White House, Top Republican Say Bernanke to Keep Job

By Scott Lanman

Jan. 25 (Bloomberg) -- Ben S. Bernanke will keep his job as Federal Reserve chairman, the White House and the Senate’s senior Republican predicted two days after wavering support among some Democrats helped drive stock prices lower.

President Barack Obama “is very confident that the chairman 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” even as a number of his party are opposed.

The assurances followed declarations of support for Bernanke from the top two Democrats in the Senate, Nevada’s Harry Reid and Richard Durbin of Illinois, who earlier said they were undecided. John McCain, the Republican 2008 presidential nominee, and John Cornyn, who runs the party’s senate campaign committee this year, are against him. Online traders yesterday raised the odds of approval to 92 percent from as low as 65 percent on Jan. 22.

“We’ve dodged the bullet on this one,” said Greg Valliere, chief policy strategist at Potomac Research Group in Washington. “People were aghast by what happened in the markets on Friday, and do they really want to get angry letters from constituents who have lost money in the stock market because of the Bernanke vote?”

Stocks Hit

The Standard & Poor’s 500 Index dropped 2.2 percent on Jan. 22 to 1,091.76, erasing gains so far in 2010, as Reid and Durbin withheld their support for Bernanke and two Senate Democrats, Barbara Boxer of California and Russ Feingold of Wisconsin, said they would join Republicans already against him. Both Boxer and Feingold are up for election this year.

The Democratic Party’s loss of a Senate seat in Massachusetts last week has added to pressure on those senators facing re-election at a time of rising voter anger over the economy. Bernanke’s critics have blamed the Fed for lax regulation of banks before the credit crisis and questioned its involvement in the $182 billion bailout of New York-based insurer American International Group Inc.

“It is difficult for governors or chairmen to discharge responsibility under a cloud of uncertainty regarding the security of tenure,” Philippine central bank Deputy Governor Diwa Guinigundo said in an interview in Manila today when asked about Bernanke’s struggle to get confirmed. “It’s best the appointment of a central bank governor is depoliticized.”

Impact on Regulation

While Bernanke’s chances of winning a second term improved, comments by lawmakers supporting him suggest that the 56-year- old former Princeton University economist will be under greater scrutiny on bank regulation and consumer protection.

Durbin, the Senate majority whip, said in a Jan. 23 statement that he will “continue to demand that the Federal Reserve make a commitment to transparency and accountability in its policies.”

“I will make it clear that if the Federal Reserve refuses to exercise its authority to demand bank reform and protect America’s consumers, I will join with members of Congress to push for new laws that achieve those goals,” he said.

Reid plans a senate vote on Bernanke’s confirmation this week, said Jim Manley, a spokesman. His term expires Jan. 31.

Senate Rules

Bernanke’s supporters need 60 votes to limit debate and clear the way for a final vote. Under Senate rules, a motion to limit debate would set up a procedural vote after two legislative days to curtail additional debate to 30 hours.

McConnell indicated enough Republicans will join Democrats in backing the central banker.

“I would anticipate he will be confirmed,” the Kentucky Republican said on NBC. McConnell declined to say how he would vote.

“We believe he will be confirmed,” White House Press Secretary Robert Gibbs said on “Fox News Sunday.”

White House senior adviser Valerie Jarrett said on NBC that Obama received assurances from Reid over the weekend that Bernanke will be confirmed, after support among Democrats ebbed in the wake of an upset victory by Republican Scott Brown in the Jan. 19 Massachusetts special election. Axelrod called Bernanke “a steady hand in the crisis.”

McCain’s Vote

Arizona’s McCain, who lost to Obama in 2008, said he is leaning toward voting against Bernanke, while being “worried” about the impact from rejecting the Fed chief.

“The fact is that Chairman Bernanke was in charge when we hit the iceberg,” McCain said on CBS’s “Face the Nation.” “His policies were partially responsible for the meltdown that we experienced, and I think he should be held accountable.”

Cornyn, of Texas, said on “Fox News Sunday” he would vote against Bernanke, while Republican Orrin Hatch of Utah and Democrat Robert Menendez of New Jersey told CNN they would support the Fed chief, a Republican first appointed by President George W. Bush four years ago.

Bernanke may get as many as 70 Senate votes, Valliere said. “After Massachusetts, nothing’s certain, but I think it’s very likely that he’ll win,” Valliere said.

Of senators who released statements or were contacted by Bloomberg News over the past two days, 31 said they would vote for Bernanke or were leaning in his favor, while 17 were opposed or leaning against him and 30 were undecided.

Dodd, Gregg

Christopher Dodd, the Connecticut Democrat who chairs the banking committee, and Judd Gregg of New Hampshire, the top Republican on the budget committee, said they are confident that Bernanke will be confirmed.

“I have some misgivings about Fed policy and the economic policy, but this man has guided us through a crisis,” Durbin said yesterday on CBS.

Richard Shelby, the senior Republican on the Senate Banking Committee, yesterday dismissed Dodd’s assertion on Jan. 22 that rejecting Bernanke risked sending the “worst signal to the markets” and triggering an economic “tailspin.”

Any decline in financial markets wouldn’t “last very long,” Shelby, of Alabama, said on CNN. Bernanke will see “a lot of tough votes against him,” and that would be a “strong message,” said Shelby, who reiterated his opposition to the Fed chief.

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

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Growth Probably Accelerated as 2009 Ended: U.S. Economy Preview

By Timothy R. Homan

Jan. 24 (Bloomberg) -- The U.S. economy probably grew in the closing months of 2009 at the fastest pace in almost four years as factories stepped up production and companies purchased new equipment, economists said before reports this week.

Gross domestic product expanded at a 4.6 percent pace from October through December, more than double the prior quarter’s growth rate and the strongest since the first three months of 2006, according to the median estimate of 74 economists surveyed by Bloomberg News. Other reports may show orders for durable goods increased and home sales declined.

Manufacturers such as Intel Corp. are leading the recovery as growing demand and dwindling inventories prompt companies to speed up assembly lines. Slower consumer spending after the third-quarter’s “cash for clunkers” rebound is a reminder that 10 percent unemployment is causing Americans to hold back, one reason why the Federal Reserve may keep interest rates low.

“Inventories are going to be responsible for at least half of the growth, if not more,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “There’s been an enormous amount of government stimulus that will be fading as we go through the year, so it’s unclear how much the economy can do on its own.”

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

Fed Forecast

The target rate for overnight lending among banks will stay in a range from zero to 0.25 percent through September before going up by half a point in the fourth quarter, according to the median forecast of economists surveyed earlier this month.

The Commerce Department’s first estimate of fourth-quarter GDP is due Jan. 29. The world’s largest economy grew at a 2.2 percent pace from July through September, the first gain in more than a year, after shrinking 3.8 percent in the 12 months to June. That marked the worst recession since the 1930s.

Stocks rallied last year on mounting signs the economic slump was ending. The Standard & Poor’s 500 Index climbed 65 percent in 2009 after reaching a 12-year low on March 9.

Additional gains in the first part of this month evaporated last week after President Barack Obama proposed limiting risk- taking at banks and as concern grew that China will have to do more to cool its economy.

Chip Demand

Intel, the world’s largest chipmaker, posted its biggest quarterly revenue in more than a year last quarter, a sign the computer industry has emerged from last year’s global recession.

“My expectation for 2010 is that we’re going to see robust unit growth,” Chief Financial Officer Stacy Smith said in an interview this month. “The consumer segments of the market will stay pretty strong, and I do believe we’re going to see a resurgence in PC client sales.”

Smaller declines in inventories contributed to growth for a second consecutive quarter as companies picked up the pace of orders, economists said. Stockpiles rose 0.4 percent in November, marking the first back-to-back increase in more than a year.

Consumer spending, which accounts for about 70 percent of the economy, probably increased at a 1.8 percent annual rate after rising at a 2.8 percent pace in the previous three months, the GDP report is also projected to show.

Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Business Investment

Orders for long-lasting goods probably rose 2 percent in December, economists project the Commerce Department will report Jan. 28. While companies are buying new equipment, they’re reluctant to hire workers.

Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years. The U.S. has lost 7.2 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.

The jobless rate held at 10 percent in December, the Labor Department said on Jan. 8. A jump in the number of discouraged workers leaving the labor market kept the rate from rising.

Property values are showing signs of stabilizing. A report from S&P/Case-Shiller, due Jan. 26, may show home prices in 20 U.S. metropolitan areas declined 5 percent in the year ended in November, the smallest drop since September 2007, according to the survey median.

Existing home sales dropped 9.8 percent in December, the month after a government tax credit was originally due to expire, the survey showed ahead of a Jan. 25 report from the National Association of Realtors. Purchases decreased to a 5.9 million pace from 6.54 million the prior month.

New-home sales last month rose 4.2 percent to an annual pace of 370,000, according to the survey median before a Commerce Department report on Jan. 27.

                        Bloomberg Survey

================================================================
                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Exist Homes Mlns          1/25      Dec.      6.54      5.90
Exist Homes MOM%          1/25      Dec.      7.4%     -9.8%
Case Shiller Monthly MO   1/26      Nov.      0.4%      0.3%
Case Shiller Monthly YO   1/26      Nov.     -7.3%     -5.0%
Case Shiller Monthly In   1/26      Nov.     146.6     146.8
Consumer Conf Index       1/26      Jan.      52.9      53.5
New Home Sales ,000’s     1/27      Dec.      355       370
New Home Sales MOM%       1/27      Dec.     -11.3%     4.2%
Initial Claims ,000’s     1/28     16-Jan     482       450
Cont. Claims ,000’s       1/28     9-Jan      4599      4600
Durables Orders MOM%      1/28      Dec.     -0.7%      2.0%
Durables Ex-Trans MOM%    1/28      Dec.      1.5%      0.5%
GDP Annual QOQ%           1/29      3Q A      2.2%      4.6%
Personal Consump. QOQ%    1/29      3Q A      2.8%      1.8%
GDP Prices QOQ%           1/29      3Q A      0.4%      1.3%
Core PCE Prices QOQ%      1/29      3Q A      1.2%      1.3%
Employ Costs QOQ%         1/29       4Q       0.4%      0.4%
Chicago PM Index          1/29      Jan.      58.7      57.4
U of Mich Conf. Index     1/29     Jan. F     72.8      73.0
================================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Pound Rises Against the Dollar Before Tomorrow’s GDP Report

By Matthew Brown

Jan. 25 (Bloomberg) -- The pound rose against the dollar before a report tomorrow that’s forecast to show the U.K. economy emerged from a recession in the fourth quarter.

The British currency also traded within 2 pence of a five- month high against the euro after a report from Rightmove Plc said U.K. house prices will extend gains over the next 12 months as supplies remain constrained and the economy improves. The Office for National Statistics will say tomorrow U.K. gross domestic product expanded 0.4 percent in the final three months of 2009, after contracting 0.2 percent in the third quarter, according to a Bloomberg survey. The U.S. Federal Reserve will decide on interest rates on Jan. 27.

“Gross domestic product is the main focus for the pound at the moment,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG. “Sterling has detached, to some extent, from the risk-on, risk-off story and is more driven by the macro outlook.”

The British currency rose 0.2 percent to $1.6151 as of 12:32 p.m. in London. The pound was little changed at 87.74 pence per euro. It appreciated to 86.51 pence on Jan. 20, the strongest since Aug. 21.

The pound correlation coefficient between the pound and the MSCI World Index of global stocks touched the lowest level since October 2008 last week as the British currency’s relationship with risk weakened. The correlation was 0.46 today, compared with 0.57 on Oct. 2.

Hung Parliament

The pound is likely to drop this year no matter who prevails in this year’s election, because the next government may not have enough support in parliament to rein in the Group of 20’s biggest budget deficit, according to currency analysts.

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.

U.K. two-year government bonds fell, pushing the yield up 1 basis point to 1.24 percent. The 3.25 percent security due December 2011 fell 0.02, or 20 pence per 1,000-pound ($1,616) face amount, to 103.68. Ten-year gilt yields rose 1 basis point, or 0.01 percentage point, to 3.93 percent.

Gilts have returned 0.6 percent this year, compared with 1.1 percent for German government bonds and 1.5 percent for U.S. Treasuries, according to indexes compiled by Bank of America Corp’s Merrill Lynch unit.

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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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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