Oil at $100 Doesn’t Compute as OPEC Output Pace Grows

By Mark Shenk

Nov. 9 (Bloomberg) -- OPEC is increasing output at the fastest pace in two years, adding to near-record inventories and threatening speculators betting on $100 crude with losses.

The number of options contracts to buy oil at $100 by March almost quadrupled in October and increased another 5.9 percent so far this month. As traders piled in, OPEC boosted production 4 percent, or 1.1 million barrels a day, since March amid the worst global recession since World War II.

Saudi Arabia’s King Abdullah has targeted $75 oil as a fair price for consumers and producers and has the capacity to increase pumping by about 50 percent, or 4 million barrels a day, enough for all of Brazil. The prospect of more supply comes with inventories in industrial countries already the highest since 1998, when oil collapsed to $10.

“It’s not in OPEC’s interest to see $100 oil,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania. “They know that it’s the speculators that are the main driver in sending prices higher. At some point this market will implode, because this isn’t sustainable.”

Futures contracts show investors expect oil at $79 in March and none of the Wall Street analysts tracked by Bloomberg predict $100 before the end of next year. Crude closed at $77.43 last week on the New York Mercantile Exchange.

Oil, which has jumped 74 percent this year, is headed for the biggest annual gain since 1999. The appreciation coincided with a 5.4 percent increase in U.S. stockpiles to 335.9 million barrels.

Ida Boosts Crude

Crude oil rose from a one-week low today as the approach of Hurricane Ida shut some output in the Gulf of Mexico. Oil for December gained as much as 95 cents, or 1.2 percent, to $78.38 a barrel in after-hours electronic trading on the New York Mercantile Exchange and was at $78.28 at 11:38 a.m. in Singapore.

The number of outstanding options contracts to buy oil at $100 by March rose to 27,482 in October from 7,181 in September, and climbed another 1,609 to 29,091 by Nov. 5. The contracts cover more than 29 million barrels of crude.

Inventories are mounting as the Organization of Petroleum Exporting Countries produced 28.76 million barrels a day in October, up 80,000 from September and the highest in 10 months, according to data compiled by Bloomberg. Saudi Arabia has raised shipments in four of the past six months, the data show.

“Listen to the Saudis,” said Lawrence Eagles, the global head of commodities research at JPMorgan Chase & Co. in New York. “They have said they want prices at this level, and they have the ability to keep them here.”

Saudi Output

Saudi crude-oil production has risen to 8.15 million barrels a day after dropping to 7.86 million in February, the lowest level since 2002. Even with the recent increases, October production was down 13 percent from a year earlier.

The desert kingdom has idled about 4 million barrels a day, or one-third of its capacity, according to data from the country’s oil ministry. Officials from the department didn’t return calls seeking comment.

“The Saudis can close or open the valve and control the flow of oil at any time,” said Robert Ebel, chairman of the energy and national security program at the Center for Strategic and International Studies in Washington. “They realize it’s not in their interest to see prices climb to an unacceptable level.”

When prices were headed to a record $147.27 last year, Saudi officials increased production by 500,000 barrels a day in June and July to halt the rally. By December 2008, prices collapsed as low as $32.40.

‘Upper End’ Prices

“Prices are probably at the upper end of what they are comfortable with right now because they are concerned about the health of the global economy,” said David Kirsch, an Overland Park, Missouri-based analyst with PFC Energy, an energy strategist to companies and governments.

Finance ministers and central bank governors of the Group of 20 nations said Nov. 7 that while economic and financial conditions have improved, “the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern.” The U.S. unemployment rate jumped to 10.2 percent in October, the highest level since 1983, the Labor Department said last week.

Crude and fuel stockpiles held in non-government tanks in the 30 developed countries in the Organization of Economic Cooperation and Development rose to 2.76 billion barrels in the third quarter, close to the record 2.77 billion reached in 1998, U.S. Energy Department figures show.

Storage Bulging

The 1998 glut caused oil to collapse to $10 a barrel. Now with storage tanks bulging from Singapore to Oklahoma, traders are being forced to store oil and fuel on ships that are bigger than the Chrysler Building.

The amount of heating oil and jet fuel stored at sea increased 17 percent to 112 tankers with a combined capacity of 13.1 million deadweight tons, London-based Simpson, Spence & Young Ltd., the world’s second-largest shipbroker, said in a Nov. 6 report.

OPEC President Jose Maria Botelho de Vasconcelos said Oct. 25 that the group may raise exports in December if prices remain above $75. Ministers are scheduled to meet on Dec. 22 in Luanda, Angola, to review production quotas that the group left unchanged at three gatherings in 2009. OPEC last agreed to increase supply targets in September 2007.

“We’re getting noise from OPEC and it’s probably Saudi inspired,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “They would probably like oil between $65 and $75 because that would be high enough for them and their friends to be fairly compensated.”

OPEC Concern

OPEC will hold a special meeting if oil prices reach $100 a barrel, Kuwait’s Oil Minister Sheikh Ahmad al-Abdullah al-Sabah said in Kuwait City on Nov. 3.

Rising equity prices and the weakening dollar have been reasons for the oil’s rally this year and will probably limit OPEC’s ability to dictate prices, according to Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington.

“Things are still being driven by the dollar, which raises challenges for OPEC,” Sieminski said. “If oil makes a run toward the triple-digits, they would traditionally put more oil on the market, but right now refiners have plenty on hand.”

The dollar has dropped 6.8 percent in the past year against a basket of six major currencies as the Fed, led by Chairman Ben S. Bernanke, cut rates to near zero in an effort to lift the U.S. economy out of its worst recession since the 1930s.

“Prices are being held up by non-oil factors,” Kirsch said. “The easiest way for OPEC to lower prices would be for them to buy up dollars and Treasuries.”

Iran, Venezuela

The falling dollar has hurt the buying power of oil exporters, according to Iran and Venezuela.

“It went to $81 to $82 for a few days but you can’t believe that’s what you’re really getting,” Iran’s OPEC governor, Mohammad Ali Khatibi, said in a phone interview from Tehran on Nov. 3. “You have to consider not only the current price, but the year-to-date average.”

The benchmark crude price used by OPEC, derived from the cost of oil produced by each of its 12 members, averaged $41.50 barrel in January and was at $77.45 on Nov. 5.

“A floor of $80 and stability” are Venezuela’s goal for next year, the country’s oil and energy minister, Rafael Ramirez, told reporters in Caracas on Nov. 4.

Iran pumped an average 444,000 barrels a day above its OPEC target in October, making it the biggest quota-buster, according to data compiled by Bloomberg. Venezuela produced 234,000 barrels more than its target.

“They are always looking for higher prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “They let the Saudis do the work, while they pump as much as they can.”

To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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G-20 Splits on Tobin Tax, Signals Banks Should Cover Bailouts

By Simon Kennedy and Emma Ross-Thomas

Nov. 9 (Bloomberg) -- Group of 20 governments signaled banks will be forced to cover a greater cost of future bailouts even as they split over whether that should be achieved by taxing financial trading. After spending more than $500 billion in taxpayer’s money to save banks from Royal Bank of Scotland Group Plc to Citigroup Inc., officials meeting in St. Andrews, Scotland this weekend debated how the financial industry can be forced to pay for future rescues. The specifics sparked division, with U.K. Prime Minister Gordon Brown’s call to consider a so-called Tobin tax immediately opposed by U.S. Treasury Secretary Timothy Geithner. “It cannot be acceptable that the benefits of success in this sector are reaped by the few but the costs of its failure are borne by all of us,” Brown told finance ministers and central bankers at their Nov. 7 talks. Geithner said “we want to make sure that we don’t put the taxpayer in a position of having to absorb the costs of a crisis in future.”

G-20 officials are narrowing their focus on reining in excessive risk-taking after uniting earlier this year to fight the worst financial crisis since the Great Depression. While the U.S. pushback means a transaction tax is unlikely to occur, the mere discussion of it may be enough to unsettle markets.

Banks’ earnings will inevitably come under pressure as governments agree on other proposals to force banks to fend for themselves in a crisis, says Charles Dumas, chairman of Lombard Street Research in London.

Lower Profits

“The banking industry is only just starting to realise they won’t be able to go back to business as usual,” said Dumas. “The natural thing to do is go for some kind of insurance premium and higher capital requirements. It probably will reduce profitability, and it should reduce profitability.”

The G-20, which met at the end of a week in which Royal Bank of Scotland became the most expensive bailout ever, plans to discuss how banks can “contribute to paying for burdens” arising from state rescues at its next summit.

The push comes amid voters’ anger that banks rescued by taxpayers are returning to profit even as unemployment rises around the world. The U.S. jobless rate rose to a 26-year high in October just as the Centre for Economics & Business Research Ltd. forecasts bankers’ bonuses will rise 50 percent this year.

“We cannot afford having some individuals taking risks without having the pressure on them,” IMF Managing Director Dominique Strauss-Kahn said in an interview on Nov. 7.

Tax Split

Other proposals listed by Brown included getting banks to pay an insurance fee that reflects their risk, forcing them to create a pool to finance bailouts or ordering them to pay an upfront amount in return for being able to raise money if they run into trouble.

The Tobin-tax split this weekend, along with tensions over Chinese currency policy, nevertheless suggests the G-20’s ability to find consensus is being tested two months after leaders made it the main body for coordinating global policy.

“Each day the crisis recedes, the old battle-lines reemerge and it gets tougher to find common conclusions,” said Tim Adams, the U.S. Treasury’s top international official during George W. Bush’s administration and now a managing director at the Lindsey Group, an investment consultancy run in Fairfax, Virginia.

Chinese central bank Governor Zhou Xiaochuan arrived at St. Andrews dismissing suggestions that China is under pressure to allow the yuan to appreciate. Later that day, Japan said a more flexible currency would be desirable and the IMF told the G-20 that the yuan is “significantly undervalued” after being kept unchanged against the dollar since July 2008.

No Agreement

The G-20 also failed to reach an agreement on climate change finance ahead of next month’s summit in Copenhagen.

Brown’s Tobin-tax push broke with his past resistance to a levy, lending momentum to a debate started earlier this year by French President Nicolas Sarkozy and backed by Germany.

Geithner responded that a “day-by-day” tax on speculation is “not something we’re prepared to support.” British Bankers’ Association Chief Executive Officer Angela Knight said it “wouldn’t work in practice.” Geithner says the U.S. would prefer to cover the cost of bailouts by forcing banks to repay rescue funds once the crisis is over. European Central Bank President Jean-Claude Trichet said Brown’s other proposals may be more acceptable. For Brown, trailing in polls less than seven months before the next election is due, the comments are designed to open a divide with the Conservative opposition. While they say the biggest risk to the economy is the record budget deficit, Brown has stepped up his attacks on banks.

Debate

Economists argued over the merits of a tax on speculation. Julian Jessop, chief international economist at Capital Economics Ltd., said it “could make a useful contribution to reducing the risk of future financial crises and sharing the costs more fairly.”

Bill Witherell, chief global economist at Cumberland Advisors Inc. in Vineland, New Jersey, countered that banks would circumnavigate it and that it would do more harm than good.

“The idea of trying to tax transactions is a populist measure that may appeal to those upset with banks, but would be short-sighted,” said Witherell.

The G-20 still agreed to keep interest rates low and maintain record budget deficits until recoveries take hold. Banks are also still vulnerable, the Financial Stability Board told the G-20, saying that some are too optimistic about the state of their finances. To ensure the next expansion is less reliant on excesses such as U.S. spending and Chinese saving, the G-20 signed up to a plan in which they will outline plans to fix weaknesses in their economies and subject themselves to an IMF-led examination by counterparts.

Members will submit reports on their own economies by the end of January before refining their goals in concert for a summit of leaders in South Korea next November. “The hard work does not end here,” Brown said. “In fact it begins now.”

To contact the reporters on this story: Simon Kennedy in St. Andrews at skennedy4@bloomberg.net. Emma Ross-Thomas in St. Andrews at at erossthomas@bloomberg.net;

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Dollar Weakness May Take on a ‘Life of Its Own,’ RBS Says

By Daniel Tilles

Nov. 9 (Bloomberg) -- The dollar’s weakness may gather pace as 2009 draws to a close, according to Royal Bank of Scotland Group Plc.

“Overall risk appetite may remain relatively subdued into year-end, although it would not surprise to see the dollar weakness appear to take on more of a life of its own, rather than just a negative correlation to equities,” Greg Gibbs, a foreign-exchange strategist in Sydney, wrote today in a report.

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

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German Exports Undercut Trichet’s Weaker Euro Push

By Matthew Brown and Oliver Biggadike

Nov. 9 (Bloomberg) -- A decade after the euro replaced the deutsche mark, Germany’s export-driven recovery is undermining European Central Bank President Jean-Claude Trichet’s efforts to slow the currency’s record rise.

Speculators are the most bullish in almost two years on the euro, betting the eight-month, 20 percent rally won’t stop until it hurts the continent’s biggest economy. Even as Spain, France and Portugal advocate weakening the euro to lower the price of their products overseas, 32 of 47 strategists surveyed by Bloomberg forecast an increase from last week’s $1.4847 close by Dec. 31 or March 31. It rose 0.5 percent to trade at $1.4921 as of 12:56 p.m. in Tokyo.

Intended to unify, the euro is proving divisive as Europe battles recession. Germany, the world’s largest goods exporter in 2008, is leading the rebound, deflating pressure to depreciate the currency. Trichet has argued for a strong dollar repeatedly, calling it “extremely important” Oct. 15. A day later, Germany’s then-Economy Minister Karl-Theodor zu Guttenberg said “there is no reason for concern” because his country’s competitiveness “does not depend on the dollar rate” versus the euro.

“Global growth has helped Germany’s exports and made it less sensitive to the exchange rate,” said Bilal Hafeez, chief currency strategist at Frankfurt-based Deutsche Bank AG, the largest currency trader and Germany’s biggest bank. “They won’t get worried about the euro’s strength until at least $1.55.”

Bullish Speculators

Euro options-trading indicates about a 60 percent chance it will reach $1.55, a 4 percent gain, by March 31, implied volatility data tracked by Bloomberg show. Hedge fund managers and other large speculators had more than twice as many futures and options bets in September and October that the currency would rise as wagers on a decline, the most bullish ratio since November 2007, Commodity Futures Trading Commission data show.

Germany is recovering faster than other euro countries from the worst global downturn since the 1940s. Its economy expanded 0.3 percent in the second quarter, after contracting the previous four. The euro zone shrank 0.2 percent in April, May and June. Deutsche Bank predicts Germany’s exports will rise almost 6 percent in 2010, compared with the region’s 4.4 percent.

An index measuring German executives’ optimism hit a 17- month high of 96.8 in October, the Munich-based Ifo institute’s business climate survey showed. Manufacturing orders increased an unprecedented 19 percent in the seven months to Sept. 30, according to the German central bank.

Spain’s Pain

Mercedes-Benz maker Daimler AG in Stuttgart reported its first quarterly profit in a year on Oct. 27, and the shares are up 84 percent since March 1. Ludwigshafen-based BASF SE, the world’s largest chemical company, earned profits for three straight quarters, including 237 million euros ($352 million) in the third, when 46 percent of its revenue came from outside Europe. Competitors struggled, with Arkema SA in Colombes, France, posting losses for the past three quarters.

Exports accounted for 40 percent of Germany’s economy in the second quarter, compared with 35 percent for the euro region. France and Spain sell a combined 15 percent of Europe’s cross- border shipments of what the Paris-based CEPII Institute considers “high quality” goods.

Germany’s share is almost a third. They include Porsche SE’s 911 Carrera sports cars, which are manufactured in Zuffenhausen and sell for at least $77,800 in the U.S.; Wuerzburg-based Koenig & Bauer AG’s printing presses, which produce 90 percent of the world’s cash; and optical lenses from Carl Zeiss AG, which began making microscopes in Jena in 1847 and is now based in Oberkochen.

Mercedes Sales

Daimler, the world’s second-largest maker of luxury vehicles behind Munich-based Bayerische Motoren Werke AG, said U.S. Mercedes-Benz sales jumped 21 percent in October.

“Germany has shown the capacity to compete probably more effectively at these kind of exchange rates than many other European countries,” said Alan Ruskin, head of international North American currency strategy at RBS Securities Inc. in Stamford, Connecticut.

Spain contracted 1.1 percent in the second quarter, and Deutsche Bank sees its exports trailing Germany’s with a 2.4 percent increase in 2010. Spain’s economy was once an engine of growth, expanding 3.9 percent a year on average in the decade to June 2007, compared with the region’s 2.3 percent.

While France’s gross domestic product grew as much as Germany’s in the three months through June, its exports will lag behind, with 3.8 percent growth next year, Deutsche Bank estimates. After Portugal’s economy rose 0.3 percent in the second quarter, exports slumped in August by 32 percent.

Unprecedented Fall

The euro’s rally followed a record 23 percent, seven-month drop to $1.2330 on Oct. 28, 2008, from $1.6038, the all-time record, in April 2008. It rose to $1.50 on Oct. 21, as investors dumped U.S. assets on signs of a global recovery and central banks diversified away from the greenback.

Euros account for 28 percent of the world’s $4.3 trillion in currency reserves, versus the dollar’s 63 percent, the slimmest margin ever, International Monetary Fund data show.

Meudon, France-based Gemalto NV, the world’s largest maker of smartcards for data storage and financial transactions, reported third-quarter sales on Oct. 22 that fell short of analysts’ estimates, leading to the stock’s worst day in almost two years.

“Weighing on our margin is this adverse currency effect simply because the euro has strengthened quite a bit,” Gemalto Chief Executive Officer Olivier Piou said as the company posted second-quarter earnings on Aug. 25, when the euro was at $1.43. “Year-on-year gross margin was down 3 percentage points,” in part due to the euro’s advance, he said.

Sarkozy’s ‘Disaster’

Service Point Solutions SA in Barcelona, Spain’s only publicly-traded document manager, may post its biggest loss since 2002 in the third quarter, partly because of the stronger currency, analysts’ estimates show.

“About 30 percent of our sales are in the U.K., so our sales are lower,” Chief Financial Officer Matteo Buzzi said in a Nov. 6 interview. The euro was up as much as 12 percent against the pound last month from June’s six-month low.

Henri Guaino, an aide to French President Nicolas Sarkozy, called the euro at $1.50 a “disaster” on Oct. 20, the day before it hit that level for the first time in 14 months. Portuguese Finance Minister Fernando Teixeira dos Santos said in an Oct. 1 interview that he looks with “concern” at its impact on his country’s exports, which fell to a four-year low in August.

Trichet Rhetoric

Trichet said on Nov. 5 that ECB officials “appreciate” U.S. statements supporting a “strong dollar,” a phrase he uttered at least seven other times in the previous five weeks. “I echo this statement as something which is important in the present circumstances,” he said at a Frankfurt press conference. Ivan Sramko, an ECB governing council member, was more direct on Oct. 23, saying the euro rally may cause economic “problems.”

European Monetary Affairs Commissioner Joaquin Almunia, French Finance Minister Christine Lagarde and Spanish Finance and Economy Minister Elena Salgado also have complained about the euro’s strength in the past two months.

Some members of German Chancellor Angela Merkel’s ruling coalition cheer the rise of the euro, which was pegged to a basket of currencies dominated by the deutsche mark when it was created Jan. 1, 1999.

“Sure, the euro’s comparative strength is an irritation for our exporters, but that’s a short-term nuisance,” said Frank Schaeffler, a Free Democratic Party member on parliament’s Finance Committee, in a Nov. 5 interview. “We want a strong euro. The longer-term well-being of the economy depends on it.”

Euro Pride

Investors say intervention to weaken the euro is unlikely at current levels, given the dominance of Germany, which accounted for 27 percent of the zone’s third quarter GDP.

“The German government always believed in a strong- currency policy,” said Werner Eppacher, who oversees $15 billion a year in trades as head of foreign-exchange at DWS Investment GmbH in Frankfurt and predicts the euro will hit $1.52 by May. “They believed it’s something to be proud of, that a strong currency means reliable fiscal policy, strong economic structure. They viewed it as a sign that they are doing their job correctly.”

Last month, Merkel dismissed critics of Germany’s reliance on sales abroad. “All those who now say we’ve depended too much on exports are undermining our biggest source of prosperity and must be rebuffed,” she said on Oct. 14.

Reduced Chance

The last time policy makers intervened to influence the euro was after the currency had fallen 27 percent since its inception. Central banks bought about 6 billion euros on Sept. 22, 2000, pushing it to 90 U.S. cents from 85 cents in a few hours. It bottomed a month later at 83 cents and hasn’t traded below $1.10 since 1993.

An index of the euro’s value, momentum and trading trends last week signaled a 29 percent chance of another intervention, down from 55 percent in January, said Stephen Hull, Morgan Stanley’s global head of currency strategy in London.

“It’s always a combination of levels and speed,” said Thomas Stolper, an economist in London at Goldman Sachs Group Inc., the most profitable securities firm. “A gradual drift higher from here to the old highs would not necessarily trigger an intervention, but if we went to $1.60 in a few weeks, the probability would be substantially higher.”

Rising debt loads for the region’s countries may cause the euro to depreciate once growth takes hold, said Otmar Issing, the ECB’s former chief economist. The zone’s budget deficit will swell to a record 6.9 percent of GDP next year, from 6.4 percent in 2009, with all 16 countries breaching European Monetary Union limits as they pump cash into their economies, the European Commission forecast Nov. 3. Spain, Greece and Ireland will have shortfalls of 10 percent or more this year and next, it said.

‘Big Problem’

“The reasons for running deficits at the moment, to fight the crisis, are accepted, but when it ends it will be a big, big problem for the stability of the currency,” Issing said in an Oct. 26 debate at the London School of Economics.

For now, that isn’t a problem. Interest rates of 1 percent in Europe versus near zero in the U.S. have attracted investors to the euro. The American government has flooded the world with dollars by spending, committing, lending or guaranteeing $11.6 trillion to fight the recession while the ECB has been more restrained on measures that would debase its currency.

“The Fed and the government filled the market with dollars, making it the main currency for carry trades,” where low- interest economies’ money is invested in higher-yielding ones, said Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman & Co. “This will only end when the Fed starts tightening monetary policy or the market believes a hike is imminent.” He sees the euro rising to $1.53.

‘Upward Pressure’

The International Monetary Fund on Nov. 7 said “there are indications” that traders are using the dollar to fund carry trades across the world and that it may still be overvalued even after its slide this year.

“These trades may be contributing to upward pressure on the euro,” the IMF said in a report.

Investors outside developed Europe bought $6.5 billion of its government and corporate bonds from April 1 to Nov. 4, the fastest pace since March, according to Cameron Brandt, an analyst at fund-flow data provider EPFR Global in Boston. European stock purchases by foreigners totaled $5.8 billion from mid-July to November, the most since at least 1999, Brandt said. The Dow Jones Stoxx 600 Index of Europe’s shares is up 53 percent since March 9 after a record six-month rally. Germany’s DAX index is up 49 percent.

The euro’s “pain threshold is associated with new record highs, so we would need to go above $1.60,” Goldman Sachs’ Stolper said. “Demand for German goods depends a lot more on global growth and investment patterns than on the strength of the euro.”

To contact the reporters on this story: Matthew Brown in London at mbrown42@bloomberg.net; Oliver Biggadike in New York at obiggadike@bloomberg.net

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Euro Rises Versus Yen, Dollar Amid Signs Economy Is Recovering

By Yoshiaki Nohara and Ron Harui

Nov. 9 (Bloomberg) -- The euro gained against the yen and the dollar before European reports today that may add to signs the economy is recovering, boosting demand for higher-yielding assets.

The dollar declined against 14 of its 16 major counterparts after the Group of 20 governments agreed to keep stimulus measures and remained silent on the greenback’s decline this year. New Zealand’s dollar gained by the most in more than a week as Auckland-based Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, raised its forecast for milk prices by 19 percent on growing global demand.

“Overall, economic data are turning positive,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest lender. “Demand remains strong for commodity and higher-yielding currencies.”

The euro gained to 134.72 yen as of 7:15 a.m. in London from 133.45 yen in New York on Nov. 6. The euro rose to $1.4950 from $1.4847. It earlier climbed to as high as $1.4952, the strongest since Oct. 26. The U.S. currency traded at 90.11 yen from 89.88 yen.

The euro strengthened as a Bloomberg News survey of economists showed German industrial output probably expanded 1 percent in September, a second month of gains. The Economy Ministry will release the data in Berlin.

Euro Zone

A European investor confidence index improved to minus 12 in November, the highest since July 2008, according to a separate Bloomberg survey. The Sentix research institute will issue the report in Limburg, Germany.

“The euro-zone economy is performing better than economies in the U.S. and Japan,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Interest-rate differentials are also in favor of the euro.”

The yield advantage of 10-year German bunds over similar- maturity Japanese government debt widened to 1.91 percentage point on Nov. 6 from 1.89 percentage point on Nov. 5.

The dollar dropped after Alistair Darling, hosting in the U.K. a meeting of finance ministers from G-20 nations, said his colleagues decided to keep supporting their economies.

“We agreed to maintain support for the recovery until it is assured,” Darling said Nov. 7. “We are not out of the woods yet.”

New Zealand’s currency advanced against all 16 major counterparts after Fonterra said today it will probably pay its 10,500 farmer-shareholders NZ$6.05 ($4.45) for each kilogram of milk supplied in the year to May 31. That would be the second- highest since Fonterra paid a record NZ$7.90 a kilogram in the year ended May 2008.

Milk Prices

Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese and sells products in more than 140 countries.

“Dairy prices are one of the fundamental drivers of the New Zealand dollar so with that on board we’ll see more support for the kiwi this week,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “The market still has a hike in there by March next year, which is quite a bit sooner than what the Reserve Bank outlined in their most recent statement. This is further fuel to the fire.”

The New Zealand currency rose 1.5 percent to 73.58 U.S. cents, the most since Oct. 29. It gained 1.7 percent to 66.30 yen.

U.S. Dollar

The U.S. currency also dropped after the International Monetary Fund said traders are probably using the dollar to fund so-called carry trades around the world and it may still be overvalued.

The IMF said in a report published on Nov. 7 that while the dollar “has moved closer to medium-run equilibrium,” it is still “on the strong side.” The Federal Reserve last week repeated its intention to leave borrowing costs “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment fails to decline.

“The dollar was hurt by the IMF’s observation,” John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., wrote in a research note. “With the Fed implying it will keep rates very low until the unemployment rate starts falling, traders continued to pare expectations for rate hikes in 2010, which is weighing on the dollar.”

The U.S. currency has dropped against 15 of 16 major counterparts in the past six months as investors increased carry trades, where they borrow in countries with low interest rates to invest in higher-yielding assets.

The greenback’s decline helped push the price of gold to an all-time high of $1,105.11 an ounce today in Singapore, as demand increased for the precious metal as a store of value.

Interest Rates

Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 3.5 percent in Australia and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.

The dollar may fall further as economists forecast the trade deficit in the U.S. probably widened in September, reflecting growing demand for foreign oil and automobiles.

The gap between imports and exports increased to $31.8 billion from $30.7 billion the prior month, according to the median of 60 estimates in a Bloomberg News survey ahead of the Commerce Department’s Nov. 13 report.

Chinese Premier Wen Jiabao called on the U.S. to keep its deficit at an “appropriate size,” saying that it would be conducive to stability and global economic recovery, Reuters reported.

The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners, fell to 75.331 from 75.819 on Nov. 6. The index earlier today touched 75.325, the lowest since Oct. 23.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Wheat Advances as Production in Canada Forecast to Decline

By Luzi Ann Javier

Nov. 9 (Bloomberg) -- Wheat gained for the first time in three sessions as output in Canada, the world’s second-largest exporter, was forecast to drop 15 percent this year. Corn and soybeans also advanced.

Wheat output in Canada may plunge to 24.35 million tons in the marketing year that began Aug. 1, from an estimated 28.611 million tons last year, the U.S. Department of Agriculture’s Foreign Agricultural Service said in a report posted on Nov. 6.

“That’s the news, that’s why the market is rallying,” Peter McGuire, managing director at CWA Global Markets Pty. said by phone from Sydney today.

December-delivery wheat rallied as much as 1.3 percent to $5.035 a bushel in after-hours on the Chicago Board of Trade and was at $5.0225 a bushel as of 2:03 p.m. Singapore time.

Soybeans for January delivery rose as much as 1.5 percent to $9.69 a bushel before trading at $9.68. Corn for December delivery added 1.1 percent to $3.71 at 2:03 p.m. Singapore time.

The Midwest is expected to have warm weather in the coming week, according to a forecast by DTN Meteorlogix LLC.

Drier, warmer weather may advance the harvesting of soybeans and corn in the major growing regions of the U.S., the world’s biggest exporter of both crops, and accelerate planting of winter-wheat, McGuire said.

The USDA may raise its yield forecast in Tuesday’s report, he added. The USDA is scheduled to release Nov. 10 its latest estimates of U.S. and global production and demand for soybeans, corn and wheat.

The USDA forecast in October that the nation’s soybean output will rise to a record 3.25 billion bushels, higher than the 3.245 billion bushels it estimated a month earlier.

It also increased in October its U.S. corn output estimate to 13.018 billion bushels, the second-largest on record, from 12.955 billion bushels a month earlier.

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

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Palm Oil May Climb 7% by First Quarter, Mistry Says

By Bloomberg News

Nov. 9 (Bloomberg) -- Palm oil prices may advance 7 percent by the first quarter driven by a revival of demand from China and India, the world’s two biggest importers, said Dorab Mistry, director of Godrej International Ltd.

“After a few weeks, as demand from China and India returns, I expect crude palm oil futures to begin to rise and to attain my target of 2,400 ringgit in the first quarter of 2010,” Mistry said in comments prepared for delivery at a conference in Guangzhou, China, yesterday. The prediction is the equivalent of $709 per metric ton.

Palm oil, used in cooking and fuel, has climbed 31 percent this year as crude oil gained 76 percent and rains and freezing weather threatened harvesting of the soybean crop in the U.S., the biggest producer, potentially reducing output of soybean oil.

Futures may reach 2,400 ringgit before the first quarter on speculation a strengthening El Nino may hurt production next year in Southeast Asia, Mistry said in an interview in Singapore today. Prices may even surge to as high as 3,000 ringgit by the end of 2010 if oil prices advance to $100 a barrel, he said.

“My belief is that once the dry weather hits Indonesia in a big way, the sentiment will turn very fast,” Mistry said. “The dryness should be coming in anytime now. Production will be affected in the second or third quarter.”

Energy Costs

The 2010 price outlook appears “friendly,” Mistry said yesterday, adding much will depend on energy costs. His 2,400 ringgit forecast is based on crude oil around $80 per barrel in the next few months, a euro around $1.50 and the rupiah around 9,400 to the dollar.

China and India appear to be “well-covered” at present and it’s possible that palm oil stockpiles will build in the next few weeks toward the end of the calendar year, he said.

Palm oil stockpiles in Malaysia, the second-biggest producer, will probably peak at 2.1 million tons at the end of December before declining in the New Year, said Mistry, whose speech yesterday was delivered in his absence as he was unable to attend the conference.

“Whilst this figure may seem daunting, it will represent less than six weeks consumption,” he said. “It is likely stocks will decline from January or latest from February onwards.” Inventories rose 12 percent to an eight-month peak of 1.58 million tons in September, the palm oil board said Oct. 12.

Price Pressure

“It is quite possible markets may come under pressure” and futures may break 2,100 ringgit temporarily, he said. “I no longer expect CPO futures to decline to 1,900 and believe they have bottomed out at the recent low of 2,020,” he said.

January-delivery palm oil fell 0.9 percent to 2,226 ringgit ($658) a ton at the midday break on the Malaysia Derivatives Exchange. The contract closed at 2,246 ringgit on Friday.

The Southern Oscillation Index had turned “sharply negative” in the past three to four weeks and this is “usually a clear pointer to a strengthening El Nino,” he said. “It appears that we are on the brink of dry weather and rainfall deficits in Malaysia as well as Indonesia,” he said.

“A new stronger El Nino will have a profound effect on CPO production” in June to September, he said.

Palm oil stockpiles in Indonesia, the world’s biggest producer, will increase in the coming months because of higher output, Derom Bangun, a deputy chairman of Indonesia’s Palm Oil Board, said Nov. 2.

Indonesian Output

Inventories probably increased to 1.7 million tons in October, compared with the August and September average of 1.3 million tons to 1.4 million tons, he said. Mistry has previously forecast that Indonesian production would gain by 2 million tons in 2010 and Malaysian output by 500,000 tons.

Imports of vegetable oils by India will be “more or less the same” in the year starting Nov. 1, 2009, as in 2008-2009 or about 8.6 million tons, he said. Palm oil purchases by the country, the largest importer, will be 6.9 million tons, up from 6.65 million, he said. Total consumption of vegetable oils will gain by 500,000 tons on strong economic growth, he said.

“India’s industry has weathered the recession in very good shape and is now poised to grow strongly,” he said. “This will have an effect on per capita consumption.”

Soybean oil’s premium over palm oil may narrow after April as soybean production in South America increases and palm oil supplies slow in Southeast Asia, Mistry said today. “There’s a lot of money to be made on that spread,” he said.

--Feiwen Rong. With assistance from Leslie Tan and Luzi Ann Javier in Singapore and Zeb Eckert in Hong Kong. Editors: Wendy Pugh, James Poole

To contact the Bloomberg News Staff on this story: Feiwen Rong in Beijing at frong2@bloomberg.net

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Most Japanese Stocks Fall on Earnings, Forecasts; Nissan Drops

By Akiko Ikeda and Kotaro Tsunetomi

Nov. 9 (Bloomberg) -- Most Japanese stocks fell, dragging the Topix index to its lowest close in a month, after companies reported lower earnings or forecast losses.

Mitsubishi Rayon Co., a maker of synthetic fiber, sank 4.6 percent and NOK Corp., a maker of carparts, lost 11 percent after they forecast wider full-year losses. Nissan Motor Co., a carmaker that gets about 75 percent of sales abroad, lost 2.3 percent as the yen strengthened against the dollar.

“The market lacks any market-moving news for active trading, since the peak for Japanese earnings has already passed,” said Daisuke Shimazu, an investment manager in Tokyo at Sumitomo Trust Banking Co., which has about $200 billion in assets.

The Topix fell 0.4 percent to 870.67 in Tokyo, the lowest close since Oct. 5, as about two shares declined for each that advanced. The Nikkei 225 Stock Average gained 0.2 percent to 9,808.99, boosted by insurance companies.

Of the companies in the Topix that have announced financial results this earnings season, 58 percent have reported declines, according to data compiled by Bloomberg. Stocks in gauge are valued at almost 36 times estimated earnings on average, compared with 20 times at the beginning of the year.

Nippon Telegraph & Telephone Corp., Japan’s biggest phone company, retreated 1.6 percent to 3,680 yen, the steepest decline since Oct. 8. The Nikkei newspaper said the company’s operating profit probably fell 15 percent in April to September from a year earlier, due to decreased mobile-phone revenue.

Profits, Losses

NOK plunged 11 percent to 1,057 yen, the sharpest slide since Nov. 12 last year, after the maker of oil seals and rubber products forecast a net loss of 5.1 billion yen ($57 million) for the year ending March 31, compared with its earlier estimate of a deficit of 4.5 billion yen.

Mitsubishi Rayon sank 4.6 percent to 289 yen. The synthetic-fiber maker widened its full-year net loss projection to 8.5 billion yen from 1 billion yen, citing foreign-exchange losses and fixed-asset devaluations.

The yen gained to as much as 89.69 against the dollar today, 13 percent stronger than its low for the year in April. That reduces earnings at Japanese companies when overseas revenue is converted into their home currency. Nissan, Japan’s third- biggest automaker, lost 2.3 percent to 642 yen.

“If the yen strengthens to 85 or 80, many companies won’t be able to make up exchange-rate losses,” said Takeshi Osawa, a senior fund manager in Tokyo at Norinchukin Zenkyoren Asset Management Co.

Topix Advances Least

The Topix has risen 1.3 percent this year, the least among the world’s 10 largest equity markets, as the global recession sapped demand for companies’ products and the stronger yen hurt exporters. The Standard & Poor’s 500 Index in the U.S. has climbed 18 percent this year, and the Dow Jones Stoxx 600 Index in Europe has added 22 percent.

Taiyo Yuden Co. lost 4.7 percent to 942 yen, the lowest since June 23. The maker of electronic components swung to a first-half net loss of 1.42 billion yen from a profit the previous year, as sales declined 13 percent.

Insurance companies rose the most among the 33 industry groups in the Topix. Mitsui Sumitomo Insurance Group Holdings Inc. jumped 8.6 percent to 2,275 yen, the largest gain in the Nikkei 225, after its first-half net income unexpectedly rose to 57 billion yen because of smaller-than-expected payouts for typhoons and other natural disasters.

Insurance Companies Gain

Tokio Marine Holdings Inc., Japan’s largest insurer by market value, climbed 4.3 percent to 2,445 yen. The company said in a preliminary earnings statement that first-half net income totaled 71 billion yen, 78 percent more than forecast, on higher-than-expected sales. Mitsui Sumitomo Insurance and Tokio Marine were the biggest positive contributors to the Topix.

“With the typhoon season having passed, we expect any future natural disaster-related losses to be small and think the actual size of these losses will provide upside to full-year earnings,” Masayoshi Kobayashi, an analyst at Nomura Holdings Inc., said in a report dated Nov. 6. “We think this is a good time to reappraise and consider buying non-life insurance stocks based on earnings improvement.”

Aioi Insurance Co. surged 8.7 percent to 427 yen. The casualty insurer doubled its full-year net income projection to 16 billion yen, citing fewer-than-expected typhoons and other natural disasters.

Citizen Holdings Co. soared 7.8 percent to 526 yen, rising the most since May 13. The watchmaker boosted its full-year operating profit outlook 83 percent to 5.5 billion yen, citing lower fixed costs. Operating profit in the six months ended Sept. 30 plunged 82 percent to 1.73 billion yen, as sales fell by 28 percent, the company said in a release.

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Kotaro Tsunetomi in Tokyo at ktsunetomi@bloomberg.net.

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China May Offer Subsidies to Buy Domestic Soybeans

By Bloomberg News

Nov. 9 (Bloomberg) -- China, the world’s largest soybean importer, may offer subsidies to buyers of locally grown oilseeds to boost farm incomes, potentially curbing purchases from overseas, industry executives said.

“China may give a subsidy to local crushers who use domestically produced soybeans,” said Zhu Yufeng, managing director at Hanfeng Huayu (Beijing) International Trading Co. Ltd. The government may then allow the crushers to sell the soybean meal and oil onto the domestic market, Zhu said at a conference in Guangzhou at the weekend.

Slowing imports may help extend a decline in Chicago soybean prices, already down 1.1 percent this year. China’s government bought more than 6 million tons from the 2008 domestic crop in an effort to boost prices as the global recession threatened to cut farm incomes. Auctions of the soybeans, held to make room in reserve silos for the new crop, have failed to attract significant buying.

“If the government does indeed adopt this subsidy policy, then imports may fall because of the possible increase in consumption of domestically produced soybeans,” Chen Tao, chairman of Louis Dreyfus (Beijing) Commodities Trading Company Ltd., said at the conference.

The government may pay 200 yuan ($29) a ton to crushers who buy the oilseed from government supplies, three analysts and traders said in August. They asked not to be identified as the information was confidential.

Imports Jump

China relies mostly on imports to meet its soybean needs, with consumption estimated at more than 54 million tons this year and domestic supply at 14.5 million tons, according to the U.S. Department of Agriculture. China’s inbound soybean shipments jumped 13 percent from a year ago to 32.4 million tons in the first nine months of this year, customs figures show.

Soybeans for September 2010 delivery on the Dalian Commodity Exchange, the most-actively traded contract for locally produced soybeans, were little changed at 3,719 yuan a ton today. Prices have gained 10 percent this year.

“Despite robust demand in China, the high stockpiles will suppress local market prices and may lead to a situation where domestic prices are lower than the imported cost,” said Zhou Xuejun, general manager of vegetable oils and protein trading, Cargill Investments (China) Ltd.

Soybeans gained 1.5 percent to $9.6975 a bushel in Chicago at 3:33 p.m. in Singapore today.

China may slow vegetable oil imports in 2009-2010 amid high domestic stockpiles, Wang Yinji, deputy general manager at Cofco Oil & Grains Co. said Nov. 7. Soybean oil imports will fall 20 percent to 2 million tons and palm oil shipments will be “mainly flat” at 6 million tons, Wang said.

--Feiwen Rong. Editors: Richard Dobson, James Poole.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at +86-10-6649-7563 or frong2@bloomberg.net

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Asian Stocks Gain on G-20; Weaker Dollar Drives Gold to Record

By Darren Boey and Jonathan Burgos

Nov. 9 (Bloomberg) -- Asian stocks rose after Group of 20 governments agreed to maintain stimulus efforts and Axa SA and AMP Ltd. made the region’s biggest takeover offer this year. Gold climbed to a record after the dollar fell.

The MSCI Asia Pacific Index advanced 0.7 percent to 117.18 as of 4:50 p.m. in Tokyo. Gold for immediate delivery reached an all-time high of $1,107.91 an ounce as the weakening U.S. currency prompted investors to increase bullion holdings as a store of value. The dollar declined against 13 of its 16 major counterparts amid expectations of low borrowing costs in the U.S. Oil rose as a hurricane disrupted Gulf of Mexico production.

“Maintaining stimulus measures will help support a further rally in equities and commodities, though it’s not necessarily a positive thing,’ said Pauline Dan, Hong Kong-based chief investment officer at Samsung Investment Trust Management, which oversees $100 billion in assets. “That means the economy is not recovering at a desirable pace. The U.S., for instance, does not really have a choice but to keep its monetary policy loose.”

Axa Asia Pacific Holdings Ltd. shares surged 33 percent in Sydney after rejecting a hostile bid from its parent and AMP, Australia’s No. 2 insurer by value. The country’s benchmark S&P/ASX 200 Index rallied 1.8 percent, buoyed by Commonwealth Bank of Australia’s report of A$1.4 billion ($1.3 billion) in first-quarter profit.

Hong Kong’s Hang Seng Index gained 1.7 percent as Moody’s Investors Service upgraded its outlook on Hong Kong and China’s debt ratings to “positive” from “stable.” Futures on the U.S. Standard & Poor’s 500 Index added 0.6 percent.

Carry Trades

Yields on 10-year Treasury notes rose three basis points to 3.52 percent, according to BGCantor Market Data. The U.S. House approved health-care legislation that would cost more than $1 trillion over 10 years, indicating the government will have to increase its debt sales to pay for it.

Gold for immediate delivery advanced 1.1 percent to $1,107.19 an ounce. Prices of the precious metal jumped 5.5 percent in the past month as the Dollar Index, which measures the U.S. currency against 6 major counterparts, lost 1.5 percent.

“It’s inextricably linked to the dollar,” said Geoff Clear, head of Asia commodities at Australian & New Zealand Banking Group Ltd. “All commodities are reflecting dollar weakness and gold at a record is a result of investor appetite and safe-haven buying.”

The Dollar Index dropped 0.7 percent today. The International Monetary Fund said in a Nov. 7 report traders are probably using the dollar to fund so-called carry trades around the world and it may still be overvalued.

Maintaining Support

The U.S. currency fell to $1.4957 per euro in Tokyo from $1.4847 in New York on Nov. 6. It dropped to as low as $1.496, the weakest since Oct. 26. The dollar traded at 90.25 yen from 89.88 yen.

Alistair Darling, hosting in the U.K. a meeting of finance ministers from G-20 nations, said his colleagues decided to keep supporting their economies. Australian Treasurer Wayne Swan said on Nov. 8 that it’s too early to retract government stimulus.

The New Zealand currency rose 1.7 percent to 73.70 U.S. cents as Auckland-based Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, raised its forecast for milk prices by 19 percent amid growing global demand. Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese.

“Dairy prices are one of the fundamental drivers of the New Zealand dollar so with that on board we’ll see more support for the kiwi this week,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington.

Hurricane Ida

Crude oil for December delivery in New York rose as much as 1.7 percent to $78.78 a barrel in after-hours trading as Hurricane Ida, packing 105 mile-an-hour winds, entered the southern Gulf of Mexico. Offshore output along the U.S. Gulf accounted for 28 percent of national output in June, according to U.S. Energy Department data.

Chevron Corp. said it began evacuating some personnel. Petroleos Mexicanos, the government-owned oil company, shut 90 wells at onshore fields in the western states of Veracruz and Tabasco, the EFE news service reported.

Ida “could be a mildly bullish event” for oil if any production gets shut-in as a result, said Toby Hassall, research analyst with CWA Global Markets Pty in Sydney. “The market doesn’t have the same sensitivity to supply-side issues that it did a couple of years ago.”

Oil, which was recently at $78.65, reached a one-year high of $82 on Oct. 21 as rising stock markets boosted investor confidence and a falling dollar encouraged buying of physical assets.

Axa Takeover

Shares of Cnooc Ltd., China’s largest offshore oil producer, gained 1.8 percent to HK$12.48. Woodside Petroleum Ltd., Australia’s No. 2 oil company, added 1.3 percent to A$48.51.

Axa Asia Pacific soared 33 percent to A$5.70 after rejecting the takeover bid, which is worth about $10 billion. Sydney-based AMP planned to buy Axa Asia Pacific, keep the Australian and New Zealand units, and sell the Asian divisions to Paris-based Axa for A$7.7 billion ($7.1 billion).

“The companies that have come through the crisis best are reasonably cashed up and are looking at how to deploy that cash,” said Angus Gluskie, who oversees about $300 million at White Funds Management Pty. in Sydney, including AMP and Axa Asia Pacific shares.

Commonwealth Bank’s profit report drove the shares up by 4.5 percent to A$55.08 even as Chief Executive Officer Ralph Norris pledged to maintain “conservative business settings.”

The MSCI Asia Pacific Index has climbed 66 percent from a more than five-year low on March 9, outpacing gains by the S&P 500 and Europe’s Dow Jones Stoxx 600 Index. Stocks in the MSCI gauge are valued at 22 times estimated earnings, compared with 17 times for the S&P and 15 times for the Stoxx.

Japanese insurers climbed after boosting profit forecasts. Casualty insurer Aioi Insurance Co. gained 8.7 percent to 427 yen after doubling its full-year net income projection, citing fewer-than-expected typhoons and other natural disasters.

To contact the reporters on this story: Darren Boey in Hong Kong at dboey@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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London Bourse Delays Baikal Launch on Turquoise Talks, WSJ Says

By Patrick Rial and Jackie Cohen

Nov. 9 (Bloomberg) -- London Stock Exchange Group Plc has postponed the launch of its dark-pool trading system Baikal as it negotiates a possible purchase of rival Turquoise, the Wall Street Journal reported.

Jane Zhu, Hong Kong-based head of Asia Pacific for the LSE, wasn’t immediately available to comment. The LSE, Europe’s largest bourse by value of listed companies, had planned to start matching orders through Baikal this year.

Stock exchanges have been losing market share to so-called multilateral trading facilities including Turquoise that offer lower fees, faster trades and anonymity. The LSE said on Oct. 1 it’s in exclusive talks with Turquoise, a trading system founded by banks including Morgan Stanley and Goldman Sachs Group Inc., that “may lead to a transaction.”

“You’re going to see a general move of more and more exchanges looking to set up something first of all from a profitability perspective, but also from a competitive perspective you have to be involved,” said Christian Kielland, head of trading at BTIG Hong Kong Ltd.

Trading on dark pools, off-exchange platforms that don’t display public quotes, will likely rise to 7 percent of the total in “major” European markets next year from the current level of 4.1 percent, Tabb Group LLC said on Nov. 2. Average daily trading on the LSE fell 43 percent in the five months ended Aug. 31, the exchange said in September.

The LSE will likely merge Turquoise with Baikal in a non- cash transaction that will give the LSE a 51 percent share of the joint venture, the Financial Times reported on Oct. 31.

The “need to effect large crosses of risk not just for equities, but for fixed income, foreign exchange, for many asset classes, matches the needs of corporates, investors and intermediaries,” Xavier Rolet, chief executive of the bourse, said in an Oct. 28 interview with Bloomberg. “That need has existed for decades and will continue to exist.”

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Jackie Cohen in San Francisco at jcohen72@bloomberg.net.

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European, U.S. Stock-Index Futures Gain; Asian Shares Advance

By Adria Cimino

Nov. 9 (Bloomberg) -- European and U.S. stock-index futures rose and Asian shares advanced after the Group of 20 nations agreed to maintain stimulus efforts and Axa SA and AMP Ltd. offered to buy Axa Asia Pacific Holdings Ltd.

Axa Asia Pacific, the Australian unit of France’s biggest insurer, soared 33 percent after rejecting an unsolicited $10 billion bid from parent Axa SA and wealth manager AMP Ltd. Cadbury Plc may be active as today is the deadline for Kraft Foods Inc. to make a formal bid for the world’s second-largest candy and chocolate maker. Continental AG may gain after Citigroup Inc. recommended the tiremaker.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, added 1 percent at 7:16 a.m. in London. The U.K.’s FTSE 100 Index may increase 33, according to Cantor Index, a betting firm.

“Equity markets in Europe are set to start the week on an upbeat footing after the G-20 meetings concluded that global stimulus efforts would remain in place,” Ben Potter, research analyst at IG Markets in Melbourne, wrote in a note.

U.K. Chancellor of the Exchequer Alistair Darling, hosting a meeting of finance ministers from G-20 nations, said his colleagues decided to keep supporting their economies. The G-20 agreed to keep interest rates low and maintain record budget deficits until recoveries take hold.

Tobin Tax

The G-20 split on whether to introduce a so-called Tobin tax on financial trading as part of a broader strategy to ensure the global economy’s expansion is less crisis-prone.

U.K. Prime Minister Gordon Brown told the meeting in St. Andrews, Scotland that such a levy could prevent excessive risk taking and fund future bank rescues, adding momentum to a debate begun by France. U.S. Treasury Secretary Timothy Geithner said a “day-by-day” tax on speculation is “not something we’re prepared to support.”

European stocks last week rebounded from a one-month low as better-than-expected earnings at companies from Swiss Reinsurance Co. to Delhaize Group SA fed investors’ expectations a seven-month advance will go on. U.S. shares halted a two-week retreat after worker productivity, manufacturing and home sales beat economists’ projections and Warren Buffett’s Berkshire Hathaway Inc. made its biggest purchase.

The global rally in equities lost pace in October on concern the rebound has gone too far relative to the prospects for economic growth. The Stoxx 600 is up 53 percent since March 9 even after dropping 2.3 percent last month.

U.S., Asian Shares

Standard & Poor’s 500 Index futures added 0.5 percent today, while the MSCI Asia Pacific Index advanced 0.7 percent.

Axa Asia Pacific soared 33 percent to A$5.70 in Sydney. The offer, Asia’s largest takeover bid this year, marks the second attempt by parent Axa SA to buy the unit in the past five years to tap rising wealth in a region recovering from the global financial crisis faster than the U.S. and Europe. Axa said it will raise 2 billion euros ($3 billion) in a rights offering to finance acquisition opportunities.

Cadbury may be active. Kraft, the world’s second-largest food maker, may have to increase its 9.8 billion-pound ($16 billion) bid for confectioner Cadbury Plc by today’s deadline to keep its takeover attempt alive, investors said. U.K. regulators set a Nov. 9 deadline for Kraft to make a formal offer or walk away for six months.

Cadbury Chairman Roger Carr has met most of the company’s 50 largest shareholders to persuade them to back the confectioner’s defense against the takeover offer, the London- based Sunday Telegraph reported, citing people familiar with the matter.

Continental, EDF

Continental, Europe’s second-largest auto-parts maker, was upgraded to “buy” from “hold” at Citigroup, which cited improved earnings prospects and the potential for a “favorable” debt refinancing next year in a note to clients.

Electricite de France SA, Europe’s biggest power producer, had its recommendation cut to “underweight” from “neutral” at HSBC Holdings Plc.

Allianz SE, Europe’s biggest insurer, said third-quarter profit more than doubled after investment income recovered from year-earlier writedowns. Net income rose to 1.32 billion euros, from 545 million euros a year earlier, excluding the sale of Dresdner Bank. That beat the 1.25 billion-euro median estimate of 18 analysts surveyed by Bloomberg.

Stocks around the world are falling at the fastest rate since the worst of the credit crisis on concern central banks will start raising rates, a signal that triggered the biggest rallies over the past three decades.

Benchmark indexes from New York to Tokyo to Frankfurt have lost an average of 4.4 percent since Oct. 19 on speculation policy makers will curtail stimulus measures before the global economy revives. History shows stocks have climbed 92 percent of the time in the six months before government borrowing costs began the biggest increases, data compiled by Bloomberg show.

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

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