U.K. Banks to Swallow ‘Poison Pill’ of Bonus Tax

By Andrew MacAskill and Gavin Finch

Dec. 10 (Bloomberg) -- British Chancellor of the Exchequer Alistair Darling’s plan to levy a 50 percent tax on bonuses will make banks choose between punishing shareholders or employees.

Darling yesterday imposed the tax, to be paid by all banks operating in the U.K., on bonuses they pay employees until April 5. The measure, which the Treasury says will raise more than 550 million pounds ($890 million), will affect about 20,000 people.

Banks will have to decide whether to maintain payments to employees, allowing the additional tax expense to boost the cost of compensation and reduce profits for shareholders, or to protect profits by slashing bonuses. In some cases, firms may have to pay out bonuses because the terms have already been agreed with staff, said Jo Keddie, an employment lawyer at London-based Dawsons LLP.

“It’s a poison pill,” Keddie said in a telephone interview. “Either shareholders are going to take home less, or banks are going to have to punish their employees who have done very well,” she said. “It’s potentially shareholders that are going to lose out because many of the bonuses have already been agreed.”

Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, and U.K. banks including Barclays Plc and Royal Bank of Scotland Group Plc are most affected by the levy because they have the largest bonus pools, said Shaun Springer, chief executive officer of Square Mile Services Ltd., which advises London financial firms on pay.

‘Most to Lose’

Goldman Sachs, based in New York, set aside $16.7 billion to pay employees in the first nine months of the year. RBS’s directors are seeking to increase the amount the Edinburgh-based lender allocates for bonuses by at least 50 percent to 1.5 billion pounds, the Sunday Times reported Dec. 5, without saying where it got the information.

“Goldman has the most to lose,” said Springer. “Banks that employ the most U.K. citizens will be next in line.”

Barclays Capital, Barclays’s securities unit, employs about 20,000 people, and RBS employs about the same amount at its investment-banking division worldwide. Officials at Goldman Sachs, Barclays and RBS declined to comment.

International securities firms such as Goldman Sachs and JPMorgan Chase & Co. both base their European headquarters in the square mile, as London’s principal financial district is known. Goldman Sachs International Ltd., one of the firm’s more than 25 U.K. divisions, employed 5,831 people and allocated a total of 81 million pounds in gross wages and salaries in the year through November 2008, according to filings at the Cardiff, Wales-based registrar Companies House.

‘Bankers’ Folly’

U.K. financial firms were preparing to set aside as much as 6 billion pounds in bonuses for 2009, 50 percent more than 2008, according to an October report by the Centre for Economics & Business Research Ltd., a London-based research firm.

Rising bonus payments sparked anger among politicians and labor unions after the government provided more than 1 trillion pounds to prop up lenders including Royal Bank of Scotland during the credit crisis.

“It’s just not on to make nurses, social workers, dinner ladies, cleaners and hospital porters pay the price for the folly of the bankers,” said Dave Prentis, general secretary of Unison, the U.K.’s largest public employees’ union. “The people who earn most should pay the most.”

The U.K. will force banks awarding discretionary bonuses of more than 25,000 pounds to pay the one-time levy. Employees will still have to pay income tax on bonuses, the Treasury said. The top tax rate on earnings of more than 150,000 pounds will rise to 50 percent in April, a measure announced earlier this year. The bonus measure may be extended beyond April if the Treasury finds banks are deferring payments.

Thatcher, Blair

“On a bonus of 1 million pounds, the new tax will be 500,000 pounds, National Insurance will be 130,000 pounds, and personal income tax is 400,000 pounds,” said Chris Maddock, tax director of Vantis Group Ltd. “This makes a total of 1.03 million pounds for the Treasury.”

Bankers aren’t the first to be subject to an industry- specific tax. In 1981, the Conservative Party under Margaret Thatcher imposed a 2.5 percent levy on bank deposits, saying that rising interest rates were generating unearned profit. Almost two decades later, Tony Blair later put a windfall levy on utility companies.

Package Differently

“It’s something that the banks are probably going to have to pay up on this year and hope it doesn’t happen again,” said Daniel Naftalin, a partner at Mishcon de Reya in London. “This isn’t really a tax on individual bankers, so the government is a lot less open to legal challenges than it could have been.”

Taxes on bankers pay may extend beyond the next general election even if the Conservative Party who are leading in the polls take power, said Mark Wickham-Jones, professor of politics at the University of Bristol.

“One of the by products of the banking crisis is that it has marginalized bankers and turned them into a sort of bogey man,” he said. “The Conservative Party may continue with similar measures arguing the taxes are functional. They will just package the rhetoric differently.”

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

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Australian Employment Soars for Third Straight Month

By Jacob Greber

Dec. 10 (Bloomberg) -- Australian employment soared for a third straight month as companies added six times more jobs than economists estimated. The nation’s currency rose as traders bet the central bank will keep raising interest rates next year.

The number of people employed gained 31,200 in November from October and the jobless rate fell to 5.7 percent from 5.8 percent, the statistics bureau said in Sydney today.

Reserve Bank Governor Glenn Stevens raised the benchmark interest rate Dec. 1 for an unprecedented third straight month and said this week the economy is stronger than he previously forecast. Mining companies including BHP Billiton Ltd. are taking on more workers as they increase iron-ore production to satisfy China’s demand for steel.

“It looks increasingly like the unemployment rate’s going to top out a little bit below 6 percent,” said David Forrester, a currency economist at Barclays Capital in Singapore. “That may pressure the RBA to move a little bit faster on rates.”

The Australian dollar rose to 91.53 U.S. cents at 1:33 p.m. in Sydney from 91.05 cents just before the report was released. The two-year government bond yield rose 10 basis points to 4.5 percent.

Bets on Rates

Investors are betting there is a 60 percent chance of a quarter-point increase in the benchmark lending rate to 4 percent at the central bank’s next meeting on Feb. 2, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 12:10 p.m. It stood at 48 percent just before today’s report. Rates are near zero in the U.S. and Japan.

The local currency has risen 40 percent in the past 12 months, the most among the 16 major currencies tracked by Bloomberg. The Australian dollar carry trade, in which investors borrow yen, Swiss francs and U.S. dollars to invest in higher yielding assets, is helping stoke the nation’s currency, central bank official Guy Debelle said.

“The Australian dollar carry trade now again appears to be back in vogue,” the Reserve Bank assistant governor said in Sydney today. “The Australian interest-rate differential remains relatively high compared to most other major currency pairs.”

Australia’s economy shows signs of strengthening, helped by a surge in business confidence last month to the highest level in more than seven years, and increased Asian demand for iron ore, coal and gas.

Natural Gas

Chevron Corp. said Dec. 5 it has signed an agreement with Japan’s Tokyo Electric Power Co. to supply liquefied natural gas from its Wheatstone venture in Western Australia, a deal the Australian government values at A$90 billion ($82 billion). The project is forecast to generate 6,500 jobs during construction.

It is in addition to the Chevron-led Gorgon gas venture, which is forecast to create another 10,000 jobs when construction starts early next year. Qantas Airways Ltd.’s low- cost carrier Jetstar is also taking on more workers.

The number of full-time jobs gained 30,800 in November and part-time employment increased 300, today’s report showed. Employers have added 99,500 new jobs in the past three months. The median estimate of 22 economists surveyed by Bloomberg was for an increase of 5,000 jobs in November.

BHP and Rio Tinto Group boosted iron-ore production to a record in the third quarter to satisfy Chinese demand for steel, which helped exports surge 5 percent in September.

The labor market in “the mining sector is pretty much back to capacity,” Governor Stevens told economists in Sydney on Dec. 8. “There are a lot of other countries in the world who would like to have that problem.”

U.S. Unemployment

Unemployment in the U.S. was 10 percent in November, 9.8 percent among European Union countries in October, the highest level in more than a decade, and 7.8 percent in the three months through September in the U.K.

“Australia has lived up to its reputation as the ‘wonder from Down Under,’” Craig James, chief economist at CommSec, said in a note after the report was released. “The economy may not yet be going gangbusters, but Australia clearly has the strongest economy in the developed world.”

Rising consumer demand after Prime Minister Kevin Rudd’s government distributed more than A$20 billion ($18 billion) in cash to households is also prompting airlines and retailers to boost hiring.

Airline Jobs

Jetstar plans to hire 300 workers as it adds 700,000 new seats to existing routes with four extra Airbus 320 planes, the Australian Financial Review said today, citing Chief Executive Officer Bruce Buchanan.

Michael Luscombe, chief executive officer of Australia’s largest retailer, Woolworths Ltd., told Bloomberg in an Oct. 20 interview the company will hire another 6,000 workers.

Advertisements for job vacancies jumped in November by the most since May 2007, a survey by Australia & New Zealand Banking Group Ltd. showed this week.

The government is also stoking demand for workers as it spends A$22 billion on roads, ports, schools and hospitals. An index of business confidence rose in November to the highest level since May 2002, according to a National Australia Bank Ltd. survey published on Dec. 8.

“At the beginning of the year, I would not have expected the economy be looking as good as it does” now, Stevens said this week. “I thought things would turn out rather worse than they have. But who’s complaining? Not me.”

Stevens is the only central banker in the world to raise borrowing costs three times this year, predicting Chinese demand for iron ore will stoke a surge in economic growth in Australia, one of the few nations to skirt the global recession.

The participation rate, which measures the labor force as a percentage of the population aged over 15, fell to 65.2 percent in November from a revised 65.3 percent, today’s report showed.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Japan Machinery Orders Decline as Companies Cut Costs

By Keiko Ujikane and Tatsuo Ito

Dec. 10 (Bloomberg) -- Orders for Japanese machinery fell in October, adding to signs the nation’s rebound from its deepest postwar recession isn’t strong enough to encourage companies to spend on plant and equipment.

Orders, an indicator of business investment in three to six months, declined 4.5 percent from September, when they increased 10.5 percent, the Cabinet Office said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg was for a 4.4 percent drop.

Companies including Kyocera Corp. are cutting costs to limit losses, and have little incentive to add plant and equipment with more than one third of the country’s factory capacity sitting idle. A government report yesterday showed growth last quarter was a third of the pace initially reported as businesses slashed spending.

“We do not expect a full-scale capex recovery anytime soon given uncertainties surrounding the corporate earnings picture,” said Tetsufumi Yamakawa, chief Japan economist at Goldman Sachs Group Inc. “Exports will remain the key economic driver in 2010-11 amid continued weakness in domestic demand.”

The yen traded at 88.26 per dollar at 10:40 a.m. in Tokyo from 88.03 before the report was published. The Nikkei 225 Stock Average rose 0.1 percent.

Today’s report suggests Japanese companies are concerned about the sustainability of global demand once more than $2 trillion in government stimulus wears off.

Stocks Fall

Japanese stocks fell yesterday after a report showed gross domestic product growth slowed last quarter and a Dubai developer posted a $3.65 billion loss, fueling concern the recovery in the global financial system would stall. The yen, which climbed to a 14-year high of 84.83 per dollar on Nov. 27, has gained more than 4 percent in the past three months. An advance in the currency erodes the value of profits exporters earn overseas.

“Factory orders will stay at a low level because corporate sentiment isn’t rising,” said Yasuhiro Onakado, chief economist at Daiwa SB Investments Ltd. in Tokyo. “The stronger yen and the Dubai shock have increased uncertainties about the future, so companies can’t help but be cautious about spending.”

Manufacturer orders rose 25.4 percent in October led by a large request for chemical equipment, the Cabinet Office said. Orders by non-manufacturers fell 17.3 percent, the report said.

Combat Deflation

The Japanese government unveiled a 7.2 trillion yen ($81 billion) economic stimulus package this week to combat deflation and the rising yen. The plan came a week after the Bank of Japan released a 10 trillion yen credit program to support the economy.

Some companies are trying to protect earnings by cost reductions from cutting jobs and slashing investment in plant and equipment.

Kyocera plans to close a mobile phone factory in Tianjin, China, and consolidate production in Malaysia to help return the business to profit, the Nikkei newspaper reported last month. The Kyoto-based company has been cutting production amid struggling sales in North America, the newspaper said.

Sega Toys Co. said on Dec. 1 that it plans to eliminate 35 jobs and to save about 300 million yen from the measure.

Increase Outlays

Some economists say Japanese companies may become confident enough to increase outlays as their earnings recover.

Last quarter “should still mark the bottom in the investment cycle,” said Julian Jessop, chief international economist at Capital Economics Ltd. in London, citing improvements in areas including capacity use and profits. “The weakness last quarter may simply reflect the long lags between projects being put on hold at the height of the financial crisis and this showing up in the actual data.”

The Cabinet Office forecast last month orders will increase 1 percent in the three months ending Dec. 31, which would be the first advance in seven quarters.

Demand from Asia, especially China, is helping Japanese exports and production. Exports fell at the slowest pace in a year in October and industrial output increased for an eighth month. China’s economy, Japan’s biggest overseas market, grew 8.9 percent in the third quarter, the fastest expansion in a year, spurring demand for Japanese cars and electronics.

“On the whole, machinery orders are showing signs of bottoming,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo. “Exports are looking strong, so Japan will probably be able to avoid a double-dip recession.”

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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Chinese Exports May Rebound, Spurring Deutsche Bank Bet on Yuan

By Bloomberg News

Dec. 10 (Bloomberg) -- China is likely to report its first gain in overseas shipments in 13 months, beginning a rebound that may encourage the world’s second-biggest exporting nation to let the yuan strengthen next year.

Exports rose 1.4 percent in November from a year earlier, according to the median estimate of 26 economists surveyed by Bloomberg News. The trade surplus swelled to $24.3 billion, the largest this year excluding seasonal distortions, tomorrow’s report in Beijing may show.

China’s exports may jump 20 percent in the first quarter of 2010 because of the global recovery and comparisons with this year’s low base, according to Macquarie Securities Ltd. and Royal Bank of Scotland Group Plc. Yuan forwards suggest that the currency will appreciate about 2.6 percent against the dollar in the next 12 months even after Premier Wen Jiabao last month rebuffed Europe’s calls for gains.

“Global political pressure for currency gains will continue to intensify,” said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. “China may begin to increase the flexibility of its currency in March or April.”

Ma forecasts a gain of as much as 5 percent against the dollar in the next year.

China had “good reason” to depreciate its currency during the global financial crisis as exports fell and chose instead to keep the yuan stable, central bank Deputy Governor Zhu Min said at a forum in Beijing yesterday. He echoed Wen’s comments to European leaders, saying a stable yuan aids a world recovery.

Return to Inflation

“We took the same policy as we did in the Asian financial crisis; we decided to stabilize the renminbi exchange rate,” the central banker said, using another word for the yuan.

November’s data may show a return to inflation as China’s economy rebounds from the slowest growth in almost a decade and food prices climb. Consumer prices rose 0.4 percent from a year earlier, the survey of economists showed.

Industrial output gained 18.2 percent, the most in more than two years, and retail sales climbed 16.5 percent, economists estimated. Banks may have extended 250 billion yuan ($36.6 billion) of local-currency loans, compared with 253 billion yuan in October.

Urban fixed-asset investment may have increased 33 percent in the first 11 months of 2009 from a year earlier as stimulus spending and unprecedented bank lending drove a recovery.

Citic Securities Co. said Dec. 8 that China’s textile and apparel companies may “outperform” as domestic sales are sustained and exports recover, recommending companies including Fujian Septwolves Industry Co., Luthai Textile Co. and Youngor Group Co.

‘Toughest Time’

“The toughest time is behind us and we expect overseas demand to continue to recover next year,” Kelly Wen, the overseas sales manager of shoe company Yaqite Industrial Co. said at the Canton Fair, China’s biggest trade show, last month.

China’s trade surplus, export gains and a currency effectively pegged to the dollar may exacerbate trade tensions. China faces U.S. tariffs on tires and European Union duties on screws and bolts and is investigating imports of U.S. autos and poultry.

China was the second-biggest exporter of goods in 2008 and is poised to overtake Germany. The Asian nation’s trade surplus was $24 billion in October.

The nation already sees itself as being at the center of world trade friction, facing 101 trade-remedy investigations in 19 countries and regions involving more than $11 billion of goods, the state-run Xinhua News Agency reported Dec. 3, citing the commerce ministry.

Trade ‘Tranquility’

Morgan Stanley’s Asia chairman Stephen Roach said that high unemployment in the U.S. and the need to win votes in congressional elections in November next year may push President Barack Obama to take tougher trade action against China.

“This is not a recipe for tranquility on trade,” Roach said in an interview in Beijing on Dec. 3.

Wen told European leaders Nov. 30 that calls for the yuan to appreciate are “unfair” as the country faces rising protectionism and a stable yuan aids the world’s recovery.

Authorities in Beijing have held the currency steady at about 6.83 against the U.S. dollar since July 2008. The yuan rose 21 percent in the three years after a fixed exchange rate was scrapped in 2005.

The International Monetary Fund says the yuan is “substantially” undervalued and Pacific Investment Management Co., which runs the world’s biggest bond fund, describes bets that China will ease controls on its currency as among the best in emerging markets.

‘Gradual’ Gains

Societe Generale SA said Dec. 8 that investors should use call options to benefit from China allowing “gradual” gains in the yuan next year as the economy recovers.

Policy makers are more likely to allow yuan appreciation for domestic economic reasons than in response to pressure from foreign governments, said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong.

Inflation pressures are building as import prices rise and “if you don’t allow the yuan to appreciate you are shooting yourself in the foot,” Lai said.

--Kevin Hamlin, Li Yanping. Editors: Paul Panckhurst, Leon Mangasarian.

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

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Saudi Arabia to Supply Full Crude Oil Volumes to Asia

By Christian Schmollinger and Yuji Okada

Dec. 10 (Bloomberg) -- Saudi Arabian Oil Co., the world’s largest producer, will supply full volumes of crude to refiners in China, South Korea and Japan for January.

Saudi Aramco, as the company is known, will provide 100 percent of cargoes sold under long-term contracts next month, according to a Bloomberg News survey of refinery officials in Japan, South Korea, China, who asked not to be identified because of confidentiality of agreements with the company.

For December, Saudi Aramco will provide full volumes to refiners in Japan while other Asian refiners will get 85 percent to 90 percent of their contracted deliveries.

Aramco on Dec. 6 raised the official selling price for its Medium grade by 10 cents to a discount of 45 cents a barrel to the average price of Middle East benchmarks Oman and Dubai. It Heavy crude was increased by 20 cents to a discount of $1.25 a barrel. Arab Light, the country’s largest export type, was lowered by 5 cents to a premium of 45 cents a barrel.

Super Light crude was raised by 40 cents to a premium of $1.70 a barrel while Extra Light was left unchanged at a premium of $1.25 a barrel.

Saudi Arabia has reduced its output under the production quotas instituted by the Organization of Petroleum Exporting Countries. The country is OPEC’s biggest producer.

Saudi Arabia has an OPEC production quota of 8.051 million barrels a day. In November, the kingdom pumped 8.19 million barrels a day, up from 8.19 million barrels a day in October, according to a Bloomberg News survey.

OPEC’s compliance with its production target has slipped as crude prices have climbed. The target for the 11 members with quotas, all except Iraq, is set at 24.845 million barrels a day. Since reaching a low of 25.32 million barrels a day in March, output has climbed to 26.5 million barrels a day last month.

Crude oil traded in New York was at $70.68 a barrel at 12:21 p.m. Singapore time. Prices have gained 59 percent this year. The OPEC price basket, a volume-weighted average of the various grades produced by the group, was at $74.60 on Dec. 8, the last day it was calculated. That’s up from $37.73 a barrel a year ago.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net

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BOE May Hold Bond Purchases at 200 Billion Pounds

By Jennifer Ryan

Dec. 10 (Bloomberg) -- The Bank of England will probably today stick to its plan to spend 200 billion pounds ($326 billion) on bonds as officials seek to cement Britain’s recovery from recession.

The Monetary Policy Committee, led by Governor Mervyn King, will keep the purchase program unchanged, according to all 38 economists in a Bloomberg News survey. Policy makers said last month they may also consider trying to stoke lending with a reduction in the rate paid on commercial bank deposits. The bank will announce today’s decision at 12 p.m. in London.

Bank of England policy makers expanded the emergency bond plan last month after Britain unexpectedly stayed mired in the longest recession on record in the third quarter. Chancellor of the Exchequer Alistair Darling said today the recession hasn’t ended, a day after he proposed measures to aid growth amid a record budget deficit.

“Darling and King both see the recovery as being fairly tentative at the outset and the need to maintain the stimulus that’s in place at least for the next year,” said David Tinsley, an economist at National Australia Bank who used to work at the central bank. “There’s an outlying risk that they move on the deposit rate, but our view is that if they want do anything more at all they’ll wait.”

The bank will keep its benchmark interest rate at a record low of 0.5 percent, according to all 53 economists in a Bloomberg News survey. The Swiss National Bank kept its benchmark, the three-month Libor target, at 0.25 percent, as forecast by all 16 economists in a Bloomberg News survey.

‘Open Mind’

The Bank of England has now spent more than 187 billion pounds of newly created money on bonds. The bulk of its purchases have been in gilts, with the rest on corporate securities.

King said last month he had an “open mind” on further bond purchases as he weighed the risk that withdrawing stimulus too soon will jeopardize the recovery. Policy makers said at the November decision that the next “most natural time” to assess the plan will be in February, when they produce new economic forecasts.

The economy may now have escaped the recession. An index of service company growth stayed close to a two-year high in November, the Chartered Institute of Purchasing and Supply and Markit Economics said last week. Gross domestic product rose 0.2 percent in the quarter through November, an estimate by the National Institute of Economic and Social Research shows.

Tesco Plc, the world’s third-largest retailer, is seeing “improving customer confidence and encouraging trends in both the U.K. and our international businesses,” Chief Executive Officer Terry Leahy said in a statement this week.

Darling’s Forecast

Darling predicted yesterday that the economy will expand as much as 1.5 percent next year after contracting 4.75 percent in 2009. He pledged to increase income taxes as the recession drives up U.K. government borrowing, and said today spending cuts are in store.

“We’re not out of recession yet,” he told BBC Radio 4 today. “A reduction in spending, that will be done in an orderly way, it will be tough.”

The U.K. will increase gilt sales to a record 225.1 billion pounds in the year ending March 2010. Gilts advanced after the announcement yesterday, though today the yield on the 10-year bond rose 9 basis points to 3.753 percent as of 8:51 a.m. in London. The pound rose 0.4 percent to $1.6284.

While the Bank of England has been trying to keep a lid on yields with its purchases of government bonds, it has also pursued other measures to ensure the recovery.

The bank said last week it will consider selling corporate bonds it purchased to improve market liquidity. While conditions in the new issue, or primary, bond market have improved, buying and selling of company bonds in the secondary market is “somewhat restricted,” it said.

Deposit Rate

Policy makers also discussed cutting the deposit rate last month to spur lending. While they said it was “unlikely to have a significant impact on the outlook,” they said that it “could ease monetary conditions further” and might be something they would consider in future.

“There won’t be any change at the Bank of England this month, though there may be some discussion of other measures,” said Jonathan Loynes, an economist at Capital Economics in London. “They won’t want to slam on the brakes when the economy hasn’t emerged from the recession.”

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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SNB to Stop Bond Purchases, Joining Central-Bank Exit

By Klaus Wille

Dec. 10 (Bloomberg) -- Switzerland’s central bank said it will stop purchases of corporate bonds as it joins other countries in starting to withdraw emergency measures.

The Swiss National Bank, which announced plans to buy bonds in March, also held the three-month Libor target at 0.25 percent, as expected by all 16 economists in a Bloomberg News survey. It will continue to “act decisively to prevent any excessive appreciation” in the Swiss franc, it said.

Central banks around the world have started withdrawing measures used to fight the worst global recession in more than six decades. While the Swiss economy returned to growth in the third quarter, SNB Chairman Jean-Pierre Roth said today that a “swift correction in monetary policy would be precipitate” as deflation risks remain.

“The interesting part was the first settings of an exit road map,” said Julien Manceaux, an economist at ING Group in Brussels. “The SNB did not rush to the exit door. Although all economic indicators have improved since the last meeting, it is certainly too early to act.”

The franc was little changed as of 10:45 a.m. in Zurich, at 1.5113 per euro from 1.5120 yesterday.

Roth said the franc has stayed “stable” against the euro since the SNB began intervening and that the central bank’s monetary policy since March “has been effective.”

Growth Forecast

Some central banks have already started unwinding their non-conventional policies. European Central Bank President Jean- Claude Trichet last week announced plans to scale back its emergency lending next year. Federal Reserve Chairman Ben S. Bernanke has promised a “smooth” withdrawal of stimulus in the U.S.

Swiss gross domestic product rose 0.3 percent in the three months through September, ending a year-long contraction, and data indicate the recovery is strengthening. The KOF leading indicator has risen for seven months and manufacturing has resumed expansion.

The SNB sees the economy expanding between 0.5 percent and 1 percent in 2010 after a contraction of about 1.5 percent this year. It previously forecast that the economy would shrink as much as 2 percent this year. It sees inflation averaging 0.5 percent in 2010 and 0.9 percent in 2011.

“Risks remain significant, and for this reason we are maintaining our expansionary monetary policy,” said Roth, chairing his last monetary policy meeting before Vice-Chairman Philipp Hildebrand takes over in January.“The legacy of the crisis still weighs heavily.”

To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net.

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British Pound Strengthens Against Euro Before BOE Rate Decision

By Keith Jenkins

Dec. 10 (Bloomberg) -- The pound rose against the euro for the first day in three before the Bank of England decides on interest rates and its asset-purchase plan.

Sterling also snapped a five-day decline versus the U.S. currency. Policy makers, led by Governor Mervyn King, will keep the benchmark rate at a record low of 0.5 percent and their bond-buying program unchanged at 200 billion pounds ($326 billion), according to separate analyst surveys by Bloomberg.

We don’t expect any policy change from the Bank of England, said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.

The pound appreciated to 90.43 pence per euro as of 9:16 a.m. in London, from 90.56 pence yesterday. The U.K. currency was little changed at $1.6267, from $1.6261.

Sterling may depreciate toward $1.50 and 92.40 pence against the euro over the next six months, Hardman said.

Gilts dropped, sending the yield on the 10-year bond up 13 basis points to 3.79 percent. The two-year note yield advanced 4 basis points to 1.15 percent.

To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net

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Americans Want Government to Spend for Jobs, Send Bill to Rich

By Mike Dorning and Catherine Dodge

Dec. 10 (Bloomberg) -- Americans want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless.

They also want the deficit to come down. And most are ready to hand the bill to the wealthy.

A Bloomberg National Poll conducted Dec. 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit.

Even though almost 9 of 10 respondents also say they believe the middle class will have to make financial sacrifices to achieve that goal, only a little more than one-fourth support an increase in taxes on the middle class. Fewer still back cuts in entitlement programs such as Social Security and Medicare or a new national consumption tax.

These long-standing contradictions in voters’ attitudes toward taxes, spending and the deficit are intensified as the U.S. grapples with the most severe economic crisis in decades, says J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. The rich have become an especially inviting target as the combination of a bank bailout and big bonuses stoke resentments, she says.

“People are hurting,” Selzer says. “They want anything that can help and not hurt them more.”

“It’s hard enough just to get by,” says poll respondent Trevor Wofsey, 32, a postal carrier in Big Pine Key, Florida. “We’re being cut at every level: There are less hours at work and they want us to pay more into medical. Food is up, gas is up.”

Obama Jobs Initiative

The findings are in tune with the job-promotion initiatives President Barack Obama announced Dec. 8, as well as the administration’s assurances it will address the deficit, and proposals from some Democratic lawmakers to raise taxes on the wealthy.

The difficulty of reconciling public demands for government action on jobs while at the same time reducing the deficit is shaping up as a major political theme ahead of the 2010 midterm elections. Obama and Democrats in Congress confront an unemployment rate that was 10 percent for November and a deficit that is forecast to be more than $1 trillion over each of the next two years.

While the public sees both unemployment and the deficit as a threat, anxiety over unemployment is higher. Eight out of 10 poll respondents rate unemployment a high risk to the economy in the next two years and 7 of 10 say the same about the deficit.

Infrastructure Spending

The poll contains some of the features Obama announced in his jobs plan. Two-thirds of Americans back boosting spending on infrastructure. Six of 10 also support more spending on alternative energy to stimulate job growth, another measure Obama announced.

“The best thing we could do is take some public money to rebuild our infrastructure and improve it,” says poll respondent Richard Kellaway, 75, a Unitarian Universalist minister who lives in Dorchester, Massachusetts. Unemployed people “could be put to work in a matter of days.”

Americans support a range of other potential new government initiatives presented as employment programs, with ideas from both parties backed by wide majorities. An across-the-board tax cut, a favorite of some Republicans, also is supported by 6 of 10 Americans.

A tax credit for businesses that hire new workers, which Obama favored as a presidential candidate and this week proposed in a limited form available only to small firms, gains backing from 7 of 10 Americans.

Skeptical About Results

Americans support the proposals even as they express doubts the federal government will help cut joblessness. A 51 percent majority say they are pessimistic about the prospects.

When it comes to the deficit, they are more distrustful: 61 percent say they are pessimistic the government will bring down the budget shortfall.

Nearly 9 out of 10 Americans say the middle class will have to make sacrifices to cut the deficit. That doesn’t mean that they are ready to embrace the idea.

“With the middle class making more sacrifices than they are already making because of what the government ran up, it’s going to eventually leave the middle class at the bottom,” says poll respondent Laisha Wright, 25, an unemployed resident of Columbus, Ohio.

The wealthy would be better able to bear the burden of more taxes, she says. “I don’t think it would be a big issue for them.”

Across Party Lines

The appeal of taxes on the wealthy crosses party lines. About half of Republicans back the idea and it is more popular among Democrats and independents.

House Democrats have proposed surtaxes on the wealthy to pay for the health-care overhaul and the decision to send an additional 30,000 troops to Afghanistan Obama announced last week.

Obama made tax increases on the wealthy a theme of his presidential campaign, promising to roll back the Bush administration’s tax cuts for families that earn more than $250,000.

White House Budget Director Peter Orszag has promised to produce a budget that will cut the long-term federal deficit, and Senate Budget Committee Chairman Kent Conrad, a Democrat from North Dakota, is pressing for a bipartisan commission on deficit reduction.

The poll shows that an across-the-board 5 percent cut of all discretionary government spending also attracts support as a deficit-reduction measure, with 57 percent saying they would back it.

Majorities of poll respondents also say some big government programs either are not justified or could be cut. They included the $700 billion rescue of the nation’s banking system, the auto industry bailout, Iraq War funding, the $787 billion economic stimulus package and funding for the Afghanistan War.

Cuts in funding for the Medicare prescription drug program would be resisted by 71 percent.

To see methodology and exact question wording, 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; Catherine Dodge in Washington at cdodge1@bloomberg.net

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Yen Weakens as Australian Jobs Report Boosts Recovery Optimism

By Lukanyo Mnyanda

Dec. 10 (Bloomberg) -- The yen declined against higher- yielding currencies after a report showed companies in Australia added six times more jobs than economists estimated.

Japan’s currency snapped three days of gains against the so-called Aussie and fell for a second day against the kiwi after the statistics bureau in Sydney said the jobless rate fell to 5.7 percent and Reserve Bank of New Zealand Governor Alan Bollard said he expects to begin raising interest rates in the middle of next year. The dollar fell as investors cut bets that the Federal Reserve will increase interest rates next year. The Swiss franc was little changed after the central bank said it will halt bond purchases and left its main rate at a record low.

The Australian and New Zealand dollars “should strengthen across the board, particularly the Aussie, which is ahead in terms of the recovery cycle,” said Steve Barrow, head of Group of 10 foreign-exchange strategy in London at Standard Bank Plc. “The Aussie will keep getting stronger and the dollar is the carry currency to use there.”

The yen declined 1.3 percent to 80.88 per Australian dollar as of 9:43 a.m. in London and 1.8 percent to 64.30 per New Zealand dollar. Japan’s currency also weakened 0.4 percent to 88.26 per dollar. The euro bought 129.85 yen, from 129.39 yesterday.

Australia added 30,800 full-time jobs last month, today’s report showed. That pushed the number of new jobs created in the past three months to 99,500. The median estimate of 22 economists surveyed by Bloomberg was for 5,000 new jobs.

New Zealand Growth

New Zealand’s central bank increased its growth forecast for the first quarter of 2010 to 1.9 percent from 1.3 percent, according to a report published today. Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the nations’ assets.

The Aussie has gained 30 percent against the U.S. dollar this year, the best performer after the Brazilian real. The Reserve Bank of Australia increased interest rates three times since October. The kiwi is the fourth-best performer versus the U.S. currency.

Australia’s currency gained 0.9 percent to 91.64 U.S. cents, while the kiwi was 1.4 percent stronger at 72.86 cents.

“Australia’s data revived confidence in the bright story for the global economy,” said Tomohiro Nishida, a foreign- currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “Renewed risk sentiment will support higher-yielding assets and pressure funding currencies such as the yen and the dollar.”

Japanese Orders

The yen also declined as a report showed orders for Japanese machinery fell in October. A separate report showed producer prices dropped for an 11th month in November, fueling speculation deflation may undermine the economic recovery.

Futures on the Chicago Board of Trade showed a 41 percent chance yesterday that the Fed will raise its target rate for overnight bank loans by at least a quarter-percentage point by its June meeting. The odds were 51 percent a month ago. The central bank next meets to review borrowing costs on Dec. 16. The U.S. currency has fallen against all its most-actively traded peers since this year.

The franc traded at 1.5112 against the euro, from 1.5120 yesterday. It was at 1.0271 per dollar, from 1.0267.

The Swiss National Bank, led by Jean-Pierre Roth, held the three-month Libor target at 0.25 percent, as expected by all 16 economists in a Bloomberg News survey. It was last monetary policy decision before Roth is replaced by Vice-Chairman Philipp Hildebrand next month.

The euro gained against the yen as a report showed German wholesale prices increased last month, adding to evidence the recovery in Europe’s largest economy is taking hold. Prices rose 0.7 percent, compared with a 0.4 percent decline in October, the Federal Statistics Office in Wiesbaden said.

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

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Wheat Gains on Speculation Investors Closing Bets on Price Drop

By Luzi Ann Javier

Dec. 10 (Bloomberg) -- Wheat futures rose, ending a seven- day decline that was the longest losing streak in more than a year, on speculation that some investors were closing bets that prices will drop by quitting so-called short positions.

“People are just profit-taking,” Toshiro Horiguchi, assistant general manager at Agrex Asia Pte, said by phone from Singapore today. Still, wheat prices may extend falls on concern that there is a global oversupply, Horiguchi said.

Speculative shorts had outnumbered bets that prices will rise by 1,693 contracts on the Chicago Board of Trade in the week ended Dec. 1, the Commodity Futures Trading Commission said in a report. Futures fell 9.1 percent this month to yesterday.

Wheat for March delivery added as much as 0.6 percent to $5.385 a bushel, before trading at $5.3675 at 1:49 p.m. in Singapore. The seven-day drop to yesterday was the longest series of declines since September 2008.

Global wheat stockpiles are forecast to rise for a second year to 188.3 million metric tons in the 2009-2010 marketing year as output exceeds demand, according to a U.S. Department of Agriculture report on Nov. 10. The agency is scheduled to release its latest supply-and-demand estimates later today.

Wheat planting in France, the European Union’s largest grower, will expand 3 percent to 4.89 million hectares (12.08 million acres) next year as farmers shift from less profitable barley, FranceAgriMer, the national crops office said yesterday.

Corn Declines

Corn for March delivery fell for a second day, losing as much as 0.4 percent to $3.82 a bushel, reversing a 0.4 percent gain earlier. The contract traded at $3.825 at 2:12 p.m.

Korea’s Major Feedmill Group bought 110,000 tons of corn from Cargill Inc. late yesterday, two executives who participated in the biddings said today, declining to be identified as the tender results are confidential. The group paid $227.49 a ton for 55,000 tons from either the U.S. or South America, and $228.49 a ton for the rest from the U.S., they said.

Separately, the Korea Feed Association, South Korea’s biggest grain-buying group, purchased 55,000 tons of U.S. corn from Archer-Daniels-Midland Co. at $229.99 a ton in a private tender earlier this week, the executives said.

January-delivery soybeans fell as much as 0.9 percent to $10.19 a bushel, and last traded at $10.2025.

Rice for March delivery rose 0.9 percent to $15.95 per 100 pounds in Chicago at 1:23 p.m. Singapore time, after jumping 2.6 percent yesterday to the highest since Jan. 7.

Traders on Dec. 8 offered to sell rice to the Philippines for at least $618.95 a ton, 30 percent more than the average price paid by the government in November. Hedge funds and speculators are making the most bets in 19 months that prices will rise, echoing conditions in 2008, when grain shortages forced India, the Philippines and Egypt to boost subsidies.

“The bulls are out there,” said Peter McGuire, managing director at CWA Global Markets Pty. “There’s wonderful money to be made. You’ve just got to have nerves of steel.”

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

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Palm Oil Pares Losses as Malaysian Stockpile, Production Drop

By Thomas Kutty Abraham

Dec. 10 (Bloomberg) -- Palm oil futures pared losses after stockpiles in Malaysia, the second-largest producer, dropped in November as output declined the most in almost three years.

Inventories of the cooking oil fell 2 percent to 1.93 million metric tons from a 10-month high in October, the Malaysian Palm Oil Board said in a statement today. Production dropped 20 percent to 1.6 million tons, while exports gained 1.5 percent to 1.5 million tons, it said. The decrease in output was the most since December 2006, according to Bloomberg data.

February-delivery palm oil reversed losses to increase as much as 0.4 percent to 2,535 ringgit a ton ($746) in the afternoon session on the Malaysia Derivatives Exchange after the data was released. The contract later traded down 0.6 percent at 2,510 ringgit a ton at 4:23 p.m. in Singapore.

“Lower stockpiles will be supportive for prices and demand from India may stay particularly strong in the coming months,” Ben Santoso, an analyst at DBS Vickers Securities (Singapore) Pte., said by phone from Singapore. “Inventory levels will continue to decline as the low production cycle kicks in.”

Palm oil, used as an alternative fuel, advanced 48 percent this year as investors bought commodities as a haven from a declining dollar. The commodity may climb to 3,000 ringgit by March as drought disrupts supplies and demand grows in China and India, the biggest users, according to Dorab Mistry, director of Godrej International Ltd., one of India’s biggest edible oil buyers, last week.

Lower Production

Output in Malaysia may drop to 17.5 million tons this year from last year’s record 17.7 million tons, Mistry said. Tree stress and dry weather from the developing El Nino has created a “pessimistic outlook” for output in the second half of 2010, he said on Dec. 4.

The commodity will be supported early next year by lower- than-expected global soybean supply before coming under pressure as the South American harvest gets under way in the second quarter, DBS Vickers’ Santoso said.

Crude palm oil prices may average 2,380 ringgit in 2010, compared with a forecast of 2,300 ringgit this year, he said.

Palm oil exports from Malaysia fell 5.2 percent to 399,575 tons in the first 10 days of December from the same period in November, independent market surveyor Societe Generale de Surveillance said in an e-mailed report in Kuala Lumpur. That compares with 2.2 percent increase in exports at 412,166 tons estimated by another surveyor Intertek said.

January-delivery soybean oil dropped 3 percent yesterday, the most in more than three months, and traded 0.8 percent higher at 39.60 cents a pound at 4:26 p.m. Singapore time. The premium of soybean oil in Chicago over palm oil in Malaysia, which slumped 10.8 percent yesterday, jumped 6.2 percent to $131.21 a ton today, according to Bloomberg data.

To contact the reporters on this story: Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net Thomas Kutty Abraham at tabraham4@bloomberg.net

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Asian Stocks Fall Amid Yen Strength, China Property Concerns

By Masaki Kondo and Jonathan Burgos

Dec. 10 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index to the lowest this month, amid concern gains in the yen will hurt Japan’s export earnings and as China moved to curb property speculation.

Mazda Motor Corp., which gets 25 percent of its revenue in North America, lost 3 percent in Tokyo as the yen traded near its highest level against the dollar in a week. China Vanke Co., the nation’s biggest listed developer, dropped 1 percent after the government extended the period of a sales tax on homes. Motech Industries Inc., Taiwan’s largest solar-cell maker, fell 6.9 percent after agreeing to sell a stake to Taiwan Semiconductor Manufacturing Co. at a discount.

The MSCI Asia Pacific Index lost 0.8 percent to 119.10 as of 6:18 p.m. in Tokyo, the lowest level since Nov. 30. The gauge is headed for its third weekly decline in four as downgrades of Spain’s debt outlook and Greece’s credit rating exacerbated credit-market concerns sparked by Dubai World’s plan to reschedule its debt payments.

“It is good for investors to take some money off the table given prevailing uncertainties,” said Daphne Roth, Singapore- based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Asian exports are still fragile and there are risks of credit defaults in Dubai and Greece.”

China’s Shanghai Composite Index added 0.5 percent, erasing an earlier 0.4 percent drop, as investors weighed the impact of policies announced by the State Council yesterday. Hisense Electric Co., which makes flat-panel televisions, climbed 5.7 percent in Shanghai after the government said it will continue appliance trade-in subsidies beyond May 2010, when it had been set to expire.

Credit Defaults?

Japan’s Nikkei 225 Stock Average dropped 1.4 percent. Hong Kong’s Hang Seng Index lost 0.2 percent. The S&P/ASX 200 Index sank 0.7 percent in Australia, even after a government report showed the country’s jobless rate dropped.

Futures on the Standard & Poor’s 500 Index added 0.3 percent. The gauge added 0.4 percent yesterday, as analyst upgrades of 3M Co. and Sprint Nextel Corp. helped offset concern that credit defaults will spread through the global economy. The index had declined earlier as Spain’s credit outlook was reduced to “negative” from “stable” at S&P.

The downgrade came after Fitch Ratings cut Greece’s credit rating on Dec. 8. The reliability of sovereign credit has come under scrutiny since Nov. 25, when Dubai World, a state-owned holding company, said it would seek a standstill agreement on its debt. The company has since said it’s in talks to renegotiate $26 billion of loans.

‘More Sensitive’

“Global uneasiness about credit is increasing,” said Mitsushige Akino, who oversees the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “People are becoming more sensitive to risks and they are reconsidering investments.”

Japanese automakers fell after the yen appreciated to as much as 87.37 per dollar yesterday, a level not seen since Dec. 3. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency. The yen was at 87.78 per dollar at the 3 p.m. close of stock trading in Tokyo.

Mazda, Japan’s fourth-largest automaker, slid 3 percent to 195 yen. Toyota Motor Corp., which gets 31 percent of its revenue in North America, lost 1.6 percent to 3,650 yen and was the heaviest drag on the MSCI Asia Pacific Index.

Suzuki Motor Corp. dropped 6.5 percent to 2,215 yen even after Volkswagen AG said it will buy a 19.9 percent stake in the Japanese automaker.

“Investors largely shrug off good news but respond quickly to bad news because they have little appetite for Japanese equities with the yen staying high,” said Toshio Sumitani, chief strategist at Tokai Tokyo Securities Co.

Chinese Automakers

Geely Automobile Holdings Ltd. tumbled 8.2 percent to HK$4.23 in Hong Kong. BYD Co., the maker of batteries and cars in which Warren Buffett has a stake, lost 1.5 percent to HK$68.75. They are among Chinese automakers that will suffer from a higher sales tax on smaller vehicles, CLSA Asia-Pacific Markets said today.

China will charge a 7.5 percent sales tax on vehicles with engines of 1.6 liters or less through the end of 2010, according to a statement posted on the State Council’s Web site yesterday. The government had halved the tax to 5 percent this year. The lower 5 percent tax is due to expire at the end of 2009.

While extending favorable policies for consumption, China’s government will impose a sales tax on homes sold within five years of their purchase, increasing the time period covered by the charge from two years, according to the State Council.

Extending Subsidies

China Vanke retreated 1 percent to 11.91 yuan, and Shanghai Industrial Development Co. lost 1.3 percent to 16.40 yuan. Gemdale Corp. fell 1 percent to 15.65 yuan.

Hisense jumped 5.7 percent to 24.34 yuan. Hefei Rongshida Sanyo Electric Co., which makes washing machines, added 5.5 percent to 24.87 yuan. The government will extend subsidies for purchases of appliances, automobiles and farming equipment in rural areas, the State Council said.

In Taipei, Motech tumbled 6.9 percent to NT$135.50. The company agreed to sell a 20 percent stake to Taiwan Semiconductor at a 16.9 percent discount. Taiwan Semiconductor dropped 1.8 percent to NT$61.30.

The MSCI Asia Pacific Index has risen 33 percent this year, set for the biggest annual increase since 2003, as government spending and lower interest rates revived economies globally. The index’s 2009 rally has outpaced gains of 21 percent by the S&P 500 and 22 percent by Europe’s Dow Jones Stoxx 600 Index on optimism growing demand in China will drive growth in Asia.

Companies in the MSCI gauge trade at an average 22 times estimated net income for this year, compared with 17 times for the S&P and 15 times for the Stoxx 600.

“Shares are no longer cheap and people are wondering how long the momentum in the stock market will last,” said Yoji Takeda, who manages the equivalent of $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “I’m currently seeking companies whose valuations aren’t very high but fundamentals are solid.”

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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German IPOs Suffer 2nd Setback in Week as Scan Energy Postpones

By Michael Tsang

Dec. 10 (Bloomberg) -- Scan Energy A/S postponed its $232 million initial public offering, becoming the second company to shelve a German IPO in less than a week.

The Dybvad, Denmark-based wind- and solar-power producer couldn’t find enough buyers for its 19.7 million share offer at 8 euros ($11.80) each yesterday. Investors rejected the IPO even after Scan Energy reduced the price of its initial sale from as much as 13 euros three days earlier and extended the offer period to attract more buyers.

Scan Energy is the latest setback for the European IPO market and casts doubt on whether initial sales in the region will recover in 2010. The number of IPOs in Germany, Europe’s biggest economy, may triple next year as investor confidence rebounds and private-equity firms sell their companies on the stock exchange, Paris-based Societe Generale SA said this week.

“Due to the recent events in the financial markets and investor hesitation on the German IPO market the company does not at this point in time wish to pursue an IPO and a subsequent listing,” Scan Energy said in a statement.

Hochtief AG, Germany’s largest builder, shelved a 1 billion-euro offering of its unit that runs toll roads and airports on Dec. 3 that would have been the country’s largest initial share sale in two years. The Essen, Germany-based company cited the debt crisis in Dubai and “resulting disturbances in the international capital markets.”

The day after Hochtief postponed the offering, Scan Energy said it was proceeding with its sale after receiving “positive” feedback from investors.

Lehman Brothers

The European IPO market has been slower to recover than in the U.S. after New York-based Lehman Brothers Holdings Inc.’s collapse in September 2008 spurred a credit-market freeze. American offerings have outpaced sales in western Europe by more than four times this year, data compiled by Bloomberg show.

Other IPOs on tap in Germany include Brenntag Holding GmbH, a chemicals distributor owned by private-equity firm BC Partners Ltd., and Flint Group, the world’s second-biggest maker of printing ink, people familiar with the plans have said.

There may be eight to 10 IPOs in Germany with a value of 3 billion euros to 6 billion euros next year after no “sizable” share sales in 2009, Armin Heuberger, head of equity capital markets at UBS AG in Germany, said yesterday in Frankfurt, as private-equity firms begin selling and buying companies.

To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net.

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U.K. Stocks Gain, Led by Shares of Lloyds Banking Group, RBS

By Adria Cimino

Dec. 10 (Bloomberg) -- U.K. stocks gained, led by Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, offsetting losses by mining stocks as copper prices fell.

RBS, the largest state-controlled U.K. lender, Lloyds and Barclays Plc gained more than 2 percent. Rio Tinto Group, the world’s third largest mining company, slid 1.1 percent.

The benchmark FTSE 100 advanced 28.96, or 0.6 percent, to 5,232.85 as of 10:28 a.m. in London. The FTSE All-Share Index rose 0.5 percent and Ireland’s ISEQ Index added 0.6 percent. After rallying as much as 53 percent since its low on March 3, the FTSE 100 has been little changed since mid- October amid concern the global economic recovery won’t be sustained.

European stocks rose today, snapping three days of declines, as the European Union’s Jean-Claude Juncker said he rules out a Greek state bankruptcy. Stocks declined for the first three days of the week as concern mounted about the finances of indebted countries. Spain’s credit outlook was reduced to negative from stable by Standard & Poor’s Ratings Services and Fitch Ratings downgraded Greece.

Barclays added 2.5 percent to 285 pence. Lloyds added 3.5 percent to 56.59 pence.

RBS gained 3.3 percent to 31.31 pence. The bank is close to selling assets in China, Malaysia and India to HSBC Holdings Plc, pending regulatory approval, the Wall Street Journal reported, citing people familiar with the matter.

Rio Tinto slipped 1.2 percent to 3,104 pence. Lonmin Plc, the third-largest platinum maker, lost 1.1 percent to 1,714 pence. Copper, nickel and tin declined in London.

The following shares rose or fell in London and Dublin. Stock symbols are in parentheses.

DS Smith Plc (SMDS LN) surged 9.3 percent to 124 pence, rising the most in two months. The owner of the Spicers office products brand said it will likely exceed its fiscal full-year expectations.

Irish Life & Permanent Plc (IPM ID) added 2.1 percent to 3.32 euros, rebounding after three days of losses. Ireland’s biggest mortgage lender was raised to “buy” from “hold” at Citigroup Inc., which said “the market will increasingly focus on fundamental valuation.”

Premier Farnell Plc (PFL LN) jumped 5.3 percent to 167 pence, rebounding after two days of declines. The U.K. electronic and industrial components supplier said it’s well placed to lead recovery in the industry.

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

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European Stocks Gain, Led by Retailers; Asian Shares Decline

By Daniela Silberstein

Dec. 10 (Bloomberg) -- European stocks advanced, snapping three days of declines for the Dow Jones Stoxx 600 Index, as retailers gained after Inditex SA reported earnings that beat analysts’ estimates. Asian shares fell.

Inditex, the world’s biggest clothing retailer, rose 2.3 percent. ING Groep NV rallied 4.2 percent after BofA Merrill Lynch Global Research recommended the shares. Mazda Motor Corp. lost 3 percent in Tokyo amid concern gains in the yen will hurt Japan’s export earnings.

Europe’s Stoxx 600 added 0.8 percent to 243.45 as of 10:25 a.m. in London. The gauge climbed 59 percent from March 9 to Nov. 11 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy. The measure is valued at about 55 times its companies’ reported earnings, near the highest level since 2003, data compiled by Bloomberg show.

The MSCI Asia Pacific Index fell 0.8 percent today, extending yesterday’s 0.7 percent drop, as China scrapped a tax break on property sales. Futures on the Standard & Poor’s 500 Index rose 0.3 percent.

Inditex gained 2.3 percent to 42.21 euros. The owner of the Zara chain said net income declined to 831 million euros ($1.2 billion) in the nine months through October from 843 million euros in the year-earlier period. The average estimate of seven analysts compiled by Bloomberg was 807 million euros.

Retailers Rise

A gauge of retailers in the Stoxx 600 advanced 1.2 percent, snapping a three-day drop. Kesa Electricals Plc added 2.6 percent to 158.8 pence as Deutsche Bank AG upgraded Europe’s third-largest electronics retailer to “buy” from “hold,” saying “a healthy recovery looks likely.”

ING climbed 4.2 percent to 5.85 euros. The Netherlands’ biggest financial-services company was added to BofA Merrill Lynch’s “Europe 1” list.

Irish Life & Permanent Plc increased 1.2 percent to 3.29 euros. Ireland’s biggest mortgage lender was raised to “buy” from “hold” at Citigroup Inc., which said “the market will increasingly focus on fundamental valuation.”

Japanese automakers fell after the yen appreciated to as much as 87.37 per dollar yesterday, a level not seen since Dec. 3. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency. Mazda, Japan’s fourth-largest automaker, lost 3 percent to 195 yen in Tokyo, while Honda Motor Co., which gets 42 percent of its sales in North America, slipped 1.5 percent to 2,930 yen.

China Vanke Co., the nation’s biggest listed developer, dropped 1 percent to 11.91 yuan after the government extended the period of a sales tax on homes.

Spain, Greece

The Stoxx 600 fell for the first three days of this week as Spain’s credit outlook was reduced to negative from stable by Standard & Poor’s Ratings Services and Fitch Ratings downgraded Greece. The reliability of sovereign credit has come under increased scrutiny since Nov. 25, when Dubai World, a state- owned holding company, said it would seek a standstill agreement on its debt. The company has since said it’s in talks to renegotiate $26 billion of loans.

National Bank of Greece SA, the country’s biggest bank, rose 2.9 percent to 17.49 euros as the European Union’s Jean- Claude Juncker said he rules out a Greek state bankruptcy.

“I completely rule out a bankruptcy of the Greek state,” Juncker, who chairs a group of euro-area finance ministers, told reporters in Bonn. Asked if the EU would need to assist Greece, he said “this won’t be necessary.”

BOE Bond Purchases

The Bank of England will probably today stick to its plan to spend 200 billion pounds ($324 billion) on bonds as officials seek to cement Britain’s recovery from recession.

The Monetary Policy Committee, led by Governor Mervyn King, will keep the purchase program unchanged, according to all 38 economists in a Bloomberg News survey. The bank will also keep its benchmark interest rate at a record low of 0.5 percent, according to all 53 economists in a separate survey. The BOE will announce today’s decision at 12 p.m. in London.

Switzerland’s central bank left its benchmark rate unchanged today and said officials will end some emergency measures as they try to nurture the economy’s recovery from the deepest recession in three decades.

A report from the U.S. Labor Department at 8:30 a.m. New York time may show the number of Americans filing first-time claims for unemployment insurance fell to 455,000 last week, the fewest since September 2008, according to the median estimate of economists in a Bloomberg survey.

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

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