Goods Orders, New-Home Sales in U.S. Probably Rose Last Month

By Timothy R. Homan

Sept. 25 (Bloomberg) -- Orders for durable goods probably rose in August for the fourth time in the last five months, a sign companies are gaining confidence the U.S. is emerging from the worst recession since the 1930s, economists said before reports today.

Bookings for long-lasting goods likely rose 0.4 percent, according to the median forecast of 75 economists surveyed by Bloomberg News. Another report may show purchases of new homes climbed last month to a one-year high, the survey showed.

Government stimulus measures such as “cash for clunkers” and credits to first-time homebuyers have revived manufacturing and housing, two areas that deepened the slump. Federal Reserve policy makers this week acknowledged the economy had picked up and pledged to keep interest rates low for the foreseeable future to ensure the rebound is sustained.

“The recovery is here, and it’s starting to look like it will be more robust than we previously thought” said Christopher Low, chief economist at FTN Financial in New York. “There’s no question it would not be happening at all without stimulus. But the stimulus is there and will continue to be there next year.”

The Commerce Department’s durable goods report is due at 8:30 a.m. in Washington. Survey estimates ranged from a decline of 2 percent to a 4 percent increase. The projected gain would follow a 5.1 percent surge in July that was the biggest jump in two years.

Broad Gains

Excluding transportation equipment, such as cars and aircraft, orders climbed 1 percent, according to the survey median. That would be the fourth monthly gain and the longest streak since November 2005.

Carmakers including General Motors Co. and Ford Motor Co. plan to boost output through the second half of the year to rebuild depleted inventories. The government’s $3 billion cash- for-clunkers incentive to trade in gas-guzzlers for more fuel- efficient vehicles lifted auto sales and production last month.

GM will add a third shift at three U.S. plants that are taking on additional production from factories slated to close or be idled. The facilities getting the new shifts are in Fairfax, Kansas; Fort Wayne, Indiana; and Delta Township, Michigan, GM said this week. The changes will restore 2,400 jobs, the Detroit-based company said.

“This is a really good day for GM employees,” Tim Lee, the company’s vice president of global manufacturing, said during a Sept. 22 conference call. An additional 600 jobs will be restored at stamping and powertrain facilities, he said.

New-Home Sales

Data on new-home sales, due from the Commerce Department at 10 a.m., will probably show sales rose 1.6 percent to a 440,000 rate, according to the survey median. They reached a record-low rate of 329,000 in January.

The Obama administration’s $8,000 tax credit for first- time buyers has helped boost new-home sales this year.

Sales of existing homes, meanwhile, unexpectedly fell last month for the first time since March. Purchases dropped 2.7 percent in August to a 5.1 million annual rate, the second- highest level in the last 23 months, the National Association of Realtors said yesterday. The median price dropped 12.5 percent from August 2008.

Housing starts rose to a nine-month high in August, the Commerce Department reported last week, signaling residential construction may soon add to growth after subtracting from gross domestic product since 2006.

The Standard & Poor’s Homebuilder Supercomposite is up 29 percent so far this year, compared with a 16 percent gain for the broader S&P 500.

Consumers are becoming less pessimistic as the recession eases. The Reuters/University of Michigan index of consumer sentiment probably rose to 70.5 this month from 65.7 in August, according to economists’ forecasts before today’s report, due at 10 a.m.

                        Bloomberg Survey

===============================================================
                         Durables Durables U of Mich New Home
                           Orders Ex-Trans    Conf.    Sales
                             MOM%     MOM%    Index   ,000’s
===============================================================
Date of Release              09/25    09/25    09/25    09/25
Observation Period            Aug.     Aug.  Sept. F     Aug.
---------------------------------------------------------------
Median                        0.4%     1.0%     70.5      440
Average                       0.4%     1.1%     70.5      442
High Forecast                 4.0%     2.3%     72.0      500
Low Forecast                 -2.0%     0.3%     67.0      420
Number of Participants          75       44       65       75
Previous                      5.1%     1.1%     70.2      433
---------------------------------------------------------------
4CAST Ltd.                    1.0%     2.0%     71.0      450
Action Economics              2.0%     0.6%     71.0      450
Aletti Gestielle SGR          2.2%     ---      71.0      440
Ameriprise Financial Inc      0.5%     0.8%     70.0      435
Argus Research Corp.         -0.5%     ---      71.0      430
Banesto                       0.4%     ---      70.0      440
Bank of Tokyo- Mitsubishi     0.9%     ---      68.8      441
Bantleon Bank AG             -0.5%     0.3%     70.2      436
Barclays Capital              0.5%     ---      71.0      445
Bayerische Landesbank         0.3%     1.0%     71.0      445
BBVA                         -0.7%     0.5%     70.3      446
BMO Capital Markets          -0.7%     1.5%     70.5      445
BNP Paribas                   0.0%     1.5%     70.0      450
Briefing.com                  1.2%     0.7%     71.2      425
Calyon                        0.2%     0.9%     70.0      437
Capital Economics             0.5%     0.8%     70.2      500
CIBC World Markets           -0.8%     0.5%     ---       444
Citi                          0.9%     1.1%     72.0      450
ClearView Economics           0.5%     ---      67.0      450
Credit Suisse                 1.0%     2.0%     70.0      430
Daiwa Securities America      2.0%     ---      ---       460
Danske Bank                   ---      ---      70.0      435
DekaBank                     -1.0%     ---      71.0      430
Desjardins Group              1.5%     ---      70.2      440
Deutsche Bank Securities      2.0%     0.5%     71.0      440
Deutsche Postbank AG         -0.2%     1.2%     70.5     ---
DZ Bank                       0.5%     1.1%     70.2      440
First Trust Advisors          0.1%     1.5%     71.0      447
Fortis                        0.5%     ---      ---       440
FTN Financial                 2.5%     1.5%     70.5      450
Goldman, Sachs & Co.          0.0%     ---      ---       442
Helaba                        0.0%     ---      ---       440
Herrmann Forecasting         -0.2%     0.5%     70.5      446
High Frequency Economics     -1.0%     0.5%     70.2      450
IDEAglobal                    0.3%     0.5%     72.0      445
IHS Global Insight            0.7%     ---      70.0      450
Informa Global Markets        0.5%     ---      69.5      440
ING Financial Markets         0.5%     1.0%     69.7      440
Insight Economics             2.0%     ---      70.0      445
Intesa-SanPaulo               1.0%     2.0%     69.5      450
J.P. Morgan Chase             1.0%     1.5%     70.0      440
Janney Montgomery Scott L     0.4%     1.1%     ---       427
Jefferies & Co.               0.8%     ---      70.5      466
Johnson Illington Advisor    -1.0%     ---      70.0      430
Landesbank Berlin             4.0%     1.5%     70.5      420
Landesbank BW                -1.0%     ---      70.5      440
Merrill Lynch/BAS             1.0%     2.3%     71.0      455
MFC Global Investment Man     0.7%     1.5%     71.0      445
Mizuho Securities            -2.0%     ---      70.5      433
Moody’s Economy.com           1.0%     1.0%     70.7      455
Morgan Keegan & Co.          -0.3%     ---      ---       421
Morgan Stanley & Co.         -0.6%     ---      ---       450
National Bank Financial       0.3%     1.5%     70.3      445
Natixis                       0.2%     1.1%     ---       450
Newedge                       0.1%     0.8%     70.0      440
Nomura Securities Intl.       1.2%     0.8%     ---       425
Nord/LB                      -0.5%     0.7%     70.0     ---
PNC Bank                     -2.0%     ---      ---       425
Raymond James                 1.5%     2.1%     71.0      460
RBC Capital Markets           0.4%     1.2%     70.5      447
RBS Securities Inc.          -1.5%     ---      70.2      425
Ried, Thunberg & Co.         -1.2%     ---      72.0      440
Schneider Foreign Exchang    -1.7%     0.6%     70.0      435
Scotia Capital                0.2%     0.6%     ---       470
Societe Generale              1.0%     1.0%     72.0      433
Standard Chartered            0.1%     0.8%     71.0      445
Stone & McCarthy Research     2.4%     ---      71.0      440
TD Securities                 1.0%     0.5%     72.0      445
Thomson Reuters/IFR           1.4%     1.0%     71.5      460
UBS                           ---      ---      71.0      440
UniCredit Research            0.0%     ---      71.0      435
Union Investment              ---      ---      70.5     ---
University of Maryland        1.5%     ---      70.2      443
Wells Fargo & Co.            -0.5%     0.5%     ---       440
WestLB AG                     0.8%     ---      70.0      445
Westpac Banking Co.           1.5%     ---      71.0      422
Woodley Park Research        -1.6%     ---      70.5      424
Wrightson Associates         -1.2%     ---      72.0      440
===============================================================

To contact the reporter on this story: Timothy Homan in Washington at thoman1@bloomberg.net

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Equinox May Reach Full Copper Production by Mid-2010

Sept. 25 (Bloomberg) -- Equinox Minerals Ltd., owner of Africa’s biggest copper mine, expects to reach full production at its Lumwana project in Zambia by the middle of next year.

“Once we are up to full-steam production, we should be able to achieve something of” the order of 170,000 metric tons of copper output a year, Chief Executive Officer Craig Williams said today in an interview. “At the end of the second quarter we should be hopefully getting pretty close to full productivity.”

Equinox cut its 2009 output target by as much as 35 percent last month because of insufficient availability of mining equipment and “challenges” in processing ore. The $841 million Lumwana mine, Zambia’s largest foreign investment project, began production in December 2008.

“The key thing you try to do is to have the mine output the same as the mill throughput,” Williams, 58, said. “ We’re not achieving that yet and we’re working on various productivity improvement programs to increase that mine output.”

Equinox fell 2.4 percent to A$3.40 at the 4:10 p.m. close in Sydney of the Australian stock exchange, giving it a market value of A$2.4 billion ($2.1 billion). The stock also trades on the Toronto stock exchange.

Takeover Opportunities

The company is looking at global takeover opportunities to expand, probably in copper, Williams said, adding that it isn’t “actively” involved in takeover talks at present.

“In a couple of years’ time I think we’ll have more than one producing asset,” he said. “The focus is certainly on looking for producing assets.”

Copper for delivery in three months on the London Metal Exchange rose 0.6 percent to $5,998 a ton at 4:26 p.m. in Sydney. It dropped as low as $2,845 on Dec. 24 last year and reached a record $8,730 on July 4, 2008.

“We’re heading into a bit of a crunch point,” he said. “Although demand has flattened out from what it was a couple of years ago, it’s still ticking along and there’s no supply coming through. The medium trend should see prices go north.”

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net

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Japan Copper, Alloy Output May Fall to 34-Year Low

By Jae Hur and Yasumasa Song

Sept. 25 (Bloomberg) -- Japan’s output of copper and copper alloy fabricated products may decline by 11.5 percent this fiscal year to the lowest in 34 years, according to the Japan Copper and Brass Association.

Production for the year that began in April is forecast to drop to 713,930 metric tons from 806,999 tons the previous year, the association said today, citing preliminary data. That would be the lowest level since 1975, when the country produced 574,000 tons. Output dropped 21 percent to 55,700 tons in August from a year earlier, the smallest decline since November, the data showed.

Japan’s exporters are in danger of being left behind by a global trade recovery as a change in government ushers in a tolerance for exchange-rate gains that threaten to erode profits. Exports fell 36 percent in August from a year earlier, the Finance Ministry said yesterday, an 11th straight decline.

Production of cars, electronics and semiconductors, the key users of copper and copper alloy products, hit bottom in the first quarter amid the economic slowdown, said Keizo Tani, research section manager at the association.

“However, the industry is experiencing a V-shaped recovery in demand, especially for hybrid and electric cars, since April, thanks to the government’s economic measures,” he said.

Yen High

A recovery in exports helped Japan’s economy grow for the first time in more than a year in the second quarter, ending the country’s worst postwar recession. Japan’s currency jumped to a seven-month high last week after Finance Minister Hirohisa Fujii, whose Democratic Party of Japan won elections promising to boost consumers’ purchasing power, said he didn’t support a weak yen.

The country’s copper wire and cable shipments may drop 15 percent this fiscal year to the lowest level in 38 years on slumping demand from construction companies and electric- machinery makers, according to the Japanese Electric Wire and Cable Makers’ Association.

Shipments, which include exports and domestic business, may decline to 648,000 metric tons in the year started April 1, the industry group said on Sept. 17. That compared with a March forecast of 705,000 tons and would be the lowest since the year that began April 1971, the group said.

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net

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Aluminum Imports by China to Drop on Prices, Antaike’s Li Says

By Bloomberg News

Sept. 25 (Bloomberg) -- Aluminum imports by China, the world’s largest user, will decline because the gap between domestic and international prices is not enough to encourage purchases, said a state-owned research company.

Inbound shipments of primary aluminum may be 100,000 metric tons per month from now to the end of December, Li Yang, senior aluminum analyst at Beijing Antaike Information Development Co., said in an interview yesterday. That compares with 117,213 tons in August and is down 72 percent from a record 362,400 tons in April, according to data compiled by Bloomberg.

Aluminum, used in homes, cars and drinks cans, has advanced 19 percent this year on the London Metal Exchange as China’s 4 trillion yuan ($586 billion) stimulus package and state stockpiling increased imports to a record and as the world recovered from its worst recession since World War II.

“We don’t expect another Chinese stimulus spending plan unless there is a double dip recession in the U.S. and Europe,” Li said. Therefore “we’re unlikely to see an unusual amount of imports next year.”

Shipments over the rest of this year may be mostly for tolling, or importing the primary metal in exchange for exporting the processed products, he said, adding he does not see any Chinese tax changes on aluminum before the year-end.

Commercial stockpiles of primary aluminum in China are currently at 400,000 to 500,000 tons, excluding State Reserve Bureau inventories of 590,000 tons, Li said. At the start of the year there was a deficit of commercial supplies because of the bureau’s buying on the domestic market, he added.

Production of primary aluminum in China may decline by 4 percent to 13 million tons this year from 13.6 million tons in 2008, and recover to as much as 14.5 million tons in 2010 as some facilities resume output. Consumption may be 12.5 million tons this year, the same as last year, he said.

He expects the price of aluminum on the London Metal Exchange to drop to $1,500 a ton by the end of the year and the price on the Shanghai Futures Exchange to decrease to 13,500 yuan per ton. Prices may return to $2,000 a ton and 16,000 yuan a ton next year because of improved global demand, he said.

--Li Xiaowei. Editor: Richard Dobson.

To contact the Bloomberg News staff on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

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Copper Imports by China to Decline on Stockpiles, Antaike Says

By Bloomberg News

Sept. 25 (Bloomberg) -- Copper imports by China, the world’s largest consumer, will drop as the country works off substantial stockpiles, said a state-owned research company.

Inbound shipments of refined copper may be 150,000 metric tons per month over the rest of the year, Li Yusheng, a senior copper analyst at Beijing Antaike Information Development Co., said in an interview yesterday. That compares with 219,731 tons in August and is less than half the record 378,943 tons in June, according to data compiled by Bloomberg.

Copper, used in pipes, wires and power cables, has doubled this year in London as China’s 4 trillion yuan ($586 billion) stimulus package and state stockpiling boosted imports to a record and as a recovery in the global economy drove demand.

The surge in first half imports was “very unusual”, said Li, who has followed the Chinese copper industry for 20 years. “There’re substantial inventories to be worked off before China steps up purchases again.”

The copper surplus in China so far this year may be as much as 1.2 million tons, including the State Reserve Bureau purchases, Li said. The bureau buying totaled 235,000 tons, according to a Caijing magazine report.

Refined copper production in China may climb 4.5 percent to 3.95 million tons this year from 3.78 million tons in 2008 and increase to 4.2 million tons in 2010, he said. Consumption may gain 10 percent this year to as much as 5.4 million tons.

He expects the London Metal Exchange price to drop as low as $5,000 a ton by the end of the year because of the surplus in China, and the Shanghai price to fall as low as 47,000 yuan a ton. He estimates an average next year of $4,780 to $5,000 a ton on the LME and 47,000 yuan in Shanghai.

Three-month delivery copper traded at $5,990 a ton at 1:58 p.m. in Beijing today.

--Li Xiaowei. Editor: Richard Dobson.

To contact the Bloomberg News staff on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

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Sugar’s ‘Perfect Storm’ May Triple Price by June, PFGBest Says

By Yi Tian

Sept. 25 (Bloomberg) -- Sugar futures may triple to the highest price since 1974 as a “perfect storm” of technical and fundamental indicators “come together in a pretty strong way,” said Martin Snow at commodity broker PFGBest.

Raw-sugar futures may jump to 66 cents a pound in New York before June, expanding a 2009 rally that sent prices to a 28- year high this month, Snow said. The price has gained 94 percent this year as adverse weather hampered harvests in Brazil and India, the world’s largest producers, threatening to extend a global-production deficit into next year.

“India is having the worst monsoon season in seven years, so they’ve got a crop-shortage problem until next year,” Snow, a senior commodity specialist, said on Sept. 23 from Los Angeles. “Brazil has some weather problems themselves, so they’re not able to fill the gap. You’ve got a set-up for a perfect storm, in terms of price construction, at least between now and going into the summer next year.”

India, expected to import 6 million metric tons this year, will need more in 2010 to make up for cane-crop declines, analysts and traders said. The world’s largest consumer of the sweetener will permit duty-free imports of white sugar until May or June, extending an earlier exemption, Farm Minister Sharad Pawar said. Last month, the duty-free window was widened to Nov. 30 for refined sugar and until March 31 for raw stock.

Demand from other countries, including Russia, Pakistan, Egypt, Indonesia and Japan, may also support prices before Brazil’s next harvest.

Center South Outlook

In Brazil’s Center South, which accounts for about 90 percent of the nation’s sugar output, production this year will trail earlier forecasts as the heaviest rainfall in more than two decades delays harvesting and reduces yields.

Unica, a Brazilian industry association, today forecast output of 29.35 million tons from the Center South, down 5.9 percent from an April estimate. The region produced 26.7 million tons a year earlier.

While next year’s crop may be bigger, supplies for export may be limited as mills juggle domestic needs and demand for ethanol, analysts said. The biofuel is made from cane in Brazil.

Compared with 1974, when prices shot up fivefold, and 1980, when they tripled, sugar was relatively stable for most of the past 20 years. A rally that began in late 2005 brought New York futures to 19.73 cents a pound in February 2006 and then faded by August.

After taking out the 2006 high, “the market has nothing to look for going all the way back to the 1970s and 1980s,” Snow said. By August of this year, prices shot past the 19.73-cent peak of 2006. Sugar “broke clearly above it, closed above it and stayed above it,” Snow said. “That’s technically very strong.”

Sugar may either top the 1974 high of 66 cents a pound in the next nine months or form a so-called double top, where prices match that level and then fall, Snow said. “And if that’s case, it will come down very quickly,” he said.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.

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Japan’s Topix Declines Most in 3 Months on Nomura’s Share Sale

By Masaki Kondo

Sept. 25 (Bloomberg) -- Japanese stocks sank, sending the Topix index to its biggest slide in three months, after Nomura Holdings Inc. said it will sell new shares and as the Group of 20 nations discuss tighter capital requirements for banks.

Nomura, Japan’s largest brokerage, tumbled 16 percent after announcing the issuance of stock that will dilute existing share value by about 30 percent. Mizuho Financial Group Inc. slumped 4.4 percent amid concern bad loans are increasing at banks. Japan Airlines Corp. dived 7.6 percent after its turnaround plan failed to satisfy the government. K.K. daVinci Holdings tumbled 10 percent on speculation the company can’t repay a loan.

“There is no bright spot in the financial industry as losses on non-performing loans will likely stay high,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $14 billion. “Even if banks increase capital to comply with tighter regulations, they may not get sufficient returns.”

The Nikkei 225 Stock Average slid 2.6 percent to close at 10,265.98 in Tokyo. The broader Topix index lost 2.9 percent to 922.67, the sharpest dive since June 16. Eight stocks dropped for each that rose and all industry groups on the Topix fell.

For this holiday-shortened week, the Nikkei dropped 1 percent, while the broader index lost 1.8 percent. Markets were shut Sept. 21 through Sept. 23.

Yesterday was the last day investors could get rights to dividends for some shares that will be paid on Oct. 1, according to Joinvest Securities Co., a subsidiary of Nomura.

‘Hanged Man’

Concerns are growing that banks will be saddled with bad loans as consumer lender Aiful Corp. and mobile-phone carrier Willcom Inc. seek to delay debt repayments, while Japan Airlines is asking for a fourth state bailout since 2001. With Japan’s deflation accelerating at a record pace in July, companies’ sales will likely continue to shrink and banks are getting cautious about expanding lending, said Tsutomu Yamada, at kabu.com Securities Co. in Tokyo.

“With non-performing loans increasing, Japan’s financial sector is like a hanged man whose legs are being pulled,” said Yamada. “The industry’s atmosphere is turning unpleasant.”

Nomura tumbled 16 percent to 573 yen, the steepest drop in at least three decades. Mizuho retreated 4.4 percent to 176 yen, while market leader Mitsubishi UFJ Financial Group Inc. dropped 5.4 percent to 493 yen. The two banks, along with No. 3 Sumitomo Mitsui Financial Group Inc., have raised $19 billion by selling shares since the end of December.

G-20 Meeting

Nomura plans to sell a record 511.3 billion yen ($5.6 billion) of stock to fund expansion in the U.S. The Tokyo-based brokerage will offer about 800 million shares, equivalent to almost 30 percent of the stock outstanding, according to documents filed to the Ministry of Finance.

Leaders of G-20 nations are meeting in Pittsburgh, where they are discussing measures to support the global economic recovery. They are also working on policies to require banks to hold more capital in reserve against potential losses and limit bankers’ pay. The two-day session ends today.

Japan Airlines dived 7.6 percent to 133 yen, adding to yesterday’s 16 percent plunge, after the nation’s transport minister said neither he nor banks were satisfied with a turnaround plan offered by the company.

DaVinci tumbled 10 percent to 7,750 yen in Osaka trading, extending its eight-day decline to 47 percent. The company said on Sept. 11 that it will unlikely be able to reach an agreement with creditors by the Sept. 25 deadline to extend a loan secured by a Tokyo building. Hideyuki Shinkai, a fund manager for Norinchukin Trust & Banking Co., said concern the company will default on the loan is causing the stock to decline.

In New York, the S&P 500 slid 1 percent after a report from the National Association of Realtors showed sales of existing U.S. homes dropped 2.7 percent last month, while economists had estimated purchases would increase.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, fell 2.6 percent, and smaller rival Fuji Heavy Industries Ltd. retreated 3.7 percent.

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

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Asian Stocks Decline on Nomura’s Share Sale, U.S. Home Report

By Shani Raja

Sept. 25 (Bloomberg) -- Asian stocks dropped the most in almost two weeks after Nomura Holdings Inc. announced a record $5.6 billion share offering and sales of existing U.S. homes unexpectedly declined.

Nomura, Japan’s largest brokerage, tumbled 16 percent. Mitsubishi UFJ Financial Group Inc., the nation’s biggest publicly traded bank, slid 5.4 percent. Toyota Motor Corp., which gets 31 percent of its sales in North America, dropped 2.6 percent. The dollar and yen rose against the euro as some investors sought haven amid speculation Group of 20 leaders will agree to regulate riskier investments.

The MSCI Asia Pacific Index fell 1 percent to 117.45 as of 4:41 p.m. in Tokyo. The gauge dropped 0.8 percent this week. It has surged 66 percent from a five-year low on March 9 on speculation improved global growth will boost corporate earnings.

“Investors are feeling twitchy,” said Shane Oliver, head of investment strategy with AMP Capital Investors Ltd., which manages about $78 billion. “There’s been some disappointing economic data and talk of exit strategies. The market worries that the withdrawal of stimulus will be premature, and that the recovery will be threatened when the punchbowl gets taken away.”

Japan’s Nikkei 225 Stock Average slumped 2.6 percent, while South Korea’s Kospi retreated 0.1 percent. Australia’s S&P/ASX 200 Index gained 0.3 percent, with Australia & New Zealand Banking Group Ltd. rising 1.3 percent after agreeing to its biggest acquisition since 2003.

Public Funds

Japan Airlines Corp. fell 7.6 percent as Prime Minister Yukio Hatoyama said public funds may be needed to support the carrier. Emeco Holdings Ltd., an Australian earthmoving company, tumbled 11 percent after ending takeover talks. New Zealand’s Fisher & Paykel Appliances Holdings Ltd. slumped 12 percent on a loss forecast. Among gainers today, Aiful Corp. surged 17 percent in Tokyo after Nikko Citigroup Ltd. upgraded the stock.

Futures on the Standard & Poor’s 500 Index rose 0.5 percent. The gauge dropped 1 percent yesterday after a report from the National Association of Realtors showed sales of existing U.S. homes dropped 2.7 percent last month, while economists had anticipated an increase. Separately, the Federal Reserve said it will cut the size of two programs meant to boost credit markets.

“I wouldn’t be surprised if we’d seen the peak of the market for this year because the economic news isn’t going to improve very much,” Marc Faber, the publisher of the Gloom, Boom & Doom report, said today in an interview with Bloomberg Television.

Stimulus Measures

Signs that government stimulus measures worldwide were reviving economies hit by the credit crisis have driven the MSCI World Index up by 63 percent from a 13-year low on March 9. The MSCI Asia Pacific Index’s rally since then has lifted the average price of the gauge’s members to 1.6 times book value from 1 at this year’s low.

The G-20 nations today conclude a two-day meeting in Pittsburgh on measures to help prevent the risk-taking that triggered the financial crisis. U.S. officials said they were uniting behind a plan to tighten capital requirements. The dollar today gained versus 15 of its 16 major counterparts, while the yen headed for a weekly advance against the euro.

“Worries the G-20 may impose stricter financial market regulations are causing risk aversion,” said Toshihiko Sakai, head of trading for foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “There’s safe- haven buying of the dollar and the yen.”

Share Sale

Nomura plans to sell a record 511.3 billion yen ($5.6 billion) of stock to fund expansion in the U.S. The Tokyo-based brokerage will sell about 800 million shares, equivalent to almost 30 percent of the stock outstanding, according to documents filed to the Ministry of Finance.

Nikko Citigroup Ltd. downgraded Nomura to “sell” from “hold.” Mitsubishi UFJ slumped 5.4 percent to 493 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank, dropped 4.2 percent to 3,120 yen.

“Investors are increasingly wary major financial companies will enter another round of equity sales,” said Tsutomu Yamada, at Tokyo-based kabu.com Securities Co.

ANZ Bank, Australia’s fourth biggest bank, rose 1.3 percent to A$23.79, after agreeing to buy ING Groep NV’s stake in their life insurance and wealth-management venture. National Australia Bank Ltd., the nation’s No. 1 by assets, climbed 1.8 percent to A$30.42.

“There’s no doubt Australian banks are carrying less risk than many global banks and that they do have some scope to be acquirers,” said Angus Gluskie, who manages about $300 million at White Funds Management Pty. in Sydney.

‘Less Risk’

Japan Airlines sank 7.6 percent to 133 yen. The airline may need to raise 150 billion yen in capital by Nov. 31 and a further 100 billion yen by March 31 to continue operating, Nikkei English News reported, without citing anyone.

Aiful surged 17 percent to 119 yen. Japan’s second-largest consumer lender by assets, which said yesterday it plans to cut jobs and close branches to reduce costs, climbed after Nikko Citigroup raised it to “hold” from “sell,” as concerns over near-term funding “dissipate.”

The company has been shut out of credit markets by the global financial crisis and is increasing provisions for repayments of interest overcharges. Bank of Japan board meeting minutes released today showed that members last month remained concerned that small companies are struggling to borrow.

Losses and Writedowns

The global credit crunch, worsened by the collapse of Lehman Brothers Holdings Inc. a year ago, has caused more than $1.6 trillion of writedowns and losses at the world’s biggest financial institutions. The MSCI Asia Pacific Index slumped by a record 43 percent in 2008.

Toyota, the world’s No. 1 automaker, dropped 2.6 percent to 3,710 yen. Honda Motor Co., which gets 47 percent of its sales in North America, lost 1.8 percent to 2,815 yen after the unexpected decline in home sales, which also caused commodity prices to fall.

BHP Billiton Ltd., the world’s biggest mining company, dropped 1 percent to A$37.34, after losing as much as 2.4 percent earlier on declining oil and metal prices. Rio Tinto Group, the third largest, slumped 1.5 percent to A$59.98. Inpex Corp., Japan’s largest oil explorer, lost 2.9 percent to 783,000 yen. Crude oil dropped 4.5 percent in New York yesterday to $65.89 a barrel, the lowest settlement since July 29, while copper slid 3.5 percent.

‘The Market’s Overbought’

“We’ve been saying for a while that the market’s overbought,” said Rob Patterson, who helps manage $3.3 billion at Argo Investments Ltd. in Adelaide. “There’s been a fair push with this rally, and it’s due for a rest.”

Emeco tumbled 11 percent to 84 Australian cents in Sydney, after the company ended takeover talks and a proposed offer by a financial investment firm was withdrawn. Fisher & Paykel Appliances slumped 12 percent to 65 New Zealand cents, after the nation’s largest maker of cookers and refrigerators forecast a full-year loss on weaker than expected U.S. sales.

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

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Arctic Oil Tempts Norway to Seek Drilling at ‘Gates of Hell’

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Arctic Oil Tempts Norway to Seek Drilling at ‘Gates of Hell’

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By Marianne Stigset

Sept. 25 (Bloomberg) -- Norway started a push to explore for oil and natural gas in more remote regions like its Arctic volcanic island of Jan Mayen, as the country seeks to reverse almost a decade of dwindling North Sea output.

“We’ve explored an increasingly large part of the Norwegian shelf,” Oil Minister Terje Riis-Johansen said in an interview on a trip to the barren outpost on Sept. 23. “If we now wish to develop Norway as an oil and gas nation, it will have to be in other areas.”

Diminishing access to traditional reserves is prompting countries to turn to unconventional sources such as oil sands and shale-rock formations to meet demand. Russia, Canada, the U.S. and Iceland are vying for a stake of the Arctic, which may hold as much as 50 percent of the world’s undiscovered oil, according to BP Plc.

Crude output from Norway, the world’s fifth-biggest oil exporter, peaked between 2000 and 2001 and may fall 9.7 percent this year, according to the Petroleum Directorate. Norway gets almost a 25 percent of its economic output from oil and gas, which has made it the world’s second-richest nation and financed its cradle-to-grave welfare system.

The minister held a seminar and trip for unions, business groups and environmentalists on the potential for exploration off the glacier-clad island north of Iceland, dominated by the world’s most northerly active volcano, Beerenberg.

‘Gates of Hell’

Jan Mayen is reputed to have been discovered by the Irish monk Brendan in the 6th century, who sailed past it during volcanic activity and thought he had found the “gates of hell,” according to a hand-out by the oil ministry.

“This is extreme exploration,” Bente Nyland, head of the Norwegian Petroleum Directorate, said in an interview on the island on Sept. 23. “You’re in an area where you have very little control, so you need to have a lot more knowledge before you can start any activity.”

BP, Europe’s second-largest oil company, estimates the Arctic Ocean may hold around 200 billion barrels of oil equivalent, or 25 percent to 50 percent of the world’s undiscovered hydrocarbons. The U.S. Geological Survey last year estimated the area to hold 90 billion barrels of oil.

“For 15 years we have indeed made many discoveries, but almost without exception small discoveries,” Per Terje Vold, head of the Norwegian Oil Industry Association, said. “Hence, the industry’s desire for new areas to explore.”

Island Annexed

Norway and Iceland last year signed an agreement clarifying an accord from 1981 on exploring for oil and gas between Iceland and Jan Mayen, which was annexed by Norway in 1926. Iceland has a head start and started offering licenses this year in the southern part of the so-called Jan Mayen Ridge, for which only two companies applied. Results will be announced in October.

Iceland offered about 100 licenses covering an area of about 40,000 square kilometers at depths of as much as 1,800 meters. Iceland has no estimates of the potential reserves in the area under licensing. Norway and Iceland conducted joint seismic surveys in 1985 and 1988 and Wavefield Inseis ASA, a Norwegian oilfield surveyor, made independent seismic surveys in 2006 and in 2008, according to Iceland’s Energy Authority.

“We have very little data coverage, so it’s not possible to give an estimate for any petroleum resources, but we can’t discard the potential,” Nyland said at a seminar on Sept. 21. “Some people have spoken of finds the size of Troll.”

Troll is Norway’s largest field with about 60 percent of Norway’s natural-gas reserves.

Government Planning

The directorate wants to drill a shallow well outside of Jan Mayen to assess geological structures of the so-called microcontinent. Nyland said she doesn’t anticipate drilling in the area until 2020, should petroleum reserves be proven. Riis- Johansen said he hoped to present a plan for the area to parliament during the current session, which ends in 2013.

The cost entailed due to the technological challenges caused by Jan Mayen’s distance to mainland Norway would require a significant find for any exploration activity to be initiated, the minister said. The island is 900 kilometers (560 miles) west of Norway and 550 kilometers north of Iceland.

“The find would probably have to bigger than anything we’ve seen in the past 10 years, should exploration be considered, otherwise the costs involved in operating so far out would be too high,” the minister said.

Terje Hagevang, the chief executive officer of Oslo-based Sagex Petroleum ASA, one of two bidders for Iceland’s licenses, said he’s convinced the area has potential and technological hurdles can be overcome.

Floating Unit

“We have indications that there can be oil and gas here,” Hagevang said on the phone from Oslo Sept. 22, adding that a floating production unit can be used. “It may be a problem if we find lots of gas because it’s more difficult to bring to a floater, but work is being done on that.”

Environmentalists are skeptical about how nature will fare should oil and gas be found. “The dollar signs light up in the eyes of the politicians, and then it gets to be really hard to be a seabird on Jan Mayen,” said Ingeborg Gjaerum, head of the environmentalist group Natur og Ungdom, at the Sept. 21 seminar.

The last major eruption of the island’s 2,277-meter (7,470 feet) volcano was in 1970, followed by a lesser one in 1985, and earthquakes shake the island regularly, including on Sept. 21. Fog and heavy winds can make landing on the island impossible for as long as a week, while reefs limit access by sea.

“I think these people should come spend a year here before they decide to do anything,” said Ingar Stenslet, an engineer on Jan Mayen. He’s one of 18 people stationed on the island for six months to a year at a time, who work for the Norwegian Armed Forces and the meteorological institute.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

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Marc Faber Says Stocks Have Likely Peaked for 2009

By Patrick Rial and Paul Gordon

Sept. 25 (Bloomberg) -- Stocks may have already peaked for this year and might drop 20 percent, Marc Faber, the publisher of the Gloom, Boom & Doom report, said today in an interview with Bloomberg Television.

The dollar is likely to rebound from an “oversold” position, which will be negative for equities, Faber said on the sidelines of CLSA Ltd.’s annual investor conference in Hong Kong.

“I wouldn’t be surprised if we’d seen the peak of the market for this year because the economic news isn’t going to improve very much,” Faber, 63, said.

The investor predicted on March 9 in a Bloomberg interview that equities would rally because of government stimulus measures. The Standard & Poor’s 500 Index dropped to a 12-year low that day and has since climbed 55 percent. The MSCI World Index rallied 63 percent in that time.

Official comments have been mixed even as economies around the world emerged from recession. Federal Reserve Chairman Ben S. Bernanke said on Sept. 15 that the U.S. recession is “very likely” over, while warning that growth may not be strong enough to quickly reduce unemployment. The Bank of Japan upgraded its assessment of the economy on Sept. 17 though said it remained concerned about the strength of the recovery.

Faber predicted today that gold “should correct” like equities. Gold futures rose above $1,000 an ounce for the first time in seven months on Sept. 11.

“We probably had a false breakout on the upside,” Faber said. “I wouldn’t be surprised to see a little bit more of a correction down to maybe $920 per ounce.”

Faber expects the dollar to rally as concerns about deflation prompt risk-averse investors to repatriate funds back to the U.S. The Dollar Index has slumped 8.4 percent in the past six months amid speculation investors are using borrowed dollars to fund asset purchases in other countries.

To contact the reporters on this story: Patrick Rial in Hong Kong at prial@bloomberg.net; Paul Gordon in Hong Kong at Pgordon6@bloomberg.net.

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Morgan Stanley’s Todd Boosts S&P 500 Year-End Target

By Sarah Jones

Sept. 24 (Bloomberg) -- Morgan Stanley’s Jason Todd, who had been Wall Street’s most bearish equity strategist, boosted his 2009 forecast for the Standard & Poor’s 500 Index by 17 percent because of higher-than-anticipated earnings.

The strategist recommended investors cut stock holdings in July following a 41 percent surge in the S&P 500 since March 9. Todd now expects the index to finish the year at 1,050 after it rose 10 percent to 1,050.78 since his comments two months ago. He also upgraded his 2010 profit forecast for S&P 500 companies by 13 percent to $70 a share.

“The current rally is typical of what follows major bear markets and is not, in our view, the start of a new multi-year bull market,” Todd wrote in a note to investors dated today. “However, we now think it can run for longer than we previously expected.”

Strategists at Wall Street’s biggest securities firms have failed to keep up with the S&P 500 after the steepest surge since the 1930s. The benchmark gauge for U.S. equities is above all but one of the 10 projections by forecasters in a Bloomberg survey this month, the first time that’s happened in data going back to 1999. The average estimate is 1,037.

While Todd’s year-end target is 0.1 percent below today’s close, he said the index could rise as high as 1,100 between now and Dec. 31.

Joyce, Garthwaite, Zyblock

Todd, whose prior forecast was 900, is now tied with Bank of Montreal’s Ben Joyce, Credit Suisse Group AG’s Andrew Garthwaite and RBC Capital Markets’ Myles Zyblock. Barclays Plc’s Barry Knapp is the most bearish at 930.

“None of the traditional equity market indicators are giving a strong sell signal,” Todd said. “Against a backdrop where growth data are likely to be strong into year end and where liquidity remains generous, we think the headwinds preventing the market from trading higher are limited.”

Todd also increased his 2009 earnings estimate by 7.8 percent to $55. Analysts estimate companies in the S&P 500 will end a two-year profit slump in the last three months of 2009, with earnings projected to rise 62 percent on average, according to forecasts compiled by Bloomberg.

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

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Agrium, CanWest, Research In Motion: Canadian Equity

By Sapna Maheshwari

Sept. 24 (Bloomberg) -- Shares of the following companies may have unusual moves in Canadian trading tomorrow. Stock symbols are in parentheses.

The Standard & Poor’s/TSX Composite Index fell 231.78 points, or 2 percent, to 11,285.76 today.

Agrium Inc. (AGU CN): Terra Industries Inc. (TRA US) said it plans to pay a $750 million dividend to shareholders as it seeks to thwart CF Industries Holdings Inc.’s (CF US) hostile takeover attempt. Agrium, North America’s third-largest fertilizer producer, is trying to purchase CF.

CanWest Global Communications Corp. (CGS CN): The owner of Canada’s Global television network and National Post newspaper’s sale of its 50.1 percent stake in Ten Network has been well received by investors, the Australian Financial Review reported in its Street Talk column, without saying where it got the information.

Research In Motion Ltd. (RIM CN): The company forecast third-quarter sales that missed analysts’ estimates, signaling the BlackBerry maker may sell phones at lower prices to compete with Apple Inc.’s (AAPL US) iPhone. The shares fell as much as 12 percent in U.S. trading following the projection.

To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.

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Grupo Mexico, Multiplan, Genomma Lab: Latin Equity

By Hugh Collins

Sept. 25 (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 fell 1.2 percent to 3,573.16. In Brazil, preferred shares usually are the most-traded class of stock.

Brazil

Itau Unibanco Holding SA (ITUB4 BS): Brazil’s largest non- government bank plans to open as many as 150 branches next year as Brazil’s economy grows faster, Chief Executive Officer Roberto Setubal said in Sao Paulo. Itau fell 1 percent to 33.15 reais.

Multiplan Empreendimentos Imobiliarios SA (MULT3 BS): The Brazilian real estate developer is raising 792.4 million reais ($440.1 million) in a share offering. The company is selling 29.9 million common shares for 26.50 reais each, according to details posted on the securities regulator Web site. Multiplan rose 1.9 percent to 27 reais.

Colombia

Textiles Fabricato Tejicondor SA (FABRI CB): Venezuelan President Hugo Chavez said it will be “difficult” to improve relations with Colombian President Alvaro Uribe, and that trade between the neighboring countries will fall to “zero.” Venezuela is Fabricato’s biggest export market. The shares slid 0.5 percent to 20.2 pesos.

Grupo Nacional de Chocolates SA (CHOCOLA CB): Colombia’s biggest food producer is “aggressively” seeking acquisitions, according to Chief Financial Officer Ana Maria Giraldo. The company is seeking opportunities in the Andean region, the Caribbean, Mexico, and the U.S., she said on the sidelines of a conference. Chocolates fell 1.7 percent to 22,520 pesos.

Mexico

Genomma Lab Internacional SAB (LABB MM): The producer of over-the-counter drugs was rated “buy” in new coverage at IXE Grupo Financiero SA. IXE analyst Raquel Moscoso cited the company’s “strong” financial position and the expected impact of an alliance with Grupo Televisa SA for the rating. Moscoso set a share price estimate of 23.50 pesos for the end of 2010. Genomma Lab rose 0.1 percent to 18 pesos.

Grupo Mexico SAB (GMEXICOB MM): The latest offer from Sterlite Industries (India) Ltd. to buy Grupo Mexico’s bankrupt Asarco LLC unit should be ignored by the court that will make the final decision, a bankruptcy court judge said in an opinion issued yesterday. Grupo Mexico, the country’s largest miner, fell 4.7 percent to 25.09 pesos.

To contact the reporter on this story: Hugh Collins in Mexico City at Hcollins8@bloomberg.net

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AMR, Cepheid, Hewlett-Packard, RIM, Tibco: U.S. Equity

By Lu Wang

Sept. 25 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

AMR Corp. (AMR US): The parent of American Airlines and four other carriers were upgraded to “buy” from “neutral” at UBS AG, which cited an economic recovery and lower bankruptcy risk. The other airlines are Alaska Air Group Inc. (ALKS US), Continental Airlines Inc. (CAL US), US Airways Group Inc. (LCC US) and UAL Corp. (UAUA US)

Cepheid Inc. (CPHD US): The maker of products to detect disease-causing agents in food and water said it won approval from the U.S. Food & Drug Administration to sell a test for genetic risk of thrombosis.

Hewlett-Packard Co. (HPQ US): The world’s biggest personal- computer maker forecast sales for 2010 that may miss some analysts’ estimates, indicating that the technology market is still taking time to recover.

Research In Motion Ltd. (RIMM US): The maker of the BlackBerry phone forecast third-quarter sales of $3.85 billion at most. That missed the average analyst estimate of $3.91 billion.

Tibco Software Inc. (TIBX US): The software company reported profit excluding some items of 13 cents a share in the fiscal third quarter, exceeding the average analyst estimate by 24 percent.

Terra Industries Inc. (TRA US): The fertilizer producer said it plans to return about $750 million in cash to shareholders through a special cash dividend of $7.50 a share,

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

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Buyout Firms Return as Select Medical Readies IPO

By Jason Kelly, Cristina Alesci and Michael Tsang

Sept. 24 (Bloomberg) -- The owners of Select Medical Holdings Inc. may almost double their money when the hospital operator goes public tomorrow as leveraged buyout firms take advantage of the steepest stock market rally in 70 years.

Welsh Carson Anderson & Stowe and Thoma Cressey Bravo LLC will hold a stake valued at more than $1 billion if Select Medical fetches $12 a share, the midpoint yesterday for its initial public offering price. The private-equity firms invested $617 million in cash when acquiring the Mechanicsburg, Pennsylvania-based company in February 2005, according to a regulatory filing.

Buyout firms are lining up IPOs to repay debt used to purchase companies and return profits to their investors. KKR & Co., Silver Lake and Fortress Investment Group LLC are among those planning share sales amid a 57 percent gain by the Standard & Poor’s 500 Index since March 9.

“In an environment in which private-equity performance has suffered, the ability to demonstrate cash-on-cash returns by exiting investments at an attractive valuation is compelling and may help firms raise future funds,” said Andrew Wright, a partner at law firm Kirkland & Ellis LLP in New York.

Select Medical plans to sell 33.3 million shares today at $11 to $13 apiece, raising as much as $433.3 million, according to a U.S. Securities and Exchange Commission filing. The stock is set to begin trading tomorrow on the New York Stock Exchange.

KKR’s Pair

Bankers arranged about $1.5 billion in financing for the Select Medical purchase by New York-based Welsh Carson and Thoma Cressey of Chicago, which subsequently split into two firms. The transaction was valued at $2.1 billion including assumed debt, according to data compiled by Bloomberg.

The firms will use IPO proceeds mostly to reduce Select Medical’s debt, they said in the filing. Officials didn’t return phone calls seeking comment.

KKR, based in New York, and Menlo Park, California-based Silver Lake, took Avago Technologies Ltd. public last month in a $745 million deal. The Singapore-based semiconductor maker has gained 16 percent since it began trading in early August. KKR subsequently filed an initial public offering for discount retailer Dollar General Corp. of Goodlettsville, Tennessee.

RailAmerica Inc., a Jacksonville, Florida-based railroad operator owned by Fortress, said Sept. 22 it increased the size of its IPO to $450 million from $300 million. New York-based Fortress bought the company in February 2007.

‘Pent-Up Supply’

Private-equity firms bought a record $1.4 trillion of companies in 2006 and 2007, the height of the leveraged-buyout boom. The global credit crisis brought dealmaking to a halt and prevented firms from selling companies they already owned.

“There is a pent-up supply of portfolio companies, many of which will go public,” said Jay Ritter, a professor of finance at the University of Florida. “During the last year, exits had ground to a halt.”

Companies are selling shares after the S&P 500 climbed in six straight months, restoring about $4.9 trillion to U.S. equity markets. The advance since the gauge fell to a 12-month low in March represents the steepest rally since the Great Depression, according to data compiled by Bloomberg.

Health-care stocks are the third best-performing industry behind household-product makers and technology companies in the S&P 500 since it climbed to a record 1,565.15 on Oct. 9, 2007.

Eleven companies may sell shares to the public this month, the most since January 2008, Bloomberg data show. The deals may raise $4.15 billion, the most since March 2008, when Visa Inc.’s $17.9 billion IPO accounted for almost all the money raised.

Cerberus Windfall

Five companies, including KAR Holdings Inc., a vehicle- auction company based in Carmel, Indiana, and Houston-based Cobalt International Energy Inc., an energy-exploration firm, filed this month to raise as much as $1.82 billion.

Among the biggest scheduled IPOs this month is Talecris Biotherapeutics Holdings Corp., the drugmaker controlled by private-equity firm Cerberus Capital Management LP and Ampersand Ventures, which plans to raise $850 million on Sept. 30, according to data compiled by Bloomberg.

The Research Triangle Park, North Carolina-based maker of protein therapies derived from blood plasma said in its Sept. 10 filing that it seeks to sell 44.7 million common shares at $18 to $20 apiece.

At $19 a share, Cerberus and Ampersand would reap a profit of $300 million for their investors selling 15.8 million shares. After the IPO, the private-equity firms will own 60.5 percent of Talecris, valued at $1.38 billion based on a $19 IPO price.

No More Dividends

Peter Duda, a spokesman for New York-based Cerberus, declined to comment, as did Becky Levin, a spokeswoman for Talecris, citing the quiet period before the IPO.

Cerberus and Ampersand of Wellesley, Massachusetts, created Talecris after buying Bayer AG’s plasma business in 2005. At the time, the purchase was valued at $590 million, with the private- equity firms investing a combined $125 million in cash.

Talecris has paid its owners at least $833.2 million in dividends since then, mainly funded by a $1.35 billion loan. Including the payouts, Cerberus and Ampersand are set to earn 20 times their initial cash investment in the company.

The company will use its share of IPO proceeds to pay down debt. It doesn’t plan to pay shareholder dividends after the IPO, using all earnings to finance operations, according to its prospectus.

To contact the reporters on this story: Jason Kelly in New York at jkelly14@bloomberg.net; Cristina Alesci in New York at Calesci2@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.

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U.S. Stocks Retreat on Drop in Home Sales, Cut in Fed Programs

By Rita Nazareth

Sept. 24 (Bloomberg) -- U.S. stocks fell for a second day as sales of existing homes unexpectedly slumped and the Federal Reserve said it will cut the size of two programs meant to bolster credit markets. Oil tumbled to a one-month low as the dollar strengthened, while Treasuries rose.

Alcoa Inc.,General Electric Co. and Caterpillar Inc. dropped at least 2.4 percent after the National Association of Realtors said purchases declined 2.7 percent last month. D.R. Horton Inc. fell 4.2 percent to lead declines in homebuilders. Bank of America Corp. and Citigroup Inc. retreated after the Fed said it will shrink emergency programs that auction loans to commercial banks and Treasuries to bond dealers.

“The housing data disappointed and investors will be looking for signs that the Fed will pull back a bit on the stimulus,” said Mark Bronzo, a money manager at Security Global Investors, which oversees $21 billion in Irvington, New York. “The stock market is tired and we may see a sell-off going to the end of the quarter.”

The Standard & Poor’s 500 Index lost 1 percent to 1,050.78 at 4:04 p.m. in New York, trimming its 2009 gain to 16 percent. The Dow slipped 41.11 points, or 0.4 percent, to 9,707.44.

Benchmark indexes rose in early trading after an unexpected decrease in jobless claims bolstered speculation that the economy is emerging from the worst recession in seven decades.

The S&P 500 yesterday dropped from its highest level since October. A 57 percent rally from March 9 through yesterday left the measure valued at about 20 times the reported earnings of its companies, the most expensive level since 2004, according to weekly data compiled by Bloomberg.

‘Reason to Sell’

“Things are not as bad as they were but it will obviously take a fair amount of time to have the economy growing,” said Richard Sichel, chief investment officer at Philadelphia Trust Co. in Philadelphia, which manages $1.3 billion. “Obviously when you have such a dramatic move in stocks, any disappointing economic number could be a reason to sell.”

The Fed signaled yesterday that the U.S. economy’s return to growth is insufficient to withdraw stimulus as officials seek to reduce the highest unemployment rate in a quarter century. While the economy has “picked up,” the central bank’s planned asset purchases will help ensure a “gradual return to higher levels of resource utilization,” the Fed’s Open Market Committee said.

‘Continued Improvement’

The Fed today cited “continued improvements” in financial markets for shrinking its liquidity programs. The Term Auction Facility will sell $50 billion in 70-day funds next month, down from $75 billion in 84-day funds in September, with the auctions’ size and maturity decreasing more in November and December, the Fed said. The Term Securities Lending Facility will shrink to $50 billion, and then $25 billion, from $75 billion.

A gauge of 79 banks, insurers and investment firms in the S&P 500 helped lead the index lower, falling 1.8 percent. The S&P 500 Financials Index has rallied 143 percent from a 17-year low on March 6 amid growing speculation that the worst of the credit crisis is over.

Bank of America fell 3 percent to $16.98, while Citigroup declined 2 percent to $4.43.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said plans by world leaders to overhaul financial regulation will curb banks’ profitability.

‘Political Will’

“The political will is clear: the banking sector will be given tighter boundaries and the profitability of the financial industry as a whole will be lower,” Ackermann wrote in a column in Switzerland’s Neue Zuercher Zeitung. Banks will be required to hold more, and “higher-quality” capital, while governments may set defined leverage ratios for banks, he added.

U.S. President Barack Obama and his counterparts from G-20 nations meet today warning that the recovery is still too weak to start reversing lifelines to banks and the broader economy.

A gauge of 12 homebuilders fell 2.2 percent and real-estate companies had the biggest decline in the S&P 500 among 24 industries, dropping 3.6 percent. Sales of existing homes decreased in August by 2.7 percent to a 5.1 million annual rate, still the second-highest level in the last 23 months, the National Association of Realtors said. The median price dropped 12.5 percent from August 2008.

D.R. Horton fell 4.2 percent to $11.93, while Lennar Corp. declined 4.5 percent to $14.82.

Bed Bath & Beyond, Electronic Arts

Bed Bath & Beyond Inc. dropped 3.3 percent to $37.75. The largest U.S. home-furnishings retailer said full-year profit will be $1.79 a share. Analysts predict annual profit of $1.80.

Electronic Arts Inc. fell 2.7 percent to $19.29, following a 7.1 percent rally yesterday. Microsoft Corp., responding to market speculation, said it isn’t seeking to buy the video-game publisher.

“There’s no truth” to the speculation, David Dennis, a Microsoft spokesman, said late yesterday. “We have no plans to purchase EA.”

Producers of raw-materials fell 2 percent for the steepest decline among 10 groups and energy shares lost 1.3 percent.

Gold fell the most in two months as the dollar rallied, reducing demand for the precious metal as an alternative investment. Copper prices tumbled to a one-month low. Crude oil for November delivery fell $3.06, or 4.4 percent, to $65.91 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $65.60, the lowest level since Aug. 17.

Dollar Strengthens

Freeport-McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper producer, fell 4.2 percent to $68.10. AK Steel Corp. tumbled 7 percent to $21.23. Chevron Corp., the second-largest U.S. oil company, lost 0.9 percent to $70.71, and Occidental Petroleum Corp. dropped 2.4 percent to $74.49.

The dollar gained 0.5 percent to $1.4656 per euro after declining to $1.4844 yesterday, the weakest level since Sept. 22, 2008. Treasuries gained for a third day. The 10-year note yield fell three basis points to 3.38 percent. The yield touched 3.361 percent, the lowest level since Sept. 14.

Bed Bath & Beyond Inc. lost 3.3 percent to $37.75. The largest U.S. home-furnishings retailer forecast full year profit of $1.79 a share, shy of analysts’ prediction of $1.80.

“We’ve certainly come very fast, very far,” Barry Ritholtz, chief executive officer and director of equity research at FusionIQ, told Bloomberg Radio. “The issue is -- are we going to see a rollover in six months or a consolidation or more gains? We suspect that we’re going to see some consolidation.”

McDonald’s Corp. was the biggest gainer on the Dow, rising 1 percent to $56.12. EVA Dimensions upgraded the world’s largest restaurant company to “buy” from “hold.”

Red Hat, Cintas Jump

Red Hat Inc. jumped 12 percent to $27.95 for the largest advance in the S&P 500. The biggest seller of the Linux operating system reported second-quarter sales and profit that beat analysts’ estimates as subscription revenue rose.

Cintas Corp. rose 6.5 percent to $30.20. The largest U.S. supplier of uniforms reported first-quarter profit of 43 cents a share, beating the average analyst estimate by 9.4 percent.

Morgan Stanley strategist Jason Todd today raised his year- end forecast for the S&P 500 to 1,050 from a previous estimate of 900. That’s still 1 percent below yesterday’s closing price.

“The current rally is typical of what follows major bear markets and is not, in our view, the start of a new multi-year bull market,” New York-based Todd wrote in a report to clients.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.

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