S. economic recovery will be delayed and as Japan’s Prime Minister called national elections.

Samsung Electronics Co., Asia’s biggest maker of computer- memory chips and flat screens, lost 3.9 percent in Seoul as a U.S. consumer sentiment index fell more than economists estimated. Cathay Financial Holding Co. sank 6.7 percent in Taipei on concern a trade agreement with China will take longer than expected to negotiate. Japan’s Nikkei 225 Stock Average sank 2.6 percent as Prime Minister Taro Aso, whose party is trailing in polls, called an election for Aug. 30.

The MSCI Asia Pacific Index slumped 2.4 percent to 98.20 as of 7:37 p.m. in Tokyo, the lowest level since May 18. The gauge has lost 6.7 percent from an eight-month high on June 12 as optimism for a global economic recovery waned. The index had risen as much as 49 percent from a five-year low on March 9.

“The market did run ahead of itself,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “The data we’ve been seeing in the U.S. have not been as strong as the market had been hoping for. We’re still very cautious.”

Taiwan’s Taiex Index tumbled 3.5 percent, the most since April 17. South Korea’s Kospi Index sank 3.5 percent. Hong Kong’s Hang Seng Index lost 2.6 percent. Australia’s S&P/ASX 200 Index declined 1.5 percent, led by Rio Tinto Group, the world’s third-largest mining company, which fell 3.6 percent as commodity prices dropped.

Merger Talks?

Among stocks that advanced today, Daiichi Sankyo Co. rose 2.4 percent after its anti-clotting drug was approved for sale in the U.S. Kirin Holdings Co., Japan’s biggest beverage maker, surged 7.8 percent after the Nikkei newspaper said the company may merge with Suntory Holdings Ltd.

Futures on the U.S. Standard & Poor’s 500 Index fell 0.4 percent, while Treasuries rose as demand for the relative safety of government debt increased. The S&P 500 dropped 0.4 percent on July 10 after the Reuters/University of Michigan preliminary index of consumer sentiment slid to 64.6 in July from the prior month. Economists had estimated the gauge would fall to 70.

“It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” U.S. Treasury Secretary Timothy Geithner said in an interview with “CNN’s Fareed Zakaria GPS” show.

Samsung Electronics dropped 3.9 percent to 620,000 won. Li & Fung Ltd., a Hong Kong trading company that sells goods to Wal-Mart Stores Inc., lost 2.2 percent to HK$19.66. Taiwan Semiconductor Manufacturing Corp., the world’s largest maker of customized chips, fell 2 percent to NT$55.

Economic Figures

Disappointing economic data, including worse-than-expected U.S. unemployment figures on July 2, has fanned investor concern that stock gains since March had outpaced prospects for an economic recovery. China’s exports slid 21.4 percent in June from a year earlier, the customs bureau said on July 10 after the market closed, following a record 26.4 percent drop in May.

Japan’s government said on July 8 that machinery orders declined 3 percent in May. Economists had estimated a 2 percent increase. Growth in Japanese bank lending slowed to 2.5 percent last month from a year earlier, compared with 3.3 percent growth in May, the Bank of Japan said on the same day.

“Investor sentiment is drifting because they can’t determine whether a recovery will be fast or slow,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $90 billion.

Cathay Financial, Taiwan’s largest publicly traded financial services company, declined 6.7 percent to NT$47.70. Fubon Financial Holding Co., the island’s second-largest listed financial services company, slumped 7 percent to NT$30.70.

China, Taiwan Accord

The Taiex Index has gained 44 percent in the past six months on optimism closer ties with China will boost Taiwan’s economic growth.

Negotiations for an economic cooperation agreement with China should begin this year with the signing of a deal next year, Lai Shin-yuan, chairwoman of the Mainland Affairs Council, said in a statement on the council’s Web site yesterday.

“Investors are disappointed by the news; they were expecting the agreement to be signed this year,” Monika Yang, who helps oversee $10 billion at Hamon Asset Management Ltd. in Hong Kong, said by phone. “Now, any good news in the market is overshadowed by this.”

Rio Tinto declined 3.6 percent to A$46.63. Jiangxi Copper Co., China’s biggest producer of the metal, dipped 2 percent to HK$11.98. Cnooc Ltd., the nation’s largest offshore oil producer, lost 2.8 percent to HK$8.81 in Hong Kong.

Drug Approval

A gauge of six metals in London dropped 1.3 percent on July 10, posting a weekly loss of 3.9 percent, the most since the week ended April 24. Crude oil fell 0.9 percent in after-hours trading, extending July 10’s 0.9 percent drop.

Daiichi Sankyo gained 2.4 percent to 1,702 yen. Prasugrel, a drug developed by the company and its partner Eli Lilly & Co., was approved by the Food and Drug Administration on July 10 for sale in the U.S.

Kirin advanced 7.8 percent to 1,392 yen. The company and privately held Suntory are in merger talks, the Nikkei newspaper reported today. Spokespeople for both companies declined to confirm or deny whether the companies were in talks.

Japanese stocks were dragged lower after Prime Minister Aso called the election, with polls indicating his ruling Liberal Democratic Party may lose power for only the second time since 1955. The LDP has lost five successive local elections, including yesterday’s vote for the Tokyo assembly, in which the opposition Democratic Party of Japan won the most seats.

Forty-two percent of people prefer DPJ leader Yukio Hatoyama as prime minister compared with 22 percent for Aso, the Asahi newspaper said in a survey published July 6.

“Investors have no idea on what’s going to happen once the DPJ replaces the LDP and that’s negative for the stock market,” said Hideo Arimura, who oversees the equivalent of $2.2 billion at Mizuho Asset Management Co. “Nobody knows either if a DPJ- led government is better than the LDP for the economy.”

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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Infineon, Porsche, Siemens, Volkswagen: German Equity Preview

By Claudia Rach and Daniela Silberstein

July 13 (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 DAX declined 1.2 percent to 4.576.31 on July 10.

BASF SE (BAS GY): The world’s biggest chemical company was added to Bank of America Corp.’s “Europe 1’ list. The shares retreated 0.3 percent to 27.66 euros.

Bayer AG (BAY GY): Germany’s largest drugmaker said its experimental florbetaben product showed promise in predicting Alzheimer’s disease in tests. The stock declined 2.1 percent to 35.66 euros.

Deutsche Telekom (DTE GY): Vodafone Group Plc has set Europe’s largest phone company a mid-July deadline to agree on cooperation on the high-speed VDSL network in Germany, Focus magazine said, citing no one. Telekom shares fell 1.2 percent to 7.98 euros.

Escada AG (ESC GY): The German maker of luxury clothing for women is in talks with bankruptcy experts, a step that prepares for a possible insolvency if investors don’t back a refinancing plan, Welt am Sonntag said, citing Chief Executive Officer Bruno Saelzer. The shares advanced 7 percent to 2.70 euros.

Infineon Technologies AG (IFX GY): Europe’s second-largest chipmaker may sell its wireless communication and smartcard units, Martin Kimmich, an IG Metall labor union member, told Euro am Sonntag. The shares rose 5.4 percent to 2.72 euros.

K+S AG (SDF GY): Europe’s largest producer of potash used in fertilizers was cut to “sell” from “neutral” at UBS AG. The stock dropped 4.9 percent to 37.89 euros.

Metro AG (MEO GY): Metro plans to add Permira Advisers LLP’s Olaf Koch to its management board to allow Chief Financial Officer Thomas Unger to concentrate on restructuring the German retailer, Handelsblatt reported. Metro plans to make “decisions on personnel” at its next supervisory board meeting, spokesman Martin Bommersheim told Bloomberg News in a telephone interview today. The shares fell 48 cents, or 1.4 percent, to 34.52 euros.

Porsche SE (PAH3 GY): Qatar offered about 7 billion euros ($9.8 billion) for a stake in the carmaker and stock options in Volkswagen AG, Spiegel said, without citing anyone. Separately, the Berliner Morgenpost said the Persian Gulf State would invest in a joint company of VW and Porsche only after all conflicts between the two carmakers were resolved. The shares gained 0.4 percent to 42.34 euros.

Q-Cells SE (QCE GY): Charles Anton Milner, chief executive officer of Germany’s largest solar company, expects market conditions to improve in the second half of the year after prices slumped in the solar energy industry, WirtschaftsWoche magazine reported. The shares fell 2.5 percent to 12.68 euros.

Siemens AG (SIE GY): Europe’s largest engineering company had unexpectedly weaker orders in its transmission unit in June and may extend shorter working hours, Euro am Sonntag said, citing works council leader Lothar Adler. Separately, Siemens aims to become the market leader for solar thermal energy, Spiegel said, citing Chief Executive Officer Peter Loescher. Siemens shares fell 1.7 percent to 46.43 euros.

ThyssenKrupp AG (TKA GY): Germany’s biggest steelmaker expects its pretax loss to exceed 1.5 billion euros for the year ending Sept. 30, Financial Times Deutschland said, citing internal documents. The stock slipped 1.1 percent to 16.66 euros.

Volkswagen AG (VOW GY): Europe’s biggest carmaker boosted first-half China sales 23 percent to 652,222 vehicles.

Separately, VW used loopholes in the German tax system to lower its tax payments. It used the money save to raise its offer for a 49.9 percent state in Porsche by about 1 billion euros, Focus said, without citing anyone. The Spiegel magazine reported VW raised its offer for the Porsche stake clearly to more than 4 billion euros. The shares fell 1.9 percent to 213.20 euros.

To contact the reporters on this story: Claudia Rach in Berlin at crach1@bloomberg.net; Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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U.K. Stocks Fluctuate; Rio Tinto Falls, Friends Provident Jumps

By Alexis Xydias

July 13 (Bloomberg) -- The U.K.’s benchmark FTSE 100 Index swung between gains and losses as a sell-off in mining companies was countered by a rally in Friends Provident Plc.

Rio Tinto Group and Vedanta Resources Plc retreated after Treasury Secretary Timothy Geithner said the U.S. economy still faces “enormous challenges.” Xstrata Plc declined following a report the mining company may offer as much as 5 billion pounds ($8.1 billion) more to convince Anglo American Plc investors of its merger bid. Friends Provident jumped 5.5 percent after rejecting a takeover bid from Resolution Ltd.

The FTSE 100 lost 4.09, or 0.1 percent, to 4,123.08 as of 11:00 a.m. in London, after gaining as much as 0.3 percent earlier. The FTSE All-Share Index slipped 0.1 percent and Ireland’s ISEQ Index decreased 0.3 percent.

The FTSE 100 has slumped 8.5 percent since June 1 amid speculation stock prices have outpaced the outlook for economic growth as a three-month, 28 percent rally pushed valuations to the highest in five years.

“The market is taking a breather since sentiment was running ahead of fundamentals,” said Boris Boehm, board member at Hamburg-based Aramea Asset Management, which oversees about 800 million euros ($1.23 billion). “This is now a normal recession and not the doom scenario of last year, so the market should get back on its recovery.”

Rio Tinto, the world’s second-largest iron-ore producer, lost 2.7 percent to 1,850.5 pence. Vedanta Resources, the biggest copper producer in India, dropped 2.5 percent to 1,300 pence.

Aluminum, nickel and zinc were among commodities that fell in the London Metals Exchange on concern the economy may take longer than expected to recover.

‘Going to be a While’

While the pace of decline in the U.S. economy has “slowed dramatically,” there are still “enormous challenges,” Geithner said. “It’s going to be a while before we’re confident we’re going to have a strong, sustainable recovery in place,” he said in an interview with CNN’s “Fareed Zakaria GPS” show.

Xstrata slipped 4.7 percent to 569 pence. The company may offer a cash payment to convince Anglo American shareholders to consider its merger proposal, the Observer said, citing unidentified people in the City of London. Xstrata spokeswoman Claire Divver declined to comment on the story. Anglo fell 1.7 percent to 1,627 pence.

Friends Provident soared 5.5 percent to 63.74 pence. The 177-year-old U.K. insurer rejected a 1.7 billion-pound takeover approach from Clive Cowdery’s Resolution, saying the bid was too low.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.

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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jul 13 09 10:08 GMT |

Sterling has been hit by more gloom this morning, suffering significant losses against the JPY, the EUR and the USD. The dominant tone in the market continues to favour safe haven although initial consolidation in AUD/USD and small gains in the FT-SE 100 index was suggestive of some reprieve early on in London. Japanese politics have hit the headlines with the ruling LDP party losing its majority in the Assembly to the DPJ and PM Aso calling a general election for next month. Japanese stock markets are lower, the JPY, however, remains heavily underpinned by safe haven demand. A press report citing the IMF as saying that the UK is alone with Argentina as the only G20 country which cannot afford further fiscal support in 2010 has undermined the pound this morning. Reports that the Lloyds banking group is braced for a GBP 13 bln write-off and that its losses are accelerating has pushed the woes of the UK banking sector back to the fore and also weighed on the pound. GBP/JPY fell progressively overnight and this morning, hitting lows of 147.68 so far this session. EUR/GBP has traded above last week's high this morning returning to levels not seen since early June. No UK data has been released today. Tomorrow, June UK CPI data could be key. The market is expecting inflation to finally come in below the BoE's 2.0% target. A number significantly weaker than the 1.8% y/y market median could increase speculation that the BoE will increase its QE program and could increase the pressure on the pound. Japanese Jun consumer confidence data was weaker than expected at 38.1. While it improved from 36.3 in May, the weak economic backdrop goes some way to explain the government's poor performance in yesterday's local election. The resultant loss of the LDP's sway in the Assembly and the decision by the PM to call a general election for next month could result in a change in the ruling party in Japan for the first time since 1955. While USD/JPY initially found support in London hours, JPY buying on safe haven concerns re-emerged pushing USD/JPY down towards 91.80. The US monthly budget statement is due today. The market is expecting a huge USD97.0 bln deficit. 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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European Market Update

Daily Forex Fundamentals | Written by Trade The News | Jul 13 09 10:07 GMT |

Japanese Cabinet raises economic assessment for the third straight month; Risk Aversion theme continues to simmer on renewed corporate financial sector and government fiscal health concerns ECONOMIC DATA (CZ) Czech May Final Industrial Output Y/Y: -22.0% v -21.7% prior; Construction Output Y/Y: -2.1% v 2.1% prior (SZ) Swiss June Producer & Import Prices M/M: 0.0% v 0.1%e ; Y/Y: -5.6%-5.4%e (JP) Japan Cabinet Office Monthly Economic Report: Raises economic view for third straight month but remains cautious on outlook SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM In equities news overnight: Equity markets entered the week on a bearish tone following like-minded trading in Asia. Significant equity declines in Australian, Japanese, Chinese and Indian markets reflected both political and global economic concerns that the US and macro/global economy continues to face (as worded by Geithner) significant challenges. With concerns that the timing of a global recovery may be pushed back to well-within 2010, risk aversion trades denominated equity markets. This sentiment dominated perceptions as the first full week of Q2/H1 earnings prepared to report a more detailed perspective of corporate health and operations. Pre-market Q2 reports out of Philips [PHIA.NV] significantly beat expectations on its net earnings, while simultaneously noting that outlook, sentiment and visibility remained limited. In sector performance, utilities, oil and financials performed the worst on the open (dollar strength, earnings concerns, legacy losses) while health care traded slightly higher. Downward pressures intensified through the first 15 min with equities printing lows down approx -0.50% before staging an abrupt turnaround. In a market session light on economic data or central bank talk, continued strong performance out of Philiips rallied tech and electronic names while a gradual recovery in EUR/USD and commodity prices facilitated an equity rise. By 4:00EST equities had recovered all their opening losses and had moved through the unchanged mark. In roads into positive territory remained slight (+0.10-0.25%) but were maintained through the 4:00EST hr and into 5:00EST. Volumes on European bourses remained light with the CAC off 42% ahead of its national holiday tomorrow (Batille Day). In Individual equities: Philips [PHIA.NV] Reported Q2 Net profit €45M better than the loss €77.8M expected. Revenues came in at €5.2B slightly below the €5.3B expected. Q2 Healthcare sales -5% y/y. Q2 Consumer Lifestyle sales -30% y/y, Ex. Televisions -19% y/y. Q2 Lightning sales -18% y/y. CEO: Despite some markets showing signs that decline in demand is bottoming out we remain cautious about our sales level for the rest of the year. Expected H2 of 2009 to improve over H1 due to cost cutting having positive impact on the bottom line. || Lloyds [LLOY.UK]: Speculation that the company might pepare to write off approx £13B linked to loans in commercial property, business, and mortgage holders - Sunday Times. || UBS [UBSN.SZ]: Reached prelim agreement with US DoJ; delays hearing to Aug 3; will provide information on a 'significant number' of clients. Agreement includes provisions for the IRS. Department of Justice, UBS and the Swiss government have requested a stay with a rescheduled hearing date of Aug. 3, 2009 . ||BA [BAY.UK] Declined to comment on reports that it has secured shareholder approval for an emergency rights issue of up to £500M (36% of market cap) - London Times. British Airways ready to improve merger terms and conditions -el Economista. BA may be ready to consider a 50/50 share swap, New financial head of airline would be moved from London to Spain, Iberia in return would take on substantial part of BA pension debts. || Anglo American [AAL.UK] Xstrata to reportedly offer an extra cash bonus of approx £5B to shareholders in efforts to assist negotiations - Guardian. Xstrata to raise the additional cash through rights issue as credit market currently to thin. Article states that fresh takeover attempts could appear as soon as August. Under speculated new offer, not only would additional cash be added to the share offer providing demanded premium, but in the new enlarged firm, Xstrata would represent 45% of overall voice, not 50% seen in initial offer. || Friends Provident [FP.UK] Resolution confirms considering possible offer for the company. Confirms that it is considering a possible offer for the entire issued (and to be issued) share capital of Friends Provident in connection with this consolidation strategy and has approached the Friends Provident Board in this regard. Although Resolution's proposal was not considered to be acceptable by the Board of Friends Provident, Resolution received constructive feedback from Friends Provident and its advisers and is considering its response. Clive Cowdery's Resolution to take £1.7B bid directly to shareholders -Times. Action comes after Resolutions all stock offer has been rejected by the board. Is expected to be officially confirmed in today's session. At £1.7B, offer price is at a slight premium from Friday's close price of £0.60/share. || Centrica [CNA.UK] Firm is preparing to give go-ahead for £800M Lincolnshire offshore wind array -Guardian. Lincolnshire field to generate 250MW. Rival RWE Npower is in final stages of deciding to pursue £2.2B North Wales project that is seen producing 750mw. Both programs were given gov approval. If both projects are given green light, article notes that this could be seen as sign that current slowdown in green energy construction in the UK is coming to an end. Green light would also be seen as sign that UK gov support program announced in April to subsidize and provide renewable obligation credits for new wind farm operations has achieved positive results. || Experian [EXPN.UK] Provides interim statement: Reports Q1 total revenue +1% y/y (-8% ex FX). North America Rev -2% y/y, Latin America Rev +15% y/y, UK and Ireland Rev flat y/y, EMEA/Asia Pacific+5% y/y. || Venture Production [VPC.UK] Formally rejects offer from Centrica. Board has concluded that Centrica's offer substantially undervalues Venture given its near and long term prospects and the strategic position and high quality of its UK gas reserves and resources. Reminder: Over the weekend company received cash buyout offer of 900p/shr from Centrica valued at £1.3B - Sunday Times. Centrica targeting 71% not currently owned, current offer carried premium of 7.64%. || Areva [CEI.FR] Made bids to build two new generation atomic reactors in India. Singed accord with Tata Sons Ltd. for engineering services and plans a forged-parts. || VW [PAH3.GE]: Volkswagen increases offer for 49.9% of the company above €4.0B from €3.0-4.0B prior offer - Der Spiegel. Article sees stake bid from Qatar at approx €7B for 25% stake in Porsche and the options that it holds. || Lufthansa [LHA.GE] EU may decline request for €500M subsidy for Austrian Airline acquisition - Die Presse. EU may withhold the request because it believes that airline will require further assistance. || Telecom Italia [TIT.IT] Update: PE firms looking to take stake in Sparkle unit -Il Giornale. PE names looking to take 49% stake in unit for price of up to €600M. || Banco Popolare [BP.IT] Update: Considering cap increase of €1-1.2B for Italease unit -La Stampa. Italease may be split into 'good' and 'bad' operating units. Actions to be taken following complete buyout of Italease by the bank. || Speakers: China PBoC Assistant Gov saw positive signs in its economy; China to improve financial support for the economy, Bank lending to be reasonably controlled || China MOF stated that Jun fiscal revenues rose 19.6% y/y while its H1 Revenue declined by 2.4% y/y. The MOF saw difficulty for Government finance over remainder of 2009 as the foundation for fiscal revenue growth was not solid || Spain Econ Secretary commented that Q2 GDP contraction would be significantly less than the -1.9% experienced back in Q1. He noted that cutting deficit to 3% to satisfy Maastricht treaty could be achieved by 2012|| Japan Cabinet Office Monthly Economic Report raised its economic assessment for third straight month but remained cautious on outlook. The report upgraded its view of exports, imports, business spending and private consumption. It expected economy to pick up in coming months as companies finish adjusting inventories, overseas economies improve and the effect of policy measures spreads, It did note that the Japanese economy was still in difficult situation and remained cautious on the outlook for spending, as wages are falling and companies are cutting jobs. Volatility in foreign exchange and stock markets also posed risks ||Indian Coal Minister commented that the country likely to face coal shortage of 70M tons in 2010 with demand expected at 604.3M tons in 2010 || Poland Deputy Fin Min commented that it could not exclude another USD denominated debt issue. He reiterated the view that the Zloty currency was currently undervalued. A revised plan for Euro adoption to be completed this summer || UK Financial Investments (UKFI) commented that it could make first sales of stakes in UK banks if there is an early economic recovery. It would not set a timetable for sale of Government stakes. Most sales expected to take place once economy was in recovery phase and expected to undertake several transactions in bank shares. Sales would take place on a commercial basis and also occur via private placement. It did note that UK banks face significant legacy losses In Currencies: Initial risk aversion initially benefited the USD and JPY pairs but price action well within last week's trading ranges. EUR/USD tested the 1.3900 while USD/JPY failed to move back below the 92 area. The GBP was broadly weaker in the session. GBP/USD tested the 1.6055 leve before consolidating its losses while EUE/GBP inched its way towards the 0.86 area. Uk press noted that the IMF raised new warnings about the U.K.'s public finances. Commodity bloc currencies continuing to suffer in the wake of broad based risk reduction. AUD/USD tested 0.7700 before consolidating while USD/CAD ended the European morning at 1.1645 area. In Energy/commodities: Iraqi PM: To supply 15 bcm of gas to Europe via Turkish pipeline || Iran's OPEC Governor commented that OPEC to decide on crude output ceiling at its September meeting. He did not see unscheduled meeting before September || Nigerian rebel group (MEND) has attacked the Atlas Cove Oil Jetty in Lagos State. MEND set the depot and loading tankers moored there on fire. || WSJ reports that Iran plans to submit a package of proposals discussing its nuclear program to Western govt's so as to rebuild its recently weakened diplomatic ties || MEPS analyst noted that 2009 global steel output seen at 1.17B tons (-12% y/y) In Fixed Income Supply: Government bonds have got off to a solid start this week in Europe. Gilts are leading the way up on a cross-market basis ahead of the BoE's smaller than usual round of buybacks. As the UK yield curve steepens, US and European yield curves are undergoing some bull flattening with Us 2s10s moving below 239bps for the fist time since late June and German 2s10s below 205bps for the first time since early May . Meanwhile yields on the Bund and the 10y Note are approaching parity for the first time since 4th June. Three month Euribor reset at a fresh record low below 1.00%) for the first time in history and below the ECB refi rate for the first time since April In the papers: (GE) Handelsblatt reported that German Jun tax revenues fall 8.8% y/y. Article noted that employee withholding taxes declined 5.2% as more workers went on government subsidized reduced hourly schedules while corporate tax revenue declined to €2.5B, down over 50% y/y. Income from sales taxes, the largest source of revenue, was up 1.6% y/y || UK telegraph reported that IMF warned that UK cannot afford another fiscal rescue. Article noted that IMF paper presented to world's leaders has laid bare how the UK's indebtedness has left it unable to provide the vital stimulus the economy could need over the next 18 months IMF paper noted that every other G20 country apart from the UK and Argentina has been able to budget for temporary spending increases or tax cuts next year to help drag their economies out of recession NOTES Risk Aversion theme continues to simmer on renewed financial sector concerns Lloyds rumors: Preparing to write off approx £13B linked to loans in commercial property, business, and mortgage holders…meanwhile NY Times reports Goldman Sachs likely to post huge profits Sotomayor hearings start today. Japan calls for elections on Aug 30th. Opposition party calls for diversification of reserves. Looking Ahead 6:30 (EU) ECB's Trichet Speaks at Ifo Seminar in Munich 9:30 (CA) Canadian Q2 BoC Senior Loan Officer Survey 2Q No expectations v 60.3 prior 10:30 (CA) Canadian Q2 Business Outlook Future Sales 2Q No expectations v -22 prior 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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Technical Analysis Daily: USD/JPY

Daily Forex Technicals | Written by iFOREX.bg | Jul 13 09 10:13 GMT |

USD/JPY 92.05 USD/JPY Open 92.40 High 93.18 Low 91.72 Close 92.52 On Friday Dollar/Yen continued descending. The currency couple made a peak at 93.18, than collapsed down to 92.02, closing the week higher at 92.52. The longer the pair stays under 92.50, each upward movement is considered as a normal correction, and our preferable short term scenario for now is descending. The nearest support is today's bottom at 91.70. Break below this level may lead to further bearish movement towards next objective 90.60. The CCI indicator is in the overbought zone and downwards of the 1 hour chart, suggesting potential descending pressure. Technical resistance levels: 92.90 94.00 95.35 Technical support levels: 91.70 90.60 89.45 Trading range: 92.15 - 91.55 Trend: Downward Sell at 92.05 SL 92.35 TP 91.65 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Jul 13 09 10:11 GMT |

EUR/USD Current level-1.3931 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.3064 and 1.3524. The pair is in a corrective mode after Friday's low at 1.3878 and we hold on to our view, that current consolidation precedes a slide towards 1.3746. Intraday bias is slightly positive for 1.4010, where a reversal should be expected, before deeper drowning below 1.3878. Resistance Support intraday intraweek intraday intraweek 1.4010 1.4201 1.3878 1.3746 1.4072 1.4338 1.3746 1.35+ USD/JPY Current level - 92.21 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 98.13 and 97.75. Still in the 93.82-91.72 range and we are expecting negative bias to be renewed soon, for a break below 91.72, towards 89.60. Resistance Support intraday intraweek intraday intraweek 93.58-82 99.74 92.12 89.60 96.27 101.45 91.72 87.12 GBP/USD Current level- 1.6072 The pair is in an downtrend, after peaking at 1.6746. Trading is situated above the 50- and 200-day SMA, currently projected at 1.4778 and 1.5510. Obviously the sell from last week's high at 1.6374 is not corrective in nature and we are tempted to think, that current slide is a part of a larger consolidation above 1.5982, preceding a fast downtrend towards 1.5352 support. Nevertheless, while the pair holds above 1.5983 there is a chance for on more upswing towards 1.6281, which will be confirmed after a break above 1.6150 resistance level. Resistance Support intraday intraweek intraday intraweek 1.6150 1.6746 1.6015 1.5778 1.6283 1.7440 1.5879 1.5352 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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Forex Market Update: Risk Aversion Still The Dominant Theme As A New Week Begins

Daily Forex Fundamentals | Written by Saxo Bank | Jul 13 09 06:43 GMT |

GBP especially suffers as weekend press has nothing positive to report HEADLINES - PREVIOUS SESSION US May Trade Balance out at -$26.0 bln vs. -$30.0 bln expected and -$29.2 bln prior US Jun Import Price Index out at +3.2% m/m vs. +2.0% expected US Jun Univ. of Michigan Sentiment Index out at 64.6 vs. 70.0 expected and 70.8 prior NZ May Retail Sales out at +0.8%m/m vs. +0.2% expected and +0.5% prior NZ May Retail sales ex-autos out at +1.6% m/m vs. +0.5% expected and revised flat prior JP May Final IP out at +5.7%m/m, -29.5% y/y vs. +5.9%/-29.5% prior JP May Final Capacity Utilization out at +8.0% m/m vs. +10.2% prior JP Jun Consumer Confidence out at 38.1 vs. 39.5 expected and 36.3 prior THEMES TO WATCH - UPCOMING SESSION UK US Tres Sec Geithner meets PM Brown, Canc. Darling (N.A.) Swiss PPI (0715) EU ECB's Trichet speaks (1030) CA BOC Business Outlook Survey (1430) CA BOC Loan Officer Survey (1430) US Monthly Budget Statement (1800) Market Comments Weekend press did not have much positive news for the UK, and consequently the pound. UK's Telegraph reported that the IMF has warned that the UK could not afford the vital stimulus required by the economy over the next 18 months due to the precarious state of its public finances. In its recent paper presented to a G20 meeting, it highlighted that every other G20 country apart from the UK and Argentina had been able to budget for temporary spending increases or tax cuts next year to pull their respective currencies out of recession. The news underlines prior warnings from S&P about the dire state ok UK finances and the risk of a possible ratings downgrade. Meanwhile the UK's Times reported that Lloyds Banking Group is poised to write off as much as GBP13 bln on its loans to commercial property, businesses and mortgage holders. GBPUSD broke through recent lows early in the Asian session and looks set to extend its fall. Also in the Telegraph, columnist Ambrose Evans-Pritchard's piece featured further bearishness on Europe as he lambasted the ECB, expressing concerns that its actions in refusing to join the 'club' of quantitative easing central banks could end in pushing the weakest states under its auspices into a debt-compound spiral that could end in bond crises and/or the disintegration of the EU. EUR started the Asian session with a mild bid tone but soon gave up the gains after struggling to break through the key 1.40 mark. Japanese politics hit the headlines over the weekend after metropolitan elections results saw PM Aso's LDP party lose its majority in the Tokyo assembly to the opposition DPJ party for the first time in 44 years. The result is seen as a good barometer for the pending general election and has stirred up a host of calls for immediate dissolution of parliament, possibly as early as tomorrow, as Aso faces increased pressure to resign from both within and outside the party. An early dissolution is regarded as being positive for markets as it removes the uncertainty early on. While the JPY is not seen as the most politically-influenced currency, and delay, and extreme opposition rhetoric (recall the DPJ spoke recently, and repeated at the weekend, about diversifying Japan's FX reserves away from the dollar medium-term), may take some of the shine off JPY's recent sparkle. Latest update: Reuters reports LDP has decided on an August 30 election. As we enter another week, tomorrow is beginning to shape up as the major event risk on the horizon. Goldman Sachs will be the first of a number of financial institutions reporting Q2 numbers while economic data features retail sales numbers for June. A NY Times article gave risk sentiment a lift during the Asian morning as it suggested Goldman's could produce astounding profits from its Q2 trading. On the retail sales data, markets are hoping that constructive rebounds in PMI readings of late will transfer into end-user demand. However, given the fragile nature of recent US consumer confidence data, any improvement will likely be marginal. Recent polls suggest a 0.4% increase following last month's +0.5% with the data series ex-autos remaining steady at +0.5%. On this theme, the latest Bloomberg poll showed economists upgrading their US growth estimates for the second half of the year and 2010 as a revival in consumer spending signals an end to the recession, the report suggests. The poll suggests growth will average 1.5% for the July-December period compared with last month's 1.2% forecast. However, the same report highlights that unemployment will likely exceed 10% early next year and average 9.8% for 2010. Analysis Disclosure & Disclaimer SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated. SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations. The recommendations may expire promptly due tmarket volatility and in general, SaxBank does not anticipate its recommendations tbe valid more than one month. An analysis will be updated if and only if a market development or other issues relevant tthe analysis render a new analysis on the same topic relevant. SaxBanks analysis does not cover any specific financial product over time but only products which SaxBanks strategy team finds it important tcover at any given point in time. In order tprevent conflicts of interest, SaxBank has established appropriate business procedures, incl. procedures applicable tresearch and analysis tensure objective research reports. SaxBanks research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. SaxBank is under supervision by the Danish Financial Supervisory Authority. SaxBank does not engage in corporate finance activities and accordingly, SaxBanks employees, incl. the persons responsible for an analysis, dnot receive remuneration associated with investment banking transactions.

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