Obama Bridge to Lasting Economic Expansion Risks Going Nowhere

By Rich Miller

Oct. 30 (Bloomberg) -- President Barack Obama and Federal Reserve Chairman Ben S. Bernanke built a bridge they anticipate will lead to a lasting U.S. economic recovery. It may end up being a bridge to nowhere they want to be.

The economy grew in the third quarter for the first time in more than a year, propelled by emergency programs to boost buying of cars and homes, according to Commerce Department figures released yesterday. Policy makers are betting those temporary measures will pave the way to a self-sustaining expansion as companies hire and consumers increase spending.

The risk is that the biggest government intrusion into the economy since World War II will leave the U.S. saddled with trillions of dollars of debt and not much to show for it. The worst financial crisis since the Great Depression may have shaken companies and consumers so much that their spending won’t be enough to replace federal support.

Third-quarter growth “was boosted by the various fiscal stimulus policies,” Harvard University professor Martin Feldstein said in an e-mail. “The danger remains of a serious slowdown after this and a possible double dip” of the economy in 2010, he said.

Consumer spending on cars and homes helped power the 3.5 percent annual pace of growth. Sales at Dearborn, Michigan-based Ford Motor Co. and Detroit-based General Motors Co. were spurred by the government’s “cash for clunkers” plan, which expired in August. Builders including Miami-based Lennar Corp. benefited from a first-time home-buyers tax credit that may be extended beyond its Nov. 30 expiration date.

Excluding sales, production and inventories of vehicles, the economy grew 1.9 percent last quarter, the Commerce Department said.

‘Rickety Bridge’

“It is a very rickety bridge, but it is a bridge,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

Stock prices jumped after the stronger-than-anticipated GDP figures, with the Standard & Poor’s 500 Index finishing 2.3 percent higher yesterday at 1,066.11. The index is up 58 percent from its low for the year on March 9.

An improving U.S. and global economy helped companies from Amazon.com Inc. to Whirlpool Corp. exceed analysts’ earnings estimates last quarter. Profits at about 85 percent of the companies in the S&P 500 Index that have released results beat expectations, according to Bloomberg data. That marks the highest proportion in records going back to 1993.

Frankel Perspective

The U.S. economy probably hit its trough during the summer following four straight quarters of contraction, said Jeffrey Frankel, a Harvard University professor and member of the National Bureau of Economic Research’s Business Cycle Dating Committee.

The committee is responsible for deciding when recessions begin and end. Robert Hall, who heads the committee and is a professor at Stanford University in California, said in August it may take more than a year for the group to reach a decision.

Obama said yesterday the GDP report shows that “the steps we’ve taken have made a difference,” while acknowledging that the country has “a long way to go” before it recovers enough to bring down an unemployment rate at a 26-year high.

Most analysts anticipated that the government’s $787 billion stimulus program would have its biggest impact on growth in the second and third quarters of this year, Christina Romer, chair of Obama’s Council of Economic Advisers, told lawmakers last week.

“By mid-2010, fiscal stimulus will likely be contributing little to growth,” she added.

Rogoff Debt Warning

The $1.4 trillion budget deficit in the year ended on Sept. 30 -- which at 10 percent of GDP was the highest since World War II -- leaves the administration and Democratic lawmakers little room to add to what they’ve already done for the economy ahead of mid-term Congressional elections in November 2010.

“The debt is piling up,” Ken Rogoff, a Harvard University professor and former chief economist at the International Monetary Fund, said in a Bloomberg Radio interview two days ago. “We just don’t see” anything like it “outside wartime.”

While unemployment is likely to remain “severely elevated” for a while, any proposals for fresh government action to reduce it would need “rigorous evaluation” given the size of the budget deficit, Romer said.

Bernanke and his colleagues at the Fed have already begun to wind down some of their support for the economy. The central bank yesterday completed its purchases of $300 billion of Treasury securities under a program that was aimed at lowering borrowing costs.

FOMC Language

The Federal Open Market Committee may opt next week to soften its suggestion that short-term interest rates will stay at “exceptionally low levels” for an “extended period” in order to give it more flexibility to change policy in the future, Richard Berner, co-head of global economics for Morgan Stanley in New York, said in a report to clients on Oct. 26.

Policy makers, who have set a target of zero to 0.25 percent for their benchmark interest rate, will meet Nov. 3-4 to map monetary strategy.

As the central bank and the administration exit from their stimulus policies, it will be up to consumers and companies to fill the gap.

“The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government,” Kathleen Stephansen, chief economist at Aladdin Capital Holdings LLC in Stamford, Connecticut, said in an interview with Bloomberg Television.

End of ‘Clunkers’

Sales of cars and light trucks declined 23 percent in September after the “cash for clunkers” program ended, according to Autodata Corp. The seasonally adjusted annual sales rate for September was 9.22 million, compared with 12.6 million a year earlier.

The housing market has also shown signs of weakness amid uncertainty about whether the tax credit would be extended. Sales of new homes unexpectedly fell in September, dropping by 3.6 percent to a 402,000 annual pace. Senate Democrats have since reached an agreement to prolong the program.

Household spending is being held back as banks tighten lending standards after $1.7 trillion in writedowns and credit losses worldwide and as consumers seek to rebuild their finances.

Consumer credit fell in August for a seventh straight month, the longest series of declines since 1991.

“An ongoing balance-sheet adjustment in the household sector, combined with lingering labor market weakness, will weigh heavier on consumer spending than generally appreciated,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm, said in a note to clients yesterday.

More Job Losses

More than three-quarters of investors and analysts surveyed in a poll of Bloomberg subscribers across six continents late this month said they expect the U.S. unemployment rate to be 9.5 percent or higher a year from now. The rate in September was 9.8 percent.

Small businesses in the U.S. plan to keep reducing payrolls and inventories over the next three months on expectations sales will fall, according to a survey released on Oct. 13 by the Washington-based National Federation of Independent Business.

“The ‘job-generating machine’ is still in reverse,” William Dunkelberg, the group’s chief economist, said in a statement. “Sales are not picking up, so survival requires continuous attention to costs -- and labor costs loom large.”

The history of financial crises suggests that it will be a “long, slow haul” out of the recession, said Rogoff, author, along with Carmen Reinhart of the University of Maryland, of “This Time Is Different,” a study of such catastrophes.

“Things like unemployment, housing prices, they’re going to take a long time to come back,” Rogoff said. “We’ll probably have subpar growth” of around 2 percent “for a long time.”

To contact the reporter on this story: Rich Miller in Washington rmiller28@bloomberg.net

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BOJ Ends Debt Buying as Central Banks Phase Out Emergency Steps

By Mayumi Otsuma

Oct. 30 (Bloomberg) -- The Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures taken at the height of the financial crisis.

Governor Masaaki Shirakawa and his colleagues also said they will only extend a program providing unlimited collateral- backed loans to banks one last time through March 31. Yesterday, Germany’s Axel Weber signaled the European Central Bank may pull back its handouts of emergency liquidity next year.

Policy makers from the Group of Seven nations are starting to withdraw emergency measures as some smaller nations such as Australia and Norway tighten policy in response to a global economic recovery and surging asset prices. In Japan, the jobless rate unexpectedly fell to a four-month low in September, household spending rose and stocks rallied on optimism a rebound from its worst postwar recession is taking hold.

“Given steady improvements in credit markets, it’s not wrong to end these finance-support measures,” said Masaaki Kanno, chief economist at JPMorgan Chase & Co. in Tokyo, who used to work at the central bank. Kanno added that falling prices will prompt the policy board to keep the key rate near zero for all of 2010 at least.

The yen traded at 90.97 per dollar at 8:32 a.m. in London from 91.31 before the announcement. The Nikkei 225 Stock Average climbed 1.5 percent.

The bank also left its benchmark interest rate at 0.1 percent and pledged to keep borrowing costs at “low levels” as it forecast deflation will extend into fiscal 2011. Shirakawa said he’s “committed to prolonging the current extremely accommodative financial environment.”

Lingering Deflation

“It’s hard to expect a rate increase in Japan as long as deflation lingers,” said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. “The Bank of Japan probably won’t raise interest rates before the Fed takes action.”

Two-year Treasury note yields this week rose to the highest level in almost a month on speculation the Federal Reserve will discuss next month how and when to signal the possibility of higher U.S. rates. The U.S. economy expanded for the first time in more than a year last quarter, a report showed yesterday.

Exit strategies in Europe are starting to take shape. Bundesbank President Weber yesterday said the ECB may scale back unlimited offerings of 12-month loans in 2010. Even in the U.K., where the economy unexpectedly shrank in the third quarter, the Bank of England will probably slow or pause its bond-purchase program, former policy maker Charles Goodhart said. The ECB and the Bank of England next meet on Nov. 5.

Inflation Expectations

China’s central bank said today that policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth.

Some central banks aren’t waiting for the Fed. Australia this month became the first Group of 20 nation to raise rates since the height of the crisis and Norway’s central bank followed this week.

At the same time, Shirakawa stressed the BOJ has no plan to raise rates even though lenders’ need for the bank’s purchases of commercial paper and corporate bonds has diminished as companies find it easier to obtain credit.

“I want to underline our commitment to holding interest rates at the same level, even though the economy is recovering,” Shirakawa told reporters in Tokyo.

The bank’s forecasts of prolonged deflation will help to quash speculation for any early rate increase, analysts said. Consumer prices excluding fresh food slid 2.3 percent in September from a year ago, the government said today.

Return to Growth

The policy board said prices will fall 1.5 percent in the year ending March 2010, 0.8 percent next fiscal year and 0.4 percent in the period ending March 2012.

The economy will shrink 3.2 percent this fiscal year and grow 1.2 percent next year, board members said. The expansion will accelerate to 2.1 percent in the following 12 months.

Reports this week nevertheless show the recovery may be gaining traction. The unemployment rate fell to 5.3 percent in September and the ratio of jobs available to applicants rose for the first time in more than two years. Factory output climbed for a seventh month, figures earlier this week showed.

In one example of a firm able to get credit, Kirin Holdings Co. yesterday raised 100 billion yen ($1.1 billion) in bonds to fund its acquisition of Australian brewer Lion Nathan Ltd., according to data compiled by Bloomberg.

‘Signs of Improvement’

“Japan’s financial environment, with some lingering severity, has been increasingly showing signs of improvement,” the central bank said.

Other companies are reporting better-than-expected earnings. Sony Corp. narrowed its full-year loss forecast to 95 billion yen today, citing faster cost reductions and improving earnings from consumer electronics.

The central bank said it will stop the limitless lending facility on March 31, when companies close their books for the fiscal year end, and that the program won’t be extended further. Board member Atsushi Mizuno opposed the decision, along with the scrapping of the corporate bond purchases in December.

“The special loan program, which provides lenders with as much cash as they need, distorts price-setting in financial markets and should be wrapped up eventually,” said Izuru Kato, chief market economist at Totan Research Co. in Tokyo. “Postponing its expiry to the fiscal year end seems like a safe judgment.”

To contact the reporter on this story: Mayumi Otsuma in Tokyo motsuma@bloomberg.net

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Morgan Stanley Says BOE Exit From QE Is ‘Worrying’ Pound Bears

By Daniel Tilles

Oct. 30 (Bloomberg) -- The pound may get support from rules requiring U.K. financial institutions to boost their assets, which might spur gilt purchases from the Bank of England, according to Morgan Stanley.

“New Financial Services Authority regulations for U.K. banks might result in very large gilt purchases, possibly allowing the Bank of England an easy exit from its quantitative- easing program, something worrying pound bears,” strategist Stephen Hull in London wrote in a report dated yesterday.

The British currency may weaken in the “short term” because the central bank will probably extend its debt-buying program, according to Hull.

“The Bank of England looks likely to do more quantitative easing before it heads for the exit and that seems likely to hinder the pound in the short term,” he said.

Morgan Stanley recommended investors add to bets the pound will drop against the Norwegian krone.

Sterling rose 0.2 percent to 9.3678 kroner as of 7:24 a.m. in London.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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Lagarde Says Up to China to Decide on Stronger Yuan

By John Duce

Oct. 30 (Bloomberg) -- France’s Finance Minister Christine Lagarde said it’s up to China to decide whether to allow the yuan to strengthen and that the issue involves imbalances across exchange rates.

“China will decide for itself and it’s a matter of rebalancing several currencies to help create financial stability,” said Lagarde during a press briefing in Hong Kong today.

The comments came after she visited Beijing and Guangdong in southern China. She said that a delegation of 100 Chinese companies and Commerce Minister Chen Deming will visit Paris on Nov. 26 and Nov. 27 and she will meet them.

China and France signed a preliminary agreement to invest as much as 300 million euros ($443 million) in each other’s small and medium-sized companies during her trip. The funding will come from state-owned lenders Chinese Development Bank and Caisse des Depots et Consignations, Lagarde said. Lagarde met with Vice Premier Li Keqiang, the state-run Xinhua news agency reported.

She said today that countries should cooperate to avoid protectionism. France’s third-quarter gross domestic product will be as good if not better than that of the second quarter, she said.

To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net

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Oil Is Poised for Monthly Rise on Optimism Over U.S. Demand

By Yee Kai Pin and Ben Sharples

Oct. 30 (Bloomberg) -- Crude oil is poised for its biggest gain in five months after a report yesterday showed the U.S. economy grew in the third quarter, ending a year-long contraction and spurring optimism fuel demand will increase.

Oil rose 3.1 percent yesterday, the most in two weeks, after the Commerce Department said the world’s largest energy- consuming country expanded at a 3.5 percent annual pace between July to September. Gross domestic product was forecast to grow 3.2 percent, according to a Bloomberg News survey.

“It’s a very good number although it’s helped by stimulus from the government,” said Ken Hasegawa, a commodity derivatives sales manager at brokers Newedge in Tokyo. “We have to watch carefully the fourth quarter and the first quarter.”

Crude oil for December delivery traded at $79.52 a barrel, down 35 cents in electronic trading on the New York Mercantile Exchange at 4:22 p.m. Singapore time. Yesterday, the contract rose $2.41 to $79.87 a barrel. Futures, up 78 percent so far this year, are set to gain 13 percent in October, the biggest monthly rise since a 30 percent rally in May.

The dollar was little changed after falling yesterday against the euro. It traded at $1.4823 at 2:08 p.m. in Tokyo, from $1.4822 in New York. A declining U.S. currency spurs demand for commodities, including gold, as an alternative investment.

“There was a whole string of positive economic news from Europe, Japan, to the U.S., and the dollar was down,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Last night was a strong night for commodities across the board.”

Equities Advance

Asian stocks advanced, paring the MSCI Asia Pacific Index’s first monthly decline since February, and European stock futures were little changed. Yesterday, U.S. equities rallied on the return of economic growth. The Standard & Poor’s 500 Index climbed 2.3 percent to 1,066.11 in New York and the Dow Jones Industrial Average increased 2.1 percent to 9,962.58.

The U.S. economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four quarterly decreases marked the longest stretch of declines since quarterly records began in 1947.

“The GDP numbers really came out of the gate,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Growth is there, four quarters of negative growth are well and truly out of our way.”

The number of Americans collecting unemployment insurance fell more than forecast to the lowest level in seven months, a government report yesterday showed. Continuing claims for jobless benefits were down 148,000 at 5.8 million in the week ended Oct. 17, the lowest level since March 21 and biggest weekly drop since July, according to the Labor Department.

Price Survey

Crude oil may fall next week on speculation the dollar will rebound against the euro and equities may pull back, according to a Bloomberg News survey.

Fifteen of 34 analysts and traders, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast prices will be little changed. Last week, 50 percent of survey respondents said oil would fall.

Brent crude for December settlement traded at $77.53 a barrel on the London-based ICE Futures Europe exchange, slipping 51 cents at 4:22 p.m. in Singapore. Yesterday, the contract settled at $78.04 a barrel, up $2.18, or 2.9 percent, the most since Oct. 21.

To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net.

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Oil May Fall on Declining Equities, Rising Dollar, Survey Shows

By Blake Ellis

Oct. 30 (Bloomberg) -- Crude oil may fall next week on speculation that the dollar will rebound against the euro and equities will decline.

Fifteen of 34 analysts, or 44 percent, said futures will drop through Nov. 6. Ten respondents, or 29 percent, predicted the market will rise and nine forecast that futures will be little changed. Last week, 50 percent of analysts said prices would fall.

“I’m looking for a continuation of the rally in the dollar and weakness in equities,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “It’s starting to look like we have a major correction in store for us next week.”

A rising U.S. currency curbs demand for raw materials as an inflation hedge. Declining equities can signal the economy will be slow to recover, reducing consumption.

The Standard & Poor’s 500 Index dropped 4.6 percent to 1,042.63 in the four trading days ended Oct. 28. The dollar touched $1.4683 per euro yesterday, the strongest intraday price in more than two weeks.

The U.S. currency weakened and stocks rebounded in later trading after the U.S. Commerce Department said gross domestic product grew at a 3.5 percent pace from July through September after shrinking for four straight quarters.

Crude oil for December delivery fell 63 cents, or 0.8 percent, to $79.87 a barrel so far this week on the New York Mercantile Exchange. Futures are up 79 percent this year.

The oil survey has correctly predicted the direction of futures 47 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    10         9         15

To contact the reporter on this story: Blake Ellis in New York at bellis9@bloomberg.net

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Exxon, Oil Majors Battle to Restore Earnings as Demand Plunges

By Joe Carroll and Edward Klump

Oct. 30 (Bloomberg) -- Exxon Mobil Corp., PetroChina Co. and Royal Dutch Shell Plc are battling slumping fuel demand as oil majors seek to rebuild profits battered by the global fallout from the worst U.S. downturn since the Great Depression.

Exxon Mobil’s U.S. refineries lost about $2.3 million a day last quarter as gasoline and diesel prices fell. Shell, whose refining earnings declined 47 percent, said the plunge in demand will keep profit margins narrow in “the short and medium term” and a quick recovery in energy usage and prices is unlikely.

Oil companies around the world are slashing costs, cutting jobs and holding back on some new investment to halt the slide in earnings, even as they seek to fund renewable energy projects. Exxon Mobil cut its capital-spending estimate for 2009 by 10 percent as third-quarter profits at the Irving, Texas- based explorer and Shell hit their lowest level in six years.

“Low oil prices and tight refining margins are going to continue to haunt the majors this quarter and into the next quarter,” said Gianna Bern, president of energy consultancy Brookshire Advisory & Research Inc. in Flossmoor, Illinois. Crude oil has averaged $59 a barrel in New York this year, compared with $99.75 in 2008.

While fuel consumption slowed, crude producers pumped 3.68 million barrels in excess of worldwide demand during the third quarter, equivalent to the combined daily production of Kuwait and Libya, according to the International Energy Agency in Paris. Oil futures in the period slid almost $50 a barrel from their year-earlier average and natural gas hit a seven-year low.

Global Demand

Exxon Mobil, the world’s biggest company by market value, reported a fourth straight drop in profit yesterday after demand slumped for fuels to run cars, factories and airplanes. Its third-quarter net income fell 68 percent from a year earlier to $4.73 billion.

Shell posted a 62 percent decline in net income to $3.25 billion and Chief Executive Officer Peter Voser said the outlook “remains very uncertain” given forecasts that demand for crude will fall the most this year since 1980. Shell is cutting 5,000 jobs, equivalent to about 5 percent of its workforce, and has reduced operating costs by about $1 billion.

“What we’re hearing from the oil chiefs is that the economy has hit bottom but the jury’s still out on how robust of a recovery we’ll see,” said Haag Sherman, who manages $7.5 billion as chief investment officer at Houston-based Salient Partners.

PetroChina, the world’s second-most valuable company, on Oct. 28 posted a 24 percent drop in third-quarter profit to 30.8 billion yuan ($4.5 billion), missing analysts’ estimates. Houston-based ConocoPhillips, the third-largest U.S. oil company, said the same day its profit plunged 71 percent to $1.5 billion.

Cost Cuts

Yesterday Italy’s Eni SpA said its earnings slumped 58 percent to 1.24 billion euros ($1.82 billion) and it will fall short of its full-year production forecast.

Even as profits slid in the third quarter, analysts pointed to some signs of improvement in the industry, at least for explorers. Crude oil on the New York Mercantile Exchange, which fell 42 percent to an average of $68.24 last quarter from a year earlier, has rallied 79 percent since the start of 2009 and hit a 12-month high of $82 on Oct. 21.

While London-based BP Plc said Oct. 27 that its net income fell 34 percent to $5.34 billion, it has beaten analyst estimates for the past three quarters. It posted third-quarter earnings excluding one-time items and inventory changes of $4.67 billion, boosted by exceeding its own cost-cut target by $1 billion. CEO Tony Hayward has also reversed two years of falling output after ramping up production in the Gulf of Mexico.

China Boost

PetroChina, the Beijing-based producer and refiner, may see its earnings rebound this quarter as China’s economy leads the world out of recession, boosting oil prices and demand for gasoline and diesel, analysts said.

“The fourth quarter will compare favorably,” said Gordon Kwan, the Hong Kong-based head of energy research at Mirae Asset Securities. Kwan forecasts PetroChina’s net income will climb 63 percent from a year earlier to 34 billion yuan in the three months ending Dec. 31.

In contrast China Petroleum & Chemical Corp.’s profit fell from a record in the second quarter and may decline further as government-set fuel prices lag behind a rebound in crude oil costs, analysts said. Asia’s biggest oil refiner yesterday reported a third-quarter net income of 16.55 billion yuan, missing estimates.

‘Off The Floor’

“If you look at the whole picture for all the Big Oils, the only thing that’s really helped them is that the oil price has come off the floor,” said John Parry, an analyst with IHS Herold in Norwalk, Connecticut. “You’re still a long way from catching up to where the industry was back in ‘07 and ‘08.”

While the U.S. economy grew in the third quarter for the first time in more than a year, expanding 3.5 percent, it was propelled by stimulus-driven gains in consumer spending and home building. Even as oil companies may reap benefits from state support for the economy, they could also face higher costs from government policy measures.

“The bleeding is over, but the industry still has a lot of worries, for instance the carbon tax and some of the other issues that are going to come into play with some of their operations,” Parry said. “We’re seeing much tougher concession terms on the part of the host governments.”

Carbon Capture

Alternative energy investment is also claiming resources from the industry. Shell over the last five years has spent about $1.7 billion on renewable energy sources and carbon capture and storage, or CCS, according to its 2008 sustainability report.

Shell said in May that it will boost spending on biofuels this year and next to create a “commercial-size” renewables business. The company said earlier this year it will focus on biofuels and CCS at the expense of solar and wind energy.

“Renewables will have long-term impact, they’re dependent on the high price of oil and many are dependent on subsidies,” said Manouchehr Takin, a petroleum analyst at the Centre for Global Energy Studies in London. “Renewables first have to be developed into real, profitable ventures and that takes time.”

For Related News and Information: Stories on Exxon Mobil earnings: XOM US CN Exxon Mobil production and reserves: XOM US CH7 Royal Dutch Shell earnings matrix: RDSA LN EM Top energy news: ETOP Stories on Alternative Energy: NI ALTNRG

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Japanese Stocks Rise on Earnings Reports, Drop in Unemployment

By Akiko Ikeda and Toshiro Hasegawa

Oct. 30 (Bloomberg) -- Japanese stocks rose for the first time in four days after earnings from Sharp Corp. to Takeda Pharmaceutical Co. exceeded estimates and a report showed the unemployment rate unexpectedly declined.

Olympus Corp., a maker of endoscopes, jumped 9.2 percent following a report by Nikkei English News saying the company may report higher-than-forecast operating profit and after Bank of America Corp.’s Merrill Lynch unit boosted its investment rating. Sharp, Japan’s largest maker of liquid-crystal displays, climbed 2.5 percent after the company reported a narrower loss than estimated by analysts. Takeda rallied 3.4 percent after Asia’s biggest drugmaker said profit more than doubled.

“I see many positive surprises and many companies are likely to raise profit forecasts,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “A gradual recovery will continue in the October-December period.”

The Nikkei 225 Stock Average rose 1.5 percent to 10,034.74 at the market close in Tokyo. The broader Topix index added 1.4 percent to 894.67, with more than two stocks advancing as declining. The broad gauge sank 1.7 percent this month and has increased 4.1 percent this year.

Japan’s unemployment rate declined to 5.3 percent in September from 5.5 percent in August, the statistics bureau said today in Tokyo. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent and only one person predicted a drop.

Global Rally

Stocks in Asia extended a rally yesterday in the U.S. The Standard & Poor’s 500 Index jumped 2.3 percent, the largest advance since July 23, after the Commerce Department said gross domestic product grew at a 3.5 percent pace from July through September, faster than estimated by economists surveyed by Bloomberg, after shrinking for four straight quarters.

“That’s boosting stocks, especially exporters, which are sensitive to economic trends,” said Naoteru Teraoka, who helps oversee about $16 billion at Chuo Mitsui Asset Management Co.

Olympus, which earns about 65 percent of its sales abroad, surged 9.2 percent to 2,900 yen, its highest in a year and the largest gain on the Nikkei 225. The company may report April- September operating profit of 28 billion yen ($306 million), 47 percent more than its forecast, Nikkei English News said.

Sharp climbed 2.5 percent to 991 yen after the company reported a net loss of 17.7 billion yen in the six months ended Sept. 30, narrower than the 19 billion yen deficit expected based on the median of five analyst estimates compiled by Bloomberg. That’s still wider than the 15 billion-yen shortfall projected by the company.

Nikon, Sony, Canon

Nikon Corp. increased 3.8 percent to 1,734 yen. The second- biggest maker of cameras used by professionals narrowed its forecast for a full-year net loss by 25 percent on the outlook for increased exports.

Sony Corp., which reported results at today’s market close, increased 2.8 percent to 2,785 yen, the highest in a year. Canon Inc. added 1.7 percent. The Topix industry group that includes Olympus and Nikon climbed the most among the index’s 33 sectors, and the group that includes Sharp, Sony and Canon was the biggest contributor to the gauge in terms of index points.

Today was the busiest day in Japan’s earnings season, with 336 companies listed on the Tokyo Stock Exchange scheduled to report results.

Takeda Pharmaceutical leapt 3.4 percent to 3,650 yen, rising the most in five months. Asia’s biggest drugmaker said first-half net income more than doubled to 189.6 billion yen, exceeding the median estimate of 162.4 billion yen from a Bloomberg survey of four analysts. The company said cost cuts contributed to the profit.

Nintendo Declines

Among stocks that declined, Nintendo Co., the world’s largest maker of video-game machines, sank 3.6 percent to 23,180 yen in Osaka, the steepest drop this month. The company slashed its full-year net income forecast by 23 percent after price cuts in the flagship Wii game console failed to boost demand. Nintendo was the biggest single drag on the Topix and the most- actively traded stock in Japan, followed by Sony.

Japan’s consumer prices excluding fresh food slid at a near-record pace of 2.3 percent in September from a year earlier after dropping an unprecedented 2.4 percent in August, the statistics bureau said today in Tokyo.

Sumitomo Trust & Banking Co., which plans to merge with smaller rival Chuo Mitsui Trust Holdings Inc., tumbled 6.2 percent to 487 yen, the biggest drop on the Nikkei 225. The lender’s first-half net income declined 33 percent on shrinking loan-interest income.

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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Asian Stocks Rise on Earnings, Japan Jobless Data, U.S. Growth

By Shani Raja and Ian C. Sayson

Oct. 30 (Bloomberg) -- Asian stocks advanced, paring the MSCI Asia Pacific Index’s first monthly decline since February, as better-than-estimated earnings and Japan jobless figures followed a rebound in U.S. economic growth.

Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. gained more than 3 percent on profits that topped analyst predictions. Olympus Corp., a camera maker that gets 24 percent of its sales in North America, surged 9.2 percent in Tokyo after the Nikkei newspaper said the company will probably beat its earnings forecast. Rio Tinto Group, the world’s No. 3 mining company, rose 4.6 percent as commodity prices increased.

The MSCI Asia Pacific Index added 1.5 percent to 116.37 as of 5:23 p.m. in Tokyo, paring its drop this week to 2.6 percent. The gauge has lost 1.4 percent in October on concern governments will start withdrawing measures enacted to revive global growth. Australia this month became the first Group of 20 nation to raise interest rates amid signs of strength in its economy.

“The expectation is that the world economy will still grow faster in 2010 compared with this year, even with the anticipated withdrawal of stimulus spending by governments,” said Joel Mendoza, investment strategist at BDO Private Bank Inc. in Manila, which manages at least $2 billion in assets. “The easy money has been made and the challenge now is to find the gems in the market.”

Japan’s Nikkei 225 Stock Average rose 1.5 percent, while Hong Kong’s Hang Seng Index climbed 2.3 percent. China’s Shanghai Composite Index added 1.2 percent. Australia’s S&P/ASX 200 Index increased 1.5 percent.

U.S. Growth

Komatsu Ltd., the world’s second-biggest maker of construction equipment, advanced 4.1 percent even after its first-half net income sank. Samsung Electronics Co., which gets 19 percent of its sales from America, advanced 0.7 percent after tripling profits. Sony Corp., maker of the PlayStation game console, gained 2.8 percent as the yen weakened.

Futures on the U.S. Standard & Poor’s 500 Index lost 0.5 percent. The gauge jumped 2.3 percent yesterday, the largest advance since July 23, as the U.S. government said gross domestic product grew at a 3.5 percent pace from July through September. The growth, which followed four quarters of contraction, topped the median estimate of 3.2 percent in a Bloomberg survey of economists.

Japan’s statistics bureau said today the country’s unemployment rate declined to 5.3 percent from 5.5 percent in August. The median estimate of 29 economists surveyed by Bloomberg was for the rate to increase to 5.6 percent.

‘Sigh Of Relief’

“There’s a sigh of relief,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne. “The Japan data gives credence to the breadth of the recovery, that it’s not just occurring in the developing economies, and that’s very important for the sustainability of it.”

Industrial & Commercial Bank and Bank of China’s third- quarter earnings were buoyed by a loan surge and lower provisions for potential losses on loans and investments.

ICBC gained 3.5 percent to HK$6.29 after net income in the period rose 19 percent to 33.6 billion yuan ($4.9 billion). Bank of China, whose profit in the quarter also jumped 19 percent, climbed 5.8 percent to HK$4.58. Both beat the average estimate of analysts surveyed by Bloomberg News.

In Tokyo, Olympus surged 9.2 percent to 2,900 yen. The Nikkei newspaper said the company may beat its 19 billion yen ($208 million) operating profit forecast for the six months ended September by about 50 percent. Merrill Lynch & Co. also raised the stock’s rating to “buy” from “underperform.”

Positive Surprises

“I see many positive surprises and many companies are likely to raise profit forecasts,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “A gradual recovery will continue in the October-December period.”

Sharp Corp. advanced 2.5 percent to 991 yen. Japan’s largest maker of liquid-crystal displays posted a loss of 17.7 billion yen, less than the 19 billion yen median of five analyst estimates compiled by Bloomberg.

Komatsu added 4.1 percent to 1,818 yen after posting first- half net income that was more than double the company’s estimate. Samsung Electronics Co. added 0.7 percent to 723,000 won. Asia’s biggest maker of chips, flat screens and mobile phones said profit tripled to a quarterly record as the global economic recovery spurred a rebound in prices.

‘Fragile’ Economy

The MSCI Asia Pacific Index has climbed 65 percent from a more than five-year low on March 9, outpacing gains of more than 50 percent by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI index are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx 600.

Signs of an economic recovery have prompted some countries to wind down stimulus policies. Earlier this week, India’s central bank governor indicated it was time to shift policy toward stemming inflation, while the Bank of Japan said today it will let its programs of buying corporate debt expire at the year’s end.

Australia’s central bank raised its key interest rate on Oct. 6 after the number of people employed unexpectedly rose in September and the jobless rate fell. Michael Smith, chief executive officer of Australia & New Zealand Banking Group Ltd., said yesterday the Reserve Bank of Australia should have waited to raise rates as the country’s economy was “still fragile.”

Raw-material producers accounted for 13 percent of the MSCI Asia Pacific Index’s advance today. The London Metals Index, a measure of six metals including copper and zinc, rallied 3.5 percent, the largest advance in three weeks. Crude oil climbed 3.1 percent to $79.87 a barrel in New York yesterday.

Rio, BHP

Rio Tinto Group rose 4.6 percent to A$63.78. BHP Billiton Ltd., the world’s largest mining company and Australia’s biggest oil producer, gained 0.9 percent to A$37.45.

Sony gained 2.8 percent to 2,785 yen amid hopes the weaker yen will raise the value of sales generated overseas in local terms for Japanese companies. The yen depreciated to 91.58, compared with 90.39 against the dollar at the close of stock trading in Tokyo yesterday. Against the euro, Japan’s currency weakened to 135.92 from 133.14.

Nintendo Co., the world’s largest maker of video-game players, fell 3.6 percent to 23,180 yen after slashing its full- year net income forecast on slumping sales of its Wii console.

Net income will fall to 230 billion yen in the year to March 2010, the company said. The projected profit, the first annual drop in six years, missed the 270 billion yen median of 23 analyst estimates compiled by Bloomberg.

In Sydney, Crane Group Ltd. shares tumbled 12 percent to A$9.04 after the company said profit before significant items in fiscal 2010 may be about 30 percent lower than a year earlier.

To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Ian C. Sayson in Manila at isayson@bloomberg.net.

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European Stocks Fluctuate; Asian Shares Climb on Bank of China

By Adria Cimino

Oct. 30 (Bloomberg) -- European stocks fluctuated with the Dow Jones Stoxx 600 Index poised for its first monthly decline since June. Asian shares climbed as earnings at Bank of China Ltd. beat analysts’ estimates.

Fortis rose 1.5 percent after Deutsche Bank AG recommended the stock. Alcatel-Lucent SA slid 6 percent after reporting a wider-than-estimated loss. Bank of China gained 5.8 percent in Hong Kong.

The Stoxx 600 slipped 0.3 percent to 241.03 at 8:22 a.m. in London. The gauge has lost 0.6 percent in October and 1.6 percent this week amid speculation that an almost eight-month, 53 percent rebound has outpaced the prospects for earnings and economic growth. Equities in Europe and the U.S. rebounded yesterday on data that showed that the American economy returned to growth after the worst contraction in seven decades.

“For the next two to three months, we could go through a sideways-moving market,” said Bob Parker, who helps manage about $600 billion as vice chairman of Credit Suisse Asset Management in London. “There are downside risks given the extent of the rally. That said, in 2010 equities will be the top performing asset class.”

The MSCI Asia Pacific Index rallied 1.5 percent. Standard & Poor’s 500 Index futures slipped 0.5 percent after the benchmark index for U.S. equities climbed 2.3 percent yesterday. The gauge has still lost 1.3 percent this week, heading for its second straight weekly decline.

Fortis, Alcatel

Fortis advanced 1.5 percent to 3 euros. The owner of Belgium’s largest life insurer was rated “buy” in new coverage at Deutsche Bank.

Alcatel-Lucent slid 6 percent to 2.70 euros. The world’s largest supplier of fixed-line phone networks reported a third- quarter loss of 182 million euros ($270 million). That missed the 174.4 million-euro loss average of eight estimates compiled by Bloomberg.

Bank of China gained 5.8 percent to HK$4.58. The nation’s third-largest lender said third-quarter profit rose 19 percent to 21.1 billion yuan ($3.09 billion), beating the average estimate of 20.52 billion yuan of eight analysts compiled by Bloomberg.

Renault SA advanced 2.8 percent to 31.96 euros. France’s second-largest carmaker said third-quarter revenue declined 11 percent to 8.1 billion euros as the global economic slump hurt demand and a stronger euro diminished the value of overseas sales.

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

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NYSE Euronext Profit Declines 28%, Beats Estimates

By Whitney Kisling and Nandini Sukumar

Oct. 30 (Bloomberg) -- NYSE Euronext, the world’s largest owner of stock exchanges, reported a 28 percent decline in third-quarter profit as revenue from equity trading dropped and European competitors took market share.

Net income fell to $125 million, or 48 cents a share, from $174 million, or 66 cents, a year earlier, the New York-based company said today in a statement. Excluding some costs, profit was 53 cents a share, beating the 46 cent average of 17 analysts surveyed by Bloomberg. NYSE Euronext said in a separate statement that it signed agreements with a group of banks and liquidity providers to sell a stake in NYSE Liffe U.S., the company’s U.S. futures exchange.

Chief Executive Officer Duncan Niederauer boosted rebates for NYSE’s biggest customers and cut fees at two options exchanges in the past year to stem losses in market share in Europe and the U.S. to newer competitors such as Chi-X Europe Ltd. and Direct Edge Holdings LLC. He also eliminated at least 62 U.S. jobs this year after cutting about 230 in 2008 and said last quarter he may surpass a goal of cutting $175 million in costs this year.

“Recent results have been a step in the right direction as management continues to realize synergies and control expenses,” Howard Chen, an analyst with Credit Suisse Group AG New York, wrote in a note Oct. 7. “We balance this against our outlook for a pullback in industry-wide volumes and further competitive pressures.”

Paris Trading

NYSE Euronext gained 1.2 percent to $27.92 at 9:37 a.m. in Paris trading. The stock has risen less than 1 percent in New York this year, compared with a 48 percent jump in the FTSE/Mondo Visione Exchanges Index that tracks 18 bourses.

NYSE Euronext’s trading volume in U.S. equities and European derivatives fell in September from the same month last year, when Lehman Brothers Holdings Inc. filed for bankruptcy and the financial crisis followed. During the 2008 month, U.S. trading volume climbed more than 50 percent with a surge in volatility, according to data from NYSE Euronext.

The company’s share of U.S. equity trading in September 2009 fell to 28 percent from 34.3 percent a year earlier. NYSE’s Euronext had a similar decline in European equities trading in September, as its share of France’s CAC 40 Index volume dropped to 46 percent from 55 percent a year earlier, according to data compiled by Thomson Reuters.

Market Share

“NYSE Euronext has lost significant market share in its U.S. cash markets over the last years,” Mike Vinciquerra, an Atlanta-based analyst with BMO Capital Markets, wrote in an Oct. 12 note. “Share losses in the European cash business are evident and likely to continue for the foreseeable future, and volume at NYSE Liffe remains soft. Overall, revenue growth remains a challenge for NYSE.”

Nasdaq OMX Group Inc., operator of the second-largest U.S. stock exchange, is set to report earnings Nov. 5, along with Deutsche Boerse AG, the No. 2 exchange operator. CME Group Inc., the world’s largest futures market, yesterday posted a 20 percent rise in profit as the average rate it charges per contract increased.

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.

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Rice Crop Storm Losses Widen 25% in Philippines, Official Says

By Luzi Ann Javier

Oct. 30 (Bloomberg) -- Rice crop losses in the Philippines from Tropical Storm Ketsana and Typhoon Parma have increased by 25 percent from previous estimates to 1 million tons, widening the shortfall in the world’s biggest importer, an official said.

The Southeast Asian nation’s crop losses increased from an earlier estimate of 800,000 tons, Agriculture Undersecretary Emmanuel Paras said today. Typhoon Mirinae is bearing down on the country and is expected to make landfall this weekend.

The Philippine weather bureau today raised the typhoon warning in seven of the nation’s largest rice-producing regions, including the three biggest growers.

About a third of the crop in areas that may be affected by Typhoon Mirinae has yet to be harvested, Paras said. Rice output in those regions was forecast at 3.26 million tons, the Bureau of Agriculture Statistics said in an August report. The country’s total fourth-quarter output was forecast at 6.5 million tons.

The Philippines will bring forward imports for 2010 after losses from Ketsana and Parma, National Food Administrator Jessup Navarro said Oct. 26.

Global output is forecast by the U.S. Department of Agriculture to fall below demand by 2.4 million metric tons in 2009-2010, tightening supply and pushing prices higher.

The Philippines and India are the two “problem countries right now that can tilt the market one way or the other,” International Rice Research Institute senior economist Samarendu Mohanty said on Oct. 28.

“We are not very far from another rerun of 2008 prices,” Arthur Yap, the Philippines’ Agriculture Secretary, said at a conference in Cebu, central Philippines, on Oct. 28.

Indian Imports

India, the world’s second-largest rice grower, may become a net importer for the first time in 21 years in 2010 and may purchase as much as 3 million tons, Mohanty said. He forecast the South Asian nation’s output in the wet season will drop by 20 million tons to 65 million tons.

Food price protests swept the globe from Bangladesh to Haiti last year after fears of shortages prompted producers including India to cut rice exports and importers increased purchases to secure supplies, sending prices to a record.

Rice for January delivery climbed for a fourth straight day, gaining as much as 1.6 percent to $14.635 per 100 pounds in after-hours electronic trading on the Chicago Board of Trade. The most-active contract was up 1.3 percent at $14.60 as of 3:13 p.m. Singapore time. The price surged to a record $25.07 in April 2008.

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

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Copper May Decline on Speculation About Further Dollar Rebound

By Anna Stablum

Oct. 30 (Bloomberg) -- Copper may decline in London on speculation the dollar will rebound further, curbing demand and making metals priced in the currency more expensive for holders of other monies, a survey showed.

Eight of 15 analysts, investors and traders surveyed by Bloomberg, or 53 percent, said the metal would fall next week. Seven predicted higher prices.

The Dollar Index, a gauge of the greenback’s performance against six currencies, has risen this week after three weekly drops, paring its 2009 loss to 6.6 percent. The dollar’s slide has helped copper prices to more than double by spurring demand for alternative investments.

Copper for three-month delivery was little changed this week at $6,651 a metric ton at 5 p.m. yesterday on the London Metal Exchange.

The weekly copper survey has forecast prices accurately in 30 of the past 61 weeks, or 49 percent of the time.

This week’s survey results: Bullish: 7 Bearish: 8

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

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Yen Strengthens Against Dollar as Exporters Repatriate Earnings

By Yasuhiko Seki and Lukanyo Mnyanda

Oct. 30 (Bloomberg) -- The yen rose against the dollar, set for its first weekly gain in three, on speculation Japanese exporters purchased the currency after its decline increased the appeal of repatriating the proceeds of foreign sales.

Demand for the yen also increased after the Bank of Japan said it will stop buying corporate debt at the end of the year, as central banks around the world phase out emergency measures begun during the financial crisis. The dollar headed for a fourth month of losses against the euro, the longest stretch of declines since 2004, as the U.S.’s return to growth in the third quarter boosted demand for higher-yielding assets.

“A lot of exporters were reluctant to come in and buy yen at below 90 per dollar and they’ve now come back to the market,” said Lee Hardman, a foreign-exchange strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “There’s been a degree of buying after the BOJ’s decision to end some of its support measures.”

The yen strengthened to 91.01 against the dollar as of 8:33 a.m. in London, from 91.41 yesterday in New York. Japan’s currency was at 135.09 per euro from 135.51 yesterday. The dollar traded at $1.4816 per euro, from $1.4822.

Large Japanese manufacturers expected the yen to average 94.50 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released Oct. 1. The forecast in the previous report was for a rate of 94.85.

Toyota Motor Corp. and Honda Motor Co., Japan’s two biggest automakers, may increase overseas production as a stronger yen makes exports less competitive. Japanese carmakers have lost U.S. market share to South Korea’s Hyundai Motor Co. after the yen rose to a 13-year high against the dollar in January.

‘Liquidity Is Ample’

Australia’s dollar is set for a record ninth month of gains after a rally in stocks worldwide and higher prices for commodities that comprise more than half of the South Pacific nation’s exports.

“The recovery is still at work and the liquidity is ample,” said Tomohiro Nishida, a dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “You can’t stop money flying into higher-yielding currencies at the expense of funding currencies.”

The MSCI Asia Pacific Index of regional shares advanced 1.5 percent today and the Nikkei 225 Stock Average gained 1.5 percent. The Standard & Poor’s 500 Index increased 2.3 percent yesterday and crude oil for December delivery increased 3.1 percent to $79.87 a barrel.

The Australian dollar slipped 0.2 percent today to 91.28 U.S. cents, trimming a 3.4 percent gain in October.

U.S. Recovering

The dollar fell the most against the South Korean won as a Bloomberg survey of economists showed that the Institute for Supply Management-Chicago Inc.’s business barometer probably rose to 49.0 in October from 46.1 in the previous month. The report is due today.

Adding to signs the world’s largest economy is recovering, the Institute for Supply Management’s factory gauge rose to 53.0 in October from 52.6 in the previous month, according to a separate Bloomberg News survey before the release on Nov. 2. Fifty is the dividing line between expansion and contraction.

The Commerce Department reported yesterday that U.S. gross domestic product grew at a 3.5 percent annual pace in the third quarter, after shrinking the previous four periods. The median forecast of 79 economists in a Bloomberg survey was for an expansion of 3.2 percent.

Investors remained skeptical that the Federal Reserve will increase borrowing costs early next year. Fed funds futures show a 34 percent chance that the central bank will lift its target lending rate at the March meeting from a range of zero to 0.25 percent, compared with a 47 percent likelihood a month earlier.

Bank of Japan

“The Fed is still far away from exiting credit easing,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co. “The hyper-liquidity will keep a lid on the dollar.” The Federal Reserve Board holds a two-day policy meeting next week.

The Bank of Japan today said it will let programs to buy corporate debt expire at year-end as policy makers around the world start phasing out emergency measures taken at the height of the financial crisis.

The BOJ decided to end purchases of commercial paper and corporate bonds from lenders as scheduled, while extending unlimited collateral-backed lending through March 31, the bank said in a statement released in Tokyo today. It kept the benchmark interest rate unchanged at 0.1 percent.

‘Good Data’

“The BOJ’s decision to unwind some of its unconventional steps is being perceived among foreigners as limiting the availability of excessive liquidity,” said Yuji Saito, head of the foreign-exchange group at Societe Generale SA in Tokyo. “This may damp appetite for yen carry trades, thereby pushing up the Japanese currency.”

The yen headed for its ninth-straight monthly decline against the New Zealand dollar, the longest slide since 1997.

“Good data from Japan will strengthen the risk appetite that resurfaced on strong U.S. data,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp.

Separate Japanese government figures showed the job-to- applicant ratio, a leading indicator of employment trends, improved for the first time in more than two years. The ratio rose to 0.43 last month from a record low of 0.42 in August, meaning there are 43 jobs for 100 job seekers.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

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Gold Heads for Second Monthly Gain in London, Buoyed by Dollar

By Stuart Wallace and Kim Kyoungwha

Oct. 30 (Bloomberg) -- Gold, little changed in London today, headed for a second monthly advance as a decline in the dollar buoyed demand for the metal as a hedge against further weakness in the U.S. currency.

The Dollar Index, a gauge of the greenback’s performance against six currencies, is on course for a fourth monthly drop, the worst performance since 2004. The U.S. economy expanded for the first time in more than a year in the third quarter, the Commerce Department said yesterday.

“Confirmation the U.S. economy had exited its worst contraction in 70 years gave equities and commodities a boost, sending the dollar and safe-haven currency trades south,” James Moore, an analyst at TheBullionDesk.com in London, said today in a note.

Gold for immediate delivery fell $2.89, or 0.3 percent, to $1,044.11 an ounce at 8:18 a.m. in London, for a monthly advance of 3.6 percent. The metal reached a record $1,070.80 on Oct. 14 and has gained 19 percent this year. Gold for December delivery lost 0.2 percent to $1,044.50 an ounce on the New York Mercantile Exchange’s Comex division.

Thirteen of 23 traders, investors and analysts surveyed by Bloomberg, or 57 percent, said bullion would fall next week. Seven forecast higher prices and three were neutral.

“I have never been a gold bug,” Paul Tudor Jones of Tudor Investment Corp. told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”

Tudor Investment

Tudor Investment manages about $11.6 billion out of Greenwich, Connecticut. Fund manager John Paulson increased his bets on gold this year, while David Einhorn told clients of his Greenlight Capital Inc. hedge fund in January he was buying gold for the first time.

Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the precious metal, were unchanged yesterday at 1,104.43 metric tons, according to figures on the company’s Web site today.

Harmony Gold Mining Ltd., Africa’s third-largest producer of the metal, beat its own output guidance, raising production 5.6 percent during the fiscal first quarter. Output climbed to 373,431 ounces in the three months through September, from 353,752 ounces in the previous quarter, the Johannesburg-based company said today.

Among other precious metals for immediate delivery in London, silver dropped 0.7 percent to $16.575 an ounce.

Silver Holdings

Holdings in the iShares Silver Trust, the biggest exchange- traded fund backed by the metal, increased 131.43 tons to 8,744 tons as of Oct. 29, according to figures on the company’s Web site.

Platinum fell 0.6 percent to $1,327 an ounce and palladium was up 0.6 percent to $330.50 an ounce.

ING Groep NV raised its 2010 forecasts for gold, silver, platinum and palladium. Gold will average $1,025 an ounce next year, compared with a previous estimate of $925, the bank said in a report. The silver estimate rose to $15 from $13.50, platinum to $1,400 from $1,300, and palladium to $280 from $250.

To contact the reporters on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net; Stuart Wallace in London at swallace6@bloomberg.net.

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Genworth, McAfee, MetLife, Priceline.com: U.S. Equity Preview

By Lynn Thomasson and Sapna Maheshwari

Oct. 30 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Bare Escentuals Inc. (BARE US): The maker of mineral-based cosmetics reported third-quarter profit of 24 cents a share, exceeding the average analyst estimate by 17 percent, according to data compiled by Bloomberg.

Endurance Specialty Holdings Ltd. (ENH US): The Bermuda- based reinsurance company reported third- quarter adjusted earnings of $2.41 a share, exceeding the average analyst estimate of $1.38 a share. The company also reported adjusted net income that beat analyst estimates.

Genworth Financial Inc. (GNW US): The life insurer and mortgage guarantor reported its first profit in six quarters on improved investment results. Operating income available to common shareholders, which excludes some investment results, was 18 cents, beating by 15 cents the average estimate of 16 analysts surveyed by Bloomberg.

Las Vegas Sands Corp. (LVS US): The casino company run by billionaire Sheldon Adelson said Las Vegas convention business is recovering, after collapsing during the recession.

Manitowoc Co. (MTW US): The maker of cranes and machinery reported third-quarter sales, adjusted net income and adjusted earnings that missed analysts’ estimates. The company reported a quarterly loss of 4 cents a share, compared with the average analyst estimate of 7 cents in profit.

McAfee Inc. (MFE US): The second-biggest maker of security software reported third-quarter sales that fell short of some analysts’ estimates as the company took fewer clients from rival Symantec Corp.

MetLife Inc. (MET US): The biggest U.S. life insurer posted its third straight loss as the bond market rally that helped restore profits at smaller rivals weighed on results.

Priceline.com Inc. (PCLN US): The online travel agency will replace Schering-Plough Corp., the drugmaker being acquired by Merck & Co., in the Standard & Poor’s 500 Index.

Tessera Technologies Inc. (TSRA US): The maker of semiconductor technology predicted fourth- quarter sales of no more than $62 million, missing the average analyst forecast of $68.9 million, according to data compiled by Bloomberg.

Varian Medical Systems Inc. (VAR US): The maker of radiation equipment used to treat cancer projected first-quarter profit of no more than 56 cents a share, missing the average analyst estimate of 62 cents a share in a Bloomberg survey.

To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net.

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