Pound Seen as Diminished No Matter Who Wins Election

By Lukanyo Mnyanda and Paul Dobson

Jan. 25 (Bloomberg) -- No matter who prevails in this year’s election between U.K. Prime Minister Gordon Brown and opposition leader David Cameron, the loser will be the pound because the next government may not have enough support in parliament to rein in the Group of 20’s biggest budget deficit.

Strategists cut forecasts on sterling versus the dollar by as much as 2 percent this month to the lowest since June. The currency will be weighed down by polls that point to the first parliamentary stalemate in a generation, growth that lags behind the four biggest industrialized economies and a fiscal shortfall that has ballooned to almost 13 percent of gross domestic product, double what it was a year ago, the strategists said.

SJS Markets Ltd., last year’s second-most accurate forecaster on the pound versus the dollar, sees the U.K. currency falling 1.3 percent by Dec. 31. BNP Paribas SA says the pound will wipe out all of last year’s 11 percent gain, its best since 2006. The last time a U.K. election failed to produce a clear winner was in 1974. The currency fell 28 percent in the next two years as the government’s failure to fund its deficit led to an International Monetary Fund bailout.

“If you end up with political paralysis in the U.K., that would be the worst of both worlds, where no one governs and everybody is fighting each other,” said Sebastien Galy, a New York-based senior foreign-exchange strategist at BNP, which sees the pound sinking to $1.40 this year. “It’s not a happy time when you have to go through fiscal restraint as it makes nobody happy, and if you do it with a weak majority or weak type of coalition, it’s not easy to sustain.”

Poll Results

Brown’s popularity waned during the U.K.’s worst postwar recession, and Conservative leader Cameron, 43, has struggled to maintain enough backing to avoid a stalemate in an election that must be held by June. A YouGov survey for the Sunday Times, released Jan. 17, showed the Conservatives with 40 percent support and a 9-point lead over Brown, 58, whose Labour Party has ruled since 1997. The opposition needs a winning margin of 10 percentage points to control Parliament, according to Anthony Wells, a YouGov pollster.

Global investors are less enthusiastic about the U.K. than any other major economy, according to a quarterly poll of Bloomberg subscribers released Jan. 22. About 66 percent of respondents are pessimistic about the country’s investment climate. As for Brown, 62 percent view him unfavorably worldwide, and 86 percent of British respondents feel likewise.

Declining Forecasts

Sterling traded today at $1.6157, down less than 0.1 percent this year. The median forecast of 26 analysts in a Bloomberg survey predicts a 2.7 percent gain to $1.66 per pound by Dec. 31. As recently as Oct. 8, the consensus was $1.71, or 5.8 percent more than today’s level.

The median tumbled 2.9 percent in three weeks to $1.62 on Jan. 15, turning bearish for the first time in two months after being bullish for almost all of last year. It hadn’t fallen so fast since dropping 4.6 percent in September, at a time when Bank of England Governor Mervyn King was warning Parliament that “the strength and sustainability of the recovery is highly uncertain.”

UniCredit SpA in Milan, last year’s fourth-best pound forecaster, cut its year-end prediction by 6.7 percent to $1.68, from $1.80, on Jan. 22, citing the U.K.’s slower growth prospects. Britain’s GDP, the fifth-biggest among industrialized economies, will expand 1.2 percent this year, compared with 2.7 percent in the U.S., 1.35 percent in Japan, 1.9 percent in Germany and 1.3 percent in France, median analyst estimates compiled by Bloomberg show.

Bearish Bets

“The risk of a hung parliament might be a drag,” said Roberto Mialich, a UniCredit currency strategist. “A dramatic worsening of U.K. public finances that forces rating agencies to cut the AAA rating” may push the pound lower, he said.

Hedge funds and other speculators have had an average of almost three times as many bets that the pound will fall as wagers that profit from a rise this month, data from the U.S. Commodity Futures Trading Commission in Washington show. Traders haven’t been that bearish since October.

A weaker pound would help U.K. exporters. International Power Plc, the biggest U.K.-based electricity producer, has assets in about 20 countries and gets more than half of its earnings from overseas. The company is likely to report increased profit due to foreign revenue, said Mark Freshney, an equities analyst at Credit Suisse Group AG in London.

“The fall in the value of the pound against the key currencies in which International Power operates has been a driver,” Freshney said in a Jan. 20 note.

Interest-Rate Outlook

Thanos Papasavvas, who helps oversee $5 billion as head of currency management at Investec Asset Management Ltd. in London, says bears are underestimating the timing and pace of central bank interest-rate increases as the economy recovers and inflation accelerates. He predicts the currency will rise 5.5 percent to about $1.70 by year-end after policy makers abandon their record-low 0.5 percent benchmark.

Inflation hit 2.9 percent in December, up an unprecedented 1 percentage point from the previous month, while unemployment fell at the fastest pace since April 2007, the government said last week.

“Data is continuing to surprise on the upside, inflation pressures are here, and we’re seeing a gradual recovery worldwide,” Papasavvas said. The pound is “the cheapest of the major currencies, and that’s why we like sterling.”

BNP’s Galy discounts the positive economic indicators.

Highs and Lows

“Some of the good performance in the U.K. economy is actually backward looking, and some of the elements are probably not sustainable,” he said. “When the fundamentals come through, sterling won’t be the prettiest currency around.”

After rising to as high as $2.1161 in November 2007, the pound fell 26 percent in 2008 as the global financial crisis plunged the U.K. into its longest recession on record. It hit $1.3503 last January, the lowest since 1985.

Chancellor of the Exchequer Alistair Darling funded stimulus measures by record borrowing, swelling the budget deficit. It hit 15.7 billion pounds ($25.3 billion) last month, the most for any December since records began, the Office for National Statistics said Jan. 21.

Sterling’s gains last year were driven by optimism that the central bank’s plan to pump 200 billion pounds of new money into the economy and record-low interest rates would revive growth. Mortgages approved by the country’s six biggest banks stayed close to the highest level in a year last month, and lenders predicted demand will remain “broadly stable,” the Bank of England said on Jan. 21.

Inflation, Unemployment

The currency rose to a six-week high of $1.6458 last week after the inflation and unemployment data prompted speculation that the central bank would raise borrowing costs.

The BOE’s key interest rate will match that of the U.S. Federal Reserve at 1 percent by the fourth quarter, median economist forecasts show. The Fed’s main rate is now between zero and 0.25 percent. The predictions see the U.K.’s rate lagging behind higher year-end rates in the euro region, Canada, Sweden and Norway, making the pound a relatively less attractive investment.

“I don’t think we can look to interest rates as the savior for the pound,” said Nick Beecroft, a London-based senior foreign-exchange consultant at Saxo Bank A/S, in a Jan. 4 Bloomberg television interview. “It faces many headwinds, the most important of which is the possibility of a hung parliament.”

No Help

Even a Conservative victory that secures control of Parliament may not help the pound, said Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, which Euromoney Institutional Investor Plc ranks as the world’s second-biggest currency trader. Investors may spurn the currency on speculation that Cameron’s promises to rein in the deficit will prompt the central bank to try to safeguard a recovery by delaying rate increases, he said.

“We could see sterling come back under pressure as people realize that an austerity budget is going to present a problem on the monetary side,” Kim said. “You can’t suddenly tighten monetary policy then too.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Paul Dobson in London at Pdobson2@bloomberg.net

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Yen Drops on Speculation Bank of Japan Prepares More Easing

By Lukanyo Mnyanda and Yoshiaki Nohara

Jan. 25 (Bloomberg) -- The yen fell against the dollar and the euro amid speculation Bank of Japan policy makers are prepared to increase purchases of government debt to safeguard the recovery and limit the currency’s strength.

Japan’s currency snapped seven days of gains against the euro after people with knowledge of the matter said the central bank may also expand an emergency-loan program for banks. The yen and the dollar dropped on speculation Federal Reserve Chairman Ben S. Bernanke will win lawmakers’ support for a second term, boosting demand for higher-yielding assets. The dollar also declined before a report that may show sales of existing U.S. homes dropped last month.

“There’s still this whole debate about whether Japan will accept a strong yen and I think it won’t,” said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt. “They will intervene if they feel the yen starts to accelerate too much.”

The yen depreciated to 127.96 per euro as of 7:03 a.m. in New York, from 126.98 last week. It weakened to 90.27 per dollar, from 89.82. It traded at 89.79 on Jan. 22, its strongest level since Dec. 18. The dollar declined to $1.4174 per euro from $1.4139, after appreciating to $1.4029 on Jan. 21, its highest level since July.

Bernanke’s Support

President Barack Obama “is very confident” Bernanke will be confirmed, David Axelrod, a senior White House adviser, said on CNN’s “State of the Union” program. Senate Republican leader Mitch McConnell said on NBC’s “Meet the Press” that Bernanke will have “bipartisan support in the Senate.”

Mounting opposition to Bernanke’s reappointment from senators including John McCain and Russ Feingold helped push U.S. stocks lower last week on concern that uncertainty at the Federal Reserve may risk prospects for an economic recovery. Investors may opt to sell borrowed yen to fund purchases of riskier assets when the economic outlook improves.

Japan’s central bank will leave interest rates and its lending program unchanged tomorrow, according to 16 of 17 economists in a Bloomberg survey. How the Bank of Japan responds in coming months will depend on the extent of any further economic shocks, such as a surge in the yen to November’s 14- year high, said the people familiar with the central bank’s plans, who spoke on condition of anonymity.

“If deflation pressures continue to build, there’s going to be more political pressure on them to act,” driving the yen’s move than the Bernanke speculation, said Derek Halpenny, European head of global currency research at Bank of Tokyo- Mitsubishi UFJ Ltd.

High-Yielders

The dollar weakened most against the South African rand and Mexican peso. The National Association of Realtors may say today that U.S. existing home sales dropped to a 5.9 million annual rate in December from 6.54 million in November, according to the median estimate of economists in a Bloomberg survey.

Fed officials will do their part to spur growth by keeping interest rates near zero after their two-day meeting this week, economists forecast in a Bloomberg survey. Policy makers, who meet Jan. 26-27, may reiterate their pledge to hold rates “exceptionally low” for “an extended period.”

Futures trading in Chicago on Jan. 22 showed an 19 percent chance that the Fed will raise its target rate for overnight bank loans by at least a quarter-percentage point by its June meeting, down from 26 percent odds a week earlier.

Interest Rates

Benchmark interest rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 percent in Australia and 2.5 percent in New Zealand, making the South Pacific nations’ assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves will erase profits.

Australia’s dollar rose to 90.64 U.S. cents from 90.07 cents, and gained to 81.80 yen from 80.91 yen. New Zealand’s currency climbed to 71.41 cents from 70.97 cents, and advanced to 64.45 yen from 63.75 yen.

U.S. stock-index futures gained, indicating that the Standard & Poor’s 500 Index will rebound from its biggest three- day decline since the rally that began in March. Futures on the S&P 500 expiring in March advanced 0.8 percent.

Gains in the euro were tempered on speculation that Greece will struggle to contain its budget deficit, reducing the allure of assets in the 16-nation region. Greece may sell at least 5 billion euros ($7.1 billion) of five-year debt this week, according to a person familiar with the matter.

‘Drag on Euro’

European Central Bank President Jean-Claude Trichet said in an interview published last week with Germany’s Focus magazine that Greece, whose deficit has expanded to almost 13 percent of gross domestic product, hasn’t respected the Stability and Growth Pact, which requires members to limit budget shortfalls to 3 percent of GDP.

“Signs of an additional increase in the Greek risk premium would likely remain a drag on the euro,” Thomas Stolper, a London-based economist at Goldman Sachs Group Inc., wrote in an e-mail to Bloomberg. “There also remains the risk that other countries come under more fiscal pressures as well.”

The British pound gained 0.2 percent to $1.6147 and was little changed at 87.79 pence per euro.

The U.K. currency may be the loser no matter who prevails in this year’s election between Prime Minister Gordon Brown and opposition leader David Cameron, because the next government may not have enough support in parliament to rein in the Group of 20’s biggest budget deficit. Strategists cut forecasts on sterling versus the dollar by as much as 2 percent this month to the lowest since June, forecasts compiled by Bloomberg.

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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China’s Coal Shortage May Persist in First Quarter

By Bloomberg News

Jan. 25 (Bloomberg) -- China, the world’s second-biggest energy consumer, may continue to face a coal shortage until the end of March because of winter demand, the government said.

Coal demand has increased faster than anticipated since the fourth quarter because of accelerating growth in power generation, steel production and metal processing, the National Energy Administration said on the government’s Web site today. China relies on coal for about 80 percent for its power output.

Demand for heating, power and coal surged as China faced its coldest winter in at least 50 years while the government’s $586 billion stimulus spending spurred energy consumption. Domestic benchmark coal prices have risen about 40 percent since July, the energy bureau said.

“If domestic supply cannot catch up with demand, coal prices in China may continue to rise,” Martin Wang, an analyst with Guotai Junan Securities in Hong Kong, said by phone.

Manufacturing grew at its fastest pace in 20 months in December while electricity generation rose 16 percent. The Chinese economy will expand four times faster than the U.S. in 2010, the United Nations said last month. There’s still “lots of room” for energy demand to grow, the energy bureau said.

Domestic coal output may rise about 5 percent this year while coal import growth is likely to slow as potentially higher global demand pushes up higher, the energy administration said.

China’s coal output gained 13 percent in 2009 while electricity generation increased by 7 percent, the government said on Jan. 21.

Energy Demand Growth

Energy demand growth may be faster in the first half than in the second, the bureau said, without elaborating. China’s electricity generating capacity may increase to 960,000 megawatts by the end of 2010, it said.

The country’s fuel demand may recover and increase by about 4 percent this year, it said. Additional oil refining capacity may exceed 20 million tons and the domestic fuel market will remain “oversupplied in general,” it said.

Separately, China has started building liquefied natural gas receiving terminals in Shandong and Hainan, it said, without giving details.

--Wang Ying, with assistance from Winnie Zhu. Editors: Ryan Woo.

To contact the reporter on this story: Ying Wang in Beijing at ywang30@bloomberg.net

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China’s Coal Shortage May Persist in First Quarter

By Bloomberg News

Jan. 25 (Bloomberg) -- China, the world’s second-biggest energy consumer, may continue to face a coal shortage until the end of March because of winter demand, the government said.

Coal demand has increased faster than anticipated since the fourth quarter because of accelerating growth in power generation, steel production and metal processing, the National Energy Administration said on the government’s Web site today. China relies on coal for about 80 percent for its power output.

Demand for heating, power and coal surged as China faced its coldest winter in at least 50 years while the government’s $586 billion stimulus spending spurred energy consumption. Domestic benchmark coal prices have risen about 40 percent since July, the energy bureau said.

“If domestic supply cannot catch up with demand, coal prices in China may continue to rise,” Martin Wang, an analyst with Guotai Junan Securities in Hong Kong, said by phone.

Manufacturing grew at its fastest pace in 20 months in December while electricity generation rose 16 percent. The Chinese economy will expand four times faster than the U.S. in 2010, the United Nations said last month. There’s still “lots of room” for energy demand to grow, the energy bureau said.

Domestic coal output may rise about 5 percent this year while coal import growth is likely to slow as potentially higher global demand pushes up higher, the energy administration said.

China’s coal output gained 13 percent in 2009 while electricity generation increased by 7 percent, the government said on Jan. 21.

Energy Demand Growth

Energy demand growth may be faster in the first half than in the second, the bureau said, without elaborating. China’s electricity generating capacity may increase to 960,000 megawatts by the end of 2010, it said.

The country’s fuel demand may recover and increase by about 4 percent this year, it said. Additional oil refining capacity may exceed 20 million tons and the domestic fuel market will remain “oversupplied in general,” it said.

Separately, China has started building liquefied natural gas receiving terminals in Shandong and Hainan, it said, without giving details.

--Wang Ying, with assistance from Winnie Zhu. Editors: Ryan Woo.

To contact the reporter on this story: Ying Wang in Beijing at ywang30@bloomberg.net

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White Sugar Advances in London on Demand to Expand Stockpiles

By M. Shankar

Jan. 25 (Bloomberg) -- White sugar advanced in London on speculation that India, Indonesia and other importers will buy more because of expectations for a supply shortfall.

India, the world’s largest consumer, will have to import at least 7 million metric tons this season, Macquarie Group Ltd. said in a report this month. Indonesia, Southeast Asia’s largest sugar buyer, may have a shortfall of 530,976 tons in white sugar for household consumption in early May, Trade Minister Mari Pangestu told parliament members today in Jakarta.

“We are still seeing supply shortfalls across the world and that is supportive for sugar prices,” Peter de Klerk, an analyst with C. Czarnikow Sugar Futures Ltd. in London, said by phone today.

White sugar for March delivery advanced as much as $12.30, or 1.6 percent, to $759.30 a ton on the Liffe exchange, and was trading at $749.90 at 12:05 p.m. local time. The contract last week climbed to $767, the highest level in at least two decades. Raw sugar for March delivery rose 1.9 percent to 29.32 cents a pound on ICE Futures U.S. in New York.

Excess rains in Brazil and a weak monsoon in India hurt sugar-cane output from the world’s two biggest growers. Global demand for sugar will outpace supply by 13.5 million tons in the 2009-10 season, according to Czarnikow.

Five of 10 traders, analysts and brokers surveyed last week forecast that white sugar traded in London would gain, and three said the price would retreat.

Boosting Inventories

Indonesia, which had a white-sugar stockpile of 350,626 tons at the end of 2009, may produce 218,398 tons of sugar in the first four months of this year, while demand in the period may reach 1.1 million tons, according to Pangestu.

Egypt, Pakistan and Philippines have also said they intend to import sugar to cool domestic prices, crimping supplies.

Among other agricultural commodities traded on Liffe, cocoa for March delivery slid 10 pounds, or 0.4 percent, to 2,330 pounds ($3,766) a ton.

Cocoa exports from Ivory Coast, the world’s largest producer of the chocolate ingredient, jumped 18 percent to 184,448 tons in December, according to data supplied by the ports of Abidjan and San Pedro.

The West African nation is expected to ship 900,000 tons of the beans during this season’s harvest, little changed, from last year, according to officials from state agencies interviewed last week.

Robusta coffee for March delivery jumped $10, or 0.7 percent, to $1,370 a ton. It earlier climbed to as high as $1,385 a ton.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net.

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Corn Climbs on Speculation Lower Prices May Boost U.S. Exports

By Luzi Ann Javier

Jan. 25 (Bloomberg) -- Corn rose in Chicago on speculation that a two-week drop is attracting investors and importers after a jump in export sales from the U.S., the world’s biggest shipper of the grain.

U.S. exporters sold 1.61 million metric tons of corn in the week ended Jan. 14, almost five times the 327,286 tons destined for overseas buyers a week earlier, the U.S. Department of Agriculture said in a report released on Jan. 22.

“Corn demand has started to improve, with the USDA indicating big export sales,” Luke Mathews, an agricultural commodity strategist at Commonwealth Bank of Australia in Sydney, said in a report published today.

Corn for March delivery climbed 1 percent to the session high of $3.685 a bushel on the Chicago Board of Trade at 11:43 a.m. Paris time. Prices slid 14 percent in the prior two weeks.

March-delivery soybeans added 0.3 percent to $9.545 a bushel. U.S. export sales of the oilseed jumped to 990,563 tons from 754,144 tons a week earlier, the USDA said.

“Oilseed demand continues to support” soybean prices, Mathews said.

Still, soybeans will fall as much as 6.2 percent in the next three months on record South American harvests and as U.S. farmers begin planting increased acreage in April, Rich Nelson, director of research for commodity research advisory firm Allendale Inc., said at a conference on Jan. 23.

Wheat for March delivery rose 0.6 percent to $5.015 a bushel. Milling wheat for March delivery traded on Liffe in Paris climbed 0.6 percent to 127.25 euros ($180.21) a ton.

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

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Asian Stocks Fall for Sixth Day on Bank Capital, Profit Concern

By Shani Raja

Jan. 25 (Bloomberg) -- Asian stocks fell for a sixth day, dragging Hong Kong’s Hang Seng Index 10 percent below its November high, on concern Chinese banks need more capital and that profit growth won’t be enough to justify equity valuations.

Bank of China Ltd. lost 2.1 percent in Hong Kong on plans to raise $5.86 billion from selling convertible bonds. BHP Billiton Ltd., the world’s largest mining company, sank 1.1 percent in Sydney as copper and oil futures declined. Honda Motor Co., which receives 42 percent of its sales from North America, declined 1.7 percent on speculation U.S. measures to restrict risk-taking at banks will derail the global recovery.

The MSCI Asia Pacific Index lost 0.7 percent to 121.57 as of 7:42 p.m. in Tokyo. The index sank 4.1 percent in the past six days on U.S. President Barack Obama’s bank proposal and growing concern China will take further steps to rein in growth. Companies on the gauge are priced at 1.6 times book value, near the highest level since September 2008.

“Asian markets are correcting over concerns the trajectory of growth is insufficient to justify some valuations,” said Tim Schroeders, who helps manage $1.1 billion at Pengana Capital Ltd. in Melbourne.

Hong Kong’s Hang Seng Index dipped 0.6 percent, as financial shares led the gauge into a so-called correction. The Shanghai Composite Index lost 1.1 percent, led by PetroChina Co. as crude oil fell. Japan’s Nikkei 225 Stock Average and Australia’s S&P/ASX 200 Index each retreated 0.7 percent.

Proprietary Trading

Futures on the Standard & Poor’s 500 Index climbed 1 percent after Obama received assurances from Senate leaders that Ben S. Bernanke will be confirmed for a second term as Federal Reserve chairman. The S&P 500 lost 2.2 percent on Jan. 22 as uncertainty over Bernanke’s confirmation weighed on lenders.

Obama last week called for limits on the size and trading activities of financial institutions as a way of preventing another financial crisis. The proposals, to be added to an overhaul of regulations being considered by Congress, would prohibit banks from running proprietary trading operations solely for their own profit. The rules would also prevent them sponsoring hedge funds and private-equity funds.

“The change to U.S. banking regulations will severely hamper the ability of many banks to meet forecast profit growth,” said Pengana’s Schroeders. “The fear in Asia is that similar type legislation could be enacted in the region as governments focus on how to fund the bill for the bailout of the global economy.”

Banking Regulations

An index of finance stocks on the MSCI Asia Pacific Index lost 1.1 percent, the most of 10 industry groups. In Sydney, Westpac Banking Corp. dropped 1.8 percent to A$24.92. QBE Insurance Group Ltd., Australia’s biggest property and casualty insurer, lost 0.7 percent to A$22.91 after Deutsche Bank AG cut its rating to “hold” from “buy.”

Woori Finance Holdings Co., South Korea’s third-biggest financial company, fell 4.6 percent to 14,500 won. The Public Fund Oversight Committee will discuss another block sale of Woori Finance shares when it meets on Jan. 27, people familiar with the plans said.

Bank of China lost 2.1 percent to HK$3.81. The nation’s third-largest lender by market value said its board will seek shareholder approval to issue six-year convertible bonds. Bank of Communications Ltd. fell 2.5 percent to HK$8.18.

“The size of Bank of China’s fundraising is huge,” Li Jun, a strategist at Central China Securities Holdings Co., said in Shanghai. “I’m afraid more big banks will follow suit in order to boost their capital adequacy ratio, which will be negative for the market.”

Hang Seng Correction

The Hang Seng Index has tumbled 10.2 percent since closing at a high of 22,943.98 on Nov. 16. The gauge has retreated 5.8 percent in 2010, more than three times as fast as the MSCI World Index of 23 developed markets as investors sold the city’s banks and energy producers on speculation China will rein in economic growth.

Today’s decline marked the first 10 percent retreat in the developed world since Greece’s Athens Stock Exchange General Index lost 30 percent starting in October.

“The market is correcting as China changes its policy focus,” said Alex Au, managing director of Richland Capital Management Ltd., which oversees $300 million of assets. “Risk appetite is decreasing.”

The MSCI Asia Pacific lost 3.5 percent last week on concern the pace of economic growth will prompt central banks from China to India to curb price increases. Chinese government reports on Jan. 21 showed the country’s fourth-quarter gross domestic product grew 10.7 percent, more than economists estimated, while inflation accelerated in December.

Oil, Copper

PetroChina, the nation’s top oil producer, sank 1 percent to 13.39 yuan in Shanghai. Santos Ltd., Australia’s third- biggest oil and gas producer, declined 1.2 percent to A$13.39. BHP lost 1.1 percent to A$41.25. Mitsubishi Corp., which trades commodities, dropped 1.1 percent to 2,267 yen in Tokyo.

Crude-oil futures fell 0.4 percent during Asian trade today, adding to last week’s 4.4 slump. Copper for three-month delivery dropped 0.7 percent to $7,340 a metric ton on the London Metal Exchange today.

Exporters fell amid investor concerns about the health of the global economy should Obama’s plan be approved. Honda dropped 1.7 percent to 3,175 yen. Infosys Technologies Ltd., India’s No. 2 software services exporter, declined 1.3 percent to 2,542.3 rupees.

Toyota Motor Corp., the world’s largest automaker, slumped 2.1 percent to 3,970 yen after saying global sales fell 13 percent in 2009 to 7.81 million units. The Sankei newspaper reported the figures earlier.

Rising Valuations

The steepest stock market rally since the 1930s pushed worldwide valuations to six-year highs, helped by more than $8 trillion in global spending to end the recession. The MSCI World Index trades for more than 28 times annual profit of its companies, near the highest level since 2002. The MSCI World dropped 3.8 percent last week, the most since October. It was little changed today.

“The sell-off that began last week has developed into a correction,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney.

In Tokyo, Nissha Printing Co., which makes film for screens used in mobile phones, tumbled 7.6 percent to 4,090 yen after cutting its profit forecast. India’s Tech Mahindra Ltd. plunged 7.8 percent to 1,049.1 rupees after reporting a 23 percent decline in third-quarter earnings.

Daelim Industrial Co., a South Korean builder, fell 6.7 percent to 80,200 won after Mirae Asset Securities Co. cut its stock recommendation “hold” from “buy.”

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

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European Stocks Erase Gains; Stoxx 600 Index Is Little Changed

By Sarah Jones

Jan. 25 (Bloomberg) -- European stocks erased gains, as shares of Ericsson AB declined.

The Dow Jones Stoxx 600 Index was little changed at 250.04 at 11:57 a.m. in London, after earlier rising as much as 0.4 percent.

Ericsson slid 1.8 percent to 70.60 kronor. The company reported a 92 percent plunge in fourth-quarter net income to 314 million kronor ($43 million) as phone companies reduced spending on networks.

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U.K.’s FTSE 100 Advances, Led by Barclays, Standard Chartered

By Alexis Xydias

Jan. 25 (Bloomberg) -- U.K. stocks advanced, with the FTSE 100 Index reversing earlier declines, as shares of banks rebounded from their steepest loss in eight months.

Barclays Plc, Royal Bank of Scotland Group Plc and Standard Chartered Plc rose more than 2 percent. British Airways Plc declined as the airline’s 12,000 cabin crew start voting to go on strike.

The benchmark FTSE 100 Index added 0.3 percent to 5,321.25 as of 10:18 a.m. in London. The FTSE All-Share Index rose 0.3 percent and Ireland’s ISEQ Index climbed 0.2 percent.

Global stocks fell last week, with the FTSE 100 posting its biggest retreat since October, as banks plunged on a White House proposal to limit financial risk, China moved to rein in economic stimulus and speculation grew Australia may consider raising taxes on mining companies.

U.K Chancellor of the Exchequer Alistair Darling said U.S. President Barack Obama’s proposals for banks may undermine the consensus amongst Group of 20 nations on reform, the Sunday Times said, citing an interview.

Barclays added 2 percent to 276.7 pence, snapping four days of losses. RBS, the recipient of the world’s largest bank bailout, rose 3.4 percent to 35.87 pence. Standard Chartered added 3.6 percent to 1,480 pence. HSBC, Europe’s biggest bank, climbed 1.5 percent to 683.5 pence, the first advance in 11 sessions.

The FTSE 350 Banks Index tumbled 6.3 percent last week, the steepest weekly drop since May, after Obama proposed plans including a scrap on proprietary trading to curb risk-taking in banks.

“If everyone does their own thing it will achieve absolutely nothing,” Darling said, according to the Sunday Times. “The banks are global -- they are quite capable of organizing themselves in such a way that if the regime is difficult in one country they will go to another one, and that doesn’t do anyone any good.”

British Airways lost 0.9 percent to 206.1 pence. The airline will today begin training pilots, baggage handlers and engineers to take over the duties of flight attendants as cabin crew commence voting on a walkout over staffing reductions.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

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U.S. Stock-Index Futures Rise; S&P 500 Poised to Reverse Slump

By Adam Haigh

Jan. 25 (Bloomberg) -- U.S. stock-index futures gained amid signs Ben S. Bernanke will be confirmed as Federal Reserve chairman for a second term, indicating the Standard & Poor’s 500 Index will rebound from its biggest three-day decline since the rally began in March.

Intel Corp. gained 1.6 percent after Barron’s reported the world’s largest chipmaker may surge 25 percent in the next few years as consumers and businesses replace their older computers with new machines.

Futures on the S&P 500 expiring in March advanced 1 percent to 1,101.9 as of 6:46 a.m. in New York. The S&P 500 is up more than 60 percent since March as governments worldwide pledged more than $12 trillion to revive the economy. Dow Jones Industrial Average futures gained 0.9 percent to 10,241 today and Nasdaq-100 Index futures added 0.7 percent to 1,809.5.

“We expect the U.S. market to perform well in 2010 as the extreme policy measures implemented by the U.S. administration bear fruit,” said Ian Scott, chief global equity strategist at Nomura Holdings Inc. in London. “The asset allocation position should also be very supportive for equities as both households and institutions are holding relatively large amounts in cash.”

U.S. equity benchmark indexes have slipped for three days as President Barack Obama called for a limit on risk-taking by banks and concern mounted that China will take measures to stem economic growth. Futures contracts indicated indexes will snap these losses today when the equity market opens after Obama received assurances from Senate leaders that Bernanke will be confirmed for a second term as Fed chairman. Bernanke’s term expires Jan. 31.

Fed, Home Sales

Fed officials will keep interest rates near zero after their two-day meeting this week, economists forecast in a Bloomberg survey.

Sales of existing homes probably fell in December, the month after a government tax credit was originally due to expire, economists said before a report set for 10 a.m. in Washington. Purchases dropped to a 5.9 million annual rate from a 6.54 million pace in November, marking the first decrease in four months, according to the median of 57 economists surveyed by Bloomberg News.

Eaton Corp. and Halliburton Co. are among companies reporting fourth-quarter results today. A record nine-quarter earnings slump is projected to have ended in the fourth quarter with a 73 percent increase in S&P 500 profits. More than 130 companies in the index are scheduled to release results this week, including Apple Inc., 3M Co. and Microsoft Corp.

Intel

Intel gained 1.6 percent to $20.23 in pre-market New York trading. Intel may benefit from an upgrade cycle with the availability of the Windows 7 operating system, as well as the introduction of new chips such as Sandy Bridge, which combines microprocessing and a memory controller with graphics capability, the weekly newspaper said in its Jan. 25 edition. The article did not specify a time period for the possible rally.

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

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G-7 Will Be Eclipsed by E-7 by 2020 as China Surges, PwC Says

By Simon Kennedy

Jan. 21 (Bloomberg) -- The Group of Seven economies will be eclipsed in size by the world’s biggest emerging markets within two decades, led by China, according to calculations by PricewaterhouseCoopers LLP.

After matching the G-7 in around 2019, the combined gross domestic product of China, India, Brazil, Russia, Mexico, Indonesia and Turkey will be around 30 percent higher by 2030 than that of the U.S., Japan, Germany, France, U.K., Italy and Canada, John Hawksworth, PwC’s London-based head of macroeconomics, said in a report today.

The study is the latest to highlight the rise of emerging economies such as China and their increasing power over the direction of the world economy after developed nations triggered the worst financial crisis since the Great Depression. As recently as 2000, the G-7’s GDP was twice as large as that of what PwC calls the Emerging Seven and this year the gap will have shrunk to 35 percent, the study said.

“The E-7’s influence is already huge and this analysis shows it’s not a matter of if the E-7 will overtake the G-7, but when,” said Hawksworth.

China is on course to overtake the U.S. as the world’s largest economy around 2020 before its ageing population slows its advance, the economist said.

The next largest economies by 2030 will be India, Brazil, Russia, Germany, Mexico, France and the U.K., the report said.

To contact the reporter on this story: Simon Kennedy in Paris at Skennedy4@bloomberg.net

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European Manufacturing, Services Expansion Slows

By Simone Meier

Jan. 21 (Bloomberg) -- Expansion in Europe’s service and manufacturing industries unexpectedly slowed in January, adding to signs the pace of the economy’s recovery may weaken.

A composite index based on a survey of purchasing managers in both industries in the 16-nation euro region fell to 53.6 from 54.2 in December, London-based Markit Economics said today in an initial estimate. Economists expected an increase to 54.4, according to the median of 15 estimates in a Bloomberg survey. A reading above 50 indicates expansion.

The euro-region economy may lose momentum as the effect of government stimulus measures tapers off and rising unemployment erodes consumers’ willingness to spend. German investor confidence dropped in January and European Central Bank Executive Board member Juergen Stark said yesterday that euro- area growth in the first half of 2010 may be “somewhat more muted” than in the second half of last year.

“The drop was a little bit stronger than expected,” said Juergen Michels, chief euro-area economist at Citigroup Inc. in London. “We might see more of a sideways development over the coming months. We’re far from a contraction though.”

An index of services dropped to 52.3 in January from 53.6 in the previous month, Markit said. A gauge of manufacturing increased to 52 from 51.6 in December.

‘Bumpy’ Recovery

The euro extended declines against the dollar after the report and was down 0.4 percent at $1.4054 as of 11:10 a.m. in Frankfurt. The yield on the German 10-year benchmark bond rose 0.1 basis point to 3.23 percent.

The ECB this month kept borrowing costs at a record low of 1 percent and President Jean-Claude Trichet predicted Europe’s economy would expand at “only a moderate pace” this year. Stark said on Jan. 20 that the euro region will show a “gradual” and “bumpy recovery.”

“The region faces a still challenging economic environment,” said Howard Archer, chief European economist at IHS Global Insight in London. “There remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures.”

Companies may remain reluctant to step up hiring as the euro’s 8 percent ascent against the dollar over the past year threatens to undermine exports by making them less competitive just as surging energy prices pushing up costs. Crude oil prices have more than doubled over the past year to about $78 a barrel.

Forecasts ‘Difficult’

European unemployment rose to the highest in more than 11 years in November. Exports declined for a second month and retail sales fell the most in over a year.

“Forecasts regarding consumer behavior this year are as difficult as forecasts about the exact end of the global economic crisis,” Henning Kreke, chief executive officer of Douglas Holding AG, Europe’s largest makeup and perfume retailer, said on Jan. 13.

Governments around the world have pledged trillions of dollars to fight the worst global recession in more than six decades. In the U.S., the world’s largest economy, industrial production rose for a sixth month in December and consumer confidence increased.

A rebound in exports helped the euro-region economy emerge from a recession in the third quarter, with gross domestic product increasing 0.4 percent. In Germany, Europe’s largest economy, GDP growth accelerated to 0.7 percent in that period.

Alstom SA, the world’s second-largest train maker based in Paris, said on Jan. 19 that it “saw an improvement” in the last three months of 2009. Lanxess AG, Germany’s biggest publicly traded specialty chemicals maker, said it expects 2010 to be “a good year” on reviving demand.

“We continue to have growth in the fourth quarter,” European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said on Jan. 18. “It’s a fragile recovery and we have a level of uncertainty that’s clearly higher than in a normal situation.”

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

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Jobless Claims in U.S. Unexpectedly Rise on Backlog

By Bob Willis

Jan. 21 (Bloomberg) -- More Americans than anticipated filed claims for unemployment benefits last week, reflecting a backlog of applications from the year-end holidays.

Initial jobless claims rose by 36,000 to 482,000 in the week ended Jan. 16, the highest level in two months, from 446,000 the prior week, Labor Department figures showed today in Washington. The jump was due to an “administrative” accumulation from late December and early January holidays, and did not reflect “economic” reasons, a Labor Department spokesman said.

The biggest increase in sales in two decades and an expanding economy may be prompting companies to retain remaining staff after cutting 7.2 million workers from payrolls since the recession began in December 2007. A rebound in hiring may take longer to develop, one reason why unemployment is forecast to average 10 percent this year.

“The trend in employment is still toward improvement,” said James O’Sullivan, chief economist at MF Global Ltd. In New York. “This level of claims is still associated with net declines in payrolls, but the message is that declines are getting smaller and smaller.”

Stock-index futures dropped immediately after the report, erasing earlier gains. The contract on the Standard & Poor’s 500 Index was down 0.1 percent to 1,133.2 at 8:49 a.m. in New York. Treasury securities fell.

Exceeds Forecast

Initial jobless claims were forecast to decline to 440,000 from 444,000 the week before, according to the median estimate of 40 economists surveyed by Bloomberg. Estimates ranged from 430,000 to 457,000.

Government workers took time to sort through applications that piled up in prior weeks after returning from Christmas and New Year vacations, the Labor Department spokesman said in a press conference. That suggests claims in the prior two weeks may have been lower than the numbers indicated. The number of applications is likely to fall when the next week’s data are released, the spokesman said.

In addition, because state offices were closed on Jan. 18 for the Martin Luther King holiday, the government had to estimate claims for six states and the District of Columbia, the spokesman said.

Continuing claims fell by 18,000 to 4.6 million in the week ended Jan. 9. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Extended Benefits

Today’s report showed the number of people who’ve used up their traditional benefits and are now collecting extended payments increased by about 613,000 to 5.92 million in the week ended Jan. 2.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.5 percent in the week ended Jan. 9, today’s report showed.

The U.S. unexpectedly lost 85,000 jobs in December after a revision for November showed the first payroll gain in almost two years, according to Labor Department data released Jan. 9.

The unemployment rate held at 10 percent, near the 26-year high of 10.1 percent reached in October. The report also showed workers were unemployed for 29.1 weeks on average, the most since records began in 1948.

Job Losses

The loss of jobs since the recession began has been the worst in the post-World War II era.

The world’s largest economy probably grew in excess of 5 percent at an annual rate in the fourth quarter, the best performance in almost six years, according to forecasts by economists at JPMorgan Chase and Credit Suisse in New York. Gross domestic product expanded at a 2.2 percent in the previous three months, the first gain in more than a year.

Sales at factories, wholesalers and retailers increased 6.2 percent from June through November, the biggest six-month gain since 1987, according to figures from the Commerce Department.

Smithfield Foods Inc., the world’s largest pork processor, is among companies cutting jobs in a bid to lower costs. The Smithfield, Virginia-based companies said yesterday it plans to close an Iowa meat plant that was among the company’s oldest and most inefficient. The shutdown will affect 1,450 workers.

The John Morrell & Co. facility in Sioux City, Iowa, will close on April 20 and shift some pork production to other locations, the Smithfield, Virginia-based company said yesterday in a statement.

“We recognize that layoffs and plant closings are difficult for everyone concerned,” Joseph B. Sebring, the president of John Morrell, said in the statement. “At the same time, we believe this is a necessary business decision.”

Chevron Corp., the second-biggest U.S. oil company, said Jan. 19 it will cut an undisclosed number of refining jobs as part of a restructuring.

Details of the restructuring will be announced in March, spokesman Lloyd Avram said in an interview from San Ramon, California. “The organization is going to be leaner and less complex,” he said. “It will require fewer positions.”

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

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China’s Copper Output in 2009 Gains 9.6% to a Record

By Bloomberg News

Jan. 21 (Bloomberg) -- Copper production by China, the world’s largest metals consumer, gained to a record in 2009 as smelters expanded on rising demand and prices.

Output of refined copper gained 9.6 percent to 4.25 million metric tons, the statistics bureau said today. That’s a record, according to Grace Qu, an analyst at CRU International Ltd.

Copper had the biggest annual increase in more than two decades last year as China boosted imports to a record on $586 billion of stimulus spending and state stockpiling. The Asian nation’s growth rate accelerated to the fastest pace since 2007 in the fourth quarter.

The record output “is a result of expansions at Chinese smelters, spurred by strong demand and rising prices,” Qu said from Beijing.

Chinese smelters such as Daye Nonferrous Metal Co., the fifth largest, plan to expand this year by at least 25 percent, the Huangshi Daily reported this month, citing general manager Zhang Lin.

--Li Xiaowei. Editors: Richard Dobson, Jake Lloyd-Smith.

To contact the Bloomberg News staff on this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

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Freeport Profit Tops Estimates on Higher Metal Prices

By Rob Delaney

Jan. 21 (Bloomberg) -- Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, posted a fourth-quarter profit that topped analysts’ estimates after the economic recovery boosted metal prices.

Net income was $971 million, or $2.15 a share, compared with a loss of $13.9 billion, or $36.78, a year earlier, Phoenix-based Freeport said today in a statement. Excluding one- time items, the company earned $2.25 a share. Freeport was expected to have a profit of $1.75, the average estimate of 17 analysts surveyed by Bloomberg.

Chief Executive Officer Richard Adkerson is benefiting from copper prices that more than doubled last year as the U.S. economic recovery boosted demand for the metal used in pipes and wires. Industrial production in the U.S. rose 0.6 percent in December, the sixth straight monthly gain. Freeport’s sales more than doubled to $4.61 billion.

Freeport rose 18 cents to $83.70 at 8:20 a.m., before the start of regular New York Stock Exchange composite trading. The shares gained more than threefold last year.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

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Oil Heading for $70.92, Commerzbank Says: Technical Analysis

By Grant Smith

Jan. 21 (Bloomberg) -- Crude oil may plunge toward $70 a barrel after failing to break resistance around $84 last week, according to technical analysts at Commerzbank AG.

Oil futures in New York have lost almost 7 percent since reaching a one-year high of $83.95 a barrel on Jan. 11. Prices have peaked in the short-term and will extend their slide until reaching a trend line linking price lows in 2009, according to analysts at Commerzbank, last year’s third most-accurate oil forecaster in a survey by Bloomberg.

“Last week the market charted a key week reversal from the $83.95 level,” Commerzbank’s London-based technical analyst Karen Jones said in a report. “This does imply that short-term at least, the market has charted an interim top, and we would allow for losses back toward the channel support at $70.92.”

Last year’s minimum support line connects weekly price lows such as $58.32 a barrel on July 17 and $68.59 on Dec. 18.

“Longer term, providing the channel holds, the outlook remains bullish,” Commerzbank’s Jones said.

Prices may then rise toward a resistance level between $85.82 and $86.24 a barrel, defined by oil’s low points in December 2007 and February 2008, she added.

This threshold is “a significant hurdle and we would not be surprised to see oil stall here for a while,” Jones said.

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

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Asian Stocks Fall for Fourth Day on China Concern; ICBC Drops

By Anna Kitanaka and Kana Nishizawa

Jan. 21 (Bloomberg) -- Asian stocks fell the fourth straight day as China’s fastest quarterly economic growth since 2007 and Indian food inflation raised concern about government action to control price increases.

Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. sank at least 1.6 percent in Hong Kong. Larsen & Toubro Ltd., India’s biggest engineering company, tumbled 6.5 percent after profit slid by half Santos Ltd., Australia’s third-largest oil and gas producer, declined 1.1 percent after fourth-quarter sales dropped.

The MSCI Asia Pacific Index lost 0.5 percent to 123.61 at 7:45 p.m. in Tokyo, with about five stocks falling for every four that rose. The measure has jumped 50 percent in the past 12 months as growth in China helped the global economy emerge from the worst slowdown since World War II.

“China has done the heavy lifting in the recovery process, and now needs to cool its economy down a little bit,” said Prasad Patkar, who helps manage about $1.6 billion at Platypus Asset Management in Sydney. “Policy tightening measures will be forthcoming, but they need to be viewed in the context of how strong the economy has been.”

Hong Kong’s Hang Seng Index fell 2 percent, while China’s Shanghai Composite Index advanced 0.2 percent. Australia’s S&P/ASX 200 Index lost 0.8 percent. The Bombay Stock Exchange’s Sensitive Index fell 2.4 percent after a government index of food inflation stayed above 15 percent.

Japan’s Nikkei 225 Stock Average climbed 1.2 percent, with Toyota Motor Corp. pacing gains among automakers as a weaker yen boosted the outlook for export earnings. South Korea’s Hynix Semiconductor Inc. advanced 2.2 percent after reporting its biggest quarterly profit in three years.

Starbucks, EBay

Futures on the U.S. Standard & Poor’s 500 Index lost 0.2 percent even as Starbucks Corp., the world’s largest coffee-shop operator, and EBay Inc., the most-visited U.S. e-commerce site, reported better-than-estimated profit after markets closed. The S&P 500 lost 1.1 percent yesterday.

Industrial & Commercial Bank of China, the world’s biggest bank by market value, fell 2.9 percent to HK$5.72, the third- biggest drag on the MSCI Asia Pacific Index. China Construction Bank dropped 1.6 percent to HK$6.12.

China’s fourth-quarter gross domestic product grew 10.7 percent from the same period a year ago, more than the median forecast of 10.5 percent in a Bloomberg News survey, a statistics bureau report showed in Beijing today.

The report may stoke speculation the central bank will raise its benchmark interest rate and tighten restrictions on the nation’s lenders. Minutes after the release, traders said the People’s Bank of China guided three-month bill yields higher at an auction for the second time in two weeks.

Oil Prices

Economic growth of 10 percent or more is excessive, monetary policy committee member Fan Gang said in November. The PBOC ordered ICBC to raise its reserve ratio by 0.5 percentage point, Reuters reported late yesterday, citing two unidentified people. A spokesman for the lender declined to comment.

“At this point, too much growth increases fear of inflation, and not enough growth increases the fear of a recession,” said Roger Groebli, Singapore-based head of financial-market analysis at LGT Capital Management, which oversees about $75 billion in assets. “The government has to make sure the recovery will continue smoothly and not build up a bubble,” he added.

Property developers with projects in China declined on concern tighter lending restrictions will curb real-estate demand. Shimao Property Holdings Ltd. dropped 3.7 percent to HK$12.58, the lowest since Sept. 2. Henderson Land Development Co., a Hong Kong-based developer which gets 12 percent of sales from China, slumped 4.1 percent to HK$51.90.

Consumer Prices

“The strong GDP growth will spur a normalization of easy monetary conditions in China but I don’t think there will be a serious tightening,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees $11 billion. “That’s not going to trigger a slowdown.”

Consumer prices in China rose 1.9 percent in December from a year earlier, today’s data showed, after a 0.6 percent gain in November. Producer prices climbed 1.7 percent, after declining for the previous 12 months.

Signs of a recovery in Asia’s economies have helped drive the MSCI Asia Pacific Index up by 75 percent from a more than five-year low on March 9. Stocks on the gauge are priced at 1.63 times book value, near the highest level since September 2008.

Asset Bubbles

Developing Asian economies face the risk of asset bubbles or overheating as the region’s growth outpaces the rest of the world this year, the World Bank said in a report today. An index of wholesale food articles compiled by the commerce ministry rose 16.81 percent in the week ended Jan. 9 from a year earlier.

Larsen & Toubro sank 6.8 percent to 1,524.1 rupees. The company cut its sales forecast for the year ending March 31 after customers delayed projects, Chief Financial Officer Y.M. Deosthalee said on CNBC-TV18 channel. His comment came after Larsen & Toubro reported third-quarter profit fell 50 percent.

Santos fell 1.1 percent to A$13.48 after saying fourth- quarter sales dropped 7 percent because of lower oil prices. Crude oil for March delivery sank 2 percent to $77.74 a barrel in New York yesterday, while copper futures fell 2.7 percent.

BHP Billiton Ltd., the world’s largest mining company, dropped 1.7 percent to A$42.67. Rio Tinto Group, the world’s third-biggest mining company, retreated 3.2 percent to A$75.55. The two companies were the biggest drags on the MSCI Asia Pacific Index.

Yen Benefits

Japanese automakers advanced on optimism the weaker yen will boost the value of overseas sales when converted into the companies’ home currency. The yen depreciated to 91.56 against the dollar, the weakest intraday level since Jan. 14, from 91.24 yesterday.

Toyota, which gets 31 percent of sales in North America, jumped 2.1 percent to 4,190 yen. Honda Motor Co. added 1.7 percent to 3,310 yen.

Every 1 yen increase by the currency against the dollar this fiscal year will cut Honda’s operating profit by about 12 billion yen ($132 million) and reduce Toyota’s profit by about 30 billion yen, the automakers said in November.

Hynix, the world’s second-largest computer-memory chipmaker, gained 2.2 percent to 25,950 won after saying fourth-quarter net income was 652 billion won ($573 million), compared with a 1.69 trillion-won loss a year earlier. The company also said sales more than doubled.

Rising Demand?

Hynix’s earnings follow those of Intel Corp., the world’s largest chipmaker, which last week forecast higher first-quarter sales than analysts had estimated. Micron Technology Inc., the biggest U.S. producer of computer-memory chips, last month reported its first quarterly profit in more than two years.

Samsung Electronics Co. rose 1.9 percent to 850,000 won, the second-leading mover on the MSCI Asia Pacific Index, behind Toyota. Advantest Corp., the world’s largest maker of memory- chip testers, gained 3.6 percent to 2,597 yen, the highest since Aug. 11. Elpida Memory Inc., Japan’s biggest computer memory- chip maker, added 4.6 percent to 1,769 yen.

“The outlook for the first half looks positive” because of demand for personal computers, said Benjamin Ban, an analyst at Daishin Securities Co. “Still, if there’s too much investment in the industry going forward, we may have to see what happens in the second half.”

To contact the reporter for this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.

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U.K.’s FTSE 100 Fluctuates; Easyjet Rises, Mining Stocks Fall

By Sarah Jones

Jan. 21 (Bloomberg) -- U.K. stocks fluctuated between gains and losses as a rally in United Utilities Plc and airline companies offset a selloff in mining shares and an unexpected rise in American jobless claims.

United Utilities Plc surged by the most in ten months on the company’s outlook. EasyJet Plc gained on higher revenue and passenger numbers and British Airways Plc also advanced. Anglo American Plc fell 2.6 percent, leading a gauge of mining shares lower for a second day as copper erased gains in London.

The benchmark FTSE 100 Index rose 4.79, or less than 0.1 percent, to 5,425.59 in London at 2:00 p.m. The gauge earlier rallied as much as 0.9 percent and fell as much as 0.4 percent. The FTSE All-Share Index gained 0.1 percent and Ireland’s ISEQ Index added 0.1 percent.

Stocks pared earlier gains after the U.S. Labor Department said more Americans than anticipated filed claims for unemployment benefits last week, reflecting a backlog of applications from the year-end holidays. Initial jobless claims rose by 36,000 to 482,000 in the week ended Jan. 16, the highest level in two months, from 446,000 the prior week. The jump was due to an “administrative” accumulation from late December and early January holidays, and did not reflect “economic” reasons, a Labor Department spokesman said.

United Utilities

United Utilities jumped 4.7 percent to 532.5 pence, the highest level since February last year, as Britain’s largest publicly traded water company said it’s confident of delivering a “sound underlying” performance for the year to March 31. The company also described its balance sheet as “robust.”

EasyJet rallied 4.7 percent to 382 pence after Europe’s second-biggest airline reported an 11 percent rise in first- quarter revenue to 608 million pounds ($984 million) and a 9 percent rise in passenger numbers to 11 million, beating internal forecasts. Chief Executive Officer Andy Harrison also predicted an improvement in earnings for the full year ending Sept. 30.

British Airways, Europe’s third-largest airline, climbed 4 percent to 210.3 pence. Ryanair Holdings Plc gained 1.3 percent to 3.44 euros in Dublin.

Enterprise Inns Plc surged after the company said the rate of decline in profit across its pub estate has slowed. The U.K.’s second-biggest pub owner reported a 4 percent fall in net income per pub in the 16 weeks ended Jan. 16. That compares to an 8 percent decline in the financial year that ended last September. The stock surged 21 percent to 114.5 pence, the biggest advance since October.

Mining Stocks

Anglo American paced declining shares, falling 2.6 percent to 2,582 pence, as copper pared gains in London. Rio Tinto Group, the world’s third-largest mining company, slid 2.3 percent to 3,385.5 pence. Kazakhmys Plc retreated 2.9 percent to 1,322 pence.

A gauge of mining shares yesterday dropped by the most since Nov. 26 amid concern China may rein in stimulus measures to prevent the economy overheating.

The nation’s chief banking regulator, Liu Mingkang, said in an interview that some banks have been asked to limit lending after they failed to meet certain requirements. A report today showed China’s economy expanded 10.7 percent in the fourth quarter from the same period a year ago, the fastest pace since 2007.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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European Stocks Pare Gains After U.S. Jobless Claims Increase

By Andrew Rummer

Jan. 21 (Bloomberg) -- European stocks pared their advance after a report showed more Americans than forecast filed unemployment-benefit claims last week.

The Dow Jones Stoxx 600 Index added 0.1 percent to 256.56 at 1:34 p.m. in London, having earlier risen as much as 0.6 percent.

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U.S. Stock Futures Retreat on Jobless Claims, China Concern

By Nikolaj Gammeltoft

Jan. 21 (Bloomberg) -- U.S. stock futures fell as a gain in initial jobless claims and concern China will move to slow economic growth offset better-than-estimated results at Goldman Sachs Group Inc., EBay Inc. and Starbucks Corp.

United Technologies Corp. and Walt Disney Co. fell at least 0.6 percent to lead declines in Dow Jones Industrial Average stocks. Goldman Sachs, the most profitable securities firm in Wall Street history, climbed after results were boosted by a reduction in the percentage of revenue allocated to compensation. EBay, the most-visited U.S. e-commerce site, added 8.4 percent after reporting its first profit increase in more than a year. Starbucks gained 3 percent as it raised its annual forecast following higher-than-estimated first-quarter earnings.

Futures on the Standard & Poor’s 500 Index expiring in March slipped 0.1 percent to 1,133.2 as of 8:51 a.m. in New York. Dow Jones Industrial Average futures dropped 0.2 percent to 10,528 and Nasdaq-100 Index futures lost less than 0.1 percent to 1,866.5.

More than 60 companies in the S&P 500 are reporting fourth- quarter results this week and analysts surveyed by Bloomberg forecast total earnings grew 67 percent, with estimates for a 30 percent increase in the first quarter of 2010. The benchmark index’s valuation climbed last week to 25 times its companies’ reported operating profits, the highest level since 2002, following a 70 percent jump since March.

‘Enduring Bull Market’

“2010 could be the year in which the market recovery of 2009 is transformed into a long and enduring bull market,” said Max King, a London-based strategist at Investec Asset Management, which oversees about $55 billion. “The consensus earnings forecast of over 30 percent growth looks not just achievable but beatable.”

China’s economy grew 10.7 percent in the fourth quarter, the fastest pace since 2007 and more than the median forecast of 10.5 percent in a Bloomberg News survey, according to the statistics bureau in Beijing, fanning speculation the central bank will curb record loan growth to prevent the economy from overheating.

A global rally in stocks may end in the second half of the year amid a muted recovery in the world’s largest economies and as deflationary pressures limit gains in corporate earnings, Nouriel Roubini, the Harvard-schooled New York University professor who in 2006 foresaw the financial crisis, said in Hong Kong today.

More Americans than anticipated filed claims for unemployment benefits last week, reflecting a backlog of applications from the year-end holidays. Initial jobless claims rose by 36,000 to 482,000 in the week ended Jan. 16, the highest level in two months, from 446,000 the prior week, Labor Department figures showed.

The index of U.S. leading indicators probably rose in December for a ninth month, signaling the economy will keep growing through the first half of the year, economists said before a report at 10 a.m. New York time.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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Sugar Climbs to Two-Decade High as India May Increase Purchases

By M. Shankar

Jan. 20 (Bloomberg) -- White sugar surged to the highest price in at least two decades in London on speculation that India and other importers will purchase more of the sweetener as a supply deficit looms.

India, the world’s largest consumer, may import 2 million metric tons in the year ending Sept. 30, up from 225,000 tons in the previous 12 months, said R.L. Tamak, business head for sugar at the Indian unit of Olam International Ltd. White, or refined, sugar prices have more than doubled in the past year.

“Right now, few factories” have refining facilities during the off-season, Tamak said in a telephone interview. “White sugar has to be imported to meet the demand.”

White sugar for March delivery climbed as much as $11.10, or 1.5 percent, to $755 a ton on the Liffe exchange, the highest price since at least January 1989. The contract was at $752.10 a ton at 9:43 a.m. local time.

On ICE Futures U.S. in New York, raw sugar for March delivery gained 0.1 percent to 29.02 cents a pound and earlier rose to 29.15 cents, the highest for a most-active contract since January 1981.

Egypt, Indonesia, Pakistan and Philippines have also said they intend to import sugar to cool domestic prices, crimping supplies.

Excess rains in Brazil and a weak monsoon in India hurt sugar-cane output from the world’s two biggest growers. Global demand for sugar will outpace supply by 13.5 million tons in the 2009-10 season, according to broker Czarnikow Group Ltd.

Among other agricultural commodities traded on Liffe, cocoa for March delivery advanced 0.1 percent to 2,320 pounds ($3,784) a ton. Robusta coffee for March delivery declined 0.8 percent to $1,362 a ton.

To contact the reporter on this story: M. Shankar in London at mshankar@bloomberg.net.

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