Increases in U.S. Payrolls, Manufacturing Probably Were Sustained in March

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March 31 (Bloomberg) -- David Cote, chief executive officer of Honeywell International Inc., talks with Judy Woodruff about the outlook for the U.S. economy and the crude oil market. (This is an excerpt from "Conversations With Judy Woodruff," which airs weekends on Bloomberg Television. Source: Bloomberg)

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March 31 (Bloomberg) -- Anthony Dwyer, chief equity strategist at Collins Stewart, talks about the outlook for Federal Reserve monetary policy. Dwyer also discusses tomorrow's U.S. jobs report for March, the U.S. economy and stocks. He speaks with Matt Miller, Adam Johnson, Julie Hyman and Sheila Dharmarajan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

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March 31 (Bloomberg) -- Anthony Crescenzi of Pacific Investment Management Co. talks about the outlook for the financial industry, demand for U.S. Treasuries and the state of the labor market. He speaks with Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)

The pickup in U.S. employment was probably sustained in March, and factory assembly lines kept humming, showing that a jump in fuel costs has yet to choke the expansion, economists said before reports today.

Payrolls increased by 190,000 workers last month after a 192,000 advance in February that was the biggest in nine months, according to the median forecast of 83 economists surveyed by Bloomberg News. Manufacturing may have expanded at about the same pace as in February, the strongest month in almost seven years.

Record exports and gains in business and consumer spending are prompting companies like Chrysler Group LLC and Kohl’s Corp. (KSS) to boost staff, helping the U.S. weather the highest energy prices in more than two years. The improving economy encouraged Federal Reserve policy makers last month to signal they were unlikely to extend bond purchases beyond June.

“The improving trend in employment is a bright spot,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “The private sector is picking up its hiring. The economy is on a firmer footing, but not yet on a firm footing.”

The Labor Department’s jobs numbers are due at 8:30 a.m. in Washington. Bloomberg survey estimates ranged from payroll increases of 150,000 to 295,000.

Private payrolls are forecast to rise by 208,000 in March after a 222,000 gain, according to the survey median, the biggest back-to-back increase since 2006. Manufacturing payrolls are forecast to rise by 30,000.

Jobless Outlook

Unemployment probably held at 8.9 percent, the lowest level in almost two years, according to the survey median. The rate dropped by 0.9 percentage point over the prior three months, the biggest decline in such a time span since 1983.

The March jobs reading will likely be the first of the year that wasn’t skewed by weather. Winter storms constrained payrolls in January, prompting a February rebound when temperatures were closer to normal for the month.

A report from the Tempe, Arizona-based Institute for Supply Management at 10 a.m. will show the purchasers’ factory index fell to 61 last month from 61.4 in February, its highest level since May 2004. The gauge climbed over 50, signaling growth, in August 2009, two months after the recession ended.

The manufacturing industries that account for 11 percent of the economy are likely to remain at the forefront of the recovery as businesses replenish inventories, the auto industry rebounds and China and other emerging markets boost imports of U.S.-made goods.

Auto Demand

Auto sales, after climbing for six consecutive months, reached the highest level in more than a year in February. Demand at General Motors Co. (GM), Chrysler and Toyota Motor Corp. (TOYOF) exceeded analysts’ estimates.

Chrysler, aiming for its first net profit since emerging from bankruptcy in 2009, plans to hire 1,000 engineers and high- tech workers for its small and midsized vehicles. The Auburn Hills, Michigan-based company is also urging its dealers to hire more salesmen and service workers to help boost sales 32 percent this year.

“Hiring additional personnel in preparation for the spring market is essential for success in 2011,” Peter Grady, vice president of Chrysler’s network development and fleet, said in a memo to dealers last month.

Kohl’s said this week that it plans to open a new e- commerce distribution center in Edgewood, Maryland, in July and hire 1,200 workers over the next three years.

Fuel Costs

Oil prices that closed at $106.72 yesterday, the highest since September 2008, may keep climbing should Middle East political turmoil continue unabated, raising the risk that consumer spending will slow in coming months.

U.S. companies are also still trying to gauge the effects of the March 11 earthquake in Japan and the subsequent nuclear crisis on international supply chains. Toyota expects assembly interruptions that may affect North America plants.

The Fed, after its latest policy meeting March 15, pledged to continue its program of purchasing $600 billion of bonds by June, in order to “promote a stronger pace of economic recovery.” Policy makers also said the economy was on “firmer footing” and acknowledged a rise in commodity prices, signaling deflation risk had diminished and they were unlikely to expand the bond purchase plan.

The housing industry that led the economy into recession in December 2007 remains a weak link in the recovery. Construction spending, due at 10 a.m., fell 0.2 percent in February after a 0.7 percent decline the prior month, economists forecast the Commerce Department will report.

                         Bloomberg Survey  ==============================================================                            Nonfarm  Private Unemploy      ISM                           Payrolls Payrolls     Rate     Manu                             ,000’s   ,000’s        %    Index ==============================================================  Date of Release              04/01    04/01    04/01    04/01 Observation Period           March    March    March    March -------------------------------------------------------------- Median                         190      208     8.9%     61.0 Average                        196      214     8.9%     61.0 High Forecast                  295      315     9.1%     64.0 Low Forecast                   150      165     8.7%     59.0 Number of Participants          83       42       80       79 Previous                       192      222     8.9%     61.4 -------------------------------------------------------------- 4CAST Ltd.                     215      240     8.9%     60.8 ABN Amro Inc.                  210      230     8.9%     61.0 Action Economics               185     ---      8.9%     60.0 Aletti Gestielle               190      205     8.9%     61.5 Ameriprise Financial           210      235     8.9%     59.8 Banesto                        220     ---      ---      61.1 Bank of Tokyo- Mitsubishi      170      187     8.8%     61.9 Bantleon Bank AG               180     ---      9.0%     61.3 Barclays Capital               175      190     8.9%     62.0 Bayerische Landesbank          180     ---      8.9%     61.2 BBVA                           195      220     8.9%     62.5 BMO Capital Markets            230     ---      8.9%     61.5 BNP Paribas                    180     ---      9.0%     61.0 BofA Merrill Lynch             160      185     9.0%     59.5 Briefing.com                   175      200     9.0%     59.0 Capital Economics              175     ---      8.9%     60.0 CIBC World Markets             230     ---      8.9%     59.5 Citi                           250      265     9.0%     59.0 ClearView Economics            200      230     9.0%     60.0 Commerzbank AG                 200     ---      8.9%     61.0 Credit Agricole CIB            180     ---      8.9%     62.0 Credit Suisse                  200     ---      8.9%     61.4 DekaBank                       180     ---      9.0%     61.5 Desjardins Group               155     ---      9.0%     62.0 Deutsche Bank Securities       200     ---      8.9%     60.0 Deutsche Postbank AG           190     ---      8.9%     60.5 Exane                          230     ---      9.0%     61.0 Fact & Opinion Economics       235     ---      8.9%     61.5 First Trust Advisors           165      185     8.8%     61.2 FTN Financial                  200      225     8.9%     61.0 Goldman, Sachs & Co.           175     ---      8.9%     60.0 Helaba                         200     ---      8.9%     60.0 High Frequency Economics       175      200     ---      --- HSBC Markets                   175      190     8.9%     60.0 Hugh Johnson Advisors          180     ---      9.0%     62.0 IDEAglobal                     250      265     8.8%     63.0 IHS Global Insight             160      175     8.9%     61.6 Informa Global Markets         175     ---      8.9%     61.7 ING Financial Markets          170      185     8.9%     61.6 Intesa-SanPaulo                200     ---      8.9%     61.5 ITG Investment Research        185      200     ---      --- J.P. Morgan Chase              185      200     8.9%     61.0 Janney Montgomery Scott        201      222     8.9%     59.8 Jefferies & Co.                240      260     8.8%     62.0 Landesbank Berlin              250     ---      9.0%     62.0 Landesbank BW                  280     ---      8.8%     62.0 Maria Fiorini Ramirez          225      240     8.9%     60.0 MET Capital Advisors           200     ---      8.9%     62.0 MF Global                      175      195     9.0%     61.5 Mizuho Securities              175     ---      8.9%     60.0 Moody’s Analytics              190      200     9.0%     60.7 Morgan Keegan & Co.            162     ---      8.9%     --- Morgan Stanley & Co.           180     ---      9.0%     61.0 National Bank Financial        150     ---      9.0%     61.0 Natixis                        180     ---      8.9%     60.5 Newedge                        200      230     8.9%     61.6 Nomura Securities              225     ---      8.9%     61.6 Nord/LB                        180      210     8.9%     59.0 OSK Group/DMG                  190     ---      9.0%     60.6 Paragon Research               220     ---      9.0%     --- Parthenon Group                246     ---      8.9%     60.5 Pierpont Securities            210      225     8.9%     61.8 PineBridge Investments         235     ---      8.9%     61.5 PNC Bank                       220      222     9.1%     62.5 Prestige Economics             165      180     8.9%     61.0 Raiffeisenbank International   185      210     8.9%     61.4 Raymond James                  165      190     8.9%     62.2 RBC Capital Markets            168      180     8.8%     62.7 RBS Securities Inc.            180      200     9.0%     61.0 Scotia Capital                 170     ---      8.9%     60.5 Societe Generale               295      315     8.7%     62.0 Standard Chartered             195      230     8.9%     64.0 State Street Global Markets    192      206     8.9%     60.4 Stone & McCarthy Research      150      165     8.8%     62.0 TD Securities                  200      210     9.0%     62.0 UBS                            205      225     8.8%     62.0 UniCredit Research             160     ---      9.1%     60.0 Union Investment               201     ---      8.8%     61.0 University of Maryland         163      183     8.9%     60.2 Wells Fargo & Co.              220     ---      8.8%     60.0 WestLB AG                      195     ---      8.9%     60.0 Westpac Banking Co.            160     ---      9.1%     59.0 Wrightson ICAP                 275      290     8.8%     60.5 ============================================================== 

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

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Oil Leads Quarterly Gains on Middle East Unrest as Earthquake Saps Stocks

Oil’s biggest advance in two years led commodities to a third straight quarterly gain as political turmoil erupted in the Middle East and north Africa, while stocks were curbed by Japan’s strongest earthquake on record. Photographer: Noah Friedman-Rudovsky/Bloomberg

Oil’s biggest advance in two years led commodities to a third straight quarterly gain as political turmoil erupted in the Middle East and north Africa, while stocks were curbed by Japan’s strongest earthquake on record.

Brent jumped 5 percent in March for a three-month gain of 24 percent, helping to drive the Standard & Poor’s GSCI Total Return Index 12 percent higher. The MSCI World Index of stocks fell 1.2 percent last month, paring its quarterly advance to 4.3 percent. Bonds were little changed and the Dollar Index, a gauge of the currency against those of six major U.S. trading partners, lost 3.8 percent.

Rising food prices sparked protests in Tunisia and Egypt and fighting erupted in Libya as unrest swept across a region that produces about 35 percent of the world’s oil. Central banks from China to Brazil raised interest rates, while Japan grappled with the worst nuclear crisis since the 1986 Chernobyl disaster following the March 11 quake that left more than 27,000 people dead or missing. Government bonds may fall through the rest of the year, while stocks and oil extend gains, according to data compiled by Bloomberg.

“The two largest themes have been Middle East-North Africa unrest and the Japan quake,” said Francisco Blanch, head of commodities research at Bank of America Merrill Lynch in New York. “These two things will have important implications for markets over the next quarters and years. We’ve lost a lot of oil supply. The potential for unrest doesn’t stop in Libya.”

Dwindling Returns

The quarterly gain in the MSCI World (MXWO) Index was the third straight, as investors bet radiation leaks from the Fukushima Dai-Ichi nuclear plant following the magnitude-9 quake and tsunami would hamper industrial production and sap growth. The Nikkei 225 (NKY) Stock Average slid 8.2 percent in March, ending a four-month rally and producing a quarterly drop of 4.6 percent. Tokyo Electric Power Co., which runs the plant, lost 78 percent.

The Standard & Poor’s 500 Index climbed 5.4 percent, following gains exceed 10 percent in the previous two quarters. The Stoxx Europe 600 Index was little changed in the quarter, as was the U.K.’s FTSE 100 Index. The MSCI Asia Pacific Index ended the quarter down 1.4 percent, its first loss since dropping 9.8 percent in the three months ended June 30, 2010.

The S&P 500 will climb a further 7.5 percent by the end of the year, according to the median of 13 strategists’ estimates compiled by Bloomberg.

‘Supporting Markets’

“It is remarkable to me how well stocks have done, given all the headlines,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $55 billion. “I suspect it’s the largesse of central banks and federal governments that they’ve been pretty much supporting their markets for years now. So far this year, we think negative in bonds, positive in stocks and commodities.”

Global sovereign, corporate, asset-backed and mortgage bonds lost 0.07 percent this quarter through March 30, after tumbling 1.64 percent in the final three months of 2010, the worst performance since losing 1.67 percent in the three months ended June 30, 2008, according to Bank of America Merrill Lynch’s Global Broad Market Index.

U.S. government bonds fell 0.14 percent, extending a 2.7 percent drop in the final three months of 2010, Bank of America Merrill Lynch’s Treasury Master Index shows. German bunds slipped 2.23 percent, following a loss of 2.64 percent in the prior quarter. Portugal’s debt tumbled 8.26 percent as speculation the nation would be the third nation in the euro region to seek a bailout sent yields to all-time highs.

Central Bank Stimulus

Government bonds are falling amid speculation that the world’s major central banks may soon end unprecedented monetary stimulus. European Central Bank President Jean-Claude Trichet said in March that interest rates in the region may rise as soon as this month. Federal Reserve Bank of St. Louis President James Bullard said policy makers should consider curtailing purchases of Treasuries earlier than planned as the economy strengthens.

“If the economy is as strong as I think and hope it will be in 2011, I think it will be time for us to start to reverse our ultra-aggressive and ultra-easy monetary policy,” Bullard told reporters at a financial conference in Prague this week. “We could pull up a little bit shy of our total” of $600 billion in purchases through June, he said.

The yield on the benchmark 10-year Treasury note may rise 42 basis points to 3.89 percent by year-end, from 3.47 percent on March 31, according to the median of 63 strategists’ forecasts compiled by Bloomberg.

America’s Economy

America’s economy, the world’s largest, may expand 3.1 percent this year, up from 2.9 percent in 2010 and the most since 2005, according to the median estimate of 68 analysts surveyed by Bloomberg. Goldman Sachs Group Inc. forecasts a global economic expansion of 4.8 percent this year, while JPMorgan Chase & Co. predicts 4.4 percent. The average over the past two decades is 3.4 percent.

The People’s Bank of China raised interest rates last month for the third time since mid-October. Policy makers in Brazil lifted the nation’s benchmark rate a second consecutive time in March. Central banks in India, Russia, Sweden, Poland, South Korea, Peru, Chile, the Philippines, Thailand and Israel also increased borrowing costs.

IntercontinentalExchange Inc.’s Dollar Index, fell to 75.996, from 79.028 at the end of 2010. The measure dropped to 75.249 on March 22, the lowest level since December 2009.

Sweden, Japan

The Swedish krona rose the most against the dollar among the 16 most-widely traded currencies, appreciating 6.13 percent, followed by the euro’s 5.78 percent gain. The Dollar Index is likely to slip a further 0.3 percent by year-end, a Bloomberg survey showed.

Japan’s yen fell the most, weakening 2.42 percent, while New Zealand’s dollar depreciated 2.4 percent as that nation dealt with the aftermath of its own earthquake.

The yen depreciated tumbled as Group of Seven nations sold the currency on March 18 after it reached its strongest level since World War II. The yen surged in the days following the earthquake on speculation investors would repatriate funds to help the reconstruction effort. It tumbled the most in more than two years against the dollar on the day of the sales.

The euro strengthened against 15 of the 16 major currencies as the prospect of higher interest rates overshadowed concern that the sovereign-debt crisis will worsen. It may weaken to $1.35 by year-end, from $1.4158 yesterday, according to the median of 39 analysts’ forecasts compiled by Bloomberg.

Crude, Cotton

Crude and refined products posted three of the four biggest gains among the 24 materials on the GSCI Index, as anti- government protests in Libya, home to Africa’s largest oil reserves, turned into an armed conflict. Gasoil climbed about 28 percent and gasoline about 24 percent. Brent may decline to $100 a barrel by year-end, from $117.36 in London yesterday, according to forecasts compiled by Bloomberg.

Cotton, which has a 1.1 percent weighting in the gauge, had the biggest increase, rising 39 percent, on surging export demand for U.S. supplies amid crop damage in China and India, the biggest producers. Cotton may still drop about 50 percent to $1 a pound by Dec. 31, according to the median forecast in a Bloomberg survey of 14 analysts and traders.

“The amplitude of the cotton price increase was a real surprise,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “It’s been a very divided quarter for commodity markets. It started on a very positive note on recovery hopes. On agriculture in general, the sentiment in the first weeks of this year was extremely optimistic. Then the turmoil in North Africa, and under pressure from what’s going on in Japan, the whole tenor of the market reversed.”

Production ‘Trickle’

Oil production in Libya fell to a “trickle” as fighting between rebels and soldiers loyal to Muammar Qaddafi forced companies to suspend operations, the Paris-based International Energy Agency said. The country pumped 1.6 million barrels a day in January, about 1.8 percent of global production.

Silver jumped about 20 percent during the quarter, trading at the highest level since 1980. Lean hogs gained on speculation of increased demand for U.S. pork supplies from Japan after elevated levels of radioactivity were discovered in milk and vegetables in parts of the country.

Raw sugar futures, wheat and rice all declined. Copper slid on the London Metal Exchange, and gold for immediate delivery advanced 0.8 percent to $1,432.30 an ounce, after reaching a record $1,447.82 March 24.

Emerging Markets

In emerging markets, Hungarian stocks were the best performers, with the BUX Index gaining 8 percent. The forint appreciated 9.8 percent against the dollar as the government promised to reduce spending and delay tax cuts.

Russia’s Micex Index jumped 7.4 percent as investors bet the world’s biggest energy exporter would benefit from gains in oil. Holders of ruble-denominated bonds earned 10.4 percent in the quarter, the strongest performance since the second quarter of 2009 and topping the 1.8 percent average for emerging markets, according to the JPMorgan Chase & Co. GBI-EM Unhedged Index. The MSCI Emerging Markets Index advanced 1.7 percent.

The first quarter “could be split down the middle with roughly the first 45 days representing an attempt to get exposure across that board and the final 45 days being a period of correction and consolidation,” said Michael Shaoul, chairman of Marketfield Asset Management, which oversees $1 billion in New York. “There have been some dramatic headlines accompanying this latter period, but for the majority of the U.S. equity market they strike us as fairly irrelevant.”

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

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net

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Corn Extends Advance on Concern Higher U.S. Acreage Won't Boost Stockpiles

Corn futures jumped to the highest in almost a month, after surging the most allowed by the exchange yesterday, on concern an expansion in plantings in the U.S. won’t be enough to rebuild global stockpiles.

May-delivery corn advanced as much as 5.9 percent to $7.34 a bushel, the highest price for the most-active contract on the Chicago Board of Trade since March 4. The contract traded at $7.31 a bushel at 2:52 p.m. in Singapore, set for a 6.1 percent advance this week.

U.S. stockpiles at the beginning of March dropped to 6.52 billion bushels, the lowest for the date since 2007, the country’s Department of Agriculture said yesterday. Farmers will sow corn on about 92.178 million acres (37.3 million hectares), the second-largest since 1944, as profits rise while increasing demand for food and biofuel cuts world stockpiles, the USDA said.

“While the increase in area could be seen as bearish, the figure was overshadowed by the shock in the grain stocks report,” Rabobank Agri Commodity Markets Research said in a report e-mailed today. “The new crops are not expected to replenish inventories to any meaningful extent, keeping prices in the new season high.”

Global food costs climbed to a record in February, a United Nations index showed. High food prices and corruption have spurred unrest in northern Africa and the Middle East this year, triggering the ouster of leaders in Tunisia and Egypt. The U.S. is the biggest exporter of corn, soybeans and wheat.

Dwindling Stockpiles

Even with the expansion in acreage, which may take the U.S. corn harvest to a record, the nation’s stocks-to-use ratio in the 2011-2012 season will still be the second-lowest since the 1995-1996 season, according to Rabobank.

The U.S. is estimated to account for 39 percent of the global corn harvest in the 2010-2011 season, according to a USDA estimate on March 10.

Soybeans for May delivery were little changed at $14.0875 a bushel, after advancing 2.8 percent yesterday, the biggest closing gain since March 17. The contract is set for a 3.7 percent advance this week.

U.S. farmers will cut soybean acres by 1 percent to 76.609 million, the USDA said, close to analysts’ expectations. The nation is estimated to represent 35 percent of the global harvest of the oilseed in the current season, USDA data last month showed. Inventories as of March 1 dropped 1.7 percent from a year earlier to 1.249 billion bushels, the USDA said.

Wheat for May delivery declined 0.5 percent to $7.5925 a bushel in Chicago, after surging 5 percent yesterday. It is set for a 3.6 percent gain this week.

Total wheat acres in the U.S. may expand 8.2 percent from last year to 58.021 million compared with analysts’ expectations of 57.239 million. About 14.427 million acres will be planted with spring wheat, up 5.3 percent from last year, the USDA said.

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

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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U.S. Stocks Fall as S&P 500 Trims Biggest First-Quarter Advance Since 1998

David Sokol, former Midamerican Energy Chairman David Sokol. Photographer: Daniel Acker/Bloomberg

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March 31 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks fell, trimming the biggest first-quarter rally for the Standard & Poor’s 500 Index since 1998, as a Federal Reserve official said interest rates may need to rise and concern about Europe’s debt crisis grew. Bloomberg's Julie Hyman also speaks. (Source: Bloomberg)

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March 31 (Bloomberg) -- Anthony Dwyer, chief equity strategist at Collins Stewart, talks about the outlook for Federal Reserve monetary policy. Dwyer also discusses tomorrow's U.S. jobs report for March, the U.S. economy and stocks. He speaks with Matt Miller, Adam Johnson, Julie Hyman and Sheila Dharmarajan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

U.S. stocks fell, trimming the biggest first-quarter rally for the Standard & Poor’s 500 Index since 1998, as a Federal Reserve official said interest rates may need to rise and concern about Europe’s debt crisis grew.

Berkshire Hathaway Inc. (BRK/A) lost 2.1 percent as David Sokol, once a candidate to succeed Warren Buffett as the head of the investment firm, resigned. CarMax Inc. (KMX) slumped 7.2 percent after the largest U.S. seller of used cars said margins shrunk. Home Depot Inc. (HD), Intel Corp. and American Express Co. (AXP) fell more than 1.3 percent to lead losses in the Dow Jones Industrial Average.

The S&P 500 fell 0.2 percent to 1,325.83 at 4 p.m. in New York and advanced 5.4 percent during the January-March period. The Dow average dropped 30.88 points, or 0.3 percent, to 12,319.73 today. Stocks extended losses late in the session as Fed Bank of Minneapolis President Narayana Kocherlakota told the Wall Street Journal that policy makers may have to lift rates to fight inflation.

“That kind of brought the market back to reality,” Michael Nasto, senior trader at U.S. Global Investors Inc., which manages $3 billion in San Antonio, Texas, said of Kocherlakota’s comments. “We had a negative tone set. It’s another example of people being a little bit timid about going to the market simply because of what they’re hearing.”

Equities fell earlier after Irish regulators instructed four banks to raise 24 billion euros ($34 billion) in additional capital following a stress test on the nation’s lenders. Portugal reported a budget deficit of 8.6 percent of gross domestic product last year, higher than a government target of about 7 percent. In the U.S., jobless claims topped economist estimates a day before the Labor Department’s monthly labor data.

First-Quarter Gains

The S&P 500 usually climbs further following first-quarter gains similar to this year’s, according to Birinyi Associates Inc. The index has risen about 7.1 percent in the final three quarters of years following January-March gains of 5 percent to 7 percent, Birinyi data dating back to 1928 show.

The benchmark gauge of U.S. stocks is trading for about 13.7 times its companies’ estimated operating earnings, compared with an average multiple of 18.1 times reported profits over the last decade, data compiled by Bloomberg show.

Jobless claims fell by 6,000 to 388,000 in the week ended March 26, the Labor Department said. The median forecast of economists in a Bloomberg survey was for a decline to 380,000 claims. The report comes before tomorrow’s monthly government report on non-farm payrolls, expected to show that the economy added 190,000 jobs in March.

Economy Watch

Other reports showed U.S. factory orders unexpectedly fell 0.1 percent after a 3.3 percent gain in January, the Commerce Department said today. The Institute for Supply Management- Chicago Inc.’s business barometer fell in March. The Bloomberg Consumer Comfort Index rose for the first time in five weeks to minus 46.9 in the period ended March 27 from a seven-month low of minus 48.9 the prior week.

Berkshire Hathaway Class B shares fell 2.1 percent to $83.63. Sokol bought about 96,000 Lubrizol Corp. shares in January before recommending the company as a takeover target, according to a statement late yesterday from Buffett, Berkshire’s chairman and chief executive officer. Sokol had initiated confidential talks with Lubrizol the month before. Berkshire agreed to buy the firm for $9 billion on March 14.

CarMax slumped 7.2 percent to $32.10, its biggest decline of the year. The largest U.S. seller of used cars said gross margin for the fourth-quarter fell to 14.2 percent from 14.5 percent in the year-ago period.

Dow Movers

Home Depot, the largest U.S. home-improvement retailer, fell 1.4 percent to $37.06. American Express, the biggest credit-card issuer by purchases, slid 1.6 percent to $45.20.

Intel Corp. (INTC), the world’s largest chipmaker, fell 1.4 percent to $20.18 after FBR Capital Markets said in a note to clients the world’s largest chipmaker faces slower-than-expected growth in the personal-computer market during the second quarter and its Sandy Bridge products are not stimulating as much demand as anticipated.

American International Group Inc. (AIG) fell 2.5 percent to $35.14 after the Federal Reserve Bank of New York said it has declined the insurer’s $15.7 billion offer to purchase the residential-mortgage backed securities owned by the central bank’s Maiden Lane II LLC rescue fund.

U.S. Steel, Rowan

U.S. Steel Corp. declined 4.2 percent to $53.94 after the Pittsburgh-based company was added to Deutsche Bank AG’s short- term sell list.

Rowan Cos. advanced 3 percent to $44.18 after Moody’s changed the offshore driller’s outlook to “stable” from “negative.”

CF Industries Holdings Inc. (CF), the world’s second-largest maker of nitrogen fertilizer, rallied 3.2 percent to $136.79. The U.S. Department of Agriculture reported corn acreage this year will be the second largest since 1944 as increasing demand for food and fuel cuts stockpiles worldwide.

XL Group Plc (XL) added 4 percent to $24.60 after Egan-Jones Ratings Co. said the insurer stands good chance of a takeover by Berkshire Hathaway or other stronger peers.

The rebound in the S&P 500 isn’t over, according to Bay Crest Partners LLC. When the S&P 500 slipped to 1,249.05 on March 16, the weekly survey from the American Association of Individual Investors showed the next day that the ratio of bulls to bears fell to 0.71, the lowest since Aug. 26, Bloomberg data show. Christian Bendixen, director of technical research at Bay Crest, said the increase in pessimism may reverse and help the S&P 500 climb to 1,425, or 7.3 percent above yesterday’s close.

“We have some good reasons to want to own stocks,” said Perry Piazza, director of investment strategy at Contango Capital Advisors in San Francisco, who helps oversee about $3.3 billion of assets. “We know the energy and materials sectors are doing really well, we know the dollar is weak, we know that individual investors are interested again in coming back to the stock market. I don’t think it’s time to take your chips off the table yet.”

To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Brown & Brown, Global Payments, Krispy Kreme, Xyratex: U.S. Equity Preview

Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Alexander & Baldwin Inc. (ALEX) : Bill Ackman’s Pershing Square Capital LP reported a stake of about 9.9 percent in the parent of ocean-transport company Matson Navigation and plans to start talks with the company, according to a regulatory filing.

Brown & Brown Inc. (BRO) : The family-run insurance broker agreed to buy First Horizon National Corp. (FHN US). The deal is likely to close in late April, according to a statement.

Cascade Corp. (CASC) : The maker of equipment for forklifts posted fourth-quarter earnings that fell short of the average analyst estimate, Bloomberg data show.

Christopher & Banks Corp. (CBK) : The Minnesota-based women’s clothing retailer said its fourth-quarter loss will be at least 41 cents a share, wider than the average analyst projection for a loss of 31 cents, according to a Bloomberg survey.

Exfo Inc. (EXFO) : The maker of equipment for the telecommunications industry said third-quarter revenue will be no more than $72 million. Analysts project $73.2 million on average, Bloomberg data show.

GameStop Corp. (GME) : The world’s largest video-game retailer said it is buying Spawn Labs, a streaming technology company, and has an agreement to buy Impulse Inc., a digital distribution business.

Global Payments Inc. (GPN) : The provider of card- processing services increased the bottom range of its annual revenue forecast to $1.8 billion to match the average forecast of analysts surveyed by Bloomberg. Earnings may be as low as $2.70 a share, compared with the average projection of $2.75 a share.

Krispy Kreme Doughnuts Inc. (KKD) : The doughnut chain posted fourth-quarter sales that fell short of the average of analyst estimates, Bloomberg data show. The company also reiterated its 2012 forecast for operating income.

Resources Connection Inc. (RECN) : The provider of legal and accounting services said third-quarter net income was 2 cents a share, falling short of the average analyst estimate of 6 cents, according to Bloomberg data. Revenue also missed projections.

Xyratex Ltd. (XRTX) : The provider of data storage and network technology said it will earn 6 cents a share at most in the second quarter. Analysts projected a profit of 27 cents a share, Bloomberg data show.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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Asian Stocks Decline as Exporters Drop; Woodside Leads Oil Stocks' Advance

Asian stocks declined, dragging the regional benchmark index lower for the first time in three days, as exporters dropped after a Federal Reserve official said interest rates made need to rise to curb inflation.

Nintendo Co., the maker of Wii game consoles that counts America as its biggest market, and Honda Motor Co., which gets about 44 percent of sales from North America, lost at least 1.4 percent. U.S. payroll reports will be released later today. Tokyo Electric Power Co., operator of a nuclear plant crippled after an earthquake and tsunami on March 11, slipped 3.7 percent as speculation grew the company will be nationalized. China Railway Group Ltd. (601390), the country’s No. 2 heavy construction firm, declined 5.6 percent after JPMorgan Chase & Co. cut its rating.

“Investors are sitting on the sidelines, waiting for the U.S. jobs data due out tonight,” said Manpreet Gill, Singapore- based Asian strategist at Barclays Wealth. “It’s premature to raise interest rates in the U.S. as the labor market is recovering very slowly.”

The MSCI Asia Pacific Index lost 0.1 percent to 135.61 as of 3:40 p.m. in Tokyo, paring losses of as much as 0.4 percent earlier. About the same number of stocks rose as fell in the index, which is set for a 1 percent advance this week. The gauge last week had its biggest weekly gain since November as Japan moved to stabilize nuclear reactors damaged by the earthquake, and as companies from Cnooc Ltd. (883) to Bank of China Ltd. reported earnings that surpassed estimates.

China, South Korea Data

Japan’s Nikkei 225 (NKY) Stock Average dropped 0.5 percent. Hong Kong’s Hang Seng Index gained 0.4 percent. China’s Shanghai Composite Index both advanced 1.1 percent as the nation’s manufacturing growth accelerated for the first time in four months, easing concern that monetary tightening may lead to a slowdown in the world’s second-biggest economy.

South Korea’s Kospi Index gained 0.7 percent to a record close as the country’s inflation climbed to the highest level in 29 months and exports reached a record in March, adding pressure for another interest-rate increase. Australia’s S&P/ASX 200 Index both climbed 0.5 percent. New Zealand’s NZX 50 Index increased 0.4 percent.

Futures on the Standard & Poor’s 500 Index were little changed today. The index fell 0.2 percent yesterday after Fed Bank of Minneapolis President Narayana Kocherlakota told the Wall Street Journal that policy makers may have to lift rates to fight inflation.

A Labor Department report today may show total U.S. non- farm payrolls rose 190,000 in March and the unemployment rate held at 8.9 percent, economists predict. The jobless rate fell below 9 percent in February for the first time in 22 months.

Exporters Drop

Nintendo dropped 1.4 percent to 22,160 yen in Tokyo. Honda Motor Co., Japan’s second-biggest carmaker, declined 2.4 percent to 3,050 yen. Li & Fung Ltd. (494), the largest supplier to Wal-Mart Stores Inc., declined 0.1 percent to HK$39.80 in Hong Kong.

Tokyo Electric Power Co., operator of the crippled Fukushima Dai-Ichi nuclear power plant, slipped 3.7 percent to 449 yen. Japan’s government hasn’t ruled out the possibility of investing in Tokyo Electric, Chief Cabinet Secretary Yukio Edano said.

The company faces claims of as much as 11 trillion yen ($131.5 billion), if the crisis lasts two years, that could lead to nationalization, a Bank of America Merrill Lynch report said this week.

China Railway Group dropped 5.6 percent to HK$4.74, the worst performer on the MSCI Asia Pacific Index. JPMorgan lowered its rating to “underweight” from “overweight.” China Railway Construction Corp., the country’s third-largest heavy construction company by market capitalization, dropped 4.5 percent to HK$7.72, its lowest level since October 2008, after also being downgraded to ‘underweight’ by JPMorgan.

Acer Inc. (2353), the world’s second-largest maker of personal computers, tumbled 4.8 percent to NT$57.1. The company said yesterday said Chief Executive Officer Gianfranco Lanci resigned after clashing with board members over the company’s strategy.

Energy Stocks Rally

Among stocks that advanced, Woodside Petroleum Ltd. (WPL), Australia’s second-biggest oil and gas producer, increased 1.3 percent to A$47.40 in Sydney. Royal Dutch Shell Plc might be holding talks with BHP Billiton Ltd., Mitsui & Co. Ltd. and Mitsubishi Corp. for a sale of its 24 percent stake in Woodside, the Australian Financial Review reported in its Street Talk column, without citing anyone.

Cnooc Ltd., China’s biggest offshore oil producer gained 2.6 percent to HK$20.10 in Hong Kong. Inpex Corp. (1605), Japan’s No.1 energy explorer jumped 4.3 percent to 658,000 yen.

Crude oil for May delivery climbed 2.4 percent to $106.72 a barrel yesterday, the highest settlement since Sept. 26, 2008, in New York amid concern the Libyan conflict will prolong production cuts.

Ping An Insurance (Group) Co., China’s second-largest insurer, jumped 4.1 percent to HK$82.10. Daiwa Securities Group Inc. raised its share-price forecast to HK$124.47 from HK$109.14 and maintained its “buy” rating.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 82.43; (P) 82.81; (R1) 83.25

Intraday bias in USD/JPY remains neutral and some more consolidations could be seen below 83.20 temporary top. But break of 80.50 support is needed to signal short term topping. Otherwise, outlook will remains cautiously bullish and we'd continue to favor further rally. Above 83.20 will target 84.49 key resistance next.

In the bigger picture, with 84.49 resistance intact, there is no confirmation of trend reversal yet and the multi-decade down trend in USD/JPY could still be in progress for a new low below 76.40. However, note that decisive break of 84.49 will argue that an important medium term bottom is formed. Focus will then turn to whether USD/JPY could sustain above 55 weeks EMA (now at 85.22). In that case, stronger rise could be seen towards 94.97 resistance and above.

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GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.6006; (P) 1.6044; (R1) 1.6111;

GBP/USD's sharp reversal after hitting 1.6140 minor resistance revives the original bearish view that fall from 1.6400 is not over. Break of 1.5935 will target medium term trend line support (now at 1.5811). Sustained break there will indicate that whole rise form 1.4230 has finished too and will turn outlook bearish for 1.5343 support. On the upside, however, above 1.6149 will dampen this immediate bearish case again and turn focus back to 1.6400 high instead.

In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4230 is treated as the third leg of such consolidation and with 1.5343 support intact, such rise could still continue for 1.7043 resistance. But after all, strong resistance should be seen between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside. On the downside, break of 1.4230 support will be the first signal of down trend resumption and will turn focus to 1.3503 low for confirmation.

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Japan Sold 692.5 Billion Yen in March to Weaken Currency From Postwar High

Japan sold 692.5 billion yen ($8.4 billion) from Feb. 25 to March 29, the Ministry of Finance said in Tokyo today, showing the nation’s efforts to bring the currency down from a postwar high that threatened a recovery from its biggest-ever earthquake.

The yen climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade. The currency had risen on prospects Japanese investors would repatriate assets to pay for rebuilding.

“The intervention’s impact has been huge,” Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank, said before the Finance Ministry released the data. “It’s not only stemmed the yen’s gain, but also sent a clear message that they will step into the market should the yen rapidly strengthen beyond 80 per dollar. That’s significant.”

The yen traded at 82.92 per dollar at 11:07 a.m. in London from 82.89 in New York yesterday, and compared with 82.98 on March 10, a day before the magnitude-9 temblor struck. The currency was at 117.86 per euro from 117.10, down from 114.49 on March 10.

G-7 finance chiefs said in a joint statement on March 18 they will “provide any needed cooperation” with Japan. “We will monitor exchange markets closely and will cooperate as appropriate,” the statement also said. The G-7 members hadn’t stepped in the market together since September 2000 when they sought to support the euro as it tumbled in its second year of existence.

September Intervention

Japan unilaterally sold 2.12 trillion yen in foreign- exchange markets from Aug. 28 through Sept. 28 in its first intervention since 2004 to keep the yen from reaching its previous postwar high of 79.75 per dollar reached in April 1995.

The Bank of Japan pumped 40 trillion yen into the banking system in successive one-day emergency cash operations from March 14 to March 22 to try to settle financial markets after the quake. The Japanese government said there’s no evidence insurance companies were repatriating assets from abroad due to the risk of radiation leaks from a quake-crippled nuclear plant.

Totan Research Co. had estimated that the BOJ may have spent about 690 billion yen when it intervened in the currency markets on March 18, based on the central bank’s holdings of government securities. The BOJ’s debt assets temporarily increase when Japan intervenes because the government sells bills to the bank to obtain funds for intervention, said Izuru Kato, chief market economist at Totan Research in Tokyo.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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Sarkozy Backs Broader Role for Yuan as Geithner Urges Flexibility at G-20

French President Nicolas Sarkozy said the yuan should be in the International Monetary Fund’s Special Drawing Rights, a unit of account derived from the value of the dollar, yen, pound and euro. Photographer: Qilai Shen/Bloomberg

The U.S. and France signaled openness to a greater role for the yuan while stressing the importance of exchange-rate flexibility as Group of 20 officials met in China to discuss the international monetary system.

French President Nicolas Sarkozy said the yuan should be in the International Monetary Fund’s Special Drawing Rights, a unit of account derived from the value of the dollar, yen, pound and euro. U.S. Treasury Secretary Timothy F. Geithner said world powers’ currencies should be included “over time” so long as they have flexible exchange rates and free capital flows.

Chinese officials said that the yuan’s value wouldn’t be a topic at today’s seminar in Nanjing and Geithner didn’t refer to the currency directly in his prepared remarks. At the same time, he said the mismatch between flexible currencies and the “tightly managed” exchange rates of some emerging economies is the most important problem to solve in the international monetary system.

“China will continue to proceed with currency reform at its own pace” and regardless of Sarkozy and Geithner’s comments, said Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., who formerly worked for the International Monetary Fund and the European Central Bank.

The yuan touched 6.5488 per dollar in Shanghai today, the highest in 17 years. The U.S. describes the currency as still “substantially undervalued,” with American lawmakers arguing that gives China, the world’s biggest exporter, an unfair advantage in global trade.

‘Overwhelming’ Support

The Special Drawing Rights basket is reviewed every five years by the IMF’s executive board, and the most recent changes took effect in January. The next review will be in 2015, according to the Washington-based fund’s website.

Jim O’Neill, chairman of Goldman Sachs Asset Management, said the “overwhelming” view at today’s event seemed to be that the yuan should be included earlier than the IMF procedures may currently allow. His view is that the currency doesn’t need to be fully convertible and should be brought in “now.”

Sarkozy said that imbalances under existing monetary arrangements indicate the need for a “more flexible system” rather than a return to fixed or managed exchange rates.

G-20 finance chiefs, central bankers including the European Central Bank’s Jean-Claude Trichet and private economists are meeting for the one-day seminar that Sarkozy initiated on altering the monetary system to reduce the risk of a repeat global financial crisis.

IMF’s Role

The French president said that the IMF should have a bigger role in supervising nations’ balance of payments and reserves to help limit risks.

In October 2008, after the collapse of Lehman Brothers Holdings Inc., the volatility of the world’s major currencies rose to the highest level since at least 1992, according to a JPMorgan Chase & Co. index. Price swings also increased in May last year because of Europe’s debt turmoil and this month because of Japan’s earthquake.

The Group of Seven nations intervened to weaken Japan’s yen after the March 11 disaster. Sarkozy suggested today that a broader group should monitor currency markets.

Today’s meeting at the Purple Palace resort is being attended by economists including Nobel laureate Robert Mundell. It’s intended to lay the groundwork for an agreement at the G-20 summit in Cannes, France, in November that would lead to a more “stable and resilient” monetary order, Sarkozy said.

‘Financial Protectionism’

With France holding the presidency of the G-20 this year, Sarkozy has made the monetary system one of his priorities. He said today that without extra rules for foreign-exchange regimes, there is a risk of more conflict over currencies.

Sarkozy recalled the G-20’s unity at the height of the global financial crisis in 2009. Now, nations pursuing their own interests risk a “proliferation of unilateral measures during crises resulting in a new financial protectionism in which all economies suffer,” he said.

A gathering of G-20 finance ministers in February underscored the difficulties, with China resisting the inclusion of foreign-exchange reserves as a yardstick for gauging global imbalances. Sarkozy views China’s decision to host today’s event as a first step toward a more flexible yuan that should result in its inclusion in the IMF’s currency basket.

Created in 1969, Special Drawing Rights serve as international reserve assets and represent potential claims on usable currencies of IMF members. As of March 30, one SDR was the equivalent of $1.5797.

Capital Flows

“Currencies of large economies heavily used in international trade and financial transactions should become part of the SDR basket,” Geithner said. “To achieve this objective, the concerned countries should have flexible exchange-rate systems, independent central banks and permit the free movement of capital flows.”

An SDR system without the yuan would be “ridiculous” and lack legitimacy, People’s Bank of China adviser Li Daokui said in Nanjing.

Chinese President Hu Jintao told Sarkozy yesterday in Beijing that China views the internationalization of the yuan as inevitable, with only the pace of the move in question, a French official said.

Officials including French Finance Minister Christine Lagarde are discussing topics including “shortcomings in the international monetary system” and dealing with volatile capital flows, according to the schedule for the conference at Nanjing, a city on the Yangtze River, about 170 miles (270 kilometers) from Shanghai.

U.S. Monetary Policy

Nations including Brazil, China and South Korea have argued that U.S. monetary easing has added to the threat of inflows of capital fueling inflation and asset bubbles. Ahead of today’s meeting, Xu Hongcai, a Chinese state economist, revived complaints about U.S. monetary policy in a paper that said the world had fallen into a “dollar trap.” Xu is an official at the China Center for International Economic Exchanges, the co- host of the Nanjing event.

China has an extra stake in the U.S. maintaining the value of the dollar as the biggest foreign holder of Treasuries, owning more than $1.1 trillion of the securities. China’s build- up of a world-record $2.85 trillion of foreign-exchange holdings, driven by trade surpluses and limits on gains in the yuan, highlights imbalances blamed for contributing to the global financial crisis.

--James Hertling, Michael Forsythe, Kevin Hamlin, Bonnie Cao in Nanjing and Zheng Lifei in Beijing. Editors: Paul Panckhurst, Sunil Jagtiani

To contact the Bloomberg News staff on this story: James Hertling at jhertling@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Soybeans Gain on Speculation Lower U.S. Sowing, Brazil Rain May Cut Supply

Soybeans gained on speculation that reduced planting in the U.S., the world’s largest exporter, and rain in Brazil that is slowing collection of the oilseeds will curb production.

The area planted with soybeans in the U.S. may total 76.79 million acres this year, compared with the Department of Agriculture’s February estimate of 78 million acres, according to the average forecast of 32 analysts surveyed last week by Bloomberg News. Rain in Brazil, the third-biggest shipper of the oilseeds, has delayed the harvest and may curb yields.

“The Brazilian situation is still a major issue, and the continuing rain is still holding exports down,” said Jonathan Bouchet, an analyst at broker OTCex Group in Geneva. Investors may be buying contracts ahead of the USDA report, set to be released at 8:30 a.m. in Washington, expecting planting estimates to be lower than previously forecast, Bouchet said.

Soybeans for May delivery gained 6 cents, or 0.4 percent, to $13.78 a bushel by 10:07 a.m. London time on the Chicago Board of Trade. The most-active contract is set for a 1.8 percent loss this quarter, the first in three.

“Soybean values are sitting just under resistance levels,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA), said today in a report. “A low-acreage estimate should be enough to push the market through these,” he wrote, referring to points where investors may sell contracts.

The U.S. is estimated to account for 39 percent of global corn harvests in the 2010-2011 season, 35 percent of soybean output, and 28 percent of world wheat exports, according to USDA estimates on March 10.

Expand Plantings

Wheat futures were little changed on speculation that farmers in the U.S., the world’s largest shipper, may expand plantings, easing supply concerns.

Sowing of the grain may reach 57.2 million acres, up from the USDA’s estimate last month of 57 million acres, and 53.6 million acres a year ago, according to a Bloomberg News survey last week.

Wheat for May delivery dropped 1 cent, or 0.1 percent, to $7.2625 a bushel in Chicago. Futures have dropped 8.6 percent this quarter, the first such loss in four.

Corn for May delivery gained 0.2 percent to $6.6475 a bushel in Chicago, taking the quarterly gain for the most-active contract to 5.7 percent. Futures jumped 93 percent in the past year as production lagged behind demand, draining global stockpiles.

Areas seeded with the grain in the U.S., the largest grower and exporter, may climb to 91.751 million acres from 88.192 million last year, according to the Bloomberg survey. That would be the biggest since 2007 and the second-largest since 1944.

“The grains are holding pretty well following that Japanese quake, as they are expected to boost imports very soon,” Bouchet said. “But for today, most traders are waiting for the USDA report to come out.”

To contact the reporter on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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Euro Rises Versus Dollar After Inflation Accelerates; Norway's Krone Gains

The euro strengthened against the dollar and the yen after euro-region inflation unexpectedly accelerated in March, bolstering the case for the European Central Bank to raise interest rates next week.

The 17-nation currency remained higher against most its major counterparts after Ireland announced that four of the country’s banks need to raise 24 billion euros ($34 billion) of additional capital. The dollar weakened as fewer Americans filed jobless benefits applications last week before the March employment report tomorrow. Norway’s krone rose to a two- and one-half-year high against the dollar as oil prices advanced and retail sales exceeded forecasts.

“As risk is being put back on, the euro is benefitting as the market looks forward to interest-rate expectation, regardless of what their economy is doing, the Irish stress test or any banking issues,” said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo New York. “Not only is the euro resilient against the dollar, it’s kicking everyone’s tail.”

The euro climbed 0.4 percent against the dollar to $1.4185 as of 11:41 a.m. in New York. It appreciated 0.3 percent to 117.42 yen and reached 117.90 yen.

Japan’s currency was little changed at 82.78 per dollar. It earlier depreciated to 83.21, the weakest since March 11, when Japan was struck by its biggest recorded earthquake.

Futures Bets

The shared currency earlier pared gains against the greenback after Anglo Irish Bank Corp. Chief Executive Officer Mike Aynsley said he’s “not sure we’ll get details” of plans for a funding facility for Irish banks after results of the stress tests.

Inflation in the 17-nation euro region quickened to 2.6 percent in March from 2.4 percent in February, European Union estimates showed today. That’s the fastest pace since October 2008, and exceeds the ECB’s 2 percent limit for a fourth month. Economists had forecast inflation to hold steady.

“Consumer price data is outweighing Portugal and Ireland,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “It adds supports to the euro.”

The euro is the second-best performer, after the Swedish krona, in the past quarter, according to Bloomberg Correlation Weighted Indexes, which tracks nine-developed market currencies. It has gained 3.6 percent against nations like the U.S., Canada and Britain.

Trichet Stand

ECB President Jean-Claude Trichet signaled on March 3 that policy makers may raise interest rates at their April 7 meeting. The implied yield on the three-month Euribor contract expiring in December rose three basis points to 2.09 percent today, as investors added to bets that rates will rise.

“The rate differential is being borne out more by the fact that the Fed is still printing money,” said Derek Halpenny, European head of currency research at Bank of Tokyo in London, referring to the Fed’s bond-buying program. “That tells you how far away we are from a shift in yields, and that is what’s dictating the dollar selling at the moment.”

U.S. jobless claims fell by 6,000 to 388,000 in the week ended March 26, Labor Department figures showed today in Washington. Nonfarm payroll are forecast to increase by 190,000 in March, according to the median estimate of 83 economists. The unemployment rate is projected to remain at 8.9 percent.

The Dollar Index, which InterContinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.3 percent to 75.894. It approached a 15-month low of 75.249 reached on March 22 and headed for a 4.1 percent decline this quarter. The gauge is weighted 57.6 percent to moves in the euro.

Krone Performs

The Norwegian krone was the best performer against the dollar today, reaching a two and a half year high after retail sales in February were greater than expected. The krone appreciated 0.8 percent to 5.53083 per dollar after reaching 5.51028, the strongest since September 2008.

Crude oil rose 1.4 percent to $105.75 a barrel in New York. Norway, the world’s sixth-largest oil exporter.

Norges Bank, which has kept its benchmark rate at 2 percent since May last year, signaled this month it may start raising borrowing costs earlier than previously indicated to quell a credit-driven surge in property prices.

The yen headed for an 8.4 percent quarterly loss against the euro and 2 percent decline versus the dollar as Japan sold 692.5 billion yen ($8.4 billion) from Feb. 25 to March 29, the Ministry of Finance said in Tokyo today.

Yen Declines

The Japanese currency climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade.

Australia’s dollar reached a record versus the U.S. currency after a government report showed retail sales increased in February by more than economists forecast. Sales rose 0.5 percent last month, the Bureau of Statistics said today, surpassing the 0.4 percent increase projected by economists.

The Aussie was 0.2 percent stronger at $1.0353, after rising to $1.0362, the strongest level since the currency was freely floated in 1983.

China’s yuan rose to a 17-year high as G-20 finance chiefs are meeting in Nanjing, China. The yuan gained as much as 0.12 percent to 6.5478 per dollar, the strongest level since the country unified official and market exchange rates in 1993.

China may face pressure from nations including the U.S., India and Brazil to allow a stronger yuan, a seminar initiated by French President Nicolas Sarkozy on reshaping the global monetary system. former U.S. Trade Representative Susan Schwab said.

“My guess is that the conversations will take place, but they will take place quietly,” Schwab, a strategic adviser at law firm Mayer Brown LLP, told Bloomberg Television from Washington.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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Gold Heads for Longest Run of Quarterly Gains in 3 Decades on Libya, Debt

Gold rose in New York, heading for the longest streak of quarterly gains in more than three decades, as fighting in Libya and concerns about European debt spurred demand for an alternative investment.

Troops loyal to Muammar Qaddafi forced Libyan rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces. Gold futures reached a record $1,448.60 an ounce on March 24 as fighting in Libya, the Japanese nuclear crisis and concerns about European debt boosted demand for a protection of wealth.

“Given the unrest in the Middle East and North Africa region, increasing debt issues in the euro zone and the environment of historically low interest rates, gold and silver should continue to remain underpinned and test towards recent highs,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.

Gold futures for June delivery rose $14.80, or 1 percent, to $1,439.70 an ounce at 10:06 a.m. on the Comex in New York. Prices are up 1.3 percent this quarter. A 10th quarterly increase would be the best run of gains since at least 1975. The metal for immediate delivery in London was 1.1 percent higher at $1,438.40.

Libyan Foreign Minister Moussa Koussa quit Qaddafi’s government as rebels were forced to abandon much of the territory they captured after the U.S.-led air campaign against Qaddafi’s army began almost two weeks ago. The fighting in Libya is the most violent seen in more than two months of popular uprisings across the Middle East and North Africa.

Portuguese Debt

Standard & Poor’s this week cut credit ratings for Greece and Portugal, and the cost of insuring Portuguese government debt reached a record according to CMA prices, as speculation mounted the nation will be forced to restructure its borrowings.

Tokyo Electric Power Co. has been spraying water on the reactors at the Fukushima Dai-Ichi plant damaged after this month’s earthquake and tsunami in Japan. Work to repair the plant’s monitoring and cooling systems has been hampered by discoveries of hazardous radioactive water. The government hasn’t ruled out pouring concrete over the whole facility as one way to shut it down, Chief Cabinet Secretary Yukio Edano said.

Gold and silver are being supported by “inflation, geopolitical and euro zone debt concerns,” analysts at GoldCore Ltd. in Dublin said in a report.

Inflation Accelerates

European inflation unexpectedly accelerated to 2.6 percent in March, the fastest in more than two years, the European Union’s statistics office said today.

Gains were limited this quarter on signs the U.S. economy is improving, boosting investor appetite for higher-yielding assets like stocks. St. Louis Federal Reserve Bank President James Bullard yesterday said the central bank may need to begin pulling back from record levels of monetary accommodation even amid uncertainties in Japan and the Middle East.

Silver for May delivery in New York rose 1.1 percent to $37.91 an ounce. It reached $38.18 on March 24, the highest level since February 1980, the year futures reached a record $50.35. Prices are up 23 percent this year, heading for a ninth straight quarterly advance, the best run of gains since at least 1975.

An ounce of gold bought as little as 37.72 ounces of silver in London today, the lowest level since October 1983, data compiled by Bloomberg show. Silver is used more in industry than gold.

“Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices,” GoldCore analysts said. With gold near a record, “silver is the cheap alternative to gold and an attractive store of value.”

Palladium for June delivery was up 1.6 percent at $769.95 an ounce, and is down 4.2 percent this quarter. Platinum for July delivery gained 0.5 percent to $1,782.80 an ounce. Prices are up 0.3 percent this quarter.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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Commodities Heading for a Third Quarterly Advance on Recovery, Oil's Surge

Commodities headed for a third quarterly advance as the global economy extended its recovery, and as crude oil climbed on concern that conflict in Libya and unrest in the Middle East would curb supplies.

Raw materials measured by the Standard & Poor’s GSCI Spot Index of 24 futures increased 0.2 percent to 712.61 at 1:42 p.m. in Singapore, extending its gain to 13 percent this year. Oil jumped 15 percent, cotton increased 35 percent, silver gained 22 percent and lean hogs rose 28 percent in the past three months.

Fighting in Libya, the toppling of leaders in Tunisia and Egypt and protests in countries from Bahrain to Syria drove crude oil past $100 a barrel this year. Floods in Australia and dry weather in China threatened crops, while Japan’s worst earthquake on record spurred speculation of increased commodity demand for rebuilding and food. That offset concern over a potential growth slowdown in China, the biggest commodity user, as the government seeks to tame inflation.

“We had a significant change in the overall environment, with some unexpected introduction of external risk,” said Yingxi Yu, Barclays Capital’s commodities analyst in Singapore.

Oil climbed 0.3 percent to $104.56 a barrel today, heading for its third quarterly increase on concern supplies will be reduced by an escalating conflict in Libya. Troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces.

Military Action

Commodities will “attract inflows” on strong emerging market growth and inflation risks and as investors seek to hedge against “tail events” such as military action in the Middle East and Africa and the nuclear accident in Japan, Michael Lewis, head of commodities research at Deutsche Bank AG, wrote in a quarterly report yesterday.

Gold for immediate delivery jumped to a record $1,447.82 an ounce on March 24 and silver surged to a 31-year high of $38.165 an ounce as investors sought precious metals to protect their wealth from geopolitical risk and rising energy costs. Gold traded at $1,427.65 and silver at $37.6850 today.

“The big picture is that the global economy is continuing to recover,” Pu Yonghao, Hong Kong-based chief investment strategist at UBS Wealth Management, said in a Bloomberg Television interview. “Emerging markets continue to remain strong although inflation is a problem.”

The LME index of six industrial metals is up 0.9 percent this year, led by tin. The metal increased to a record $32,799 a metric ton on Feb. 15 and copper touched an all-time high of $10,190 a ton on expectations supply will trail demand.

Slowdown Risk

Crude oil prices at more than $100 a barrel, the potential for further monetary tightening in China and the debt crisis in Europe may weigh on the global recovery, analysts said.

“We’re already starting to see some demand destruction,” said Francisco Blanch, Bank of America Merrill Lynch’s head of commodities research.

China’s central bank boosted banks’ reserve-requirement ratios eight times and raised interest rates three times since the start of 2010 to cool the economy and tame inflation. The People’s Bank of China may raise interest rates again in early April, according to Citigroup Inc.

“If China over-tightens and this leads to a faster than expected slowdown, there is some downside risk but it shouldn’t be overstated,” said Barclays’s Yu. Europe’s “economy is not on a strong footing and the sovereign debt issue is not over.”

The debt crisis which began in Greece persists as Portugal had its credit rating cut this week, after the country’s parliament rejected a deficit-cutting plan, sparking the resignation of Prime Minister Jose Socrates on March 23.

In Ireland, top finance officials will today seek to show investors, taxpayers and the rest of the euro region that the banking crisis in the country might be nearing an end.

Central Bank Governor Patrick Honohan will publish the results of a third round of stress tests on the country’s banks at 4:30 p.m. in Dublin. Shortly afterwards, Finance Minister Michael Noonan will set out how more capital will be raised.

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

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net

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Commodities Heading for a Third Quarterly Advance on Recovery, Oil's Surge

Commodities headed for a third quarterly advance as the global economy extended its recovery, and as crude oil climbed on concern that conflict in Libya and unrest in the Middle East would curb supplies.

Raw materials measured by the Standard & Poor’s GSCI Spot Index of 24 futures increased 0.2 percent to 712.61 at 1:42 p.m. in Singapore, extending its gain to 13 percent this year. Oil jumped 15 percent, cotton increased 35 percent, silver gained 22 percent and lean hogs rose 28 percent in the past three months.

Fighting in Libya, the toppling of leaders in Tunisia and Egypt and protests in countries from Bahrain to Syria drove crude oil past $100 a barrel this year. Floods in Australia and dry weather in China threatened crops, while Japan’s worst earthquake on record spurred speculation of increased commodity demand for rebuilding and food. That offset concern over a potential growth slowdown in China, the biggest commodity user, as the government seeks to tame inflation.

“We had a significant change in the overall environment, with some unexpected introduction of external risk,” said Yingxi Yu, Barclays Capital’s commodities analyst in Singapore.

Oil climbed 0.3 percent to $104.56 a barrel today, heading for its third quarterly increase on concern supplies will be reduced by an escalating conflict in Libya. Troops loyal to Libyan leader Muammar Qaddafi forced rebels to retreat as the U.S. and U.K. said they would consider arming opposition forces.

Military Action

Commodities will “attract inflows” on strong emerging market growth and inflation risks and as investors seek to hedge against “tail events” such as military action in the Middle East and Africa and the nuclear accident in Japan, Michael Lewis, head of commodities research at Deutsche Bank AG, wrote in a quarterly report yesterday.

Gold for immediate delivery jumped to a record $1,447.82 an ounce on March 24 and silver surged to a 31-year high of $38.165 an ounce as investors sought precious metals to protect their wealth from geopolitical risk and rising energy costs. Gold traded at $1,427.65 and silver at $37.6850 today.

“The big picture is that the global economy is continuing to recover,” Pu Yonghao, Hong Kong-based chief investment strategist at UBS Wealth Management, said in a Bloomberg Television interview. “Emerging markets continue to remain strong although inflation is a problem.”

The LME index of six industrial metals is up 0.9 percent this year, led by tin. The metal increased to a record $32,799 a metric ton on Feb. 15 and copper touched an all-time high of $10,190 a ton on expectations supply will trail demand.

Slowdown Risk

Crude oil prices at more than $100 a barrel, the potential for further monetary tightening in China and the debt crisis in Europe may weigh on the global recovery, analysts said.

“We’re already starting to see some demand destruction,” said Francisco Blanch, Bank of America Merrill Lynch’s head of commodities research.

China’s central bank boosted banks’ reserve-requirement ratios eight times and raised interest rates three times since the start of 2010 to cool the economy and tame inflation. The People’s Bank of China may raise interest rates again in early April, according to Citigroup Inc.

“If China over-tightens and this leads to a faster than expected slowdown, there is some downside risk but it shouldn’t be overstated,” said Barclays’s Yu. Europe’s “economy is not on a strong footing and the sovereign debt issue is not over.”

The debt crisis which began in Greece persists as Portugal had its credit rating cut this week, after the country’s parliament rejected a deficit-cutting plan, sparking the resignation of Prime Minister Jose Socrates on March 23.

In Ireland, top finance officials will today seek to show investors, taxpayers and the rest of the euro region that the banking crisis in the country might be nearing an end.

Central Bank Governor Patrick Honohan will publish the results of a third round of stress tests on the country’s banks at 4:30 p.m. in Dublin. Shortly afterwards, Finance Minister Michael Noonan will set out how more capital will be raised.

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

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net

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U.S. Stocks Fluctuate as Jobless Claims Top Economist Estimates

David Sokol, former Midamerican Energy Chairman David Sokol. Photographer: Daniel Acker/Bloomberg

U.S. stocks fluctuated at the end of the biggest first-quarter rally in 13 years as higher oil and metal prices drove commodity producers higher, while consumer companies and banks slumped.

Chevron Corp. (CVX) added 0.9 percent as oil headed for a third quarterly gain in New York. Berkshire Hathaway Inc. (BRK/A) lost 1.6 percent as David Sokol, once a candidate to succeed Warren Buffett as the head of the investment firm, resigned after helping to negotiate the acquisition of a company whose shares he had purchased. Carmax Inc. (KMX) slumped 7.1 percent after the largest U.S. seller of used cars said gross margin dropped.

The Standard & Poor’s 500 Index slipped less than 0.1 percent to 1,327.48 at 11:14 a.m. in New York. The Dow Jones Industrial Average rose 4.73 points, or less than 0.1 percent, to 12,355.34. Equity index futures retreated before the open of exchanges after first-time claims for unemployment insurance topped economists’ estimates.

“You had the weekly jobless claim numbers slightly weaker, so you don’t have anything helping the market here,” said Timothy Ghriskey, chief investment officer at the Solaris Group LLC in Bedford Hills, New York, which manages $2 billion. “The market also had quite a recovery here since mid-March and there could be some profit-taking today as we end the quarter.”

The S&P 500 advanced 5.6 percent in this quarter through yesterday and is poised for its biggest gain in the January- March period since 1998. An earthquake and tsunami in Japan and concern that revolts in the Middle East and northern Africa will curb global growth dragged the S&P 500 as much as 6.4 percent lower from its high for the year on Feb. 18 through March 16. The gauge has recovered most of that loss, trimming its drop from its 2011 high to 1.1 percent.

First-Quarter Gains

The S&P 500 usually climbs further following first-quarter gains similar to this year’s, according to Birinyi Associates Inc. The index rises about 7.1 percent in the final three quarters of years following January-March gains of 5 percent to 7 percent, Birinyi data dating back to 1928 show.

The benchmark gauge of U.S. stocks is trading for about 13.7 times its companies’ estimated operating earnings, compared with an average multiple of 18.1 times reported profits over the last decade, data compiled by Bloomberg show.

Jobless claims fell by 6,000 to 388,000 in the week ended March 26, Labor Department figures showed. The median forecast of economists in a Bloomberg survey was for a decline to 380,000 claims. The report comes before tomorrow’s monthly government report on non-farm payrolls, expected to show that the economy added 190,000 jobs in March.

European Bonds

Other reports showed U.S. factory orders unexpectedly fell 0.1 percent after a 3.3 percent gain in January, the Commerce Department said today. The Institute for Supply Management- Chicago Inc.’s business barometer fell in March. The Bloomberg Consumer Comfort Index rose for the first time in five weeks to minus 46.9 in the period ended March 27 from a seven-month low of minus 48.9 the prior week.

European stocks slipped as the bonds of the region’s most- indebted nations sank and the cost of insuring against a Portuguese default jumped to a record as Ireland prepared to give banks more aid, deepening concern over Europe’s debt crisis.

“There are clearly quite a few risks out there that might hurt growth, not just in the U.S. but also the rest of the world,” Philippe Gijsels, the Brussels-based head of research at BNP Paribas Fortis Global Markets, said in a Bloomberg Radio interview.

Energy Companies Gain

Energy companies in the S&P 500 added 0.4 percent as a group as oil jumped 1.8 percent to $106.18 a barrel amid concern that the Libyan conflict will prolong production cuts. Chevron advanced 0.9 percent to $108.93.

Berkshire Hathaway Class B shares fell 1.6 percent to $84.11. Sokol bought about 96,000 Lubrizol Corp. shares in January before recommending the company as a takeover target, Buffett, Berkshire’s chairman and chief executive officer, said late yesterday in a statement. Sokol had initiated confidential talks with Lubrizol the month before. Berkshire agreed to buy the firm for $9 billion on March 14.

Carmax slumped 7.1 percent to $32.13 after declining 7.9 percent, the most intraday since Dec. 21. The largest U.S. seller of used cars said gross margin for the fourth-quarter fell to 14.2 percent from 14.5 percent in the year-ago period.

American International Group Inc. (AIG) fell 2.7 percent to $35.09 after the Federal Reserve Bank of New York said it has declined the insurer’s $15.7 billion offer to purchase the residential-mortgage backed securities owned by the central bank’s Maiden Lane II LLC rescue fund.

To contact the reporter on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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