China Said to Plan 8 Trillion Yuan Loans Cap for 2010

By Bloomberg News

Dec. 9 (Bloomberg) -- China’s banking regulator plans to slow new lending to between 7 trillion yuan ($1 trillion) and 8 trillion yuan next year, a person familiar with the matter said.

The China Banking Regulatory Commission’s recommended range compares with 8.9 trillion yuan of new local-currency loans in the first 10 months of this year. The person spoke on condition of anonymity because he isn’t authorized to discuss the matter publicly.

China is trying to ensure credit flow is enough to support an economic recovery while limiting the risk that this year’s lending boom will lead to bad loans and asset bubbles. The country will maintain a “moderately” loose monetary policy to keep economic growth from slowing, according to a statement from the annual central economic work conference that ended Dec. 7.

“This is pretty much in line with market expectations and should arm the government with enough bullets to maintain an economic recovery,” said She Minhua, a Shanghai-based analyst at Haitong Securities Co.

Phone calls to the CBRC’s press office weren’t answered.

The government’s 4 trillion yuan stimulus package and record bank lending helped ailing exporters refinance debt and provided funding for an acceleration in fixed-asset investment, reigniting economic growth that had fallen to the lowest in more than a decade.

Credit Standards

A debt-fueled increase in investments “may imply additional demand for loans in the future, to complete the underlying project,” the Bank for International Settlements said in a quarterly report published this month. Should China tighten monetary policy, that could “leave projects incomplete and lead to a build-up of bad loans.”

China’s credit boom may erode the quality of bank balance sheets as the jump in lending was “unavoidably” linked to an easing of credit standards, the BIS said.

The nation’s house prices jumped the most in 14 months in October, adding to concern that record lending may create asset bubbles in the world’s fastest-growing major economy. The benchmark Shanghai Composite Index has gained 78 percent this year as the economy recovered.

“History shows that credit growth of 13-14 percent can support fixed-asset expansion of over 20 percent,” She said. “So 7 trillion yuan of new loans will be adequate to keep existing projects floating and add on some new ones.”

The regulator in October said it would tighten regulation of personal loans to ensure that bank credits are not misused and “enter the real economy.” A “significant” part of loans doled out by banks may have flowed into equity and property markets, the BIS said.

Capital Eroded

China’s new loans may slow to 7 trillion yuan next year, UBS AG forecast last month. “We believe slower credit growth in 2010 will be key to avoid a boom-bust scenario in the economy,” UBS economist Wang Tao said in a Nov. 30 report.

China’s five largest banks submitted plans to regulators for raising money after unprecedented lending eroded their capital, four people with knowledge of the matter said last month. Chinese lenders would need as much as a combined 368 billion yuan to keep their capital adequacy ratios at 12 percent, according to BNP Paribas.

The CBRC’s loan target requires approval from the central government, the person said. The 7 trillion yuan to 8 trillion yuan range is similar to one proposed by Tang Shuangning, former vice chairman of the regulator, on Nov. 21.

--Philip Lagerkranser. Editors: Andreea Papuc, Malcolm Scott.

To contact the Bloomberg News staff for this story: Philip Lagerkranser at at lagerkranser@bloomberg.net

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Hatoyama Stimulus to Avert Recession, Leave Deflation

By Aki Ito and Keiko Ujikane

Dec. 9 (Bloomberg) -- Japanese Prime Minister Yukio Hatoyama’s 7.2 trillion yen ($81 billion) stimulus will help the nation avert another recession next year without overcoming the deflation that threatens the economy’s longer term prospects.

The spending, unveiled ahead of a government report today that showed growth in the third quarter was slower than initially estimated, included employment subsidies, loan guarantees and incentives to buy energy-efficient products.

Hatoyama compiled his first stimulus package since becoming premier in September after the yen surged to a 14-year high against the dollar, threatening the export-led recovery. The plan may keep the economy afloat until the rebound in overseas demand reaches households, according to Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo.

“In the short term, it will help avert a double-dip recession,” Miyazaki said. “This stimulus won’t do enough to fight deflation, and it didn’t include anything to weaken the yen.”

The yen surged to 84.83 on Nov. 27, the highest level since 1995, and has advanced 4 percent against the dollar in the past three months. It traded at 88.56 per dollar at 9:19 a.m. in Tokyo from 88.43 late yesterday.

Slower Growth

The Nikkei 225 Stock Average fell 1.3 percent after the Cabinet Office said the economy expanded at an annual 1.3 percent pace in the three months ended Sept. 30, slower than the 4.8 percent reported in preliminary figures last month. The figure was revised to reflect a Finance Ministry survey that showed companies slashed spending at a record pace in the period.

Economists say Hatoyama’s package will help growth next year. Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, predicts it will add 0.2 percentage point to gross domestic product, while Yasuo Goto, chief economist at Mitsubishi Research Institute, forecasts it will bolster GDP by 0.5 percentage point. The economy will expand 1.2 percent in 2010, according to the median estimate of 14 economists surveyed by Bloomberg News.

Not everyone says the spending will help the economy. Morgan Stanley Asia Chairman Stephen Roach said Hatoyama needed to be “much more aggressive” with his policies.

Second Lost Decade

“It’s tiny,” Roach said of the stimulus in an interview on Bloomberg Television yesterday. “This is an economy that went into its worst recession, the second lost decade, late last year and is barely coming out. The new government is not off to a good start in formulating policy strategy.”

The stimulus lacked focus on policies that could bolster the nation’s growth prospects in the long term, such as corporate tax reductions and incentives for companies to invest in developing industries, according to Yasukazu Shimizu, a senior market economist at Mizuho Securities Co. in Tokyo.

Mitsubishi’s Goto says the stimulus doesn’t guarantee Japan will be able to shake off falling prices and policy makers must be prepared to take further action.

“Deflationary pressure in the Japanese economy is so strong that the measures unveiled so far won’t be enough to overcome it,” said Goto, a former Bank of Japan official. “The real issue is whether they’re going to be prepared to fire a second or third bullet when the need arises.”

Bank of Japan

The central bank released a 10 trillion yen credit program last week, satisfying calls from government ministers for it to do more to fight declining prices.

Nobuaki Koga, head of Japan’s largest labor union, applauded the government’s efforts to spur growth by saving jobs.

“This is worth praise,” said Koga, head of the Japanese Trade Union Confederation, known as Rengo. “It includes employment measures and I support the main pillars. Bigger would be better, but there are fiscal limitations.”

Recent data indicate the recovery is losing steam. Industrial production grew at its weakest pace in eight months in October and a report yesterday showed merchant sentiment tumbled by a record amount in November. Exports fell for the 13th straight month in part because of the yen’s strength.

Fujio Mitarai, head of the nation’s biggest business lobby and chairman of Canon Inc., said last month the government needs to take “urgent steps” to stem the yen’s gains.

Debt Burden

Hatoyama’s ability to revive the economy has been limited by the nation’s swelling debt burden, which is already the largest in the industrialized world. He said the package was a reflection of the government’s will to spur growth without blowing out growing public debt.

“This reflects our intention to resuscitate the economy,” Hatoyama told reporters in Tokyo yesterday. “There was a sharp debate from differing perspectives on what must be done, on whether the economy or fiscal discipline take priority, and I think that should be recognized.”

The premier’s sliding popularity may hurt his party’s momentum ahead of the July upper house elections in July 2010. His approval rating fell below 60 percent for the first time, declining to 59 percent from last month’s 63 percent, the Yomiuri newspaper reported this week.

Some say the measures, which extended policies inherited by the previous administration, are merely a stop gap to prevent the economy from deteriorating before the election.

“The package doesn’t help the economy much, the DPJ’s just afraid of being blamed if there’s a double-dip slump,” said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. “I don’t think there’s any legitimate logic for implementing these measures except for political reasons.”

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Japan Economy Grows 1.3%, Less Than Initial Estimate of 4.8%

By Keiko Ujikane and Tatsuo Ito

Dec. 9 (Bloomberg) -- Japan’s economy expanded less than a third of the pace initially reported in the three months to September as companies slashed spending.

Gross domestic product rose an annualized 1.3 percent, slower than the 4.8 percent reported last month, the Cabinet Office said today in Tokyo. The revision, which was deeper than the predictions of all but one of the 17 economists surveyed by Bloomberg News, also showed that price declines accelerated.

Stocks fell after the report underscored concern about the sustainability of a recovery that is under threat from deflation and a rising yen. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($81 billion) stimulus package yesterday to ensure the economy avoids another recession next year.

“These numbers were weak,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “The stimulus will have a positive effect on the economy. But it’s not, in any way, enough to offset how steeply third-quarter GDP was revised.”

In nominal terms the economy shrank 0.9 percent last quarter, more than the 0.1 percent contraction in the preliminary report. The GDP deflator, the broadest indicator of price declines, slid 0.5 percent, revised from a 0.2 percent increase. The gauge has only risen twice in the past decade.

“This is a reminder of the deflation gap,” said Shuichi Obata, senior economist at Nomura Securities Co. in Tokyo, the only company to forecast a decline in the deflator. “It will be important to see how much Japan can recover while deflation continues.”

Nikkei Slides

The Nikkei 225 Stock Average slid 1.3 percent, led by Honda Motor Co. and Mizuho Financial Group Inc. The yen traded at 88.45 per dollar at 12:56 p.m. in Tokyo from 88.40 before the report. The currency has weakened since climbing to a 14-year high of 84.83 per dollar on Nov. 27. The median estimate of economists surveyed by Bloomberg News was for an annualized 2.8 percent expansion.

Investment by companies drove the downward revision in last quarter’s growth. Capital spending fell 2.8 percent in the three months through September from the previous quarter. That compares with a 1.6 percent increase reported last month.

“The recovery in capital investment will be dull,” said Yasuhiro Onakado, chief economist in Tokyo at Daiwa SB Investments Ltd., whose 1 percent prediction for growth was the most accurate of analysts surveyed. “Capacity utilization levels are still low, meaning that companies are saddled with idle assets and have no room for new investment.”

Record Cuts

The economy expanded 0.3 percent in the third quarter from the previous three months, the Cabinet Office said, slower than the 1.2 percent first reported. The cuts in both quarterly and annualized growth were the biggest since the survey was introduced in 2002, the government said, voicing concern about the size of the revision.

While the initial report gave the impression export growth is spreading to the domestic economy, “we’ll need to reexamine that,” Keisuke Tsumura, a parliamentary secretary at the Cabinet Office told reporters.

Consumer spending, which makes up about 60 percent of the economy, climbed 0.9 percent, compared with a 0.7 percent gain initially reported. Exports increased 6.5 percent from the previous quarter, compared with the 6.4 percent first published.

Some exporters are scaling back their spending plans as the yen’s rise to a 14-year high threatens their profits and market share.

Toyota Cuts Investment

Toyota Motor Corp., Japan’s biggest automaker, aims to cut capital investment by 70 billion yen from its initial plans for the year ending March, the most among major companies, a Nikkei Inc. survey showed on Nov. 30.

Sony Corp., forecasting its first consecutive annual loss since its listing in 1958, said last month that it will eliminate 250 jobs at its information devices unit to reduce costs. The company will close down a factory in Miyagi Prefecture making magnetic heads and transfer some of its touch- panel production to China.

Falling prices have been squeezing profit at home, prompting the government to declare last month that the country is back in deflation and push the Bank of Japan to do more to spur the economy. The central bank released a 10 trillion yen credit program last week, a move that Deputy Prime Minister Naoto Kan said yesterday had a “considerable impact” on weakening the yen.

Yesterday’s stimulus includes employment subsidies, loan guarantees and incentives to buy energy-efficient products. Japan has compiled four spending packages since September 2008 totaling more than 29 trillion yen. Some economists say these measures won’t be enough to support growth.

“Consumer spending will probably start to decelerate in coming quarters,” said Seiji Adachi, a senior economist at Deutsche Securities in Tokyo. “People won’t keep purchasing durable goods just because the government has extended incentives.”

To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Tatsuo Ito in Tokyo at tito@bloomberg.net.

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Darling May Tax Bonuses, Raise Debt as Election Nears

By Gonzalo Vina and Robert Hutton

Dec. 9 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling today may boost the U.K. Treasury’s borrowing and raise taxes on bankers, part of the Labour government’s effort to revive voter support before next year’s election.

The BBC reported that banks awarding bonuses above a specific threshold will have to pay a levy of about 50 percent on them. It didn’t say where it got its information. Darling speaks at 12:30 p.m. in Parliament.

“Nobody wants to drive banks and bankers away from the City of London, they’re important for our economy,” Business Secretary Peter Mandelson told GMTV. “But we’re seeing in some respects a return to the short-term bonus culture that got us into trouble in the past, so it’s reasonable for the chancellor to deliver a message to the banks.”

Trailing in opinion polls before an election that he must hold by June, Prime Minister Gordon Brown is balancing the need to clamp down on a record budget deficit while extending support to voters struggling in the deepest recession since 1980.

Darling may add 30 billion pounds ($48 billion) to the government’s borrowing forecasts for the next four years, according to the median estimate of 37 economists surveyed by the Treasury last month.

The chancellor will maintain plans to trim government spending over the next two years, an official at the Treasury said, asking not to be named because details remain confidential. Total managed expenditure will be 671.4 billion pounds in the year through March and 701.7 billion pounds the following fiscal year, the official said.

‘Belt-Tightening’

“It’s not going to be painless what the chancellor announces this afternoon, but it’s not going to be reckless,” Mandelson said. “He’s going to introduce some belt-tightening measures, but he’s not going to act in a way that will slam on the brakes on the recovery that’s underway.

The report will contain a pledge to maintain current spending levels for schools, hospitals and police. That will mean cuts in other government programs beyond 2012, the official said.

The pound fell for a fifth day today, weakening 0.2 percent to $1.625 against the dollar. The currency will stay under “downward pressure” because the budget report today will fail to reassure investors Britain can shore up its finances, Citigroup Inc. economists said today.

Already, the chancellor has said he will claw back money from bankers after the industry benefited from the 117 billion pounds of support the Treasury granted financial institutions since the credit crisis started in 2007.

Taxpayer Bailout

“They need to realize that there would not be a bank standing today if taxpayers hadn’t put their hands in their pockets,” Darling said on Dec. 7. “The industry as a whole does need to show some degree of restraint.”

Brown’s Labour government and David Cameron’s Conservative both have promised measures to rein in the culture of bonus payments in the City, London’s financial district.

“There is a feeling out there that these guys are overpaid and the public wants retribution,” said Keith Pilbeam, a professor of financial economics at City University in London. “There is an idea that they need punishing because they haven’t really suffered at all during this crisis.”

Where the two parties diverge is on just how quickly the government should curb the deficit. In March, Darling forecast a shortfall of 175 billion pounds in the year through March 2009. At more than 12 percent of gross domestic product, it’s the most among the Group of 20 nations. Cameron says the deficit is the biggest threat to the economy and may weaken Britain’s top-notch credit rating.

Deficit Reduction

“We can’t solve the problem of the deficit straight away, but what there’s an absence of is a credible plan,” Cameron said yesterday. “I don’t think anyone’s going to be impressed with a plan that doesn’t at least have some early action in it.”

Darling said Dec. 7 that voters “don’t buy the argument that there should be a decade of austerity” and that “going further and faster” on curbing the deficit “would be ruinous.”

Five polls since the beginning of November have signaled the Conservative lead over Labour is narrow enough to deny the opposition an outright victory in the election. Those findings coincided with Brown and Darling stepping up attacks on bankers who they blame for causing the economic crisis.

A Populus Ltd. survey finished Dec. 6 showed the Conservatives with an eight-point lead over Labour, not enough to win a majority in the House of Commons.

Banker Concern

Barclays Plc President Robert Diamond yesterday said plans to impose a windfall tax on bankers’ bonuses are unwarranted, and that the U.K. risks putting the City at a competitive disadvantage.

The tax proposal “isn’t supported by the principles we adopted” in response to the financial crisis, said Diamond, who oversees the London-based lender’s investment-banking division.

Darling earlier this week said he will not be “held to ransom” by bankers who have cried foul about the levy. Bonuses for financial services employees may rise by 50 percent to 6 billion pounds this year, the Centre for Economics & Business Research Ltd. said in October.

Moody’s Investors Service yesterday said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because their deficits are worsening. With the Institute for Fiscal Studies expecting tax increases to plug the hole in its public finances, Darling is looking for targets.

“Banks won’t be able in such a short timeframe be able to give everyone a big salary increase, so I think they will identify the bonuses fairly easily,” said City University’s Pilbeam.

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net or Robert Hutton in London at rhutton1@bloomberg.net

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Almunia Says EU Officials Ready to Assist Greece in Budget Plan

By John Fraher and Kevin Costelloe

Dec. 9 (Bloomberg) -- The European Union’s economic affairs commissioner said officials are ready to help Greece get to grips with its budget deficit after concerns about its public finances sparked a rout in Greek government bonds.

The European Commission “stands ready to assist the Greek government in setting out the comprehensive consolidation and reform program, in the framework of the treaty provisions for euro-area member states,” said Joaquin Almunia, who is in charge of economic and monetary affairs, in a statement late yesterday. He didn’t say what form any assistance could take.

Greek stocks and bonds tumbled yesterday after Fitch Ratings cut its rating on government debt to BBB+ and two other major ratings companies are threatening to follow suit. Greece, the lowest-rated country in the euro region, is struggling to cut a budget deficit of 12.7 percent.

The benchmark Athens Stock Exchange General Index dropped as much as 6.1 percent, its biggest intraday decline since Nov. 26. The spread between the Greek and German 10-year benchmark bonds widened to 221 basis points from 130 basis points on Oct. 5. That compares with 23 basis points for Finnish 10-year bonds.

Almunia’s comments come as investors debate whether EU governments would bail out Greece if it was unable to pay its bills. Former German Finance Minister Peer Steinbrueck said in February that euro members would “in reality” rescue states in difficulty. Almunia said yesterday Greece “is a matter of common concern” for euro nations, echoing language he has used since November. He didn’t elaborate further.

No Bailouts?

At the same time, the worst financial crisis since the Great Depression has abated since February and European governments have made no effort to elaborate how a bailout would happen in practice.

“In today’s markets, the risk of using Greece as a showcase of the ‘no bailout clause’ is too dangerous,” said Wim Boonstra, chief economist at Rabobank Nederland. “In the current situation it’s in the interests of the other countries that Greece does not fail.”

Greek Finance Minister George Papaconstantinou said yesterday his government, which came to power in October promising higher spending and wages, will cut the budget deficit in a “fair” consolidation of public finances.

That’s not enough for some European finance officials, who are increasing pressure on Greece government to take lasting measures to reduce the deficit.

“The situation in Greece is very difficult,” European Central Bank President Jean-Claude Trichet said Dec. 7. “We all know the figures, and we all know the very important, courageous decisions that have to be taken to put the situation back on track.”

Almunia said yesterday “the commission will continue to monitor the situation in Greece very closely.”

To contact the reporter on this story: John Fraher in London at jfraher@bloomberg.net; Kevin Costelloe in Brussels at kcostelloe@bloomberg.net.

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Americans Grow More Pessimistic on Economy, Nation’s Direction

By Mike Dorning and Rebecca Christie

Dec. 9 (Bloomberg) -- Americans have grown gloomier about both the economy and the nation’s direction over the past three months even as the U.S. shows signs of moving from recession to recovery.

Almost half the people now feel less financially secure than when President Barack Obama took office in January, a Bloomberg National Poll shows.

Those concerns have put consumers in a miserly mood as they head to the mall for holiday shopping, with half the country planning to spend less on gifts than last year and few buyers willing to run up credit-card debt for Christmas.

“The recession may be over, but the administration seems to be losing the battle when it comes to winning the hearts and minds of Americans,” says Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “This is important because the spending of consumers is the main factor that will turn the economic recovery into a self- sustaining one.”

Obama yesterday addressed anxiety over the economy with a speech proposing new spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient.

Unemployment in November stood at 10 percent, a drop from 10.2 percent in October yet still the second month in a row the figure stood in double digits.

No. 1 Concern

The economy is the country’s top concern, with persistently high unemployment the greatest threat the public sees. Eight of 10 Americans rate joblessness a high risk to the economy in the next two years, outranking the federal budget deficit, which is cited by 7 of 10. An increase in taxes is named as a high risk by almost 6 of 10.

Fewer than 1 in 3 Americans think the economy will improve in the next six months. They are pessimistic that the government will succeed in reducing unemployment or lowering the budget deficit.

A year into Obama’s presidency, only 32 percent of poll respondents believe the country is headed in the right direction, down from 40 percent who said so in September.

The mood among members of Obama’s own Democratic Party has shifted most dramatically: While Democrats remain the most positive, the proportion saying the country is on the right track dropped to 58 percent from 71 percent in September. Among independents, 26 percent say the country is on the right track, down from 29 percent in September.

The poll of 1,000 U.S. adults was conducted Dec. 3-7 by Selzer & Co., a Des Moines, Iowa-based firm. The margin of error is plus or minus 3.1 percentage points. The poll includes 714 likely voters in the 2010 general election, the margin of error for questions based on likely voters is plus or minus 3.7 percentage points.

Skeptical Over Stimulus

The country has grown increasingly skeptical of the centerpiece of Obama’s economic agenda, the $787 billion economic-stimulus package, with 60 percent of Americans saying it hasn’t helped the economy, up from 49 percent who said that three months ago.

Michele Crawford, 37, a Las Vegas health-care worker who identified herself as a Democrat, says the stimulus plan put too much money in the hands of corporations rather than sending it directly to families through tax cuts.

“I think that was the wrong approach,” Crawford says.

For now, former President George W. Bush continues to get most of the blame for the hard economic times. Six of 10 poll respondents say the economic difficulties Obama confronts were mostly inherited.

Blaming Bernanke, Geithner

Still, there are signs the economic doldrums are tarnishing current officeholders.

Americans have turned against the administration’s leading economic spokesman, Treasury Secretary Timothy Geithner, with 33 percent viewing him unfavorably against 26 percent with a favorable view. As recently as September, a slim plurality viewed Geithner favorably.

Federal Reserve Chairman Ben S. Bernanke, another public face of economic policy though he is independent of the White House, also declined in popularity. A third of the country views Bernanke favorably, down from 41 percent in September.

Bernanke’s standing fell even though the Fed as an institution improved, with 50 percent holding a favorable opinion versus 44 percent three months ago.

Four out of 10 respondents have no opinion on either Geithner or Bernanke.

Some of the malaise may stem from middle-class households bracing for the expectation of greater burdens ahead, says J. Ann Selzer, president of Selzer & Co. Almost 9 in 10 poll respondents say they believe middle-class Americans will have to make sacrifices to decrease the deficit.

‘We’re Under Water’

When asked about changes in measures of personal economic well-being -- household income, job security, quality of health care, retirement savings and home equity -- the responses changed little from September. Only 1 in 3 Americans indicated an improvement in any category.

For many consumers, that uneasiness means a shorter Christmas shopping list.

Cindy Gamet, 54, an environmental project manager who lives in Greeley, Colorado, says her family’s prolonged encounter with financial insecurity is leading her to cut back further this holiday season.

“The economy has been on the decline for some time,” Gamet says. “Our major investment, which was our home, it went south. So now we’re under water.”

‘We’re Spenders’

Though it goes against her inclination -- “we’re spenders,” Gamet says -- she and her husband plan to limit gifts for their grandchildren and forgo presents to their adult children.

“We’re going to do what we can for the kids, but the adults are just going to have to understand,” Gamet says.

Just 8 percent of people plan to spend more on gifts this year than they did last year, while 47 percent say they will spend less.

The country is especially leery of taking on new debt for the holidays, with 82 percent of respondents saying they plan to pay for Christmas gifts solely from cash on hand or savings.

The Grinch may even have come to the Internet, where commerce has been shifting in recent years. Only a quarter of respondents -- 27 percent -- say they will buy more gifts over the Web this year, while 42 percent say they will buy fewer and 22 percent say they will buy nothing at all.

To see the methodology and exact wording of the poll questions, click on the attachment tab at the top of the story.

To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net.

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Dollar Index May Advance to 3-Month High: Technical Analysis

By Candice Zachariahs and Ron Harui

Dec. 9 (Bloomberg) -- The Dollar Index may extend gains to a three-month high of 77.69 after rising above resistance at the lower end of an ichimoku cloud, said Barclays Capital, citing trading patterns.

The index, which is used to track the dollar against the currencies of six major U.S. trading partners, posted yesterday its first close since April above 76.05, the base of the cloud according to Bloomberg data. The cloud is the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

“A potential change in trend is developing,” MacNeil Curry, chief North American technical strategist in New York at Barclays Capital, said in a telephone interview. Yesterday’s close “indicates that the trend is likely to extend and that we’re likely to see continued strength in the Dollar Index.”

The Dollar Index traded at 76.279 as of 7:15 a.m. in London from 76.198 in New York yesterday. It advanced 1.2 percent in the five days ended Dec. 4, the biggest weekly gain since June 5.

The index may rise to as high as 77.69, the low point set on Dec. 18, 2008, Barclays Capital analysts including Curry wrote in a note to clients yesterday. Support typically becomes resistance when it is broken. The 77.69 level would be the highest since Sept. 8.

An ichimoku chart analyzes the midpoints of historic highs and lows. Resistance is a level at which sell orders may be clustered and support is where there may be buy orders.

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 reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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Yen Advances as Stocks Decline on Speculation Recovery Stalling

By Lukanyo Mnyanda

Dec. 9 (Bloomberg) -- The yen rose as stock markets fell and a report showed Japan’s economy expanded more slowly than initially reported, deepening concern that the pace of the global recovery is flagging.

The yen strengthened for a third day against the euro as the MSCI World Index of stocks slid 0.2 percent, boosting demand for the Japanese currency as a refuge. The British pound weakened to its lowest level in almost two months against the dollar before Chancellor of the Exchequer Alistair Darling presents his pre-budget report today in parliament.

“Risk aversion has been the main driver,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “I wouldn’t exclude the possibility of more bad news, which would be bad for the high- yielding currencies.”

The yen appreciated to 129.24 per euro as of 8:23 a.m. in London, from 130.03 yesterday in New York, after earlier trading at 129.18, the strongest since Nov. 30. Japan’s currency was at 87.71 per dollar, from 88.43. The euro bought $1.4734, from $1.4704, after earlier declining to $1.4668, the weakest level since Nov. 3.

The Japanese currency climbed against all of its 16 major counterparts, rising the most against the South Korean won and the pound.

Sterling dropped 0.3 percent to $1.6236 and weakened 0.5 percent to 90.71 pence per euro.

Japan’s Cabinet Office said today in Tokyo that gross domestic product rose at an annual 1.3 percent pace last quarter, slower than the 4.8 percent rate reported in preliminary figures last month. The median estimate of economists surveyed was for 2.8 percent growth.

Japanese Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($81 billion) stimulus package yesterday and the Bank of Japan last week announced a 10 trillion yen credit program to revive the economy.

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

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Oil Snaps Five-Day Decline After Report Shows Drop in Supplies

By Christian Schmollinger

Dec. 9 (Bloomberg) -- Crude oil climbed above $73 a barrel in New York after an industry report showed U.S. supplies dropped, bolstering optimism that fuel demand in the biggest energy-consuming nation will increase.

Oil rose for the first time in six days after the American Petroleum Institute said crude inventories fell by 5.82 million barrels. Futures dropped to an eight-week low yesterday as the dollar gained against the euro. The U.S. Energy Department will release its weekly report today in Washington. Inventories are forecast to rise, according to a Bloomberg News survey.

“After the API numbers came out, the market shot up right away,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “But people are holding back a bit for the EIA numbers. If we see a similar number there, oil could spike up $2 or $3.”

Crude oil for January delivery gained as much as 72 cents, or 1 percent, to $73.34 a barrel in electronic trading on the New York Mercantile Exchange. It was at $73.01 at 3:12 p.m. in Singapore. Yesterday, the contract fell $1.31 to $72.62 a barrel, the lowest settlement since Oct. 9. Futures are up 64 percent this year.

The Energy Department report is forecast to show that crude inventories increased 250,000 barrels, according to the survey. Oil-supply totals from the API and Energy Department moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg News.

Dollar Strength

The euro traded near a one-month low against the dollar on speculation credit ratings of more European nations will be cut after Greece’s debt ranking was lowered by Fitch Ratings Ltd. The dollar was little changed after rising a third day yesterday to $1.4704 per euro in New York.

“The dollar has been a very supportive element for oil in recent months,” said Toby Hassall, an analyst at CWA Global Markets Pty in Sydney. “If you pull that support away, it exposes a bit of downside.”

Gasoline supplies fell 753,000 barrels last week, according to the API report. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.01 million barrels to 168.9 million, the report showed.

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires reports to be filed with the Energy Department for its weekly survey.

The Energy Department report will likely show gasoline inventories rose 1.6 million barrels in the week ended Dec. 4 from 214.1 million the prior week, according to a survey of analysts. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 750,000 barrels from 165.7 million the prior week.

Brent Premium

Brent crude oil for January settlement rose as much as 53 cents, or 0.7 percent, to $75.72 a barrel on the London-based ICE Futures Europe exchange. It was at $75.52 a barrel at 3:12 p.m. Singapore time. The contract fell $1.24, or 1.6 percent, to $75.19 a barrel yesterday.

Brent traded at a premium of $2.44 a barrel to West Texas Intermediate contracts traded on New York today after widening to $2.57 yesterday, the highest since August. The Nymex contract has declined relative to the U.K. grade as U.S. stockpiles rose.

Oil inventories at Cushing, Oklahoma, the delivery point for Nymex futures, rose to 30.89 million barrels in the week ending Nov. 27, the highest since early September.

“The refinery runs are in the low 80’s or lower now, so we’ll have to see those runs get back up to 85 percent and then you can start taking those stocks out of Cushing,” said Hudson Capital’s Chu. “The runs are really the key.”

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net

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Copper Falls in London on Slower Growth in Japan: LME Preview

By Anna Stablum

Dec. 9 (Bloomberg) -- Copper fell for a fifth day in London, posting the longest losing streak since July, as Japan’s economy grew less than expected in the third quarter and concern mounted about Greece’s ability to meet debt commitments.

Market News:

Metals News:

Metals Prices:

-- Copper declined 0.8 percent to $6,920 a metric ton on the
LME at 8:21 a.m. Relative Strength Index 55.
-- Aluminum dropped 0.9 to $2,143 a ton. RSI 64.
-- Zinc shed 1.2 percent to $2,300 a ton. RSI 53.
-- Lead fell 0.2 percent to $2,282 a ton. RSI 46.
-- Nickel little changed at $16,150 a ton. RSI 40.
-- Tin eased 0.7 percent to $15,050 a ton. RSI 51.

Other markets:      Last           % Change  % YTD
Dollar Index        76.079          -0.2     -6.4
Crude oil           $73.38           1.1       65
Gold                $1,134.30        0.5       29
MSCI World Index    1,148.98        -0.2       25

Economic Events:
                                Forecast       Prior     Time
                                                      (London)
U.S.  MBA Mortgage Applications                  2.1%     12:00
UK Pre-Budget Report Published                            12:30
U.S. Wholesale Inventories        -0.5%          -0.9%    15:00
JN   Machine Orders (MoM)         -4.4% 0.7%     10.5%    23:50

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

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Gold Rallies After Slide to Three-Week Low Lures Investors

By Kim Kyoungwha

Dec. 9 (Bloomberg) -- Gold advanced for the first time in five days on speculation that the metal’s slide to the lowest price in three weeks is attracting some investors.

Bullion slumped 2.6 percent yesterday as the dollar strengthened and after Lee Eung Baek, head of reserve management at the Bank of Korea, described gold as an “illusion” and said the bank is unlikely to raise holdings.

“There’s some buying on weakness in gold and oil so far,” said Ben Westmore, a commodities analyst with National Australia Bank in Sydney. “We’ve seen quite thin trading in commodities markets as it moves into the turn of the year. Some investors are still optimistic about the global recovery and willing to buy on weakness.”

Gold for immediate delivery strengthened as much as 0.8 percent to $1,136.90 an ounce before trading at $1,134 at 1:53 p.m. in Singapore. The price dropped to $1,124.60 an ounce yesterday, the lowest price since Nov. 16.

February-delivery futures on the New York Mercantile Exchange’s Comex unit slid 0.7 percent to $1,135.20.

The Dollar Index, a six-currency gauge of the dollar’s value, fell 0.1 percent today.

The dollar traded near a five-week high against the euro on speculation that credit ratings of more European nations will be cut after Fitch Ratings lowered Greece’s debt ranking. The euro bought $1.4724 from $1.4704.

“A rebounding dollar is giving an excuse to those who were trying to book profits ahead of year-end,” said Kim Kang Nam, a trader with Tongyang Futures Co. in Seoul. “Gold may find some support around $1,100.”

Silver for immediate delivery increased 0.6 percent to $17.695 an ounce. Palladium slipped 0.6 percent to $367.50 an ounce and platinum climbed 0.3 percent to $1,416 an ounce.

To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net;

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China to Close Steel Mills Failing Environment Limits

By Bloomberg News

Dec. 9 (Bloomberg) -- China, the world’s largest emitter of greenhouse gases, set new environmental and power standards for steelmakers and threatened closures to curb pollution and overcapacity.

Plants should cap effluent discharge at 2 cubic meters and sulfur dioxide emission at 1.8 kilograms for every ton of steel made, according to draft regulations the industry ministry made available for public comment on its Web site.

China, the world’s largest steelmaking nation, has rejected almost $29 billion of industrial projects this year and is planning measures to close plants to curb pollution, it said last month. A steel oversupply is overwhelming demand created by the government’s stimulus, and depressing profits for larger mills including Baoshan Iron & Steel Co.

“These environmental and power standards are all necessary for the long-term development of China’s steel industry,” said Hu Yanping, analyst at industry publication Umetal. “But the key is how to implement the policies. After all there are various parties involved with different profit interests.”

Baoshan Iron & Steel, the largest Chinese steelmaker, rose 0.7 percent to close at 9.24 yuan in Shanghai trading. The benchmark Shanghai index dropped 1.7 percent.

“Steel mills must exit the industry if they can’t meet the requirements,” the Ministry of Industry and Information Technology said in the proposal. Government departments shouldn’t approve construction and upgrading if the mills can’t meet the requirements and shouldn’t issue effluent discharge and land permits, the draft also said.

Copenhagen Summit

China is proposing the standards as Copenhagen this week hosts the United Nations climate summit, where delegates from almost 200 countries are discussing how to extend or replace the 1997 Kyoto Protocol. The Asian nation last month pledged to cut output of carbon dioxide gas per unit of gross domestic product by 40 percent to 45 percent by 2020 from 2005 levels.

Banks shouldn’t give credit support and government departments must not issue iron ore import permits and supply the steelmaking ingredient to mills failing to meet the new requirements, the Chinese ministry said today in the proposal.

Steel plants should cap energy consumption of blast furnaces at 411 kilograms coal equivalent and fresh water use at 6 tons for each ton they produce, the statement said.

The ministry also proposed that carbon steel mills should have a minimum production capacity of 1 million tons, and specialized makers of at least 500,000 tons. It didn’t suggest penalties for those failing to meet output limits.

Small Plants

“The draft has more details on power and environmental standards compared with the industry policy announced in 2005,” said Xu Xiangchun, chief analyst at researcher Mysteel Research Institute. China has between 300 to 400 carbon steel mills with individual capacity of less than 1 million tons, he said.

The government last month also issued environmental standards for lead smelting, capping sulfur dioxide emissions at a maximum of 8 kilograms for each ton of lead produced.

Crude steel production in China may rise 14 percent to 570 million tons this year, Xu Lejiang, chairman of Baosteel Group Corp., the parent of Baoshan Steel, said Dec. 3. The nation’s output capacity may have reached 700 millions or higher, the National Development and Reform Commission, the country’s top economic planner, said last week.

China is planning measures to close plants in steel, aluminum, cement, coke, paper, glass and utility industries, the Ministry of Environmental Production said Nov. 13. The NDRC is seeking to address the slow pace of consolidation in industries with overcapacity, it said Nov. 27.

--Xiao Yu. Editors: Tan Hwee Ann, Ravil Shirodkar.

To contact the Bloomberg News Staff of this story: Xiao Yu in Beijing at yxiao@bloomberg.net

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Asian Stocks Decline as Greece Rating Cut Dents Recovery Hopes

By Shani Raja and Jonathan Burgos

Dec. 9 (Bloomberg) -- Asian stocks fell, led by finance and mining companies, after Japan’s economy grew more slowly than estimated and Fitch cut Greece’s credit rating, denting confidence in the global economic recovery.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, sank 5.2 percent in Tokyo. Nissan Motor Co., a Japanese automaker that gets 35 percent of its revenue from North America, slumped 3.4 percent as the dollar weakened against the yen. Newcrest Mining Ltd., Australia’s largest gold producer, slipped 1.6 percent after the price of the metal dropped for a fourth day.

“Investor sentiment is worsening because of the reignited uncertainty about credit,” said Naoteru Teraoka, who helps oversee about $16 billion in Tokyo at Chuo Mitsui Asset Management Co. “There’s uncertainty about the future and companies are cautious.”

The MSCI Asia Pacific Index declined 0.6 percent to 120.19 as of 6:07 p.m. in Tokyo. The gauge has rallied 70 percent from a five-year low on March 9 on signs stimulus measures were reviving global growth. Japan’s Nikkei 225 Stock Average dropped 1.3 percent as the Cabinet Office said the economy expanded less than initially estimated in the third quarter.

Hong Kong’s Hang Seng Index fell 1.4 percent. Standard Chartered Plc dropped 4.2 percent after CLSA Asia-Pacific Markets recommended investors sell the stock.

China Lending Curbs

The Shanghai Composite Index fell 1.7 percent, extending yesterday’s 1.1 percent drop, on concern the government will curb new lending to avert asset bubbles. Industrial Commercial Bank of China Ltd., the nation’s biggest lender, fell 1.5 percent.

Australia’s S&P/ASX 200 Index lost 0.7 percent as reports showed consumer confidence fell in December and home-loan approvals dropped in October. Woolworths Ltd., the nation’s largest retailer, dropped 1.7 percent, while Australia & New Zealand Banking Group Ltd. dipped 1.9 percent.

New Zealand’s NZX 50 Index slipped 0.3 percent in Wellington, even as Finance Minister Bill English said the nation’s economic outlook was improving.

Futures on the Standard & Poor’s 500 Index added 0.2 percent. The gauge declined 1 percent yesterday, led by commodity producers. Fitch cut Greece’s credit rating one step to BBB+, the third-lowest on the investment-grade scale, and said the outlook for the rating is negative. Standard & Poor’s yesterday put the country’s rating on watch for a downgrade.

‘Sense of Indecision’

“There’s a sense of indecision,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which oversees about $75 billion. “The fact that Greece has been downgraded is going to upset the market in the short term.”

Separately, Nakheel PJSC, the Dubai World property developer, posted a first-half loss of 13.4 billion dirhams ($3.65 billion) as it wrote down the value of land and property, according to a document obtained by Bloomberg News.

Dubai World roiled global markets two weeks ago after seeking to delay debt repayments. It last week began talks with banks to restructure $26 billion of debt, including a $3.52 billion Islamic bond of Nakheel’s maturing on Dec. 14.

Mitsubishi UFJ was the biggest drag on MSCI Asia Pacific Index, dropping 5.2 percent to 477 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by value, slipped 2.7 percent to 2,740 yen. Mizuho Financial Group Inc., the nation’s No. 3 lender by market value, sank 3 percent to 161 yen.

Japan GDP Revision

Japan’s gross domestic product rose at an annual pace of 1.3 percent, slower than the 4.8 percent reported in preliminary figures last month, the Cabinet Office said today. The revised figure was also lower than the predictions of all but one of the 17 economists surveyed by Bloomberg News.

The Japanese government yesterday unveiled a 7.2 trillion yen ($81 billion) economic stimulus package, bringing to more than 29 trillion yen the amount of spending to boost the economy since September 2008.

In Shanghai, ICBC, as the world’s most profitable bank is known, dropped 1.5 percent to 5.22 yuan. China Construction Bank Corp., the nation’s second-biggest lender, slipped 1.3 percent to 6 yuan.

The China Banking Regulatory Commission will “strictly control lending to industries that are energy-intensive, polluting and have overcapacity, and raise the quality of lending,” Chairman Liu Mingkang said late yesterday. Overall, it will “increase regulatory supervision,” the official said.

Japanese exporters declined as the stronger yen threatened to reduce the value of overseas revenue at the companies when converted into their home currency.

Japan Exporters Decline

Nissan slumped 3.4 percent to 711 yen. Sony Corp., an electronics maker that gets 24 percent of revenue in the U.S., lost 2.9 percent to 2,510 yen. Canon Inc., the world’s biggest maker of office equipment, declined 1.6 percent to 3,650 yen.

The yen appreciated to as high as 87.79 against the dollar in early trading today in Tokyo, compared with 88.90 at the 3 p.m. close of stock trading yesterday. Against the euro, Japan’s currency strengthened to as much as 129.18 from 131.96.

“Concerns remain about currencies as well as overseas credit risks,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo.

The MSCI Asia Pacific Index’s rally from the March low has outpaced gains of 61 percent by the S&P 500 and 54 percent for Europe’s Dow Jones Stoxx 600 Index. Stocks in the benchmark are valued at 22 times estimated earnings, compared with 17 times for the S&P 500 and 15 times for the Stoxx.

Australian Consumer Confidence

In Sydney, Woolworths slipped 1.7 percent to A$26.96. Harvey Norman Holdings Ltd., Australia’s biggest electronics retailer, dropped 2.6 percent to A$4.12.

The country’s consumer confidence fell in December after central bank Governor Glenn Stevens increased borrowing costs for an unprecedented third straight month, according to a survey by Westpac Banking Corp. and the Melbourne Institute.

The number of loans granted to build or buy houses and apartments in Australia dropped 1.4 percent in October from the previous month, when they gained a revised 3.3 percent, the country’s statistics bureau said today.

ANZ Bank, the nation’s fourth-largest lender, dropped 1.9 percent to A$21.51. Westpac lost 1.1 percent to A$23.59.

In Hong Kong, Standard Chartered declined 4.2 percent to HK$182.20. CLSA Asia-Pacific Markets cut its recommendation on the stock to “sell” from “underperform.” It was CLSA’s second downgrade of Standard Chartered in two weeks after Dubai World attempted to reschedule its debt.

Miners Slide

Newcrest lost 1.6 percent to A$35.17. Sumitomo Metal Mining Co., Japan’s biggest gold producer, dropped 2.6 percent to 1,403 yen. Zijin Mining Group Co., China’s biggest producer of the metal, slipped 1.7 percent to HK$8.12 in Hong Kong. Gold futures in New York fell 1 percent to $1,132.20 an ounce in New York, the fourth day of declines.

“There was a whole host of negative issues that gave people an excuse to cut back on risky positions,” said Chris Weston an institutional dealer at IG Markets in Melbourne. “People seem quite happy to sit on the sidelines until the new year.”

BHP Billiton Ltd., the nation’s biggest oil producer, fell 1.2 percent to A$40.55. Crude oil dropped 1.8 percent to $72.62 a barrel yesterday, the lowest settlement since Oct. 9. Oil rose 1 percent today.

Woodside Petroleum Ltd., Australia’s second-largest oil producer, slipped 2.1 percent to A$47.17. Mitsui & Co., which gets half of its sales from energy and metals, declined 3.3 percent to 1,234 yen.

New Zealand Oil & Gas Ltd., the country’s biggest publicly traded explorer, lost 1.1 percent to NZ$1.77. New Zealand could do better than expected in the May budget, Finance Minister Bill English told parliament’s finance & expenditure select committee in Wellington today.

To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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U.K. Stocks Fluctuate; Kazakhmys, Man Group Retreats, RBS Gains

By Roger Neill

Dec. 9 (Bloomberg) -- U.K. stocks fluctuated as Kazakhmys Plc followed copper prices lower and Man Group Plc said the net asset value of its flagship fund dropped, countering a rebound in Royal Bank of Scotland Group Plc.

The benchmark FTSE 100 Index lost 6.35, or 0.1 percent, to 5,216.78 as of 8:45 a.m. in London.

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European, Asian Stocks Decline; Man Group, Mitsubishi Retreat

By Adam Haigh

Dec. 9 (Bloomberg) -- European stocks declined for a third day and Asian shares fell after Japan’s economy grew more slowly than estimated and Fitch Ratings downgraded five Greek banks.

Man Group Plc, the biggest publicly traded hedge-fund manager, slid 3.6 percent after the value of its flagship fund dropped. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded bank, sank 5.2 percent in Tokyo. Debenhams Plc advanced 3.1 percent after BofA Merrill Lynch Global Research recommended the retailer.

Europe’s Dow Jones Stoxx 600 Index slipped 0.5 percent to 242.76 at 8:45 a.m. in London. The regional gauge has climbed 54 percent since March 9, lifted by record-low interest rates and about $12 trillion in spending by governments worldwide. The measure is valued at about 54 times its companies’ reported earnings, near the highest level since 2003, data compiled by Bloomberg show.

The MSCI Asia Pacific Index declined 0.6 percent today, led by finance and mining companies, after Japan’s economy expanded an annualized 1.3 percent in the third quarter, slower than the 4.8 percent reported last month.

Mitsubishi UFJ led the declines in Asia, dropping 5.2 percent to 477 yen. Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by value, slipped 2.7 percent to 2,740 yen. Mizuho Financial Group Inc., the nation’s third- largest lender by market value, sank 3 percent to 161 yen.

U.S. Futures

Futures on the Standard & Poor’s 500 Index added 0.2 percent. Treasury Secretary Timothy Geithner plans to tell Congress that the Obama administration will extend the $700 billion Troubled Asset Relief Program until next October, according to people familiar with the matter. A letter notifying Congress of the extension could come as soon as today said the people, who declined to be identified. Andrew Williams a Treasury Department spokesman, declined to comment.

Man Group dropped 3.6 percent to 305.2 pence after the net asset value of its flagship Man AHL Diversified Futures Ltd. fund fell 4.3 percent in the week ended Dec. 7.

Debenhams surged 3.1 percent to 82.5 pence. The U.K.’s second-largest department-store chain was raised to “buy” at BofA Merrill Lynch, which said “management will drive up profitability through better buying, mix and cost control.”

National Bank of Greece SA slid 4.7 percent to 17.35 euros and Alpha Bank SA dropped 3.7 percent to 7.72 euros. Fitch Ratings downgraded National Bank, Alpha Bank and three other Greek lenders following its downgrade of the nation’s sovereign rating to BBB+ from A- yesterday.

VW Gains

Volkswagen AG advanced 2.5 percent to 80.82 euros after Europe’s largest carmaker agreed to buy 20 percent of Suzuki Motor Corp. for 222.5 billion yen ($2.5 billion) to boost its presence in India. The Japanese automaker is the parent of Maruti Suzuki India Ltd., the maker of half of the cars sold in the country, which rose 1.7 percent to 1,595.8 rupees.

Reed Elsevier Plc, the publisher of Variety magazine, climbed 1.2 percent to 473.7 pence after Deutsche Bank AG raised its recommendation on the shares to “buy” from “hold.”

Chancellor of the Exchequer Alistair Darling today may boost the U.K. Treasury’s borrowing and raise taxes on bankers, part of the Labour government’s effort to revive voter support before next year’s election. Darling, who speaks at 12:30 p.m. London time in Parliament, may add 30 billion pounds ($48 billion) to the government’s borrowing forecasts for the next four years, according to the median estimate of 37 economists surveyed by the Treasury last month.

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

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