Wheat Advances as El Nino Weather Threatens Australian Output

By Luzi Ann Javier

Aug. 26 (Bloomberg) -- Wheat rose on concern global supplies may be smaller than expected as El Nino weather conditions threaten to curb output in Australia, the fourth- largest exporter.

Parts of Queensland, New South Wales, South Australia, Victoria and Tasmania have less than 40 percent chance of getting above-average rainfall from September to November, as the weather pattern “dominates the outlook in eastern Australia,” the country’s Bureau of Meteorology said today.

An El Nino event, which causes drier weather in Asia, may cut Australia’s wheat output by between 20 percent and 40 percent, Ben Barber, futures adviser at Bell Commodities Ltd., said by phone from Melbourne today. Traders in the U.S. “could be seeing it and buying into that,” he said.

Wheat for December delivery added 0.5 percent to $5.0125 a bushel in after-hours electronic trading on the Chicago Board of Trade at 1:14 p.m. in Singapore.

New South Wales, Victoria, Queensland and South Australia states were estimated to produce 14.5 million metric tons in 2009-2010, up from an estimated 12.5 million tons a year earlier, according to a June 16 forecast by Australian Bureau of Agricultural & Resource Economics.

Together, the four states account for almost 70 percent of the nation’s output. That share may drop to as little as 50 percent, should a mild El Nino take hold in September and damage crops, John Reeve, agricultural commodity sales director at Standard Chartered Bank in Singapore, said July 29.

El Nino

“We usually produce on average between 19 million to 20 million tons,” Bell’s Barber said, referring to the national output. “In previous El Nino years, Australia produced anywhere from 9 million tons to 12 million tons.”

Futures also advanced as farmers in Argentina said they will halt some grain and beef shipments from Aug. 28. to Sept. 4, after the government vetoed parts of a bill that cut export taxes for growers affected by the worst drought in decades.

“It will obviously curb supply,” Barber said. Still, the suspension of some exports would not have as much effect on prices as last year’s farmer protests because the market has been anticipating smaller shipments from the South American nation, he said.

The U.S. Department of Agriculture lowered on Aug. 12 its estimate on Argentina’s wheat exports to 1.5 million tons in the 2009-2010 marketing year, from 2.5 million tons in July. That compares with 8.4 million tons in 2008-2009, when Argentina was ranked the world’s sixth-largest shipper.

Tax Protests

Farmers staged a week-long protest against taxes and export restrictions in March, blocking highways and halting shipments. Four months of protests last year halted grain and livestock sales, sparking food shortages.

Soybeans for November delivery added as much as 0.7 percent to $10.0575 a bushel in Chicago, before trading at $10.0375 a bushel at 1:19 p.m. Singapore time.

China, the world’s largest importer of the oilseed, bought 110,000 tons of soybeans from U.S. exporters for delivery in the marketing year beginning Sept. 1, the USDA said yesterday.

“That’s supporting the fundamentals of soybeans,” Barber said. “You’re constantly seeing that demand for U.S. soybeans” from Chinese buyers, he said.

Sales of U.S. soybeans for delivery in the year that starts Sept. 1 totaled 11 million tons as of Aug. 13, up 57 percent from a year earlier, when sales before the North American harvest were a record, USDA data show. China bought 6.87 million tons, or 62 percent of the total, according to the department.

Corn for December delivery gained 0.6 percent to $3.2875 a bushel, after declining as much as 0.4 percent earlier.

“Corn is just following soybeans and wheat a little bit as well,” Barber said, referring to the trend in futures prices. “The main story is soybeans.”

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

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Asian Stocks Advance on China Earnings, U.S. Consumer Report

By Shani Raja

Aug. 26 (Bloomberg) -- Asian stocks advanced, lifting the MSCI Asia Pacific Index to a two-week high, as Chinese companies increased earnings and a U.S. consumer confidence report beat economist estimates.

Air China Ltd., the country’s biggest international carrier, surged 10 percent in Shanghai after first-half net income doubled. China Life Insurance Co., the nation’s biggest insurer, gained 2.5 percent as profit in the period climbed 15 percent. Westfield Group, which operates 55 U.S. shopping malls, rose 4.5 percent in Sydney as a gauge of American home prices advanced.

“People are generally happy that things are improving,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “It’s now a question of how strong that is going to be. We’re probably still going to get the occasional rogue figure from time to time.”

The MSCI Asia Pacific Index rose 0.8 percent to 113.92 as of 2:45 p.m. in Tokyo. The gauge has climbed 61 percent from a more than five-year low on March 9 on speculation government stimulus packages and lower borrowing costs will revive the global economy.

Japan’s Nikkei 225 Stock Average gained 1.5 percent as a government report showed the country’s exports fell 36.5 percent in July from a year earlier, less than some economists predicted. China’s Shanghai Composite Index rose 2.3 percent. Taiwan’s Taiex Index sank 1.3 percent, the region’s biggest drop.

Beating Estimates

A third of the 548 companies in the MSCI Asia Pacific Index that have reported net income since early July have exceeded analyst estimates, while 19 percent have missed, according to data compiled by Bloomberg.

Yinchuan Xinhua Department Store Co. rose 7.1 percent in Shanghai after first-half profit climbed. Noritz Corp., which makes water heaters, soared 10 percent after Credit Suisse Group AG said the party favored to win Japanese elections on Aug. 30 will push a policy requiring people to replace old boilers. Consolidated Media Holdings Ltd. surged 11 percent in Sydney after agreeing to sell a stake in an employment Web site.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge advanced 0.2 percent yesterday as the Conference Board’s consumer-confidence index climbed in August for the first time in three months. The S&P/Case-Shiller home- price index declined 15.4 percent in June from a year earlier, less than estimated by economists.

“The housing and confidence reports cemented evidence that the U.S. economy is recovering,” said Hiroichi Nishi, an equities manager at Tokyo-based Nikko Cordial Securities Inc.

China Earnings

Air China climbed 10 percent to 7.92 yuan. Net income surged to 2.88 billion yuan ($422 million) from 1.23 billion yuan a year earlier, the carrier said in a Hong Kong stock exchange statement late yesterday. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, added 1.1 percent to HK$11.32.

China Life gained 2.5 percent to 28.50 yuan as net income increased to 18.2 billion yuan from 15.8 billion yuan a year earlier on investment returns, the company said late yesterday.

Yinchuan Xinhua Department Store rose 7.5 percent to 20.90 yuan in Shanghai after first-half profit climbed 49 percent from a year earlier to 93.9 million yuan.

Asian stocks have rallied this week after the National Association of Realtors said existing home purchases in the U.S. jumped in July by the most since the tallies began in 1999. U.S. Federal Reserve Chairman Ben S. Bernanke said Aug. 21 that the global economy was “beginning to emerge” from recession after “aggressive” action from central banks and governments.

Westfield Group rose 4.5 percent to A$13.01. The world’s largest owner of shopping centers said it doesn’t need to sell shares to raise capital, as the company reported a first-half loss on property writedowns.

U.S. Sales

Toyota Motor Corp., which gets 31 percent of its sales in North America, climbed 2 percent to 4,130 yen in Tokyo. Honda Motor Co., which gets 45 percent of its revenue in North America, added 1 percent to 3,020 yen.

Companies on the Asian gauge are currently priced at an average 24 times estimated earnings, up from 13.7 times at the end of 2008, as improving economic data and better-than-expected corporate earnings globally point to a global economic recovery.

Water-heater maker Noritz climbed 10 percent to 1,298 yen, while rival Rinnai Corp. added 0.2 percent to 4,480 yen.

The Democratic Party of Japan, which opinion polls suggest will win Aug. 30 parliamentary elections by a landslide margin, has promised to require old water heaters to be replaced with high-efficiency models, a Credit Suisse report said.

Stake Sale

Consolidated Media surged 11 percent to A$3.24. The company said it expects A$440.6 million ($368 million) from the sale of a stake in Seek Ltd., which dropped 1.3 percent to A$5.28.

Transfield Services Ltd. surged 6.3 percent to A$3.70, as the provider of network-maintenance services to miners and utilities said it won a C$150 million ($138 million), 12-year contract with the Ontario Ministry of Transportation.

Aozora Bank Ltd. gained 3 percent to 139 yen. The lender will form a business alliance with Hokuhoku Financial Group Inc.’s Hokkaido Bank to provide agricultural sector finance, Aozora said in a release. Hokuhoku lost 1.3 percent to 230 yen.

Central Glass Co. surged 15 percent to 495 yen, after Hiroshi Matsuda, an analyst at Mizuho Securities Co. boosted the glassmaker’s stock rating by two notches to “strong buy” from “hold.”

To contact the reporter for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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Japan Stocks Rise on U.S. Confidence, Home Prices; Noritz Jumps

By Masaki Kondo

Aug. 26 (Bloomberg) -- Japanese stocks rose after U.S. consumer confidence gained and American home prices dropped less than estimated.

Toyota Motor Corp., a carmaker that generates 30 percent of sales in North America, added 1.5 percent. Orix Corp., Japan’s largest non-bank financial company, advanced 3.2 percent after the Nikkei newspaper said it will invest in a real-estate fund. Noritz Corp., which makes water heaters, soared 9.2 percent after Credit Suisse Group AG said the party favored to win elections this weekend will seek to require people to replace old boilers.

“The market is sandwiched between the U.S. economy’s recovery from the housing recession and concern that current stock prices are too high,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages the equivalent of $13 billion.

The Nikkei 225 Stock Average increased 1.4 percent to 10,643.99 as of 1:04 p.m. in Tokyo. The broader Topix index rose 1.2 percent to 976.51, with five times as many stocks gaining as declining.

The Nikkei’s 49 percent rally from a more than quarter- century low on March 10 has boosted its estimated price-earnings ratio to 45.6 times. That’s the highest the level among the gauges of the world’s five biggest markets including the U.S. and China, data compiled by Bloomberg show.

From Ocean Trench

In New York, the Standard & Poor’s 500 Index added 0.2 percent yesterday after rising as much as 1.2 percent. The Conference Board’s consumer-confidence index climbed in August for the first time in three months. The S&P/Case-Shiller home- price index declined 15.4 percent in June from a year earlier, less than estimated by economists.

Toyota, the world’s biggest automaker, advanced 1.5 percent to 4,110 yen, while closest domestic rival Honda Motor Co. rose 1 percent to 3,020 yen. Panasonic Corp., the world’s largest maker of plasma televisions, added 1.4 percent to 1,502 yen Makers of electronics and cars contributed the most to the Topix’s gain.

“Production is rebounding as if it’s starting to emerge from a deep ocean trench, but it’s still on the sea bottom thousands of meters below the surface,” said MU’s Morikawa. “With companies having to dispose of manufacturing equipment, falling investment and job cuts will continue to weigh on the global economy for a long time.”

Toyota said today it will shut down one of its assembly lines next year to cope with slowing demand. The company cut its domestic production almost in half through June.

Boiler Makers

Orix climbed 3.2 percent to 6,740 yen. Sumitomo Realty & Development Co., Japan’s No. 3 property developer, added 3.1 percent to 1,998 yen. Daikyo Inc., which builds and sells condominiums, soared 6.7 percent to 238 yen, set for the highest close since May 2008.

About 40 companies, including Orix, will invest 30 billion yen ($319 million) in a public-private fund to be set up next month, the Nikkei said today. The fund will finance real-estate investment trusts to ease the credit crisis, the newspaper said.

Noritz soared 9.2 percent to 1,288 yen, en route for the steepest leap since Oct. 14. Rival Rinnai Corp. gained 3.4 percent to 4,620 yen. Polls show the opposition Democratic Party of Japan, or DPJ, is favored to win parliamentary elections. The ruling Liberal Democratic Party has governed Japan for all but 10 months since 1955.

“A DPJ victory could focus attention on water-heater makers such as Rinnai and Noritz in the short term,” Credit Suisse analysts Yoji Otani and Masahiro Mochizuki, wrote in a report yesterday.

Nikkei futures expiring in September added 1.1 percent to 10,620 in Osaka and gained 1.2 percent to 10,625 in Singapore.

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

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ING Said to Seek $1.8 Billion for Private Bank Units

By Cathy Chan and Ambereen Choudhury

Aug. 26 (Bloomberg) -- ING Groep NV, the biggest Dutch financial-services company, has asked for final bids for its private banking operations and is seeking about $1.8 billion, two people familiar with the matter said.

The Amsterdam-based bank has selected companies to enter final bidding as early as Sept. 1, one of the people said. ING expects its Asian private banking operations to contribute about 70 percent of the proceeds, the person said.

ING, which received a 10 billion euro ($14.3 billion) lifeline in October from the Netherlands, is seeking to raise as much as 8 billion euros selling assets to boost capital. The sale of private banking assets in Asia, home to the world’s two fastest-growing major economies, may attract buyers seeking to expand their wealth-management operations in the region.

Raymond Vermeulen, an Amsterdam-based spokesman for ING, declined to comment. Marie Cheung, a Hong Kong-based spokeswoman for JPMorgan Chase & Co., which is advising ING, also declined to comment.

ING’s second-quarter profit fell 96 percent, more than analysts estimated, as it set aside money for risky loans and reduced the value of its real-estate holdings. Chief Executive Officer Jan Hommen, who took over in January, this month said the company would cut 8,219 jobs, more than previously planned, and reduce costs.

The firm raised 1.4 billion euros in February by selling its 70 percent stake in ING Canada Inc., that country’s largest property and casualty insurer. The company agreed to sell its annuity and mortgage businesses in Chile to Corp Group Vida Chile SA last month. Corpvida will pay about $350 million for the assets, Santiago-based newspaper Diario Financiero said.

To contact the reporters on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net; Ambereen Choudhury in London at achoudhury@bloomberg.net

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Commerzbank, Boewe Systec, Leica Camera: German Equity Preview

By Aaron Kirchfeld

Aug. 26 (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 Index added 0.7 percent to 5,557.09.

Boewe Systec AG (BSY GY): The maker of machines that insert mass mailings into envelopes said it plans to return to profitability this year after a loss in 2008. The shares fell 19 cents, or 3.6 percent, to 5.06 euros.

Commerzbank AG (CBK GY) and Deutsche Bank AG (DBK GY): German Finance Minister Peer Steinbrueck said the government may need to pump more money into credit markets if measures by the banks aren’t sufficient to feed the economy, Handelsblatt reported. Steinbrueck wants to tackle the more difficult credit conditions, though he doesn’t plan to force banks to issue loans, Handelsblatt said.

Commerzbank was unchanged at 6.02 euros while Deutsche Bank fell 31 cents, or 0.6 percent, to 49.29 euros.

Leica Camera AG (LCA1 GY): The maker of photographic equipment said Franz Jung has been designated to succeed supervisory board Chairman Wolf Schumacher, who will resign at the end of August. The shares last traded Aug. 10 at 4.74 euros.

To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Irish Life, Paddy Power, Tullow Oil: U.K., Irish Equity Preview

By Morwenna Coniam and David Merritt

Aug. 26 (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 20.6, or 0.4 percent, to 4,916.8. The FTSE All-Share Index rose 0.4 percent and Ireland’s ISEQ Index gained 1.4 percent.

Antofagasta Plc (ANTO LN): The London-based miner of copper in Chile is scheduled to report earnings. The stock fell 24.5 pence, or 3 percent, to 789.5 pence.

BP Plc (BP/ LN): Europe’s second-largest oil company sought to sell a cargo of Forties crude oil without attracting a buyer. The stock rose 4.6 pence, or 0.9 percent, to 533 pence.

Glanbia Plc (GLB ID): Producer of a third of Ireland’s milk and cheese is scheduled to report earnings. The stock rose 0.1 euros, or 3.9 percent, to 2.7 euros.

Irish Life & Permanent (IPM ID): Ireland’s third-biggest bank is scheduled to report earnings. The stock rose 0.3 euros, or 9 percent, to 4 euros.

John Wood Group Plc (WG/ LN): The U.K.’s largest oilfield- services provider is scheduled to report earnings. The stock fell 4.6 pence, or 1.4 percent, to 325.3 pence.

Lloyds Banking Group Plc (LLOY LN): The U.K.’s biggest mortgage lender may have to write off 500 million pounds ($817 million) on loans made to Admiral Taverns Ltd., the Financial Times reported. The stock fell 0.1 pence, or 0.1 percent, to 107.8 pence.

Melrose Plc (MRO LN): The U.K. investment company that owns the maker of handles for Gillette razors is scheduled to report earnings. The stock fell 0.9 pence, or 0.6 percent, to 141.1 pence.

Paddy Power Plc (PWL ID): Ireland’s largest bookmaker is scheduled to report earnings. The stock rose 0.6 euros, or 3.4 percent, to 19.1 euros.

Serco Group Plc (SRP LN): The operator of London’s Docklands Light Railway and service provider for the U.K. and U.S. navies is scheduled to report earnings. The stock rose 11.9 pence, or 2.7 percent, to 455 pence.

Tullow Oil Plc (TLW LN): The U.K. explorer in Africa is scheduled to report earnings. The stock fell 4 pence, or 0.4 percent, to 1,096 pence.

WPP Plc (WPP LN): The world’s largest advertising company is scheduled to report earnings. The stock fell 3.5 pence, or 0.7 percent, to 520 pence.

To contact the reporters on this story: Morwenna Coniam in London at mconiam@bloomberg.net.

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Applying Roubini Wisdom to Stocks Means Missing Out

By Whitney Kisling

Aug. 26 (Bloomberg) -- Making money on the thinking of Nouriel Roubini isn’t what it used to be.

The New York University professor, who in 2006 foretold the worst financial unraveling since the Great Depression, has yet to say the economy is worth investing in again. “There is a big risk of a double-dip recession,” wrote Roubini, also known as Dr. Doom, in his column in the Financial Times this week.

Anyone attempting to apply Roubini’s wisdom to stocks may be forgiven for missing the biggest rally since the 1930s as the Standard & Poor’s 500 Index climbed 52 percent in six months. While Roubini said in March the advance was a “dead-cat bounce,” that it may “fizzle” in May and warned in July that the economy’s “not out of the woods,” the MSCI World Index was posting a 58 percent gain, the largest since it began in 1970.

“We’re looking at a bull cycle in phase one,” Laszlo Birinyi said in a telephone interview yesterday. Birinyi was the top-ranked Dow Jones Industrial Average forecaster for most of the 1990s on PBS’s “Wall Street Week with Louis Rukeyser.” “No one wants to come out and say, ‘This is a bull market.’ Everyone’s just dancing around the term,” he said.

The S&P 500 added 14 percent since Westport, Connecticut- based Birinyi Associates Inc., which manages $350 million, said on May 20 that a bull market had begun, according to data compiled by Bloomberg. Roubini, who forecast in October 2008 that the U.S. was in a recession that would last 24 months, said on March 9 that the index might fall back to 600. It has risen to 1,028 since then.

$4 Trillion Gained

Futures on the S&P 500 added 0.2 percent to 1,028.40 as of 1:09 a.m. in New York. The MSCI World Index was little changed.

About $4 trillion has been restored to U.S. equity markets since March following better-than-forecast corporate profits and signs of an improving economy. More than 72 percent of the S&P 500’s companies beat analysts’ average estimates for second- quarter earnings, matching the highest proportion since Bloomberg began tracking the data in 1993. The Conference Board’s index of leading economic indicators has risen four consecutive months.

Roubini’s July 2006 warning about the financial crisis protected investors from losses in the S&P 500’s worst annual tumble in seven decades. He also correctly warned investors to avoid stocks following the steepest advances in 2008.

On Dec. 12, he said U.S. stocks might fall 20 percent after the S&P 500 gained 17 percent in three weeks. The index lost 23 percent through March 9, 2009. During an 18 percent jump in the index between Oct. 27 and Nov. 4, Roubini warned the S&P 500 might reverse course and lose 30 percent. It dropped 28 percent through March.

‘Understand the Market’

He may have missed this year’s bull market because Roubini isn’t focused on stocks, according to Birinyi.

Roubini has “done a very good job on the economy,” Birinyi said in an interview Aug. 24. “Our approach is to try to understand the market and not try to do much more than that.”

Jonathan D. Goldberg, a New York-based spokesman for Roubini, said he wasn’t available to comment because he’s on vacation.

Roubini, 51, wrote this week in the Financial Times that the economy may worsen again even after it stops shrinking this year. The global contraction will bottom in the second half of 2009, and the recession in the U.S. won’t be “formally over” before the end of the year, he said.

‘Fizzle Out’

The forecast was a reiteration of Roubini’s call for an 18- to 24-month contraction that he made in October 2008. The recession began in December 2007, according to the National Bureau of Economic Research’s Business Cycle Dating Committee.

Roubini told Bloomberg Television on May 13 that the stock market’s rally “might fizzle out,” citing expectations for weak growth in earnings. On March 9, he said it was “highly likely” the S&P 500 would fall to 600 or below because of plunging profits, an accelerating contraction in the global economy and a deteriorating outlook for banks.

The index reached a 12-year low of 676.53 that day and has since climbed for almost six months. Reports on industrial production, housing starts and car sales, along with comments from the Federal Reserve that the economy is “leveling out,” helped boost equities in the world’s largest economy.

In July 2006, Roubini predicted the financial crisis that led to $1.6 trillion in credit-related losses and writedowns. He forecast a “catastrophic” meltdown in February 2008, leading to the bankruptcy of large banks with mortgage holdings and a “sharp drop” in equities.

Bear Stearns, Lehman

Since then, Bear Stearns Cos. and Merrill Lynch & Co. were taken over, American International Group Inc. and Citigroup Inc. required government bailouts and Lehman Brothers Holdings Inc. filed for the world’s biggest bankruptcy. All the companies were based in New York.

Birinyi, 65, who spent a decade on the trading desk at Salomon Brothers Inc. before founding Birinyi Associates in 1989, said on May 20 that the S&P 500 may reach 1,700 by 2011, shifting from his April 13 call that the market had risen too much “by almost every measure.” In October 2007, he told investors to avoid bank stocks, saying bad loans and lower revenue from underwriting would damp earnings. The S&P 500 Financials Index then plunged 82 percent through March 6, 2009.

“Both of them just have a pretty deep understanding of the history of economic and business cycles,” said Eric Teal, who oversees $5 billion as chief investment officer at First Citizens Bank in Raleigh, North Carolina. “Roubini has just had more of an academic background, whereas Birinyi has been much more in the spotlight managing money and working in capital markets.”

Growth Forecasts

The U.S. economy has contracted four straight quarters. It will expand 2.2 percent during the third quarter and 2 percent in the fourth, before growing 2.3 percent in 2010, according to the median estimate of economists surveyed by Bloomberg News.

Roubini, who received a Ph.D. in economics from Harvard University in 1988, was a member of Yale University’s faculty until joining NYU in 1995. He started his consulting firm, Roubini Global Economics LLC, in 2004, providing subscribers access to written and broadcast commentary and archived data. The firm’s 1,300 institutional clients include asset managers and hedge funds, as well as investment banks and universities. Roubini doesn’t invest any money on behalf of customers.

“There’s a lot more weight behind pundits who put their money where their mouth is,” said Jack Ablin, who oversees $60 billion as chief investment officer of Harris Private Bank in Chicago. “Where I get up and pay attention is when I see someone who’s been bearish go bullish.”

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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Bourbon, Corio, Heineken, Swiss Life: European Equity Preview

By Whitney Kisling

Aug. 26 (Bloomberg) -- The following companies may have unusual price changes in Europe trading. Stock symbols are in parentheses, and share prices are from the previous close.

Europe’s Dow Jones Stoxx 600 gained 0.4 percent to 237.84. The Dow Jones Stoxx 50 Index rose 0.5 percent to 2,415.40. The Euro Stoxx 50 Index, a benchmark for nations using the euro, added 0.8 percent to 2,801.14.

Banca Popolare di Milano Scrl (PMI IM): The country’s oldest cooperative bank posted a 19 percent drop in second- quarter profit as it earned less from lending and put aside more money to cover bad loans. The shares rose 6 cents, or 1.2 percent, to 4.88 euros.

Bourbon SA (GBB FP): The oil services company reports first-half earnings before the market opens in Paris. The shares added 47.5 cents, or 1.5 percent, to 32.29 euros.

Corio NV (CORA NA): The biggest Dutch property developer is scheduled to report first-half results after trading ends. Corio increased 1.34 euros, or 3.2 percent, to 43.60 euros.

Dexia SA (DEXB BB): The world’s largest lender to local governments may say second-quarter net income dropped 27 percent to 388.5 million euros, the average of six analyst estimates compiled by Bloomberg. Dexia reports earnings after the close of trading. The shares advanced 14 cents, or 2.2 percent, to 6.50 euros.

Heineken NV (HEIA NA): The world’s third-largest brewer may report first-half net income rose 4.4 percent to 425 million euros ($608 million), the average of nine analyst estimates compiled by Bloomberg. Heineken slipped 4 cents, or 0.1 percent, to 27.86 euros.

Natixis SA (KN FP): The investment bank whose losses pushed its biggest shareholders to merge reports first-half earnings before the market opens in Paris. The shares last traded Aug. 24 when they rose 3.4 cents, or 1.5 percent, to 2.31 euros.

Repsol YPF SA (REP SM): Spain’s largest oil refiner may be active after crude oil rose for a fifth day to a 10-month high, as stronger equities bolstered confidence in the economic recovery. Repsol shares gained 36.5 cents, or 2.1 percent, to 17.47 euros.

Swiss Life Holding AG (SLHN VX): Switzerland’s biggest life insurer may say first-half profit fell 89 percent from a year earlier, when it had gains from selling its wealth management business and Dutch and Belgian units. The shares gained 3.8 francs, or 3.1 percent, to 127 francs.

Suez Environnement SA (SEV FP): The world’s second-biggest water company reports first-half earnings before the market opens in Paris. The shares gained 11 cents, or 0.9 percent, to 13.04 euros.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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Bernanke May Redefine Fed Mission in Financial-Market Stability

By Craig Torres

Aug. 26 (Bloomberg) -- Ben S. Bernanke’s renomination allows him to redefine the Federal Reserve’s mission as he expands its power over financial markets and pulls back on a credit surge the central bank used to keep the economy from collapse, economists say.

Bernanke’s agenda during the next four years will include elevating the Fed’s role in reducing excessive risk in major financial institutions, figuring out how to curtail asset bubbles, and scaling back $1.2 trillion of monetary stimulus.

“He will have the opportunity to permanently change the structure of the Federal Reserve system,” said Vincent Reinhart, a former director of the Fed’s Monetary Affairs Division who’s now a resident scholar at the American Enterprise Institute, a Washington-based research group.

President Barack Obama nominated Bernanke, 55, for a second term yesterday, lauding the Fed chairman for helping “put the brakes on our economic free fall.”

Bernanke, a former Princeton University economist, has already set in place numerous changes since he took over from Alan Greenspan in February 2006. He’s forced more cooperation between bank supervisors and staff economists and steered the Fed toward greater transparency. He’s also made his office more accessible, explaining his actions to the public on the CBS Corp. television program “60 Minutes” and at a town-hall meeting in Kansas City, Missouri.

Volcker’s Legacy

Bernanke has been a steward of former Fed Chairman Paul Volcker’s legacy of establishing a regime of low inflation. His own imprint will be different, however, because he will help make explicit the Fed’s role in assuring financial stability, said Al Broaddus, former president of the Richmond Fed.

Volcker’s “job was to get monetary policy, the true engine of inflation, under control,” Broaddus said. Bernanke’s actions in confronting the credit crisis put the Federal Reserve’s responsibility for financial stability “in strong relief” and “cemented that unwritten mandate,” he said.

Now, the Obama administration is seeking to give the Fed an even larger mission.

The administration wants the central bank to dictate capital, liquidity and risk-management standards at the nation’s biggest financial companies. That proposal has met with congressional resistance.

The Senate Banking Committee “should carefully examine the impact of the Fed’s failures as a bank regulator, how such failures contributed to the financial crisis, and whether Chairman Bernanke’s performance as the chief regulator merits his reconfirmation,” Senator Richard Shelby of Alabama, the top Republican on the panel, said in a statement yesterday.

Ramping Up Role

Bernanke is already preparing to play a larger part in oversight, no matter how Congress rewrites the rules. Fed bank examiners are putting more emphasis on comparing the risks inside one large bank with those faced by other big lenders.

The stakes are high, said Henry Kaufman, president of Henry Kaufman & Co. in New York. Success in overhauling supervision of the financial system would mean “improved economic conditions for an extended period of time,” Kaufman said. Failure would mean a return to “continued volatility.”

The Obama plan also envisions a permanent role for Bernanke’s broadened use of the Fed as lender of last resort. The Board of Governors used emergency powers to rescue American International Group Inc., as well as markets for commercial paper, housing bonds and asset-backed securities. In the process, the Fed’s balance sheet expanded by $1.2 trillion over the past year.

‘Mondustrial Policy’

Regional Fed bank presidents and scholars are divided over the Fed’s direction. John Taylor, an economics professor at Stanford University, is concerned that emergency loans will draw the central bank into allocating credit to politically favored industries, such as housing. Taylor, a former Treasury undersecretary, calls such actions by the monetary authority “mondustrial policy.”

Some investors say such loans add to political pressure to continue extending credit to satisfy interest groups, threatening the Fed’s goal of keeping inflation low.

“What they are doing is not monetary policy,” said Axel Merk, who has moved the $352 million Merk Hard Currency Fund away from dollar assets to avoid inflation. “His credit programs are fiscal policies. They are inviting political scrutiny and jeopardizing independence. It is a very dangerous road to be on.”

‘Intense Financial Crisis’

Others praise Bernanke for averting a global meltdown.

“His biggest legacy for sure will be having designed and implemented a policy for dealing with an intense financial crisis,” said former Fed governor Laurence Meyer, now vice chairman of St. Louis-based Macroeconomic Advisers LLC. “Here is what is amazing: It was ad hoc, yet it looks very good.”

Bernanke’s first test on inflation will be reversing the $1.2 trillion in additional Fed credit his policies created. The challenge will be to maintain the Fed’s credibility for keeping prices stable, while avoiding a premature increase in interest rates that may snuff out an emerging recovery.

The chairman devoted a section of his semiannual testimony before Congress in July to his exit strategy, saying the Fed could neutralize money in the banking system through tools such as interest on reserves, reverse repurchase agreements, or outright sales of securities.

Unemployment Peaking

Traders in federal funds futures see a rising probability of an interest rate increase in March. The federal funds rate has been in a range of zero to 0.25 percent since December.

A March rate rise would occur in the quarter when economists forecast the unemployment rate to peak at 10 percent, according to the median estimate of a Bloomberg News survey. That could add momentum to legislative proposals that would expose Fed policy-making to greater examination.

U.S. Representative Ron Paul, a Texas Republican, has written legislation that would open the Fed’s monetary policy to audits. The measure has 282 co-sponsors in the House, according to Paul’s Web site.

The timing of any tightening move is “is going to be very tricky,” said Julia Coronado, senior economist at BNP Paribas in New York and a former member of the Fed Board research staff.

Much of the criticism of the Fed from Congress stems from its failure to curb asset bubbles. Subprime-mortgage originations jumped to $600 billion in 2006 from $310 billion in 2003, according to estimates by Inside Mortgage Finance. Fed officials were reluctant to raise interest rates to slow down credit growth.

Siding With Greenspan

As a Fed governor in 2002, Bernanke sided with Greenspan and said “monetary policy cannot be directed finely enough to guide asset prices without risking severe collateral damage to the economy.”

He is likely to maintain a preference for what regulators call “supervisory tools.” Yet he’ll also probably remain open to any solution. Even the use of interest rates is back on the table for some officials.

Janet Yellen, president of the San Francisco Fed, said in June, “In certain circumstances, the answer as to whether monetary policy should play a role may be a qualified yes.”

After an eventful four years, investors are now looking to the central bank for stability, said Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., which manages the world’s largest bond fund, in Newport Beach, California.

“Crisis management defined Bernanke’s first term,” he said. “Markets look to Bernanke for policy continuity and, when the time comes, an eventual orderly exit from a complex set of unconventional policies.”

To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net.

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S&P 500 May Post New Highs After ‘Breakout’: Technical Analysis

By Julie Cruz

Aug. 25 (Bloomberg) -- The Standard & Poor’s 500 Index may climb as much as 3.8 percent after breaching a technical level last week, according to Bank of America Corp. analysts who base forecasts on price and volume charts.

The benchmark gauge for U.S. equities may advance to 1,065 after topping a so-called resistance level at 1,014 on Aug. 21, New York-based analysts Mary Ann Bartels and Stephen Suttmeier wrote in a report dated yesterday. The S&P 500 lost 0.1 percent to 1,025.57 yesterday.

“Further new recovery highs are likely over coming days and weeks,” the analysts wrote. “The breakout does point to our targets being tested at 1,055 to 1,065.”

The S&P 500 gained for the fifth time in six weeks last week, reaching the highest level since October, as rising commodity prices and a surge in U.S. home sales added to signs the worst of the recession is over.

“The sentiment is becoming more optimistic,” Bartels said in an interview with Bloomberg Television on Aug. 18. The market will enter “a pause that refreshes and will allow the market to rally back into the end of the year.”

Technical analysts look at price charts to forecast resistance levels, or ceilings restricting further price increases, and support levels, or floors limiting declines. A breakout above the resistance level is considered a sign for further gains.

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net.

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Labopharm, LDK Solar, Myriad, Transocean: U.S. Equity Preview

By Lu Wang

Aug. 26 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Blue Coat Systems Inc. (BCSI US): The provider of Internet security for corporations posted earnings excluding some items of 23 cents a share in the fiscal first quarter, beating the average analyst estimate by 1 cent, according to Bloomberg data.

Hain Celestial Group Inc. (HAIN US): The biggest U.S. maker of organic foods forecast profit of $1.28 a share at most in fiscal 2010. That trailed the average analyst estimate of $1.37 from analysts in a Bloomberg survey.

Labopharm Inc. (DDSS US): The Canadian drug developer said the U.S. Food and Drug Administration accepted its response regarding a new formulation of the antidepressant trazodone.

LDK Solar Co. (LDK US): The Chinese maker of silicon wafers used in solar power cells said it will help develop up to 500 megawatts of solar power projects in eastern China’s Yancheng City over the next five years.

Myriad Genetics Inc. (MYGN US): The maker of a widely used test for detecting inherited breast cancer reported fourth- quarter profit excluding some items of 37 cents a share, beating the average analyst estimate by 60 percent.

Transocean Ltd. (RIG US): The world’s largest offshore oil driller said a unit of Noble Energy Inc. has awarded a 455-day contract for the ultra-deepwater semisubmersible rig Sedco Express. The estimated revenue related to the contract is about $241 million.

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

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BBA Posts Highest Home Mortgages Approved Since 2008

Daily Forex Fundamentals | Written by ecPulse.com | Aug 25 09 11:36 GMT |

Today we see that the British Banker's Association (BBA) released its loans for house purchases showing that they climbed to the highest level since February 2008 surpassing markets expectations while net mortgage lending dipped to the lowest level since nearly 9 years! BBA loans for house purchases for the month of July rose to 38181 which is higher than the revised prior reading of 35564 from 35235 while also better than the predicted reading of 37800. The rise in loans for house purchases is showing us that activity in the housing sector is improving which therefore supports the fact that the government interventions next to the Bank of England buying 175 billion pounds of gilts is easing the frozen credit conditions as lending is slowly increasing again and more Britons are able to gain access of loans. The BoE began using quantitative easing after interest rates were already reduced to the their lowest since 1694 at 0.5% to encourage borrowing, stimulating economic growth while at the same time battling deflation risks that were aroused from the crippled domestic demand and plummet in energy prices. Mortgage approvals is a good gauge for measuring activity in the housing sector and since it showing that it is rallying, this supports the fact that the housing sector is bottoming out and all from the aid of the central bank and government measures. The Association also released its net mortgage lending seasonally adjusted for July showing that it fell to 1.6 billion pounds which was the lowest increase since October 2000 while the revised prior month was at 2.2 billion pounds. This shows that banking systems have not fully stabilized as lending is still rigid. Lending to non-financial companies in July fell to 4.1 billion pounds from the previous 0.3 billion pounds decline; this marked the most slip in three years before the credit quake began in the United Kingdom. A major factor that is weighing on the housing market is the softening labor market because usually buying a home requires a great amount of money and since already there are low levels of income in the nation while more employees are being terminated from their job daily, there is weaker demand on homes. Prime Minister Gordon Brown is having a difficult time to try and get banks lending again as some remain reluctant which is further choking a recovery in the housing sector yet data continues to chime together in the housing market that is hinting the housing sector is starting to show slight recovery. When the housing sector begins to prosper accurately next to dominate sectors that once fueled economic growth expanding will all be factors that jolt the nation of its worst economic recession since post world war era, yet this will not take place if the banking and financial systems do not stabilize which is why we see the nation begin to expand not before next year especially as there are high unemployment rates that are undermining growth prospects. Now turning to UK stocks we see that the they are shedding points falling from a 10-month high as a result of metal prices plummeting therefore weighing on raw-material producer company stocks. As of 10:38 GMT the FTSE-100 dipped 9.59 points or 0.20% to 4,886.64 points. 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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London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Aug 25 09 12:17 GMT |

The pendulum of risk continues to swing and late London trading saw optimism return. Economic data was nothing to write home about and the only noteworthy release was the final cut of German GDP. The number came in bang-on expectations, rising 0.3% in the quarter. Nonetheless, equity marts in Europe managed to press back to flat after being down more than -1% in some parts. US futures are now firmly in the green as we write. The price action in currencies looks flow driven rather than news driven and talk that a large European bank was a good buyer of EUR/CHF got the ball rolling ahead of the NY open. EUR/USD has recovered all the way back from a 1.4253 low to trade near the 1.4330/40 highs currently. Stops are seemingly building above 1.4340/50 so we would expect some decent short-term resistance into this zone. The yen crosses have recovered in obvious fashion and EUR/JPY has rallied from a 133.96 low back towards the 134.80 area. USD/JPY remains more of a mixed bag and trades just 20 pips above its intraday 93.79 low. The shift back to risk has seen the commodity complex recover as well. Oil is comfortably back above $74 and this saw AUD/USD test the air above 0.8400 briefly while USD/CAD continues to flirt with 1.0750 support here. Looking ahead to NY trading, we have a few important economic events. Fed Chairman Bernanke is set to be reappointed by President Obama shortly after 9am ET and while this is baked in the cake, it will remove some uncertainty from the marketplace. On the data front, we have Case-Shiller home prices for the US at 900am ET and the Conference Board consumer confidence index at 1000am ET. Consumer confidence is the more forward looking of the two and thus will be closely watched. Should the number print above the expected 47.9 for August, look for the rally in risk to extend. Upcoming Economic Data Releases (NY Session) prior expected 8/25 13:00 GMT US S&P/CaseShiller Home Price Ind JUN 139.84 - - 8/25 14:00 GMT US Consumer Confidence AUG 46.6 47.6 8/25 14:00 GMT US Richmond Fed Manufact. Index AUG 14 16 8/25 14:00 GMT US House Price Index MoM JUN 0.90% 0.40% 8/25 15:15 GMT SZ SNB Governing Board Member Thomas Jordan Makes Speech 25-Aug 8/25 16:15 GMT CA Bank of Canada Deputy Governor Tim Lane Speaks in Kingston 25-Aug 8/25 16:15 GMT UK Bank of England's Bean to Make Speech 25-Aug 8/25 21:00 GMT US ABC Consumer Confidence 23-Aug -46 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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USD Lower Despite Weaker Asian Equity Market Trade

Daily Forex Fundamentals | Written by Easy Forex | Aug 25 09 12:18 GMT |

FX Highlights USD is trading mixed to lower despite an uptick in risk aversion, the Shanghai Index traded 5% lower, the Shanghai Index was pressured by a rumor of Chinese bank capital adequacy shortfalls, USD demand was limited by firmer equity trade in Europe and anticipation of higher opening for US equities, UK mortgage approvals rise sharply in August, Swiss nonfarm payrolls fall in Q2 along with consumption, ECB officials warn about uncertain outlook for EU recovery, oil prices decline as Asian equity markets are hit by news from China and by uncertainty about the global recovery, China's Premier says the recovery faces many uncertainties Focus turns to today's release of Case-Shiller home price index and consumer confidence Rumors circulated in Asian trade that a Chinese bank may need to raise capital to meet the recent change in China's bank capital requirements, JPY higher Japans Finance Minister Yasano warns that the current fiscal conditions in Japan will not allow the Democratic Party to carry out its spending plans if elected, Japan's election is August 30th and polls suggest a victory for the Democratic Party UK mortgage approvals rise to 38,181 from 35,564 in July, GBP lower Swiss Q2 nonfarm payrolls fall 0.4%, this marked the first fall in six years, UBS July Swiss consumption indicator falls to 0.766 from 0.951 last month, CHF higher ECB's Gonzalez-Paramo says EU economic outlook remains uncertain, ECBs Mersch said that EU recovery depends on global demand and he warned about succumbing to optimism about the recovery, German final Q2 GDP expanded by 0.3%, EUR higher President Obama will re-appoint Bernanke as chairman of the FOMC Midwest factory index for July rose for the first time in over a year powered by a surge in auto production US equity markets set to open mixed, European equities fractionally higher, Nikkei closed 84 points lower Upcoming Events US- Tuesday, Case-Shiller home price index will be released expected at -16.6 compared to -17.1 last month along with August consumer confidence expected at 48 compared to 46.6 last month CAN- Tuesday, no major Canadian economic data is due for release today By Michael J. Malpede Easy Forex Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst. Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

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Rehashing Two Key Points

Daily Forex Fundamentals | Written by Black Swan Capital | Aug 25 09 12:27 GMT |

Currency Currents Key News Court Orders Federal Reserve to Disclose $2 Trillion Loan Program Details (Bloomberg) China Stocks Decline as Premier Warns Economy Faces Many `Uncertainties' (Bloomberg) Quotable "Pleasure cannot be shared; like Pain, it can only be experienced or inflicted, and when we give pleasure to our Lovers or bestow Charity upon the Needy, we do so, not to gratify the object of our Benevolence, but only ourselves. For the Truth is that we are kind for the same reason as we are cruel, in order that we may enhance the sense of our own Power." Aldous Huxley FX Trading - Rehashing Two Key Points Quickly, a brief market update before I revisit two components vital to global recovery, as we see it. Yesterday the European currencies struggled while the commodity dollars firmed up ... that is until US stocks began rolling over late in the session to ultimately finish the day flat. The dollar strengthened. The US dollar was stronger early this morning, giving it back now, while the British pound is the weakest of the pack. Many analysts noted the particularly dismal day that gold had yesterday after finishing last week on a strong note. Gold is trying to bounce back this morning. S&P 500 futures have pushed lower this morning but have fought back to even things out, bidding up a bit going into the open. Overall, the price action is rather subdued thus far as we await the Case-Shiller Home Price Index at 9 am eastern ... and then consumer confidence at 10 am. Which brings me to ... All Wet Without the Consumer Frankly, and if you've been reading our stuff for a while you know, we've been fairly surprised at the sustained risk appetite and periods of optimism that have so steadily driven equity markets higher ... and kept the US dollar smothered. There's simply been a disconnect between our global fundamental analysis and market sentiment. Of course, varying time frames is a challenge in and of itself. But still, we wonder how much recovery can happen without the US consumer. Consumption in the US has for some time made up an overwhelming portion of US GDP. And even though consumers have taken a hiatus, US GDP numbers are still as heavily dependent upon the consumer come out of hiding. And there's the rub, as they say - US consumers have taken on a mindset of savings and debt reduction. Certainly, with all the better-than-expected data that seems to be surfacing throughout the economy and driving risk appetite these days, consumer statistics cannot be included in such bright-eyed indicators. A recent blog post I came across sums up some very key points quite well. An excerpt: An increased savings rate will put pressure on consumption, which will in turn pressure GDP. In the following chart, notice how consumption as a percent of GDP remains above historical norms. Consumption would have to contract another $800 Billion for personal consumption expenditures as a percent of GDP to revert to historical levels. "Everyone privately thinks this is an asset bubble driven purely by liquidity." The above is attributed to an executive at a Chinese investment bank. He seems to be on point. And it is likely the reason for the recent double digit percent declines in Chinese equities over the last few weeks. This comes as no surprise to us - we've seen stimulus measures and excessive lending to be misdirected and misused. And after an extreme rise in stocks, more investors are beginning to awaken to the same idea. What has come as sort of a surprise is the global market reaction to China's stock market. For two reasons: No doubt, China's market is a major indicator of risk taking, but for some reason the money flowing out of China's stocks hasn't sparked similar risk aversion in other stock markets. The US markets made new highs yesterday. The recognition of empty price gains should beg the question: are economic growth expectations warranted considering the excess liquidity dynamic? If not, then you would think China's bearing on global trade would mean bad things for prices of natural resources and emerging market assets. Interestingly enough, I pointed out to Jack yesterday investors' feeling that emerging markets are becoming less risky, i.e. investors are willing to put up money for smaller potential yield on their capital. From Bloomberg: Emerging market borrowing costs dropped to a seven-day low. The extra yield investors demand to own developing nations' bonds instead of U.S. Treasuries declined 3 basis points to 3.62 percentage points, the lowest level since Aug. 12, according to JPMorgan Chase & Co.'s EMBI+ Index. So in the face of leaking optimism over China's stock market strength and potentially over economic growth, investors in emerging markets have not blinked. It's possible that global investors are turning their heads from China and focusing on whatever green shoots they can dig up elsewhere. But I wouldn't be surprised to see global markets cave in to China if share prices don't soon stabilize. As far as the US dollar goes, we've yet to be validated on our long-term global macro forecast; risk appetite has kept the buck suppressed. But it could pay off royally to be open to potentially major US dollar strength in the coming days and weeks ahead. Black Swan Capital http://www.blackswantrading.com

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Daily Report: Yen Rises As China Stocks Ended Three Days Rebound, Sterling Soft

Japanese yen and dollar to a lesser extent are lifted as China stocks ended the three days rebound and dropped nearly 2.5% today. In addition, yen is supported by the sharp reversal in treasury yield yesterday, which saw yield on 10 year note rose sharply to 3.61% before closing down by -0.06% at 3.494%. The development in yen crosses argues that three wave corrective rise since last week was over, considering that GBP/JPY is now back pressing last week's low of 153.43. We'd anticipate some more strength in yen going forward today which might also give the greenback some support.

One of the important factors that could change the above anticipated development is the release of Conference Board Consumer Confidence from US, which is expected to improve to 48 in August. The index bottomed at 25.3 in Feb, then surged to 54.8 before stabilizing below 50. Stabilization between last month's low of 46.6 and May's high of 54.8 will be welcomed by the markets but any surprise that swing the reading beyond this range will likely rock the sentiments of investors.

In most cases, Sterling will continue to be the weaker major currency and might extend recent loses. EUR/GBP has already taken the lead by breaking through key near term resistance yesterday and edged higher to 0.8734 today and remains firm there. GBP/JPY is back pressing last week's low of 153.43 and might be resuming recent fall too. GBP/USD had the weakness rebound last week and has taken out an intraday pattern support of 1.6375 in early European session and might be heading to retest 1.6274 low too.

Economic data released today saw Germany GDP finalized 0.3% growth in Q2. Swiss employment level was basically unchanged at 3.95M level. US S&P/Case-Shiller Composite-20 is expected to drop less by -16.4% yoy in June. House price index in US is expected to rise slightly by 0.4% mom in June.

Dollar index's recovery from 77.76 continues today with 4 hours MACD staying above signal line. While some more upside might be seen, short term outlook remains bearish as long as 78.67 minor resistance holds. The current fall from 79.51 is possibly resuming whole decline from March high of 89.62 and might extend further to 77.43 and below. Nevertheless, strong support is expected above 75.89 key medium term level that finally bring reversal to conclude whole fall from 89.62 as well as medium term consolidation from 88.46. Break of 78.67 will be an important sign of stabilization and turn short term outlook neutral while break of 79.51 will revive the case that the index has already bottomed out at 77.43 already.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 154.41; (P) 155.61; (R1) 156.41; More

GBP/JPY was once again limited by 4 hours 55 EMA and weakened again and is now back pressing 154.34 low. Break there will confirm that whole fall from 164.05 has resumed and should target key support level of 146.75 next. On the upside, while consolidation from 153.43 might still continue and another rise cannot be ruled out, it should be limited below 160.34 resistance and bring fall resumption.

In the bigger picture, as discussed before, rise from 118.81 is treated as correction to the larger down trend from 07 high of 251.90 only. We're slightly favoring the case that such correction has completed at 163.05 already with bearish divergence conditions in daily MACD and RSI. Firm break of 146.75 support will confirm and will turn outlook bearish for 118.81 low and beyond. On the upside, in case of another rise, upside is expected to be limited by 50% retracement of 215.87 to 118.81 at 167.34 to conclude such correction and bring reversal finally.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
3:00	NZD	RBNZ 2-Yr Inflation Expectation Q3	2.30%	--	2.20%
6:00	CHF	UBS Consumption Indicator Jul	0.77	--	0.96	0.95
6:00	EUR	German GDP Q/Q Q2 F	0.30%	0.30%	0.30%
7:15	CHF	Employment Level Q2	3.95M	3.956M	3.957M
13:00	USD	S&P/Case-Shiller Composite-20 Y/Y Jun		-16.40%	-17.10%
14:00	USD	Consumer Confidence Aug		48	46.6
14:00	USD	House Price Index M/M Jun		0.40%	0.90%
14:00	USD	House Price Index Y/Y Jun		--	-19.07%

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FX Drifts, Focus on Central Banks

by Korman Tam

With little economic data released at the start of the week, the focus in the currency market has shifted to Central Bank rhetoric, with the key highlights attributed to commentary from Fed Chairman Ben Bernanke and ECB President Jean-Claude Trichet. Speaking from the Fed’s annual symposium in Jackson Hole, Wyoming, Bernanke offered an optimistic assessment over the economic outlook saying, “economic activity appears to be leveling out, both in the US and abroad, and the prospects for a return to growth in the near-term appear good”. His upbeat outlook spurred on gains in the equity and commodities markets, while pushing the dollar slightly lower against the majors.

Meanwhile, ECB President Trichet sounded a cautious tone over the economic outlook for the Eurozone, suggesting that interest rates will likely remain low for a protracted length of time. He said, “We see signs confirming that the real economy is starting to get out of the period of freefall”, yet it “does not mean at all that we do not have a very bump road ahead of us”.

Nonetheless, the major currency pairs continue to drift in a lackluster manner as the summer doldrums have confined foreign exchange to rangebound trading. We remain biased for further dollar weakness in the coming weeks as economic data from the US continue to gradually improve and support the equity markets.

Euro Drifts Lower

The euro was confined within range at the start of the week in a lackluster session, with the single currency drifting slightly lower against the greenback overnight. The economic data released saw June industrial orders, which posted a steep improvement, up 3.1% versus a 0.2% decline in the previous month and improving to -25.1% from -30.1%.

In the coming session, data slated for release include Germany’s import prices and Germany’s Q2 GDP. Growth in the Eurozone’s largest economy is seen expanding by 0.3% versus the previous quarter and contracting by 5.9% from the previous year.

EURUSD holds steady just beneath the 1.43-level with interim resistance seen at 1.4330, followed by 1.4360 and 1.44. Subsequent ceilings are eyed at 1.4440, backed by 1.4470 and 1.45. Support is seen at 1.4280, followed by 1.4230 and 1.42. Additional floors will emerge at 1.4150, followed by 1.41 and 1.4070.

taken from forexnews.com


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