Pakistan’s Engro to Build $1 Billion Phosphate Plant

By Farhan Sharif

Oct. 15 (Bloomberg) -- Engro Chemical Pakistan Ltd., the nation’s second-largest urea maker, plans to build a $1 billion phosphate fertilizer plant in North Africa to feed demand in Pakistan and Western Europe. Shares rose.

“Pakistan produces a lot of nitrogenous fertilizer indigenously but we don’t have the raw material for phosphatic and potassium fertilizers,” Chief Executive Officer Asad Umar, said in an interview at his office in Karachi. “North Africa is the biggest hub of phosphate fertilizer in the world.”

Demand for fertilizer in rising in Pakistan, where farming accounts for one-fourth of gross domestic product and employs 45 percent of the workforce. Engro, which has spent $1.7 billion expanding into milk and consumer goods in the past three years, will join the Fauji Group in supplying Pakistan with fertilizer from North Africa.

“The expansion in fertilizer is very timely because of demand,” said Farhan Bashir, research analyst at Invest Capital & Securities Ltd. in Karachi, who has a “buy” recommendation on the stock. “Their diversification is a strength that mitigates the risk of investing in one area.”

Engro’s shares, which have more than doubled this year, rose 1.7 percent to 182.838 rupees at the 3:30 p.m. local time close on the Karachi Stock Exchange, after rising as much as 2.8 percent earlier. The proposed North African fertilizer plant will produce about 1 million metric tons a year, Umar said, almost three times more that Fauji’s joint venture.

Engro plans to invest $5 billion in the next five years to expand in areas including power generation and food exports, Umar said. It will seek funds for the growth in local and international equity markets, said Umar, 48, who joined the company in 1985 and was appointed CEO more than five years ago.

Financing Cost

“The worry is that the major expansion has increased the cost of financing,” said Nasim Beg, who manages 16 billion rupees in stocks and bonds at Arif Habib Investments Ltd. in Karachi. “Once the burden of cost of financing is clear, the company has potential to utilize the benefits of an agriculture-based economy.”

Umar expects revenue, which rose 21 percent to 10.7 billion rupees in the six months ended June 30, to double by 2011. He wouldn’t say exactly where the phosphate plant would be built, saying he’s considering “more than one country.”

Fauji Fertilizer Bin Qasim Ltd., Pakistan’s only di- ammonium phosphate producer, and Fauji Fertilizer Co. make 375,000 tons a year from a joint venture plant they started in Morocco last year, according to Atlas Capital Markets Ltd. in Karachi. Fauji Fertilizer Co. rose 3 percent to 109.09 rupees.

Urea Expansion

Pakistan uses 1.5 million tons of di-ammonium phosphate, a year, Umar said. The government forecasts the farm sector will expand 3.8 percent in the year ending June 30, compared with 4.7 percent a year ago.

Engro also plans to begin exporting urea to India next year. The company is building the world’s largest urea plant at Daharki, in southern Pakistan, which will produce 1.3 million tons and begin output in mid-2010.

The company plans to export milk and may start selling rice overseas next year, Umar said. Pakistan is the world’s fifth-biggest producer of milk and the fifth-largest rice exporter, according to the government.

Engro entered the consumer goods business in 2006 with the Olper’s brand of packaged milk and now also produces cream, a tea whitener and ice cream. Pakistan’s consumer goods market is led by units of Nestle SA and Unilever NV, the world’s largest and third-largest food companies.

“Pakistani rice is very high quality but sells at a discount against competitors because it’s not branded or marketed properly,” Umar said.

Engro’s energy unit, which is aiming to produce 4,000 megawatts of power by 2016 using coal from Thar, in southeastern Pakistan, should start up a 220 megawatt power generation plant by December, Umar said.

Pakistan plans to add a total of 5,000 megawatts of electricity to the national grid by 2013 after violent demonstrations against power outages broke out in several cities in past two years. Pakistan has faced power shortages of as much as 4,500 megawatts a day, or 30 percent of capacity, during the peak summer season since May.

To contact the reporter on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net.

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Exxon Mobil Won’t Face Punitive Damages in New York Water Case

By Thom Weidlich

Oct. 15 (Bloomberg) -- Exxon Mobil Corp. won’t face punitive damages in a trial in which New York City accuses it of poisoning water wells with a gasoline additive meant to improve air quality, the trial judge said.

U.S. District Judge Shira Ann Scheindlin in Manhattan ruled in the company’s favor yesterday. A jury is deliberating on whether Exxon Mobil, the biggest U.S. oil company, is liable for injuring the city by poisoning five wells in and near the Jamaica area of the borough of Queens with methyl tertiary butyl ether, or MTBE.

“The city has not provided sufficient evidence to allow this jury to” rule on punitive damages, Scheindlin said.

Victor Sher, a lawyer for the city at Sher Leff LLP in San Francisco, declined to comment.

The city asked for $250.5 million in compensatory damages to treat the water.

The Exxon Mobil case is part of larger litigation over MTBE. More than 70 lawsuits filed by water providers and state and local governments were consolidated before Scheindlin for pretrial information-gathering, according to an industry Web site.

BP Plc, Chevron Corp.,ConocoPhillips, Hess Corp. and Royal Dutch Shell Plc were among 33 companies that settled with New York. Exxon Mobil, based in Irving, Texas, was the lone holdout.

Exxon Mobil lawyers argued that the wells were turned off and unusable because of contaminants other than MTBE, including perchloroethylene, or PCE, a chemical used in dry-cleaning clothes, which the company says is the main cause of the area’s contamination.

1999 Merger

Exxon and Mobil, which merged in 1999, began using MTBE in the 1980s to boost octane. Additives such as MTBE are chemical compounds that raise the oxygen content of gasoline to make it burn more cleanly and efficiently.

The city argues the company could have used ethanol as an oxygenate in New York. Exxon Mobil used MTBE to save money, it said.

In an earlier phase of the trial, the jury ruled that MTBE will contaminate the wells’ output at a peak level of 10 parts per billion in 2033. It had also ruled that the city intends to build the treatment plant.

The case is City of New York v. Exxon Mobil Corp., 04-cv-03417, grouped with others in the master-file case, In Re: Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation, 00-cv-1898, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.

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Nippon Oil to Keep Mizushima No. 2 Crude Unit Shut Through March

By Michio Nakayama

Oct. 15 (Bloomberg) -- Nippon Oil Corp., the nation’s largest oil refiner, will keep its Mizushima No. 2 crude distillation unit shut until at least the end of March because of weak domestic demand, a company spokeswoman said by phone from Tokyo.

The company shut the 110,000 barrel-a-day unit on July 24 for maintenance.

To contact the reporter on this story: Michio Nakayama in Tokyo at mnakayama4@bloomberg.net

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London Finance Firms to Cut Fewer Jobs Than Forecast, CEBR Says

By Kevin Crowley

Oct. 15 (Bloomberg) -- U.K. financial services firms will cut fewer jobs this year than previously forecast after the economy rebounded, according to the Centre for Economics & Business Research Ltd.

Banks, insurers and asset managers in London may eliminate 18,000 positions this year, the CEBR said in a report today, paring its April forecast of 29,000 cuts by more than a third.

“The reason for the upward revision to 2009 is the unexpected speed with which the economy has turned the corner,” the CEBR said. “Many banks are now reporting healthy profits.”

JPMorgan Chase & Co., which has its European headquarters in London, yesterday reported its biggest profit since the subprime mortgage market collapsed in 2007. The U.K.’s benchmark FTSE 100 index has gained 50 percent from its low in March. U.K. unemployment rose by the least in a year in the three months through August, the Office for National Statistics.

Mergers advisers and derivatives traders still face deepest cuts this year amid a dearth of takeovers and demand for “complex” products, the CEBR said. The number of jobs in mergers has dropped 42 percent from its 2007 peak, and the number in derivatives has fallen 31 percent, the CEBR said.

In all, the total of people employed in London’s financial services industry will start rising next year, and is likely to reach 325,000 in 2012. That’s still 8.2 percent below the record reached in 2007. Employment in the industry won’t return to that level for at least a decade as governments step up oversight of the industry, the CEBR said.

Tougher Requirements

“Re-regulation of London’s wholesale financial services sector will act to limit its economic activity over the medium term,” said Benjamin Williamson, a CEBR economist who helped compile the report. “Growth is likely to remain below recent levels owing to tougher capital requirements and lower yields reducing firms’ profits.”

Lobby groups including the Association of British Insurers, the British Bankers’ Association and the City of London Corporation have warned that excessive regulation of the city’s financial markets may slow recovery. Legislators are seeking to boost oversight to prevent a repeat of the credit crisis.

To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net

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Liikanen Says Finland’s Economy Has Bottomed, Savon Sanomat Says

By Kati Pohjanpalo

Oct. 15 (Bloomberg) --European Central Bank council member Erkki Liikanen said the Finnish economy has bottomed out and is in for a period of slow growth, Finnish newspaper Savon Sanomat reported on its Web site today.

Starting now, each quarter will be better than the previous one, said Liikanen, who also heads the Bank of Finland, according to Savon Sanomat.

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Pound Jumps on Speculation BOE May Pause Asset-Purchase Program

By Lukanyo Mnyanda

Oct. 15 (Bloomberg) -- The pound rose the most against the euro in almost seven months on speculation policy makers will pause their bond-buying program as the economy shows signs of recovering from the recession.

Sterling also jumped versus the dollar, headed for its biggest three-day gain in more than two months, as the Financial Times cited Bank of England Markets Director Paul Fisher as saying policy makers would be more likely to pause asset purchases, giving themselves the option of “doing more later,” rather than stopping them. Rising asset prices and improved confidence may be signs the program is working, Deputy Governor Charles Bean said two days ago. A report yesterday showed U.K. unemployment rose less than forecast last month.

“If the market senses that unemployment and quantitative- easing supply measures are turning, the bears will cut and run,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Bean catalyzed some bears into profit taking after comments on gradually removing the stimulus on pickup.”

The U.K. currency strengthened 1.7 percent to 91.87 pence per euro as of 11:01 a.m. in London, the biggest gain since March 24. The pound advanced 1.6 percent to $1.6231, pushing its gain in the three days to 2.7 percent, the most since the first week of August.

The pound may rise to $1.75 by the end of March, according to Jones. That compares with the $1.65 median prediction of 34 analyst forecasts compiled by Bloomberg.

‘More Confident Now’

Fisher said he’s “much more confident now” that the bank’s asset purchase program is having the “scale and speed of impact that we would have hoped for when we started,” according to the FT transcript.

As the recovery gathers pace, the central bank “will need gradually to remove the large monetary stimulus that we have imparted to the economy, otherwise we will be in danger of overshooting our 2 percent inflation target,” Bean said in a speech in London. The inflation rate was 1.1 percent last month from a year earlier, down from 1.6 percent in August, a government report showed on Oct. 13.

The number of people claiming jobless benefits increased by a less-than-forecast 20,800 in September, a report yesterday showed.

“The data hasn’t been as negative as feared and there has been some questioning whether the Bank of England will necessarily extend quantitative easing,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “Speculators have sold sterling hard and there was always a risk of a snap back.”

Sterling Turnaround

Sterling declined 7.2 percent against the euro since June as the central bank increased its asset-purchase program and Bank of England Governor Mervyn King was cited in the Newcastle Journal as saying the pound’s weakening was “helpful” to the economy. It gained 12 percent versus the euro in the first half as the economy showed signs of emerging from the slump.

The yield on the 10-year gilt climbed 5 basis points to 3.55 percent, and the two-year note yield rose 3 basis points to 0.86 percent.

The short-sterling interest-rate futures contract expiring in March 2010 increased 1 basis point to 0.84 percent, signaling some investors are adding to bets policy makers will increase interest rates. The rate was at 0.78 percent on Sept. 28, the lowest level this year.

The Bank of England’s main interest rate is 0.5 percent, an all-time low.

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

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Dollar to Slide to $1.55 Versus Euro, Goldman Says

By Candice Zachariahs

Oct. 15 (Bloomberg) -- Goldman Sachs Group Inc. said the dollar is likely to extend drops against the euro and commodity- backed currencies over the coming six months, based on the greenback’s correlation with cyclical assets and capital flows.

The dollar will weaken to $1.55 versus the euro in three and six months, the bank said, revising previous forecasts of $1.45 for both periods. The U.S. currency, which has fallen versus all of the 16 most-traded currencies this year, will recover to $1.35 in 12 months, Goldman Sachs said. The bank left its dollar-yen forecasts unchanged.

“It now looks as though the dollar trough will be slightly deeper,” analysts including Thomas Stolper in London, New York- based Mark Tan and Hong Kong’s Fiona Lake wrote in a note to clients yesterday. “The underlying longer-term view is that the dollar is undervalued and will recover somewhat.”

The currency fell to $1.4953 versus the euro as of 12:27 p.m. in Tokyo after touching $1.4960, the weakest since August 2008. It has declined 7 percent against Europe’s single currency this year.

The U.S. dollar will begin to recover some ground over 12 months as household savings rise and foreign investors regain confidence in the U.S. economy, Goldman Sachs predicts.

“We don’t expect the euro to make significant new historical highs above $1.60,” the analysts wrote. “In fact, we would expect policy makers to become very vocal about excessive dollar weakness when we approach these levels.”

‘No Alternative’

European Central Bank President Jean-Claude Trichet said Oct. 8 that a strong dollar is “important,” repeating previous remarks. Toyoo Gyohten, an adviser to Japan’s finance minister, said the same day there is “no better alternative to the dollar.” Bank Rossii First Deputy Chairman Alexei Ulyukayev said Sept. 29 that Russia will keep buying Treasuries because there’s no realistic alternative.

Still, the U.S. dollar weakened as global equity markets rallied and the Treasury sold a record amount of debt to finance a budget deficit that totaled $1.4 trillion in the fiscal year ended Sept. 30.

Goldman Sachs now expects the Canadian dollar to reach parity with its U.S. counterpart in three months before falling back to C$1.08 versus the dollar in 12 months.

The Australian currency will peak at 95 U.S. cents and Brazil’s real will trade at 1.65 to the dollar in three months, it said, compared with a previous call for 87 cents and 1.80. New Zealand’s kiwi will trade near current levels for the next six months before declining to 70 cents in a year.

The Canadian and New Zealand dollars climbed to the most since July 2008 today, trading as high as C$1.0208 and 74.84 U.S. cents respectively. Australia’s dollar rose to as much as 74.84 U.S. cents, the strongest since August 2008. The real yesterday was at 1.7009 per dollar.

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

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Pound Jumps on Speculation Central Bank to Pause Bond Purchases

By Bo Nielsen

Oct. 15 (Bloomberg) -- The pound rose the most in more than eight months against the euro on speculation policy makers will pause their asset-purchase program next month.

The British currency gained against all 16 of its major counterparts as investors bet its 7 percent decline since Aug. 1 against the U.K.’s major trading partners was exaggerated. The yen dropped the most versus the euro in a week as better-than- forecast earnings at Goldman Sachs Group Inc. fueled speculation banks are weathering the recession, boosting demand for higher- yielding assets.

“There’s only one story on town today and that’s the pound,” said Gavin Friend, a markets strategist at National Australia Bank in London. “We’re seeing a general sterling recovery and it’s affecting all the major currencies.”

The U.K. currency strengthened 2 percent to 91.58 pence per euro as of 7:13 a.m. in New York, the biggest gain since Jan. 30 based on closing prices. It advanced 1.9 percent to $1.6272, pushing its gain in the three days to 3 percent.

Bank of England Markets Director Paul Fisher said policy makers would be more likely to pause asset purchases, giving themselves the option of “doing more later,” rather than stopping them, according to the Financial Times. Rising asset prices and improved confidence may be signs the program is working, Deputy Governor Charles Bean said two days ago.

Underpinning ‘Risk Appetite’

The Japanese currency dropped most against the pound and the New Zealand dollar as the MSCI World Index advanced 0.2 percent, a second day of gains. Goldman Sachs today posted third-quarter earnings of $5.25 a share, beating analysts estimates of $4.18 a share. The company is seeing “growth across a number of sectors,” it said.

“Good earnings and rising stocks underpin risk appetite,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “That will weigh on the yen as funding currency along with the U.S. dollar.”

The yen weakened to 90.24 per dollar, from 89.44 in New York yesterday, and to 146.71 per euro, from 133.47. The dollar strengthened to $1.4889 per euro, from $1.4925. It traded at $1.4967 earlier, the weakest level since August 2008.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against those of six major U.S. trading partners, was little changed at 75.552, after declining to 75.211 earlier, the lowest level since August 2008.

Dollar’s ‘Perfect Storm’

“2009 has been a seminal moment in the market where the dollar’s hegemony as a reserve currency has come into question,” Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London, the world’s biggest custodian of financial assets. “A perfect storm of issues” may send the dollar to $1.60 by the beginning of 2010, he said.

The Dow Jones Industrial Average yesterday closed above 10,000 for the first time in a year after JPMorgan posted third- quarter earnings that beat analysts’ estimates.

“All factors point to continued dollar weakness and a break above critical resistance at $1.50 looks likely” against the euro, BNP Paribas SA analysts led by London-based Hans- Guenter Redeker, head of global currency strategy, wrote in a client note today.

Australia’s dollar traded at a 14-month high after central bank Governor Glenn Stevens said policy makers can’t be “too timid” in raising interest rates, stoking speculation it will add to last week’s unexpected increase.

The so-called Aussie rose to 91.67 U.S. cents, from 91.50 cents yesterday.

Goldman Sachs Forecasts

Goldman Sachs said the U.S. dollar is likely to extend declines against the euro and most commodity-backed currencies over the coming six months, based on the greenback’s correlation with cyclical assets and capital flows.

The bank expects the Australian dollar to peak at 95 cents and Brazil’s real to trade at 1.65 per dollar in three months.

The Federal Reserve minutes yesterday showed some U.S. policy makers were open last month to boosting the central bank’s $1.25 trillion mortgage-backed securities purchase program to revive the world’s biggest economy.

“The Fed is basically saying it’s not going to raise rates anytime soon, so the yield advantage enjoyed by many other currencies including the Australian dollar or the euro is going to be around for a long time,” said Adam Carr, senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest broker of trades between banks.

The Fed may report U.S. industrial output rose 0.2 percent in September, after gaining 0.8 percent in August, according to the median estimate of 75 economists in a Bloomberg News survey. The data is due tomorrow.

Sumitomo Forecast

Benchmark interest rates are 3.25 percent in Australia and 1 percent in the euro zone, compared with 0.1 percent in Japan. The Fed’s target rate for overnight bank loans is zero to 0.25 percent. The central bank may start raising its target rate in the second quarter of 2010, according to analysts’ forecasts compiled by Bloomberg.

The dollar may sink to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.

The dollar will target 50 yen during the current wave, based a retracement using the Fibonacci series of numbers, the strategist said.

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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Oil Little Changed Near One-Year High Before Report on Supplies

By Grant Smith

Oct. 15 (Bloomberg) -- Crude oil was little changed near a one-year high in New York before a report forecast to show that U.S. crude inventories rose.

Oil earlier climbed to $75.96 a barrel, its highest since October 2008. Crude stockpiles probably expanded by 1 million barrels last week, while distillates, a category that includes heating oil, fell by 100,000 barrels, according to a Bloomberg survey before today’s report from the Energy Department.

“On the fundamental side nothing points to higher prices,” said Gerrit Zambo, a trader with Bayerische Landesbank in Munich. “I don’t think demand is going to pick up to the extent that we’ll get any physical shortages. Overall market sentiment is driving oil.

Crude oil for November delivery traded 10 cents higher at $75.28 a barrel in electronic trading on the New York Mercantile Exchange as of 11:21 a.m. London time. Prices have gained 5 percent this week.

Today’s peak of $75.96 a barrel, the highest intraday price since Oct. 20, 2008, was driven by a decline in the dollar and a worldwide advance in equity markets. Yesterday, the American Petroleum Institute reported that U.S. crude oil and gasoline stockpiles dropped last week.

The Dow Jones Industrial Average broke 10,000 yesterday for the first time in a year on better-than-estimated earnings at JPMorgan Chase & Co. and Intel Corp.

Crude Stockpiles

U.S. crude oil stockpiles fell 172,000 barrels to 339.2 million last week, according to the industry-funded American Petroleum Institute. Gasoline inventories declined 2.66 million barrels to 210.4 million, its report showed.

The Energy Department will release its Weekly Petroleum Status Report at 11 a.m. in Washington, a day later than usual because of the Columbus Day holiday Oct. 12.

The Energy Department will post a 100,000-barrel drop in distillate fuel stockpiles in the week to Oct. 9, according to the median estimate from 14 analysts surveyed by Bloomberg News. Inventories including diesel and heating oil have risen seven weeks to 171.8 million barrels, the highest since January 1983.

Crude oil stockpiles probably rebounded 1 million barrels from the previous week’s decline, based on the survey. Nine analysts predicted an increase while four said there was a drawdown. Gasoline inventories climbed 1.13 million barrels, the survey showed.

Oil-supply totals from the API and Energy Department moved in the same direction 76 percent of the time over the past four years, according to data compiled by Bloomberg.

U.S. Dollar

The dollar was at $1.4916 per euro as of 11:01 a.m. London time after falling as low as $1.4968 per euro, the weakest since August 2008.

“The U.S. dollar knows only one direction and that is helping the oil price,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “It may have also got a boost from the API data.”

Brent crude oil for November settlement rose as much as 76 cents, or 1 percent, to $73.86 a barrel on the London-based ICE Futures Europe exchange. The contract, which expires today, was unchanged at $73.10 a barrel at 11:04 a.m. local time. December futures were at $73.93 a barrel.

To contact the reporter on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.netGrant Smith in London at gsmith52@bloomberg.net

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Soybeans Rise as Dollar Weakens, Freeze Delays U.S. Harvest

By Luzi Ann Javier

Oct. 15 (Bloomberg) -- Soybeans rose for a second day as U.S. harvesting delays raised the risk the world’s largest exporter may miss a record output forecast and as a weaker dollar made commodities more attractive to investors.

Cooler, wet weather forecast for the Midwest, the largest U.S. growing region, may create “generally difficult harvest conditions” after heavy rainfall on Oct. 13, DTN Meteorlogix LLC said yesterday.

“Frost and the delay in harvests are all going to push prices higher,” Peter McGuire, managing director of CWA Global Markets Pty in Sydney, said by phone today. “All the soft markets have had a strong rally and that could continue.”

Soybean futures jumped 7.6 percent this month as freezing weather delayed harvest. The November-delivery contract added as much as 0.5 percent to $9.99 a bushel in after-hours electronic trading and was at $9.97 at 1:31 p.m. Singapore time.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the value of the greenback against the currencies of six major U.S. trading partners, fell for a fourth straight session amid speculation the Federal Reserve won’t raise interest rates for some time. The index was at 75.279, down 0.4 percent.

About 23 percent of the soybean crop in the 18 largest U.S. producing states had been harvested as of Oct. 11, compared with 49 percent a year earlier and the past five-year average of 57 percent, the Department of Agriculture said Oct. 13. About 13 percent of the corn crop was collected, compared with 20 percent a year ago and the average 35 percent in the past five years.

Soybean Production

The USDA forecast Oct. 9 that the soybean crop would rise 9.5 percent to a record 3.25 billion bushels in the marketing year that began Sept. 1, and the corn crop would be 13.018 billion bushels, the second-largest on record. Investors are pricing in the risk that harvests may be smaller than expected, McGuire said.

Corn for December delivery fell as much as 0.9 percent to $3.7950 a bushel and last traded at $3.8275. The most-active contract has gained 11 percent this month.

The grain’s relative strength index, a momentum measure used by some investors to determine if price are about to rise or fall, has been above 72 since Oct. 12. A reading of more than 70 is seen by some investors as a signal prices may fall.

Wheat for December delivery fell 0.6 percent to $5.0975 a bushel. The most-active contract has jumped 11 percent this month, after four straight monthly declines.

Corn and wheat “have run up a bit the last few days on short covering and a weak U.S. dollar, but the fundamentals still remain weak,” Ben Barber, a futures adviser at Bell Commodities Ltd. in Melbourne said in an e-mail.

The USDA on Oct. 9 raised its estimate for global wheat stockpiles at the end of the 2009-2010 marketing year to 186.7 million tons, compared with 166.8 million tons a year earlier.

The agency forecast global corn output forecast at 792.5 million tons, from 791.3 million tons a year earlier.

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

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Gold May Reach $1,200 as Weak Dollar Ignites Investment Demand

By Kim Kyoungwha

Oct. 15 (Bloomberg) -- Gold will rise to $1,200 an ounce by yearend as the dollar extends a slump, increasing demand for the metal as a store of value, according to researcher CPM Group.

“There will be increased economic volatilities, albeit not a major disruption, in the coming five to ten years,” Douglas Horn, a New York-based analyst at CPM, said in an interview at a conference in Singapore. “Investors perceive gold as an asset class to hedge against these volatilities.”

President Barack Obama has increased U.S. marketable debt to a record as he borrows to spur growth in the biggest economy, raising concern that the increasing money supply will debase the dollar and stoke inflation. Gold prices reached an all-time high of $1,070.80 an ounce yesterday as the greenback declined to the lowest since Aug. 2008 against a basket of six major currencies.

Gold for immediate delivery climbed $2.72 to $1,065.13 an ounce at 2:10 p.m. in Singapore, while December-delivery gold on the Comex division of the New York Mercantile Exchange stood at $1,065.50 an ounce after rising 80 cents. The metal has risen 21 percent this year, heading for a ninth straight annual gain.

Bullion will account for 1 to 2 percent to total assets in global investment portfolios, compared with less than 1 percent currently, as flows into commodity products increase, Horn said.

Commodity-linked products attracted $2.63 billion in August, at least twice the amount recorded for any August, according to Barclays Capital. Exchange-traded funds products attracted $1.74 billion, according to the bank.

“In the past years, we used to see retail investors coming to the market to buy gold but now we’re seeing a large scale of institutional investors participating in the gold market. That’s a significant change,” said Horn.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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Russia Unlikely to Sell Palladium Stocks in 2009, Norilsk Says

By Maria Kolesnikova and Yuriy Humber

Oct. 15 (Bloomberg) -- Russia, accounting for half the world’s palladium supply, appears unlikely to sell any of its stockpiles of the metal this year, OAO GMK Norilsk Nickel said.

No stockpile sales appear to have been made so far, said Anton Berlin, head of Norilsk’s department for analysis and market developments, citing the “indirect evidence” of customs data. Even if the government chose to make sales now, the metal would be unlikely to reach the market until next year, he said in a phone interview from London yesterday.

In terms of possible explanations for the apparent lack of sales this year, “Russia may have run out of stockpiles, the government decided to refrain from selling or the government is waiting for better prices,” Berlin said.

Norilsk mined 2.82 million ounces of palladium last year, equal to 39 percent of global supply estimated at 7.31 million ounces by Johnson Matthey Plc.

Palladium surged 74 percent this year in London trading, outpacing gains in gold, silver and platinum. The metal, used mostly in autocatalysts and electronics, is still trading at less than a third of the record $1,125 an ounce reached in 2001. Supply has outpaced demand every year since 2001, according to Johnson Matthey.

Russia was expected to sell 40.4 metric tons (about 1.3 million troy ounces) of palladium from state stockpiles this year, up from 39.8 tons in 2008, Peter Ryan from London-based researcher GFMS Ltd. said this month. Russia doesn’t disclose its stockpiles of metals.

Palladium Demand

Demand for palladium was buoyed this year by “cash for clunkers” programs in countries including the U.S. and U.K., which shored up demand for cars. Still, that may have just moved demand from 2010 to this year, Berlin said.

Norilsk also produced 299,700 tons of nickel last year, making it the world’s biggest producer of the metal used in stainless steel. The metal rose 58 percent this year in London trading, on expectations that demand will rebound as the world recovers from its worst recession since the 1930s. Nickel consumption will slump 7.6 percent this year, before expanding by 16 percent next year, Barclays Capital estimates.

“It’s probably too early to be very optimistic, because we see that consumers remain very cautious and restrained,” Berlin said. “Some big consumers have returned to pre-crisis levels, which is an optimistic signal, while some smaller companies continue to operate, depending on the country and the industry, at some 30 to 70 percent of capacity.”

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net, Yuriy Humber in Moscow at yhumber@bloomberg.net

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Japanese Stocks Advance on Elpida Earnings, Analysts

By Masaki Kondo and Patrick Rial

Oct. 15 (Bloomberg) -- Japanese stocks gained after Elpida Memory Inc.’s earnings and brokerage upgrades at electronics makers boosted speculation demand for products is picking up.

Elpida, Japan’s biggest maker of computer memory-chips, gained 2.9 percent. Panasonic Corp., the world’s largest maker of plasma televisions, gained 3 percent after JPMorgan Chase & Co. lifted its view on Japan’s electronics industry to “bullish.” Nippon Steel Corp. added 3.1 percent after South Korean rival Posco boosted its profit forecast.

“I’m bullish on Japanese equities,” said Masayuki Kubota, a senior fund manager at Daiwa SB Investments Ltd., which manages the equivalent of $38 billion in Tokyo. “Manufacturing is recovering significantly and the business environment for Japanese companies is improving.”

The Nikkei 225 Stock Average rose 1.8 percent to close at 10,238.65 in Tokyo, and the broader Topix index added 1.1 percent to 904.11, with more than twice as many stocks rising as falling. Both gauges climbed to their highest this month.

Elpida climbed 2.9 percent to 1,260 yen, after surging as much as 6.3 percent. The company posted operating profit in the three months to Sept. 30 because a recovery in demand triggered a “substantial” increase in memory prices. It was the company’s first operating profit in eight quarters.

“A turnaround in major electronics markets should lead to improved sentiment,” Yoshiharu Izumi, a JPMorgan analyst, wrote in a report yesterday. “Of the consumer electronics companies, we like Panasonic the most, followed by Sony and then Sharp.” Izumi raised his view on Japan’s electronics industry from “neutral.”

Panasonic, Sony, Sharp

Panasonic climbed 3 percent to 1,267 yen, and Sony Corp., the maker of the Vaio personal computer, advanced 3.6 percent. Sharp Corp., Japan’s biggest maker of liquid-crystal displays, rose 3 percent after Barclays Capital upgraded the stock to “equal weight” and South Korean rival LG Display Co. reported that profit almost doubled in the third quarter.

“The business climate is improving for the high-tech industry,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “Demand is robust, especially in China, for products such as sophisticated mobiles” and inexpensive laptop computers.

Gains in U.S. equities gave an extra boost to the Japanese market as the Standard & Poor’s 500 Index added 1.8 percent yesterday to the highest since October 2008. A Commerce Department report showed retail sales fell less than economists had estimated in September.

Nippon Steel, the world’s No. 2 steelmaker, rose 3.1 percent to 365 yen after HSBC Holdings Plc, raised the shares to “neutral” from “underweight.” JFE Holdings Inc., Japan’s second-biggest steelmaker, gained 2.1 percent and smaller competitor Kobe Steel Ltd. advanced 3 percent.

Posco lifted its operating profit forecast for 2009 by 23 percent yesterday. Global steel demand will increase in 2010 as orders from industries including automakers and builders improve, the company said. The World Steel Association said on Oct 12. that global demand will rebound 9.2 percent next year.

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

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Asian Stocks Rise on Earnings Optimism; Treasuries, Dollar Fall

By Adam Haigh and Jonathan Burgos

Oct. 15 (Bloomberg) -- Asian stocks advanced for a third day after JPMorgan Chase & Co.’s earnings topped estimates and Posco raised its profit forecast. Treasuries and the dollar fell as investors sought higher-yielding assets.

Hana Financial Group Inc., South Korea’s No. 4 financial company, climbed 3.6 percent in Seoul on speculation it may cancel a share-sale plan. Posco, Asia’s third-largest steelmaker, gained 3.7 percent as its forecast signaled higher demand for the raw material. Elpida Memory Inc. rose 2.9 percent after posting its first operating profit in eight quarters. Inpex Corp., Japan’s largest energy explorer, gained 2.6 percent as crude-oil prices climbed.

“Investors are putting more money into equities in anticipation of further improvements in economic data and corporate earnings,” said Michiya Tomita, who helps manage $61 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong.

The MSCI Asia Pacific Index added 0.6 percent to 120.75 as of 7:34 p.m. in Tokyo, the highest level since Sept. 8, 2008. The gauge has climbed 71 percent from a more than five-year low on March 9 amid increasing signs stimulus measures around the world are reviving the global economy.

Japan’s Nikkei 225 Stock Average gained 1.8 percent as Elpida climbed and Credit Suisse Group AG advised buying shares of Panasonic Corp., the world’s largest maker of plasma televisions. South Korea’s Kospi Index advanced 0.6 percent.

Australia’s S&P/ASX 200 Index increased 0.6 percent as the country’s central bank governor signaled a “gradual expansion” for the economy next year. Retailers David Jones Ltd. and JB Hi- Fi Ltd. climbed more than 2 percent.

Most markets in the region rose, apart from Thailand, India and Sri Lanka. The SET Index sank 5.9 percent in Bangkok on concern over the health of the country’s king.

JPMorgan Earnings

Futures on the Standard & Poor’s 500 Index were little changed. The gauge rose 1.8 percent yesterday, while the Dow Jones Industrial Average rose above 10,000 for the first time in a year, following JPMorgan’s earnings and a better-than- estimated retail sales report.

Speculation the global recovery is on track caused investors to pare holdings of the U.S. currency and Treasuries today. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, sank 0.4 percent to 75.288, the lowest since August 2008. The yield on the 10- year Treasury note rose five basis points to 3.46 percent, according to BGCantor Market Data.

Financial companies led yesterday’s rally in U.S. stocks. JPMorgan’s investment-banking revenue from fixed income jumped to a record $5 billion as Chief Executive Officer Jamie Dimon capitalized on his 2008 acquisition of Bear Stearns Cos.

Seven-Month Rally

Finance shares are the MSCI Asia Pacific Index’s best- performing group in the rally since March as concerns eased about the health of the industry. Bear Stearns and Lehman Brothers Holdings Inc. were among the biggest casualties of the credit crisis that has caused more than $1.6 trillion of losses at the world’s biggest financial companies.

Sumitomo Trust & Banking Co., Japan’s fifth-biggest bank, climbed 4.7 percent to 492 yen. Westpac Banking Corp., the No. 2 lender in Australia by assets, added 1.1 percent to A$27.10.

“The news out of the U.S., particularly companies such as JPMorgan, is boosting sentiment and banks are likely to be at the center of a move by investors back into the market,” said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC Co. in Tokyo.

Hana Financial climbed 3.6 percent to 37,350 won after the Korea Economic Daily reported the company put its plan to sell new shares in a rights offer on hold after a plunge in its stock price. The company may reconsider a rights offer after March, the Korean-language newspaper said today.

Steel Demand

In Seoul, Posco climbed 3.7 percent to 534,000 won after lifting its operating profit forecast for 2009 by 23 percent yesterday amid signs steel demand is recovering. The World Steel Association said on Oct 12. that the global market will rebound 9.2 percent next year.

Elpida, Japan’s biggest computer-memory chipmaker, rose 2.9 percent to 1,260 yen. Operating profit, or sales minus the cost of goods sold and administrative expenses, was 500 million yen ($5.6 million) in the three months to Sept. 30, the company said in a preliminary earnings statement today. Elpida reported a 24.5 billion yen loss a year earlier.

Signs of growth in Asia have helped the MSCI Asia Pacific Index has outpaced gains by the S&P 500 Index and Europe’s Dow Jones Stoxx 600 Index in the past seven months. Stocks in the Asian gauge are valued at 23 times estimated earnings, compared with 18 times for the S&P and 16 times for the Stoxx 600.

Interest-Rate Increases

Reserve Bank of Australia Governor Glenn Stevens said today the central bank can’t be too timid in raising its benchmark interest rate now that the threat of an economic crisis in the nation has passed.

Stevens became the first Group of 20 central banker to increase borrowing costs when he unexpectedly boosted the overnight cash rate target last week by a quarter percentage point from a half-century low.

David Jones, a department-store operator, gained 2.1 percent to A$5.84. JB Hi-Fi climbed 5.6 percent to A$20.50 as brokerages from Morgan Stanley to Deutsche Bank AG boosted their share-price targets.

Panasonic rose 3 percent to 1,267 yen as Credit Suisse raised its recommendation to “outperform” from “neutral,” citing the company’s low valuations and strong balance sheet.

Inpex gained 2.6 percent to 787,000 yen, while Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 1.1 percent to A$53.20. Crude oil rose above $75 a barrel in New York for the first time in a year. The London Metals Index, a measure of six metals including copper and zinc, added 0.9 percent yesterday.

China, Thailand

In China, the Shanghai Composite Index rose 0.3 percent as government reports showed new lending expanded last month and home prices increased. Bank of Communications Ltd. added 1.4 percent to 8.87 yuan, while Industrial Bank Co. gained 1.4 percent to 37.56 yuan.

Thailand’s SET Index fell for a third day, while the baht slumped to a two-week low as King Bhumibol Adulyadej, who has reigned for more than six decades, remained in hospital for a 26th day. The monarch’s “general condition is good,” the royal household said.

Siam Commercial Bank Pcl, the nation’s No. 3 lender by assets, slumped 6 percent to 81.75 baht, while Siam Cement Pcl, the country’s biggest maker of the building material, lost 6.3 percent to 209 baht. Crown Property Bureau, the monarchy’s investment arm, controls both companies.

“If something happens to the king, then there will be a period of confusion in Thailand,” Jim Rogers, chairman of Rogers Holdings, said today in Seoul.

To contact the reporters for this story: Adam Haigh in Hong Kong at ahaigh1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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DAX Index Fluctuates Near One-Year High; RWE Drops, Metro Gains

By Julie Cruz

Oct. 15 (Bloomberg) -- German stocks swung between gains and losses near the highest level in a year before earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. and economic data in the U.S.

E.ON AG and RWE AG, the country’s largest utilities, declined more than 1 percent as German electricity for delivery next year fell to the lowest in more than a week. Metro AG advanced 2.2 percent after JPMorgan Chase & Co. recommended shares of the nation’s biggest retailer.

The benchmark DAX Index slipped less than 0.1 percent to 5,852.35 at 12:13 p.m. in Frankfurt, after rising as much as 0.2 percent earlier. The measure has rallied 60 percent since March 6 as companies reported better-than-estimated earnings and economic data signaled the global recession is nearing an end. The broader HDAX Index decreased 0.1 percent today.

Goldman Sachs may say before the U.S. market opens that earnings almost tripled to $2.4 billion in the third quarter, according to analysts’ estimates compiled by Bloomberg. Citigroup is also scheduled to report results today.

Prices paid by U.S. consumers probably rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the recession, economists said before reports today. Other data may show manufacturing in the New York and Philadelphia regions continued to expand this month.

In Europe, consumer prices dropped for a fourth month in September as energy prices declined and companies cut jobs and reduced costs to weather the global economic slump.

Utilities

E.ON lost 1.5 percent to 26.53 euros, while smaller competitor RWE dropped 1.3 percent to 61.40 euros. Baseload electricity for 2010 in Europe’s biggest power market slid as much as 0.7 percent to 47.70 euros a megawatt-hour, its lowest since Oct. 6, according to broker data on Bloomberg.

K+S AG slipped 0.8 percent to 38.90 euros. Europe’s biggest potash producer was cut to “underweight” from “equal- weight” at Morgan Stanley, which cited “an unfavorable Chinese potash settlement.”

Metro climbed 2.2 percent to 39.95 euros, a sixth straight advance. The shares were raised to “overweight” from “neutral” at JPMorgan.

Deutsche Bank AG added 2 percent to 57.10 euros after the country’s biggest bank was raised to “outperform” from “underperform” at CA Cheuvreux.

Commerzbank AG rose 1.2 percent to 8.80 euros, extending yesterday’s 3.3 percent advance. Germany’s second-largest lender sold its Kleinwort Benson wealth management unit to RHJ International for 225 million pounds ($362 million) in cash to fulfill European Union demands for approving state aid.

Merck, Escada

Merck KGaA gained 1.6 percent to 70.36 euros. The German company and Dyesol Limited have entered an agreement to collaborate in the development of electrolytes for use in dye solar cells, Merck said.

Escada AG climbed 4.2 percent to 74 cents. The insolvent fashion company has received acquisition bids from at least five investors, including Sven Ley and his wife, Zoe Appleyard-Ley, Sueddeutsche Zeitung reported, without saying where it got the information.

Kuka AG rose 3.2 percent to 11.05 euros, extending yesterday’s 5.4 percent increase, as the German company whose robots assemble Jeep Wrangler bodies was raised to “buy” from “hold” at Berenberg Bank.

Stada Arzneimittel AG retreated 3.5 percent to 20.32 euros. Germany’s largest publicly traded maker of generic medicines was downgraded to “reduce” from “hold” at Commerzbank, which said in a report “we cannot call off the normal pricing pressure threat.”

Q-Cells SE slid 1.9 percent to 13.02 euros as the solar company was downgraded to “sell” from “hold” at DZ Bank AG, which said it expects “difficult” years in 2010 and 2011 because of cuts in solar energy subsidies. Solarworld AG slid 2.3 percent to 16.47 euros as the bank cut its stance to “hold” from “buy.”

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

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U.K. Stocks Are Little Changed; Anglo American Shares Retreat

By Adam Haigh and Alexis Xydias

Oct. 15 (Bloomberg) -- U.K. stocks were little changed after Xstrata Plc dropped a proposed bid for Anglo American Plc, offsetting gains in insurance companies.

Anglo American fell 2 percent after Xstrata walked away from the proposed 29.6 billion-pound ($48 billion) deal. RSA Insurance Group Plc, the U.K.’s biggest non-life insurer, and Old Mutual Plc climbed after BofA Merrill Lynch Global Research recommended buying the insurers’ shares.

The benchmark FTSE 100 Index slid 6.63, or 0.1 percent, to 5,249.47 as of 10:16 a.m. in London. The FTSE All-Share Index lost 0.1 percent and Ireland’s ISEQ Index dropped less than 0.1 percent.

A seven-month rally in equities has gathered pace since the third-quarter earnings season started this month, amid speculation profits at companies will beat estimates. Nokia Oyj in Finland and Golden Sachs Group Inc. in the U.S. are among today’s largest companies reporting results.

“At this point, we are factoring in a lot of good news,” said Simon Denham, managing director at Capital Spreads in London. If results “are good, nobody is going to be surprised. I would almost say we are now in a situation where bad news or even flat news will have a worse effect than good news would have a positive one.”

Anglo American dropped 2 percent to 2,265 pence. Xstrata pulled out of the merger with Anglo American five days before a deadline for it to male a formal bid or walk away.

“It is regrettable that the board of Anglo American immediately rejected our approach, without engaging with Xstrata,” Xstrata Chief Executive Officer Mick Davis said in a statement. “The compelling strategic rationale for a merger of the two companies remains undiminished.”

RSA gained 1.9 percent to 135.5 pence. BofA Merrill Lynch raised its rating on the U.K.’s biggest non-life insurer to “buy” from “neutral,” saying the company “is one of the most cash-generative stocks in European insurance.”

Old Mutual added 1.2 percent to 114.3 pence. The largest insurer in Africa was raised to “buy” from “neutral” at BofA Merrill Lynch, which said the company may resume dividends to shareholders from full year 2010.

To contact the reporters on this story: Adam Haigh in Hong Kong at ahaigh1@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net.

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U.S. Stock Futures Fluctuate Before Earnings, Economic Reports

By Daniela Silberstein

Oct. 15 (Bloomberg) -- U.S. stock-index futures drifted between gains and losses before companies from Goldman Sachs Group Inc. and Citigroup Inc. to International Business Machines Corp. report quarterly earnings today.

Goldman Sachs and Citigroup advanced at least 1 percent. CIT Group Inc. rallied 12 percent as people familiar with the matter said the lender is in talks to amend a $29 billion debt swap. Caterpillar Inc. slipped before figures on manufacturing in the New York and Philadelphia regions.

Futures on the Standard & Poor’s 500 Index expiring in December added 0.1 percent to 1,088.30 as of 6:56 a.m. in New York, after falling as much as 0.1 percent earlier. Dow Jones Industrial Average futures rose 0.1 percent to 9,958. Nasdaq-100 Index futures decreased 0.1 percent to 1,746.75. European and Asian shares advanced.

“The whole world sees a need for consolidation but in the short term disappointments are missing,” said Rudolf Buxtorf, who manages about $114 million at RBS Coutts Bank in Zurich. “Market sentiment is skeptical but the earnings season has been smooth and negative news has stayed away.”

U.S. stocks rallied yesterday, sending the Dow average above 10,000 for the first time in a year, on better-than- estimated earnings at JPMorgan Chase & Co. and Intel Corp.

Companies in the S&P 500, which has rebounded 61 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show.

Beating Estimates

All but one of the 18 companies in the S&P 500 that have reported earnings since Oct. 7 surpassed analysts’ projections, according to Bloomberg data.

Goldman Sachs, which is scheduled to announce third-quarter results at 7:30 a.m., added 1 percent to $194.23 in pre-market New York trading. The bank’s earnings almost tripled to $2.4 billion, according to analysts’ estimates compiled by Bloomberg. Citigroup, which analysts project will report at 8 a.m. its sixth unprofitable quarter in the past two years, gained 1.2 percent to $5.06.

IBM may say after the market’s close that its profit margin widened for an eighth straight quarter as the company’s expansion in computer software and services helped counter spending cuts by customers. Third-quarter profit probably climbed to $2.38 a share, based on estimates compiled by Bloomberg. The shares were little changed in early New York trading, adding 0.1 percent to $128.50. Google Inc. is also scheduled to report earnings after the close of markets today.

CIT Group, Lazard

CIT Group soared 12 percent to $1.19 in New York. The 101- year-old commercial lender seeking to avoid collapse is in talks with some bondholders to amend terms of its $29 billion debt exchange, according to people familiar with the matter.

Lazard Ltd. slid 6.9 percent to $40.29 in Germany. The shares were cut to “market perform” from “outperform” at Oppenheimer & Co. because of the death of Chairman and Chief Executive Officer Bruce Wasserstein. Vice Chairman Steven Golub was named interim chief executive officer of the firm.

Caterpillar, the world’s largest maker of construction equipment, slipped 0.6 percent to $54.20. Regional Federal Reserve reports may show New York area manufacturing slowed this month after growing in September at the fastest pace in almost two years, while a factory gauge for the Philadelphia region likely dropped from the highest reading since June 2007, economists said.

Economy Watch

Prices paid by U.S. consumers probably climbed at a slower pace in September, showing inflation will not be a threat as the economy emerges from the recession, economists said before Labor Department data due at 8:30 a.m. The cost of living may have gained 0.2 percent after rising 0.4 percent in August, according to the median of 79 projections in a Bloomberg News survey.

As the Dow posted its steepest advance in seven decades to rally above 10,000, investors were pouring money into bonds. The nation’s fixed-income funds have attracted 18 times more money than stocks in 2009, even as the measure surged 53 percent after sinking to a 12-year low in March, according to data compiled by Morningstar Inc. and Bloomberg.

Americans who stashed $1.45 trillion in money-market accounts in 2007 and 2008 as the financial crisis intensified have redeployed a quarter of that cash.

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

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European Stocks Gain Before Goldman Sachs, Citigroup Earnings

By Sarah Jones

Oct. 15 (Bloomberg) -- European stocks rose before earnings from Goldman Sachs Group Inc. and Citigroup Inc. U.S. futures fluctuated, while Asian shares advanced for a third day.

ING Groep NV gained 1.7 percent after Singapore’s Oversea- Chinese Banking Corp. agreed to pay $1.46 billion for the Dutch company’s private-banking assets in Asia. Remy Cointreau SA jumped 7.8 percent as its sales decline eased. Nokia Oyj slumped the most in three months the world’s biggest maker of mobile phones posted a loss.

Europe’s Dow Jones Stoxx 600 Index rose 0.6 percent to 248.42 at 11:51 a.m. in London, extending a 12-month high. The measure has surged 57 percent since March 9 as companies from Royal Philips Electronics NV to JPMorgan Chase & Co. reported earnings that beat analysts’ estimates.

“It’s very difficult to see what is going to derail the markets,” Andreas Uterman, chief investment officer at the RCM unit of Allianz Global Investors, which manages $1.34 trillion, said in a Bloomberg Television interview. “I think we are going to face a pretty good earnings season. The combination of top- line growth, good business models from some companies, and the continued effects from cost cutting is going to produce some quite good numbers.”

The MSCI Asia Pacific Index added 0.6 percent today as Posco, the region’s third-largest steelmaker, increased its profit forecast. Thailand’s SET Index tumbled 5.3 percent, the biggest loss in a year, as King Bhumibol Adulyadej remained in the hospital for a 26th day. The 81-year-old monarch’s “general condition is good,” the Royal Household Bureau said in faxed statement late yesterday.

U.S. Futures

Futures on the Standard & Poor’s 500 Index and the Dow Jones Industrial Average were little changed after the Dow climbed above 10,000 for the first time in a year yesterday on better-than-estimated earnings from JPMorgan and Intel Corp.

The S&P 500 and Dow extended their advances yesterday after minutes from the Federal Reserve’s September meeting showed central bankers raised economic projections based on improved housing markets and a recovery in growth outside the U.S.

Goldman Sachs gained 1 percent to $194.23 in pre-market New York trading before reporting earnings. The bank’s third-quarter profit almost tripled to $2.4 billion, according to analysts’ estimates compiled by Bloomberg. Goldman Sachs is due to announce third- quarter results at 7:30 a.m. in New York, with Citigroup reporting at 8 a.m.

ING Increases

ING climbed 1.7 percent to 12.70 euros. Oversea-Chinese, Singapore’s third-largest lender, agreed to buy the assets after beating out HSBC Holdings Plc. The price includes the unit’s estimated surplus capital of about $550 million. HSBC slipped 0.7 percent to 718.1 pence in London.

Remy Cointreau jumped 7.8 percent to 34.17 euros after France’s second-largest liquor company reported a smaller sales decline as demand for cognac in the U.S. and Asia improved. Revenue in the six months to June 30 fell 0.7 percent to 362.7 million euros. That was less than the 7.5 percent drop reported for the first quarter.

Diageo Plc and Pernod Ricard SA, the world’s largest distillers, gained 1.6 percent to 971.5 pence and 2.4 percent to 55 euros, respectively.

Nokia fell 7 percent to 9.58 euros after posting a third- quarter net loss of 449 million euros ($833.9 million), compared with 1.09 billion-euro profit in the year-earlier period. Analysts in a Bloomberg survey had forecast a profit of 367 million euros, on average. Sales declined to 9.8 billion euros, missing analysts’ estimates of 10.03 billion euros.

Sainsbury, Qatar

J Sainsbury Plc surged 8.7 percent to 338.1 pence, the biggest intraday advance in more than a year, amid speculation Qatar is interested in acquiring the U.K.’s third-largest supermarket owner.

“There is definitely more interest in Sainsbury this morning,” said Manus Cranny, London-based senior market commentator at MF Global Spreads. “It looks as if the rumbling rumor of the Qataris potentially looking at Sainsbury is back on the rumor mill.”

Charles Watenphul, a spokesman for Sainsbury, said “we never comment on market speculation.”

Ashmore Group Plc surged 9.7 percent to 301 pence, the biggest intraday jump since in tow months. The U.K. money manager that focuses on emerging markets said assets under management gained 25 percent last quarter, boosted by rising markets as investors bet the worst of the recession is over.

Anglo, Xstrata

Anglo American Plc slipped 3.6 percent to 2,227 pence as Xstrata Plc dropped its proposed 30.4 billion-pound ($49 billion) hostile bid. Xstrata fell 2 percent to 1,010 pence.

Aggreko Plc climbed 5.8 percent to 770.5 pence. The world’s largest provider of mobile power-supply gear raised its outlook for earnings this year, boosted by an improvement in orders and margins at its unit which supplies portable power plants to clients across Africa, Asia and Latin America.

WH Smith Plc increased 2.8 percent to 511 pence after the U.K.’s biggest seller of magazines posted a 7 percent increase in full-year profit to 63 million pounds, driven by gains at its travel shops.

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

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