Unemployment in U.S. Probably Increased, Payrolls Dropped Again

By Bob Willis

Oct. 2 (Bloomberg) -- The U.S. jobless rate probably rose to a 26-year high in September as employers kept cutting staff, signaling consumers will not lead the recovery, economist said before a report today.

Unemployment likely climbed to 9.8 percent, the highest since 1983, from 9.7 percent in August, according to the median estimate of 81 economists surveyed by Bloomberg News. Payrolls probably fell by 175,000 workers, the smallest drop in 13 months, they survey also showed.

Federal Reserve Chairman Ben S. Bernanke yesterday said the expansion may not be strong enough to “substantially” bring down unemployment, indicating the central bank will be slow to drain the trillions of dollars it’s pumped into the economy. UAL Corp. is among companies still cutting jobs on concern spending will fade as government stimulus wanes.

“The magnitudes of the job losses are going to continue to get smaller, but unfortunately we don’t see very much hiring going on,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “Until that changes, doubts about the sustainability of this rebound in economic activity are going to linger.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ payroll forecasts ranged from declines of 100,000 to 260,000.

Employment Slump

The September projection would bring total jobs lost since the recession began in December 2007 to 7.2 million, the biggest decline since the Great Depression. Monthly losses reached a six-decade peak of 741,000 in January.

Economists surveyed by Bloomberg last month projected the jobless rate will reach 10 percent by late 2009 and average 9.7 percent for all of next year even as the economy expands at an average 2.6 percent pace in the second half of this year and 2.4 percent in 2010.

Bernanke told lawmakers in Washington yesterday that he anticipated the jobless rate will hold above 9 percent though 2010.

The Standard & Poor’s 500 Index is down 3.9 percent since Sept. 22 as figures on home sales, manufacturing and business spending were weaker than analysts anticipated. The index is still up 52 percent from a 12-year low in March as the economy showed signs of recovering.

While acknowledging that “economic activity has picked up,” Fed policy makers on Sept. 23 said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”

Less Income

Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Personal income was down 2.6 percent in August from a year earlier, a Commerce Department report yesterday showed.

General Motors Co. this week said it would close the Saturn brand after Penske Automotive Group Inc. broke off discussions to buy the unit. Saturn dealers will have until October 2010 to wind down operations. The Detroit-based automaker said in June a Saturn sale would have saved 13,000 jobs and 350 dealerships.

GM had called back some workers after the government’s “cash-for-clunkers” plan cut further into inventories that were already diminished during the bankruptcy shutdown.

Sales of cars and light trucks plunged last month after the $3 billion incentive plan expired in late August. Vehicles sold at a 9.2 million annual pace in September, down from a 14.1 million annual pace in August.

Job Cuts

Tenneco Inc., the largest North American maker of shock absorbers, said Sept. 22 it will shut a factory in Cozad, Nebraska, by the end of next year and shift production of the parts to plants in Georgia, Arkansas and Celaya, Mexico.

Airlines are also cutting staff. UAL’s United Airlines, the third-biggest U.S. carrier, last month furloughed 290 more pilots under a plan to trim jobs and limit labor costs, while American Airlines said it would furlough 228 flight attendants.

The Labor Department today will also publish its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February.

Employers cut 4.8 million jobs in the 12 months through March 2009, the period covered by the revisions. Economists at UBS Securities LLC in Stamford, Connecticut, said income tax records indicate about another 200,000 jobs were lost from March 2008 through December 2008.

                        Bloomberg Survey

===============================================================
                          Nonfarm Unemploy     Manu  Factory
                         Payrolls     Rate Payrolls   Orders
                           ,000’s        %   ,000’s     MOM%
===============================================================
Date of Release              10/02    10/02    10/02    10/02
Observation Period           Sept.    Sept.    Sept.     Aug.
---------------------------------------------------------------
Median                        -175     9.8%      -52     0.0%
Average                       -179     9.8%      -53     0.0%
High Forecast                 -100     9.9%      -35     2.1%
Low Forecast                  -260     9.6%      -75    -1.7%
Number of Participants          84       81       24       64
Previous                      -216     9.7%      -63     1.3%
---------------------------------------------------------------
4CAST Ltd.                    -155     9.7%     ---      0.0%
Action Economics              -160     9.8%      -65     1.7%
AIG Investments               -214     9.8%     ---     -0.7%
Aletti Gestielle SGR          -215     9.8%      -60     1.0%
Ameriprise Financial Inc      -190     9.7%      -50     0.8%
Argus Research Corp.          -260     9.8%      -75    -0.4%
Bancolombia SA                -150     9.8%     ---      ---
Banesto                       -185     ---      ---      1.1%
Bank of Tokyo- Mitsubishi     -202     9.9%     ---     -1.0%
Bantleon Bank AG              -160     9.8%     ---     -0.5%
Barclays Capital              -175     9.8%      -40     0.0%
Bayerische Landesbank         -180     9.8%     ---      1.1%
BBVA                          -190     9.8%      -35     1.2%
BMO Capital Markets           -170     9.8%     ---     -0.9%
BNP Paribas                   -175     9.9%     ---      1.0%
BofA Merrill Lynch Resear     -150     9.8%     ---     -0.5%
Briefing.com                  -225     9.9%     ---     -1.7%
Calyon                        -250     9.8%     ---     -1.1%
Capital Economics             -150     9.8%     ---     -1.5%
CIBC World Markets            -220     9.7%     ---      0.5%
Citi                          -175     9.8%     ---      0.0%
ClearView Economics           -175     9.9%      -50    -1.1%
Commerzbank AG                -150     9.8%     ---      1.0%
Credit Suisse                 -140     9.8%     ---      1.0%
Daiwa Securities America      -160     9.8%     ---      0.0%
Danske Bank                   -100     9.8%     ---      ---
DekaBank                      -170     9.7%     ---      1.0%
Desjardins Group              -200     9.8%     ---     -0.5%
Deutsche Bank Securities      -100     9.8%     ---     -0.5%
Deutsche Postbank AG          -200     9.8%     ---      0.8%
DZ Bank                       -170     9.8%     ---      1.3%
First Trust Advisors          -135     9.6%      -55    -0.8%
Fortis                        -190     9.8%     ---      ---
FTN Financial                 -150     9.8%     ---      0.4%
GAIN Capital                  -205     ---      ---      ---
Goldman, Sachs & Co.          -250     9.8%     ---     -1.0%
Helaba                        -210     9.8%     ---      0.5%
Herrmann Forecasting          -136     9.8%      -53    -0.6%
High Frequency Economics      -180     9.8%     ---     -1.5%
HSBC Markets                  -170     9.8%     ---      ---
Ibersecurities                -180     ---      ---      0.9%
IDEAglobal                    -150     9.8%      -45     0.8%
IHS Global Insight            -175     9.7%     ---      ---
Informa Global Markets        -190     9.8%      -50     ---
ING Financial Markets         -175     9.9%      -50     1.0%
Insight Economics             -150     9.9%     ---     -0.8%
Intesa-SanPaulo               -170     9.7%     ---      ---
J.P. Morgan Chase             -140     9.8%      -45    -0.1%
Janney Montgomery Scott L     -200     9.8%     ---      0.6%
Jefferies & Co.               -190     9.8%      -55    -0.8%
Johnson Illington Advisor     -240     9.8%      -60     ---
Landesbank Berlin             -200     9.9%     ---      2.1%
Maria Fiorini Ramirez Inc     -215     9.8%     ---      ---
MFC Global Investment Man     -170     9.8%      -45     0.5%
Mizuho Securities             -225     9.8%     ---      ---
Moody’s Economy.com           -155     9.8%      -50     0.3%
Morgan Keegan & Co.           -175     9.8%     ---     -1.1%
Morgan Stanley & Co.          -150     9.8%     ---     -0.4%
National Bank Financial       -120     9.8%     ---      ---
Natixis                       -180     9.8%     ---      ---
Newedge                       -165     9.8%      -48     ---
Nomura Securities Intl.       -170     9.8%      -55    -1.5%
Nord/LB                       -190     9.8%      -45     0.0%
PNC Bank                      -190     9.8%      -60    -0.8%
Prestige Economics            -200     9.9%     ---      ---
Raymond James                 -150     9.8%     ---      ---
RBC Capital Markets           -190     9.7%     ---      ---
RBS Securities Inc.           -160     9.7%     ---     -0.6%
Ried, Thunberg & Co.          -225     9.9%     ---     -0.4%
Schneider Foreign Exchang     -138     9.9%     ---     -1.2%
Scotia Capital                -200     9.8%     ---      0.5%
Standard Chartered            -170     9.8%      -55     1.1%
Stone & McCarthy Research     -185     9.8%      -60     1.6%
TD Securities                 -175     9.7%     ---      ---
Thomson Reuters/IFR           -170     9.8%     ---     -1.3%
Tullett Prebon                -180     9.7%     ---      0.2%
UBS                           -150     9.8%     ---     -0.3%
UniCredit Research            -200     9.8%     ---      ---
Union Investment              -200     9.9%     ---      ---
University of Maryland        -190     9.8%      -55     1.2%
Wells Fargo & Co.             -205     9.8%     ---     -1.0%
WestLB AG                     -180     9.8%     ---      1.0%
Westpac Banking Co.           -150     9.7%     ---      1.5%
Wrightson Associates          -225     9.9%     ---     -0.4%
===============================================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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G-7 May Break With Currency Tradition as Status Fades

By Simon Kennedy and Matthew Brown

Oct. 2 (Bloomberg) -- Group of Seven finance officials meet this weekend in Istanbul debating whether to surrender the weapon that helped shape currency markets for three decades.

One week after the Group of 20 anointed itself the world economy’s main policy forum, G-7 finance ministers and central bankers may break with tradition and choose not to release a statement on the global economy and currencies, said officials who declined to be identified. That would deprive traders of the commentary that policy makers frequently use to influence exchange rates.

The debate over the G-7’s role comes as European Central Bank President Jean-Claude Trichet and Bank of Canada Governor Mark Carney signal concern about the U.S. dollar’s slide over the past seven months and Japan’s new government struggles to find a clear line on the yen. The diversity of the G-20, which includes China and India, means investors may have to deal with conflicting signals as its members seek common ground.

“There may be communication difficulties as policy makers misspeak and inject volatility into markets,” said Stephen Jen, a managing director at BlueGold Capital Management LLP in London. “It will take a few rounds of G-7 and G-20 meetings to form a collective opinion on currencies.”

The euro fell against the dollar yesterday after Trichet said “disorderly movements” in exchange rates have “adverse implications” for economies. The euro traded at $1.4533 per dollar at 10:11 a.m. in Istanbul after falling 0.7 percent yesterday. It has gained 16 percent since the start of March.

Narrowing Imbalances

Officials gather tomorrow, one week after President Barack Obama and other G-20 leaders left Pittsburgh pledging to work together to narrow so-called imbalances such as the U.S. trade deficit and China’s current-account surplus.

“They clearly believe the G-20 will be the appropriate place to discuss currency,” said Simon Derrick, chief currency strategist at BNY Mellon Corp.

The embrace of the G-20 reflects China’s increased role in the global economy and the view that its policy of managing the yuan’s value against a basket of currencies means its opinions can’t be ignored.

“Only the G-20 can say anything meaningful about currencies because the big policy issue is the dollar-China peg,” said Bilal Hafeez, Deutsche Bank AG’s London-based head of foreign-exchange strategy. China has kept the yuan little changed against the dollar for more than a year.

Faster Yuan Easing

Canadian Finance Minister Jim Flaherty told reporters in Ottawa yesterday that China should accelerate efforts to ease restrictions on its currency and that exchange rates are “regularly” discussed at G-7 meetings. He wasn’t sure if the group would issue a statement.

The biggest industrial nations first started to meet regularly in the 1970s after the Bretton Woods currency framework that had governed the global economy since World War II collapsed.

Their power to steer currencies reached its pinnacle in the 1980s when five of its members signed the Plaza Accord to weaken the dollar. The Louvre Accord was introduced two years later to buoy it. In September 2000, the G-7 rescued the euro -- the last time it intervened.

Three years later in Dubai, it began to lobby China to allow the yuan to appreciate with a call for “more flexibility in exchange rates.”

Currency Study

A study last year by ECB economist Marcel Fratzcher found the G-7 was successful in moving currencies on 80 percent of the 29 occasions it tried to do so since 1975 within a year.

“G-7 currency statements were not always effective straight away, but there have been times when they have signaled clear preferences,” said Thomas Stolper, a currency strategist at Goldman Sachs Group Inc. in London.

This time, balancing the world economy will likely weaken currencies such as the dollar and sterling, while boosting the euro and yuan, whose economies are export-led, said Marco Annunziata, chief economist at UniCredit Group in London.

That may concern some in the G-7 as the dollar’s 13 percent slide against a basket of seven currencies since the start of March impedes their recovery by making exports more expensive.

Carney said on Sept. 28 that the Canadian dollar’s gain was a “major risk” and Trichet said the same day that a strong dollar is “extremely important” for the world economy.

Japan’s Fujii

Japanese Finance Minister Hirohisa Fujii said on Sept. 29 that the government may act to stabilize the foreign-exchange market and denied that he supported a stronger yen. He reiterated today that he won’t discuss the currency’s gains at the meeting, Kyodo News reported.

“There is definitely rising concern about currencies as we’re at a delicate moment for economies,” Annunziata said.

While the dollar’s slide may buoy the U.S. economy by easing lopsided flows in trade and investment, World Bank President Robert Zoellick this week became the latest official to question its role as the world’s only reserve currency. Such speculation could undermine the U.S.’s ability to draw the foreign finance it needs to fund its $11.8 trillion debt.

U.S. Treasury Secretary Timothy Geithner yesterday repeated that a “strong dollar is very important” to the U.S., while Federal Reserve Chairman Ben S. Bernanke said there’s “no immediate risk” to the currency.

The trend away from the G-7 has been building since it stopped backing up its talk with money, said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. It took almost two years for China to heed the request for more currency flexibility.

“I have a G-7 bias, I was weaned on currency accords,” Gilmore said. “On G-7 weekends now I go fishing.”

To contact the reporters on this story: Simon Kennedy in Istanbul at skennedy4@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net

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Dollar, Yen Rise on Concern Recovery to Be Slow as Stocks Drop

By Matthew Brown and Yoshiaki Nohara

Oct. 2 (Bloomberg) -- The dollar and the yen rose on concern rising unemployment and loan defaults will slow the U.S. economic recovery, sending stocks lower and boosting demand for the currencies as a refuge.

Europe’s single currency was poised for a second week of declines against the dollar on speculation Group of Seven finance officials meeting in Istanbul this weekend will discuss the euro’s gains. The number of U.S. lenders that can’t collect on at least 20 percent of their loans hit an 18-year high, according to Federal Deposit Insurance Corp. data. A government report today may show U.S. employers cut jobs for a 21st month.

“The G-7 is coming up, there’s concern about the jobs data and the market is on tenterhooks,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. “There’s been a degree of consolidation over the last two weeks as the market took a bit of risk off the table.”

The Japanese currency was at 129.93 versus the euro as of 9:09 a.m. in London from 130.35 in New York yesterday. It earlier reached 129.64, the highest level since July 14. The dollar was at $1.4536 per euro from $1.4545. It earlier touched $1.4503, the highest level since Sept. 10. The yen was at 89.42 per dollar from 89.40.

U.S. employers shed 175,000 jobs in September after a reduction of 216,000 in August, according to the median forecast of economists surveyed by Bloomberg News. A separate survey showed the U.S. unemployment rate probably rose to 9.8 percent in September from 9.7 percent in August. The Labor Department will release the figures today in Washington.

‘A lot Slower’

“We have to remember the growth going forward is going to be a lot slower than growth we’ve seen over the past five years,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Risk appetite will be tempered a little bit. The U.S. dollar will be supported.”

Goldman Sachs Group Inc. yesterday changed its forecast on the payrolls data to show larger cuts, citing “disappointing” economic data, including the number of people receiving jobless benefits. Payrolls probably fell by 250,000 workers last month rather than the 200,000 Goldman Sachs had previously estimated, chief U.S. economist Jan Hatzius said in a note to clients.

Units of Frontier Financial Corp., Towne Bancorp Inc. and Steel Partners Holdings LP are among 26 firms with more than one-fifth of their loans 90 days overdue or not accruing interest as of June 30 -- a level of distress almost five times the national average -- according to FDIC data compiled for Bloomberg News by SNL Financial, a bank research firm. Three reported almost half of their loans weren’t being paid.

Recovery to Falter

The U.S. recovery will falter as banks continue to curb lending to small companies, said Meredith Whitney, whose 2007 prediction that Citigroup Inc. would cut its dividend triggered a plunge in the bank’s stock.

“Access to credit is being denied at an accelerating pace,” Whitney said in a commentary in the Wall Street Journal. While large companies have no problem obtaining loans, small businesses “have never had a harder time,” she said in the article, dated yesterday.

The euro reached $1.4844 on Sept. 23, the highest level in a year, making European exports more expensive.

The 16 nations that use the euro have a “shared interest in a strong and stable international financial system,” European Central Bank President Jean-Claude Trichet said yesterday after a meeting of euro-area finance ministers in Sweden before the G-7 gathers in Istanbul.

‘Excess volatility’

“Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” Trichet said.

Portuguese Finance Minister Fernando Teixeira dos Santos also said yesterday European officials are concerned about the impact of the euro’s advance on the region’s exports. U.S. Treasury Secretary Timothy Geithner reiterated that a “strong dollar is very important” to the U.S.

“Worries are high that this weekend’s G-7 meeting will discuss the euro’s strength,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “These concerns are likely to weigh on the euro, especially against the yen, which may be also benefiting from a slight rise in risk aversion.”

G-7 finance ministers and central bankers may break with tradition and choose not to release a statement on the global economy and currencies, said officials who declined to be identified. The G-20 anointed itself last week as the global economy’s main policy forum.

Carry Trades

An increase in carry trades funded in the dollar may push the greenback toward $1.50 against the euro, Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong, said in an interview with Bloomberg Television. “But that is likely to be the top. In fact, I would expect some verbal intervention from the ECB and finance ministers from the eurozone if it goes above $1.50.”

The yen gained as concern mounted that a seven-month rally in equities outpaced prospects for a global economic recovery, spurring investors to sell stocks in favor of safer assets.

The MSCI World Index of shares slid 0.9 percent and the Dow Jones Stoxx 600 Index of European shares slipped 1.1 percent. The MSCI Asia Pacific Index slid 2.1 percent. The VIX Index, a measure of stock-market volatility known as Wall Street’s fear gauge, climbed to 28.27 yesterday, the highest level since Sept. 3, from 25.61 on Sept. 30.

Risk Aversion

“Risk aversion is being fueled by worries over the durability of the recovery around the world, especially the U.S.,” said Yuji Saito, head of the foreign-exchange group at Societe Generale SA, France’s third-largest bank. “Equities are also weak and another reason to avoid risk. The bias is for the yen and the dollar to be bought.”

Japan’s currency rose to a six-month high on a trade- weighted basis last month amid speculation the Federal Reserve will keep interest rates low and the government led by Yukio Hatoyama won’t intervene to stem the yen’s gain.

The yen’s real effective exchange rate advanced 3.1 percent in September from a month earlier to 118.5, the fastest increase since December, the Bank of Japan said today in Tokyo. The gauge measures the yen’s value against the currencies of 15 trading partners after adjusting for inflation.

With interest rate differentials between Japan and the U.S. having little room to narrow, “the yen may rise to as high as 85 per dollar, though its unlikely to strengthen further than that,” said Yuji Kameoka, senior economist at Daiwa Institute of Research in Tokyo.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net

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Japan to Ease Wheat Import Controls, Change Pricing

By Aya Takada

Oct. 2 (Bloomberg) -- Japan, Asia’s largest wheat importer, will ease control over imports and change the method of setting prices for millers as it moves to curb purchasing costs and risk.

The government will raise the volume it purchases under the so-called simultaneous buy and sell system, increasing opportunities for exporters other than the U.S., Canada and Australia to boost shipments to Japan, Shirara Shiokawa, director at the grain trade division of the Ministry of Agriculture, Forestry and Fisheries, said today in Tokyo.

The ministry is reducing its import role amid volatile markets and stricter food safety requirements and as Japan’s new government, elected Aug. 30, plans to boost spending on raising food self-sufficiency by cutting other costs. The nation relied on imports for 59 percent of its food in the year ended March 31, the highest rate among industrialized nations, according to ministry data.

“As global food supplies and prices are becoming increasingly unstable, the SBS system will play an important role,” Akio Shibata, director at Marubeni Research Institute, said at a panel meeting today that proposed the change. The change will increase grain purchasing flexibility, he said.

About 6 percent of Japan’s food wheat imports last fiscal year were through the SBS system, which was started in April 2007 and allows purchases from any country. Under the system, introduced to loosen the government’s grip on imports, Japanese food makers and trading companies jointly bid for the grains.

Most of Japan’s imports are bought through regular ministry tenders held almost every week, where the grain is only purchased from Australia, Canada and the U.S.

Russia, Argentina

The change could increase chances for exporters such as Russia, France and Argentina to sell to Japan, which buys almost 90 percent of its wheat overseas. Last fiscal year Japan bought 60 percent of its foreign milling wheat from the U.S., the world’s largest shipper.

The government will delay the change to as early as 2014 to allow millers time to prepare, Shiokawa said, without giving details of the likely size of the increase in SBS volumes.

Japan will also change the price calculation method for foreign wheat sold to domestic flour millers. The government has reviewed selling prices of imported milling wheat twice a year, based on average buying costs over eight months. It will shorten the period to six months to better reflect international market fluctuations, Shiokawa said.

The new method will be applied to the next price change. Selling prices of imported wheat dropped by 14.8 percent on average in April, the first cut in three years, after import costs fell on a higher yen and a slump in overseas markets.

The ministry bought 3.91 million tons of milling wheat through regular tenders in the year ended March 31. It purchased 258,754 tons of food wheat under the SBS system last fiscal year.

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

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Copper Poised for Fifth Weekly Drop on Rising Inventory, Dollar

By Glenys Sim

Oct. 2 (Bloomberg) -- Copper fell for a second day in Asia and is poised for its fifth weekly decline as rising stockpiles and the dollar’s recovery reduced investor demand.

Stockpiles of the metal monitored by London Metal Exchange warehouses climbed to 346,050 metric tons yesterday, the highest level since May 19. Copper slid 1.2 percent this week as a trade-weighted index of the dollar advanced for a second week, reducing the appeal of commodities priced in the U.S. currency.

“It appears that central bankers are becoming increasingly uneasy over the falling U.S. dollar,” said David Thurtell, a Citigroup Inc. analyst in London. “The rising U.S. dollar, in turn, is having an impact on financial market participants’ preparedness to put on new risk trades.”

London Metal Exchange copper for delivery in three months fell as much as 1.5 percent to $5,896 a ton at 3:19 p.m. in Singapore. The metal is heading for its longest losing streak since a seven-week slump that ended on Aug. 15, 2008.

December delivery copper on the Comex division of the New York Mercantile Exchange lost 1.6 percent to $2.694 a pound at the same time. China’s markets are closed for an eight-day holiday.

The dollar strengthened to a three-week high against the euro as the prospect of slower global growth fueled demand for the safety of the yen and the U.S. currency.

A report later today will probably show the U.S. jobless rate climbed for a second month to 9.8 percent, according to a Bloomberg survey of economists.

The dollar also rallied after European Central Bank President Jean-Claude Trichet said that “disorderly” exchange rate movements have “adverse implications” for economies, ahead of a Group of Seven meeting in Istanbul tomorrow.

Among other LME-traded metals, aluminum was down 1.6 percent at $1,827.50 a ton, zinc fell 1.5 percent to $1,885 a ton, and lead slid 4.6 percent to $2,090 a ton. Nickel dropped 1.2 percent to $17,220 a ton, and tin lost 2.8 percent to $13,750 a ton.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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East Europe Shares Rally 65% Without Making Mobius Less Bullish

By Michael Patterson and Zijing Wu

Oct. 2 (Bloomberg) -- Templeton Asset Management Ltd.’s Mark Mobius said he’s still buying Russia’s OAO Gazprom even after shares surged 64 percent this year because the stock remains relatively cheap.

The natural gas producer trades at about half the valuation of both Houston-based ConocoPhillips and EnCana Corp. of Calgary, Canada, and may climb 40 percent in the next 12 months, the average of analyst estimates compiled by Bloomberg shows.

Mobius, who oversees about $25 billion as Templeton’s executive chairman in Singapore, also is adding to holdings in Hungary, the Czech Republic and Poland. After rallying 28 percent in the third quarter to lead worldwide gains and 65 percent this year, the MSCI Eastern Europe Index trades at 1.2 times net assets, 40 percent less than the MSCI Emerging Markets Index’s 2 times, Bloomberg data show.

“I can’t remember ever being so positive on eastern Europe,” said Maarten-Jan Bakkum, an equity strategist at ING Groep NV’s money-management unit in The Hague who has analyzed emerging markets for 13 years. “Valuations still look quite good relative to other emerging markets,” said Bakkum, whose firm oversees about $400 billion worldwide.

Europe’s developing nations are poised to post the biggest swings in economic output among emerging-market regions next year, according to International Monetary Fund forecasts. Central and eastern European economies may expand 1.8 percent after contracting 5 percent in 2009, and Russia’s gross domestic product may rise 1.5 percent in 2010 after a 7.5 percent contraction this year, the Washington-based IMF estimates.

Roubini, Moody’s

Profits in the region may climb 22 percent next year, according to the average of analysts’ projections compiled by Bloomberg.

The eastern Europe index plunged a record 70 percent last year in the first global contraction since World War II. Everyone from New York University professor Nouriel Roubini to Moody’s Investors Service said the area may get worse in 2009. Roubini, who predicted the financial crisis, said in February that emerging Europe was a “recipe for disaster” and Moody’s forecast a “deep and long” recession.

Now stocks are beating benchmarks in western Europe, the U.S.,Latin America and Asia after international lenders provided more than $85 billion in aid, commodity prices rose and currencies from the zloty to the forint strengthened.

Cheap Shares

The outlook is improving as the eastern Europe gauge trades at 12.6 times its companies’ per-share earnings, compared with 20 times profit for the global emerging-market index, Bloomberg data show. The measure shows stocks in eastern Europe are cheaper than in Asia, where they trade at a combined 26 times earnings, and Latin America at 16 times profits. Eastern Europe’s price-to-book ratio of 1.2 is lower than Asia’s 2.1 and Latin America’s 2.2.

“Eastern Europe will outperform the global markets,” said Michael Ganske, the London-based head of emerging markets research at Commerzbank AG. “I’m still quite bullish.”

The gauge’s 117 percent rally from a nearly six-year low is “ahead of fundamentals” because many of the region’s economies are still contracting and any recovery will probably lag behind a global rebound, according to Christian Menegatti, the vice president of global economic research at New York-based RGE Monitor, Roubini’s research and advisory service.

The east Europe measure plunged 10 percent on Feb. 17 after Moody’s said some of Europe’s largest banks may be downgraded because of bad loans as the area’s economies entered a “deep and long economic downturn.” The index bottomed on March 2.

Downside Risks

“The downside risks to equities were there, and might be there now if it’s true, as we think it is, that there’s an over- valuation,” Menegatti said in a Sept. 30 interview. Roubini wasn’t available to comment, according to his spokesman Seth Linden.

Kristin Lindow, a senior vice president at Moody’s in New York, said in an interview on Sept. 29 that investors may have overreacted to the Feb. 17 report’s conclusions.

“I don’t think that was based on the paper itself, it just seemed to hit a chord,” Lindow said. Loan losses at east European banks have increased since the report and they keep climbing, Lindow said. Economies in some of Europe’s smallest developing countries may keep contracting through 2010, Lindow said. The Czech Republic and Poland are two of the most resilient countries in the region, she said.

Eastern Europe’s stocks and currencies remain the most vulnerable to a selloff should the global economic recovery and demand for higher-yielding assets falter, said Tim Ash, head of Europe, Middle East and Africa research at Edinburgh-based Royal Bank of Scotland Group Plc, Britain’s biggest government- controlled bank.

IMF Bailouts

Russia depends on global demand sustaining fuel prices, with about 30 percent of its output derived from oil and gas, according to the nation’s energy ministry.

Hungary and Ukraine required a combined $46 billion of bailout commitments from the IMF and other international lenders as the countries struggled to finance their current-account deficits, the broadest trade measure. Poland, facing what Finance Minister Jacek Rostowski called the zloty’s “uncontrolled depreciation,” obtained a $20.6 billion credit line from the IMF in May.

The east Europe index has slipped 1.3 percent from its 2009 peak on Sept. 22 as U.S. economic data trailed economists’ estimates, spurring concern the global recovery isn’t robust enough to justify this year’s rally.

“The major risk is that the growth story disappoints,” Ash said in an interview. Eastern Europe’s rally is “largely” due to an improved outlook for the global economy, he said.

Baltics Surge

Baltic markets led stock indexes tracked by Bloomberg last quarter, with Lithuania’s OMX Vilnius Index jumping 72 percent. Estonia’s OMX Tallinn index added 49 percent, boosted by Stockholm-based phone company TeliaSonera AB’s Aug. 24 offer to buy out other shareholders of its Lithuanian and Estonian units.

Eastern Europe’s currencies are also rallying. Poland’s zloty climbed about 17 percent from an almost five-year low against the euro in February. Hungary’s forint advanced 18 percent from its weakest level in March. Russia’s ruble gained 21 percent from a February low versus the dollar.

The zloty may appreciate 15 percent versus the euro by the end of next year as the forint and Czech koruna strengthen, median forecasts in a Bloomberg analyst survey show.

Money Supply Boost

Stocks and currencies are bouncing back after the world’s richest countries pledged more than $1 trillion to help developing nations’ finances. Demand for higher-yielding assets helped governments in the region sell $23.7 billion of dollar- and euro-denominated bonds this year to repay existing debt and fund economic stimulus plans, up from $16.3 billion in the same period last year, Bloomberg data show.

“The improved global sentiment has increased risk appetite and helped the financing side,” said Claire Franklin, an equity analyst at London-based F&C Asset Management, which oversees about $136 billion. “We increased our holdings of stocks in the region” last quarter, she said.

A surge in money supply around the world spurred by historically low interest rates will keep cash flowing into emerging markets and boost equity prices, according to Mobius. Russian shares are “quite interesting” because of their relatively inexpensive valuations, he said in an interview this week.

The RTS index in Russia, the fourth largest of the so- called BRIC markets, trades at 1.1 times net assets after climbing 27 percent the past three months.

Goldman Call

India’s Bombay Stock Exchange Sensitive Index has a 3.6 price-to-book ratio, the highest among major emerging markets, after an 18 percent rally last quarter. The Shanghai Composite Index in China, the biggest emerging market, is valued at 3 times book value after declining 6.1 percent, according to Bloomberg data. Brazil’s Bovespa index has a price-to-book ratio of 2 after gaining 20 percent.

Goldman Sachs Group Inc., the New York-based bank that coined the BRIC moniker in 2001 to describe the four nations it projects will join the U.S. and Japan as the world’s largest economies by 2050, forecasts Russia’s RTS will gain another 34 percent in the next 12 months on “cheap” valuations and an economic recovery driven by rising commodities. Crude oil, Russia’s main export, has jumped 58 percent in New York trading since December, to about $70 a barrel.

‘Explosive’ Profits

Gazprom, Russia’s natural-gas export monopoly, trades at 6.4 times analysts’ average estimate for 2009 earnings, compared with 14.7 times for MSCI’s index of energy stocks worldwide, according to data compiled by Bloomberg. The shares may climb to 245.75 rubles in Moscow trading in the next 12 months from their closing price yesterday of 176.1 rubles, according to the average of analyst estimates compiled by Bloomberg.

ConocoPhillips, the second-biggest U.S. refiner, trades at 12.6 times analysts’ average estimate for 2009 earnings and EnCana, Canada’s largest natural-gas producer, is valued at 15 times.

UBS AG predicted an “explosive” rebound in Russian profits that will exceed analyst estimates by about 30 percent as companies cut costs and revenue rebounds.

“In Russia’s case the gearing to global recovery is at very high levels,” said John Lomax, the head of emerging-market strategy at HSBC Holdings Plc in London. “The market is outstandingly cheap,” said Lomax, whose bank is the world’s second-biggest by market value. He predicted Russia’s market will advance 20 percent by the end of this year.

Poland, Hungary

Poland’s WIG20 Index may climb 15 percent in the next six months, extending an 18 percent rally last quarter as the global economy fuels growth in the only eastern European Union member to escape a recession since the credit crisis began, said Wojciech Bialek, the chief analyst at the brokerage unit of Warsaw-based Bank Pekao SA, Poland’s biggest lender by market value.

KGHM Polska Miedz SA, Poland’s sole copper producer, trades at 7.5 times 2009 earnings estimates, compared with 24.3 times for MSCI’s index of global raw-materials shares.

The country’s gross domestic product will expand 0.8 percent in 2009 and 2 percent in 2010, according to median estimates of economists in a Bloomberg survey. The zloty will strengthen to 3.70 per euro by the end of 2010 from 4.26 yesterday, according to the median forecast from 25 banks and brokerages.

“Poland is the most attractive right now looking at the fundamentals,” said Mariusz Banasiak, who manages about $8 billion in emerging-market bonds and currencies at Prudential Investment Management in Newark, New Jersey. “If credit conditions loosen up and confidence grows more you will see more capital going into those markets,” said Banasiak, who predicts the zloty may gain 10 percent in the next year.

Czech Rally

Hungary’s BUX stock index, up 32 percent last quarter, may advance 10 percent more in the next five months as profits and the economy rebound, according to Zoltan Reczey, an analyst in Budapest at BudaCash Brokerhaz, the nation’s biggest stocks- derivatives trader. The forint will strengthen 2.3 percent by the end of next year, according to the median estimate of analysts surveyed by Bloomberg.

OTP Bank Nyrt., Hungary’s largest lender, is valued at 1.3 times net assets, compared with the 2.7 times average for emerging-market financial companies, according to Bloomberg data.

The Czech Republic’s PX Index gained 29 percent last quarter, while the koruna strengthened 3.1 percent against the euro. Prague-based utility operator CEZ AS will advance 8.3 percent in the next 12 months, according to the average of 19 analyst estimates compiled by Bloomberg.

Raiffeisen Centrobank AG, the securities unit of Austria’s third-biggest bank, upgraded CEZ to “buy” from “hold” last month, saying the electricity company is “well-positioned” to benefit from the region’s economic recovery.

For Related News and Information: Emerging-market news: NI EM For eastern Europe stocks news: TNI EEU STK Developing economy market moves: EMMV Emerging-market economic statistics STAT4

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Rubber Declines as Stock Markets Drop, U.S. Auto Sales Slump

By Jae Hur

Oct. 2 (Bloomberg) -- Rubber declined as global equity markets dropped and U.S. auto sales slumped in September, eroding optimism that demand may grow for the commodity used in tires and gloves.

Futures in Tokyo fell as much as 1.9 percent, paring this week’s gain. Japanese stocks fell after an unexpected drop in a U.S. manufacturing gauge and increasing jobless claims dragged down the Standard & Poor’s 500 Index to its biggest decline in three months. September U.S. auto sales fell after a purchasing incentive program left dealers’ inventory depleted.

“The rubber market was pressured by the drop in U.S. car sales and slumping equity markets,” Hiroyuki Kikukawa, general manager of research at IDO Securities Co., said today by phone. An eight-day holiday from yesterday in China, the world’s biggest consumer, also added pressure on the market, he said.

March-delivery rubber lost as much as 3.8 yen to 198.6 yen a kilogram ($2,128 a metric ton) on the Tokyo Commodity Exchange and closed at 200.8 yen. The most-active contract has risen 2.7 percent this week, heading for the first gain in three weeks.

The Nikkei 225 Stock Average declined 2.5 percent to 9,731.87 in Tokyo. The Standard & Poor’s 500 Index slumped 2.6 percent yesterday, the most since July 2.

U.S. auto sales plunged 23 percent, and the seasonally adjusted annual sales rate fell to 9.22 million units, said industry researcher Autodata Corp. of Woodcliff Lake, New Jersey.

Worse Than Estimates

GM deliveries tumbled 45 percent, while Toyota dropped 13 percent, both worse than analysts had estimated. Ford slid 5.1 percent, and Chrysler Group LLC, Honda Motor Co. and Nissan Motor Co. also posted declines.

There was little concern in Tokyo that the Sept. 30 earthquake off Indonesia’s Sumatra Island may disrupt rubber supplies to the country, Kikukawa said.

“The quake has had little impact on the market as Japan imports more from Thailand,” he said. Thailand is the world’s largest producer and exporter of rubber.

Rubber and palm oil shipments from Indonesia’s quake-hit provinces may be delayed by more than a week after access to a port was blocked and factories and roads were damaged, producers’ groups said. Indonesia is the world’s top producer of palm oil and second-biggest grower of rubber.

About 90,000 tons of palm oil for October delivery are likely to be delayed, Bambang Aria Wisena, head of organizational affairs at the Indonesian Palm Oil Association, wrote in a text message today. Transport problems may halt 50,000 to 60,000 tons of rubber, Asril Sutan Amir, chairman of the Rubber Association of Indonesia, said by phone.

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

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Accenture, BB&T, First Solar, Immucor, PNC: U.S. Equity Preview

By Lu Wang

Oct. 2 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Accenture Plc (ACN US): The world’s second-largest technology-services company forecast revenue for this quarter and for fiscal 2010 that missed analysts’ estimates as the economic slump crimped consulting sales.

First Solar Inc. (FSLR US): The world’s largest maker of thin-film solar power modules was picked to replace Wyeth (WYE US) in the Standard & Poor’s 500 Index on a date to be determined later, according to S&P.

Glimcher Realty Trust (GRT US): The owner of shopping centers said the agreement for the sale of its Lloyd Center property, a regional mall located in Portland, Oregon, to Merlone Geier Partners IX L.P. has been terminated.

Immucor Inc. (BLUD US): The maker of products used in blood screening reported profit excluding some items of 32 cents a share in the first quarter, topping the average analyst estimate by 28 percent.

Murphy Oil Corp. (MUR US): The oil producer and refiner said it purchased a corn-based ethanol plant located in Hankinson, North Dakota, for $92 million.

PNC Financial Services Group Inc. (PNC US): The fifth- largest U.S. bank by deposits was cut to “underperform” from “market perform” at Keefe, Bruyette & Woods Inc., which said the stock’s valuation “looks full.”

Keefe Bruyette raised BB&T Corp. (BBT US) and U.S. Bancorp (USB US) to “outperform.”

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

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Copper-Aluminum Ratio Signals Copper Drop: Technical Analysis

By Glenys Sim

Oct. 2 (Bloomberg) -- Copper may decline as the ratio between copper and aluminum prices holds “bearish seasonal tendencies”, said Barclays Capital.

“For five consecutive years this ratio has dropped in October,” the bank’s analysts, led by global head of technical strategy Jordan Kotick, said in a report e-mailed today. The ratio was around 3.23 today, according to Bloomberg data.

“With the ratio itself failing to surge meaningfully above its summer peak, the risks into year-end are for copper to underperform and for the ratio to dip back to 3.00-3.05, below which would confirm a more significant top,” he said.

Copper for delivery in three months has almost doubled this year on the London Metal Exchange, and traded at $5,960 a metric ton at 9:49 a.m. Singapore time. Three-month delivery aluminum has gained 20 percent, and traded at $1,845 at the same time.

“When comparing median returns in the fourth quarter for copper and aluminum, copper consistently posts lower returns,” said Kotick.

In a sample of seven securities including spot gold and the Reuters/Jefferies CRB Index of 19 futures, copper historically has the lowest median return, with October being the worst month of the year for the metal used in construction and automobiles, Kotick said in a separate report dated Sept. 30.

Historically, copper’s average return in October is -1.4 percent and its median return is -2.49 percent, according to Kotick, who used monthly closes to calculate returns. This compares with aluminum’s average return of -0.5 percent and median return of 0.83 percent.

Last year, copper fell 36 percent in October while aluminum declined 16 percent in the same period, according to Bloomberg calculations.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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European, Asia Stocks Drop; U.S. Futures Fall Before Jobs Data

By Sarah Jones

Oct. 2 (Bloomberg) -- European and Asian stocks fell and U.S. index futures retreated before a report that may show the jobless rate in America climbed to a 26-year high in September.

BHP Billiton Ltd. and Total SA sank for a fourth day as metals and oil prices slid. Tesco Plc led U.K. retailers lower as Citigroup Inc. rated the shares “sell” in new coverage. Toyota Motor Corp., which gets 31 percent of its revenue in North America, retreated 3.1 percent in Tokyo after its U.S. sales slumped last month.

Europe’s Dow Jones Stoxx 600 Index slid 0.9 percent at 8:04 a.m. in London, extending its second straight weekly decline to 1.1 percent. The MSCI Asia Pacific Index sank 2.1 percent, bringing its slump since Sept. 25 to 2.9 percent.

“October has started with a collapse on Wall Street and Asian markets following suit,” said Melbourne-based Ben Potter, a research analyst at IG Markets. “The U.S. non-farm payroll figures will help many determine how equities finish this week.”

Futures on the Standard & Poor’s 500 Index lost 0.2 percent, indicating the benchmark measure for U.S. equities may extend its 1.4 percent weekly slide. The S&P 500 tumbled by the most in three months yesterday as a gauge of manufacturing unexpectedly fell and jobless claims grew more than forecast.

A Labor Department report today may show U.S. unemployment climbed to 9.8 percent, from 9.7 percent in August, according to the median estimate of 81 economists surveyed by Bloomberg News. Payrolls probably fell by 175,000 workers, the smallest drop in 13 months, they survey also showed.

Goldman Sachs, Whitney

Goldman Sachs Group Inc. yesterday said the U.S. economy probably lost more jobs in September than it previously anticipated, citing “disappointing” economic data including the number of people receiving jobless benefits.

Payrolls probably fell by 250,000 workers last month rather than the 200,000 Goldman Sachs had previously estimated, chief U.S. economist Jan Hatzius said in a note to clients.

“It’s all to do with non-farm payrolls and if Goldman Sachs are right, then I think the market’s cage will be rattled,” said David Buik, a London-based market analyst at BGC Partners.

Separately, Meredith Whitney said in the Wall Street Journal that the U.S. economic recovery will falter as banks continue to curb lending to small companies.

“Access to credit is being denied at an accelerating pace,” Whitney, whose 2007 prediction that Citigroup Inc. would cut its dividend triggered a plunge in the bank’s stock, said in a commentary in the Wall Street Journal. While large companies have no problem obtaining loans, small businesses “have never had a harder time,” she said in the article, dated yesterday.

2009 Rally

Europe’s Stoxx 600 has still surged 50 percent since March 9 and recorded its biggest quarterly gain since 1999 as the European Central Bank kept interest rates at a record low and the French and German economies unexpectedly exited recessions. The rebound has sent price-earnings valuations on the index this month to the highest levels since 2003.

BHP, the world’s largest mining company, dropped 1 percent to 1,627 pence as copper, lead, nickel and tin fell in London. Rio Tinto Group, the third-biggest, sank 1.9 percent to 2,528 pence.

Total, Europe’s third- largest oil company, fell 0.7 percent to 39.64 euros. Crude oil for November delivery dropped as much as 1.2 percent to $70 a barrel on the New York Mercantile Exchange.

U.K. Retailers

Tesco slipped 2 percent to 385.9 pence, while J Sainsbury Plc sank 1.4 percent to 318.5 pence and William Morrison Supermarkets Plc declined 1.6 percent to 273.4 pence. The U.K. retailers retreated after Citigroup initiated coverage of the shares with a “sell” recommendation.

Toyota, Japan’s largest carmaker, fell 3.7 percent to 3,380 yen after its U.S. sales slumped 13 percent in September following the end of the “cash for clunkers” rebate program. Honda Motor Co., which had a 20 percent drop in U.S. sales, declined 3.4 percent to 2,670 yen.

CIT Group Inc. climbed 14 percent to $1.21 in Germany. The 101-year-old commercial lender is seeking to cut at least $5.7 billion of debt as part of a plan to avoid collapse and return to profitability after nine quarters of losses.

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

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U.K.’s FTSE 100 Index Falls for Fourth Day on Economy Concern

By Alexis Xydias

Oct. 2 (Bloomberg) -- U.K. stocks fell for a fourth session, the longest losing streak since April, amid concern a seven-month rally has outpaced the prospects for economic growth.

Eurasian Natural Resources Corp., a producer of steelmaking raw materials in Kazakhstan, and Kazakhmys Plc led declines among mining companies as metals pries dropped.

The FTSE 100 fell 41.92, or 0.8 percent, to 5,005.89 as of 8:42 a.m. in London, taking the loss this week to 1.4 percent. The FTSE All-Share Index slipped 0.9 percent today, while Ireland’s ISEQ Index dropped 1.5 percent.

The FTSE 100 has surged 43 percent since this year’s low on March 3 amid speculation the worst of a global slowdown is past. An index of U.K. manufacturing yesterday unexpectedly fell, while economists forecast a release today to show the U.S. jobless rate probably rose to a 26-year high in September.

ENRC, a producer of steelmaking raw materials in Kazakhstan, declined 2.6 percent to 811 pence. Kazakhmys, the Asian country’s biggest copper producer, lost 2.3 percent to 1,013

Copper for delivery in three months slid as much as 1.5 percent to $5,896 a metric ton in London, extending yesterday’s 2.8 percent drop. Nickel, lead, zinc and aluminum prices also fell.

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

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Rossi, PDG Are Raising 2 Billion Reais in Brazil Share Sales

By Fabiola Moura and Heloiza Canassa

Oct. 2 (Bloomberg) -- Rossi Residencial SA and PDG Realty SA Empreendimentos & Participacoes, Brazilian homebuilders whose shares have more than doubled this year, are selling 2 billion reais ($1.11 billion) of new stock to tap surging demand.

Sao Paulo-based Rossi is offering 74.3 million shares for 12.50 reais each, according to data posted on the Web site of Brazil’s securities regulator last night. PDG of Rio de Janeiro and its stockholders are selling 75.6 million shares at a price of 14 reais.

The sales are the first of four from Brazilian developers scheduled for this month after an equity rally that sent the BM&FBovespa Real Estate Index up 170 percent in 2009. The offers from Rossi, PDG, Brookfield Incorporacoes SA and Cyrela Brazil Realty SA Empreendimentos & Participacoes may raise a total of 3.4 billion reais and will be used to boost growth, JPMorgan Chase & Co. analyst Adrian Huerta wrote in a note this week.

Demand is coming more from foreign investors than from local ones, said Silvio Araujo, real estate analyst at Lopes Filho & Associados, in a phone interview from Rio de Janeiro. Many real estate companies have no controlling shareholder, which “increases mobility, gives higher participation in all the businesses” for investors, he said.

Homebuilders surged as Brazilian policy makers cut interest rates to a record low, the economy showed signs of recovery and President Luiz Inacio Lula da Silva unveiled a 34 billion-real program to build 1 million homes. The benchmark Bovespa index rallied 61 percent in 2009.

Discounts

Rossi, the second-best performing stock in the Bovespa index this year with a 252 percent gain, sold shares at a 6 percent discount to today’s closing price of 13.30 reais. PDG’s offer was 2 percent below the close of 14.30 reais.

Rossi is trading 47 percent below the 25 reais price at which it sold shares in February 2006. PDG has fallen 43 percent since its last equity offering at 25 reais in October 2007.

Brookfield, a Rio-based real estate developer, may sell as much as 700 million reais of stock, the company said last month. Sao Paulo-based Cyrela, Brazil’s largest homebuilder, filed a request with the country’s investment bank association on Sept. 21 to sell new shares, without disclosing how many it plans to offer. Both companies have more than doubled in 2009.

At least seven companies have filed in the last two months to sell shares in secondary offerings, including Gol Linhas Aereas Inteligentes SA, Brazil’s second-biggest airline, and Cia. de Concessoes Rodoviarias, the largest toll-road operator.

Santander

Banco Santander SA, Spain’s largest lender, aims to raise as much as 13.1 billion reais in an initial public offering of its Brazilian unit next week. The IPO, the third in Brazil this year, would surpass Cia. Brasileira de Meios de Pagamento’s 8.4- billion real offering as the country’s biggest in history.

Direcional Engenharia SA may raise as much as 600 million reais in an IPO, according to JPMorgan’s Huerta. The sale will be the first homebuilder IPO in Brazil since Helbor Empreendimentos SA listed in October 2007. Fourteen developers began trading in 2007, part of a record year with 64 initial offerings.

To contact the reporters on this story: Fabiola Moura in New York at fdemoura@bloomberg.net; Heloiza Canassa in Sao Paulo at hcanassa@bloomberg.net

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Japanese Stocks Fall on U.S. Job Data in Third Weekly Decline

By Masaki Kondo

Oct. 2 (Bloomberg) -- Japanese stocks fell, capping their third-straight weekly slump, after an unexpected drop in the nation’s joblessness rate failed to convince investors the economy is improving.

Sony Corp., which gets 23 percent of its sales from the U.S., and Toyota Motor Corp. retreated at least 3.7 percent after a U.S. government report showed increasing claims for unemployment benefits. Aomori Bank Ltd. tumbled 18 percent as it planned to sell new shares. Nippon Mining Holdings Inc. slid 3.2 percent after metal prices dropped in London.

“The job market is in a terrible state, and consumers’ purse strings are still tied tight,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $56 billion. “There seems to be growing consensus that the pace of the recovery will slow.”

The Nikkei 225 Stock Average sank 2.5 percent to close at 9,731.87 in Tokyo. The broader Topix index slipped 2.4 percent to 874.67, with all of its 33 industry groups falling. The Nikkei and the Topix retreated 5.2 percent this week, their third-straight drop for the period.

Shares fell even after the statistics bureau said Japan’s unemployment rate improved to 5.5 percent in August from a record 5.7 percent in July. Household spending increased 2.6 percent in August from a year earlier, while economists had estimated a 0.2 percent decline.

Jobs, Yen

The Nikkei and Topix weekly slumps were their steepest since the five days ended July 10, after Nomura Holdings Inc. announced a record $5.6 billion share sale and a Bank of Japan survey showed companies planned to further cut investment. Both gauges have fallen, while the MSCI Asia Pacific Index has gained since Aug. 31, the day after Japan’s Liberal Democratic Party was routed in national elections, ending its half century of almost unbroken rule.

Sony, the maker of the PlayStation 3 game machine, dropped 5 percent to 2,450 yen. Toyota Motor Corp., which gets 31 percent of its revenue in North America, retreated 3.7 percent to 3,380 yen. Makers of electronics and cars weighed the most on the Topix, followed by banks.

In New York, the Standard & Poor’s 500 Index slid 2.6 percent yesterday, the most since July 2. A U.S. Labor Department report showed the number of Americans filing first- time claims for joblessness benefits increased last week by more than economists had estimated.

The yen appreciated, exacerbating drops in Japanese equities. The currency strengthened to as much as 89.21 per dollar today from 90.07 at the 3 p.m. close of stock trading in Tokyo yesterday. A stronger yen cuts the value of overseas sales at Japanese companies when converted into their home currency.

Aomori Bank

“The world’s economy isn’t up to the mark, so foreign exchange has a bigger influence on exporters’ earnings than usual,” said Mitsubishi UFJ’s Ishigane.

Aomori Bank plunged 18 percent to 298 yen, the sharpest drop since 1979. The bank said yesterday it planned to raise as much as 11.6 billion yen ($130 million) in a sale of new shares. Japan’s three largest banks, Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc., have raised 1.8 trillion yen by selling shares since the end of December.

Nippon Mining fell 3.2 percent to 427 yen. Mitsui Mining & Smelting Co. lost 2.7 percent to 218 yen. A gauge of six metals, including copper, dropped 2.8 percent yesterday in London, breaking a three-day winning streak. Nippon Mining’s metal unit owns 66 percent of Pan Pacific Copper Co., Japan’s biggest smelter of the metal. Mitsui Mining controls the rest.

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

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Asian Stocks Fall on Growth Concerns; Treasuries, Yen Advance

By Masaki Kondo and Kotaro Tsunetomi

Oct. 2 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to a one-month low, as concerns the economic recovery will falter caused automakers and mining shares to drop. Treasuries and the yen rose as demand for haven assets increased.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, retreated 3.7 percent in Tokyo after its U.S. sales slumped last month. BHP Billiton Ltd., the world’s biggest mining company, sank 2.7 percent in Sydney after metal prices dropped. Yields on 10-year Treasuries fell to the lowest level since May and the yen extended gains after CIT Group Inc. said it may file for bankruptcy protection.

The MSCI Asia Pacific Index lost 2.1 percent to 114.36 as of 4:12 p.m. in Tokyo, set for the lowest close since Sept. 7. The gauge has declined 2.9 percent this week, during which the measure capped its second-straight quarterly advance. It has climbed 58 percent in the past seven months.

“There seems to be growing consensus that the pace of the recovery will slow,” said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $56 billion. “There is a question mark over a further rebound in consumption and production.”

Japan’s Nikkei 225 Stock Average slumped 2.5 percent even after the statistics bureau said the unemployment rate fell to 5.5 percent in August from a record 5.7 percent in July. Panasonic Corp. dropped 3.6 percent on a brokerage downgrade, while Aomori Bank Ltd. tumbled 18 percent on share-sale plans.

U.S. Economic Data

Hong Kong’s Hang Seng Index fell 2.7 percent, with Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., slumping 4.2 percent. Australia’s S&P/ASX 200 Index sank 2.1 percent. Singapore’s Straits Times Index dropped 1.6 percent. All markets in the region that were open declined. China, India and South Korea are closed for holidays.

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent. The gauge declined 2.6 percent yesterday after reports on the reports on manufacturing and jobless claims missed economists’ estimates.

Disappointing U.S. economic data and a Bank of Japan survey showing companies planned to further cut investment has put the MSCI Asia Pacific Index on course for its biggest weekly decline in more than a month.

A government report due later today may show U.S. employers cut jobs for a 21st month in September. Goldman Sachs Group Inc. said yesterday the economy probably lost more jobs last month than it previously anticipated.

High Expectations

Toyota, Japan’s largest carmaker, fell 3.7 percent to 3,380 yen after its U.S. sales slumped 13 percent in September following the end of the “cash for clunkers” rebate program. Honda Motor Co., which had a 20 percent drop in U.S. sales, dropped 3.4 percent to 2,670 yen.

“Expectations about the economic outlook have been too high,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “For now, we have nothing that can lift the market.”

Li & Fung slipped 4.2 percent to HK$29.95 in Hong Kong. Panasonic, Japan’s largest maker of home appliances, sank 3.6 percent to 1,248 yen as Mizuho Securities Co. cut its recommendation on the company to “reduce” from “hold.”

Japanese exporters also fell amid concerns a stronger yen will reduce the value of repatriated overseas sales. The currency strengthened to 130.16 versus the euro from 130.35 in New York yesterday and rose to 89.57 per dollar from 89.60.

“Risk aversion is coming back with stocks falling and the U.S. economic outlook remaining iffy,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.

CIT Collapse?

The yield on the 10-year Treasury note fell two basis points to 3.16 percent, according to BGCantor Market data. The yield, which has declined 15 basis points this week, is at the lowest since May 21 amid concerns CIT, a 101-year-old commercial lender will fail to cut debt and raise capital.

In Sydney, BHP shares lost 2.7 percent to A$36.20 after a gauge of six metals, including copper, dropped 2.8 percent yesterday in London, breaking a three-day winning streak. Copper futures in New York decreased 1.1 percent, extending yesterday’s 2.9 percent slump.

Nippon Mining Holdings Inc. fell 3.2 percent to 427 yen in Tokyo. The company’s metal unit owns 66 percent of Pan Pacific Copper Co., Japan’s biggest smelter of the metal. Maanshan Iron & Steel Co., the second-biggest Hong Kong-listed Chinese steelmaker, declined 5.6 percent to HK$4.42.

Spending Packages

Platinum Australia Ltd., which owns mines in South Africa and Australia, sank 4 percent to 85 Australian cents after completing a share sale to raise A$30 million ($26 million).

Signs that lower borrowing costs and spending packages were dragging economies out of recession have fueled the seven-month stock rally. MSCI’s Asian index this week completed its second quarterly advance, gaining 14 percent in the three months through Sept. 30.

The advance was less than the previous quarter’s 28 percent increase amid valuation concerns. The average price of the MSCI Asia Pacific Index’s shares rose to 1.6 times book value on Sept. 17, up from 1 at the measure’s five-year low on March 9.

“We believe that the recovery prospects are a bit overplayed,” Arnout van Rijn, chief investment officer of Robeco Hong Kong Ltd., told Bloomberg Television today.

Aomori Bank plunged 18 percent to 298 yen. The bank said yesterday it planned to raise as much as 11.6 billion yen ($130 million) in a sale of new shares.

Japan’s three largest banks, Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc., have raised 1.8 trillion yen by selling stock since the end of December.

China Petroleum & Chemical Corp. retreated 3.2 percent to HK$6.38. Asia’s biggest refiner may be banned by Iraq from the second round of bidding on oil and natural-gas projects because the company hasn’t given up its contract in the country’s northern Kurdistan area, the Wall Street Journal reported.

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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