RBS, Barclays Cut Lending as Treasury Pushes for More

By Andrew MacAskill and Jon Menon

Sept. 4 (Bloomberg) -- Royal Bank of Scotland Group Plc and Barclays Plc, two of Britain’s biggest banks, cut lending even after promising the government to give more credit to borrowers and help revive the economy.

RBS and Lloyds Banking Group Plc, the two biggest banks bailed out by the government, and Barclays Plc reduced lending globally by 165 billion pounds ($270 billion) in the first half, according to company filings. RBS and Barclays reduced loans by about 11 percent, the most among Europe’s largest banks.

RBS and Barclays are at risk of missing the government’s target to boost their U.K. net lending by 36 billion pounds this year. The two banks cut lending to U.K. homeowners and businesses by 9.5 billion pounds in the first half, the filings show. London-based Lloyds, which is 43 percent owned by the taxpayer, declined to disclose its net U.K. lending.

“This is a bearish sign for the economy,” said Jonathan Loynes, chief European economist at Capital Economics Ltd. in London. “For there to be economic growth, bank lending needs to rise. It is pretty clear that there are supply constraints.”

The Treasury has committed 1.4 trillion pounds to rescue the nation’s banking system through direct investments, asset insurance and loan underwriting amid the worst recession in 60 years. Banks may not be lending the extra cash as they seek to bolster capital, Bank of England Deputy Governor Charles Bean said last week. Consumers repaid debt at a record pace in July, according to the Bank of England.

Lending Shrinks

Global lending fell by an average of 5.4 percent at the five largest U.K. banks in the first half, five times more than at the 10 biggest banks in continental Europe, company reports show. RBS, which is 70 percent government-owned, shrunk its global loan book by 91 billion pounds, Barclays by 50 billion pounds, and Lloyds by about 24 billion pounds, the filings show.

Fiona MacRae, a spokeswoman for Edinburgh-based RBS, said the bank had planned to shrink its loan book after receiving a government bailout. London-based Barclays said the reduction in lending was due to a decline in cash held against derivative trades and a stronger pound. Lloyds spokeswoman Eve Speight said the bank was committed to lending to “creditworthy” borrowers.

In all, Europe’s 15 largest banks by market value cut lending to customers by 2.9 percent from a year earlier, the company filings show. Banks provide about 70 percent of corporate financing in Europe compared with about 20 percent in the U.S., where borrowers sell commercial paper and corporate bonds to fund the majority of investments, according to the European Central Bank.

Some Banks Expanding

ECB President Jean-Claude Trichet and politicians around the continent are warning that banks’ reluctance to boost lending risks prolonging the recession.

Stockholm-based Nordea Bank AB bolstered lending by 5 percent in the period, more than any of the European banks. London-based Standard Chartered Plc and Zurich-based Credit Suisse Group AG increased loans by 3.6 percent.

All banks that received government aid cut lending in the first half, company filings show. Lloyds, Britain’s biggest mortgage lender, reduced its loan book by 3.6 percent. Zurich- based UBS AG, which received a cash injection from the Swiss government last year, pared lending by 7.2 percent.

“The priority of the weak banks right now is rebuilding their balance sheets,” said Arturo de Frias, a banking analyst at Evolution Securities Ltd. in London. “They are increasing some new lending, but at the same time running down their books by cutting old loans.”

Easing Demand

Banks say the lending slowdown is largely the result of a drop in demand from borrowers, a consequence of the recession. U.K. consumers, the most indebted in Europe, are paying back mortgages and credit card debt as interest rates drop.

RBS said U.K. net lending, which takes customer repayments into account, fell by 3.2 billion pounds in the first six months. The bank agreed to increase annual net lending by 25 billion pounds in February as a condition for state support. David Gaffney, an RBS spokesman, said businesses are looking to reduce their debt levels rather than increase them.

RBS said today it won’t call $1.6 billion of subordinated bonds after regulators objected to using state aid to pay holders of the lender’s lowest-rated securities. The Financial Services Authority told RBS not to redeem four series of bonds early after the European Commission said banks shouldn’t use government cash to repay equity and subordinated debt.

Brown Under Pressure

Barclays reduced its outstanding loans in the U.K. by 6.3 billion pounds in the first half even as it made 17 billion of new loans to households and businesses, indicating the bank may struggle to meet its target to increase lending by 11 billion pounds this year. Barclays spokeswoman Gemma Abbott declined to comment on the figures.

A Treasury spokesman said RBS’s lending targets are legally binding and apply over the 12 months from March. Barclays, which didn’t receive a government bailout, isn’t legally bound to increase lending, he added.

The failure to get credit flowing increases the pressure on Prime Minister Gordon Brown, who nationalized banks, insured assets and is underwriting loans to spur lending. Politicians have repeatedly criticized banks for failing to boost credit after receiving government bailouts and guarantees.

“The banks are still not playing fair,” said John Wright, chairman of the London-based Federation of Small Businesses, which represents 215,000 entrepreneurs. “Small businesses are still having difficulty getting finance from banks, and those that are fortunate enough to get finance face higher interest payments.”

To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net; Jon Menon at jmenon1@bloomberg.net

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U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

By Sonia Sirletti and Jeffrey Donovan

Sept. 4 (Bloomberg) -- The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.

“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”

Roubini said he didn’t see a risk of a dollar crash in the “‘short term.” The value of the U.S. currency relative to currencies such as the yen or the euro “cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that’s going to warp any chance for the European economy to recover, same argument as to the yen,” he said.

“Most of the adjustment of the dollar in the future has to occur relative to China, relative to emerging Asia and relative to some of the other commodity exporters in the world, whether these are advanced economies or emerging markets,” he said.

Foreign creditors need assurances that the U.S. will address its deficit, Roubini said.

“Unless in the medium term these issues of fiscal sustainability are addressed, and unless we mop up that excess liquidity from the financial system, eventually the financial markets and the foreign creditors of the United States might get more concerned about the sustainability of the U.S. fiscal deficit and about the U.S. being tempted to use the inflation tax as a way of resolving its private and public debt problems,” he said.

To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Jeffrey Donovan in Rome at jdonovan26@bloomberg.net

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Canadian Dollar Gains as Job Reports Boost Appetite for Risk

By Chris Fournier and Matt Townsend

Sept. 4 (Bloomberg) -- Canada’s dollar advanced the most in more than a week as investors’ appetite for riskier assets grew after government reports showed the nation unexpectedly added jobs in August and the U.S. shed fewer positions than forecast.

“People are putting risk back on,” said John Curran, a Toronto-based senior vice president at CanadianForex Ltd., an online foreign-exchange dealer. “The Canadian dollar should head back down toward the bottom of the well-established range.” A “rather large” option expiry next week at C$1.10 should limit Canadian dollar gains, he said.

The Canadian currency appreciated as much as 1.2 percent to C$1.0887 per U.S. dollar, the biggest intraday advance since Aug. 27, before trading at C$1.0969 at 9:09 a.m. in Toronto, from C$1.1019 yesterday. One Canadian dollar purchases 91.17 U.S. cents.

Employment in Canada increased by a net 27,100 jobs last month after a decline of 44,500 in July, the nation’s statistics agency reported today in Ottawa. The median forecast of 21 economists in a Bloomberg News survey was for a decrease of 15,000 jobs.

“The number was well above consensus,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “It certainly suggests an improvement. It’s not necessarily a defining moment in Canadian job creation, but it certainly suggests a more bullish direction for the Canadian economy and, by extension, the Canadian dollar.”

U.S. Job Report

U.S. employers eliminated 216,000 jobs in August after a revised decrease of 276,000 jobs in the previous month, the Labor Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg was for a reduction of 230,000. The unemployment rate increased to 9.7 percent from 9.4 percent in July.

The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, appreciated 11 percent this year. It weakened 1.5 percent against the greenback last month, performing worse than 13 of the 16 most-traded currencies tracked by Bloomberg. The loonie was the No. 1 performer in July, gaining 7.9 percent.

Canada’s dollar will strengthen by the end of next year against its U.S. counterpart to C$1.07, according to the median forecast of 37 economists and analysts in a Bloomberg survey.

To contact the reporters on this story: Matt Townsend in New York at mtownsend9@bloomberg.net; Chris Fournier in Montreal at cfournier3@bloomberg.net

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Euro Erases Gain Against Yen as Stocks, Bond Yields Fluctuate

By Oliver Biggadike and Ye Xie

Sept. 4 (Bloomberg) -- The euro erased its gain versus the yen as U.S. stocks and government bond yields fluctuated after the Labor Department said employers eliminated fewer jobs in August than economists forecast.

“It’s a slightly better-than-expected number,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “There’s too much uncertainty about how this will play out. From a recession point of view, we still have a long way to go.”

Canada’s currency rose against all of the 16 most-traded counterparts tracked by Bloomberg as Statistics Canada reported the first gain in jobs since April. New Zealand’s dollar increased against the greenback and yen as Chinese stocks extended yesterday’s biggest gain in six months.

The euro was little changed at 132.10 yen at 9:42 a.m. New York, compared with 132.03 yesterday, after earlier increasing 0.8 percent. The dollar appreciated 0.3 percent to $1.4210 per euro, from $1.4252, and rose 0.3 percent to 92.92 yen, from 92.64.

Employers eliminated 216,000 jobs in August after a revised decrease of 276,000 jobs in the previous month, the Labor Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a reduction of 230,000. The unemployment rate increased to 9.7 percent.

The Dollar Index rose 1.2 percent to 78.975 on Aug. 7 as 10-year Treasury yields climbed after a report showed July payrolls dropped less than economists forecast. The gauge, which the ICE uses to track the currencies of six major U.S. trading partners, advanced 0.2 percent to 78.609 today.

Trichet on Recovery

The euro erased its gain versus the dollar yesterday as European Central Bank President Jean-Claude Trichet said the economic recovery will be “rather uneven” after holding the target lending rate at a record low of 1 percent.

“Trichet sounded extremely dovish,” a team of Commerzbank AG analysts including Ulrich Leuchtmann in Frankfurt said in a report today. “It is hardly surprising that the dollar was able to benefit from it.”

The Federal Reserve signaled in minutes of its August meeting published on Sept. 2 that it’s trying to prepare investors for an end to some of its asset purchases as the U.S. economy shows signs it’s beginning to recover from its worst recession since the Great Depression.

Treasury Secretary Timothy Geithner told reporters on the same day in Washington that it’s still “too early” for the Group of 20 nations to implement exit strategies. G-20 finance ministers and central bankers meet today and tomorrow in London.

The kiwi, as the New Zealand currency is known, advanced 0.9 percent to 63.30 yen and appreciated 0.5 percent to 68.17 U.S. cents.

Canada’s dollar strengthened 0.7 percent to C$1.0944 per U.S. dollar as Statistics Canada reported employment rose by 27,100, compared with economists’ median forecast of a drop of 15,000. The unemployment rate increased to 8.7 percent as the labor force grew faster than employment.

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

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Corn, Soybeans Head for Weekly Decline on High U.S. Harvests

By Jae Hur

Sept. 4 (Bloomberg) -- Corn and soybeans are poised for weekly declines on forecasts that rain last month will allow farmers in the U.S. Midwest to produce more of the crops than the government forecast.

Before today, corn fell 4 percent this week and the oilseed slumped 6.9 percent. U.S. corn output will total 13.01 billion bushels, Informa Economics Inc. said yesterday. The Department of Agriculture forecast 12.761 billion last month, up from an estimated harvest of 12.101 billion last year.

“Informa’s bearish supply forecasts were a weight on the Chicago grains and oilseeds, but at this stage the market should be well aware of the bountiful new crop supply,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney.

Corn for December delivery fell as much as 0.6 percent to $3.1375 a bushel in electronic trading on the Chicago Board of Trade by 4:37 p.m. in Singapore. The price touched $3.115 yesterday, the lowest since Aug. 17.

Soybeans for November delivery were little changed at $9.41 a bushel. Prices reached $9.295 yesterday, the lowest level since July 30.

The soybean crop will total 3.305 billion bushels and could reach 3.372 billion with favorable September weather, Informa said. The USDA is estimating a crop of 3.199 billion bushels and is scheduled to release its second survey-based production forecast on Sept. 11.

Inventories, Demand

“Very tight inventories and voracious Chinese import demand will makes soybeans very sensitive to any adverse late- season weather events,” CWA’s Hassall said.

U.S. exporters sold 110,000 metric tons of soybeans to China and 174,000 tons of corn to unknown buyers for delivery in the marketing year that ends Aug. 31, the USDA said yesterday.

China’s soybean output in 2009-2010 may fall by 14.8 percent to 14.05 million metric tons on adverse weather conditions, Li Qiang, chairman of Shanghai JC Intelligence Co., said today at a Beijing conference.

Wheat for December delivery in Chicago fell 0.1 percent to $4.7825 a bushel at 4:38 p.m. Singapore time. The price touched $4.7525 yesterday, the lowest level since Dec. 5. Before today, the grain had lost 3.3 percent this week.

Grain crops in Australia’s New South Wales, usually the nation’s second-largest wheat producer, may fail after rain forecast this week missed many areas. The state was forecast to produce 6.8 million tons of wheat, 1.6 million tons of barley and 321,000 tons of canola this season.

‘Pretty Disappointing’

Rainfall in the past two days was “pretty disappointing,” Frank McRae, grains specialist at the state’s Department of Industry and Investment, said today. As much as 30 percent of the winter crop, including wheat, barley and canola, may be in “dire straits,” he said.

Hot, dry weather in eastern parts of Australia and the forecast return of an El Nino has raised concerns that the nation’s grain output may miss forecasts. The country, the world’s fourth-largest wheat exporter, relies on rain in September to boost yields ahead of the harvest from November.

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

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Cocoa Exports From Indonesia Advance 60% in August

By Yoga Rusmana

Sept. 4 (Bloomberg) -- Cocoa bean exports from Indonesia’s Sulawesi island, the nation’s main growing region, surged 60 percent in August as farmers sold stockpiles to benefit from a gain in prices and raise funds ahead of a Muslim festival.

Shipments from South and Central Sulawesi provinces, which account for about four-fifths of Indonesia’s output, advanced to 47,527 metric tons last month compared with 29,725 tons in July, according to data today from the Indonesian Cocoa Association. Sales were 25,261 tons in August last year.

Increased shipments from the world’s third-biggest grower may help to arrest this year’s 9 percent gain in the price of the chocolate ingredient, which has risen on concern that global demand will exceed supply. Indonesia, with the world’s largest Muslim population, will mark Eid al-Fitr on Sept. 21.

“Now is the right time to sell beans as the price is high,” Herman Agan, the head of the association’s Central Sulawesi branch, said by phone from Palu. “Farmers need money to buy food and new clothes for the festival.”

Cocoa for December delivery slipped 0.5 percent to $2,923 a ton on ICE Futures U.S. in New York yesterday. Ivory Coast is the world’s top producer, with Ghana the second-biggest.

Indonesian exports in the first eight months of the year slid to 176,312 tons from 180,891 tons a year ago, the trade group said today. The country harvests most of its crop from April to July, with smaller volumes gathered until September.

Production in Indonesia may rise next year for the first time in four years as improved yields offset any setback from a lack of rain from an El Nino, Halim Razak, chairman of the association, said on July 9. Output in 2010 may gain to 500,000 tons from an estimated 480,000 tons this year.

El Ninos shift weather patterns around the world and can cause drought in the Asia-Pacific.

To contact the reporter on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net

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Crude Oil Rises for First Time in Five Days as Equities Gain

By Grant Smith

Sept. 4 (Bloomberg) -- Crude oil rose for the first time in five days as rising equity markets encouraged hopes that the economic recovery is still on track.

Oil is nonetheless set for a weekly decline amid forecasts that the Organization of Petroleum Exporting Countries will keep production targets unchanged when it meets next week. Floor trading in New York will close for Labor Day on Sept. 7, marking the end of the peak gasoline consumption period in the U.S., where the jobless rate is at the highest since 1983.

“Medium-term our forecast is for a weaker dollar that might support oil prices,” said Sintje Diek, an analyst with HSH Nordbank in Hamburg. “But the bigger point is that the fundamental situation doesn’t support prices above $70, and risk aversion may lead to a correction.”

Crude oil for October delivery advanced as much as 82 cents, or 1.2 percent, to $68.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded for $68.05 as of 1:03 p.m. London time.

Oil has declined almost 6 percent this week, the biggest drop since the week to July 10, as early gains during each trading session have been erased before the close.

Europe’s Dow Jones Stoxx 600 Index advanced 1.4 percent to 233.95 at 1:36 p.m. in London.

OPEC members, due to meet in Vienna Sept. 9, have implemented about 71 percent of the 4.2 million barrels a day of supply cuts agreed on last year, according to data compiled by Bloomberg. The group pumps 40 percent of the world’s oil.

OPEC President

Jose Maria de Botelho Vasconcelos, the organization’s president and Angolan oil minister, said on Sept. 2 that the 12- member group would hold its current course to avoid higher oil prices derailing the global economic recovery.

OPEC will reduce shipments by 1.1 percent in the month to Sept. 19, according to consultant Oil Movements. The producer group will export 22.34 million barrels a day by sea in the four-week period, down from an average of 22.58 million barrels a day in the month to Aug. 22, the U.K. tanker tracker said in a report yesterday.

The U.S. jobless rate in August jumped to 9.7 percent, the highest since 1983, and employers cut another 216,000 jobs, highlighting threats to consumer spending.

The increase in the unemployment rate from 9.4 percent exceeded forecasts. The smaller-than-anticipated drop in payrolls was the least in a year, and followed a decrease of 276,000 in July that was larger than previously reported, Labor Department data showed today in Washington.

Brent crude oil for October settlement on the London-based ICE Futures Europe exchange traded up 20 cents at $67.32 a barrel as of 1:34 p.m. London time.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net;

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Fortis Plans to Hire at Least 10 Commodities Traders

By Claudia Carpenter

Sept. 4 (Bloomberg) -- Fortis Bank (Nederland) NV, owned by the Dutch government, plans to hire at least 10 commodities traders, brokers and sales people as it expands from energy into precious and industrial metals and agriculture.

Seven agriculture brokers from BNP Paribas Fortis including Jonathan Parkman and Eric Sivry will join in London in November, said Seb Walhain, global head of energy, carbon and commodities at Fortis Bank in Amsterdam. That will take the team to 15 in London and Amsterdam and Fortis is also hiring for its Hong Kong and New York offices, he said. The commodities business now covers oil and environmental products such as emissions trading.

“We will offer a full range of products from energy to carbon and commodities,” Walhain, 37, said by phone today. “We want to hire another 10 people and if all goes well maybe another 20 people” by the end of the year.

Societe Generale SA, Bank of America Corp., Barclays Plc and Morgan Stanley are among banks hiring commodity personnel after copper prices doubled and crude oil jumped 54 percent this year. Commodity prices as measured by the Standard & Poor’s GSCI Index of 24 commodities jumped 27 percent this year, exceeding a 16 percent gain in the MSCI World Index of stocks and a 2.8 percent drop in Treasuries.

Banking and Insurance

The Netherlands bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro Holding NV for 16.8 billion euros ($24 billion) after the company ran out of short-term funding. Pascal Henisse, a spokesman for BNP Paribas in Paris, didn’t immediately respond to e-mails seeking comment.

“We’ve been in commodities for centuries,” Walhain said. “We lost some of the business as part of all the turmoil and we’re just getting back into it as soon as we can.”

Walhain said he plans to go to New York next week to recruit for the office on Park Avenue.

Fortis Bank’s merchant banking business, which includes energy, commodities, transportation and principal finance, had net income of 39 million euros ($55.6 million) in the first half of the year, according to a presentation on the company’s Web site. Total profit fell to 338 million euros from 543 million euros a year earlier, the company said last month.

The Dutch government plans to merge all of Fortis Bank’s assets under the ABN Amro name and then sell it to private investors after 2011.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

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Copper Premiums Drop in China as Asia Stockpiles Soar, CRU Says

By Chanyaporn Chanjaroen

Sept. 4 (Bloomberg) -- Surcharges added to copper prices, a signal for demand, have dropped as much as about 40 percent in China as Asian stockpiles swell in response to slower buying in the world’s largest consumer of the metal, CRU said.

The so-called copper premium has slid to between $70 and $90 a metric ton in Shanghai, according to Paul Settles, an analyst at the London-based commodities researcher. The premium, which includes freight and insurance and is paid on top of London Metal Exchange prices, was $120 in the first week of August, he said.

LME-tracked inventories in South Korea, the nearest location to China, have soared more than 26-fold to 27,075 tons from 1,025 tons at the end of June. Copper stockpiles have dropped in Europe and the U.S., drained by record first-half imports into China, where the government is spending 4 trillion yuan ($586 billion) to stimulate the local economy.

“China has got a bit of stockpile, and they will have to work that down before they come back to the market,” Settles said yesterday by phone. “It might be later in the fourth quarter or in the first quarter next year” when buyers from the country resume purchases in the physical market, he said.

Copper inventories in LME-registered European warehouses have plunged 77 percent from the year’s peak in February. In the U.S., inventories tracked by the exchange have declined 17 percent from April’s high.

European Premiums

Any drop in South Korean inventories would indicate a pickup in Chinese purchases, Leon Westgate, an analyst at Standard Bank Plc in London, said yesterday in a daily report.

In Europe, so-called spot premiums have slid to between $60 and $85 a ton in Rotterdam from this year’s peak of $90 to $110 in June, according to CRU. U.S. premiums have dropped to around 4 cents to 4.5 cents a pound over LME prices from as much as 5.5 cents in May and June, Settles said.

Copper has doubled this year on the LME after plunging in 2008 as commodities dropped in the second half. Consumption in China has expanded at a “double-digit” rate, Settles said. At the same time, usage has slid at similar paces in the U.S., European Union nations and other leading consumers, he said.

“It appears that we’ve hit the bottom, especially if macroeconomic indicators are to be believed,” said Settles. “The question is how strong the recovery will be, in both the world economy and copper demand.”

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

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Japan Stocks Fall, Led by Daiwa Securities, Dainippon Sumitomo

By Patrick Rial and Satoshi Kawano

Sept. 4 (Bloomberg) -- Japanese stocks declined to their lowest close in more than a month as Daiwa Securities Group Inc. entered talks to dissolve a venture and chemical producers sagged on concern demand isn’t recovering.

Daiwa slumped 6.1 percent after Sumitomo Mitsui Financial Group Inc. said the companies are in talks to end their venture, leaving Daiwa without a banking partner. Sumco Corp. lost 4.7 percent after the Nikkei newspaper said the world’s second- largest maker of silicon wafers will cut production capacity. Dainippon Sumitomo Pharma Co. plunged 6.1 percent after Bank of America Corp. lowered its investment rating on the stock.

“I’m guessing we’ll see the correction continue before a real buying opportunity emerges,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $13 billion. “Recent data has been fundamentally strong, but the market is showing a lukewarm reaction.”

The Nikkei 225 Stock Average lost 0.3 percent to 10,187.11 at the close of trading in Tokyo, reversing a 0.4 percent climb. The broader Topix index slipped 0.8 percent to 935.74, with more than three times as many stocks falling as rising. Both measures finished trading at the lowest levels since July.

In the last five days, the Nikkei fell 3.3 percent, while the Topix lost 3.5 percent, the most in eight weeks.

Investors avoided taking large positions ahead of U.S. unemployment data today that may give an indication on the state of the economic recovery, Morikawa said.

U.S. Unemployment

Companies cut payrolls by 230,000 workers, according to economists surveyed by Bloomberg. Estimates ranged between 100,000 and 365,000 jobs cut.

“Opinions on the unemployment data are at polar opposites, making investors wary of diving into the market today,” Morikawa said.

Japanese companies slashed capital spending in the second quarter by 22 percent from the previous year, a ninth consecutive drop, the Finance Ministry said today.

Daiwa fell 6.1 percent to 508 yen, its largest drop since June 29 and the steepest decline in the Nikkei 225. Sumitomo Mitsui slipped 2.1 percent to 3,770 yen. Nomura Holdings Inc., Daiwa’s larger rival, slumped 3.7 percent to 755 yen. The Topix gauge of securities companies had the biggest loss among 33 industry groups in the broader measure.

Daiwa may pay about 200 billion yen ($2.16 billion) to buy out Sumitomo Mitsui’s 40 percent stake in their brokerage venture, the Nikkei reported, citing unidentified people at both companies. Sumitomo Mitsui may lend Daiwa about 100 billion yen for the transaction, the report said.

‘Weaker Business’

“Daiwa will be a weaker business trying to survive as an independent company with competitors that have mostly strengthened,” said David Threadgold, a Tokyo-based analyst at Fox-Pitt Kelton. “MUFG is putting Mitsubishi UFJ Securities together with Morgan Stanley Japan, Nomura has beefed up with Lehman and Daiwa’s old partner will now be a competitor.”

Dainippon Sumitomo slumped 6.1 percent to 963 yen, a day after agreeing to buy U.S. drugmaker Sepracor for $2.6 billion to gain a U.S. sales force and experimental treatments in the world’s biggest drug market. Ritsuo Watanabe, an analyst at Bank of America, cut the stock to “underperform” from “neutral.”

Sumco dropped 4.7 percent to 1,969 yen. The company will lower 300 millimeter wafer production capacity by 10 percent, the Nikkei reported, indicating demand has yet to recover. Sumitomo Chemical Co., Japan’s second-largest chemical producer, slid 2.8 percent to 420 yen. Mitsubishi Gas Chemical Co. fell 3.3 percent to 500 yen.

Seven & I Holdings Co., the operator of 7-Eleven convenience stores, dropped 2.3 percent after Bank of America cut the shares to “neutral” due to projected weakness in the company’s department stores and general merchandise shops.

Toshiba Corp., Japan’s biggest maker of nuclear reactors in terms of power capacity, retreated 2.3 percent to 466 yen. The company may pay 500 billion yen ($5.4 billion) for the power transmission and distribution unit of Areva SA, Reuters reported, citing Jiji Press.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Satoshi Kawano in Tokyo at Skawano1@bloomberg.net.

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Asian Stocks Fluctuate as Brokerages Downgrade Seven & I, Hynix

By Shani Raja

Sept. 4 (Bloomberg) -- Asian stocks fluctuated, with the MSCI Asia Pacific Index set for its third weekly drop in five, as brokerage downgrades of Seven & I Holdings Co. and Hynix Semiconductor Inc. countered a rally in metal prices.

Seven & I, the world’s largest convenience store operator, fell 2.3 percent in Tokyo and Hynix Semiconductor Inc., the world’s No. 2 maker of computer-memory chips, sank 5.7 percent in Seoul. Zijin Mining Group Co., China’s largest gold miner, climbed 2.2 percent after the metal jumped to a six-month high. Henan Yuguang Gold & Lead Co. surged 10 percent in Shanghai.

The MSCI Asia Pacific Index was little changed at 112.80 as of 7:23 p.m. in Tokyo, with about as many stocks rising as falling. The gauge has lost 1 percent this week, paring its advance from a five-year low on March 9 to 60 percent. The rally has taken the average price of stocks on the measure to 1.5 times book value, close to a 12-month high.

“We’ve seen that economically things are improving, but the big question is how much of that is already in the price,” said Matt Riordan, who helps manage about $3.8 billion at Paradice Investment Management in Sydney. “We need to see companies pushing up their guidance. If that doesn’t happen it means things are looking pretty full on the valuation side.”

Japan’s Nikkei 225 Stock Average lost 0.3 percent, erasing an earlier 0.4 percent advance. Daiwa Securities Group Inc. sank 6.1 percent after Sumitomo Mitsui Financial Group Inc. said it’s in talks to end a brokerage venture between the two.

China’s Shanghai Composite Index advanced 0.6 percent, and Hong Kong’s Hang Seng Index gained 2.8 percent. China Resources Enterprise Ltd. surged 5.2 percent after JPMorgan Chase & Co. and Nomura Holdings Inc. raised their ratings.

Board Changes

Australia’s S&P/ASX 200 Index gained 0.1 percent. Asciano Group, the country’s largest port and rail operator, climbed 6 percent after announcing changes to its board. Taiwan’s Taiex Index added 0.7 percent.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge climbed 0.9 percent yesterday, ending a four- day losing streak, as supermarket operator Costco Wholesale Corp. and clothier Gap Inc. reported sales that beat estimates.

Seven & I fell 2.3 percent to 2,100 yen after Hidehiko Aoki, an analyst at Bank of America Corp.’s Merrill Lynch & Co. unit, downgraded the stock to “neutral” from “buy.”

Dainippon Sumitomo Pharma Co., which offered to buy U.S. drugmaker Sepracor Inc. for $2.6 billion yesterday, sank 6.1 percent to 963 yen. Ritsuo Watanabe, also at Merrill Lynch, lowered the stock to “underperform” from “neutral” because of expiring patents at Sepracor.

Seen The Bottom?

Hynix slumped 5.7 percent to 20,800 won in Seoul. Daewoo Securities Co. cut its rating to “hold” from “buy,” saying the share price already reflects an improved earnings outlook.

“A lot of companies are saying things have seen a bottom but they’re not prepared to go out there and say they’re confident,” said Riordan. “We’re going to want to see that start to happen in the next few months.”

Zijin Mining climbed 2.2 percent to HK$7.03 in Hong Kong trading. In Sydney, Avoca Resources Ltd., an Australian producer, gained 2.7 percent to A$1.695 Australian cents, while Dominion Mining Ltd. surged 7.9 percent to A$4.37.

Gold futures in New York jumped to a six-month high yesterday, reaching $999.50 an ounce, on speculation a weak dollar will boost demand for precious metals as an alternative investment. An index of six metals in London climbed 1.6 percent yesterday, the most since Aug. 28.

Daily Limit

Lead jumped as much as 3.3 percent in London, following a 7.8 percent surge yesterday. Henan Yuguang, China’s top producer of the metal, gained by the 10 percent daily limit to 18.30 yuan. Shenzhen Zhongjin Lingnan Nonfemet Co. added 7.2 percent to 22.77 yuan.

China Resources, with interests as diverse as food processing, retailing and ports, advanced 5.2 percent to HK$19.56. JPMorgan raised its rating to “overweight” from “neutral” after the company’s profit from beverages more than doubled in the first half. Nomura upgraded the stock to “buy.”

The MSCI Asia Pacific Index’s rally since March came as economic and earnings figures bolstered optimism the worst of the global economic crisis has passed.

This week, Australia’s statistics bureau reported second- quarter gross domestic product growth that was faster than economists estimated, while Japan’s Trade Ministry said Aug. 31 that industrial production climbed 1.9 percent from June, also exceeding economist targets.

Beating Predictions

The stock rally boosted the average price of stocks in the MSCI Asia Pacific Index to 23 times estimated earnings, up from 17.6 times at the start of the year, data compiled by Bloomberg show. The S&P 500 is at 16.7 times, while the Dow Jones Stoxx 600 Index is at 14.8 times.

“I’m guessing we’ll see the correction continue before a real buying opportunity emerges,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $13 billion. “Recent data has been fundamentally strong, but the market is showing a lukewarm reaction.”

Japanese businesses cut spending for a ninth quarter as the global recession squeezed profits, the Finance Ministry said today in Tokyo, underscoring the challenge for the country’s new government to sustain an economic recovery.

Daiwa fell 6.1 percent to 508 yen, while Sumitomo Mitsui, Japan’s second-biggest bank, lost 2.1 percent to 3,770 yen. The companies said in separate statements that no final decision had been made on ending their brokerage venture.

In Sydney, Asciano climbed 6 percent to A$1.60. The company said Malcolm Broomhead will take over as chairman from Tim Poole, who will step down from the role at the company’s annual meeting in October. Broomhead is a former managing director of Melbourne-based Orica Ltd., the world’s largest maker of industrial explosives.

Babcock & Brown Infrastructure Group slumped 22 percent to 6.1 Australian cents. The fund said an asset-sale program won’t enable it to meet 2010 financial-year debt maturities, even as the company negotiates with a potential cornerstone investor.

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

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Russia’s Rating at Risk as Era of Deficits Looms

By Alex Nicholson and Paul Abelsky

Sept. 4 (Bloomberg) -- Russia risks returning to a period of entrenched budget deficits that may threaten its credit rating and weaken the ruble as it struggles to emerge from its first recession in a decade.

The country faces “still-substantial risks to public finances due to the severe economic contraction” and financial risks linked to “stress” in the financial industry and liabilities of state-run companies, Standard & Poor’s analysts including Frank Gill in London wrote in a report yesterday.

If the government fails to rein in the shortfall, the credit rating may be cut from its current BBB rating, S&P said.

Russia expects to run a deficit equivalent to 8.9 percent of gross domestic product this year, the first in a decade, after the economy slumped a record 10.9 percent last quarter. The government plans to tap international debt markets to plug future gaps as the wider deficit threatens to spur inflation.

State spending is paced to escalate late in the year with about one third of the total to be disbursed in the fourth quarter, Anton Stroutchenevski, a Moscow based economist at Troika, said in a phone interview yesterday. That may raise the money supply by between 10 percent and 15 percent, leading the ruble to fall by the same amount, he said.

“The government’s budget policy ensures a very high exchange-rate volatility,” he said.

Widening Deficit

The budget deficit widened in the first eight months to the equivalent of 5.9 percent of gross domestic product, Finance Minister Alexei Kudrin told reporters in Moscow yesterday. The shortfall was 4.3 percent in the first seven months.

The government aims to spend an average of between 850 billion rubles ($26.8 billion) and 900 billion rubles a month this year before disbursing 1.5 trillion rubles in December, Kudrin said.

Russia’s budget allocation in the first six months of the year was uneven and inefficient, the country’s Audit Chamber said in a report published on its Web site today.

“The irregularity of budget spending in the course of the year reduces the efficiency of budget funding and leads to a failure to meet budget targets to the full extent,” the state financial watchdog said in the report.

The Finance Ministry and the Economy Ministry haven’t done enough to “diversify the sources of state revenue and optimize their structure,” the chamber said.

Energy

Energy products, including crude oil and natural gas, accounted for 65.5 percent of exports in the first half, while metals made up 12.1 percent. Levies on oil and gas producers accounted for more than two thirds of corporate tax payments to federal and regional budgets last year, Troika Dialog says.

The government is unlikely to push through austerity measures to contain the deficit and will instead deplete its wealth funds, using up oil income, said Neil Shearing, emerging Europe economist at Capital Economics.

It won’t be “politically possible” for the government to cut spending and rein in the deficit, Shearing said.

“There will be talk about the need to tighten fiscal policy and address the deficit, but what we’ll end up seeing is the government spending the wealth funds, which will probably run out by this time next year, and then move on to issuing debt,” Shearing said. “We’ll be left with a fiscal deficit for some time to come.”

Tapping Funds

The government is tapping its $85.7 billion Reserve Fund and $90.7 billion National Wellbeing fund, which were built on windfall oil revenue, to pay for an “anti-crisis” program that is worth about 2.5 trillion rubles ($79 billion) when tax breaks, central bank lending and other measures are included.

With the Reserve Fund expected to be drained by the end of next year, Russia will turn to international debt markets for the first time since 1998, seeking to raise $17.8 billion from investors next year. That amount may be trimmed if the economic outlook improves, Kudrin said. Russia expects yields on its bonds to be between 7 percent and 9 percent, he said.

The budget shortfall may narrow to 7.5 percent next year, 4.3 percent in 2011 and 3 percent in 2012, the Finance Ministry said on Aug. 18.

Russia’s current credit rating hinges on low levels of sovereign debt, S&P said. While sovereign debt is expected to remain at 14 percent of GDP by 2012, “contingent liabilities” may amount to a figure as high as or higher than the BBB rating median of 42 percent, the report said.

‘Fiscal Problems’

The country’s debt as a percentage of GDP will more than double by 2012, growing from 6.5 percent in 2008 to 16.4 percent by 2012, the Finance Ministry said on Aug. 19. Government debt will be at 10 percent this year, the ministry estimates.

Russia’s sovereign foreign debt slid to $39.05 billion on Aug. 1 from $39.14 billion a month earlier.

“I think we’ll probably end up in a position where they just keep issuing more and work the fiscal problems out further down the line,” Shearing said.

-- Editors: Tasneem Brogger, Chris Kirkham.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.

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French Stocks: Air France, Areva, Dexia, Peugeot and Renault

By Adria Cimino

Sept. 4 (Bloomberg) -- France’s CAC 40 Index advanced 24.73, or 0.7 percent, to 3,578.24 at 1:09 p.m. in Paris, paring this week’s drop to 3.1 percent. The SBF 120 Index added 0.7 percent.

The following shares rose or fell in Paris. Stock symbols are in parentheses.

Air France-KLM Group (AF FP), Europe’s biggest airline, gained 15 cents, or 1.5 percent, to 10.12 euros, rebounding from four days of losses. Air France said it plans to cut 1,500 jobs and reduce cargo capacity by 15 percent. The airline also plans to cut passenger activity by 5 percent.

Areva SA (CEI FP) climbed 8.65 euros, or 2.3 percent, to 388.25, gaining for a third day. China Investment Corp. is studying the possibility of making a bid for Areva SA’s transmission and distribution unit in partnership with other investors, French daily Les Echos reported, without citing anyone. The fund may also take a stake in Areva, according to the newspaper.

Toshiba Corp. may pay $5.4 billion for the power distribution and transmission unit of Areva SA, Reuters said, citing Japanese news agency Jiji Press.

Clasquin (ALCLA FP) sank 1.20 euros, or 8.6 percent, to 12.80, the biggest drop since February. The company said its first-half gross margin fell 4.9 percent compared with a year earlier. Oddo Securities cut its recommendation on the transporter of freight to “reduce” from “add.”

Dexia SA (DEXB BB) added 7 cents, or 1.3 percent, to 5.79 euros, gaining for a second day. The company is looking for a buyer for its unprofitable French insurance unit Epargne and Pensions, De Standaard reported, citing unidentified people.

PSA Peugeot Citroen (UG FP) jumped 1.20 euros, or 6.5 percent, to 19.86 euros, after four days of declines. Philippe Varin, chief executive officer of the automaker, is actively considering an alliance with Mitsubishi Motors Corp., French newspaper La Tribune said, without attribution.

Varin is seeking a partner outside of Europe to make the company more international, the newspaper said.

UBS AG raised its recommendation on shares of Europe’s second-biggest carmaker to “neutral” from “sell.”

Renault SA (RNO FP), France’s second-largest carmaker, climbed 1.25 euros, or 4.3 percent, to 30.05.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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DAX Rises First Time in a Week; Deutsche Bank, Daimler Advance

By Julie Cruz

Sept. 4 (Bloomberg) -- German stocks advanced for the first time this week as Goldman Sachs Group Inc. lifted its stance on European banks and strategists increased their year forecasts for European equity indexes.

Deutsche Bank AG and Commerzbank AG, the country’s biggest banks, rose at least 2 percent. Daimler AG and Bayerische Motoren Werke AG added more than 3 percent.

The benchmark DAX Index increased 0.8 percent to 5,343.96 as of 12:13 p.m. in Frankfurt. The gauge has fallen 3.1 percent this week, the biggest decline since June, on concern a six-month rally has outpaced the prospects for earnings and economic growth. The broader HDAX Index gained 0.9 percent.

Goldman Sachs Group Inc. strategists raised their year- end forecast for the Dow Jones Stoxx 600 to 260 from 235, citing upgrades to economic and earnings growth estimates. UBS AG strategist Nick Nelson increased his target for the FTSEurofirst 300 Index to 1,100 from 1,000.

“While we agree that the market tends to make its strongest returns while the economy is still contracting, albeit at a slowing rate, it tends to make further gains as the economy begins to expand,” a team of strategists at Goldman Sachs in London wrote in a report dated yesterday.

Deutsche Bank rose 2 percent to 47.82 euros, while Commerzbank jumped 3.6 percent to 6.90 euros. Goldman Sachs Group Inc. upgraded its recommendation on banks to a “modest overweight” from “neutral.” Goldman said it maintains a “broadly cyclical bias,” preferring shares that are linked to economic growth.

Daimler, BMW, Salzgitter

Daimler AG surged 3.9 percent to 31.46 euros. The world’s second-biggest maker luxury cars doesn’t plan to cut jobs for the moment and will trim costs by more than the 4 billion euros ($5.7 billion) planned for 2009, Bild Zeitung reported, citing an interview with Chief Executive Officer Dieter Zetsche.

BMW, the world’s biggest maker of luxury cars, added 3.2 percent to 31.12 euros. The Dow Jones Stoxx 600 Automobiles & Parts Index rose as much as 3.9 percent today.

Salzgitter AG, Germany’s second-biggest steelmaker, gained 1.2 percent to 63.31 euros as the shares were raised to “buy” from “sell” at Bankhaus B. Metzler seel. Sohn & Co.

Deutsche Telekom AG added 1.9 percent to 9.31 euros. Europe’s biggest telephone company has started talks with Vodafone Group Plc, France Telecom SA and Telefonica SA about selling its T-Mobile U.K. unit, the Financial Times reported, citing people familiar with the situation.

Infineon Technologies AG increased 1.8 percent to 3.66 euros. Europe’s second-largest maker of semiconductors was picked to replace Hannover Re in Germany’s benchmark DAX Index after the stock of Europe’s second-biggest maker of semiconductors rose more than fourfold this year. The changes will take effect on Sept. 21, Deutsche Boerse AG, the operator of the Frankfurt exchange, said in an e-mailed statement yesterday.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Celesio AG (CLS1 GY) rallied 4.3 percent to 19.07 euros. Europe’s largest drug wholesaler repeated its outlook for earnings before interest, tax, depreciation and amortization of just over 600 million euros this year. The company commented in a presentation on its Web site today.

Commerzbank AG raised its recommendation for the stock to “hold” from “reduce.”

Kloeckner & Co. SE (KCO GY) slumped 6.1 percent to 16.52 euros, erasing yesterday’s gain. The German steel trader said it plans to raise about 200 million euros ($285 million) by selling new shares.

ProSiebenSat.1 Media AG (PSM GY) surged 5 percent to 7.14 euros, extending yesterday’s 7.3 percent increase. Germany’s biggest private broadcaster sees a slight increase in its viewer market share, beating the market, Chief Executive Officer Thomas Ebeling told Frankfurter Allgemeine Zeitung in an interview.

Puma AG (PUM GY) rose 4 percent to 203.99 euros, the second gain this week. Europe’s second-largest sporting goods maker was raised to “overweight” from “neutral” at HSBC Holdings Plc.

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

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U.K. Stocks Rise, Led by Mining Companies; Kazakhmys Advances

By Alexis Xydias

Sept. 4 (Bloomberg) -- U.K. stocks gained, led by mining companies amid optimism that an economic rebound will feed demand for metals.

Kazakhmys Plc, Kazakhstan’s largest copper producer, jumped 4.3 percent and Lonmin Plc, the world’s third-biggest platinum producer, rose 4.7 percent as analysts advised buying the shares.

The FTSE 100 Index rose 40.19, or 0.8 percent, to 4,836.94 as of 9:03 a.m. in London, paring the decline so far this week to 1.5 percent. The FTSE All-Share Index added 0.8 percent today and Ireland’s ISEQ Index climbed 0.7 percent.

The FTSE 100 has rebounded 38 percent from a six-year low on March 3, on expectations the worst of a global recession is past. Goldman Sachs Group Inc. strategists today raised their forecast for stock gains in Europe this year, citing upgrades to economic and earnings growth forecasts.

“While we agree that the market tends to make its strongest returns while the economy is still contracting, albeit at a slowing rate, it tends to make further gains as the economy begins to expand,” a team of London-based strategists at the U.S. bank wrote in a report.

Kazakhmys rose 4.3 percent to 989 pence. The stock was upgraded to “overweight” from “equal-weight” at Morgan Stanley, which raised its price estimate to 1,380 pence from 833 pence.

Lonmin increased 4.7 percent to 1,509 pence. The shares were raised to “outperform” from “underperform” by Exane BNP Paribas, which cited the possibility that Xstrata Plc may bid for the company.

Elan Corp. dropped 3.9 percent to 4.95 euros. The Irish drugs company breached a contract with Biogen Idec Inc. by entering into a transaction with Johnson & Johnson, a U.S. judge ruled today after a court hearing. Elan had asked the court to rule that it didn’t violate its marketing agreement with Biogen on the multiple sclerosis drug Tysabri in allowing J&J to buy a minority stake in Elan.

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

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European Stocks Rise for Second Day; Kazakhmys, Peugeot Climb

By Daniela Silberstein

Sept. 4 (Bloomberg) -- European stocks rose for a second day as metals gained and strategists increased their year-end forecasts for the region’s equity indexes. U.S. futures climbed after the smallest decline in payrolls since August 2008.

Kazakhmys Plc jumped 4.7 percent as copper advanced and Morgan Stanley upgraded Kazakhstan’s biggest producer of the metal. Lonmin Plc, the world’s third-largest platinum producer, jumped 7.8 percent after Exane BNP Paribas recommended the shares. PSA Peugeot Citroen rallied 6.9 percent as the automaker signed an agreement with Mitsubishi Motors Corp. to develop electric cars.

Europe’s Dow Jones Stoxx 600 Index advanced 1.5 percent to 234.08 at 1:40 p.m. in London. The measure has fallen 1.4 percent this week on concern that a six-month surge has outpaced the prospects for earnings and economic growth. The regional gauge is valued at 44.8 times profit, near the highest level since September 2003, according to data compiled by Bloomberg.

The rally “does not mean that the market can make no further progress,” Peter Oppenheimer, a London-based strategist at Goldman Sachs Group Inc., wrote in a report, raising his year-end forecast for the Stoxx 600 to 260 from 235. “Investors may now generally require new information for the market to move higher, but we think the better news will come.”

The Stoxx 600 has surged 48 percent since March 9 as companies from L’Oreal SA to GlaxoSmithKline Plc reported higher-than-estimated profits and the German and French economies unexpectedly expanded. UBS AG strategist Nick Nelson increased his year-end target for the FTSEurofirst 300 Index to 1,100 from 1,000 today.

U.S. Jobless

Futures on the Standard & Poor’s 500 Index gained 0.7 percent after a Labor Department report showed employers in the U.S. cut 216,000 jobs in August, a smaller drop than forecast. The U.S. unemployment rate increased to 9.7 percent, the highest since 1983.

Canada unexpectedly added 27,100 jobs in August, the first gain in four months, Statistics Canada said today in Ottawa.

The MSCI Asia Pacific Index increased 0.5 percent as the Shanghai Composite Index climbed for a fourth day.

Economic policy makers are signaling they plan to leave emergency stimulus in place even as the global economy pulls out of recession, delivering what Credit Suisse Group AG and Bank of America Corp. call a “sweet spot” for financial markets.

Declare Victory

U.S. Treasury Secretary Timothy Geithner and European Central Bank President Jean-Claude Trichet are among Group of 20 finance officials gathering in London today who say it’s too soon to declare victory over the deepest recession since World War II. While data this week confirmed the slump is easing, policy makers are unwilling to curb spending or start unwinding their record low interest rates and debt purchases.

“Economies look like they are beginning to grow,” Alex Crooke, portfolio manager at Henderson Global Investors in London, which manages about $125 billion, said in a Bloomberg Television interview. “September could be another good month.”

Kazakhmys increased 4.7 percent to 992.5 pence after Morgan Stanley upgraded the shares to “overweight” from “equal weight.”

Lead, the best performer on the London Metal Exchange this year, rallied to the highest price in almost 16 months as China vowed to shut substandard smelters after thousands of children were poisoned. Copper, aluminum, nickel and tin also advanced.

Lonmin surged 7.8 percent to 1,554 pence. Exane upgraded the shares to “outperform” from “underperform,” citing the possibility that Xstrata Plc may bid for the company. Xstrata added 1.9 percent to 833 pence.

Zijin, Rio Tinto

Zijin Mining Group Co., China’s biggest gold mining company, climbed 2.2 percent to HK$7.03 in Hong Kong as the precious metal traded near a six-month high.

Rio Tinto Group added 2.6 percent to 2,407 pence. The world’s third-largest mining company said it’s still selling iron ore to China at a provisional price as benchmark negotiations with the Asian nation remain stalled.

A gauge of automakers in the Stoxx 600 rose 3.7 percent, the steepest advance among 19 industry groups.

Peugeot rallied 6.9 percent to 19.95 euros after signing an agreement with Mitsubishi Motors to develop a vehicle based on Mitsubishi’s i-MiEV electric car to be sold in Europe by October 2010 under the Peugeot and Citroen brands.

UBS raised its recommendation on Europe’s second-biggest carmaker to “neutral” from “sell.”

Daimler Gains

Daimler AG climbed 5 percent to 31.79 euros. The world’s second-largest maker of luxury cars doesn’t plan to cut jobs for the moment and will trim costs by more than the 4 billion euros ($5.7 billion) planned for 2009, Bild Zeitung reported, citing an interview with Chief Executive Officer Dieter Zetsche.

Banks in the Stoxx 600 rose 1.8 percent. Goldman Sachs upgraded its recommendation on banks to a “modest overweight” from “neutral.” Commerzbank AG, Germany’s second-largest bank, added 5.3 percent to 7.01 euros. Credit Suisse Group AG, the biggest Swiss bank by market value, increased 2.3 percent to 52.7 Swiss francs.

Celesio AG jumped 3.7 percent to 18.97 euros after the German drug wholesaler repeated its outlook for earnings before interest, tax, depreciation and amortization of just over 600 million euros this year.

Deutsche Telekom AG advanced 2.7 percent to 9.38 euros. Europe’s biggest phone company has started talks with Vodafone Group Plc, France Telecom SA and Telefonica SA about selling its T-Mobile U.K. unit, the Financial Times reported, citing people familiar with the situation.

Elan Corp. sank 7 percent to 4.79 euros after a U.S. judge ruled the drug company breached a contract with Biogen Idec Inc. by entering into a transaction with Johnson & Johnson.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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Bimbo, Clarin, Energisa, Exito, Walmex: Latin Equity Preview

By Emily Schmall

Sept. 4 (Bloomberg) -- The following companies may have unusual price changes today in Latin American trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index rose 1.4 percent to 3,245.20.

Argentina

Grupo Clarin SA (GCLA AF): Argentina’s government rejected plans by the country’s biggest media company to merge its Cablevision SA and Multicanal SA cable television units, according to a statement posted on the Communication Secretariat’s Web site. Clarin dropped 7.4 percent to 6 pesos.

Brazil

BM&FBovespa SA (BVMF3 BS): Brazil’s biggest securities exchange operator will have a proposal for a cross-trading agreement with stock exchanges in Chile, Colombia, Mexico and Peru by the end of the year, Chief Executive Officer Edemir Pinto said. Negotiations are “very advanced” with Chile’s exchanges, central banks and regulators to allow trading shares freely on both exchanges, he told reporters yesterday at an event in Rio de Janeiro. The exchange operator rose 2.5 percent to 11.30 reais.

Energisa SA (ENGI3 BZ): The owner of five electricity- distribution utilities in Brazil will submit to shareholders and to the company’s board a plan to issue units, as securities representing a group of shares are known. Energisa rose 0.9 percent to 10.90 reais when the shares last traded Sept. 2.

Colombia

Almacenes Exito SA (EXITO CB): Colombia’s biggest publicly traded retailer was upgraded to “buy” from “hold” at Interbolsa SA. The Medellin-based brokerage increased its share price estimate for Exito by 8.2 percent to 18,574 pesos, it wrote in an e-mailed note. Exito fell 1.9 percent to 16,160 pesos.

Mexico

Grupo Bimbo SAB (BIMBOA MM): Mexico’s Congress may apply sales tax to junk foods in an effort to raise in revenue in the 2010 budget, according to a legislator from President Felipe Calderon’s party. Mexico’s largest producer of bakery products rose 2.7 percent to 75.07 pesos.

Wal-Mart de Mexico SAB (WALMEXV MM): Latin America’s largest retailer said sales at stores open at least a year rose 5.6 percent in August. UBS AG said the figures exceeded investor expectations. Walmex rose 1.1 percent to 47.02 pesos.

To contact the reporter on this story: Emily Schmall in Mexico City at eschmall@bloomberg.net

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Freddie Mac, Moody’s, Novellus Systems: U.S. Equity Preview

By Elizabeth Stanton

Sept. 4 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses and prices are as of 8 a.m. in New York.

Abercrombie & Fitch Co. (ANF US) fell 4.6 percent to $29.55 in pre-market trading. The teen clothing retailer was cut to “sell” from “hold” at Citigroup Inc., which said same-store sales will probably continue falling, hurting earnings.

Freddie Mac (FRE US) rose 6.4 percent to $1.99. The mortgage-finance company under U.S. government control said it was notified by the New York Stock Exchange that it has returned to compliance with the NYSE’s minimum share-price listing requirement.

Moody’s Corp. (MCO US): Warren Buffett’s Berkshire Hathaway Inc. cut its stake in the ratings firm by 2 percent, the second reduction in two months, amid profit declines and criticism of its reports on mortgage-backed securities.

Novellus Systems Inc. (NVLS US) rose 6.1 percent to $20.24. The maker of equipment that helps turn silicon wafers into computer chips said it may break even for the third-quarter and will lose no more than 9 cents a share, less than its previous estimate for a 15-cent per-share loss.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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