Taiwan Economic Slump Probably Eased on China Demand

By Janet Ong and Jay Wang

Nov. 26 (Bloomberg) -- Taiwan’s economy contracted at the slowest pace in a year in the third quarter as Chinese demand for the island’s products spurred a recovery, economists say.

Gross domestic product shrank 2.6 percent in the three months through September, according to the median estimate of 17 economists in a Bloomberg News survey, after contracting 7.54 percent in the second quarter. The government will announce the figures at about 5 p.m. in Taipei.

Signs of recovery have prompted employers to start hiring, with Taiwan’s unemployment rate falling in October for the first time in more than a year, and companies including Taiwan Semiconductor Manufacturing Corp. forecasting better sales. The benchmark Taiex index has climbed 69 percent in 2009 as investors bet the island’s economy is past the worst.

“In the third quarter, export growth was mainly due to increased orders from China,” said Ma Tieying, an economist at DBS Group Holdings Ltd. in Singapore, who forecast the economy shrank 3.2 percent. “In the current quarter, exports to the U.S. are picking up and domestic consumption and higher employment levels are signs of a recovery.”

Taiwan is dependent on a revival of overseas sales, which account for more than two-thirds of the economy, to recover from its yearlong recession. Export orders, an indication of shipments in the next one to three months, climbed in October for the first time in 13 months, led by demand from China and Hong Kong.

Stocks, Currency

Taiwan’s currency climbed 0.2 percent to NT$32.183 against the U.S. dollar as of 10 a.m. local time, according to Taipei Forex Inc. It reached a one-year high of NT$31.995 on Oct. 1. The U.S. dollar has dropped against all 16 major currencies tracked by Bloomberg this year. The benchmark Taiex index gained 0.3 percent.

President Ma Ying-jeou’s administration plans NT$858.5 ($26.6 billion) of spending over four years, or about 6 percent of GDP, on infrastructure, consumer grants and tax cuts to revive the economy. It handed out NT$82.9 billion of shopping vouchers in January, which the island’s statistics bureau says added 0.66 percentage point to GDP.

The central bank in September kept interest rates unchanged at a record-low 1.25 percent. Governor Perng Fai-nan has cut rates by 2.125 percentage points since Sept. 25, 2008.

The central bank is likely to keep interest rates unchanged this year as the risk of inflation is limited, DBS’s Ma said. She expects the central bank to increase borrowing costs in the second half of next year, once economic growth returns to pre- crisis levels.

Exports to China

Taiwan’s exports to China, its biggest overseas market, rose 10.6 percent in October from a year earlier, after increasing 2.1 percent in September. Total exports fell 4.7 percent last month, after a 12.7 percent slump in September.

Taiwan’s electronics producers send parts to China that are re-exported as finished computers, televisions and mobile phones to consumers in the U.S. and Europe.

China’s economy expanded 8.9 percent last quarter from a year earlier, the fastest pace in a year, spurring sales for Taiwan electronics makers including Quanta Computer Inc., the world’s largest maker of notebook computers.

Taiwan Semiconductor, the world’s largest custom chipmaker, reported third-quarter sales rose 21.2 percent from the previous quarter to NT$89.9 billion, boosted by overseas demand.

“Demand from the U.S. lags China as the economic recovery in the U.S. remains sluggish,” said Tony Phoo, a Taipei-based economist at Standard Chartered Plc. He forecast a 2.6 percent contraction in GDP in the third quarter.

Financial Accord

The signing of a financial accord between China and Taiwan may boost investors’ confidence as it will pave the way for increased cross-strait trade and services cooperation, Phoo said.

China and Taiwan on Nov. 16 signed three memorandums of understanding to ease access to each other’s banks, securities and insurance industries as cross-strait relations reached their warmest in 60 years.

Taiwan was struck by its deadliest storm in 50 years in August, causing NT$110 billion of damage. The statistics bureau said on Aug. 20 that Typhoon Morakot would reduce growth by between 0.6 and 0.7 percentage point in the three months ended Sept. 30 and between 0.1 and 0.2 percentage point in the fourth quarter.

To contact the reporters on this story: Janet Ong in Taipei at jong3@bloomberg.net; To contact the reporter on this story: Jay Wang in Singapore at jwang298@bloomberg.net

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Philippine Growth Unexpectedly Holds Near Decade Low

By Karl Lester M. Yap and Cecilia Yap

Nov. 26 (Bloomberg) -- Philippine economic growth unexpectedly held near a decade low last quarter as exports plunged, signaling the country hasn’t yet benefited from the global recovery.

Gross domestic product increased 0.8 percent from a year earlier, matching the revised expansion in the second quarter, the National Statistical Coordination Board said today. That compares with the 1.9 percent median forecast of 10 economists surveyed by Bloomberg. The economy grew 0.6 percent in the first quarter, the smallest gain since a recession ended in 1998.

The Philippines is lagging behind Asian nations including India and Japan where growth is accelerating after policy makers boosted public spending and cut borrowing costs to fight the global slump. That may put pressure on the central bank to keep interest rates low as a record 2009 budget deficit limits President Gloria Arroyo’s ability to boost government stimulus.

“The government doesn’t have too much fiscal room to pump prime,” said Frederic Neumann, an economist at HSBC Holdings Plc in Hong Kong. “Monetary policy would have to take over as the driver of GDP growth.”

Bangko Sentral ng Pilipinas, which kept its benchmark interest rate unchanged at record low of 4 percent this month, slashed borrowing costs by 2 percentage points from mid-December to July to spur domestic demand. The central bank should continue its “accommodative policy” as inflation is still low, Economic Planning Secretary Augusto Santos said today.

Growth Targets

The Philippine central bank can afford to maintain its monetary policy stance because of lower-than-expected economic growth and the “within-target” inflation outlook, Governor Amando Tetangco said in a mobile-phone text message today.

The government is maintaining its 0.8 percent-to-1.8 percent growth target for this year, as fourth-quarter economic expansion will be “much better” amid spending ahead of next year’s election, Santos said. It is also keeping its 2010 GDP growth target, Economic Planning Director Dennis Arroyo said.

Exports of goods and services by companies including Texas Instruments Inc., which account for about a third of the Philippine economy, dropped 13.6 percent in peso terms last quarter from a year earlier.

Consumer spending, which accounts for about 70 percent of the economy, rose 4 percent. Remittances from the more than 8 million Filipinos living overseas rose 6.9 percent in peso terms in the third quarter. Funds sent home from abroad account for about a 10th of the economy and help fund purchases of mobile- phones, cars and homes.

Tropical Storms

Philippine Long Distance Telephone Co., the nation’s largest company by market value, cut its 2009 revenue target this month, saying consumers may limit purchases of mobile-phone credits and Internet use to pay for repairs after tropical storms destroyed homes and damaged cars and appliances in the past two months.

The peso was little changed at 46.73 a dollar today, and the benchmark stock index climbed 0.6 percent as at 11:22 a.m. in Manila. The government is “a bit worried” about the weak U.S. currency, said Arroyo, the economic planning director.

The Philippines will maintain its 250 billion-peso ($5 billion) budget deficit ceiling for now, Santos said. That would be the biggest shortfall since Bloomberg data began in 1985.

Asian economies including China and Singapore are expanding while other nations have reported smaller declines. Malaysia said Nov. 20 that its recession eased last quarter, and neighboring Thailand’s economy contracted less than estimated in the three months through September, a report showed this week.

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net;

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Fujii Is ‘Very Closely’ Watching Yen’s Gain to 14-Year High

By Kyoko Shimodoi and Keiko Ujikane

Nov. 26 (Bloomberg) -- Japanese Finance Minister Hirohisa Fujii said the government is watching currencies “very closely” after the yen advanced to a 14-year high against the dollar, threatening the country’s export-led recovery.

“If currencies make abnormal movements, we may need to take appropriate action,” Fujii told reporters in Tokyo today. “Now we’re at the stage where we need to closely monitor movements in currency markets.”

The comments suggest Japan is closer to stepping into currency markets for the first time in more than five years as the rising yen erodes exporters’ profits in the wake of the country’s worst postwar recession. The currency’s more than 8 percent advance over the past three months has also added to Japan’s deflationary pressure by driving import costs lower.

“The possibility of intervention has apparently increased,” said Masafumi Yamamoto, Tokyo-based chief foreign- exchange strategist at Barclays Bank Plc. “Stocks have been falling and the government declared Japan is in a deflationary state. In this environment, there’s no reason for it to tolerate a higher yen.”

The yen rose to 86.91 per dollar at 9:16 a.m. in London, after climbing to 86.30, the highest since July 1995. The Nikkei 225 Stock Average slid 0.6 percent to a four-month low.

Fujii, 77, said yesterday that the dollar’s weakness is spurring the yen’s advance. Today he said “a strong U.S. dollar is in their national interest. There is no change in our support for that.”

‘Huge Risk’

Manufacturers are contemplating shifting operations abroad because the yen’s gains make it costlier to run factories at home. A stronger yen would be a “huge risk” to producing autos in Japan, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga said this month.

“There is no doubt that the yen’s strength, if it accelerates further, would affect” exporters’ profits and the economy, said Chief Cabinet Secretary Hirofumi Hirano told reporters. “We must carefully assess the impact. If that happens, the government would be asked to respond.”

Hirano said he spoke with Fujii about the currency’s surge today without discussing intervention.

Japanese authorities haven’t stepped into the currency market since the first three months of 2004, when it sold a record 14.8 trillion yen ($171 billion). Fujii had spurred some of the yen’s gains after he took office in September by saying he opposed “easy intervention.” He has since toned down his remarks by saying Japan will act if currency moves are “abnormal or disorderly.”

Fujii’s ‘Discretion’

Vice Finance Minister Yoshihiko Noda said the government isn’t considering stepping into the currency market now, Reuters reported earlier today. He later backed away from the remarks, saying at a news conference that yen policy “is under the minister’s discretion” and declining to comment on the possibility of government action.

“The chances of intervention would increase if the dollar-yen breaks below 85,” Tomoko Fujii, a foreign-exchange strategist at Bank of America-Merrill Lynch in Tokyo, wrote in a report published today. “Intervention backed by a monetary policy change is more effective than intervention without supportive monetary policy action.”

Fujii at Bank of America-Merrill Lynch said it’s unlikely that the U.S. would join Japan in stepping into foreign- exchange markets, barring a “meltdown caused by a dollar crisis.” Expectations for the Bank of Japan to add liquidity to the economy will grow should the yen’s gains “sharply” lower stock prices, hurt business sentiment and exacerbate deflation, she wrote.

Deflation’s Return

The government last week said Japan was in a “mild deflationary phase.” Price declines blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s.

Meanwhile Finance Minister Fujii said yesterday that China’s currency is probably too weak, backing calls from the U.S. and Europe to let the yuan appreciate.

“It can’t be helped that people see the yuan as undervalued given the strength of the Chinese economy,” Fujii said in an interview in Tokyo. “The yuan is pegged to the dollar. I don’t think such a situation is necessarily good.”

The remarks are Fujii’s strongest on the Chinese currency since he took office in September, adding to concerns voiced by officials including European Central Bank President Jean-Claude Trichet this month about the yuan’s flexibility. The yuan’s peg to the dollar has sheltered China from the slide in the U.S. currency that’s making Japanese and European exports more expensive.

To contact the reporters on this story: Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Oil Drops as Growing Supply Undermines Biggest Gain in a Week

By Grant Smith

Nov. 26 (Bloomberg) -- Oil fell in New York on speculation that its biggest advance in a week wasn’t supported by U.S. inventory levels, which rose to a four-week high.

U.S. stockpiles increased to 337.8 million barrels in the week to Nov. 20, the Energy Department said in a report yesterday. Oil still closed 2.6 percent higher as the dollar slumped to a 15-month low against the euro, stimulating demand for commodities as a currency hedge.

“On the fundamental side, it’s not justified for oil prices to go higher,” said Gerrit Zambo, a trader with Bayerische Landesbank in Munich. “Even with a cold winter there wouldn’t be any problem with supply as storage is so full and demand isn’t as high as two years ago.”

Crude oil for January delivery fell as much as $1.11, or 1.4 percent, to $76.85 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $77.13 a barrel at 10:55 a.m. London time.

Yesterday, it rose $1.94 to $77.96 a barrel. Futures have gained 73 percent this year.

There will be no floor trading in New York today because of Thanksgiving. Electronic trading will continue during the holiday.

“With the U.S. on holiday today, both the upper side and lower side should be limited,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “We cannot expect further gains today.”

Dollar Index

The Dollar Index, which tracks the greenback against the currencies of six trading partners, rose 0.3 percent to 74.519 after it reached a 15-month low yesterday on speculation the U.S. will keep interest rates near zero.

The U.S. currency yesterday fell to $1.5144 against the euro, the lowest since August 2008, amid speculation the Federal Reserve will keep interest rates low. A European Commission report tomorrow may show executive and consumer confidence rose to the highest in 14 months. A weaker dollar bolsters the investment appeal of commodities.

U.S. gasoline inventories increased to 210.1 million barrels last week as imports rose and refiners boosted output, Energy Department data showed.

Distillate fuel supplies, which include heating oil and diesel, dropped for a second week to 166.9 million barrels even as consumption stagnated.

“The decline in distillate demand has narrowed a tad,” analysts at Barclays Capital, led by Paul Horsnell, said in a report after yesterday’s release of weekly Energy Department data. “It is still a bit too early to say that U.S. diesel demand has turned the corner.”

Brent crude oil for January delivery on the London-based ICE Futures Europe exchange fell as much as 89 cents, or 1.1 percent, to $77.55 a barrel. The contract traded at $77.85 a barrel at 10:47 a.m. in London. Yesterday, it rose 2.6 percent, the most since Nov. 16, to $78.44 a barrel.

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

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U.K. Banks Face ‘Toughest Bonus Rules,’ Walker Says

By Gavin Finch and Andrew MacAskill

Nov. 26 (Bloomberg) -- U.K. banks face the toughest bonus regime in the world if proposals outlined in a government- commissioned report are accepted, according to its author, Morgan Stanley & Co. Senior Adviser David Walker.

Banks should delay bonus payments for as much as five years and have the power to “claw back” awards, Walker, 69, said in his final report on improvements to U.K. corporate governance released today. The government strongly supports Walker’s recommendations “and will take steps to implement them as soon as possible,” according to a statement from Chancellor of the Exchequer Alistair Darling.

“If we implement what I propose, we have a tougher regime than is in place in any jurisdiction in the world,” Walker said in a telephone interview yesterday. Unless remuneration policies are enforced, then companies “just won’t do it,” Walker said.

The British government is seeking to assuage voter anger over bankers’ pay following more than a trillion pounds ($1.67 trillion) of publicly funded support to keep the country’s financial system afloat amid the worst financial crisis since the Great Depression. U.K. banks were concerned about the risk of publishing details on top-paid staff given that “too many countries show no sign of following suit,” the British Bankers’ Association said in a statement.

New Pay Policies

The Group of 20 leading industrial countries are reconsidering pay policies after an agreement in September to crackdown on excesses that helped trigger bank collapses. The Federal Reserve said last month that it will review practices at the 28 largest bank holding companies it regulates to ensure pay packages don’t encourage risk-taking. Germany’s financial- regulatory authority, BaFin, has asked all lenders to submit new pay policies by the end of the year.

The government asked Walker to review the link between pay and risk-taking and whether directors had done enough to prevent the decline of the financial industry.

Walker called for pay to be “balanced,” so that at least half of bonuses are awarded using long-term incentives over a three-to-five-year period, with the other half in short-term bonuses paid in three years. No more than one-third could be paid in the first year. Banks should be allowed to “claw back” payments in cases of “misstatement and misconduct,” he said.

The FSA gave U.K. banks until Nov. 2 to comply with a new remuneration code. The code stipulates that employee awards will be made up mostly of shares, rather than cash.

‘Broad Principles’

The interim report was criticized by banks and the industry’s main lobby group as overly detailed. The proposals should be “limited to broad principles” on pay, Royal Bank of Scotland Group Plc Chairman Philip Hampton wrote in an Oct. 1 submission to Walker, while the BBA said on Sept. 29 that the review should cover “broader remuneration policies.” HSBC Holdings Plc, Europe’s biggest bank, said lenders should be required to comply with the existing FSA remuneration code.

Banks should disclose the number of employees earning 1 to 2.5 million pounds, 2.5 to 5 million pounds and more than 5 million pounds in remuneration, including cash, shares and pension contributions, Walker said. The workers would not be named. That goes further than recommendations in the interim report that would have required banks to disclose only the number of employees earning more than the median compensation of board members. Walker told the British Broadcasting Corp. that he estimated 1,000 City of London financiers earn more than 1 million pounds a year.

Government to Legislate

The government today said it would legislate on publication of 1 million pound-plus pay packages, forcing disclosure for the 2010 performance year.

“If New York, Frankfurt and Paris don’t follow suit then presumably that is not such a fantastic thing for the U.K.,” said Rachel Kent, a regulatory lawyer at Lovells LLP in London.

Walker’s interim report recommended U.K. banks should delay bonus payments, increase the policing powers of risk committees and bolster the responsibilities of chairmen to avert a repeat of the financial crisis. Today’s document reiterated these plans, along with a recommendation that banks should consider annual re-election of their boards by shareholders.

“Several” non-executive directors on any bank board should commit to working 30 days to 36 days a year for the company and should be told in writing that this may limit their ability to take on boardroom roles elsewhere. When this isn’t possible, details of the time commitment agreed should be available to shareholders, the report said.

Risk Management

Banks and life insurers should create a committee to oversee the management of risk, including capital and liquidity, the report recommended. Fund managers and investors should disclose their voting record, the report said.

Walker received about 180 written submissions from institutions ranging from banks and assets managers and unions following his interim report. Prime Minister Brown said last week he will respond “swiftly” to the proposals in the report.

Walker, a former executive director at the Bank of England and ex-chairman of Morgan Stanley International, previously wrote a government-commissioned report recommending a code of conduct for British private equity firms published in 2007.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net

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U.K. Stores Plan Fewer Discounts to Avoid Holiday ‘Armageddon’

By Sarah Shannon

Nov. 26 (Bloomberg) -- A year after swaths of panic price cuts led to a Christmas “Armageddon” for U.K. retailers, Britons may find it harder to get a bargain before the holiday.

Marks & Spencer Group Plc, New Look Group Ltd. and House of Fraser Ltd. are among stores that say they don’t plan full-scale discounting before Dec. 25. With consumer optimism holding at an 18-month high, shoppers may still spend more in December than a year ago, according to researcher Mintel International.

“I can’t see last year’s level of disorder on the high street,” New Look Finance Director Alistair Miller said in an interview with Bloomberg News. Going on sale before the holiday “is an absolutely suicidal move for retailers.”

Ninety of Britain’s 100 biggest store owners started discounting before Christmas last year as the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. caused consumers to slash their holiday budgets. In London’s main shopping district, only 40 percent of retailers are planning pre-holiday discount days this year, according to the New West End Company, the organization which represents them.

“There’s much less blanket discounts this year,” said Richard Dickinson, the organization’s chief executive officer. “Stores have been much more astute about ordering. What people are doing is much more event driven and promotion driven.”

No ‘Armageddon’

Numis Securities analyst Andy Wade expects Christmas to be “a lot stronger” for profitability as discounting subsides. Marks & Spencer’s gross margin narrowed by 1.7 percentage points in its last fiscal year after the retailer held two “Christmas Spectaculars,” one-day events in which the price of almost all products was cut by 20 percent. Those won’t be repeated this year, according to Executive Chairman Stuart Rose, who said this month that the “Armageddon” scenario of 2008 has now passed.

M&S, the U.K.’s largest clothing retailer, will “trade full price through Christmas,” Rose said. Instead of price cuts, the London-based company will rely on 1,000 new products such as a 45-pound ($75.2) Christmas dinner for four people, and a 10 million-pound advertisement campaign featuring stars from the Absolutely Fabulous television series.

House of Fraser Plc, the U.K.’s third-largest department- store chain, will only run “targeted promotions” such as 25 pounds off party-wear in the run up to Christmas, spokeswoman Clotilde Gros said. Last year, the retailer offered price cuts of as much as 50 percent before the holiday.

New Look, the owner of 610 budget fashion outlets, will run promotions on party dresses later in the holiday season and start discounting by as much as 70 percent from Dec. 26, Miller said.

‘Cut Their Cloth’

“Compared to the build up to 2008’s doom and gloom laden Christmas period, 2009 is looking much more positive,” said Jon Wright, retailing manager at market researcher Euromonitor. “Retailers have cut their cloth accordingly in terms of inventory, staffing, merchandising activities and promotion.”

Mintel forecasts that December retail sales will rise by 2 percent after declining 1.7 percent in the same month last year. The lowest interest rates on record and improving house prices have buoyed Britons willingness to spend, according to Richard Hyman, strategic retail adviser to Deloitte & Touche LLP.

“I certainly feel more confident about the economy,” said Joanne Burrows, 61, as she shopped for gifts on London’s Oxford Street. “My husband and I are feeling a bit more certain about our savings and house prices seem to have recovered a little. I’d say I’m spending more than last year.”

To date, few town center retailers have followed the lead of department-store chain Debenhams Plc, which started a 250 million-pound price cutting campaign on Nov. 18, surpassing its 200 million pounds of discounts before Christmas last year.

‘More Profitable’

John Lewis Partnership Plc, the biggest U.K. department store owner, will start its clearance on Dec. 26 at its Trafford outlet in northwest England, spokeswoman Laura Chilvers said. All other John Lewis shops will go on sale from Dec. 27.

“Christmas 2009 will be more profitable than last year thanks to a more benign competitive environment,” said Kate Calvert, an analyst at Shore Capital. Price cutting in December last year was exacerbated by closing down sales at 815 Woolworths Group Plc stores across the U.K.

Not everyone agrees that the holiday will see growth in U.K. retail sales. Verdict Research forecasts a 0.7 percent drop.

Deloitte’s Hyman expects Christmas sales to be a “whisper” up on last year, only to fall by 1.5 percent in 2010 because of a planned increase in value-added tax in January and potential rises in interest rates and unemployment.

“It’s extraordinary that retail has held up as well as it has given the recession, and it really is a testament to how wedded to spending the U.K. consumer is,” Hyman said. “You could say they are in denial.”

On Oxford Street, 37-year-old Caroline Chambers said she can afford to spend more on gifts than she did last year.

“My husband feels more secure in his job and that’s made a big difference to how we feel about spending,” Chambers said. “I’m not that worried about next year. Things are improving.”

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net.

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AIG Settles Greenberg Disputes, May Reimburse $150 Million Fees

By Hugh Son, Dakin Campbell and David Voreacos

Nov. 26 (Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S., agreed to settle all legal disputes with former Chief Executive Officer Maurice “Hank” Greenberg and may reimburse as much as $150 million in fees.

A former U.S. judge will determine how much AIG must pay in legal expenses for Greenberg and former finance chief Howard Smith, the New York-based insurer said yesterday in a regulatory filing. AIG will return photographs, a Persian rug and other personal belongings to Greenberg, who also wins access to archival materials to write his memoirs as part of the deal.

“It was a long, really expensive fight, and AIG just basically said ‘Uncle,’” said former federal prosecutor Christopher Clark, a partner at Dewey & LeBoeuf LLP in New York who isn’t involved in the case. “I’m sure that AIG is not looking to trumpet the fact that having lost all of its claims against Greenberg, they now have to pay all of his legal fees.”

Greenberg, 84, ran AIG for almost four decades and built it into the world’s largest insurer until he was forced to retire in March 2005 amid state and federal probes into a reinsurance transaction. A tangle of lawsuits kept AIG and its former top executive in court since his departure.

AIG and Greenberg agreed that Layn R. Phillips will review legal expenses. Phillips is a partner at Irell & Manella LLP, a former judge and ex-U.S. attorney for Oklahoma, according to the firm’s Web site. AIG and two Greenberg-run investment firms agreed not to make disparaging statements about each other.

‘Significant Distraction’

“The resolution of these long-running disputes will remove a significant distraction and expense and allow AIG to better focus its efforts on paying back taxpayers,” CEO Robert Benmosche said in a statement.

Greenberg thanked Benmosche in the statement and said he looked “forward to assisting AIG in trying to preserve and restore as much value as possible for all of AIG’s stakeholders.”

Former New York Attorney General Eliot Spitzer sued Greenberg and Smith in 2005, alleging they misled regulators and investors. Spitzer dropped portions of the suit in 2006 and Greenberg asked a court to dismiss the rest. The New York suit is unaffected by this settlement, Greenberg’s lawyer David Boies said in an interview.

AIG eventually restated earnings and agreed to pay $1.64 billion to settle claims by Spitzer and other regulators, without admitting or denying wrongdoing. In court papers filed in July 2006, Greenberg argued AIG’s 2005 restatement was unnecessary and designed to force him to retire. He denied any wrongdoing in the New York civil suit.

‘Very Clear’

The insurer had sued Starr International Co., the investment firm Greenberg runs, claiming it improperly took $4.3 billion of AIG stock from an employee compensation plan. Earlier this year, a federal jury rejected those claims.

Greenberg and AIG said Aug. 31 they had agreed to binding arbitration to resolve the legal disputes, including those involving Starr. An arbitrator was to begin work by Oct. 15 and finish by March 31, according to a statement.

“The law is very clear that executives who need counsel to respond to an inquiry, an investigation, or a subpoena are entitled to full advancement and indemnification of legal fees,” Clark said.

SEC Settlement

In August, Greenberg agreed to pay $15 million to settle U.S. Securities and Exchange Commission allegations that he manipulated AIG’s earnings.

Greenberg took the top job at AIG in 1967, and eventually boosted AIG’s assets more than a thousand-fold, making $50 billion in acquisitions to reach 50 million customers in 130 countries. Under his tenure, AIG’s market capitalization grew to $166 billion, before its near-collapse amid the credit crisis.

“There has to be a recognition of the long-standing relationship that existed, and to ignore that is to disregard an important piece of history,” said Jacob Frenkel, a former SEC lawyer who specialized in fraud and stock manipulation cases. He is now with Shulman Rogers Gandal Pordy & Ecker in Potomac, Maryland.

Subprime Loans

AIG was rescued by the government last year after wrong-way bets on securities tied to U.S. subprime mortgages brought it to the brink of collapse, threatening to cause a financial-system meltdown. The insurer reported a $99 billion net loss last year.

The company has had four CEOs since Greenberg left. Martin Sullivan, who took over in 2005, was forced out in June of last year after saying losses tied to home loans would be “manageable.” Robert Willumstad was ousted when the government took over in September 2008. Edward Liddy ran the firm until August when he was replaced by Benmosche, who has said Greenberg could help the insurer.

“I want to get the benefit of his criticisms or his support,” Benmosche told Reuters in August. “The world may choose to vilify him. I think of him as having had some problems, but he can help us with the solutions.”

Liddy has said Greenberg was responsible for some of the insurer’s struggles, including the creation of the business that suffered losses on derivative trades tied to subprime mortgages.

The $182.3 billion bailout includes a $60 billion credit line, a Treasury Department investment of as much as $69.8 billion, and a $52.5 billion pledge to buy mortgage-linked assets owned or backed by the insurer. AIG agreed to turn over a majority stake to the U.S. in exchange for the rescue.

To contact the reporters on this story: Hugh Son in New York at hson1@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net; David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net.

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Dollar May Extend Recent Decline to 84 Yen: Technical Analysis

By Hiroko Komiya

Nov. 26 (Bloomberg) -- The dollar may extend its decline to the mid-84 yen level after sliding to a 14-year low today, Bank of Tokyo-Mitsubishi UFJ Ltd. said, citing trading patterns.

Having breached “the low end of a downward channel starting in March,” the U.S. currency has the potential to extend its losses to around 84.50 yen, said Masashi Hashimoto, a senior analyst at the unit of Japan’s biggest publicly traded bank. That would represent a 176.4 percent retracement of the greenback’s rally from a January 2005 low to a June 2007 high, he said, referring to a series of numbers known as the Fibonacci sequence.

“The dollar isn’t showing any signs it will halt its decline,” Tokyo-based Hashimoto said.

The dollar weakened to 86.56 yen as of 2:46 p.m. in Tokyo from 87.35 yesterday in New York. It earlier declined to 86.30, the lowest level since July 1995.

An ichimoku chart also shows the dollar is poised to keep sliding, Hashimoto said. The dollar remains below the bottom line of the so-called cloud, its shorter-term conversion line is lower than its longer-term baseline, and its lagging span is also beneath the current exchange-rate level, he said.

“All of these all represent dollar-selling signals,” Hashimoto said.

An ichimoku chart analyzes the midpoints of historic highs and lows. The conversion line is the same calculation over the past nine trading days. The baseline is the sum of the highest high and the lowest low over the past 26 trading days. A lagging span is the most recent closing price plotted 26 days behind the current level.

Relative Strength

The relative strength index indicates the dollar is oversold, but “oscillators don’t work when a trend is underway,” Hashimoto said. He said he pays more attention to shorter-term moving averages such as five- and 21 days. Should the dollar fall below the mid-84 yen level, 80 yen and a record low of 79.75 yen registered in April 1995 would then come into sight, he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net.

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Yen Rises to 14-Year High on View Authorities to Tolerate Gains

By Bo Nielsen and Yasuhiko Seki

Nov. 26 (Bloomberg) -- The yen rallied to a 14-year high against the dollar on speculation Japanese monetary authorities will tolerate further appreciation of the currency.

Finance Minister Hirohisa Fujii said today the government needs to take action on “abnormal” currency movements. Vice Finance Minister Yoshihiko Noda said the government isn’t considering stepping into the currency market, Reuters reported. The Swiss franc fell against the dollar on speculation the nation’s central bank sold the currency after it climbed to parity with the greenback for a second day.

“The Japanese authorities probably won’t step in unless we see an acceleration of the move below 85” yen per dollar, said David Deddouche, a foreign-exchange strategist in Paris at Societe Generale SA. “But traders will try to test that level in the coming days.”

Japan’s currency rose to 86.30 yen per dollar, the strongest since July 1995, before trading at 86.68 as of 10:40 a.m. in London from 87.35 yesterday in New York.

The dollar traded at $1.5085 per euro from $1.5134 yesterday, when it slid to $1.5144, the weakest since August 2008. The yen advanced to 130.76 per euro from 132.21. The franc fell 0.3 percent to 99.97 centimes per dollar.

The dollar’s decline below 87.1 yen leaves “very few supports” until the post-World War II low of 79.75 from April, 19, 1995, according to Tomoko Fujii, a foreign-exchange strategist at BofA Merrill Lynch in Tokyo.

Dollar Safety

While it slid against the yen, the dollar climbed against 14 of the 16 most-traded currencies tracked by Bloomberg after Dubai’s attempt to reschedule its debt spurred investors to seek the safety of assets perceived to be lower risk. The U.S. currency jumped 1.8 percent to 71.96 cents per New Zealand dollar.

The U.S. currency began a multiyear slide versus the yen in 1995 as a result of persistent U.S. trade deficits with Japan. The strength of the yen triggered joint purchases of greenbacks by the Bank of Japan and the Federal Reserve that year to weaken the Asian currency.

The last intervention took place on March 16, 2004 when the Bank of Japan sold 67.8 billion yen ($782 million) for dollars, according Derek Halpenny, European head of currency strategy at Bank of Tokyo-Mitsubishi UFJ Ltd.

“I am watching these movements, right now it’s time to watch them closely,” Hirohisa Fujii told reporters in Tokyo today. “We need to take appropriate action against abnormal movements.”

Recent currency moves reflect weakness in the dollar, Reuters quoted Vice Finance Minister Noda as also saying today. Chief Cabinet Secretary Hirofumi Hirano later said the government is watching currency moves closely.

‘Door Ajar’

“It is clear that the government is leaving the door ajar on the option of intervention,” Halpenny wrote. “The key justification for intervention is of course now present.”

The Swiss franc climbed to parity with the U.S. dollar yesterday for the first time in 19 months. The Swiss National Bank declined to comment on the franc’s drop today, SNB spokesman Werner Abegg said. The Bank for International Settlements also wouldn’t comment.

“Our traders are confident that the SNB was in the market to sell the franc,” said Kasper Kirkegaard, an analyst in Copenhagen at Danske Bank A/S, the Nordic region’s second- largest lender. “It fits well with the level of the franc and even more important with the pace of the decline.”

Fed officials said in minutes of their Nov. 3-4 meeting released on Nov. 24 that the dollar’s decline has been “orderly” and that they would watch for any signs that the depreciation is pushing up people’s expectations for inflation.

‘Gradual Decline’

Eisuke Sakakibara, formerly Japan’s head foreign-exchange official, said yesterday in a CNBC interview that the U.S. dollar may fall as low as 85 yen and the Japanese government might consider intervention at this amount.

Sakakibara told the financial-news channel he thought U.S. Treasury Secretary Timothy Geithner wants a “gradual decline” of the dollar to correct large trade imbalances, and wouldn’t be inclined to intervene now.

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.

Japan’s government needed to take steps to prevent a strengthening yen from damaging the country’s economy, the head of a steel industry group said.

Yen ‘Problem’

The current level of the yen was a “problem” for steel mills and their customers, Japan Iron & Steel Federation Chairman Shoji Muneoka said today at a press briefing. He is also the president of Tokyo-based Nippon Steel Corp., Japan’s largest mill.

“As long as export volumes are expanding, the most recent appreciation of the yen won’t send the Japanese economy back into a serious recession,” said Taro Saito, senior economist in Tokyo at NLI Research Institute Ltd.

Demand for the yen also increased as dollar loans remained cheaper than those in the Japanese currency.

Three-month yen London interbank offered rates, or Libor, stood at 0.301 percent yesterday, higher than the 0.256 percent rate for dollar loans, according to British Bankers’ Association data. Dollar loans became cheaper than those in yen for the first time in August.

Treasury Yields

“Recent declines in Treasury yields are also lending additional impetus for the weakness of the dollar against the yen,” said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo.

Ten-year Treasury yields fell three basis points yesterday to 3.26 percent, the lowest since Oct. 9.

The euro retreated from near a 15-month high against the dollar as the European currency’s 14-day stochastic oscillator rose to 97 yesterday, above the 80 level some traders use to signal that an asset has risen too quickly and is poised to fall.

“The euro has definitely been overbought on the charts,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “This is a technical-related reason for the euro to be sold.”

Vietnam’s dong fell to a record low after the central bank devalued the currency to curb quickening inflation and a widening trade deficit. Stocks dropped and headed for the worst week since October 2008.

The State Bank of Vietnam yesterday set the reference rate for today’s trading 5.2 percent lower at 17,961 against the dollar, after the difference between spot and black-market rates widened to the most in a decade. The dong has fallen 5.4 percent this year, set for a second annual decline.

The dong declined 3.3 percent to 18,488 against the dollar as of 3:41 p.m. in Hanoi, according to data compiled by Bloomberg. It earlier traded as low as 18,500, 3 percent weaker than the reference rate.

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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Record Gold Cools Wedding Season Demand in India

By Thomas Kutty Abraham

Nov. 26 (Bloomberg) -- Gold imports by India, the biggest buyer, slumped for the seventh month as jewelers and housewives shunned bullion because of record prices, a traders’ group said.

Purchases so far this month totaled about 18 tons compared with 34 tons a year ago, said Suresh Hundia, president of the Bombay Bullion Association Ltd., citing preliminary data.

Gold prices reached a record for a third time this week as a weaker dollar increased the metal’s appeal as an alternative investment and central banks from India and Sri Lanka purchased bullion as a hedge against the U.S. currency. There may be 1.2 million marriages in India between now and Dec. 12, Hundia said.

“Demand in India is nil when it should have been at its peak because of marriages,” he said by phone.

December-delivery futures on the Multi Commodity Exchange of India climbed to a record 17,868 rupees ($386) per 10 grams today and traded at 17,783 rupees at 6:40 p.m. local time. The price must drop to 16,000 rupees to lure buyers, Hundia said.

Global gold consumption was 34 percent lower in the third quarter compared with a year ago, when investors bought bullion as a haven from the economic crisis, the World Gold Council said Nov. 19. It was 10 percent higher at 800.3 tons in the July-to- September period as Chinese demand reached 120.2 tons.

Demand in India advanced 26 percent to 137.6 tons in the quarter ended September compared with the previous three months, while jewelry consumption climbed 27 percent to 111.6 tons from the second quarter, the council said.

Wedding Season

Sales in the wedding season, which runs from September to January, may stay weak as buyers are “yet to digest” the 50 percent jump in prices in the past six months, Harmesh Arora, director of NIBR Bullion Ltd. and vice president of the bullion association, said in a phone interview.

Bullion has gained 34 percent this year as investors seek a hedge against inflation and a weakening U.S. dollar. The price may drop to $1,120 an ounce and a breach of that support level may see gold heading to $1,088, he said.

“A correction is round the corner and may start as early as next week,” Hundia said.

Gold for immediate delivery fell 0.7 percent to $1,183.15 an ounce at 6:41 p.m. Mumbai time. The metal, which moves inversely to the dollar, climbed as high as $1,195.13 after the dollar fell to a 15-month low.

India’s central bank may add to its purchases of gold, the Financial Chronicle reported yesterday. The bank bought 200 tons for $6.7 billion from the International Monetary Fund.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net

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Asian Stocks Fall on Capital-Raising Concerns, Dollar Decline

By Shani Raja

Nov. 26 (Bloomberg) -- Asian stocks fell, led by banks and Japanese automakers, amid capital-raising concerns and as the dollar slumped to a 14-year low against the yen.

Bank of China Ltd., which this week said it’s studying options for replenishing capital, lost 2.9 percent in Hong Kong. Asahi Glass Co. slumped 7.9 percent on plans to sell convertible bonds. Investment group PT Bakrie & Brothers, which said two days ago it will sell bonds, sank 8 percent in Jakarta. Honda Motor Co. lost 1.1 percent on concern the stronger yen will hurt the value of U.S. revenue.

The MSCI Asia Pacific Index slipped 0.6 percent to 117.59 as of 7:54 p.m. in Tokyo, with about two stocks declining for each one that rose. The gauge, which swung between gains and losses at least 18 times, has climbed 67 percent from a more than five-year low on March 9 amid signs government stimulus measures were reviving economies around the world.

“Markets tend to consolidate after a very strong performance,” said Paul Xiradis, who manages $10 billion at Ausbil Dexia Ltd. in Sydney. “It’s a bit of a patience game from here. What we want to see is ongoing confirmation that things are improving, and then that being translated into improved earnings.”

Japan’s Nikkei 225 Stock Average fell 0.6 percent as Finance Minister Hirohisa Fujii said the government needs to take action on abnormal currency movements. The yen strengthened today to 86.30 per dollar, the highest since July 1995.

Lower Confidence

China’s Shanghai Composite Index sank 3.6 percent, while Hong Kong’s Hang Seng Index fell 1.8 percent. China Minsheng Banking Corp. lost 3.1 percent on its debut in Hong Kong after raising HK$30.1 billion ($3.88 billion) in the city’s biggest public share sale since April 2007.

South Korea’s Kospi Index fell 0.8 percent as a central bank survey showed manufacturers’ confidence slipped to the lowest level in four months. Australia’s S&P/ASX 200 Index declined 0.3 percent. Among stocks that gained, BHP Billiton Ltd., the world’s largest mining company, added 1.5 percent in Sydney as copper prices climbed in New York.

Futures on the U.S. Standard & Poor’s 500 Index lost 1.4 percent. U.S. markets are closed today for Thanksgiving. The S&P 500 added 0.5 percent yesterday as reports on new home sales, jobless claims and consumers spurred optimism the economic recovery is strengthening.

The MSCI Asia Pacific Index has gained 31 percent this year, more than the S&P 500’s 23 percent rise, amid confidence Asian growth will outpace the rest of the world. Shares in the MSCI gauge trade at 1.5 times book value, rising from 1.03 at the gauge’s low this year on March 9, according to data compiled by Bloomberg.

Capital Concerns

Bank of China lost 2.9 percent to HK$4.35, while China Construction Bank Corp., the nation’s No. 2 bank by market value, declined 3.6 percent to HK$6.89. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market capitalization, slid 2.8 percent to HK$6.61.

China’s five largest banks have submitted preliminary plans for boosting capital to the country’s banking regulator, people familiar with the matter said this week.

“It’s not surprising that the authorities in China are wanting to make sure that the loans go to the right places and banks are not becoming too stretched,” Geoff Lewis, Hong Kong- based head of investment services at JPMorgan Asset Management, told Bloomberg Television today. “We might see some gradual measures to withdraw some liquidity.”

China’s excess industrial capacity is “wreaking far- reaching damage on the global economy,” stoking trade tensions and raising the risk of bad loans, the European Union Chamber of Commerce in China said.

Minsheng Bank

Minsheng Bank, the nation’s first privately owned lender, fell 3.1 percent to HK$8.80, becoming the first Chinese bank in four years to fall on its Hong Kong trading debut.

Asahi Glass, Japan’s biggest glass producer, slumped 7.9 percent to 739 yen. The stock posted the largest drop on the MSCI Asia Pacific Index after the company filed to sell as much as 100 billion yen ($1.1 billion) of convertible bonds for investments and to repay maturing debt.

Bakrie sank 8 percent to 92 rupiah. The company said on Nov. 24 that it plans to raise as much as $250 million of bonds by January to help fund expansion and refinance debt. The Jakarta Composite Index slipped 2.8 percent to 2,393.52.

PT Energi Mega Persada, a Bakrie affiliate, slumped 6.4 percent to 220 rupiah after saying yesterday it plans to raise 4.8 trillion rupiah ($509 million) in a rights offer in January.

“The market is confused with the massive fundraising by the group,” Sunny Yoon, president director of PT Citigroup Indonesia said in Jakarta today. “When will it end?”

Japan Exporters Fall

Honda lost 1.1 percent to 2,765 yen and Isuzu Motors Ltd. slumped 4.7 percent to 142 yen as the dollar extended its seven- month decline against the Japanese currency. Sony Corp., the maker of the PlayStation 3 game machine, retreated 1.9 percent to 2,370 yen.

BHP added 1.5 percent to A$41.80. Oil and metals prices advanced as the weaker dollar boosted the appeal of commodities as an alternative investment. Crude oil futures in New York rose 2.6 percent to $77.96 a barrel yesterday, the highest settlement since Nov. 18, while copper futures gained 1.7 percent.

Newcrest Mining Ltd. surged 2.8 percent to A$38, as gold climbed to a record for the third time this week. Rival St. Barbara Ltd. jumped 4.4 percent to 35.5 Australian cents.

Commodity-related shares are the MSCI Asia Pacific Index’s best performers this year on speculation the revival in global growth will fuel demand for raw materials. The Organization for Economic Cooperation and Development on Nov. 19 raised its forecast for growth in the leading developed economies next year to 1.9 percent from 0.7 percent previously, as China powers a global recovery.

Taiwan Economy

Data from Taiwan’s statistics bureau today showed the island’s economy shrank 1.29 percent in the third quarter, less than economists estimated, amid rising Chinese demand for electronics.

In Seoul, Samsung C&T Corp., South Korea’s second-biggest builder, slumped 6.5 percent to 47,300 won as state-run Dubai World, with $59 billion of liabilities, sought to delay debt payments. Samsung C&T won a $350 million bridge contract from a Dubai World unit in April 2007.

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

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U.K. Stocks Drop; LSE, Anglo American, Legal & General Decline

By Adam Haigh

Nov. 26 (Bloomberg) -- U.K. stocks declined the most this month as Dubai’s proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.

London Stock Exchange Group Plc slid 4.6 percent. Borse Dubai Ltd. is the largest shareholder in the exchange operator. Anglo American Plc and Rio Tinto Group led mining companies lower as copper fell in London. Legal & General Group Plc, the U.K.’s second-biggest insurer by assets, slid 3 percent as Citigroup Inc. advised selling the shares.

The benchmark FTSE 100 Index lost 92.6, or 1.7 percent, to 5,272.2 as of 9:39 a.m. in London. The gauge has soared 50 percent since March 3 amid government stimulus programs and record low-interest rates. The FTSE All-Share Index slid 1.7 percent today and Ireland’s ISEQ Index dropped 1.7 percent. The volume of shares traded may be lower than normal today as U.S. exchanges are closed for the Thanksgiving holiday.

“This is not the end of the world for Dubai but it is a hammer blow,” said David Buik, a markets analyst at inter- dealer broker BGC Partners.

The cost of protecting government notes from Qatar to Saudi Arabia rose the most since June yesterday as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors.

London Stock Exchange slid 4.6 percent to 777 pence. Dubai has a stake of almost 21 percent in the company, according to Bloomberg data. Barclays Plc slid 4 percent to 303.8 pence. The Qatar Investment Authority owns more than 7 percent of the U.K.’s second-largest bank, according to Bloomberg data.

Anglo American Retreats

Anglo American dropped 1.3 percent to 2,653 pence. Rio Tinto, the third largest mining company, lost 1.6 percent to 3,095 pence. Copper declined as much as 0.5 percent in London and nickel, tin and zinc dropped.

Legal & General lost 3 percent to 82.25 pence. Citigroup cut its recommendation on the shares to “sell” from “hold,” citing “business model challenges.”

Mitchells & Butlers Plc rallied 3.9 percent to 266.9 pence. The U.K. owner of All Bar One and Toby Carvery pubs posted a full-year profit after a year-earlier loss as the company saw smaller declines in property values.

Severn Trent Plc, the U.K.’s second-largest water company, led gains in U.K. water utilities after industry regulator Ofwat said it would reduce household bills by less than previously estimated over the next five years. Severn Trent gained 3.7 percent to 1,043 pence, Pennon Group Plc advanced 2.2 percent to 497.7 pence and Northumbrian Water Group Plc climbed 5.5 percent to 270 pence.

Thomas Cook Group Plc added 1.3 percent to 211.2 pence. JPMorgan Cazenove Ltd. raised the shares to “outperform” from “in-line.”

To contact the reporter on this story: To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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European Stocks Slump on Dubai; LSE, Saint-Gobain Lead Retreat

By Adria Cimino

Nov. 26 (Bloomberg) -- European stocks slumped the most in almost two months amid concern Dubai’s proposal to delay debt payments may trigger the biggest sovereign default since Argentina in 2001. Asian shares fell.

London Stock Exchange Group Plc, whose largest shareholder is Borse Dubai Ltd., dropped the most in three months. Cie. de Saint-Gobain SA, Europe’s biggest supplier of building materials, slipped 3.4 percent after Goldman Sachs Group Inc. recommended selling the shares. Bank of China Ltd., which this week said it’s studying options for replenishing capital, lost 2.9 percent in Hong Kong.

Europe’s Dow Jones Stoxx 600 Index retreated 2.2 percent to 242.56 at 9:40 a.m. in London, the steepest intraday drop since Oct. 2. The measure plunged 44 percent in the six months after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008 froze credit markets and worsened the first global recession since World War II.

“The specter of financing difficulties is resurging,” said Alexandre Iatrides, a fund manager at KBL Richelieu in Paris, which oversees about $3 billion. The news from Dubai “is resurfacing worries that we had put aside. This could be the new Lehman.”

The cost of protecting government notes from Qatar to Saudi Arabia rose the most since June yesterday as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. The sheikhdom, ruled by Sheikh Mohammed Bin Rashid Al Maktoum, borrowed $80 billion in a four-year construction boom that reduced its reliance on falling oil supplies and created the region’s tourism and financial hub.

Asian Stocks

The MSCI Asia Pacific Index slid 0.6 percent as China’s Shanghai Composite Index sank 3.6 percent.

Bank of China, the nation’s third-biggest lender by market value, lost 2.9 percent to HK$4.35. China’s five largest banks have submitted preliminary plans for boosting capital to the country’s banking regulator, people familiar with the matter said this week.

The U.S. market is closed today for the Thanksgiving holiday. Futures on the Standard & Poor’s 500 Index expiring next month fell 0.9 percent.

The Stoxx 600 has rallied 54 percent since March 9, pushing its valuation to more than 57 times the reported earnings of its companies, the highest level in six years.

“The market is fully priced and won’t climb much higher,” said Guillaume Chaloin, a fund manager at Meeschaert Asset Management in Paris, which oversees $3 billion. “No one is inclined to be aggressive on stocks today.”

LSE Drops

LSE, Europe’s biggest exchange by value of listed companies, sank 4.6 percent to 777 pence, heading for the steepest decline since August. Borse Dubai is LSE’s largest shareholder, according to Bloomberg data.

Saint-Gobain declined 3.9 percent to 36.78 euros. Goldman Sachs cut its recommendation on the shares to “sell” from “neutral,” saying “there is limited scope for earnings driven outperformance.”

Porsche Automobil Holding SE tumbled 6.6 percent to 45.84 euros as UniCredit SpA and Equinet downgraded the shares. The maker of the 911 sports car was cut to “hold” from “buy” at UniCredit and to “reduce” from “buy” at Equinet.

Legal & General Group Plc sank 4 percent to 81.4 pence. The U.K.’s second-biggest insurer by assets was cut to “sell” from “hold” at Citigroup Inc., which cited “business model challenges.”

DSG International Plc gained 2.5 percent to 37.47 pence. The U.K.’s largest consumer-electronics retailer reported a smaller first-half loss as sales were boosted by refurbished stores and rising consumer confidence at home and in the Nordic countries.

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

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