India’s 7.9% Growth May Force Subbarao to ‘Sit Up’

By Cherian Thomas and Kartik Goyal

Dec. 1 (Bloomberg) -- India’s central bank may withdraw more stimulus measures by the end of the year after Asia’s third-biggest economy grew at the fastest pace in six quarters.

“The chances of a rate move before the end of December have risen,” said Robert Prior-Wandesforde, senior Asia economist at HSBC Holdings Plc in Singapore. Economic growth of 7.9 percent last quarter was an “extraordinary” number that “will no doubt make the Reserve Bank of India sit up and take notice,” he said.

Governor Duvvuri Subbarao, concerned about inflation gaining traction, last week indicated that there was a need to exit some of the “unconventional” measures used to spur growth. Australia and Vietnam have already begun to tighten monetary policy as the Asia Pacific region leads the world out of the worst recession since the 1930s.

India’s $1.2 trillion economy may grow about 7 percent in the year to March 31, Finance Minister Pranab Mukherjee said in New Delhi yesterday after the statistics bureau released gross domestic product figures for the quarter ended Sept 30. Last quarter’s growth beat the estimates of all 22 economists in a Bloomberg survey. Subbarao in October predicted growth this fiscal year of 6 percent “with an upward bias.”

The benchmark Sensitive index gained 1.8 percent to 16,926.22 yesterday after the GDP report and the rupee increased 0.3 percent to 46.5157 per dollar. The yield on the benchmark 10-year government bond rose 7 basis points to 7.26 percent.

Australia, Vietnam

India’s one-year swap rate rose 1.5 basis points to 4.615 percent at 8:24 a.m. in Singapore, after an 8.5 basis point increase yesterday. In such contracts a fixed-rate payment is swapped for a floating one.

Australia’s central bank may increase its benchmark interest rate by a quarter point today for a record third straight month as evidence mounts that the nation’s economy is strengthening, economists said. Vietnam raised its key rate by one percentage point to 8 percent last week to curb inflation.

Growth in India is benefiting from record-low interest rates, tax cuts and higher government spending unveiled by policy makers since September 2008 to shield the economy from the global slump. The combined stimulus is worth more than 12 percent of GDP.

While Subbarao started to withdraw monetary stimulus in October by ordering lenders to keep aside a greater proportion of deposits in government bonds, he has kept the benchmark reverse repurchase rate unchanged at 3.25 percent since April.

Weak Monsoon

Inflation pressures are building as growth quickens and after the weakest monsoon rains since 1972 hurt farm output, pushing up food costs. The central bank forecasts inflation of 6.5 percent by March 31 from 1.34 percent in October and 0.5 percent in September.

Macquarie Group Ltd. economist Rajeev Malik expects Subbarao to raise the cash reserve ratio, or the proportion of deposits lenders keep with the central bank as cash reserves, as early as this month before increasing interest rates.

Mukherjee said last month he will take “corrective” steps and pull back fiscal stimulus once economic recovery takes hold.

That stage may not have been reached, as the central bank deputy governor Subir Gokarn yesterday said the unexpected increase in India’s economic growth may be on account of the government stimulus and that its “premature” to say the economy can grow 7 percent in the current financial year.

Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, the government’s economic advisory arm, said the growth numbers suggest that policies are working and that there is no need to change them at present. Inflation is not a “big problem” at the moment, he said yesterday.

Withdrawing Liquidity

“We are still about two quarters away from rate hikes per se but the central bank might start withdrawing liquidity through an increase in its regulatory reserve requirements,” said Gaurav Kapur, an economist at ABN Amro Bank in Mumbai. “While there is some improvement in private consumption, investment activity still remains a laggard.”

Companies including JSW Steel Ltd., India’s third-largest producer, said it is “not very clear” whether the economy would expand at the same pace in the current quarter. Growth in the construction and real estate business has been subdued since October, JSW’s Chief Financial Officer Seshagiri Rao said yesterday.

Still, the economic expansion in India is the fastest after China among the world’s biggest economies, attracting investments from French tire maker Michelin & Cie and South Korea’s Samsung Electronics Co. China’s economy grew 8.9 percent last quarter.

Michelin said this month it plans to invest 40 billion rupees ($860 million) in a new factory in the southern Indian state of Tamil Nadu. Samsung on Nov. 17 inaugurated an air- conditioner manufacturing unit in India, its fifth such facility in the world.

“The pace of recovery is stronger than expected,” said Chetan Ahya, regional economist at Morgan Stanley in Singapore. “We maintain our view that the central bank will lift policy rates by 25 basis points in January, 2010.”

To contact the reporter on this story: Cherian Thomas in New Delhi at Cthomas1@bloomberg.net.

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South Korean Exports Rise for First Time in 13 Months

By Seyoon Kim

Dec. 1 (Bloomberg) -- South Korea’s exports rose for the first time in 13 months in November as demand for the nation’s semiconductors, display panels and auto parts increased.

Overseasshipments gained 18.8 percent from a year earlier to $34.3 billion, the Ministry of Knowledge Economy said today in Gwacheon. The median estimate of 12 economists surveyed by Bloomberg News was for a 22.8 percent increase. Imports rose 4.7 percent to $30.2 billion for a trade surplus of $4 billion.

A recovery in overseas shipments, which make up more than half of the economy, helped gross domestic product expand 2.9 percent in the third quarter, the fastest pace in seven years. South Korea’s exports in November 2008 recorded their biggest fall of the year as the financial crisis savaged demand, making a low base for comparison.

“Exports rebounded thanks to a base effect from last year and also on rising overseas orders,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul. “Exports are likely to be on the rise in coming months, supporting economic growth in South Korea.”

Companies including Samsung Electronics Co. reported surging profits, and Hyundai Motor Co. and affiliate Kia Motors Corp. expect their combined sales in China to surge 83 percent this year to 800,000 units.

The benchmark Kospi stock index rose 0.3 percent to 1,559.42 in Seoul while the won was little changed at 1,163.70 against the dollar.

Exports in 2010

South Korean exports will increase 13 percent to $410 billion next year, boosted by demand for semiconductors, cars and display panels, the government said yesterday. Imports will rise 21 percent to $390 billion for a trade surplus of about $20 billion, half of this year’s estimate of a record $40 billion, it said.

Exports are likely to total about $34 billion in December, resulting in a trade surplus of about $3 billion to $4 billion, Deputy Minister for Trade and Investment Policy Lee Dong Geun told reporters in Gwacheon today.

Exports to China, the biggest buyer of South Korean goods, surged 52.2 percent in the first 20 days of November. Shipments to the U.S. rose 6.1 percent, the ministry said. Shipments to Japan climbed 11.2 percent over the same period.

China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third- biggest economy, a report showed today. Economic growth in China accelerated to 8.9 percent last quarter, the fastest pace in a year.

Shipments of semiconductors jumped 80.7 percent last month while display panel exports rose 66.8 percent, the government said. Auto parts exports gained 50.7 percent.

South Korean President Lee Myung Bak said Nov. 28 he expects GDP to expand about 5 percent next year. The Organization for Economic Cooperation and Development said last month Asia’s fourth-largest economy will expand 0.1 percent this year and 4.4 percent in 2010.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net.

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Crude Oil Rises for a Second Day as Chinese Manufacturing Grows

By Grant Smith

Dec. 1 (Bloomberg) -- Crude oil rose for a second day after a report showed Chinese manufacturing expanded at the fastest pace in five years, spurring hopes that the world’s second- biggest oil user will buoy consumption of the fuel.

Oil advanced in tandem with equities, and as a weaker dollar enhanced the appeal of commodities for hedging inflation. The purchasing managers’ index for China, released today by HSBC Holdings Plc, rose to a seasonally adjusted 55.7 from 55.4. The government’s PMI, also released today, held at an 18-month high, aiding the rebound of the world’s third-largest economy.

“Chinese oil demand should increase by 5 percent this year, 4 percent next year,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “While the rate of growth is slowing down a bit, it means there is still growth there in one of the most important regions.”

Oil for January delivery gained as much as 66 cents, or 0.9 percent, to $77.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $77.81 a barrel at 9:55 a.m. London time.

Oil traded near $78 a barrel on Nov. 25 before Dubai World, one of the emirate’s three largest state-linked holding companies, sought to delay payments on its debt and other liabilities. The company has since begun what it described as “constructive” talks with banks to restructure $26 billion, less than half of its $59 billion in obligations.

‘China Busy’

“Dubai is being resolved and China is as busy as ever,” said Rob Montefusco, a broker at Sucden Financial in London. “The market is coming back quickly after finding support at $75.”

Iranian Oil Minister Masoud Mir-Kazemi said the Organization of Petroleum Exporting Countries won’t increase production targets when it meets later this month, Agence France-Presse reported.

The 12 OPEC states will assemble in Luanda, Angola, on Dec. 22 to review their output targets and the impact of supply reductions announced last year, the largest in the group’s history. Ministers from Kuwait and Nigeria have also indicated they expect quotas to be left unchanged.

Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $78.99 a barrel, up 52 cents, at 9:56 a.m. in London. Yesterday, the contract rose 1.7 percent to $78.47 barrel, the highest since Nov. 18.

The U.S. currency weakened to $1.507 per euro from $1.4976 yesterday, making dollar-priced assets such as crude appear less expensive to foreign investors, and more useful for hedging against inflation.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

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Manufacturing in U.S. Probably Grew for Fourth Straight Month

By Bob Willis

Dec. 1 (Bloomberg) -- Manufacturing in the U.S. probably expanded in November for a fourth consecutive month, putting factories at the forefront of the recovery, economists said before reports today.

The Institute for Supply Management’s manufacturing index fell to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News. Other reports may show pending sales of existing homes and construction spending declined in October.

Growing exports and lean inventories may keep manufacturing growing into 2010, helping drive the economic expansion. Factory production, which rose at the fastest pace in a quarter century in the three months through September, will probably climb at a slower pace in coming months as mounting unemployment restrains American consumers.

October was “strong by historical standards,” said Michael Moran, chief economist at Daiwa Securities USA Inc. in New York. “Such results seem out of line with the moderate pace of growth in the economy and corrections are likely to unfold.”

The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Forecasts ranged from 53.5 to 57. Fifty is the dividing line between expansion and contraction. Manufacturing accounts for about 12 percent of the economy.

Factory output increased 3.4 percent from July through September, the biggest three-month gain since 1984, according to figures from the Federal Reserve.

Government Help

Government-assisted rebounds in housing and auto-making, two of the most depressed areas during the recession, contributed to the initial burst of activity. Reports today may show those areas are now stabilizing.

Pending homes sales fell 1 percent in October, the first decrease in nine months, according to the survey median ahead of a report from the National Association of Realtors at 10 a.m. in Washington. Cars and light trucks probably sold at a 10.5 million annual pace last month, little changed from October, industry figures may show.

President Barack Obama last month signed legislation extending a first-time homebuyers credit through April, and expanded it to include to current owners. The $8,000 tax credit gave home sales and construction a lift for much of this year.

Also at 10 a.m., a Commerce Department report may show spending on construction projects fell 0.5 in October after rising 0.8 percent a month earlier, according to the survey median.

Rising Stocks

The Standard & Poor’s 500 Index gained 5.7 percent in November, capping a 62 percent increase since it reached a 12- year low March 9, on prospects the economy was recovering.

Other manufacturing surveys have shown improvement. The Institute for Supply Management-Chicago Inc.’s business barometer rose in November to 56.1, its highest level since August 2008, the group said yesterday. Gains in the gauges for new orders and backlogs signaled the recovery will persist.

Regional Fed Bank reports last month showed manufacturing in the New York district expanded in November for a fourth month and grew in the Philadelphia region at the fastest pace in more than two years.

General Motors Co. is among auto companies leading the rebound in output after emerging from bankruptcy. Sales are now stabilizing after slumping in September following the expiration of the government’s “cash-for-clunkers” incentives.

Auto Sales

“The encouraging thing for the industry and for GM is that this is being accomplished now without either ‘cash for clunkers’ or any federal stimulus,” Michael DiGiovanni, GM’s sales analyst, said on a conference call on Nov. 19. “Our sales appear to be right on target.”

Economists surveyed by Bloomberg at the beginning of November forecast the economy would grow at a 3 percent pace in the last three months of the year, following a 2.8 percent pace in the third quarter.

A rebound in global growth and a 16 percent drop in the dollar since March against a basket of six major trading partners is helping spur demand from abroad. Exports climbed 9.4 percent in the five months through September, the biggest such gain since comparable records began in 1992, according to figures from the Commerce Department.

                        Bloomberg Survey

===============================================================
                              ISM      ISM  Construct  Pending
                             Manu   Prices  Spending    Homes
                            Index    Index     MOM%     MOM%
===============================================================
Date of Release              12/01    12/01    12/01    12/01
Observation Period            Nov.     Nov.     Oct.     Oct.
---------------------------------------------------------------
Median                        55.0     65.0    -0.5%    -1.0%
Average                       54.9     64.6    -0.5%    -0.8%
High Forecast                 57.0     67.0     0.5%     6.5%
Low Forecast                  53.5     60.0    -2.8%    -5.0%
Number of Participants          72       17       49       35
Previous                      55.7     65.0     0.8%     6.1%
---------------------------------------------------------------
4CAST Ltd.                    54.5     ---     -0.6%     2.5%
Action Economics              55.0     66.0    -0.8%     0.0%
Aletti Gestielle SGR          55.2     63.0     ---      ---
Ameriprise Financial Inc      54.5     60.0    -0.6%    -3.7%
Bank of Tokyo- Mitsubishi     54.7     ---     -0.6%     ---
Bantleon Bank AG              56.0     ---      ---      ---
Barclays Capital              56.0     ---     -0.2%    -3.0%
Bayerische Landesbank         54.4     ---      ---      ---
BBVA                          55.8     65.5    -0.5%     1.0%
BMO Capital Markets           55.0     65.0     0.0%    -1.0%
BNP Paribas                   56.0     ---      0.2%     ---
BofA Merrill Lynch Resear     55.0     ---      0.3%     ---
Briefing.com                  54.0     ---     -0.7%    -3.0%
C I T I C Securities          55.0     ---      ---      ---
Calyon                        54.8     ---      ---      ---
Capital Economics             56.0     ---     -0.5%    -5.0%
CIBC World Markets            55.0     ---      ---      ---
Citi                          54.0     65.0    -0.6%     ---
ClearView Economics           56.2     67.0     0.3%     6.5%
Commerzbank AG                55.5     ---      ---     -2.0%
Credit Suisse                 56.0     63.0    -1.0%     ---
Daiwa Securities America      54.0     65.0    -1.5%     ---
Danske Bank                   55.7     ---      ---      ---
DekaBank                      54.8     ---     -0.6%    -2.0%
Desjardins Group              54.0     ---     -0.5%     ---
Deutsche Bank Securities      54.5     ---      0.5%     3.0%
Deutsche Postbank AG          54.8     ---      ---      ---
DZ Bank                       55.3     ---      ---      2.0%
First Trust Advisors          54.7     ---     -0.2%     ---
Fortis                        55.5     ---      ---      2.5%
FTN Financial                 54.0     ---      ---      ---
Goldman, Sachs & Co.          55.0     ---     -0.6%     ---
Helaba                        54.8     ---      ---      ---
Herrmann Forecasting          55.9     63.6    -0.3%     1.2%
High Frequency Economics      57.0     ---     -1.0%    -5.0%
IDEAglobal                    56.0     66.0    -0.4%    -0.5%
IHS Global Insight            53.5     ---     -0.4%     ---
Informa Global Markets        53.5     ---     -2.8%    -1.0%
ING Financial Markets         54.6     65.0    -0.4%    -3.0%
Insight Economics             55.0     ---      0.3%    -2.0%
Intesa-SanPaulo               54.7     ---     -0.6%     ---
J.P. Morgan Chase             53.5     ---     -0.5%    -1.0%
Janney Montgomery Scott L     54.0     ---     -0.4%    -0.2%
Jefferies & Co.               54.0     ---     -0.7%     ---
Johnson Illington Advisor     54.0     ---      ---      ---
Landesbank Berlin             54.5     ---     -1.2%     ---
Landesbank BW                 54.5     ---     -0.5%     ---
MFC Global Investment Man     56.0     66.0    -0.3%     ---
Moody’s Economy.com           54.1     ---     -0.5%    -3.0%
Morgan Keegan & Co.           ---      ---     -0.4%     ---
Morgan Stanley & Co.          55.0     ---     -0.3%     ---
National Bank Financial       55.5     ---      ---      ---
Natixis                       55.2     ---      ---     -3.0%
Nomura Securities Intl.       54.5     63.0     ---      ---
PNC Bank                      56.0     ---      0.0%     ---
Prestige Economics            56.0     ---      ---      ---
Raiffeisen Zentralbank        56.0     67.0     ---      3.0%
Raymond James                 54.6     ---     -1.0%     ---
RBC Capital Markets           54.6     ---      ---      ---
Ried, Thunberg & Co.          55.0     ---     -0.8%    -1.0%
Schneider Foreign Exchang     54.0     63.0     0.3%    -0.9%
Societe Generale              55.0     ---      ---     -4.0%
Standard Chartered            55.0     ---      ---      0.4%
Stone & McCarthy Research     53.8     ---     -0.6%     ---
TD Securities                 54.0     ---      ---     -2.0%
Thomson Reuters/IFR           55.0     ---     -0.4%     2.0%
UBS                           55.0     ---      0.0%    -2.5%
UniCredit Research            54.0     ---      ---      ---
University of Maryland        55.0     65.8    -0.4%     0.5%
Wells Fargo & Co.             53.6     ---     -0.2%     ---
WestLB AG                     55.0     ---     -0.4%     ---
Westpac Banking Co.           54.0     ---     -1.2%    -4.0%
Wrightson Associates          55.0     ---     -0.8%    -1.0%
===============================================================

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

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Pound Rises Versus Dollar as Home Prices Gain for Seventh Month

By Beth Mellor

Dec. 1 (Bloomberg) -- The pound advanced against the dollar after a report showed U.K. house prices rose for a seventh month in November.

Sterling snapped three days of losses against the U.S. currency after Nationwide Building Society said the average cost of a home increased 0.5 percent to 162,764 pounds ($266,916). The pound was little changed against the euro as an index compiled by the Chartered Institute of Purchasing and Supply and Markit Economics showed U.K. manufacturing expanded last month less than economists predicted. The pound slipped 0.1 percent against the U.S. currency in November.

“Economic data could come to the pound’s rescue, but we are not holding our breath,” Steven Barrow, head of group of 10 currency strategy at Standard Bank Plc in London, wrote in a research report today.

The U.K. currency rose to $1.6507 as of 9:40 a.m. in London, from $1.6440 yesterday. It was little changed at 91.26 pence per euro.

Gains by the pound may be limited amid a slower recovery in the U.K. than in the rest of Europe and the U.S. While the 16-nation euro region and the U.S. exited recession, U.K. gross domestic product dropped in the third quarter.

The U.K. is “likely to limp out of recession, certainly relative to its global peers,” Morgan Stanley strategists Graham Secker and Catharina Luebke-Detring wrote in a note to clients dated yesterday. An indecisive U.K. election result next year may also weaken the pound, they said.

“At the current juncture a lack of leadership from the top could have severe ramifications for foreign-exchange and bond markets and could prompt a sharp drop in sterling,” the analysts wrote.

U.K. gilts fell, pushing the yield on the 10-year note up 2 points to 3.54 percent. The yield on the two-year note advanced 1 basis point to 1.18 percent.

To contact the reporters on this story: Beth Mellor in London at bmellor@bloomberg.net

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U.K. Vote Tie May Spur Sell-Off, Morgan Stanley Says

By Svenja O’Donnell

Dec. 1 (Bloomberg) -- An indecisive U.K. election result next year may prompt a sell-off in the British currency and bond markets, Morgan Stanley said.

A weak government, along with a record budget deficit and an uneven economic recovery, may lead investors to sell the pound and bonds, particularly if ratings companies cut the U.K.’s top debt rating, London-based equity strategists Graham Secker and Catharina Luebke-Detring said in a note yesterday.

“At the current juncture a lack of leadership from the top could have severe ramifications for foreign-exchange and bond markets, a sharp drop in sterling and rise in gilt yields,” Secker and Luebke-Detring said. “It is possible that we will see some U.K. corporate bond yields trade below gilt yields in 2010.”

Former U.K. finance minister Kenneth Clarke said last month that the opposition Conservatives, which have led in opinion polls, need to “work like mad” to avoid the prospect of a government which doesn’t win a majority of seats in Parliament. Britain’s next general election must happen by June 2010.

The Conservatives had support of 37 percent of voters, compared with 27 percent for the ruling Labour Party in a ComRes poll published in the Independent today. The result, if repeated in an election, would leave the Conservatives six lawmaker seats short of a majority, the newspaper said.

The pound rose 0.4 percent against the dollar today, and traded at $1.6454 as of 7:56 a.m. in London. The yield on the two-year U.K. government bond dropped three basis points to 1.163 percent.

Equity Forecast

The U.K. stock market may stagnate next year and the most likely scenario is the FTSE-100 Index slips to 5,000 from yesterday’s close of 5,191, Morgan Stanley said. There is a 30 percent chance that the index drops to 3,600 and a 30 percent probability that it jumps to 6,500, according to the bank.

U.K. growth prospects for the next five to 10 years are likely to be restrained, Morgan Stanley said, as the “NICE” decade of “Non-Inflationary Constant Expansion” described by Bank of England Governor Mervyn King gives way to a “GRIM” period where “Growth Really is Mediocre.”

“Grim is likely to be a fairly apt description of consumer sentiment as living standards are likely to fall,” the strategists said. The economy is likely to be hurt by a “weak” jobs market, “low” wage growth, higher taxes, faster inflation and a lack of credit, they said.

Morgan Stanley expects the British economy to expand 1.1 percent in 2010 and 1.6 percent in 2011, compared with rates of 1.9 percent and 2.1 percent in the U.S.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

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Dollar Declines Against Euro as China PMI, Dubai Boost Stocks

By Lukanyo Mnyanda and Yasuhiko Seki

Dec. 1 (Bloomberg) -- The dollar fell against high-yielding currencies after China’s manufacturing grew at the fastest pace in five years and Dubai said it’s in “constructive” talks with creditors, boosting stocks and paring demand for safety.

The dollar declined for a second day against the euro as the MSCI World Index of stocks jumped. Australia’s dollar rose against the U.S. currency after the South Pacific nation’s central bank raised the benchmark interest rate for a third straight month. The yen fell against all 16 most-traded peers amid speculation policy makers will try to limit its gains even after keeping rates unchanged at an emergency meeting.

“Stock markets are on a strong footing and we should see the euro and other currencies gain against the dollar,” said Roberto Mialich, a senior currency strategist in Milan at UniCredit SpA, Italy’s largest bank. “The dollar doesn’t have significant room for appreciation at the moment.”

The dollar weakened to $1.5069 against the euro as of 9:20 a.m. in London, from $1.5005 yesterday. The U.S. currency lost 1.9 percent versus the euro in November, its fifth consecutive monthly drop, the longest run of declines since December 2004. It climbed to 86.94 yen, from 86.41 yen. Japan’s currency weakened to 131.01 per euro, from 129.64.

Government-controlled Dubai World said it began talks with banks to restructure $26 billion of debt, including liabilities owed by units Nakheel World and Limitless World. The company is seeking to delay payments on less than half its $59 billion of obligations, damping concern that a potential default may set back the global financial system’s recovery from the credit crisis.

Stocks Climb

European stocks rose, following gains in Asian equity markets, with the Dow Jones Stoxx 600 Index climbing 2.1 percent. HSBC Holdings Plc’s purchasing managers’ index for China rose to a seasonally adjusted 55.7 last month, the highest reading since the survey’s first month in April 2004. The government’s PMI, also released today, was at an 18-month high.

The U.S. currency dropped the most against the New Zealand dollar before a report economists said will show manufacturing expanded in the U.S. German retail sales increased in October by more than analysts predicted, a separate report showed today.

The New Zealand dollar climbed 1.3 percent to 72.53 U.S. cents, adding to a 0.7 percent advance yesterday. It jumped 1.8 percent to 63.01 yen. Australia’s currency increased 0.7 percent to 92.26 U.S. cents and rose 1.3 percent to 80.19 yen.

Rate Increase

Reserve Bank of Australia Governor Glenn Stevens increased the overnight cash rate target to 3.75 percent from 3.5 percent, as forecast by 19 of 20 economists surveyed by Bloomberg News.

The Bank of Japan will provide three-month loans to commercial banks at an interest rate of 0.1 percent as it seeks to remedy falling prices and the currency’s surge to a 14-year high against the dollar.

Prime Minister Yukio Hatoyama’s government has stepped up calls on the Bank of Japan to prop up growth after saying on Nov. 20 that the economy was in deflation.

The central bank introduced quantitative easing steps in March 2001 before suspending them in March 2006.

Eisuke Sakakibara, formerly Japan’s top currency official, said today that quantitative easing by the Bank of Japan wouldn’t be effective in reinvigorating the economy.

Such measures would be “better than nothing, but the effectiveness would be very limited because there are no borrowers,” Sakakibara, now an economics professor at Waseda University, said today in an interview with Bloomberg News in Tokyo. “Liquidity in Japan is already abundant.”

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

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Commercial Mortgage Defaults in U.S. Bank Portfolios Reach 3.4%

By Hui-yong Yu

Dec. 1 (Bloomberg) -- The commercial mortgage default rate on loans held by U.S. banks more than doubled to 3.4 percent in the third quarter as vacancies rose and rents declined, Real Estate Econometrics LLC said.

Defaults climbed from 1.37 percent a year earlier and from 2.88 percent in the second quarter, the New York-based property research firm said today in a report. Default rates in the first three quarters of 2009 have been the highest since 1993, the firm said.

“Mortgages originated in 2006 and 2007 are experiencing the most significant shortfalls in current cash flow relative to current debt-service obligations,” Sam Chandan, chief economist of the firm, said in the report.

Sheila Bair, chairman of the Federal Deposit Insurance Corp., and Comptroller of the Currency John Dugan told Congress in October that souring commercial real estate loans pose the biggest threat to the U.S. banking industry. Non-performing commercial property loans caused a majority of bank failures this year, said Chip MacDonald, a partner specializing in financial services at Atlanta-based law firm Jones Day.

Federal Reserve Chairman Ben S. Bernanke said in a Nov. 16 speech that “the fallout” for banks from commercial real estate could slow the nation’s economic recovery.

Defaults on bank-owned commercial property mortgages posted the biggest quarterly jump from the previous quarter in six years of FDIC data analyzed by Real Estate Econometrics, the company said.

Lenders working with property owners may be able to keep the default rate to 4 percent for the fourth quarter, Chandan said.

The firm reduced its fourth-quarter default estimate from 4.1 percent, and pared back its forecast for 2010 to 5.2 percent from 5.3 percent. In 2011, Chandan estimates that 5.3 percent of bank-held commercial property loans will be in default, less than the 5.4 percent previously forecast.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net

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Crude Oil Trades Near $77 After Gaining on Easing Dubai Concern

By Yee Kai Pin

Dec. 1 (Bloomberg) -- Crude oil traded near $77 a barrel after rising yesterday as traders bought back futures contracts amid speculation credit losses in Dubai won’t derail the global economic recovery.

Oil advanced 1.6 percent yesterday after the Institute for Supply Management-Chicago Inc. said its business barometer climbed to 56.1, the highest level since August 2008. China’s manufacturing growth held at the fastest pace in 18 months in November, aiding the rebound of the world’s third-largest economy, according to a report today.

“The recovery in oil prices is due to people becoming less concerned about the implications of Dubai World-related issues on the international economy,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The calming of some of those concerns is likely to return the oil price to where it was.”

Crude oil for January delivery was at $77.19 a barrel, down 9 cents, in electronic trading on the New York Mercantile Exchange at 3:23 p.m. Singapore time. Yesterday, the contract increased $1.23 to settle at $77.28 a barrel. Futures have gained 73 percent this year after losing 54 percent in 2008.

Oil traded near $78 a barrel on Nov. 25 before Dubai World, one of the emirate’s three largest state-linked holding companies, sought to delay payments on its debt and other liabilities. The company has since begun what it described as “constructive” talks with banks to restructure $26 billion, less than half of its $59 billion in obligations.

“The issue over Dubai’s credit risk is probably already priced into the market,” said Tetsu Emori, a commodity fund manager at Astmax Co. in Tokyo.

Investment Appeal

Easing concerns over a potential default in Dubai prompted the dollar to fall against higher-yielding currencies, bolstering the investment appeal of commodities including gold.

The U.S. currency was little changed against the euro after slipping to $1.5005 yesterday in New York. The dollar dropped for a fifth month in November, the longest losing streak since December 2004.

“The dollar remains an influence on the oil price,” said Commonwealth Bank’s Moore. “If the dollar’s moving about, then we can still see a bit of interest in the oil market.”

Oil also climbed yesterday after two separate maritime incidents. Somali pirates captured the Greek-owned Maran Centaurus carrying 2 million barrels of crude to the U.S, the second time in a year attackers have seized an oil supertanker. Iran’s navy stopped a British yacht and detained the crew, the U.K. government said.

Oil Stockpiles

Commercially held crude oil inventories in the U.S. probably fell as refineries increased operating rates and imports declined. Stockpiles dropped 850,000 barrels in the week ended Nov. 27, according to the median of estimates from eight analysts in a Bloomberg News poll before an Energy Department report tomorrow.

Stockpiles of distillate, which include heating oil and diesel, are expected to have fallen 350,000 barrels, a third weekly decrease, the survey showed. Gasoline inventories likely rose 900,000 barrels.

“The fundamentals of the crude oil market are neutral or even bearish,” said Emori at Astmax. “There’s a lot of supply available in the market.”

Brent crude oil for January settlement on the London-based ICE Futures Europe exchange traded at $78.35 a barrel, down 12 cents, at 3:25 p.m. in Singapore. Yesterday, the contract rose 1.7 percent to $78.47 barrel, the highest since Nov. 18.

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

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Sugar Output in India’s Biggest Producer Increases

By Thomas Kutty Abraham

Dec. 1 (Bloomberg) -- Sugar output in Maharashtra, India’s biggest producer, rose 5 percent in the first two months of the season that began Oct. 1 as mills boosted crushing, a producers’ group said.

Production was 850,000 metric tons in the October-November period, compared with 810,000 tons a year ago, Ajit Chowgule, secretary of the Maharashtra State Cooperative Sugar Factories Federation Ltd., said by phone. They crushed 9.5 million tons of cane, 17 percent more than a year earlier, he said.

Increased output may help the country, the biggest consumer, pare imports that helped send global prices to a 28-year high in September. The country may need to double overseas purchases to as much as 7 million tons this season started Oct. 1, Kushagra Nayan Bajaj, joint managing director at Bajaj Hindusthan Ltd., India’s top producer, said in an interview last week.

Raw-sugar futures for March delivery fell 0.6 percent to 22.64 cents a pound in New York yesterday. Earlier, the most- active contract reached 23 cents, the highest since Nov. 20. Wholesale prices in Mumbai reached a record last month.

Cane harvest in Maharashtra was disrupted twice last month after rains brought by a cyclonic storm flooded fields, hurting recovery. Average yield may improve starting this month because of warm weather over the main growing region, Chowgule said.

“It is bright and sunny. That will help improve recovery,” he said. “More mills will start crushing this month.”

Average recovery fell to 9 percent in the October-November period from 10 percent a year earlier, he said. A total of 122 units are crushing cane as of today, compared with 136 units last year, Chowgule said.

The western state is forecast to produce 4.6 million tons this crop year, unchanged from a year ago, and may harvest 41 million tons of cane, Chowgule said.

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

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Zijin Agrees to Buy Indophil for A$545 Million Cash

By Rebecca Keenan

Dec. 1 (Bloomberg) -- Zijin Mining Group Co., China’s third-largest copper producer, agreed to pay A$545 million ($500 million) for Indophil Resources NL to gain a stake in Southeast Asia’s largest untapped copper and gold deposit.

The Chinese company offered A$1.28 a share in cash, 18 percent more than the last traded price, Melbourne-based Indophil said today in a statement. Xstrata Plc, the Australian company’s largest shareholder and the majority owner of the deposit that it shares with Indophil, accepted the offer, according to a separate filing.

Zijin may have to contend with attacks by local guerrilla groups that killed a worker and delayed work on the undeveloped $5.2 billion Tampakan copper and gold project in the Philippines. China, the biggest metal consumer, wants to own deposits to guarantee supply and limit exposure to rising commodity prices.

“China would have to satisfy itself that if it supported a development it would have the security of tenure and ability to operate in a safe work practice environment,” said Grant Craighead, a mining analyst at Sydney-based Stock Resource. “China needs security of supply and it is putting its foot on as many assets as it can.”

Indophil rose 11 percent to A$1.20 at the 4:10 p.m. Sydney time close on the Australian stock exchange. Indophil shareholders voted last November to allow the company to sell its stake in the project. Zijin climbed 6.5 percent to close at HK$8.65 at 4 p.m. in Hong Kong.

Indophil is being advised by Gresham Advisory Partners Ltd., Freehills and Baker & McKenzie. Zijin is being advised by Charltons Hong Kong and Minter Ellison. The offer is subject to Chinese and Australian regulatory approvals.

Guerrillas, Protesters

Fujian province-based Zijin, also China’s largest gold producer, is planning to increase overseas investment because the time is “still good,” Vice Chairman Lan Fusheng said Oct. 22. The company has spent $300 million in the past five years on eight overseas projects, the executive had said. Zijin holders approved a 7.5 billion yuan ($1 billion) debt sale on Nov. 6.

“The scale and asset quality of Tampakan attracted us,” Lan said today. “We also value the experience of Xstrata in mining and dealing with the local community. We’ll continue to seek acquisition opportunities in other countries, such as Africa.”

Tampakan is located on Mindanao island in the Philippines and has been targeted by guerrilla groups and protests by illegal miners. An Xstrata contract worker was shot dead and two others injured near the project in December last year in an attack blamed by the police on communist guerrillas.

‘Basket Case’

“Indophil is out on Mindanao and that’s your problem,” Stock Resource’s Craighead said. “You have a good deposit there that everyone knows is attractive, it’s significant scale and it’s material to the Chinese. Politically, it’s a basket case.”

Tampakan may start in 2016, Indophil said in an October presentation.

The project is the largest undeveloped copper and gold deposit in Southeast Asia, according to the holding company Sagittarius Mines Inc. Xstrata is the operator, with a 62.5 percent stake, Indophil has a 34.23 percent stake and Alsons Corp. holds the balance, according to Indophil’s Web site. Indophil has an agreement to buy Alsons’ stake.

It will produce an average of 340,000 metric tons of copper and 350,000 ounces of gold annually for 20 years, Melbourne- based Indophil said on April 22, citing a study by Xstrata, the world’s fourth-largest copper producer.

Xstrata last year abandoned its own A$545 million cash bid for Indophil and then later blocked an offer backed by Crosby Capital Ltd. and management.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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Japan Stocks Rise as Yen Falls on Expectations for BOJ Policy

By Akiko Ikeda and Anna Kitanaka

Dec. 1 (Bloomberg) -- Japanese stocks rose, erasing declines from the morning session, after the announcement of a central bank emergency meeting raised speculation it will enact measures to limit the yen’s gains.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest listed bank, climbed 3.1 percent on speculation any new BOJ policy would stimulate lending. Nomura Holdings Inc., Japan’s largest brokerage, advanced 4 percent. Honda Motor Co., a carmaker that gets 85 percent of revenue abroad, rose 3.9 percent. The yen depreciated to as much as 87.52 to the dollar after the BOJ’s announcement, the weakest since Nov. 24. The central bank said after stock markets closed that it will provide short-term loans to commercial banks, causing the yen to pare losses.

“Unless something else comes out, the equity market might be a bit disappointed,” John Vail, head of global strategy in Tokyo at Nikko Asset Management Co., which manages $93 billion in assets globally, said in a telephone interview.

The Nikkei 225 Stock Average jumped 2.4 percent to 9,572.20 at the market close in Tokyo, rebounding from a 1.2 percent drop in morning trading. The broader Topix index gained 2.1 percent to 857.76 with about seven stocks rising for each that fell.

The Nikkei lost 6.9 percent in November, as the strengthening yen threatened to hurt the value of export earnings. It was the gauge’s steepest monthly decline since January. The MSCI World Index of 1,654 stocks gained 3.9 percent for the month, while the Standard & Poor’s 500 index climbed 5.7 percent. The yen traded at an average rate of 89.15 against the dollar in November compared with an average of 93.92 this year.

BOJ Meeting

The central bank’s plan to set aside 10 trillion yen for three-month loans came after a Kyodo News report that cited bank Governor Masaaki Shirakawa as saying the bank’s board will consider implementing monetary easing. Finance Minister Hirohisa Fujii said before the meeting that so-called quantitative easing policies to add cash to the economy would help a recovery.

Mitsubishi UFJ added 3.1 percent to 497 yen and was the most active stock by value on the Nikkei and the Topix. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, rose 1.6 percent to 2,895 yen from an earlier slump of 3.7 percent.

Mizuho Financial Group Inc., No. 3, advanced 1.9 percent to 165 yen. A gauge of bank shares has fallen 17 percent this year, compared with the Topix index’s 0.2 percent drop.

Nomura Holdings

Measures for consumer lenders and securities companies both gained 4.3 percent today, after having fallen this year by 16 percent and 4.5 percent respectively. Nomura Holdings gained 4 percent to 647 yen while Daiwa Securities Group Inc., Japan’s No. 2 brokerage, leapt 4.7 percent to 487 yen.

“Industries with a lot of debt and industries that have fallen such as financials and exporters should rebound,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees the equivalent of $96 billion.

Carmakers rallied after the yen weakened. Honda advanced 3.9 percent to 2,805 yen and was the second-largest contributor to the Nikkei’s gain. Mazda Motor Corp., which earns 75 percent of its sales from overseas, jumped 5.4 percent to 194 yen. Toyota Motor Corp. rose 2.3 percent to 3,520 yen.

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net.

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Asian Stocks Advance on BOJ Speculation, Chinese Manufacturing

By Shani Raja

Dec. 1 (Bloomberg) -- Asian stocks rose, lifting the MSCI Asia Pacific Index to a two-week high, on speculation the Bank of Japan would enact measures to limit the yen’s gains, and as Chinese manufacturing grew at the fastest pace in five years.

Nissan Motor Co., which gets 35 percent of its revenue from North America, gained 3 percent as the BOJ’s announcement of an emergency policy meeting caused the yen to slump against the dollar. Baoshan Iron & Steel Co. surged 7.8 percent on optimism steel demand in China will increase. China Eastern Airlines Corp. rose 5.9 percent in Hong Kong after winning regulatory approval to take over Shanghai Airlines Co.

The MSCI Asia Pacific Index added 1.3 percent to 119.27 as of 7:15 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average rose 2.4 percent, reversing a 1.2 percent drop. The yen, which reached a 14-year high last week against the dollar, fell as much as 1.2 percent against the U.S. currency, the most since Oct. 15. The yen pared losses as the BOJ’s announcements, which came after stock markets closed, disappointed some investors.

“Everybody will be a bit more wary than they were before about riding off any new policies by the BOJ,” said John Vail, head of global strategy in Tokyo at Nikko Asset Management Co., which manages $93 billion in assets. “Unless something else comes out, the equity market might be a bit disappointed.”

China’s Shanghai Composite Index gained 1.3 percent. Zijin Mining Group Co. jumped 7.2 percent after agreeing to buy Australia’s Indophil Resources NL. Hong Kong’s Hang Seng Index climbed 1.3 percent. South Korea’s Kospi Index added 0.9 percent after a government report showed exports rose for the first time in more than a year in November.

Dubai World

The S&P/ASX 200 Index added 0.4 percent in Australia, as the central bank raised interest rates for a third straight month amid mounting evidence of an economic recovery. Qantas Airways Ltd. rose 3.9 percent after reporting an increase in passenger numbers.

Futures on the Standard & Poor’s 500 Index added 0.8 percent. The gauge gained 0.4 percent yesterday as concerns eased about the extent of losses tied to Dubai World, the investment company seeking to delay repayment on some of its $59 billion of liabilities. Dubai World said it’s in “constructive” talks with banks to restructure about $26 billion in debt.

The MSCI Asia Pacific Index surged 3.3 percent yesterday, the most in eight months, amid speculation the region’s companies will be sheltered from most of the Dubai losses.

The gauge has climbed 69 percent from a five-year low on March 9 on signs of a global economic recovery. Stocks in the MSCI benchmark are valued at 21.5 times estimated earnings, more than the S&P 500’s 17 times.

‘Stretched’ Valuations

“Valuations are probably a bit stretched,” said Alistair Thompson, who helps manage $31 billion at First State Investments in Singapore. “Dubai serves as a stark reminder that there are an awful lot of risks out there. We’re not through the woods yet.”

Nissan advanced 3 percent to 645 yen on speculation possible steps by the central bank aimed at weakening the yen will help boost the value of Japanese exports. Komatsu Ltd., which generates 22 percent of sales from the Americas, jumped 4.3 percent to 1,771 yen.

Japan’s currency fell against all 16 major counterparts as the BOJ started its meeting at 2 p.m. in Tokyo. The central bank said afterward that it will provide short-term loans to commercial banks and kept its key overnight lending rate at 0.1 percent. Kyodo News had reported the central bank will consider monetary easing steps amid pressure to halt falling prices.

Disappointing Announcement

“What a disappointment,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp. in Tokyo. “Since they went out of their way to hold an emergency meeting, I thought they would at least boost purchases of long-term government bonds.”

Baoshan Iron & Steel, China’s largest steelmaker, gained 7.8 percent to 8.81 yuan. Anhui Conch Cement Co., the biggest Chinese construction-materials producer, rose 5.7 percent to 46.25 yuan.

A purchasing managers’ index released today by HSBC Holdings Plc rose to a seasonally adjusted 55.7 from 55.4. The government’s PMI, also released today, held at an 18-month high.

“We are still confident that China’s economy is on a solid track,” said Nina Wu, who co-manages a $991 million Greater China fund at Hamon Asset Management Ltd. in Hong Kong.

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 and predicted a further acceleration in 2011 as China powers a global recovery.

Falling Prices

Premier Wen Jiabao called yesterday for China and Europe to maintain the intensity of stimulus measures as the global economy starts to recover from the worst financial crisis since the 1930s. South Korea’s exports rose 18.8 percent in November from a year earlier, the first increase in 13 months, a government report today showed.

China Eastern Airlines climbed 5.9 percent to HK$3.06 in Hong Kong. Conditional approval from China’s securities regulator for a takeover of Shanghai Airlines clears the final hurdle for a combination that will create the nation’s second- biggest carrier. Shanghai Airlines rose 2.2 percent to 6.96 yuan.

Zijin Mining gained 7.2 percent to 10.72 yuan. The company agreed to pay A$545 million ($500 million) for Indophil Resources to gain a stake in Southeast Asia’s largest untapped copper and gold deposit. Melbourne-based Indophil surged 11 percent to A$1.20.

In Sydney, Qantas, Australia’s biggest airline, rose 3.9 percent to A$2.70 after saying group passengers increased by 6.7 percent in October from the previous year. Restaurant Brands New Zealand Ltd., which has the KFC, Pizza Hut and Starbucks franchises, jumped 11 percent to NZ$1.62, after saying full-year earnings will rise about 50 percent.

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

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

By Daniela Silberstein

Dec. 1 (Bloomberg) -- European and Asian shares gained as manufacturing grew in China and Europe and concern eased that losses from a possible default by Dubai World will spread. U.S. stock-index futures advanced.

HSBC Holdings Plc and Deutsche Bank AG rose more than 2 percent. BHP Billiton Ltd. led basic-resources companies higher on signs the Chinese economy is boosting global growth. Alstom SA and Schneider Electric SA climbed more than 4 percent as the two companies entered exclusive talks to buy Areva SA’s power- grid unit. Nissan Motor Co. and Komatsu Ltd. increased after the Bank of Japan announced an emergency policy meeting, sending the yen lower against the dollar.

Europe’s Dow Jones Stoxx 600 Index added 1.9 percent 243.72 as of 9:47 a.m. in London. The measure has surged 23 percent this year amid signs the global economy is recovering. Stocks in the European benchmark index are valued at about 55 times reported earnings, near the highest level since June 2003, according to data compiled by Bloomberg.

“The sense has grown that the influence from the Dubai situation will not be as big and we had positive surprises from the economic data in Europe,” said Daniel Knuchel, who oversees about $3 billion as chief investment officer at AAM Privatbank AG in Zurich. “The market is vulnerable to shocks and we need positive economic number to keep the gains going.”

Asian, U.S. Shares

The MSCI Asia-Pacific Index rallied 1.4 percent today, and futures on the Standard & Poor’s 500 Index added 0.8 percent. The benchmark measure for U.S. equities gained 0.4 percent yesterday as Dubai World, the investment company seeking to delay repayment on some of its $59 billion of liabilities, said it began “constructive” talks with banks to restructure about $26 billion in debt.

Debt from subsidiaries such as Infinity World Holding, Istithmar World and Ports & Free Zone World will be excluded from the restructuring negotiations because those companies “are on a stable financial footing,” Dubai World, one of the emirate’s three main state-related holding companies, said.

HSBC climbed 2.9 percent to 727.3 pence, the steepest intraday gain in two weeks. Europe’s largest bank expects concerns about Dubai World’s debt will have a limited impact on financial markets, Apple Daily reported, citing Vincent Cheng, chairman of the bank’s Asian operations.

Deutsche Bank, Germany’s biggest lender, increased 2.1 percent to 49.09 euros. Management board member Juergen Fitschen said concerns over Dubai World’s request for a standstill on debt repayment are “manageable.”

KBC Climbs

KBC Groep NV soared 4.3 percent to 30.90 euros. Belgium’s biggest bank by market value was rated “overweight” in new coverage at Morgan Stanley, which cited its “credible restructuring plan and compelling value.”

BHP Billiton, the world’s largest mining company, rose 2.5 percent to 1,904.5 pence and Rio Tinto Group, the third-biggest, added 3.3 percent to 3,189 pence as copper gained on the London Metal Exchange.

Eurasian Natural Resources Corp. climbed 5.3 percent to 907.5 pence. BofA Merrill Lynch Global Research added the Kazakh ferroalloy producer to its “Europe 1” list.

Alstom advanced 6.4 percent to 49.59 euros. The maker of high-speed trains and energy-generation equipment and Schneider Electric, a maker of electrical circuits, are in exclusive negotiations with Areva of France for its power-grid subsidiary, knocking out overseas bids from General Electric Co. and Toshiba Corp. Schneider added 4.5 percent to 76.13 euros.

Vivendi, Nissan

Vivendi SA climbed 2.7 percent to 19.71 euros. GE and the owner of the world’s largest music company agreed on a $5.8 billion valuation for the French company’s 20 percent stake in NBC Universal, according to two people with knowledge of the discussions.

Greene King Plc surged 8.1 percent to 433.9 pence, the biggest gain in the Stoxx 600. The U.K. pub owner and brewer of Old Speckled Hen ale said first-half net income rose 85 percent as the company increased its focus on food sales.

Nissan, which gets 35 percent of its revenue from North America, gained 3 percent to 645 yen and Komatsu, which generates 22 percent of sales from the Americas, jumped 4.3 percent to 1,771 yen on speculation possible steps by the central bank aimed at weakening the yen will help boost the value of Japanese exports.

The BOJ said it will provide short-term loans to commercial banks amid pressure from Prime Minister Yukio Hatoyama’s administration to address falling prices and the yen’s surge to a 14-year high. The cental kept the key overnight lending rate at 0.1 percent.

Australian Interest Rates

Australia’s central bank raised its benchmark interest rate by a quarter percentage point for an unprecedented third straight month as evidence mounts that the nation’s economy is strengthening.

China’s purchasing managers’ index released today by HSBC rose to a seasonally adjusted 55.7 in November from 55.4 the previous month. The government’s PMI, also released today, held at an 18-month high.

Europe’s manufacturing industry grew for a second month in November after the euro-region economy emerged from its worst recession in more than six decades. An index of manufacturing in the 16-nation euro area rose to 51.2 from 50.7 in October, London-based Markit Economics said. That was higher than an estimate of 51 released on Nov. 23.

German unemployment fell in November as government measures discouraged firings and the economy recovered from recession. The number of people out of work fell a seasonally adjusted 7,000 to 3.42 million, according to the Nuremberg-based Federal Labor Agency.

Manufacturing in the U.S. probably expanded for a fourth consecutive month, putting factories at the forefront of the recovery, economists said before reports today. The Institute for Supply Management’s manufacturing index fell to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News.

Other U.S. reports may show pending sales of existing homes and construction spending declined in October.

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

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U.K. Stocks Rise; Eurasian Natural Resources, Xstrata Advance

By Adam Haigh

Dec. 1 (Bloomberg) -- U.K. stocks rose after China’s manufacturing grew last month at the fastest pace in five years and concern abated that losses from a possible default by Dubai World will spread.

Rio Tinto Group, Royal Dutch Shell Plc and BHP Billiton Ltd. led gains among raw-material producers on signs the Chinese economy is boosting global growth. Eurasian Natural Resources Corp. climbed 5.4 percent after BofA Merrill Lynch Global Research added the shares to its “Europe 1” list.

The benchmark FTSE 100 Index gained 85.54, or 1.7 percent, to 5,276.22 as of 9:57 a.m. in London. The FTSE All-Share Index climbed 1.6 percent and Ireland’s ISEQ Index added 0.7 percent.

The FTSE 100 has rebounded 50 percent from its low on March 3 amid government stimulus programs and record low-interest rates. The gauge fell 3.3 percent from Nov. 25 through yesterday as Dubai World’s move to delay debt payments risked triggering the biggest sovereign default since 2001.

“Investors were in danger of exaggerating the standstill of Dubai World debt,” said Andrew Garthwaite, the London-based head of global equity strategy at Credit Suisse Group AG. “The numbers are actually a lot smaller” for exposure from foreign banks. He spoke in a Bloomberg television interview.

Dubai World, the investment company seeking to delay repayment on some of its $59 billion of liabilities, yesterday said it is in “constructive” initial talks with banks to restructure about $26 billion in debt.

China’s purchasing managers’ index released today by HSBC Holdings Plc rose to a seasonally adjusted 55.7 in November from 55.4 the previous month. The government’s PMI, also released today, held at an 18-month high.

Copper Advances

Copper advanced in London after China, the biggest user of the metal, expanded at the fastest pace in five years and the dollar fell for a second day. Lead, nickel and zinc also increased.

Rio Tinto, the third-largest mining company, gained 3.2 percent to 3,187 pence. BHP Billiton, the biggest, added 2.5 percent to 1,903 pence. Eurasian Natural Resources, which produces steelmaking raw materials in Kazakhstan, increased 5.4 percent to 908 pence.

Xstrata Plc climbed 3.3 percent to 1,104 pence. Zijin Mining Group Co., China’s third-largest copper producer, agreed to pay A$545 million ($500 million) for Indophil Resources NL to gain a stake in Southeast Asia’s largest untapped copper and gold deposit. Xstrata is the largest shareholder of Indophil and is the majority owner of the deposit which it shares with the Melbourne-based company.

Royal Dutch Shell Plc, Europe’s biggest oil company, advanced 1.4 percent to 1,826 pence. Crude rose for a second day after the Chinese manufacturing report, spurring hopes that the world’s second-biggest oil user will buoy consumption of the fuel.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

Greene King Plc (GNK LN): The U.K. pub owner and brewer of Old Speckled Hen ale soared 32.6 pence, or 8.1 percent, to 433.9. First-half profit advanced 85 percent as the company focused more on food sales.

Shaftesbury Plc (SHB LN) gained 13.3 pence, or 3.6 percent, to 381.9. The largest landlord in central London’s Carnaby Street neighborhood said its annual loss narrowed as the value of its properties declined more slowly.

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

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Altera, Cutera, Guess?, NetList, SandRidge: U.S. Equity Preview

By Lu Wang

Dec. 1 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Altera Corp. (ALTR US): The maker of programmable semiconductors said it expects sales for the fourth quarter to be 15 percent to 18 percent higher from the previous three months. Previously, it projected sales growth of 10 percent at most.

Cutera Inc. (CUTR US): The maker of lasers to remove hair said it postponed “indefinitely” the release of its TruSculpt body contouring product because clinical data failed to meet expectations.

Guess? Inc. (GES US): The clothing maker forecast 2010 profit of at least $2.45 a share, topping the average analyst estimate of $2.19, according to Bloomberg data.

NetList Inc. (NLST US): Inphi Corp. said it filed a patent infringement lawsuit against the computer-memory systems maker.

OmniVision Technologies Inc. (OVTI US): The maker of image sensors for camera phones forecast third-quarter revenue of $160 million at most, trailing the average analyst estimate of $171.7 million.

SandRidge Energy Inc. (SD US): The producer of natural gas and crude oil agreed to buy Forest Oil Corp.’s (FST US) stake in Permian Basin properties in West Texas and New Mexico for approximately $800 million.

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

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