BOE Opens Doors as Crisis-Hit Staff ‘Smell the Roses’

By Jennifer Ryan and Brian Swint

Sept. 9 (Bloomberg) -- The Bank of England is throwing open its doors to the public again in an annual event that was pared back a year ago following the collapse of Lehman Brothers Holdings Inc., a sign the financial crisis has now abated.

The central bank will allow visitors to see parts of its main building including the Court Room, where its governing board meets, as part of the Open House London weekend event on Sept. 19-20, according to the bank’s Web site. Last year the bank limited the tour to its museum as staff worked overtime on the Saturday and Sunday of Sept. 20-21 to save Britain’s financial system.

That was the weekend after Lehman filed for the biggest bankruptcy in history and the U.S. loaned $85 billion to bail out American International Group Inc. Bank of England staff then went to work on a plan to rescue the banking system, which Deputy Governor Paul Tucker said afterward came “preciously close” to collapse.

“People get pulled off teams and put into crisis groups where they’re often not allowed to talk to each other, and that happened when Lehman went under,” said Colin Ellis, who worked at the central bank until October and is now an economist at Daiwa Securities SMBC in London. “All those people who had been running to stand still are now able to go out and smell the roses more.”

Lehman filed for bankruptcy on Sept. 15, 2008, and the Federal Reserve rescued AIG the next day. Meanwhile, U.K. officials struggling to shore up HBOS Plc engineered the bank’s acquisition by rival Lloyds TSB Group Plc. That was announced on Sept. 18, the same day the Bank of England participated in a joint coordinated dollar swap with the Fed.

Economic Recovery

Bank of England Governor Mervyn King said Aug. 12 the U.K. may be heading for a “relatively slow recovery” as it emerges from the worst contraction in a generation, though the world financial system is in “a fragile condition.” To battle the crisis, the bank has cut the key interest rate to 0.5 percent, the lowest since it was founded in 1694, and is printing 175 billion pounds ($290 billion) of money to buy bonds. An official at the bank had no comment on this year’s tour.

Bank officials may have met and worked in rooms visitors would otherwise have seen on the tour of the historic chambers. Its headquarters take up a 3 1/2-acre block in the heart of London’s financial district, designed by Herbert Baker between 1925 and 1939 and incorporating elements of a previous building by Sir John Soane, the bank’s architect from 1788 until 1833.

Weather Vane

In the Court Room, a remnant of the original building close to where the bank’s Monetary Policy Committee meets to set interest rates each month, visitors will be able to see a dial linked to a weather vane and once used to set policy. Changes in wind speed and direction on the River Thames signaled that cargo ships may dock more quickly, and the heavier trading could boost demand for money and credit.

The Lehman collapse provoked a storm in financial markets. Bank officials started work “pretty much straight away” on a rescue plan which led to the government taking stakes in Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, former Deputy Governor John Gieve told the BBC last month.

“The pace at which things were moving in those two weeks after the Lehman’s bankruptcy is almost impossible to exaggerate,” Adair Turner, chairman of the U.K. Financial Services Authority, told lawmakers in November 2008.

Joint Action

The U.K. rescue plan was announced on Oct. 8, the same day the central bank made a surprise half-point interest rate cut in joint action coordinated with other central banks.

Alan Greenspan, former chairman of the U.S. Federal Reserve and an informal adviser to Prime Minister Gordon Brown, said today Britain will be slow to rebound from the slump after the global recession battered exports.

“It’s going to take a long while for you to work your way through this,” he told the BBC. “Britain is more globally oriented as an economy.”

“The prime minister’s view is that this is not a time for complacency,” Simon Lewis, Brown’s spokesman, told reporters today in London. “The prime minister feels strongly about the need to keep recovery going by maintaining the appropriate level of expenditure.”

The crisis created “exceptional levels of stress” in many parts of the bank, according to its annual report released in May. The Bank of England expanded its bonus pool and took on the most staff in more than two decades as events unfolded. The number of employees rose by about 6 percent and the bonus pot was widened to encompass 8.1 percent of salaries.

“It really struck me just how hard people were working,” said Daiwa’s Ellis. “The bank’s very lucky to have such a dedicated and able staff at its fingertips. Now the projects that had been put on hold can start up again.”

To contact the reporters on this story: Jennifer Ryan in London at Jryan13@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.

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Polish Bonds, Zloty Fall After ‘Low’ Demand at 5-Year Bond Sale

By Piotr Skolimowski

Sept. 9 (Bloomberg) -- Polish bonds weakened and the zloty fell after the Finance Ministry sold near the lowest amount of five-year notes on offer today in the first auction since the government said the budget deficit will almost double next year.

The decline in bonds pushed the yield on the notes three basis points higher to 5.75 percent after the results were announced, according to PKO Bank Polski SA. Yields move inversely to prices. The zloty extended its losses, weakening 0.8 percent to 4.1200 per euro as of 1:40 p.m. in Warsaw.

Poland sold 1.11 billion zloty ($390 million) of 5.75 percent Treasury bonds maturing in April 2014, the Finance Ministry said today. The ministry offered between 1 billion and 2 billion zloty of debt.

Poland is struggling to curb its budget deficit even as it leads the European Union in growth, expanding 1.1 percent in the second quarter. The government yesterday approved a draft 2010 budget capping the central government deficit at 52.2 billion zloty, almost twice this year’s level.

“These are not good results,” said Warsaw-based Maciej Slomka, head of fixed-income trading at Bank Pekao SA, Poland’s biggest bank by market value. “The demand was low and it seems like the news about the budget was what scared people off.”

Investors offered to buy 2.16 billion zloty of five-year bonds. The minimum price was set at 999.60 zloty and the average yield was 5.736 percent. In the previous sale of the notes on Aug. 12, the ministry sold 3.5 billion zloty of debt at a yield of 5.55 percent and demand was 4.97 billion zloty.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

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Hockuba Sees Polish Economy Growing This Year, PAP Says

By Katya Andrusz

Sept. 9 (Bloomberg) -- The Polish economy will “very probably” post positive growth this year, while it may expand more slowly in the third quarter than in the second, PAP newswire cited central bank board member Zbigniew Hockuba as saying in an interview.

The country’s economy should grow faster in 2010 than this year, Hockuba said, according to PAP. The annual inflation rate will remain above the central bank’s target this year and slow to the target in mid-2010, he added.

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Barclays Sees ‘Limited’ Euro Upside After Climb to 9-Month High

By Candice Zachariahs

Sept. 9 (Bloomberg) -- Gains in the euro may be limited after it climbed to a nine-month high against the greenback as a weak euro-region recovery prevents the European Central Bank from “aggressively” raising interest rates, Barclays Capital said.

The bank advised investors to buy options betting demand for the single currency will abate as it rises toward $1.52. Investors may benefit by purchasing the right to buy the euro at $1.4150 in three months with a so-called reverse-knock-out at $1.52, said analysts led by David Woo, global head of foreign- exchange strategy at Barclays Capital in London.

“With the euro having hit $1.45, we see the remaining upside as limited,” the analysts wrote in a note to clients yesterday. “The headwinds are likely to be greater the further up the euro moves.”

The euro traded at $1.4514 at 10:08 a.m. in Tokyo from $1.4478 in New York yesterday, when it reached $1.4535, the highest level since Dec. 18. It has gained 2.2 percent over the past month.

A reverse knock-out clause would render the option worthless if the currency gained to more than $1.52. The median forecast of 45 financial institutions surveyed by Bloomberg News is for the euro to end the year at $1.42.

“While the U.S. dollar outlook remains negative, the euro is the beneficiary by default, rather than justice,” the analysts wrote. “Eurozone two-year note yields are trading close to their lows, suggesting that the pace of recovery is not sufficient for investors to expect the ECB to raise rates aggressively.”

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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Gold May Reach Record This Year on Weaker Dollar, Survey Shows

By Nicholas Larkin and Halia Pavliva

Sept. 9 (Bloomberg) -- Gold, trading near an 18-month high in New York, may advance to a record before the end of the year as investors seek to hedge against a weaker dollar and possible inflation, a survey showed.

Bullion futures will surpass the $1,033.90 an ounce reached in March 2008, according to 10 of 12 traders, investors and analysts surveyed by Bloomberg. Gold for December delivery climbed as high as $1,009.70 an ounce on the Comex division of the New York Mercantile Exchange yesterday, after breaching $1,000 for the first time since Feb. 20.

Governments cut interest rates and the Group of 20 nations pledged about $12 trillion to combat the first global recession since World War II, International Monetary Fund data show. The U.S. Dollar Index, a six-currency gauge of the dollar’s strength, slid to more than an 11-month low yesterday.

“Extremely loose fiscal and monetary policies are likely to create an inflation headache down the road,” said Mark O’Byrne, managing director of broker GoldCore Ltd. in Dublin. “With the dollar’s global reserve status being increasingly questioned, the dollar is likely to fall further in the coming months and lead to further diversification into gold.”

Gold rose 0.5 percent to $1,003 an ounce at 3 a.m. in New York today. The metal may climb as high as $1,200 this year, O’Byrne said in an e-mail.

Gold Trust

The SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, reached a record 1,134.03 metric tons on June 1. The fund, which held 1,077.63 tons as of Sept. 8, overtook Switzerland as the world’s sixth-largest gold holding. Bullion held in ETF Securities Ltd.’s exchange-traded products reached a record 8 million ounces (248.8 tons).

The metal may fall as low as $950 before rebounding to $1,200 “toward the end of the year,” Ashraf Laidi, chief market strategist at CMC Markets in London, said in a Bloomberg Television interview yesterday.

President Barack Obama has increased U.S. marketable debt to an unprecedented $6.78 trillion as he borrows to spur the world’s largest economy. Goldman Sachs Group Inc. predicts that the U.S. will sell about $2.9 trillion of debt in the two years ending September 2010.

“Markets believe that the Federal Reserve is not going to withdraw liquidity fast enough and there will be inflation,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois.

Inflation Forecasts

U.S. consumer prices will drop 1.6 percent this quarter compared with the same period last year before rising 1.4 percent in the fourth quarter and 2 percent in each of the subsequent two quarters, according to the median estimate of economists surveyed by Bloomberg News.

Gold futures dropped 14 percent in the six weeks after they last reached $1,000. Investors should avoid buying gold at that level because investment demand is weaker than it was earlier this year, John Reade, a London-based analyst at UBS AG, said in a note yesterday.

Demand in India, the world’s largest buyer of the metal, is about 5 percent to 10 percent of last year’s peak, partly because of drought in parts of the country, he said. The bank maintained its one-month and three-month forecasts for the metal at $950 and $1,000 an ounce respectively.

Gold may reach $1,050 in the “short term” before falling, Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in an e-mail.

“The market keeps talking inflation but the price of gold is already inflated,” Perez-Santalla said. “I won’t put my money into gold and I know many traders and their families that are rummaging their jewelry looking for scrap to sell to take advantage of these high prices.”

Scrap sales were a record 1,218 tons last year, increasing supply, according to London-based researcher GFMS Ltd. Second- quarter sales may have shrunk to 350 tons, more than 40 percent less than in the preceding three months, GFMS said July 31.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Halia Pavliva in New York at hpavliva@bloomberg.net

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Sakakibara Says Dollar Will Remain Reserve Currency

By Yoshiaki Nohara and Shigeki Nozawa

Sept. 9 (Bloomberg) -- Eisuke Sakakibara, formerly Japan’s top foreign-exchange official, said the dollar will stay the main reserve currency after a United Nations report this week said the greenback’s role in global trade should be reduced.

“The U.S. will remain as the world leader for at least a few more decades,” Sakakibara, the Democratic Party of Japan’s top choice in 2003 to lead the Finance Ministry, said today in an event hosted by the Japan National Press Club in Tokyo. “The dollar will stay the reserve currency for the next 20 years.”

The comment by Sakakibara, known as “Mr. Yen” from his 1997-1999 tenure at the Ministry of Finance, comes after a UN report published Sept. 7 said a new currency should be created to reduce the dollar’s role and protect emerging markets from the “confidence game” of financial speculation. China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis led to the worst global recession since World War II.

Prime Minister-designate Yukio Hatoyama’s Democratic Party of Japan has no plan to diversify the country’s foreign reserves away from the dollar, party Secretary-General Katsuya Okada said on July 24. Japan, the biggest international owner of U.S. government debt after China, raised its total holdings of Treasuries by $34.6 billion to $711.8 billion in June.

Sakakibara said the DPJ hasn’t approached him to take a role in Japan’s new government.

‘Plenty of Room’

Japan should sell an extra 10 trillion yen ($108.1 billion) in government bonds to pay for economic stimulus measures, Sakakibara said. Ten-year yields, now at 1.325 percent, will stay below 2 percent even if debt sales increase, he said.

“The market has plenty room to take in that amount of bonds,” Sakakibara said. More issuance is “the only choice the government has to fund new measures and deal with falling revenues,” he said.

Japan’s debt burden will probably spiral to 197 percent of gross domestic product next year, according to the Organization for Economic Cooperation and Development. The Finance Ministry in April said it will boost bond issuance by 15 percent to 130.2 trillion yen this fiscal year.

Sakakibara also said a single regional currency for Asia won’t become a reality until China deregulates its currency.

“China is unlikely to remove regulations on its currency for at least 10 years,” Sakakibara said. “The common Asian currency won’t be created until that happens.”

Japan should work with other Asian nations to create a single regional currency, the DPJ’s Hatoyama wrote in the New York Times last month.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at Snozawa1@bloomberg.net.

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Moody’s Says U.K., Spain to Retain Top Credit Ratings

By Shamim Adam

Sept. 9 (Bloomberg) -- The U.K. and Spain are unlikely to lose their top credit ratings even after being “severely hit” by the global economic crisis, Moody’s Investors Service said.

Germany and France, other Aaa-rated countries which had been more affected by the crisis than Moody’s expected, remain “resistant,” Pierre Cailleteau, managing director of sovereign risk at the ratings company, said in a statement today. The U.S. doesn’t face any “downward rating pressure” in the next few years even as its balance sheet expands, Moody’s said.

The global economy is emerging from the worst recession since the 1930s, supporting governments’ decisions to increase debt levels to finance spending. Officials from the Group of 20 nations this month expressed caution on the world economic outlook and judged it premature to start unwinding record-low interest rates and about $2 trillion in fiscal stimulus.

“Almost all Aaa-rated sovereigns have been hit more severely by the global downturn than we expected earlier this year,” Moody’s said. “Nevertheless, all Aaa countries now have stable outlooks, indicating that we do not expect rating downgrades over the near term.”

At least 17 economies are rated Aaa by Moody’s. In July, it lowered its top credit rating on Ireland by one step to Aa1, citing the country’s rising debt burden and a “sudden and brutal economic and financial adjustment.”

‘Irreversible Deterioration’

“Although highly unlikely, it is conceivable that a large and wealthy economy could lose its Aaa rating if it were to experience a material and irreversible deterioration in its debt conditions over the next five years or so, following the fate of Japan in the 1990s,” Cailleteau said.

Japan lost its Aaa credit rating in November 1998 as Moody’s said government efforts to spend its way out of recession had proven costly and ineffective. In May this year, the company unified the foreign- and local-currency debt rating for Asia’s largest economy at Aa2. Japan’s public debt is now nearing 200 percent of gross domestic product.

Standard & Poor’s this year cut its ratings for Ireland, Greece, Portugal and Spain following the economic slump.

Moody’s categorizes its Aaa-rated economies as resistant, resilient or vulnerable. Resistant countries are ones which started the crisis from a robust financial position and aren’t undergoing lasting changes to their economic models, it said, pointing to Canada as an example.

Resilient, Vulnerable

Resilient economies are those that “test the Aaa boundaries” because public finances are deteriorating considerably even as their balance sheet flexibility allows them to retain their ratings, Moody’s said. Those classified under vulnerable have public finances that “seem to be stretched to the point of no return in the Aaa category,” the report said, citing Ireland.

Spain’s rating is more resistant than vulnerable, Moody’s said. It is a “safe distance” from being downgraded because growth will be better than expected, the company said.

“Spain entered the global financial crisis with relatively low debt,” Moody’s said. “Even though it is running large budget deficits due to both explicit fiscal easing and automatic stabilizers, it is likely to exit the crisis with, at most, a middling debt level.”

The U.K. and the U.S. have “lost altitude” in their ratings even as they remain resilient, Moody’s said. S&P in May lowered its outlook on Britain to “negative” from “stable” and said the nation faces a one-in-three chance of a ratings cut as debt approaches 100 percent of GDP.

Budget Deficit

In the U.S., the government and the Federal Reserve have spent, lent or committed more than $12 trillion in a bid to revive the economy and credit markets. The budget deficit is projected to reach $1.6 trillion this year and $1.4 trillion in 2010, according to the nonpartisan Congressional Budget Office.

“The U.K. and the U.S. are showing signs of recovery,” the Moody’s report said. “However, to retain their ‘resilient’ status, the U.K. and U.S. will need to severely adjust their fiscal policies, even in the unlikely event of a vigorous rebound in their economies.”

U.K. Chancellor of the Exchequer Alistair Darling predicts the budget deficit will reach 175 billion pounds ($290 billion), or 12.4 percent of GDP, in the year through March 2010, the biggest shortfall since World War II.

“We assume that the adjustment to the U.K.’s public finances that is likely to take place in the context of the forthcoming elections, probably through cuts in spending, will keep the debt trajectory within Aaa boundaries,” the Moody’s report said. “Broad acceptance among the public of the inevitability of cuts in government expenditure and tax increases suggests such consolidation is at least possible.”

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

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UBS Cuts Dollar Forecast on Risk Appetite, Stock Gain

By Ron Harui

Sept. 9 (Bloomberg) -- UBS AG, the world’s second-largest currency trader, lowered its forecasts for the dollar against currencies such as the euro and the pound, citing improving risk appetite and gains in stocks.

The dollar will weaken to $1.45 per euro in a month, compared with a previous forecast of $1.40, and it will fall to $1.63 per pound, versus an earlier prediction of $1.57, Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich, wrote in a research note today.

UBS predicts Australia’s dollar will rise to 88 U.S. cents in one month, compared with an earlier prediction of 80 cents, and New Zealand’s dollar to climb to 71 cents, from an earlier forecast of 65 cents. Canada’s dollar will strengthen to C$1.05 per U.S. dollar in one month, versus C$1.15 previously, UBS said.

“The combination of risk-seeking U.S. investors diversifying their portfolios and equities rallying further will keep the U.S. dollar weak near term,” Mohi-uddin wrote. “We lower our one- and three-month forecasts for the greenback.”

The dollar declined to $1.4497 per euro as of 11:31 a.m. in Tokyo from $1.4478 in New York yesterday, when it dropped to $1.4535, the lowest level since Dec. 18. The greenback fell to $1.6527 per pound from $1.6490, after reaching $1.6587 yesterday, the weakest since Aug. 21. The U.S. currency traded at C$1.0774 from C$1.0784.

The Australian dollar traded at 86.05 U.S. cents from 86.16 cents yesterday and the New Zealand dollar advanced to 69.67 cents from 69.61 cents.

Stock Gains

The MSCI World Index of stocks has gained 60 percent since falling to a 13-year low on March 9. It has risen 1 percent this month after a 3.9 percent increase in August and an 8.4 percent advance in July.

The dollar has fallen against all of the 16 major currencies this week after finance ministers and central bankers from the Group of 20 nations pledged on Sept. 5 to maintain efforts to pull the global economy out of recession.

“The greenback has weakened following the G-20 meeting as policy makers made it clear that they remain reluctant to tighten,” Mohi-uddin wrote.

UBS kept its one- and three-month forecasts for the dollar against the yen unchanged at 95, citing “rising risk seeking behavior” supporting the dollar-yen exchange rate.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Brazil’s Real Gains for a Sixth Straight Day Versus the Dollar

By Glenn Kalinoski

Sept. 9 (Bloomberg) -- Brazil’s real gained for a sixth straight day, strengthening 0.3 percent to 1.8236 per U.S. dollar at 8:11 a.m. New York time, from 1.8296 yesterday.

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Mexico’s Peso Advances as Government Seeks to Cut Spending

By Jens Erik Gould and Andrea Jaramillo

Sept. 9 (Bloomberg) -- Mexico’s peso rose after President Felipe Calderon yesterday proposed spending cuts and increases in income, corporate and sales taxes in a bid to rein in a swelling budget deficit.

The peso strengthened 0.3 percent to 13.3235 per U.S. dollar at 8:24 a.m. New York time, from 13.3569 yesterday.

The government, which submitted its 2010 budget proposal to Congress last night, plans to cut spending by 218 billion pesos ($16.4 billion) as part of “unprecedented” steps to offset diminishing oil revenue and prevent a credit-rating reduction.

“They preferred to go with a less ambitious reform that has a higher probability of being approved,” said Gabriel Casillas, the chief economist for Mexico at UBS AG in Mexico City. “Even if it is approved as is, we see a low likelihood that it will avoid a downgrade because it’s not creating significant new sources of fiscal revenues.”

Mexico is seeking to bolster its fiscal position as the deepest economic slump since the 1930s reduces tax collection and output at the state oil monopoly declines. The proposed changes to tax laws would generate 176 billion pesos, the Finance Ministry said. Calderon’s economic package would also merge some government ministries, modify tax laws and change rules in a bid to boost competition in the energy, banking and telecommunications industries.

Oil Income

Credit rating agencies say Mexico needs to reduce its dependence on oil income, which finances 38 percent of the budget. Standard & Poor’s may cut Mexico’s BBB+ credit rating before the end of the year, depending on how Calderon and legislators address ways to boost tax collection, analyst Lisa Schineller has said.

On May 11, S&P lowered the outlook for the federal government’s foreign and domestic debt, which stood at $217.3 billion as of December, to negative from stable.

“The economic package considers the seriousness of the circumstances that we’re facing,” Calderon told reporters yesterday at the presidential residence in Mexico City. “The proposal I’m sending to Congress is a drastic and unprecedented adjustment in the exercise of public spending.”

Yields on Mexico’s 10 percent bond due December 2024 rose two basis points, or 0.02 percentage point, to 8.29 percent, according to Banco Santander SA.

To contact the reporters on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

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Yen Falls as Rebound in Equity Markets Blunts Demand for Safety

By Lukanyo Mnyanda

Sept. 9 (Bloomberg) -- The yen dropped against the euro and the dollar as a rebound in European equities reduced demand for Japan’s currency as a refuge.

The yen fell the most against the South Korean won and the British pound as Europe’s Dow Jones Stoxx 600 Index headed for a fifth day of gains. The pound advanced against 13 of the 16 most-traded currencies as a report showed U.K. consumer confidence rose to the highest level in more than a year. The Swedish krona snapped three days of gains against the euro after Moody’s Investors Service cut the long-term debt ratings of the nation’s lenders, including Nordea Bank AB.

“When risk appetite picks up Japanese investors will look for higher yields and that should pressure the yen in coming months,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “Carry trades are more attractive already.”

The yen slipped 0.3 percent to 134.07 per euro as of 6:36 a.m. in New York. It weakened 0.2 percent to 92.48 against the dollar. The pound rose 0.3 percent to 152.63 yen. The dollar slipped 0.1 percent to $1.4495 against the euro. It reached the weakest level since Dec. 18 yesterday.

The krona weakened to 10.2153 per euro, from 10.1999 yesterday. Sterling increased to $1.6510, from $1.6490.

Europe’s Stoxx 600 index climbed 0.3 percent, recovering from a decline of 0.5 percent. The regional gauge has surged 51 percent since March 9, when it touched the lowest level this year. Futures on the Standard & Poor’s 500 Index were little changed after slipping 0.6 percent.

Consumer Prices

The yen dropped even as consumer prices in Germany, calculated using a harmonized European Union method, fell 0.1 percent from a year earlier after dropping 0.7 percent in July, according to the Federal Statistics Office in Wiesbaden today. A recovery in France, the second-largest euro-area economy, remains fragile, European Central Bank governing council member Christian Noyer said today on Europe 1 radio.

The yen may rise against the dollar as it’s replaced as the favored currency for so-called carry trades, according to Royal Bank of Scotland Group Plc.

“Over the next few months we see the yen strengthening against the dollar and European currencies,” Greg Gibbs, a foreign-exchange strategist in Sydney, said today in a report. “We expect the yen to continue to be replaced by the dollar, and even possibly European currencies, as the preferred funding vehicle for higher-risk, higher-yielding assets and currencies.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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Copper Snaps Four-Day Rally After U.S. Consumer Credit Plunge

By Anna Stablum

Sept. 9 (Bloomberg) -- Copper snapped a four-day rally in London after consumer credit in the U.S., copper’s second- largest user, plunged more than five times as much as forecast, casting doubt on the strength of the economic recovery.

Credit declined for a sixth month, the longest run of declines since 1991, as U.S. banks restrict lending and job losses make Americans reluctant to borrow. The MSCI World Index of shares also dropped for the first time in five days before the release of the Federal Reserve’s Beige Book business survey.

“The consumer is very cautious, traumatized both by imploding equity and housing prices, as well as legitimate fears about losing employment,” Edward Meir, a metals analyst at MF Global Ltd., wrote today in a report. On demand for metals, “we do expect a modest pullback over the September-October time.”

Copper for three-month delivery fell $35, or 0.5 percent, to $6,440 a metric ton on the London Metal Exchange by 10:21 a.m. in London. Futures for December delivery shed 1.7 percent to $2.939 a pound in electronic trading on the New York Mercantile Exchange’s Comex division.

Consumer credit in the U.S. fell a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released yesterday in Washington.

Copper prices more than doubled this year on record imports in the first half from China, the world’s largest consumer. The LME Index of six metals is up 73 percent.

“Upward momentum in prices will be difficult to maintain in the face of an expected fall off in Chinese metals import volumes,” Frederic Lasserre, head of commodities research at Societe Generale SA in Paris, wrote today in a report.

Copper prices may average $5,900 a ton next year, compared with $4,563 so far this year, on “steady” demand, Meir said.

Lead Smelters

Among other LME metals for three-month delivery, lead fell $1, or 0.1 percent, to $2,454 a ton. Yesterday, lead climbed as high as $2,517.25, the highest intraday price since May 7, 2008.

The metal, used mainly in batteries, has led gains this year on the LME, partly on concern about closings of smelters in China because of tighter environmental enforcement.

At least half a million tons of lead capacity is under investigation, according to Standard Chartered Plc. The country produces some 4 million tons of lead a year, almost half of total global supplies of 8.5 million tons, it said.

Tin fell 1.1 percent to $14,720 a ton. The so-called backwardation, with nearby delivery prices trading at a premium to three-month tin indicating scarce supplies, rose to $622 a ton yesterday, up 53 percent from the previous session. That’s the highest level since June 2004.

LME data show one long position, or bet on higher prices, exceeds 40 percent of tin contracts to expire in September. There are five short positions, or bets the price will fall, for the same month, according to data from Sept. 4.

Zinc shed 0.1 percent to $1,979.50 a ton, aluminum fell 0.5 percent to $1,904 and nickel rose 1.1 percent to $18,140 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

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China Steel Output Rises 2% in August, Umetal Says

By Bloomberg News

Sept. 9 (Bloomberg) -- China, the world’s largest steelmaker, increased output to a record in August as government spending spurred building and manufacturing demand, according to industry publication Umetal.

Output was 51.7 million metric tons last month, Umetal analyst Hu Yanping said today, citing data from the China Iron & Steel Association. The country produced 50.7 million tons in July, according to the National Bureau of Statistics, which will announce official August output this week.

China is spending 4 trillion yuan ($586 billion) to revive its economy, bolstering demand for steel used in cars, houses and railways. Rising output and a price surge earlier this year have led to a 17 percent decline in benchmark Chinese steel prices in the past four weeks.

“Lower prices signal September steel output is likely to fall from the previous month,” Hu said over the phone from Beijing.

Some mills in the northern province of Hebei, the nation’s biggest steelmaking region, have brought forward annual maintenance or closed small furnaces amid slowing orders, she said.

--Helen Yuan. Editors: Tan Hwee Ann, Matthew Oakley.

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

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Cocoa Rises in London as U.S. Inventories Fall to 6-Month Low

By M. Shankar

Sept. 9 (Bloomberg) -- Cocoa rose for a second session in London as falling stockpiles signaled reduced supplies of the beans used to make chocolate.

Inventories in U.S. warehouses monitored by ICE Futures U.S. fell 0.6 percent yesterday to 2.78 million bags, the lowest since Feb. 12. Cocoa has climbed 24 percent in the past year as world output is estimated to fall 73,000 metric tons short of demand in the harvest year ending September 2009, the London- based International Cocoa Organization said Aug. 25.

Falling inventories “are certainly providing a floor if not some upside to this market,” London-based Sucden Financial Ltd. trader Stephanie Garner wrote in a report today.

Cocoa for December delivery advanced 15 pounds, or 0.8 percent, to 1,900 pounds ($3,135) a ton on the Liffe exchange at 12:20 p.m. local time. It earlier rose to 1,912 pounds, the highest since Sept. 3. December cocoa futures gained 0.8 percent to $2,975 a ton on ICE Futures.

Ghana, the world’s largest producer after the Ivory Coast, will miss its target of producing 1 million tons a year by the 2010-11 season, according to Tony Fofie, chief executive officer of the Ghana Cocoa Board.

The state-run industry overseer expects the West African country to meet the goal by the 2012-13 season, Fofie said in a Sept. 7 interview at the Cocoa Producers Alliance conference in Lome, Togo.

Among other agricultural commodities traded on Liffe, white, or refined, sugar for December delivery fell 0.7 percent to $542.90 a ton.

Adequate Sugar

India, the world’s biggest sugar consumer, has enough supplies to meet rising demand for the sweetener during the nation’s festival season over the next two months, according to the Indian Sugar Mills Association.

The “current year’s demand has been met by opening stock, production and imports,” President Samir Somaiya said in a phone interview from Mumbai today, echoing assurances about supply from the government.

Robusta coffee for November delivery climbed 0.4 percent to $1,500 a ton. Coffee output in Brazil, the world’s biggest producer, next year will be close to the record 48.5 million bags produced in the 2002-03 season, said Airton Camargo, the head of agribusiness data at the Agriculture Ministry.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net

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Japanese Stocks Fall, Led by Banks After JPMorgan Lowers Stance

By Masaki Kondo and Kotaro Tsunetomi

Sept. 9 (Bloomberg) -- Japanese stocks fell for the first time in three days, led by banks after JPMorgan Chase & Co. lowered its view on the nation’s banking industry.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, lost 3 percent and smaller rival Sumitomo Mitsui Financial Group Inc. dropped 2.7 percent after JPMorgan cut its investment ratings on the stocks. Canon Inc., which gets 28 percent of its sales from the Americas, slid 2.8 percent after the dollar weakened against the yen.

“We’re seeing signs of an economic recovery but have yet to figure out how long and resilient the recovery will be,” said Naoteru Teraoka, who helps oversee about $16 billion at Chuo Mitsui Asset Management Co. “All the catalysts have run out and institutional investors are staying on the sidelines. We need a positive surprise to see a clear trend in the market.”

The Nikkei 225 Stock Average declined 0.8 percent to close at 10,312.14 in Tokyo. The broader Topix index fell 0.7 percent to 939.84, with twice as many stocks retreating as advancing. The Nikkei extended its decline in the afternoon as futures on the Standard & Poor’s 500 Index slid.

Investors are betting a recovery in profits will accelerate in 2010, helping to justify valuations for this year that are the highest among the world’s biggest equity markets. Nikkei- listed shares trade at 22.7 times next year’s estimated earnings, almost half the level for 2009, according to data compiled by Bloomberg.

Rising Joblessness

Mitsubishi UFJ fell 3 percent to 527 yen, its steepest drop since July 9, and Sumitomo Mitsui lost 2.7 percent to 3,610 yen. Katsuhito Sasajima, an analyst at JPMorgan, lowered his view on the banking industry to “slightly bearish” from “neutral,” citing the possibility that credit charges will disappoint the market. Sasajima, the No. 2 ranked analyst for the industry in Institutional Investor’s 2009 survey, cut his ratings on Mitsubishi UFJ and Sumitomo Mitsui to “neutral” from “overweight.”

Mitsubishi UFJ and Sumitomo Mitsui have consumer-finance affiliates whose operating profits fell by more than half in the April-to-June quarter. The nation’s joblessness rate jumped to a record 5.7 percent in July, a statistics bureau report showed last month.

“Rising unemployment is driving up non-performing loans, which may rattle investor confidence in the banking sector again,” said Hiroshi Sato, chief investment officer of GCSAM Co., a fund-management company in Tokyo. “Redundancies are cost cuts for corporations but translate into lower incomes for households.”

‘Stronger’ Recovery

The dollar depreciated versus the yen to as much as 92.04 overnight from 92.81 at yesterday’s close of stock trading in Tokyo. A weaker dollar reduces the value of overseas sales at Japanese companies when converted into their home currency.

Canon, the world’s biggest maker of digital cameras, slid 2.8 percent to 3,490 yen. Toyota Motor Corp., the world’s largest automaker and which gets 31 percent of its sales in North America, slid 1.8 percent to 3,800 yen. Makers of electronics and cars were the second- and third-heaviest drags on the Topix, following banks.

Inpex Corp., Japan’s largest oil explorer, rose 3.9 percent to 770,000 yen. Closest rival Japan Petroleum Exploration Co. added 1.9 percent to 4,830 yen. An index of mining companies that includes both stocks had the steepest increase among the 33 groups in the Topix. Crude oil leapt 4.5 percent yesterday, the most in three weeks.

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

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Asian Stocks Decline on Share Sales; Alibaba.com, Lenovo Drop

By Patrick Rial and Shani Raja

Sept. 9 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index from a one-year high, as Alibaba.com Ltd.’s chairman sold a stake and Lenovo Group Ltd. shareholders reduced their holdings.

Alibaba.com, owner of China’s biggest electronic-commerce Web site, dropped 6.7 percent in Hong Kong after Chairman Jack Ma sold stock for $35 million, part of the at least $2 billion of sales announced in Asia in the past two days. Lenovo, China’s biggest maker of personal computers, declined 5.7 percent. Mitsubishi UFJ Financial Group Inc. retreated 3 percent in Tokyo after JPMorgan Chase & Co. cut the bank’s rating.

The MSCI Asia Pacific Index dropped 0.8 percent to 115.02 as of 7:58 p.m. in Tokyo after closing at the highest level since Sept. 24 yesterday. The gauge has gained 63 percent in the past six months on speculation the global economy is recovering. Stocks on the index are priced at an average 23 times estimated earnings, up from 14 times at the start of the year.

“The conundrum for investors is ascertaining whether market valuations are justified by the underlying macro-economic improvement or not,” said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. “The added equity issuance in recent days is symptomatic of companies and their corporate advisers taking advantage of increased investor appetite and higher share prices.”

Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,312.14. South Korea’s Kospi Index dropped 0.7 percent. Hong Kong’s Hang Seng Index fell 1 percent. CSK Holdings Corp. sank 7.6 percent in Tokyo, while Metro Pacific Investments Corp. dropped 14 percent in Manila after they announced share sales.

Genting Offer?

Malaysia’s Genting Bhd., Asia’s biggest listed casino operator, fell 4.2 percent after its Singapore unit said it’s planning a rights offer. China Communications Construction Co., a port builder, slipped 2.9 percent after first-half profit growth missed estimates.

Futures on the U.S. Standard & Poor’s 500 Index lost 0.3 percent. The gauge rose 0.9 percent yesterday after metal prices jumped as the dollar weakened and Goldman Sachs Group Inc. boosted its forecasts because of “increasing evidence of a stronger-than-anticipated recovery in global industrial activity.”

China’s growth accelerated in the second quarter as the nation became the first of the major economies to rebound from the global recession. Industrial production has started to climb in Japan, while a survey released yesterday showed Australian business confidence rose to a six-year high.

Australia’s statistics bureau reported declines in retail sales and home-loan approvals today. The country’s S&P/ASX 200 Index lost 0.3 percent, erasing an earlier gain of 0.7 percent.

Positive Surprise Needed

“We’re seeing signs of an economic recovery but have yet to figure out how long and resilient the recovery will be,” said Naoteru Teraoka, who helps oversee about $16 billion at Chuo Mitsui Asset Management Co. “All the catalysts have run out and institutional investors are staying on the sidelines. We need a positive surprise to see a clear trend in the market.”

Alibaba slumped 6.7 percent to HK$20.20 after Ma sold 13 million shares at an average price of HK$20.78 apiece. The stock had almost quadrupled this year before today, making it the fifth-best performing member in the MSCI Asia Pacific Information Technology Index.

Lenovo fell 5.7 percent to HK$3.45. TPG Inc., General Atlantic and Newbridge Asia raised HK$1.03 billion ($133 million) selling shares at HK$3.55 apiece, according to sales document.

Equity Finance

CSK dropped 7.6 percent to 387 yen after announcing plans to raise about 46 billion yen in a sale of preferred shares. The company also forecast a full-year net loss. Metro Pacific, owner of the Philippines’ longest toll road, plunged 14 percent to 5 pesos after saying it may raise as much as $345 million in a share sale.

Genting dropped 4.2 percent to 6.87 ringgit. Its Genting Singapore Plc unit, which is building one of two casinos on the island nation, said it plans to raise as much as S$1.63 billion ($1.14 billion) in a rights offer.

This year is on pace to be one of the five biggest years globally for equity financing in the last three decades, Tsutomu Fujita, chief equity strategist at Citigroup Inc. in Tokyo, wrote in a Sept. 7 report.

In Tokyo, Mitsubishi UFJ fell 3 percent to 527 yen, while Sumitomo Mitsui Financial Group Inc. lost 2.7 percent to 3,610 yen. Bank of Yokohama Ltd., Japan’s largest regional bank, sank 2.6 percent to 479 yen.

Katsuhito Sasajima, an analyst at JPMorgan in Tokyo, cut Mitsubishi and Sumitomo Mitsui, Japan’s two largest listed banks by value, to “neutral” from “overweight,” while Yokohama was slashed to “underweight” from “neutral.”

‘Critical Question’

Since the end of March, analysts have boosted EPS estimates by 17 percent for companies in the MSCI Asia Pacific, while the gauge has rallied 42 percent.

“The critical question is: What are the earnings underpinning the valuations?” said Macquarie Group Ltd.’s Tanya Branwhite, who was voted Australia’s top strategist in a fund manager survey by BRW/East Coles. “Valuations can only be assessed reliably if the earnings underpinning the valuations turn out to be correct.”

China Communications slipped 2.9 percent to HK$9.07. First-half profit missed analyst estimates, even as it rose 38 percent from a year earlier to 3.03 billion yuan, Credit Suisse said in a note today.

Some mining companies rose after gold jumped to as high as $1,009.70 in New York yesterday, a price not seen since March 2008. A gauge of six metals in London climbed 2.4 percent to the highest level since Aug. 13. Crude oil leapt 4.5 percent, the most in three weeks.

Rio Tinto Group, the world’s third-largest mining company, gained 0.7 percent to A$58.18. Inpex Corp., Japan’s largest oil explorer, climbed 3.9 percent to 770,000 yen.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

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European Stocks Climb for Fifth Day; BMW, Renault Lead Advance

By Sarah Jones

Sept. 9 (Bloomberg) -- European stocks rose for a fifth day, the longest winning streak since July, as gains by carmakers overshadowed speculation that a six-month rally has outpaced the prospects for earnings. Asian shares fell.

Renault SA rallied 5.1 percent as Chief Executive Officer Carlos Ghosn said the worst of the financial crisis is over. Bayerische Motoren Werke AG jumped 5.4 percent after Morgan Stanley and Royal Bank of Scotland Group Plc recommended the German automaker. Cie. Financiere Richemont SA led declining shares as the world’s largest jewelry maker urged “caution” on its sales outlook.

Europe’s Dow Jones Stoxx 600 Index advanced 0.2 percent to 238.42 at 11:35 a.m. in London, after swinging between gains and losses at least five times. The regional gauge, which has surged 51 percent since March 9, is valued at 45.8 times profit, the highest level since 2003, Bloomberg data show.

“When you just look at how much the market has gone up, it could get quite scary and could get an attack of vertigo,” Patrik Schowitz, European equity strategist at Bank of America Securities-Merrill Lynch in London, said in a Bloomberg Television interview. “If you do look at valuations and ignore interest rates, I would say the market is fairly valued.”

The MSCI Asia Pacific Index fell 0.8 percent from a one- year high as Alibaba.com Ltd. and Lenovo Group Ltd. retreated. Futures on the Standard & Poor’s 500 Index were little changed after the benchmark gauge for U.S. stocks climbed for a third consecutive day yesterday.

Renault Rallies

Renault rallied 5.1 percent to 32.83 euros after Ghosn, also chief executive officer of Nissan Motor Co., told Le Figaro in an interview that the worst of the financial crisis is over and a recovery will be “gentle” and spread over several years.

In contrast, European Central Bank President Jean-Claude Trichet said the crisis is not yet finished and it’s important for policy makers to consider how they will withdraw economic stimulus measures.

BMW jumped 5.4 percent to 33.73 euros after Morgan Stanley raised its recommendation for the world’s largest maker of luxury cars to “overweight” from “underweight” and RBS upgraded shares to “buy” from “hold.”

Separately, BMW and Daimler AG’s Mercedes-Benz unit are considering building a joint transmission plant in the U.S., expanding on their cooperation in purchasing.

Daimler added 1.9 percent to 32.79 euros.

Richemont Slips

Richemont dropped 3.9 percent to 28.84 Swiss francs. The jewelry maker said five-month revenue fell 16 percent, missing analysts’ estimates, as wealthy customers reduced spending on Cartier and Montblanc brands.

“Although the rate of decline in sales is slowing, we still urge caution,” Chairman Johann Rupert said.

Lonmin Plc lost 2.3 percent to 1,673 pence. Bank of America Corp. downgraded its recommendation on the third-biggest platinum producer to “neutral” from “buy,” saying a bid from Xstrata Plc was “not a sure thing.”

Petroplus Holdings AG slipped 2 percent to 25.42 francs. Europe’s biggest independent refiner by capacity is offering about $400 million of senior notes and $150 million of new convertible bonds and said it expects to raise about 290 million francs ($277 million) in an equity offering.

Alibaba, owner of China’s biggest electronic-commerce Web site, slumped 6.7 percent to HK$20.20 after Chairman Jack Ma sold 13 million shares at an average price of HK$20.78 apiece. The stock had almost quadrupled this year before today, making it the fifth-best performing member in the MSCI Asia Pacific Information Technology Index.

Lenovo, China’s largest maker of personal computers, fell 5.7 percent to HK$3.45 after TPG Inc., General Atlantic LLC and Newbridge Capital LLC raised HK$1.03 billion ($133 million) selling shares at HK$3.55 apiece.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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NYSE to Sell Stake in Amex Options Unit to Brokers

By Jeff Kearns and Nandini Sukumar

Sept. 9 (Bloomberg) -- NYSE Euronext agreed to sell stakes in the options business it purchased last year with the American Stock Exchange to seven brokerages including Bank of America Corp. and Barclays Plc, as it seeks to revive the division.

Citadel Investment Group LLC, Goldman Sachs Group Inc., TD Ameritrade Holding Corp., Citigroup Inc. and UBS AG will also buy stakes in NYSE Amex, the company said in a Business Wire statement today. NYSE Euronext will remain the biggest shareholder in the options exchange after the transaction, which is expected to close by the end of 2009, the company said.

In selling a stake to its biggest customers, NYSE is following a strategy pioneered by rivals such as Direct Edge Holdings LLC and Bats Global Markets, which are vying to become the U.S.’s third-largest equity exchange. In Europe, broker- owned trading systems including Turquoise and Chi-X Europe Ltd. have taken about a third of market share from traditional bourses such as London Stock Exchange Group Plc and Deutsche Boerse AG.

“Gone are the days an exchange could go it alone,” said Mamoun Tazi, European exchange analyst at MF Global Ltd. “Now they need their users and shareholders to be the same people. That relationship broke down when exchanges all went public. Now they are conceding defeat.”

Market Share

Once the nation’s second-largest options exchange, NYSE Amex has lost market share for eight straight years, to 5.8 percent in 2008 from 28.6 percent in 2000, according to data compiled by Options Clearing Corp. The proportion climbed to 5.9 percent in 2009. NYSE spent $260 million buying Amex in 2008.

The $1.9 trillion U.S. options market is growing faster than that for equities, where NYSE Euronext’s 217-year-old New York Stock Exchange has the largest share of business. The number of options changing hands doubled between 2005 and 2008.

The New York-based company also owns NYSE Arca, which has handled 11 percent of U.S. equity derivatives trading in 2009 and London-based Liffe, Europe’s second-largest futures market.

NYSE Euronext will continue to manage the daily operations of NYSE Amex, which would have its own chief executive officer and board of directors, according to the statement. Financial terms weren’t disclosed.

Selling stakes to customers “is certainly a trend but this isn’t a requirement for an exchange to be successful,” Gary Katz, CEO of rival New York-based International Securities Exchange, said in an interview at an industry conference in Interlaken, Switzerland today. “There are many examples of consortiums that haven’t worked. There is no guarantee of success. Only time will tell.”

Katz, who sold 49 percent of the ISE Stock Exchange to 11 companies to drive growth, said the bourse decided to fold that business into Direct Edge after drawing less than 2 percent of market share. ISE is the second-largest options bourse behind the Chicago Board Options Exchange.

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net; Nandini Sukumar in Interlaken, Switzerland at nsukumar@bloomberg.net.

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S&P 500 Moving Averages Show ‘Fierce’ Rally: Technical Analysis

By Michael Patterson

Sept. 9 (Bloomberg) -- A rise in the Standard & Poor’s 500 Index’s five-month moving average above its 15-month moving average for the first time since 2003 signals stocks are in the early stages of a bull market, said Alexander Associates LLP.

The S&P 500’s five-month moving average climbed to 974.39 yesterday, higher than the 15-month moving average of 972.56, according to data compiled by Bloomberg.

The five-month moving average rose above the 15-month line three other times in the past two decades: March 1991, October 1994 and July 2003. Each cross foreshadowed returns of at least 16 percent during the following 18 months.

“Every time you see these two cross, it signifies a major event,” said Anthony Hughes, a London-based investment manager at Alexander Associates. “It confirms the shift in market sentiment.”

The S&P 500 has returned 53 percent since March 9, when it closed at a 12-year low, as second-quarter earnings topped analysts’ estimates and a rebound in manufacturing and home sales signaled the economy is recovering from its worst recession since the 1930s. The rally compares with a 121 percent return during the last major bull market, from Oct. 9, 2002, to Oct. 9, 2007.

The S&P 500’s monthly moving average convergence/divergence line is another bullish sign for the market, according to Hughes. The so-called MACD rose above its signal line in July, indicating that the index is poised to climb, Hughes said. Technical analysts study chart patterns to predict prices.

“It starts to build a very strong case for a fierce bull rally,” Hughes said. Money managers “see the stars aligning.”

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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Casey’s, Lazard, Ramco-Gershenson, Vivus: U.S. Equity Preview

By Lu Wang

Sept. 9 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

AeroVironment Inc. (AVAV US): The maker of U.S. military spyplanes reported a loss of 17 cents a share in the fiscal first quarter. Analysts had expected the company to earn 12 cents, according to the average estimate in a Bloomberg survey.

Casey’s General Stores Inc. (CASY US): The owner of convenience stores in the Midwest reported earnings of 87 cents a share in the fiscal first quarter. That beat the average analyst estimate by 43 percent, according to Bloomberg data.

Lazard Ltd. (LAZ US): The investment bank led by Bruce Wasserstein said some shareholders agreed to sell 5.22 million shares in an underwritten public offering. Lazard won’t receive any proceeds from the sale.

Ramco-Gershenson Properties Trust (RPT US): The owner of shopping centers reduced its earnings forecast, saying it expects $1.86 a share at most this year. The company had previously anticipated at least $2.21.

Vivus Inc. (VVUS US): The developer of drugs for sexual dysfunction and obesity said it will announce the results from the Equip and Conquer Qnexa phase 3 obesity clinical trials before the market opens.

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

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U.S. Stock-Index Futures Fluctuate; Lazard Drops as EBay Rises

By Adam Haigh

Sept. 9 (Bloomberg) -- U.S. stock-index futures drifted between gains and losses after a six-month rally in the Standard & Poor’s 500 Index left the measure valued near the most expensive level in five years.

Lazard Ltd. dropped 3.3 percent after the investment bank led by Bruce Wasserstein said some shareholders agreed to sell 5.22 million shares in an underwritten public offering. EBay Inc. advanced 1 percent as Sanford C. Bernstein & Co. recommended buying the stock.

Futures on the S&P 500 expiring this month fell 0.1 percent to 1,024.20 as of 7:01 a.m. in New York. Dow Jones Industrial Average futures lost 0.1 percent to 9,486. Nasdaq-100 Index futures declined 0.2 percent to 1,652.

The S&P 500 has rebounded 52 percent from a 12-year low on March 9 as reports from consumer confidence to home sales signaled the recession is easing and companies from Johnson & Johnson to Goldman Sachs Group Inc. posted earnings that beat analysts’ estimates. The Federal Reserve will publish its Beige Book business survey today at 2 p.m. in Washington.

The rally has pushed valuations in the benchmark index for U.S. equities to about 18.9 times the reported earnings of its companies, near the highest level since June 2004, according to weekly data compiled by Bloomberg.

“Investors should be prepared for some additional near- term corrective action,” Robert Doll, the global chief investment officer at BlackRock Inc., wrote in an e-mail to journalists yesterday. “Stocks are no longer as cheap as they were several months ago. Conditions may be overbought and there is still a great deal of uncertainty over the outlook.”

Lazard, EBay

Lazard declined 3.3 percent to $37.73 in early New York trading. The company said it won’t receive any proceeds from the share sale.

EBay, owner of the most visited U.S. e-commerce Web site, climbed 1 percent to $22.05 after Bernstein raised its recommendation to “outperform” from “market perform” and lifted its share-price estimate 17 percent to $28.

Vivus Inc. soared 40 percent to $9.70. The developer of treatments for sexual dysfunction and obesity said its Qnexa drug helped patients lose enough weight in studies to allow the biotechnology company to seek U.S. approval to sell the treatment this year.

AeroVironment Inc. fell 1.5 percent to $29.96 in Germany. The maker of U.S. military spyplanes reported a loss of 17 cents a share in the fiscal first quarter. Analysts had expected the company to earn 12 cents, according to the average estimate in a Bloomberg survey.

Kraft Foods

Kraft Foods Inc., the world’s second-largest foodmaker, is in talks to arrange about $8 billion of financing for its bid to buy candy maker Cadbury Plc, according to two people with knowledge of the matter.

Separately, the company said it was targeting operating- income margins in the mid-teens on a percentage basis by 2011, up from 12.3 percent in 2008. The information was sent today in a regulatory filing. The shares added 0.5 percent to $26.59 in early New York trading.

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

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