Europe Economic Confidence Jumps to Pre-Lehman Level

By Simone Meier

Jan. 7 (Bloomberg) -- European confidence in the economic outlook jumped in December to a level last seen before the demise of Lehman Brothers Holdings Inc., adding to signs the economy will gather pace this year.

An index of executive and consumer sentiment in the 16- nation euro region rose for a ninth month to 91.3 from 88.8 in November, the European Commission in Brussels said today. That beat economists’ forecasts and was the highest since June 2008, three months before Lehman’s collapse exacerbated the global financial crisis. Retail sales dropped 1.2 percent in November from the previous month, a separate report showed.

European companies are boosting spending and output to meet reviving global orders after governments spent billions of dollars to fight the worst economic crisis since World War II. Manufacturing in the U.S., the world’s largest economy, expanded last month at the fastest pace in more than three years. Rising unemployment may hurt consumer spending, while a stronger euro threatens to undermine exports.

“Sentiment will continue to rise over the coming months even if it doesn’t necessarily translate into a stronger economic performance,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “It’s a catching-up process. The fourth and first quarters will still show robust growth rates followed by some weakening.”

Benchmark Bond

The euro was little changed against the dollar after the confidence data, trading at $1.4354 at 10:04 a.m. in London, down 0.4 percent on the day. The yield on the German 10-year benchmark bond was unchanged at 3.38 percent.

Adding to signs the economy is gathering pace, Europe’s manufacturing and services industries expanded for a fifth month in December and European investors grew more confident in January, data showed this week. In Germany, Europe’s biggest economy, business confidence increased to a 17-month high in December.

Porsche SE, the sports-car maker merging with Volkswagen AG, said on Dec. 18 that sales may revive this fiscal year. Infineon Technologies AG, Europe’s second-largest maker of semiconductors, last month raised its first-quarter outlook.

The Dow Jones Stoxx 50 Index has risen 17 percent in the past year, while Germany’s benchmark DAX Index has gained 20 percent during the same period.

Unconventional Measures

The European Central Bank on Dec. 3 kept its benchmark interest rate at a record low of 1 percent and said it will withdraw some unconventional measures as the region’s economy strengthens. The Frankfurt-based ECB on that day predicted economic growth of about 0.8 percent this year and around 1.2 percent in 2011.

“The economic situation has improved,” ECB Executive Board member Juergen Stark told Il Sole 24 Ore in an interview published yesterday. “Data is influenced by a recovery in exports but also an improvement on equity markets and by stimulus measures taken by countries to help the economy. These two last factors are of temporary nature.”

The euro’s 5 percent ascent against the dollar over the past year is weighing on the economic recovery by making European exports less competitive just as surging oil prices threaten to crimp corporate earnings. Industrial orders declined more than economists forecast in October, led by a drop in demand for capital goods such as machinery and tools.

European unemployment probably rose to 9.9 percent in November from 9.8 percent in the previous month, according to a Bloomberg survey. That would be the highest in 11 years. The statistics office will release the report tomorrow.

‘Challenging’

Siemens AG, Europe’s largest engineering company, last month reported its first quarterly loss in a year and forecast earnings to drop in 2010. The Munich-based company expects the market environment to remain “challenging in 2010,” Chief Executive Officer Peter Loescher said on that day.

“I expect that 2010 will be, from a macro-environment point of view, still a challenging year,” said Peter Voser, CEO at Royal Dutch Shell Plc, Europe’s largest oil company. “We’ll see pressure on refining margins and some further pressure on competitive performance regarding costs.”

Economists projected a gain in economic confidence to 90, the median of 17 forecasts in a Bloomberg News survey showed.

To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net

Read more...

China Guides Bill Yields Higher, Seeking to Curb Record Lending

By Bloomberg News

Jan. 7 (Bloomberg) -- China’s central bank sold three-month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.

Stocks fell across Asia and oil declined on concern growth will slow in China, the engine of the world economy’s recovery from its worst recession since World War II. The People’s Bank of China offered 60 billion yuan ($8.8 billion) of bills at a yield of 1.3684 percent, four basis points higher than at last week’s sale, according to a statement.

“It’s definitely a signal that the central bank is tightening liquidity,” said Jiang Chao, a fixed-income analyst in Shanghai at Guotai Junan Securities Co., the nation’s largest brokerage by revenue. “The rising yield is used to prevent excessive growth in bank lending.”

Premier Wen Jiabao said on Dec. 27 that last year’s doubling in new loans had caused property prices to rise “too quickly,” while surging commodity costs were increasing inflationary pressure. Guiding market rates higher may be a prelude to raising reserve requirements or benchmark interest rates, said Shi Lei, a Beijing-based analyst at Bank of China Ltd., the nation’s third-largest lender.

The MSCI Asia Pacific Index of regional stocks fell 0.5 percent and oil for February delivery slid 0.7 percent after 10 days of gains. Copper for three-month delivery dropped 0.7 percent. The Shanghai Composite Index fell 1.9 percent, led by Bank of China Ltd. and Industrial & Commercial Bank of China Ltd.

Tightening in Asia

“We expect some tightening of monetary policy in Asia in the first half,” said Norman Villamin, Singapore-based head of investment analysis for Asia Pacific at Citigroup Private Bank. “Markets will struggle to go higher.”

Australia’s central bank raised borrowing costs by a quarter percentage point on Dec. 1 to 3.75 percent after similar moves in November and October. The Bank of Korea, which meets tomorrow, will probably raise its benchmark rate one percentage point to 3 percent by end-2010, according to a Bloomberg survey of economists. By contrast, the Federal Reserve target rate is close to zero and policy makers last month discussed increasing asset purchases should the economy weaken.

Policy makers will seek “moderate” loan growth while managing inflation expectations, the People’s Bank said yesterday in a report on its annual work meeting. The government has told lenders to pace lending, while tightening mortgage rules for second-home purchases. Liu Mingkang, the top banking regulator, wrote in an opinion piece in Bloomberg News this week that “structural bubbles threaten to emerge” in the economy.

Bill Sales

Guotai Junan’s Jiang said the yield on benchmark one-year bills will climb in open-market operations next week. The central bank resumed sales of those bills on July 9 after an eight-month suspension to help drain cash from banks.

The central bank is set to withdraw 137 billion yuan from the financial market this week, the biggest since the week ended on Oct. 23, according to data compiled by Bloomberg News.

China’s one-year interest-rate swap, the cost of receiving a floating rate for 12 months, rose 10.5 basis points to 2.24 percent. A basis point is 0.01 percentage point.

The central bank kept the benchmark one-year lending rate at a five-year low of 5.31 percent last year after five reductions in the last four months of 2008. It may rise to 5.85 by the end of 2010, according to a Bloomberg News survey of 29 economists in November.

Lending Boom

“There’s no doubt that lending has been excessive and that explains why policy makers are starting to be more cautious about lending this year,” said Qu Hongbin, chief China economist for HSBC Holdings Plc in Hong Kong.

Qu estimates new loans will be limited to 7 trillion yuan in 2010. Banks extended an unprecedented 9.21 trillion yuan of loans in the first 11 months of 2009, compared with 4.15 trillion yuan a year earlier.

The People’s Bank said it would curb volatility in lending and monitor the property market, while reaffirming a “moderately loose” monetary policy. The statement contrasted with the start of 2009, when the central bank targeted “appropriate” increases in lending and said monetary policy would play “a more active role in promoting economic growth.”

Consumer prices climbed 0.6 percent in November from a year earlier, snapping a nine-month run of declines. The central bank is on alert for inflation after economic growth accelerated to 8.9 percent in the third quarter of 2009, the fastest in a year.

Property Prices

Housing Minister Jiang Weixin said yesterday that the nation will limit credit for some home purchases to reduce property-market speculation. Prices across 70 cities rose at the fastest pace in 16 months in November, gaining 5.7 percent from a year earlier, led by Shenzhen, Wenzhou and Jinhua.

The central bank didn’t state a 2010 target for growth in M2, the broad measure of money supply, after overshooting a 17 percent goal last year. The actual rate was more than 25 percent for most of 2009, rising to a record 29.7 percent in November.

“Growth will probably slow this year as tight credit will dampen the demand side,” said Zhang Ling, who helps oversee about $7.21 billion at ICBC Credit Suisse Asset Management Co. in Beijing. “That will dash investors’ hopes of another year of fast growth.”

--Zhang Dingmin, Luo Jun, Sophie Leung, Judy Chen. Editors: Paul Panckhurst, James Regan

To contact Bloomberg News staff for this story: Dingmin Zhang in Beijing at +86-10-6649-7576 or dzhang14@bloomberg.net Jun Luo in Shanghai at +86-21-6104-7021 or jluo6@bloomberg.net

Read more...

Netanyahu Said to Ask Fischer to Serve Second Term

By Alisa Odenheimer

Jan. 7 (Bloomberg) -- Prime Minister Benjamin Netanyahu has told Bank of Israel Governor Stanley Fischer that he would like him to serve a second term, a person familiar with the situation said.

A formal offer will only be made if Fischer agrees to stay on after his term finishes at the end of April, the person, who declined to be identified because a decision hasn’t been made yet, said yesterday. Bank of Israel spokesman Yossi Saadon said that Fischer had no comment, and Netanyahu spokesman Mark Regev said the Prime Minister’s Office would not react to the reports.

Fischer, who has received offers from abroad, wants to stay on and is waiting to see whether parliament passes a new law regulating the central bank, which he strongly supports, the person said. Fischer’s children and grandchildren live abroad and family reasons are also a consideration, the person said.

Fischer, 66, helped steer the economy back to growth amid the worst global recession since World War II. Israel’s economy grew 0.5 percent last year. The economies of the U.S. and the European Union probably contracted 2.7 percent and 4.2 percent respectively last year, according to the International Monetary Fund.

The Bank of Israel will raise its 2010 growth estimate of 2.5 percent, Fischer said this morning at a hoteliers’ conference in Tel Aviv, without specifying the new figure. “The expectations for Israel’s economy are good, while those for the rest of the developed world are not as good,” Fischer said.

Stock Surge

“There is no one that comes close to the man, not in terms of his experience, understanding, confidence or his stature in the international community,” Vered Dar, chief economist at Tel Aviv-based Psagot Investment House, said in a telephone interview.

Israel’s benchmark TA-25 stock index surged 75 percent last year, led by Delek Group Ltd., an energy and real estate company, which rose more than six-fold, and Israel Corp Ltd., a holding company with interests in chemicals and energy, which gained more than 200 percent.

Fischer cut Israel’s benchmark interest rate by half a percentage point to 3.75 percent in October 2008, acting the day before the U.S. Federal Reserve, the Bank of England and the European Central Bank.

Raising Rates

In August 2009, Fischer became the first central bank governor in the world to reverse course in response to signs of a financial recovery when he raised the benchmark a quarter point to 0.75 percent. He has since raised the rate twice more to 1.25 percent.

To help cushion the damage to exports from the crisis, Fischer in March 2008 ordered the Bank of Israel to buy dollars to drive down the value of the shekel. By November 2009, foreign currency reserves more than doubled to $61.55 billion.

In the wake of the rate cuts and dollar purchases, Israel’s economy grew 1.1 percent in the second quarter of last year, snapping six months of recession. Gross domestic product expanded 3 percent in the third quarter.

“Fischer is very well respected and the markets have been happy with the job he’s done,” said Win Thin, a senior currency strategist at New York-based Brown Brothers Harriman & Co. “He cut rates aggressively and he was the first to tighten when the economy showed signs of life.”

Independence

Fischer has said one of his conditions when he accepted the offer for his first term was that Israel amend its law governing the central bank, which dates from 1954. A new draft law would ensure the independence of the central bank, demand transparency and set up a committee to set interest rates. Under the current law, the governor has the sole authority to change rates.

The daily Ma’ariv reported yesterday that Netanyahu is keen for Fischer to stay on, citing unidentified people close to the prime minister.

Fischer became governor of the Bank of Israel and a citizen of the country in 2005 following a career as an academic, international policy maker and a banker in the U.S.

As a professor at the Massachusetts Institute of Technology he was Federal Reserve Chairman Ben S. Bernanke’s adviser on his graduate thesis.

Fischer was first deputy managing director of the International Monetary Fund from 1994 to 2001.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

Read more...

Central Bankers to Gather With Private Banks at BIS

By Masahiro Hidaka and Shamim Adam

Jan. 7 (Bloomberg) -- Central bankers plan to hold talks with representatives of financial firms to discuss regulation at a Bank for International Settlements meeting this weekend, according to two Group of Seven central bank officials.

The BIS meetings, held in Basel, Switzerland, occasionally feature sessions with private banks and this month’s gathering will be such an example, the officials said on condition of anonymity because the agenda isn’t public. One of them said chief executive officers usually attend the January gatherings.

The meeting comes as policy makers seek ways to avoid a repeat of the excessive risk-taking that helped spark the recent banking crisis and a month after the BIS urged central banks to take greater account of financial stability. Leaders from the Group of 20 emerging and developed nations pledged in September to develop rules by the end of 2010 to require banks to hold more and better-quality capital and discourage leverage.

“The central bankers are clearly aiming to head off the excesses that will certainly come out of the very easy monetary policy” put in place during the crisis, said Bill Belchere, global chief economist at Mirae Asset Securities in Hong Kong. “They have no choice but to be prudent and vigilant to grapple with the potential problems and stop bubbles before they emerge.”

Central Bank Rates

The Federal Reserve has cut its benchmark rate to almost zero and taken on more than $1 trillion of assets on its balance sheet to combat the credit freeze, while its Japanese counterpart’s benchmark is also near zero. The European Central Bank’s main rate is a record-low 1 percent.

Representatives of banks including BlackRock Inc., Citigroup Inc. and Wells Fargo & Co. will attend the session over the Jan. 9-10 weekend, the Financial Times reported earlier. Wells Fargo CEO John Stumpf isn’t planning to attend, said Janis Smith, a spokeswoman for the San Francisco-based bank. A Citigroup spokesman who declined to be identified said the bank had no comment.

The FT said the BIS invitation cited concerns that financial companies are returning to risk-taking patterns that were in place before the global crisis began in 2007.

“The big issue is disclosure of financial data -- whether banks should have to disclose more information about their risk,” said Fariborz Moshirian, professor of finance at the Australian School of Business at the University of New South Wales. “Multinational banks are finding it very convenient at the moment to increase their activities because there is not any extra supervision.”

International Regulators

Bank of Italy Governor Mario Draghi, who heads the Financial Stability Board of international regulators and central bankers, is scheduled to produce a report on progress toward strengthening regulations before the next G-20 summit. Draghi has warned that banks may seek to block regulatory overhauls as the global economy recovers from the deepest postwar recession.

Banks, buoyed by improving earnings and after repaying state bailouts, have been lobbying against reforms aimed at restricting how much risk they can take. Goldman Sachs Group Inc. and JPMorgan Chase & Co. have seized on record-low interest rates, a stock-market rally and the demise of competitors like Lehman Brothers Holdings Inc. to bolster trading profits.

“As the situation improves, the power of vested interests contrary to any substantive reform get stronger,” Draghi said in a Nov. 12 speech in Rome. A “critical stage” in overhauling regulation and oversight of financial markets is beginning and authorities need “to take bold and radical action to remedy the current deficiencies,” he said.

Leverage Ratio

The Basel Committee on Banking Supervision, for which the BIS provides a secretariat, last month issued a consultation on a series of proposals aimed at making the banking industry more resilient. Among its suggestions was improving the quality of capital that banks hold and introducing a leverage ratio.

The BIS said in a report last month that central bankers should allow financial stability to play a role in monetary policy because low interest rates often spur banks to take on too much risk. It said in the same report that the “current crisis has underlined the importance” of introducing so-called macroprudential supervision, which assesses the risks posed to the whole banking sector rather than individual companies.

U.S. President Barack Obama has also expressed frustration that financial firms that got government bailouts are continuing to take large bonuses and fighting his effort to revamp bank regulations.

“I did not run for office to be helping out a bunch of, you know, fat-cat bankers on Wall Street,” Obama said in an interview with CBS’s “60 Minutes” broadcast on Dec. 13.

Central bankers meet six times a year at the BIS, which calls itself the bank for central banks, holds currency reserves on behalf of its members and produces research.

To contact the reporters on this story: Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net

Read more...

FOMC Debates Asset Purchases, Inflation as Economy Strengthens

By Scott Lanman

Jan. 7 (Bloomberg) -- Federal Reserve officials discussed whether the economy is strong enough to allow their $1.73 trillion of asset purchases to end in March and differed over the risk of inflation, minutes of their last meeting showed.

A few policy makers said it “might become desirable at some point” to boost or extend securities purchases aimed at lowering mortgage rates, while one person sought a reduction, according to minutes of the Dec. 15-16 meeting of the Federal Open Market Committee released in Washington yesterday. On inflation, some officials said slack in the economy will damp prices, and others saw risks from the central bank’s “extraordinary” stimulus.

The Fed’s debate is intensifying while Chairman Ben S. Bernanke and his colleagues are trying to withdraw unprecedented stimulus and emergency lending programs without impeding efforts to sustain a recovery. Officials judged economic and job growth “would be rather slow relative to past recoveries from deep recessions,” the Fed said.

“They’re focused on a balancing act, wrestling with a recovery that’s gaining solid footing but that remains fragile,” said Paul Ballew, a former Fed economist who’s now a senior vice president at Nationwide Mutual Insurance Co. in Columbus, Ohio. “The Fed is keeping some levers out there as options.”

Short-term Treasuries rose after the report. Two-year U.S. government bonds reversed losses, with the yield falling two basis points to 0.99 percent in New York. A basis point is 0.01 percentage point. The Standard & Poor’s 500 Index was little changed at 1,137.14.

‘Expectations Anchored’

“To keep inflation expectations anchored, all participants agreed that monetary policy would need to be responsive to any significant improvement or worsening in the economic outlook and that the Federal Reserve would need to continue to clearly communicate its ability and intent to begin withdrawing monetary policy accommodation at the appropriate time and place,” the minutes said.

Policy makers in the Dec. 16 statement following their meeting said the labor market is stabilizing, while repeating a pledge to keep interest rates “exceptionally low” for an “extended period.” The Fed said most lending programs would expire as scheduled on Feb. 1 because of “improvements in the functioning of financial markets.”

The FOMC, in a unanimous decision, left its target for the benchmark interest rate unchanged in a range of zero to 0.25 percent and left unchanged its plans to buy $1.43 trillion of housing-finance debt through March. Fed policy makers next meet Jan. 26-27 in Washington.

‘Policy Stimulus’

“A few members noted that resource slack was expected to diminish only slowly and observed that it might become desirable at some point in the future to provide more policy stimulus by expanding the planned scale of the committee’s large-scale asset purchases and continuing them beyond the first quarter,” especially if the economic outlook or mortgage market deteriorated, the minutes said.

One member said the Fed could reduce planned asset purchases because of improvement in financial markets and the economy, and “that it might become appropriate” to start reducing asset holdings “if the recovery gains strength over time.”

The Fed is buying $1.25 trillion of mortgage-backed securities issued by housing-finance companies Fannie Mae, Freddie Mac and federal agency Ginnie Mae. The central bank began the program in January 2009.

Fannie, Freddie

The Fed separately purchased $300 billion of Treasury securities from March through September 2009 and is buying, through March, $175 billion of corporate debt issued by government-backed Fannie and Freddie and the government- chartered Federal Home Loan Banks.

Officials “generally thought the most likely outcome” was for economic growth to “gradually strengthen over the next two years,” helping reduce joblessness. Still, the “weakness in labor markets continued to be an important concern.”

At the same time, Fed officials “noted that any tendency for dollar depreciation to put significant upward pressure on inflation would bear close watching,” the central bank said. Some policy makers saw “upside” inflation risks because of investor concerns about Fed stimulus and federal budget deficits, the Fed said.

“The division on inflation is a very central one in terms of how it gets resolved, in terms of how quickly and when they begin the rate process,” said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.

Rate Forecast

Policy makers won’t raise their target for overnight lending among banks until the third quarter of this year, according to the median of 62 forecasts in a Bloomberg News survey of economists taken early last month.

The minutes said that the New York Fed’s open market desk “was continuing to develop” the capacity to conduct reverse repurchase agreements using agency mortgage-backed securities collateral and expects the work to be finished in the first half of this year.

The New York Fed is also “exploring the operational issues associated with expanding potential counterparties” for reverse repurchase agreements beyond the 18 primary dealers, the minutes said.

In a reverse repo, the Fed lends securities for a set period, draining cash from the banking system. At maturity, the securities are returned to the Fed, and the cash to the 18 primary dealers that act as counterparties to the central bank.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

Read more...

Yen Declines as Japan’s Kan Says He Supports a Weaker Currency

By Bo Nielsen and Yasuhiko Seki

Jan. 7 (Bloomberg) -- The yen fell against the dollar and the euro after Japanese Finance Minister Naoto Kan said on his first day in office that he backs a weaker currency.

The Japanese currency also declined versus 11 of the 16 most-traded currencies after Kan said in his inaugural press conference that he will try to keep the yen at an “appropriate level”. The Australian dollar rose to a 25-year high versus the pound after a report showed retail sales surged the most in eight months in November, fanning speculation the central bank will raise interest rates.

“It’s clear that Kan is going to say what he thinks and he thinks the yen should weaken,” said Neil Mellor, a currency strategist at BNY Mellon Corp. in London. “He seems to have reverted back to the old weak-yen policy.”

The yen dropped to 92.69 per dollar as of 8:49 a.m. in London from 92.32 yesterday in New York. The Japanese currency slipped to 133.13 per euro from 133.01, after earlier climbing to 132.40. The dollar rose to $1.4362 per euro from $1.4408.

Kan said today in Tokyo that he will seek to keep the yen at “an appropriate level while considering various impacts on the economy that may be caused by currencies.” While the yen has fallen since reaching a 14-year high in November, “I hope it will correct a bit more,” he said.

The yen surged to 84.83 per dollar on Nov. 27, the strongest since July, 1995, after Kan’s predecessor, Hirohisa Fujii, said he didn’t support a weak yen and opposed “easy intervention.” The Japanese currency has fallen 9.3 percent since then.

‘Clear Difference’

“It was reconfirmed that Kan doesn’t want a rising yen to hurt the economy in a clear difference from his predecessor,” said Keiji Matsumoto, a strategist in Tokyo at Nikko Cordial Securities Inc. “It is apparent that Kan won’t tolerate a stronger yen.”

The Australian dollar touched 1.7310 per U.K. pound, the strongest in 25 years, and traded up 0.5 percent at 1.7330 as retail sales climbed 1.4 percent from October, when they gained a revised 0.4 percent, the Bureau of Statistics said in Sydney today. The median forecast of 12 economists surveyed by Bloomberg News was for a 0.3 percent gain.

“There’s only good news coming out of Australia,” said Ray Farris, the London-based head of FX strategy at Credit Suisse Group AG to Bloomberg Television. “We like the Australian dollar.”

Interest Rates

The Bank of England will probably keep benchmark rates at 0.5 percent at a meeting today in London, according to a Bloomberg survey. Japan’s benchmark rate is 0.1 percent and the U.S.’s is zero to 0.25 percent. Australia’s key rate is 3.75 percent.

The dollar rose against the euro before a report tomorrow that may show U.S. employers didn’t cut jobs in December for the first time since the recession started. Nonfarm payrolls were unchanged after falling 11,000 the prior month, according to the median estimate of 74 economists in a Bloomberg survey.

The MSCI Asia Pacific index fell 0.4 percent and the Dow Jones Stoxx 600 Index of European shares fell 0.2 percent, after China took steps to remove economic stimulus. The central bank sold three-month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.

“The Chinese central bank’s action came as a negative surprise,” said Kumiko Gervaise, a Tokyo-based currency analyst at Gaitame.com Research Institute Ltd., a unit of Japan’s biggest currency margin trader. “Higher-yielding currencies showed a knee-jerk reaction to this news, and the safe-haven currencies were bought back.”

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

Read more...

Poland Sells $750 Million Stake in Copper Maker KGHM

By Pawel Kozlowski and Alexis Xydias

Jan. 7 (Bloomberg) -- Poland is seeking to sell a stake of up to 10 percent in copper producer KGHM Polska Miedz SA today, an offer worth about $750 million, according to terms obtained by Bloomberg News.

The sale of about 20 million shares is being managed by Citigroup Inc., Deutsche Bank AG, ING Groep NV and Bank Zachodni WBK SA, the details showed. No price range was given in the terms e-mailed to clients.

Poland is seeking to raise a record 30 billion zloty ($10.5 billion) from sales of state assets this year to finance a budget deficit that is set to almost double this year.

KGHM, the copper producer with the biggest European mine output, slumped as much as 5.2 percent to 103.3 zloty today, posting the steepest intraday decline in more than a month. The stock traded down 3.8 percent at 104.9 zloty as of 9:54 a.m. in Warsaw, dragging the benchmark WIG20 Index 1.4 percent lower. The stock accounts for 13 percent of the gauge by weighting.

Maciej Wewior, a spokesman for the Treasury Ministry, declined to comment when contacted by Bloomberg by phone.

To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net

Read more...

Gold Drops by Most in a Week in Asia as Rally Encourages Sales

By Glenys Sim

Jan. 7 (Bloomberg) -- Gold fell by the most in a week after its climb to a three-week high yesterday prompted some investors to sell the metal.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by the metal, dropped yesterday for a second time this week to 1,126.48 metric tons. Bullion also fell as a pause in the dollar’s decline diminished the precious metal’s appeal as an alternative investment.

“A switch in investment activity and a slowing in the purchase of exchange-traded products suggest that the risk of liquidation has grown,” said Yingxi Yu, a commodities analyst at Barclays Capital. “An end to the dollar’s weakening trend could therefore be a major setback for gold.”

Gold for immediate delivery fell as much as 0.6 percent to $1,131.15 an ounce, and traded at $1,134.38 by 2:04 p.m. in Singapore. February-delivery bullion on the Comex division of the New York Mercantile Exchange lost 0.2 percent to $1,134.50.

Spot gold advanced to $1,140.78 an ounce yesterday, the highest level since Dec. 17, 2008. It climbed 24 percent last year as the dollar tumbled 4.2 percent against a basket of six major currencies.

The dollar index rose today, capping a rally in other precious metals as well. Platinum and palladium declined, after climbing to the highest levels in more than 16 months on speculation demand will increase as the global economy recovers from the worst recession since World War II.

Japanese and Korean auto companies including Toyota Motor Corp. and Hyundai Motor Co. boosted U.S. sales last month 26 percent, according to company statements. The U.S. is the world’s largest auto market and about half of platinum and palladium use is for catalytic converters to filter engine gases.

Industrial Uses

“Both metals have industrial uses, so as expectations for a global economic recovery grows, the outlook for demand also brightens,” said Steven Zhu, head trader at Shanghai Tonglian Futures Co.

Platinum for immediate delivery traded little changed at $1,559 an ounce at 2:07 p.m. in Singapore, after rising as much as 0.6 percent to $1,566 earlier, the highest level since Aug. 11, 2008. April-delivery futures on the Comex division of the New York Mercantile Exchange gained to $1,569.90 an ounce.

Immediate-delivery palladium slid 0.6 percent to $425.50 an ounce, after earlier reaching $431.23 an ounce, the highest price since July 17, 2008. The metal for March delivery touched $431.80 an ounce.

A weaker dollar and anticipation of the introduction of exchange traded funds linked to both metals also aided the recent rally, said Zhu. The U.S. Securities and Exchange Commission approved proposed rule changes on Dec. 22 to list and trade shares of the ETFS Platinum and Palladium Trusts.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

Read more...

Atlas Plans to Sell Stake in Ridley Iron Ore Mine This Half

By Rebecca Keenan and Jesse Riseborough

Jan. 7 (Bloomberg) -- Atlas Iron Ltd., an Australian iron ore producer, expects to sell a stake in its A$3 billion ($2.8 billion) Ridley project by the end of the first half after lining up buyers from China, India, South Korea and Japan.

Atlas wants to sell 70 percent of Ridley, located in Western Australia, Chief Executive Officer David Flanagan said today in an interview. Goldman Sachs JBWere Pty is the adviser for the sale for Perth-based Atlas.

Steelmakers worldwide are increasing purchases of iron ore, used to feed furnaces, as the economic recovery fuels demand by carmakers and builders. The cash price for iron ore rose to the highest in more than a year as demand from China, the largest buyer, rose and India announced plans to levy duties on exports.

“Goldman Sachs have a got a nice group of people in the final stages now and as soon as we complete we will let the market know,” Flanagan said by phone. He didn’t give details.

Atlas shares rose 4.7 percent to A$2.23 at the 4:10 p.m. close in Sydney trading. The stock gained 121 percent last year.

The company today also said it received “strong interest” from steel mills seeking supplies from its Wodgina project. Talks are advancing and are not complete, Atlas said in the statement to the Australian stock exchange.

Wodgina Production

Atlas plans to start production from Wodgina this year at an initial rate of 2 million metric tons a year, it had said in November. The company produces about one million tons of iron ore a year from the Pardoo mine in the Pilbara. It plans to increase output to 12 million tons by 2012.

“Atlas notes that the market for iron ore is very strong, reflected in the spot price, and that the strength of demand is reflected in Atlas’ discussions,” the company said in the statement. The higher spot prices may be reflected in Atlas’ cargoes later, Flanagan said.

The company last year estimated the Ridley project, which will cost A$3 billion to build, could produce 15 million tons of ore concentrate over 30 years. A study had estimated average annual earnings before interest, tax, depreciation and amortization of A$535 million.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.netJesse Riseborough in Melbourne at jriseborough@bloomberg.net

Read more...

Nikkei 225 Falls for First Time in Four Days as Yen Strengthens

By Kana Nishizawa and Satoshi Kawano

Jan. 7 (Bloomberg) -- Japan’s Nikkei 225 Stock Average fell for the first time in four days on concern the strengthening yen will crimp profits at makers of cars and electronics, and as brokerages cut investment ratings on Canon Inc. and Terumo Corp.

Toyota Motor Corp., the world’s biggest carmaker and which generates 31 percent of sales in North America, lost 1.3 percent after the yen gained against the dollar. Canon, which is the world’s largest camera maker and gets 79 percent of revenue abroad, sank 2.5 percent after Credit Suisse Group AG cut its rating. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, climbed 4.3 percent after saying it plans to sell as much as 889 billion yen ($9.6 billion) in shares.

“Investors are selling exporters as they become cautious of a re-strengthening of the yen,” said Hiroaki Hiwada, a strategist at Tokyo-based Toyo Securities Co. “In preparation for Mitsui Sumitomo’s share sale, foreign investors may be buying the yen.”

The Nikkei fell 0.5 percent to 10,681.66 at the 3 p.m. close of trading in Tokyo, reversing a 0.4 percent gain. The measure lost 0.8 percent in 20 minutes after 1:51 p.m. as the yen strengthened against the dollar.

The broader Topix index rose 0.1 percent to 931.85, with about four stocks advancing for every three that declined. Sumitomo Mitsui climbed 4.3 percent to 2,920 yen, the Topix’s biggest boost. It’s the first time since 1994 that the gauge increased on the first four business days of the year.

Yen Hurts Exporters

The yen strengthened to as much as 92.12 against the dollar this afternoon in Tokyo from 92.46 this morning, cutting the value of overseas sales at Japanese companies when converted into their home currency. It climbed to a 14-year high in November and averaged 93.59 in 2009, the highest annual level since currencies began trading freely in 1971.

The Topix climbed 5.6 percent last year, the lowest return among benchmark indexes of the world’s 40 largest stock markets, as a strong yen hurt exporters’ earnings and on concern the government wouldn’t be able to restore growth. Stocks in the index trade at an average of 1.1 times book value, compared with 2.3 times for the Standard & Poor’s 500 Index in the U.S. and 1.7 times for the Dow Jones Stoxx 600 Index in Europe.

Toyota lost 1.3 percent to 3,850 yen, and Honda Motor Co., Japan’s second-largest carmaker, sank 1.6 percent to 3,090 yen. Canon fell 2.5 percent to 3,930 yen after Credit Suisse cut its rating on the camera maker to “neutral” from “outperform.” Toyota, Canon and Honda were the biggest drags on the Topix.

Fanuc, Terumo Drop

Fanuc Ltd., a maker of industrial robots that gets almost 70 percent of revenue overseas, retreated 2.3 percent to 8,540 yen. Terumo Corp., Asia’s biggest maker of medical equipment, dropped 2.8 percent to 5,270 yen after Bank of America Corp.’s Merrill Lynch & Co. unit reduced its rating to “neutral” from “buy.” They were the largest drags on the Nikkei 225.

Japan Airlines Corp. fell the most in a week after Nikkei news said the carrier may take a 1.13 trillion-yen charge in the year ending March and file for bankruptcy. The stock dropped 9.5 percent to 76 yen, the steepest decline in the Nikkei 225.

The Nikkei 225 gained 13 percent in December, its steepest monthly gain since July 1995. The S&P 500 added 1.8 percent for the same month, while the Stoxx rose 6.2 percent.

“The market is overheating after the recent rally,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co.

To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

Read more...

Asian Stocks Fall on Currency, China Growth Concerns; LG Drops

By Masaki Kondo and Jonathan Burgos

Jan. 7 (Bloomberg) -- Asian stocks fell, dragging the MSCI Asia Pacific Index lower for the first time in five days, as stronger currencies threatened export earnings and China took steps to curb lending growth.

LG Electronics Inc. tumbled 7.6 percent in Seoul on concern profit at the handset business may miss analyst estimates and after South Korea’s won appreciated against the dollar. Canon Inc., which gets 28 percent of its sales from the Americas, sank 2.5 percent after Credit Suisse Group AG cut its recommendation. China Citic Bank Corp. fell 3.4 percent in Shanghai after the central bank said it will target “moderate” loan growth in 2010.

The MSCI Asia Pacific Index sank 0.4 percent to 123.63 as of 6:33 p.m. in Tokyo. The gauge climbed 34 percent last year, the biggest annual gain since 2003, as central banks cut borrowing costs and governments boosted spending to drag their economies out of recession.

“Markets will struggle to go higher,” said Norman Villamin, Singapore-based head of investment analysis for Asia Pacific at Citigroup Private Bank. “We’re much more sensitive to valuations given last year’s gains and will focus more on selected stock picks.”

China’s Shanghai Composite Index retreated 1.9 percent, while Hong Kong’s Hang Seng Index declined 0.7 percent. The Kospi Index sank 1.3 percent in Seoul amid speculation the central bank will raise rates after a policy meeting tomorrow.

San Miguel

Japan’s Nikkei 225 Stock Average fell 0.5 percent. Banks were the biggest contributor to the Topix Index’s 0.1 percent gain, with a gauge of lenders rising 1.7 percent, amid optimism bank share sales are close to an end. After the stock market shut, the yen slumped versus the dollar as the finance minister said he would like the currency to fall “a bit more.”

The Philippine Stock Exchange Index jumped 1.3 percent, the most among benchmark gauges in Asia. San Miguel Corp., the nation’s largest food and drinks maker, climbed 7.5 percent after agreeing to a takeover plan by its directors.

Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The stock gauge added 0.1 percent yesterday as minutes from the Federal Reserve’s last policy meeting showed central bankers considered more stimulus measures.

In Seoul, LG Electronics, the world’s No. 3 mobile-phone maker, dived 7.6 percent to 115,000 won, the biggest slump since Sept. 9, after saying today it aims to post global revenue of 59 trillion won ($52 billion) this year.

There are concerns about earnings growth at LG’s mobile- phone business, as the company has been late in introducing so- called smart phones, according to Han Eun Mee, an analyst at HI Investment & Securities Co.

Won Appreciation

Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, declined 3.3 percent to 813,000 won even after reporting fourth-quarter operating profit of about 3.7 trillion won, compared with a loss a year earlier.

The stock was the heaviest drag on the MSCI Asia Pacific Index as the stronger won threatened the value of overseas sales at South Korean companies when converted into their home currency. The won appreciated versus the dollar to as much as 1,129.42 today, a level not seen since September 2008.

Hyundai Motor Co., South Korea’s largest carmaker, dropped 4.5 percent to 106,000 yen.

The Bank of Korea will announce its monthly decision on interest rates on Jan. 8, after it kept borrowing costs on hold last month. Governor Lee Seong Tae said in his New Year speech the central bank will manage its benchmark interest rate to “help support” the economy, while monitoring for possible side effects of a loose monetary policy.

Signs Of Growth

“There seems to be investor speculation that Korea is set to join those increasing interest rates given the pace of its economic recovery,” said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages about $28 billion in assets.

Reports in the past week showed South Korea’s exports surged 33.7 percent last month and November home-building permits rose 5.9 percent in Australia, where the central bank lifted the benchmark lending rate for a third month in December.

Australian retail sales increased 1.4 percent in November from the previous month, the statistics bureau said today. The data helped drive Harvey Norman Holdings Ltd., Australia’s No. 1 electronics retailer, up by 3.7 percent to A$3.95.

The MSCI Asia Pacific Index’s advance last year came amid expectations growth in the region, driven by China, will outperform the rest of the world. The gauge’s 2009 gain drove up its price-book value ratio to 1.61, the highest level since September 2008, according to data compiled by Bloomberg.

Yen Strength

In Tokyo, Canon, the world’s biggest digital-camera maker, slid 2.5 percent to 3,930 yen after Credit Suisse reduced its rating to “neutral” from “outperform.” Honda Motor Co., which gets 47 percent of its sales in North America, lost 1.6 percent to 3,090 yen.

Japanese exporters fell as the yen appreciated to as high as 92.11 versus the dollar. The yen depreciated to 92.87 per dollar following Finance Minister Naoto Kan’s remarks.

Kan, who replaced Hirohisa Fujii as Japan’s finance minister yesterday, said he will try to keep the yen at an appropriate level while considering various impacts on the economy that may be caused by currencies.

In Shanghai, China Citic Bank slid 3.4 percent to 7.67 yuan as an increase in rates on three-month bills for the first time in 19 weeks signaled tighter liquidity.

Chinese Lenders

China Minsheng Banking Corp., the nation’s first privately owned bank, lost 2.7 percent to 7.70 yuan. Bank of Communications Co. slid 1.4 percent to HK$9.30 in Hong Kong.

Policy makers need to support “relatively fast” economic growth while stabilizing prices and managing inflation expectations, the People’s Bank of China said yesterday after an annual work meeting. It reaffirmed a “moderately loose” monetary policy.

Material producers advanced after the London Metal Exchange Index, a measure of six metals including copper and zinc, rose 3 percent yesterday to the highest level since August 2008. The advance was the most since Nov. 16. Crude oil for February delivery surged to a 14-month high yesterday in New York, rising 1.7 percent.

Korea Zinc Co., the world’s second-biggest zinc refiner, jumped 3.2 percent to 211,000 won, while Alumina Ltd. rose 1.8 percent to A$1.96 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, added 1 percent to A$48.90.

Higher Growth Estimates

“Commodities are continuing their climb as anticipation strengthens of growing demand from a global economic recovery,” said Mitsushige Akino, who manages about $450 million at Tokyo- based Ichiyoshi Investment Management Co.

The International Monetary Fund will probably raise its forecast for global growth later this month, John Lipsky, the IMF’s first deputy managing director, said in a Bloomberg Radio interview. The IMF forecast in October the global economy will expand 3.1 percent this year.

San Miguel jumped 7.5 percent to 72 pesos in Manila. Top Frontier Holdings Inc., part-owned by board members Roberto Ongpin and Inigo Zobel, plans to offer 75 pesos for each share in the foodmaker, San Miguel said yesterday.

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

Read more...

European, Asian Shares Decline; U.S. Index Futures Retreat

By Adria Cimino

Jan. 7 (Bloomberg) -- European and Asian stocks fell from the highest levels in more than 15 months after China, the driver of the global recovery, took steps to curb lending growth. U.S. index futures dropped.

Tate & Lyle Plc slid 5.7 percent after Credit Suisse Group AG downgraded the maker of the low-calorie sweetener Splenda. Lagardere SCA slipped 2.4 percent after Goldman Sachs Group Inc. recommended selling shares of France’s largest publisher. Continental AG, Europe’s second-biggest auto-parts maker, surged 7.6 percent after announcing a 1.1 billion-euro ($1.6 billion) share sale to help refinance debt.

Europe’s Dow Jones Stoxx 600 Index fell 0.4 percent to 256.83 at 8:22 a.m. in London, retreating from the highest close since October 2008. The measure jumped 28 percent last year, its biggest gain since 1999, boosted by record-low interest rates in Europe and the U.S. and about $12 trillion of commitments from governments worldwide to revive credit markets and boost growth.

The benchmark index for European shares is trading at about 59 times earnings, the highest level since 2003, according to data compiled by Bloomberg. The gauge has surged 63 percent since a 12-year low on March 9.

The MSCI Asia Pacific Index retreated 0.4 percent from a 16-month high today as the Shanghai Composite Index fell 1.9 percent, the most in two weeks. China’s central bank sold three- month bills at a higher interest rate for the first time in 19 weeks after saying its focus for 2010 is controlling the record expansion in lending and curbing price increases.

Fed Stimulus

U.S. stocks rose yesterday as higher energy and metal prices lifted commodity producers and some Federal Reserve policy makers said they would consider more stimulus measures, overshadowing declines in technology and telephone shares. Standard & Poor’s 500 Index futures lost 0.2 percent today.

Fed officials discussed whether the economy is strong enough to allow their $1.73 trillion of asset purchases to end in March and differed over the risk of inflation, according to minutes of their last meeting released yesterday.

A few policy makers said it “might become desirable at some point” to boost or extend securities purchases aimed at lowering mortgage rates, while one person sought a reduction, according to minutes of the Dec. 15-16 meeting of the Federal Open Market Committee. On inflation, some officials said slack in the economy will damp prices, and others saw risks from the central bank’s “extraordinary” stimulus.

“Whilst the general lack of fresh fundamental data could be weighing to an extent, arguably the rally should still have legs even if the Fed has come out with a rather bleak assessment of U.S. economic recovery,” Ben Potter, a research analyst at IG Markets in Melbourne, wrote in a note.

Tate, Lagardere

Tate & Lyle retreated 5.7 percent to 421.9 pence, the biggest intraday drop since July. Credit Suisse cut the shares to “neutral” from “outperform.”

Lagardere slid 2.4 percent to 28.05 euros after being downgraded to “sell” from “neutral” at Goldman Sachs and added to the firm’s “conviction sell” list.

Continental jumped 7.6 percent to 43.88 euros. A group of banks led by Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. agreed to underwrite the sale of 31 million new shares at 35 euros each, Continental said. The price is 14 percent less than the stock’s last closing price in Frankfurt.

Wolseley Plc gained 2.6 percent to 1,396 pence. The world’s biggest supplier of heating and plumbing gear was raised to “buy” from “neutral” at UBS AG, which cited possible “positive share price momentum” before the company’s strategic review in March.

J Sainsbury Plc added 1.5 percent to 322.6 pence. The U.K.’s third-biggest supermarket owner said third-quarter like- for-like sales excluding VAT and fuel rose 4.2 percent. Analysts had forecast a 3.5 percent increase, according to estimates compiled by Bloomberg.

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

Read more...

Bed Bath & Beyond, Hot Topic, InfoSpace: U.S. Equity Preview

By Lu Wang

Jan. 7 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Bed Bath & Beyond Inc. (BBBY US): The largest U.S. home- furnishings retailer forecast fourth-quarter profit of at least 67 cents a share, topping the average estimate of 63 cents from analysts in a Bloomberg survey.

Christopher & Banks Corp. (CBK US): The Minnesota-based women’s clothing retailer posted earnings excluding some items of 19 cents a share in the third quarter, missing the average analyst estimate by 7.3 percent, according to Bloomberg data.

Hot Topic Inc. (HOTT US): The teen clothing and music retailer reduced its fourth-quarter earnings forecast as December sales fell more than analysts estimated.

InfoSpace Inc. (INSP US): The provider of services for mobile phones and Web sites said fourth-quarter revenue was $69 million at least, more than it previously forecast.

Tessera Technologies Inc. (TSRA US): The designer of packaging for computer chips projected first-quarter sales of $61 million at most, trailing the average estimate of $63.7 million from analysts in a Bloomberg survey.

Zumiez Inc. (ZUMZ US): The specialty sports-apparel retailer boosted its fourth-quarter profit forecast after sales unexpectedly rose last month.

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

Read more...

FX Markets Choppy As Sovereign Debt Concerns Counter Optimism For US Data

Daily Forex Fundamentals | Written by AC-Markets | Jan 06 10 10:51 GMT |

News and Events: Coming a day after yesterday's UK debt worries, European markets were given a fresh reminder of the fragile state of Greece's predicament as Reuters reported comments from ECB's Stark that the rest of the EU would not save Greece from its fiscal difficulties. These remarks have quickly been followed up by counter comments from Greece's Finance Minister Papaconstantinou; who strenuously denied that Greece needed a bailout, and added that Stark did not need to make the bailout comments at all. Despite this timely exercise in damage limitation from the Greek camp, it seems that lingering doubts about European sovereign debt never seem to settle for long before fresh headlines shake up the delicate balance of risk sentiment. Consequently, the USD (which tends to benefit from debt crisis headlines) and FX markets as a whole are left trading in a relatively choppy fashion as improving global data clashes with waves of risk aversion on unpredictable headlines. Credit ratings agencies are certainly being kept busy with ongoing issues in Greece and Dubai, the UK and Japan also toeing a fine line, and most recent news that Iceland has been downgraded to junk status by Fitch. The latest in development in the Icelandic saga is the refusal of President Olafur Grimsson to sign a bill that would obligate Iceland to repay UK and Dutch governments for depositor claims following the collapse of Landsbanki. The bill will now be put to a referendum, but with widespread opposition amongst the population, there is considerable risk that future IMF help is hampered by this vote, and indeed the likelihood of Iceland joining the EU seems far less probable than before. Against this backdrop of economic uncertainty, FX traders are also trying to reconcile analyst optimism for upcoming US data. Consensus for this Friday's Non-Farm Payrolls is for no change – which, if realized, would constitute the first non-negative change in payrolls since December 2007. Tonight's FOMC Minutes should give some further insight into whether market optimism is echoed by the voting members of the Fed, but at this juncture we feel it is unlikely the Fed will say anything drastically different from last meeting's minutes Today Key Issues: 10:00 EUR PPI, % m/m (y/y) Nov exp: 0.2 (-4.5) prev: 0.2 (-6.7) 10:00 EUR Industrial orders, % m/m Oct exp: -1.0 prev: 1.7 13:15 USD ADP private payrolls, chg, thous Dec exp: -75 prev: -169 15:00 USD ISM non-manufacturing index Dec exp: 50.5 prev: 48.7 19:00 USD FOMC minutes released 16-Dec The Risk Today: EurUsd Choppy and directionless trading prevails in EURUSD with the morning's plunge to 1.4284 lows now quickly reversed to put us firmly back in the ranges at 1.4375. Once again we are left eyeing topside resistance ahead of 1.4500, and beyond there the major hurdles at 1.4600 and 1.4685. If we look on the daily chart, there is a flag formation being carved out with downside support currently coming in around 1.4280 (coinciding with today's lows), and if breached we can expect a continuation of the downtrend that has been in play since 4th Dec (break f the 12-minth uptrend). It may be a difficult move lower however with support lying in wait at 1.4244 (200 day moving average), and range lows at 1.4210. GbpUsd Yesterday's bout of GBPUSD weakness breached the lower end of the prior 1.6050-1.6250 range, and the break below 1.6000 now leaves the pair vulnerable to a revisit of 1.5833 (Dec 30 lows). If we re-enter the range, the 200-day movig average at 1.6100 forms first area of good supply, and beyond there expect prior resistance levels to still be in play: 1.6248 (Dec 18 highs), followed by 1.6323 (100 day moving average), and above there the 1.6400 psychological barrier. UsdJpy After a quick visit to 91.26 lows yesterday (just above 91.10 support), USDJPY has been well bid back above the 92.00 level, and looks like we will remain rangebound between 93.22 (22 Dec high) and the 91.10 lows. A break below 91.10 would indicate a resumption of the larger downtrend that has been in play since mid 2007, but for now, look for bids ahead of 91.10, and plenty of offers around 93.00-20 zone to contain the pair. Only a daily close above the 93 handle would suggest a further move higher. UsdChf Range-trading prevails in USDCHF between 1.0280 and 1.0425, but the break above the 100-day moving average (1.0301 currently) does seem to favour further USD strength from here. Next levels to watch outside the range are 1.0508 key high and beyond there the 1.0700 major resistance (38.2% correction of the move from 1.1970 down to 0.9918). Near term support stands at 1.0320 ahead of 1.0220. EURUSD GBPUSD USDJPY USDCHF 1.4580 1.6400 95.00 1.0700 1.4500 1.6335 93.35 1.0625 1.4484 1.6236 93.20 1.0425 1.4375 1.6015 92.35 1.0335 1.4232 1.5945 91.10 1.0300 1.4210 1.5833 90.00 1.0220 1.4100 1.5710 89.10 1.0175 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Read more...

European Services Continue The Progress

Daily Forex Fundamentals | Written by ecPulse.com | Jan 06 10 10:41 GMT |

Following the improvement witnessed by the manufacturing sector in the euro zone and U.K., the services sector, the leading sector in Europe, completed the progress scenario that started since the second quarter of 2009. Today, PMI services final reading for December in the euro area climbed to 53.6 from 53.0 in November. Although the reading came below estimates, but it continued its rise above 50 level, providing further clues the economy is growing in the fourth quarter. Services in the 16-nation economy were lifted by the rise in the largest economy in the region. German services soared to 52.7 from 51.4 in November; Italian PMI spiked to 53.9 from 49.8 a month earlier. On the other hand, the reading slipped in France to 58.7 in from 60.9 in November. Yesterday, PMI manufacturing for December rose to 51.6 from 51.2 in November. Consequently, PMI composite spiked to 54.7 from 53.7. The European economy is gathering strength clearing the way for a recovery in 2010. In the third quarter of 2009, the economy grew 0.4% compared with 0.2% and 2.4% contractions recorded in the second and first quarters respectively, thanks to the monetary and fiscal measures adopted by the ECB and national European governments to revive the economy. Trichet and his economic team slashed the cost of borrowing to 1% and introduced 60 billion euros spent on purchasing euro-denominated bonds. In addition, they offered to lend banks as much money as they need at the current benchmark. It is reasonable to say that the strong interventions boosted the economy that posted very weak data in the first quarter of 2009. However, sooner or later the stimulus packages will be withdrawn and the economy will rely solely on itself. Thus, the euro area may witness volatility this year before reaching full recovery in 2011, according to the EU Commission. In the U.K., services tracked the progress in manufacturing; empowering the claims that the economy will emerge from recession in the fourth quarter. The British economy eased the pace of contraction in the third quarter to 0.2% from 0.6% contraction in the second quarter. Tomorrow, BoE members will meet to set the interest rate and the amount of the APF program. The borrowing cost and the quantity of APF may remain unchanged in January, before a possible change that might take place in February when releasing the new quarterly growth and inflation reports. All 9 MPC members at the BoE voted unanimously (9-0) for keeping both interest rate and APF unchanged from November. The benchmark was left at 0.5%, while the APF quantity stagnated at 200 billion pounds; however, some analysts are predicting another increase in the amount of the APF program to 215 billion pounds proposed by Miles in November. The British economy, although improved remarkably recently, it is still lagging behind the euro zone; therefore, the economy may need another boost to accelerate the recovery that is expected to be sluggish in 2010. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

Read more...