European Construction Output Declined for Second Month in June

By Simone Meier

Aug. 19 (Bloomberg) -- European construction output declined for a second month in June even as the region’s recession eased.

Construction in the 16-member euro region dropped 1.1 percent from May, when it fell 2 percent, the European Union’s statistics office in Luxembourg said in a statement today. From a year earlier, output declined 8.8 percent.

European builders have been forced to reduce spending and jobs after the global recession eroded demand for new housing and infrastructure. Hochtief AG, Germany’s largest construction company, on Aug. 14 forecast a drop in full-year orders. The euro-area economy barely contracted in the second quarter after governments pledged billions of euros to fight the crisis and Germany and France unexpectedly returned to growth.

“European builders were severely hit by the global downturn,” said Stefan Bielmeier, chief German economist at Deutsche Bank AG in Frankfurt. “We’ll only see a very gradual recovery in construction output in the year’s second half, mainly driven by fiscal spending.”

In Spain, construction declined 0.2 percent in June from the previous month and 12.6 percent from a year earlier, today’s report showed. Output in France, the euro region’s second- largest economy, fell 0.2 percent in the month and 4.6 percent on the year. Germany, Europe’s biggest economy, saw a drop of 1.4 percent from May and a 1.2 percent gain from a year earlier.

The euro was lower against the dollar following a report earlier today that showed German producer prices declined at the fastest pace in 60 years in July. The European currency traded at $1.4104 at 9:50 a.m. in London, down 0.2 percent. The Dow Jones Stoxx 600 Index of European shares dropped 1.2 percent.

Investor Confidence

The euro-area economy shrank 0.1 percent in the second quarter from the previous three months, when it contracted a record 2.5 percent. Germany and France showed growth of 0.3 percent, while the economies of Spain, the Netherlands and Italy continued to shrink.

Adding to signs of recovery, German investor confidence jumped to the highest in more than three years in August after government stimulus measures and rising exports pulled the economy out of recession. The ZEW Center for European Economic Research said yesterday that its index of investor and analyst expectations rose to 56.1 from 39.5 in July.

European investor sentiment rose to a one-year high in August and economic confidence increased more than economists forecast in July. Manufacturing and service industries probably contracted at the slowest pace in 12 months in August, according to the median estimate of 11 economists in a Bloomberg News survey. Markit Economics will release that report on Aug. 21.

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

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Swiss Franc to Hold at 1.52 Per Euro on SNB ‘Caution,’ UBS Says

By Justin Carrigan

Aug. 19 (Bloomberg) -- The Swiss franc is likely to be little changed over the next three months as the central bank seeks to stem its gains, according to UBS AG.

The Swiss National Bank will keep interest rates near zero and continue franc sales to prevent a strengthening of the currency, Handelszeitung cited central bank board member Thomas Jordan as saying in an interview yesterday.

“The deflation risks mean it is still too early for a normalization of monetary policy” from Jordan’s perspective, Brian Kim, a currency strategist at UBS in Stamford, Connecticut, wrote in a report yesterday. The “comments echo the themes and undertone from the SNB’s mid-June assessment and so far the SNB continues to sound comparably cautious.”

The franc was little changed at 1.5202 per euro as of 7:33 a.m. in Zurich. UBS has a one-month and three-month target for the franc of 1.52 per euro.

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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New World Resources Reports First-Half Loss; Plans Energy Sale

By Douglas Lytle

Aug. 19 (Bloomberg) -- New World Resources NV, the Czech Republic’s biggest supplier of coking coal, reported a first- half loss as it cut production on weaker demand, and said its board agreed to sell the company’s energy business.

NWR posted a net loss of 41.4 million euros ($58 million), following net income of 189 million euros a year earlier, the Amsterdam-based company said in a statement today. Sales from continuing operations fell 48 percent to 484.4 million euros.

The company, which sold shares in a 2008 initial public offering in Prague, London and Warsaw, in May cut its 2009 output target to 10.5 million metric tons from 12.1 million tons because of “considerably lower” demand and higher inventories.

“I would hope we would be profitable and cash generative in the second half,” Chairman Mike Salamon said today in a phone interview from London.

Coal production fell 17 percent from a year earlier in the first half and coke production declined 40 percent, NWR said.

The company reported a net loss of 39.3 million euros in the second quarter, compared with net profit of 71.3 million euros a year earlier. The result beat the median estimate of a 20 million-euro loss in a Bloomberg survey of six analysts. Revenue from continuing operations was 243.9 million euros in the period, down from 463 million euros.

“Market conditions were difficult for NWR throughout the first half,” Salamon said in the statement. “NWR’s core customer markets are beginning to show some signs of recovery. Sales volumes have been rising since June and our inventory levels have therefore started to fall.”

The board agreed to sell the company’s energy business and said the development “is in line with our strategy to focus on our core business of coal mining and coke production, and also in order to strengthen our balance sheet,” the statement said.

NWR supplies hard coal and coke to customers such as the Czech unit of ArcelorMittal, the world’s largest steelmaker, and U.S. Steel Corp.’s division in Slovakia. It also produces coal used by power plants.

To contact the reporters on this story: Douglas Lytle in Prague dlytle@bloomberg.net

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China’s Probe of Rio Employees May Last Two Months

By Bloomberg News

Aug. 19 (Bloomberg) -- China’s investigation of four Rio Tinto Group employees, including Australian Stern Hu, for alleged bribery and theft of commercial secrets may last two months, according to a law firm representing two executives.

A probe would be followed by one-and-a-half months of review by prosecutors before court hearings, according to procedures outlined in Chinese law, Shanghai-based lawyer Zhai Jian said. Zhai’s firm represent Ge Minqiang and Wang Yong.

Hu, head of Rio’s iron ore business in China, and three Chinese colleagues, were formally arrested this month for allegedly stealing secrets related to the steel industry, a publication run by the prosecutors’ office said Aug. 12. The detention since July 5 and arrest have strained relations between Australia and China.

“The duration of the two procedures can be extended depending on specific conditions,” Zhai said over the phone today. The “court hearing may be open to the public for cases that don’t relate to state secrets or personal privacy.”

Hu, Ge, Wang and Liu Caikui, the fourth Rio Tinto employee, were originally accused of the theft of state secrets, a charge that wasn’t included in the arrest statement this month.

“Given the complexity of the Rio case, the investigations may take longer than two months,” said Xiong Dingzhong, a Beijing-based lawyer at Hantong Law Firm, which isn’t representing any of the employees. “Stern Hu has been detained for six weeks before the official arrest. It is hard to determine whether that should be included in the two months.”

Initial Investigations

The charges come as London-based Rio Tinto, the world’s second-largest iron ore supplier, refused to budge in contract price talks with Chinese steelmakers this year. The company rejected in June a $19.5 billion investment by state-owned Aluminum Corp. of China in favor of a share sale and an iron ore joint venture with rival BHP Billiton Ltd.

Initial investigations showed that the Rio Tinto workers obtained commercial secrets about the steel industry through improper means as well as evidence of bribery, the publication of the prosecutors’ office had said.

The downgrade in charges from the theft of state secrets was a “conciliatory” gesture to calm investors, said Richard Cassin, author of “Bribery Everywhere, Chronicles From the Foreign Corrupt Practices Act.”

Seven Years

“While infringing trade secrets and commercial bribery are still serious, at least the threat of life in prison or even execution is removed,” said Cassin, partner at Singapore-based law firm Cassin Law LLC. Hu and his colleagues face a potential penalty of seven years in prison and a fine, he said.

Lawyers aren’t able to see details about the prosecution’s evidence before a case is put on trial, according to Chinese law, Hantong’s Xiong said. They can visit defendants and can see summaries on the progress of the investigations, he said.

Lawyer Duan Qihua will represent Stern Hu, while Tao Wuping will represent Liu, the Wall Street Journal reported Aug. 14. Duan and Tao couldn’t be reached immediately for comments.

Chinese companies have continued to invest in Australia. Exxon Mobil Corp. yesterday agreed to sell 2.25 million metric tons a year of liquefied natural gas to China from Australia’s Gorgon project for 20 years.

Australia’s Resources and Energy Minister Martin Ferguson said the agreement, worth A$50 billion ($41 billion) was a “landmark in our relationship with China.” Foreign Minister Stephen Smith yesterday had said difficulties in ties with China following the detention and a visit by Uighur leader Rebiya Kadeer must be managed carefully.

--Helen Yuan, Andrea Tan. Editors: Tan Hwee Ann, Douglas Wong.

To contact the reporter on this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

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Pimco Says Dollar to Weaken as Reserve Status Erodes

By Garfield Reynolds and Wes Goodman

Aug. 19 (Bloomberg) -- Pacific Investment Management Co., which runs the world’s biggest bond fund, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.

The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.

“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.

The Dollar Index, which tracks the greenback against a basket of currencies, touched 78.823 today, the lowest this week. It has fallen 12 percent from this year’s high in March as U.S. authorities pledged $12.8 trillion to combat the recession. China, the world’s largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the dollar as the dominant place to store reserves.

“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote.

The U.S. government boosted spending and the Federal Reserve bought bonds to revive credit markets that seized up after financial companies posted $1.6 trillion in writedowns and losses, raising concern there is an oversupply of greenbacks.

Asian Rally

The currency was little changed today at $1.4140 per euro as of 10:27 a.m. in Tokyo. The Dollar Index is down about 3 percent this year, after a 6 percent gain in 2008.

Asian currencies stand to benefit as the region’s economy grows and the dollar’s allure fades, said Rajeev de Mello, Singapore-based head of Asian investments at Western Asset Management Co., which oversees $473.4 billion.

“We are positive on the Asian currencies against the dollar and think they will continue to rally,” de Mello said in an interview. “I do think the diversification of reserves is something that’s important and I think we’ll see some from China into other currencies and this will benefit as well Asian currencies and other emerging currencies.”

Sample Coin

China’s central bank renewed its call for a new global currency in June and said the International Monetary Fund should manage more of members’ foreign-exchange reserves. Russian President Dmitry Medvedev last month illustrated his call for a supranational currency by producing a sample coin after a summit of the Group of Eight nations.

Mewbourne joins investor Jim Rogers, who said last year that he was shifting all his assets out of dollars and buying Chinese yuan because the Fed eroded the value of the U.S. currency. The dollar is losing its status as the world’s reserve currency, said Rogers, who is the author of books on investing including “Hot Commodities.”

Sovereign Funds

Bill Gross, who runs the $169 billion Pimco Total Return Fund, is also warning the U.S. currency will fall.

Holders of dollars should diversify before central banks and sovereign wealth funds do the same because of concern government budget deficits will deepen, Gross said in June.

Gross’ fund has returned 12 percent in the past year, outperforming 95 percent of its peers, according to data compiled by Bloomberg.

The U.S. budget deficit reached a record $1.27 trillion for the first 10 months of the fiscal year and broke a monthly high for July, the government said Aug. 12.

Still, there is no viable immediate alternative to the U.S. dollar for now as the euro region lacks a political union while Japan’s economic weakness makes it impossible to consider the yen for such a role, Pimco’s Mewbourne wrote. The currencies of emerging states such as China can’t play a reserve role as long as they are subject to capital controls, which restrict international traders to using non-deliverable forwards, he wrote.

Pimco, based in Newport Beach, California, is a unit of Munich-based insurer Allianz SE.

To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.

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Yen Rises as Decline in Asian Stocks Spurs Demand for Safety

By Yoshiaki Nohara and Ron Harui

Aug. 19 (Bloomberg) -- The yen rose against the dollar and euro as renewed concerns about the strength of the economic recovery spurred demand for Japan’s currency as a refuge.

The yen gained against all 16 major counterparts after Chinese shares led equities in the region lower and the Daily Telegraph cited Germany’s economic state secretary as saying the nation is preparing countermeasures for a new credit crunch early next year.

“Risk aversion, shown in a drop in Asian stocks, is causing the yen to be bought as a refuge,” said Masashi Hashimoto, a senior analyst at Bank of Tokyo Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank. “Signs China’s economy is faltering are weighing down on the global economic outlook.”

The yen rose to 132.81 per euro as of 7:54 a.m. in London from 133.84 yesterday in New York. Japan’s currency advanced to 94.20 per dollar from 94.69 after earlier gaining to 94.14, the highest level since July 29. The dollar traded at $1.4096 per euro from $1.4136.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slumped 4.6 percent. The MSCI Asia Pacific Index of regional shares fell 0.7 percent.

The Daily Telegraph reported German economic state secretary Hartmut Schauerte said companies with weak balance sheets may struggle to roll over loans that need to be paid back in coming months.

Europe Concern

European Central Bank council member Axel Weber said in an interview in the Sueddeutsche Zeitung newspaper on Aug. 17 that the ECB will “closely monitor” banks’ lending to firms while saying that there are no signs of a credit crunch in Germany.

“There are worries that the financial turmoil in Europe, including the U.K., may deepen again,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “Risk aversion is returning, causing buying of the yen and the dollar.”

The yen typically rises during times of financial turmoil because Japan’s trade surplus means the nation doesn’t have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency.

South Korea’s won fell 0.7 percent to 1,255.85 per dollar from 1,246.65. A government report showed this month South Korea’s exports, which make up more than half of the economy, fell for a ninth month in July as demand from China, the U.S., and Japan weakened amid the global recession.

‘Clear Signs’

“On one hand, the economy is in better shape; on the other hand, you really need clear signs of future growth to push the currency stronger,” said Nizam Idris, a currency strategist at UBS AG in Singapore. The won will end this year at 1,250 and rise to 1,200 by the end of 2010, Idris said.

Gains in the dollar were limited after Pacific Investment Management Co., which runs the world’s biggest bond fund, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy.

The U.S. currency will drop the most against emerging- market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.

“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.

‘Monetary Medicine’

The U.S. must address the massive amounts of “monetary medicine” that have been put into the financial system and now pose threats to the world’s largest economy and the dollar, billionaire Warren Buffett wrote in a New York Times commentary yesterday.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners including the euro and yen, declined to 78.919 from 78.937 yesterday, after earlier touching 78.823, the lowest level this week.

The yen reversed earlier declines against the dollar and the euro amid speculation Japanese exporters bought the currency.

“There’s talk of keen yen-buying interest from exporters,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. “This is likely to put currencies such as the dollar under downward pressure.”

Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Iluka Swings to Loss in First Half After Writedowns

By Jason Scott and Rebecca Keenan

Aug. 19 (Bloomberg) -- Iluka Resources Ltd., the world’s biggest zircon producer, swung to a first-half loss after taking one-time charges for writing down the value of two deposits in Australia and closing unprofitable mines.

The net loss was A$55.8 million ($46.1 million), or 14.2 cents a share, in the six months to June 30, from A$15.6 million, or 5 cents a share, the year before, Perth-based Iluka said today in a statement. Sales fell 57 percent to A$182.3 million.

The global financial crisis forced Iluka to idle half its production in Western Australia and cut its workforce there by a third. The company had a A$78.9 million loss from continuing operations.

“It remains difficult to predict the path of the recovery or the timing for the restoration of more ‘normal’ underlying demand trends,” Managing Director David Robb said in a separate statement. He cut Iluka’s full-year zircon sales forecast as much as a third to between 200,000 and 250,000 metric tons.

Shares of Iluka have declined 28 percent this year compared with an 18 percent gain on the benchmark S&P/ASX 200 Index.

To contact the reporters on this story: Jason Scott in Perth at Jscott14@bloomberg.netRebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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Rubber Drops as Chinese Equities Slump Threatens to Hurt Demand

By Aya Takada

Aug. 19 (Bloomberg) -- Rubber dropped by as much as 2.3 percent, reversing earlier gains, as a sell-off in Chinese stocks raised concern the world’s third-largest economy may slow, curbing demand for raw materials.

Futures in Tokyo declined for the third time in four days after China’s stocks fell, briefly driving the benchmark index into a so-called bear market, more than 20 percent below this year’s high, on concern the country’s economic recovery will falter as the government reins in lending.

“A slowdown in the Chinese economy could have a significant influence on commodity demand as the nation was the main driver of the global economic recovery,” Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co., said today by phone.

January-delivery rubber, the most-active contract, lost 1.6 percent to settle at 192.7 yen a kilogram ($2,045 a metric ton) on the Tokyo Commodity Exchange.

The Shanghai Composite Index fell 4.3 percent to 2,785.584. The index has lost 19.8 percent since reaching a 14-month high on Aug. 4 and is 59 percent below its record level, reached on Oct. 16, 2007.

Chinese Prime Minister Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package, coupled with record bank lending in the first six months, helped the Shanghai index to more than double from an October low. The rally faltered as new loans in July declined to less than a quarter of June’s level.

Rubber futures earlier jumped by as much as 3.9 percent on speculation tire makers may step up raw material purchases to meet demand from carmakers. Nomura Holdings Inc. raised its stance on the Japanese auto industry to “bullish” from “neutral”, citing a recovery in demand.

Toyota Motor Corp. will raise its global production plan to 6.67 million vehicles this business year, up from 6.3 million units, because of increasing sales of hybrid vehicles, the Yomiuri newspaper said today. Hideaki Homma, a Toyota spokesman, denied the report later.

January-delivery rubber on the Shanghai Futures Exchange lost 1.1 percent to 18,005 yuan ($2,634) a ton.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net;

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Fortescue Says Remains in Financing Talks With China

By Rebecca Keenan and Stephen Engle

Aug. 19 (Bloomberg) -- Fortescue Metals Group Ltd., Australia’s third biggest iron ore exporter, remains in talks with Chinese groups to secure as much as $6 billion to expand.

“We have held discussions with major Chinese financiers to extend credit to around $5.5 billion to $6 billion to Fortescue,” Chief Executive Officer Andrew Forrest said today in an interview on Bloomberg TV. Fortescue wants to have the financing secured by the end of September, it said on Aug. 17.

Fortescue has been seeking funding as a cash squeeze and lower iron ore prices forced it to put expansions on hold. The Perth-based company may need between $3 billion and $4 billion to proceed with plans to almost double output, Hunan Valin Iron & Steel Group, its second-largest shareholder, said in May.

Fortescue rose 2.3 percent to A$4.50 at the 4:10 p.m. Sydney time close on the Australian stock exchange. It has more than doubled this year, compared with an 18 percent gain in the benchmark index. Forrest wouldn’t be specific on who the company is talking to.

Securing financing is a condition of Fortescue’s agreement with Baosteel Group Corp., China’s largest steelmaker, and the China Iron & Steel Association to cut contract iron ore prices by 35 percent.

The price agreement is deeper than the 33 percent reduction offered by Rio Tinto Group, the largest exporter of Australian iron ore, and 47 percent less than the current spot price for benchmark ore from Australia.

Price Agreement

The steel association said it wants to apply the price agreement to all ore purchased by the country, eliminating differences between contract and spot prices.

“CISA is very much a part of China’s correct belief that their people deserve a stable iron ore pricing system and not one that has a benchmark with responsible supplies and then a speculative and hugely volatile and expensive price for short term supplies,” Forrest said. “ It is clearly not in China’s best interest to have this two-tiered, dysfunctional system.”

Fortescue will sell 20 million tons of iron ore in the six months ending Dec. 31, and China will give it priority to negotiate 2010 prices, the Perth-based company said. China bought 444 million tons of ore last year from suppliers.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net;

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Gold Declines as China’s ‘Bear Market’ Boosts Demand for Dollar

By Kim Kyoungwha

Aug. 19 (Bloomberg) -- Gold fell, erasing an earlier advance, as Chinese stocks entered a so-called bear market, boosting the attractiveness of the dollar.

The Dollar Index, a gauge of the U.S. currency, rose as the Shanghai Composite Index fell on concern the nation’s economic recovery will falter as the government reins in lending. The MSCI Asia Pacific Index of regional shares also declined.

“People are wary of unease in China and other regional stock markets, which is reviving demand for the dollar,” said Hwang Il Doo, a senior trader with KEB Futures Co. in Seoul. “Still, I don’t expect any abrupt decline in gold prices.”

Gold for immediate delivery, which tends to move inversely to the dollar, fell as much as 0.4 percent to $934.90 an ounce, before trading at $935.63 at 2:52 p.m. in Singapore. Earlier, the metal gained as much as 0.4 percent as the dollar slipped.

The Shanghai Composite Index declined 4.7 percent to 2,774.77 as of 2:44 p.m. local time today, increasing its loss since the 14-month high on Aug. 4 to 20.2 percent. A drop of 20 percent is typically defined as a bear market.

Earlier, the precious metal rose after Pacific Investment Management Co., which runs the world’s biggest bond fund, said that the dollar will probably drop as it loses its status as a reserve currency.

Pacific Investment Management, a unit of Munich-based insurer Allianz SE known as Pimco, said that investors should consider cutting holdings of the U.S. currency, according to a report from Curtis A. Mewbourne, a Pimco portfolio manager.

“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar,” Mewbourne wrote.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,065.49 metric tons as of Aug. 18, according to the company’s Web site.

Among other precious metals for immediate delivery, silver fell 0.9 percent to $13.88 an ounce, platinum shed 1 percent to $1,219.50 an ounce and palladium lost 1.5 percent to $269.75.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Japanese Stocks Fall to Lowest This Month on Valuation Concerns

By Masaki Kondo

Aug. 19 (Bloomberg) -- Japan’s benchmark stock indexes extended this week’s declines to their lowest levels this month on concern share prices had risen too high given the outlook for earnings growth.

Kawasaki Kisen Kaisha Ltd., a shipping line that forecast a loss last month, fell 2.3 percent after transport rates dropped. Tokio Marine Holdings Inc., Japan’s biggest listed insurer, sank 2 percent after regulators said new guidelines may cut solvency ratios. Sony Corp., expecting a second year of losses, sank 3.9 percent after cutting the price of its PlayStation 3 game player.

The Nikkei 225 Stock Average drifted between gains and losses at least 10 times before finishing down 80.96, or 0.8 percent, at 10,204.00 in Tokyo. The broader Topix index fell 6.41, or 0.7 percent, to 943.25. Both gauges sank to a level not seen since July 30.

“Equities are not cheap relative to their earnings prospects and people are feeling the recent rally has been stretched to its limit,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $3.7 billion.

The Nikkei surged 46 percent from a 26-year low on March 10 through yesterday as government spending boosted production and corporate earnings. The rally lifted companies in the gauge to 41 times estimated net income, from as low as 9.5 times last year, according to Nikkei Inc., which compiles the gauge.

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

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Asian Stocks Fall as China Enters Bear Market; Sony Declines

By Jonathan Burgos and Shani Raja

Aug. 19 (Bloomberg) -- Asian stocks fell, dragging China’s key index into a so-called bear market, as Maanshan Iron & Steel Co. reported losses and shipping rates slumped.

Maanshan Steel, China’s No. 4 listed steelmaker, lost 7.5 percent, while China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, slumped 7.4 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent after Japanese regulators said new guidelines will hurt insurers’ solvency ratios. Sony Corp. sank 3.9 percent after cutting the price of its PlayStation 3 game player.

The MSCI Asia Pacific Index fell 0.6 percent to 109.94 as of 4:11 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.

“We may need to see a healthy pullback,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Investors are still waiting for better entry levels.”

Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,204, while Hong Kong’s Hang Seng Index sank 1.9 percent. China’s Shanghai Composite Index dropped 4.3 percent, taking its drop from this year’s high on Aug. 4 to 20 percent, the level that typically signals a bear market.

Among stocks that rose today, Honda Motor Co. added 2 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 3.5 percent as it signaled improving passenger volumes.

Home Depot, Target

Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The U.S. gauge rose 1.1 percent yesterday, aided by better-than- estimated earnings at Home Depot Inc. and Target Corp.

A third of the 508 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.

“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”

Maanshan Steel dropped 7.5 percent to 4.81 yuan in Shanghai. The company posted a half-year loss for the second consecutive period as the global recession crimped demand from homebuilders and automakers.

Baltic Dry

Shipping stocks declined after the Baltic Dry Index, which measures the cost of shipping commodities, sank 2.5 percent in London yesterday, the biggest drop in a week

China Cosco Holdings slumped 7.4 percent to 13.82 yuan. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, dipped 4.5 percent to 11,750 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, slipped 2.2 percent to 568 yen in Tokyo.

Finance companies were the biggest drag on the MSCI Asia Pacific Index. Tokio Marine, Japan’s largest publicly traded insurer, lost 2 percent to 2,650 yen. T&D Holdings Inc., the second-biggest, dropped 1.2 percent to 2,845 yen.

Japan’s financial regulator said yesterday that solvency ratios at almost all insurers will probably fall once a new standard takes effect. The measure, which will affect how companies calculate their ability to pay claims, is under review and expected to be released by June.

Sony, Nintendo

Sony sank 3.9 percent to 2,500 yen. The company cut the price of its PlayStation 3 console by 25 percent, bowing to demands from game publishers and increasing the pressure on industry leader Nintendo Co. to follow. Nintendo lost 0.5 percent to 24,480 yen.

Japanese automakers rose after Shotaro Noguchi, an analyst at Nomura in Tokyo raised his stance on the industry to “bullish” from “neutral.” The companies are likely to see a recovery in demand in developed nations due to government subsidies, which may lead them to raise their forecasts, Noguchi wrote in a report.

Honda Motor Co., which makes 51 percent of its revenue in North America, climbed 2 percent to 3,070 yen. Nissan Motor Co., Japan’s No. 3 automaker, added 0.7 percent to 706 yen.

The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.

Qantas surged 3.5 percent to A$2.69. The company said there are signs passenger volumes are improving and yields are stabilizing after reporting its first loss in six years.

Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, gained 3.7 percent to A$44.28. The company said first-half profit fell 12 percent to A$898 million ($743 million) from a year earlier on lower oil prices. That compares with the market consensus of A$878 million cited by UBS AG.

To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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Air France, PCAS, Rhodia, Sanofi, Sodexo: French Stock Preview

By Helene Fouquet and Francesca Cinelli

Aug. 19 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.

France’s CAC 40 Index climbed 31, or 0.9 percent, to 3,450.69 in Paris. The SBF 120 Index also rose 0.9 percent.

Air France-KLM (AF FP): Europe’s biggest airline said it’s pulling out of the bidding for Ceske Aerolinie AS, the Czech Republic’s state-controlled carrier. The shares added 15.7 cents, or 1.6 percent, to 10.01 euros.

European Aeronautic, Defence & Space Co. (EAD FP): The A400M military-transport plane being built by EADS unit Airbus SAS has passed a key certification test and is set to fly by the end of 2009, Les Echos reported, citing an unidentified engineer. EADS lost 3.5 cents, or 0.3 percent, to 13.3 euros.

Carrefour SA (CA FP): Europe’s largest retailer opened three smaller Carrefour Express stores on highways around Sao Paulo in Brazil. The shares gained 13.5 cents, or 0.4 percent, to 30.76 euros.

Produits Chimiques Auxiliaires et de Synthese SA (PCA FP): The maker of pharmaceutical ingredients, known as PCAS, agreed to form a joint venture in California with Nanosyn. The shares dropped 6 cents, or 2.5 percent, to 2.30 euros.

Rhodia SA (RHA FP): Credit Suisse Group AG downgraded France’s largest maker of specialty chemicals to “underperform” from “neutral.” The shares added 10.9 cents, or 1.4 percent, to 7.98 euros.

Sanofi-Aventis SA (SAN FP): The company’s patent on the blood-thinner Plavix will be reconsidered by the U.S. Patent and Trademark Office to determine if it should have been issued. The patent, issued in 1989, prevents Canadian drugmaker Apotex Inc. from selling a copy of the drug until November 2011. The shares lost 17 cents, or 0.4 percent, to 44.89 euros.

Sodexo (SW FP): The world’s second-biggest catering company said it has bought Comfort Keepers, a supplier of non-medical in-home services in North America. The shares rose 30 cents, or 0.8 percent, to 37.1 euros.

To contact the reporter on this story: Helene Fouquet in Paris at Hfouquet1@bloomberg.net; Francesca Cinelli in Milan at fcinelli@bloomberg.net.

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Anglo American, ENRC, Lloyds, Shire: U.K., Irish Equity Preview

By Matthew Campbell and Sarah Jones

Aug. 19 (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 40.77, or 0.9 percent, to 4,685.78. The FTSE All-Share Index rose 0.9 percent and Ireland’s ISEQ Index gained 0.2 percent.

Anglo American Plc (AAL LN): Credit Suisse Group AG raised its share-price estimate for the mining company by 12 percent to 3,000 pence. Anglo American increased 10.5 pence, or 0.6 percent, to 1,831.

British Airways Plc (BAY LN): Australia’s Qantas Airways Ltd. posted its first half-year loss in six years of A$93 million ($77 million) and scrapped its dividend as customers reduced travel. British Airways, Europe’s third-largest airline, lost 0.7 pence, or 0.4 percent, to 173.2.

British American Tobacco Plc (BATS LN): The maker of Lucky Strike cigarettes named Richard Burrows as its chairman. Burrows was previously chairman of Bank of Ireland Plc. The shares rose 26 pence, or 1.4 percent, to 1,900.

Eurasian Natural Resources Corp. (ENRC LN): The ferrochrome, aluminum and iron ore producer in Kazakhstan said first-half net income fell 59 percent to $553 million. The shares climbed 18.5 pence, or 2.4 percent, to 777.

Hochschild Mining Plc (HOC LN): Peru’s second-largest silver miner said first-half net income declined to $24.7 million from $32.7 million a year earlier. The stock rose 3 pence, or 1.1 percent, to 265.9.

Lloyds Banking Group Plc (LLOY LN): Royal Bank of Scotland Group Plc raised its recommendation for Britain’s biggest mortgage lender to “buy” from “hold.” The shares gained 1.76 pence, or 1.9 percent, to 96.76.

Shire Plc (SHP LN): JPMorgan Chase & Co. downgraded the U.K. drugmaker to “neutral” from “overweight.” The shares rose 18 pence, or 1.8 percent, to 1,037.

Venture Production Plc (VPC LN): The U.K. oil and gas explorer targeted for takeover by Centrica Plc (CNA LN) said first-half net income fell 1 percent to 54.1 million pounds. The shares rose 5 pence, or 0.6 percent, to 845.

Wolseley Plc (WOS LN): Nomura Holdings Inc. downgraded the supplier of plumbing and heating equipment to “reduce” from “neutral.” The shares rose 21 pence, or 1.5 percent, to 1,409.

To contact the reporters on this story: Matthew Campbell in London mcampbell39@bloomberg.net; Sarah Jones in London at sjones35@bloomberg.net.

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Merckle’s Phoenix Said to Weigh Initial Public Offering, Sale

By Aaron Kirchfeld and Ambereen Choudhury

Aug. 19 (Bloomberg) -- Phoenix Group, the German drug wholesaler started by the late billionaire Adolf Merckle, is considering an initial public offering as well as a sale, two people familiar with the plans said.

Deutsche Bank AG, which is overseeing the sale, is weighing a dual-track process, where a bank simultaneously prepares a company for an IPO and lines up potential bidders, said the people, who declined to be identified because the talks are private. Phoenix, based in Mannheim, Germany, may be valued at about 5.5 billion euros to 6 billion euros ($8.5 billion), and an IPO would take place next year at the earliest, the people said.

“It makes sense to test both options -- a sale and IPO -- to see which one fetches the most money,” said Ulrich Huwald, an analyst at M.M. Warburg in Hamburg. “There’ll probably be a number of interested strategic and private equity buyers.”

The MSCI World Index’s 51 percent gain from its 15-year low in March is making share sales more attractive for companies after a two-year lull. Ludwig Merckle is selling drug, machinery and cement assets after his father Adolf, who committed suicide in January, amassed debt and lost money on wrong-way bets on the stock market last year.

A final decision on a sale or IPO hasn’t been made so far, the people said. Vivien Kremer, a spokeswoman for the Merckles’ holding company, declined to comment, as did Deutsche Bank spokesman Armin Niedermeier.

Mepha Group

The Merckle family is also preparing to sell Mepha Group, a Swiss generic-drug maker, in an auction that could raise about 500 million Swiss francs ($464 million), people familiar with the situation said yesterday.

Phoenix operates in 23 countries and supplies about 43,000 European pharmacies with medicines. The company had sales of 21.6 billion euros in the year ended Jan. 31, 2008, about 30 percent of which were in Germany, according to its latest annual report. The Merckle family also controls generic-drug maker Ratiopharm, which is also being sold.

Alliance Boots Holdings Ltd., the U.K. drugstore chain controlled by Kohlberg Kravis Roberts & Co., is considering a bid for Phoenix, four people familiar with the plan said in March. Nottingham, England-based Boots has made no final decision, the people said at the time.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Ambereen Choudhury in London at achoudhury@bloomberg.net

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Arcandor, Continental, DIC, Premiere: German Equity Preview

By Patrick Donahue and Julie Cruz

Aug. 19 (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.

DAX Index futures expiring in September declined 0.5 percent to 5,207.00 as of 8:16 a.m. in Frankfurt. The DAX climbed 0.9 percent to 5,250.74 yesterday.

Arcandor AG (ARO GY): The insolvent retailer’s stake in Thomas Cook Group Plc will probably be offered to institutional investors rather than sold as a block to another travel company, three people with knowledge of the situation said. The shares gained 11 percent to 31 cents.

Continental AG (CON GY): Schaeffler Group will transfer 5 billion euros ($7.1 billion) of its 12 billion euros of debt into a holding company to overcome the last hurdle to its takeover of auto-parts manufacturer Continental, Die Welt reported. The shares rallied 17 percent to 26.10.

DIC Asset AG (DAZ GY): The commercial property company reported an increase in second-quarter profit to 3.5 million euros from 2.6 million euros in the first quarter. Rental income for the first half declined to 67.3 million euros from 67.7 million euros in the year-earlier period. The shares added 0.2 percent to 5.66 euros.

Sky Deutschland AG (PRE GY): Germany’s biggest pay- television company, previously known as Premiere AG, was cut to “neutral” from “outperform” at Credit Suisse Group AG. The shares dropped 2 percent to 3.49 euros.

Volkswagen AG (VOW GY): Chief Financial Officer Hans Dieter Poetsch said the purchase of Porsche SE should pay off in four to five years, Handelsblatt reported, citing comments by the CFO at a media event in Stuttgart, Germany. Forecasted savings from the takeover of 700 million euros are “very realistic” and low, Chief Executive Officer Martin Winterkorn told journalists, according to the newspaper. The shares slipped 1.2 percent to 169.71 euros.

Wirecard AG (WDI GY): The German vendor of online payment software said second-quarter earnings before interest and taxes gained 12 percent to 13.7 million euros. The shares added 2.7 percent to 7.29 euros.

To contact the reporters on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net; Julie Cruz in Frankfurt at jcruz6@bloomberg.net.

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Scholes, Fellow Laureate Merton Call for Better Bank-Asset Data

By Jeff Kearns

Aug. 19 (Bloomberg) -- Myron Scholes joined Robert Merton, with whom he shared the 1997 Nobel prize for economics, in calling for banks to give investors a clearer picture of their worth by providing better valuations for illiquid assets.

Banks should value illiquid assets by expanding the use of mark-to-market accounting or listing them on public exchanges whenever possible, Scholes said in a Bloomberg Radio interview yesterday. Scholes, winner of the Nobel with Merton for helping invent a model for pricing options, said investors need better pricing data to accurately value the debt and equity securities of banks.

“I’d like to see us encourage many more securities held on the books of the banks be migrated to exchanges if possible,” he said. Doing so would “allow for market discovery and market pricing as much as possible,” Scholes added.

Banks that oppose new accounting standards on asset values want to conceal depressed prices, Merton wrote in the Financial Times yesterday. He composed the column with Robert Kaplan, a professor at the Harvard Business School along with Merton, and Scott Richard, who the newspaper identified as a professor at the University of Pennsylvania’s Wharton School.

“This is not the way forward,” they wrote. “While regulators and legislators are keen to find simple solutions to complex problems, allowing financial institutions to ignore market transactions is a bad idea.”

‘Blow Up or Burn’

The Financial Accounting Standards Board said Aug. 13 that it will consider expanding fair-value rules to loans, a step that might accelerate banks’ recognition of losses and trigger lower earnings and book values. Accounting rules now let companies recognize most loan losses only when management judges them probable. Applying fair value to loans would require earlier recognition of losses.

Regulators need to “blow up or burn” the private over- the-counter derivative markets to help solve the financial crisis, Scholes said on March 6. Because markets had frozen, investors weren’t getting timely prices to inform their decisions, he said then, speaking at New York University’s Stern School of Business.

Scholes and Merton, together with the late Fischer Black, developed the Black-Scholes model of pricing options, or contracts that give the buyer the right to purchase a security or commodity at a later date for a specified price. Black died in 1995.

Platinum Grove Asset Management LP, the Rye Brook, New York-based hedge fund where Scholes is chairman, was forced to freeze investor withdrawals in November after a surge in redemptions. He was a partner in Long-Term Capital Management LP, whose $4 billion loss in 1998 set off a near panic in financial markets and prompted the Federal Reserve to orchestrate a bailout by 14 lenders.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

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European, U.S. Stock-Index Futures Drop; Asian Shares Decline

By Adam Haigh

Aug. 19 (Bloomberg) -- European and U.S. stock-index futures fell and Asian shares retreated as China’s Maanshan Iron & Steel Co. posted a second straight half-year loss and copper dropped. The Shanghai Composite Index entered a bear market.

Maanshan fell 7.7 percent after announcing a 795.4 million yuan ($116 million) net loss for the first half. BHP Billiton Ltd. slid 1.5 percent in Australia as lead, tin and nickel slipped on the London Metal Exchange. Telekom Austria AG will probably move as profit at the country’s biggest phone company trailed analysts’ estimates for the second quarter.

Futures on the Euro Stoxx 50 Index slid 0.7 percent at 7:52 a.m. in London. The U.K.’s FTSE 100 Index is set to open 24 points lower, according to inter-dealer broker BGC Partners. Standard & Poor’s 500 Index futures expiring in September slipped 1 percent, while the MSCI Asia Pacific Index decreased 0.7 percent.

China’s Shanghai Composite Index fell as much as 5.1 percent, a 20.5 percent retreat from this year’s high on Aug. 4. Maanshan dropped 7.7 percent to 4.80 yuan. A slump of at least 20 percent on an index is commonly defined as a bear market.

Europe’s Stoxx 600 has rallied 44 percent since March 9 as companies from GlaxoSmithKline Plc to Intel Corp. reported better-than-estimated results and Germany and France unexpectedly returned to economic growth. The increase left the measure valued at 40.2 times the profits of its companies, near the most expensive level since 2003, weekly data compiled by Bloomberg show.

Worst Drop

U.S. and European stocks rose yesterday, helping global equities rebound from the worst drop since April, following better-than-estimated earnings at Home Depot Inc. and Target Corp. and an increase in German investor confidence.

BHP slid 1.5 percent to A$36.71. Copper retreated 2.3 percent on the LME.

Telekom Austria may move. Net income dropped to 82.3 million euros ($116.5 million), missing the 84.1 million euros estimated by analysts surveyed by Bloomberg.

SBM Offshore NV, the world’s largest supplier of floating oil production platforms, will probably be active as it reported first-half profit of $95.5 million.

Earnings in Europe slumped 38 percent in the second quarter, while less than half of profits have topped analysts’ projections, according to data compiled by Bloomberg.

Dexia SA may move after Deutsche Bank AG downgraded shares of the world’s largest lender to local governments to “hold” from “buy.”

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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China Stocks Enter Bear Market as Index Falls 20% From High

By Bloomberg News

Aug. 19 (Bloomberg) -- China’s stocks fell, driving the benchmark index into a so-called bear market more than 20 percent below this year’s high, on concern the nation’s economic recovery will falter as the government reins in lending.

The Shanghai Composite Index fell 4.7 percent to 2,774.77 as of 2:44 p.m. local time today, increasing its loss since the 14-month high on Aug. 4 to 20.2 percent. The gauge remains 59 percent below its record level on Oct. 16, 2007.

Prime Minister Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package, coupled with record bank lending in the first six months, helped the Shanghai index to more than double this year from the low on Nov. 4. The rally faltered as new loans in July declined to less than a quarter of June’s level, the regulator allowed initial share sales after a nine-month moratorium and companies including Yunnan Copper Industry Co. reported losses. China follows Russia among the so-called BRIC bloc of major emerging economies to have entered bear markets.

“The current correction is reflecting the tightening in lending,” said Andy Xie, a former Asian chief economist at Morgan Stanley, who correctly predicted in April 2007 that China’s equities would tumble. “We’ve seen the peak of this market cycle, though there’s likely to be a bounce as the government seeks to stabilize the market.”

The market may extend its decline by another 10 percent, Xie said Aug. 17. Even with the recent decline, the Shanghai index is trading at 30.4 times reported earnings, against 17.5 times for shares on the MSCI Emerging Markets Index.

An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council, China’s Cabinet.

To contact the Bloomberg News staff for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net

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Eli Lilly, Hewlett-Packard, La-Z-Boy, SAIC: U.S. Equity Preview

By Lu Wang

Aug. 19 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

American Dental Partners Inc. (ADPI US): The provider of management services for dental practices said it will sell 2.26 million shares, which may dilute the value of existing equity.

Eli Lilly & Co. (LLY US): The company halted development of its experimental bone drug arzoxifene, one of its most promising new treatments, after a study found it didn’t prevent non-spinal fractures and increased the risk of blood clots.

Hewlett-Packard Co. (HPQ US): The world’s largest personal- computer maker said revenue this quarter will grow about 8 percent from the previous three months, suggesting $29.6 billion. Analysts on average forecast $29.8 billion.

La-Z-Boy Inc. (LZB US): The maker of living-room recliners posted profit excluding some items of 5 cents a share in the fiscal first quarter. Analysts, on average, estimated a loss of 6 cents.

SAIC Inc. (SAI US): The defense contractor specializing in computer services won a $250 million contract from the U.S. Defense Logistics Agency, according to the Pentagon’s Web site.

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

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Mr. Stevens During His Testimony Indicates That Raising Rates Is Inevitable In The Close Future

Daily Forex Fundamentals | Written by ecPulse.com | Aug 14 09 07:15 GMT |

Mr. Stevens Australia's central bank governor indicated today that the Australian economy conditions are ideal taking into consideration the present global economy developments, determining the monetary policy officials to abandon the extra ordinary policies, and increasing believes that the next step taking by the central bank will be raising rates. These remarks came during Mr. Stevens the semi-annual testimony to the Economic Commission of the Australian Parliament; and according to him, the fundamentals released by the Australian economy indicate that the economic performance slowdown, which Australia experienced economy due to the drop in global demand and the deterioration in the financial markets, is over. The stimulus plan adopted by the Australian government along side the aggressive reduction in interest rates by the central bank which reached to their lowest in almost half a contrary, were able to help the economy surpass the distress that prevailed the entire globe as the economy was able to see positive growth during the first quarter of this year and thereby avoid falling into recession. The direction in which the Australian economy in moving into may be far too positive for the radical steps taken by the Central Bank and the Australian Government in order to support growth, thereby it may appear some negative and undesirable results. As the improvement in export was able to determine confidence to rise among investors and companies, having a positive impact on investment levels that increased and on money supply that rose after consumer spending stabilized. And from these circumstances may result some inflationary pressures that the central bank does not desire, and to avoid such developments Mr. Stevens said that a tighter monetary policy is inevitable in the close future, and the start of this procedure which gives the ability to the central bank to control the liquidity volume in the markets is by holding rates unchanged which the central bank recently did, before raising it again. Mr. Stevens didn't neglect to mention the improvement in the economic fundamentals, which indicated that the recession the economy almost fell into is fading, and that the economy started recovering from consequences of this severe financial crisis that managed to hurt the entire planet which turned out to be the worst since the great depression. The Australian central bank sees that more risks may arise if inters rates will be kept at those very low levels for more time, as it may lead to imbalances in the Australian economy which already started to give clear signs of recovery. The central bank also noted earlier that the recovery seen by the Chinese economy has increased demand for Australian exports, since China is one of the main trading partners, and this will be able to support growth during the next periods even more. Besides this, the positives effect resulted from the reduction of interest rates by 4.25% is still seen throughout the performance of the financial and banking sector, alongside the effects from the stimulus plan adopted by the government and which reached to 12 billion Australian dollars that was directed to the domestic sector in order to encourage spending, and the other stimulus plan totaling 22 billion Australian dollars directed to infrastructure projects. All these were able to support the entire economic performance and maintain a balance of supply and demand, which ultimately drove Australia to safe land Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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