Crude Oil Drops Most in a Week as Euro Tumbles on European Debt Crisis

By Margot Habiby - Sep 10, 2011 3:10 AM GMT+0700

Oil dropped the most in a week in New York as the euro tumbled against the dollar on concern that Greece’s deteriorating debt crisis will lead to a default.

Oil fell 2 percent after Europe’s single currency declined to a six-month low and European bank and sovereign credit risk surged to all-time highs. A plan for jobs growth announced yesterday by President Barack Obama failed to boost confidence in the U.S., the world’s largest economy.

“The concerns out of Europe and the positive relationship between oil prices and the euro are the catalyst,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “The euro is getting crushed and putting pressure on all our markets right now.”

Crude for October delivery dropped $1.81 to settle at $87.24 a barrel on the New York Mercantile Exchange. Prices rose 0.9 percent this week, the third consecutive advance. Futures have fallen 4.5 percent this year.

Brent crude for October settlement declined $1.78, or 1.6 percent, to $112.77 a barrel on London’s ICE Futures Europe exchange. Brent’s premium to Nymex-traded West Texas Intermediate rose 3 cents to $25.53.

The euro fell 1.5 percent to $1.3669 at 3:23 p.m. in New York, the lowest level since February. A weaker euro and stronger dollar curb commodities’ appeal as an alternative to the U.S. currency. The euro has plummeted 3.8 percent this week.

German Chancellor Angela Merkel’s government is preparing plans to shore up German banks in the event Greece fails to meet the terms of its aid package and defaults, three coalition officials said.

Stark’s Resignation

Juergen Stark of Germany resigned from the European Central Bank’s Executive Board today after protesting the bank’s bond purchases on a conference call earlier in the week, said a euro area bank official familiar with the meeting. The purchase program was expanded last month when the ECB started buying Italian and Spanish bonds.

“When Stark stepped down, that signaled the possibility of more German opposition to bailing out Greece,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Oil is pricing the increasing odds of demand destruction on the European concerns and following the president’s speech last night.”

Obama challenged Congress to pass a $447 billion jobs plan “right away” to boost spending on infrastructure, stem teacher layoffs and halve payroll taxes paid by workers and small- business owners. He addressed a joint session of Congress yesterday and campaigned for the plan today in Virginia.

U.S. Economy

The president’s remarks came after Federal Reserve Chairman Ben S. Bernanke yesterday stopped short of outlining new plans to revive growth.

“Bernanke didn’t give any further insight into stimulus measures, and Obama’s speech has been received very tepidly, which continues to weigh on concerns about the U.S. economy,” said Matt Smith, a commodities analyst for Summit Energy Services Inc. in Louisville, Kentucky.

The Standard & Poor’s 500 Index fell 2.7 percent to 1,154.23 at 4:03 p.m. in New York. The Dow Jones Industrial Average dropped 2.7 percent to 10,992.13.

Oil also declined on signals that Libya may export a crude- oil cargo this month for the first time since March from the country’s west. The holder of Africa’s biggest oil reserves is rebuilding production which plunged 97 percent during an armed conflict to depose ruler Muammar Qaddafi, based on Bloomberg News output estimates.

Libyan Exports

“There are two critical factors dominating the outlook for the oil markets at this time, what global economic developments are doing to demand and the prospects for a pickup in Libyan oil exports,” according to a report published today by Deutsche Bank analysts including Adam Sieminski, the company’s Washington-based chief energy economist.

An 80,000-metric-ton cargo of crude is being offered for shipment from the port of Mellitah this month, three people with direct knowledge of the transaction said yesterday. The oil, equal to 600,000 barrels, will be loaded from Sept. 15 to 17, the people said, declining to be identified because the consignment has yet to be publicly announced.

Oil also declined as the National Hurricane Center forecast that Tropical Storm Nate will move toward the Mexican coast, missing the biggest U.S. oil-producing region in the Gulf or Mexico. Nate was 150 miles (240 kilometers) west of Campeche, Mexico, at about 2 p.m. New York time.

Fourteen of 28 analysts, or 50 percent of those in a Bloomberg News survey, forecast oil prices will decline next week amid heightened concern that global economic growth is slowing. Seven respondents, or 25 percent, predicted prices will increase and seven estimated there will be little change. Last week, 50 percent of surveyed analysts projected a drop.

Oil volume in electronic trading on the Nymex was 597,732 contracts as of 3:24 p.m. in New York. Volume totaled 790,112 contracts yesterday, 16 percent above the average of the past three months. Open interest was 1.5 million contracts.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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Asia Stocks Slide on Concern U.S. Economy May Weaken, European Debt Crisis

By Shani Raja - Sep 10, 2011 6:34 AM GMT+0700

Asian stocks fell this week, snapping a fortnight of advance, as exporters dropped on speculation the world’s largest economy is headed toward recession and banks slid amid concern Europe may fail to contain its sovereign debt crisis.

Honda Motor Co., a carmaker with more than 40 percent of its revenue in North America, plunged 6.4 percent in Tokyo after a report showed the U.S. job market stalled in August. BHP Billiton Ltd. (BHP) sank 2.9 percent in Sydney. HSBC Holdings Plc (HSBA), Europe’s largest lender by market value, slumped 3.3 percent in Hong Kong after the cost of insuring against default on European sovereign and financial debt surged to records. Fanuc Corp. (6954) tumbled 15 percent after an industry group said growth in machine-tool orders slowed.

“It’s clear the U.S. economy needed more stimulus as there’s a limit to what monetary policy can do,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “There’s growing concern that the sovereign-debt crisis in the EU is now manifesting into a sharp slowdown in the economy and a banking crisis,”

The MSCI Asia Pacific Index fell 2.7 percent this week to 120.78, snapping a 3.9 percent two-week advance. The gauge tumbled 8.6 percent last month amid escalating concern over Europe’s debt crisis and after Standard & Poor’s downgraded the U.S.’s credit rating. Stocks in the Asian benchmark are valued at about 11.9 times estimated earnings on average, compared with 11.5 times for the S&P 500 and 9.3 times for the Stoxx 600.

Nikkei, Kospi

Japan’s Nikkei 225 (NKY) Stock Average dropped 2.4 percent in a week when the Cabinet Office also said Japan’s economy contracted more than an initial government estimate. Australia’s S&P/ASX 200 Index slipped 1.1 percent after a statistics bureau report showed the nation’s employers unexpectedly cut jobs for a second straight month in August.

South Korea’s Kospi Index (KOSPI) slid 2.9 percent and Hong Kong’s Hang Seng Index (HSI) retreated 1.7 percent. The Shanghai Composite Index slid 1.2 percent this week.

Honda, which counts North America as its biggest market for sales, plunged 6.4 percent to 2,347 yen in Tokyo. Canon Inc. (7751), which earns more than 80 percent of its sales overseas, declined 2.9 percent to 3,490 yen. James Hardie Industries SE (JHX), a building materials supplier that gets almost 70 percent of sales from the U.S., sank 4.2 percent to A$5.78 in Sydney.

A report Sept. 2 showed U.S. payrolls were unchanged in August, the weakest reading since September 2010. The median forecast in a Bloomberg News survey called for an increase of 68,000.

‘Scary Report’

“It was a scary report,” Dan North, chief U.S. economist at Euler Hermes ACI in Owings Mills, Maryland, said in an interview from Singapore with Susan Li on Bloomberg Television on Sept. 5. “When you get to negative job growth, which we’re very close to now, it means you’re already in a recession.”

Stocks fell even as U.S. President Barack Obama outlined a jobs plan that would inject $447 billion into the economy, and Federal Reserve Chairman Ben S. Bernanke said policymakers will discuss ways to boost growth at their next meeting.

Fed officials gather for a two-day meeting on Sept. 20 that was expanded from the one day originally scheduled to “allow a fuller discussion” of the economy and the central bank’s possible policy response.

BHP, Jiangxi

BHP Billiton, the world’s No. 1 mining company and Australia’s biggest oil producer, fell 2.9 percent to A$37.91 in Sydney. Rio Tinto Group, the second-largest miner by sales, slid 1.1 percent to A$71.25. In Hong Kong, Jiangxi Copper Co., China’s No. 1 producer of the metal, slumped 4.6 percent to HK$20.95, while Chinese oil explorer Cnooc Ltd. (883) tumbled 9.3 percent to HK$14.

Belle International Holdings Ltd. (1880), a Chinese retailer of women’s shoes, plunged 10 percent to HK$14.60 in Hong Kong and Tencent Holdings Ltd. (700), a Shenzhen-based Internet company, lost 1.5 percent to HK$184.50.

China’s inflation eased in August from a three-year high, the National Bureau of Statistics said in Beijing on Sept. 9. Still, consumer prices climbed 6.2 percent from a year earlier. A separate report showed industrial output growth in China trailed estimates.

Asian stocks also slipped this week after an election loss for German Chancellor Angela Merkel’s party and reports of a rift between Greece and the International Monetary Fund fueled concern that support for bailing out indebted European nations is waning. Later in the week, European Central Bank President Jean-Claude Trichet said “downside risks” for the region have risen, while resisting calls to lower interest rates.

Financial Stocks

HSBC fell 3.3 percent to HK$64.95 in Hong Kong. Korea Exchange Bank (004940) retreated 4.3 percent to 7,590 won in Seoul. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, declined 2.9 percent to 332 yen in Tokyo after the cost of insuring against default on European sovereign and financial debt surged to records.

Investors drove yields higher on the bonds of Greece, Portugal, Spain and Italy early in the week on doubts Europe’s leaders will be able to stop the crisis spreading. The yield on the Greek two-year note rose above its price for the first time on Sept. 5, indicating mounting concern the nation will default on the debt.

Lasting Solution

“Volatility is likely to remain high until there’s clarity around Europe’s ability to work out a lasting solution,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which manages almost $100 billion. “Right now, it seems policy makers are going in the opposite direction. While the fundamentals in Asia are in better shape than elsewhere, shares here will get caught up in the crossfire.”

Fanuc, Japan’s No. 1 maker of controls used to run machine tools, fell 15 percent to 10,730 yen, after the Japan Machinery Tool Builders’ Association said growth in Japanese orders slowed in August, falling 12.7 percent from July. A separate Cabinet Office report this week said Japanese machinery orders fell 8.2 percent in July after rising 7.7 percent in June.

Komatsu Ltd. (6301), the world’s No. 2 maker of construction equipment and Japan’s largest construction machinery maker, sank 14 percent to 1,797 yen.

Technology Shares

Among stocks that advanced this week, Hynix Semiconductor Inc. (000660), the world’s second-largest maker of computer memory, jumped 4.2 percent to 19,900 won in Seoul, leading some technology stocks higher on speculation chip prices will recover. Samsung Electronics Co. gained 1.4 percent to 780,000 won.

The price of the benchmark DDR3 2-gigabit DRAM has fallen 3 percent this month after falling 14 percent in August, according to data from Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.

“There’s some consensus that the chip market is near its bottom,” Ahn Seong Ho, an analyst at Hanwha Securities Co. who covers technology stocks, said in Seoul.

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

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

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Banks May Fight Banks as Mortgage Securities Investors Try for Class Suits

By Thom Weidlich - Sep 9, 2011 11:01 AM GMT+0700

Banks including JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) may pay more to resolve claims over their alleged roles in the collapse of a $2.3 trillion mortgage- backed securities market if sophisticated investors are allowed to sue as a group along with less savvy ones.

Class-action status allows investors to pool financial and legal resources, giving them greater leverage to win larger settlements or verdicts. The banks, however, have a court ruling on their side that may help fend off such blockbuster cases. It says class status is barred because some investors are too sophisticated -- in fact, because some of them are other banks, including JPMorgan.

“It is possible to be both an alleged perpetrator and victim at the same time,” said Jacob S. Frenkel, a former U.S. Securities and Exchange Commission lawyer now in private practice in Potomac, Maryland. “It’s unprecedented that you have the most sophisticated institutions as victims, to be in a position where their losses are so great that they have sued.”

The ruling by U.S. District Judge Harold Baer Jr. in Manhattan, favoring defendants Royal Bank of Scotland Group Plc (RBS) and Ally Financial Inc., held that investors may not sue as a class in part because some of them are being sued over the same claims. Last month, that ruling was countered by two judges in Baer’s courthouse, both of whom ruled that investors in home- loan backed securities may sue as a class.

Housing Bubble

Pools of home loans securitized into bonds were a central part of the housing bubble that, once burst, helped push the U.S. into the biggest recession since the 1930s. Investors have filed class-action, or group, lawsuits against at least 16 private issuers of securities backed by mortgages.

Mortgage-bond deals now involved in the class-action suits originally held $204.6 billion of loans, an amount that’s fallen to $89 billion amid defaults, borrower refinancing and home sales, according to data compiled by Bloomberg and a list of transactions provided by New York-based law firm Grais & Ellsworth LLP. Realized losses so far total $26.6 billion, with an additional $33.8 billion of remaining loans at least 30 days delinquent.

“Class certification raises the stakes tremendously,” said Alan White, a law professor at Valparaiso University in Indiana. “The damages are going be greater in a class action than a series of individual cases.”

The investors accuse the defendant financial companies of lying about the quality of the home loans underlying the securities they back, which have deteriorated in value. The defendant banks argued the housing collapse, rather than any misrepresentation on their part, caused investor losses.

Shrunk to $1.21 Trillion

From its $2.3 trillion peak in 2007, the market for mortgage-backed securities has shrunk to $1.21 trillion as of June 30, according to the Federal Reserve.

The class actions involve some of the same securities over which the Federal Housing Finance Agency sued Bank of America, New York-based Citigroup Inc. and 15 other financial institutions on Sept. 2. Those complaints were filed on behalf of Fannie Mae and Freddie Mac, the mortgage-finance companies under government conservatorship. The securities at issue in those cases total $196 billion.

Ruled for Investors

On Aug. 22, U.S. District Judge Jed Rakoff in Manhattan issued an opinion explaining why he had earlier ruled that investors, including Mississippi’s public pension system, may sue Charlotte, North Carolina-based Bank of America’s Merrill Lynch unit as a group in a unified lawsuit.

A week earlier, U.S. District Judge Paul A. Crotty in the same court similarly held that investors including the New Jersey Carpenters Health Fund may also collectively pursue their claims against Credit Suisse Group AG (CSGN)’s DLJ Mortgage Capital.

Rakoff and Crotty weren’t swayed by bank arguments that securities buyers couldn’t band together because they were sophisticated investors who knew about deteriorating home- lending practices before the meltdown. The plaintiffs knew that in part because some of them are also being sued over the same claims, the defendant banks argued.

The inability to sue as a group would mean many investors won’t pursue their claims, plaintiffs’ lawyers said.

“Getting a class certified in a case like this, in any case, is an important part of the litigation,” said Gerald Silk, a partner at Bernstein Litowitz Berger & Grossmann LLP in New York representing investors suing Merrill Lynch.

Three Funds

The three funds seeking to represent the class against Detroit-based Ally bought a total of $1.79 million of the $3.7 billion in securities issued, they wrote in court papers. The case has so far cost more than $3.5 million to litigate and may run to three times that if it goes to trial, showing the need for class-action treatment, they wrote.

The securities lost as much as 99 percent of their value soon after they were issued, the investors wrote.

Baer’s ruling in favor of defendant banks, if upheld, “could result in dozens of securities class actions erroneously being denied certification,” the investors wrote in their appeal in the Ally case. The litigation “would likely be terminated without class certification.”

Class certification has also been a point of contention in cases filed New York and Seattle over securities issued by IndyMac Bancorp Inc. (IDMCQ) and Washington Mutual Inc., now part of New York-based JPMorgan.

Pension System

Investors including Mississippi’s pension system who are suing Goldman Sachs Group Inc. are scheduled to file their motion for class certification in November.

“They’re the kinds of cases that have been brought for decades as class actions,” Silk said. “It’s our view that they’re ideally suited for class-action treatment.”

One bank, Wells Fargo & Co. (WFC), agreed to settle litigation against it for $125 million two weeks before a scheduled class- certification hearing in July. The case concerns $27.3 billion of certificates sold by the San Francisco-based bank.

“The proposed settlement agreement is a negotiated resolution as to all named defendants and is intended to avoid the distraction and expense of litigation,” Ancel Martinez, a spokesman for Wells Fargo, said at the time.

Baer, in his Jan . 18 decision, said investors couldn’t sue as a group because they had different knowledge levels of the alleged loosening of mortgage-underwriting standards that led to the home-loan defaults, and ultimately the decline in the value of the securities.

Different Times

The investors also bought the securities at different times, in some cases when more information was surfacing about underwriting standards being ignored, the judge wrote.

“Many putative class members are sophisticated investors with significant experience in asset-backed securities markets,” he wrote. New York-based BlackRock Inc. (BLK) and Fortress Investment Group LLC (FIG) and Old Greenwich, Connecticut-based Ellington Management Group LLC “each tout their expertise in mortgage-backed securities,” the judge wrote.

In its case, Merrill Lynch called Fannie Mae, the Washington mortgage-finance company, the biggest class member and a “quintessential housing-market insider,” according to Rakoff, citing redacted portions of Merrill Lynch’s court papers. Fannie Mae bought about $5 billion of the $16.5 billion of certificates in the case, according to Rakoff’s ruling. Fannie Mae may seek to opt out of the class now that FHFA sued Merrill Lynch individually on its behalf.

Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment on the litigation.

Financial Advisers

The investors said there’s no evidence they or their financial advisers knew about specific prospectus misstatements by the defendants, especially over the particular mortgage originators’ home-lending standards, before they bought the securities.

“The way we understand the law is that the investors had to know about the scheme or the misstatements in the prospectus, and not that they were just generally sophisticated about mortgage-backed securities,” said Joel P. Laitman, a New York- based lawyer at Cohen Milstein Sellers & Toll PLLC, which sued on behalf of investors in the RBS, Credit Suisse and Ally Financial cases.

Pholida Phengsomphone, a spokeswoman for Edinburgh-based RBS, and Lawrence Grayson, a spokesman for Bank of America, declined to comment.

Risk Awareness

“We are encouraged by Judge Baer’s analysis,” said James Olecki, a spokesman for Ally. “It recognizes the legal significance of the extent of knowledge that individual investors may have had as to the risks relating to the investment.”

In the case against Credit Suisse’s DLJ Mortgage unit, which involves $2.39 billion of securities, Crotty said the defendants produced no evidence that the more than 330 investors knew about specific misstatements in the offering documents.

Steven Vames, a spokesman for Zurich-based Credit Suisse, declined to comment on the case.

Some of the defendant banks noted that potential members of the class are other financial firms that are themselves being sued over mortgage-backed securities.

Having individual banks on both sides of these cases is “slightly unusual” and shows “the multi-headed hydras these investment banks have become,” said James D. Cox, a securities- law professor at Duke Law School in Durham, North Carolina. “But they do have these Chinese walls, to make sure the underwriting people are not talking to the investment advisers.”

New York-based JPMorgan, a potential plaintiff and class member in the lawsuit against RBS over $3.45 billion in securities, is being sued in federal court in Brooklyn, New York, over mortgage-backed securities it sold. JPMorgan “is alleged to have had knowledge regarding” disintegrating underwriting standards, Baer wrote.

Investment Funds

The bank’s role in underwriting some securities doesn’t mean its affiliated investment funds knew about misrepresentations in the prospectus for completely different securities, the plaintiff investors wrote in their appeal in the RBS case. RBS is Britain’s biggest government-owned lender.

“These were not the firms that underwrote the offering,” Laitman said. “They bought like everybody else.”

In the Merrill Lynch case, Rakoff agreed with the investors.

“Although defendants note that some members of the class, including Morgan Stanley (MS) Co., have been sued in connection with their own MBS offerings, this is irrelevant to the offerings at issue in this case,” he wrote.

Motions to Dismiss

The parties in the cases against JPMorgan and New York- based Morgan Stanley await decisions on the banks’ motions to dismiss. The federal appeals court in Manhattan hasn’t said yet whether it would accept Merrill Lynch’s appeal of Rakoff’s decision certifying the class of investors.

The cases are New Jersey Carpenters Health Fund v. Residential Capital LLC, 08-08781, New Jersey Carpenters Vacation Fund v. The Royal Bank of Scotland Group Plc., 08- 05093, Public Employees’ Retirement System of Mississippi v. Merrill Lynch & Co., 08-010841, New Jersey Carpenters Health Fund v. DLJ Mortgage Capital Inc., 08-05653, Public Employees’ Retirement System of Mississippi v. Goldman Sachs Group Inc. (GS), 09-01110, In re Morgan Stanley Pass-Through Certificates Litigation, 09-02137, and In re IndyMac Mortgage-Backed Securities Litigation, 09-04583, U.S. District Court, Southern District of New York (Manhattan); Plumbers’ & Pipefitters’ Local #562 Supplemental Plan & Trust v. J.P. Morgan Acceptance Corp., 08-01713, U.S. District Court, Eastern District of New York (Brooklyn); In re Wells Fargo Mortgage-Backed Certificates Litigation, 09-01376, U.S. District Court, Northern District of California (San Jose); and In re Washington Mutual Mortgage- Backed Securities Litigation, 09-cv-00037, U.S. District Court, Western District of Washington (Seattle).

To contact the reporter on this story: Thom Weidlich in federal court in Brooklyn, New York, at tweidlich@bloomberg.net.

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Oil Heads for Third Weekly Gain on Obama Job Plan, Storm in Gulf of Mexico

By Ben Sharples and Ann Koh - Sep 9, 2011 11:42 AM GMT+0700

Oil headed for a third weekly gain as investors bet President Barack Obama’s proposed job-creation plan will support demand for fuel and as producers in the Gulf of Mexico evacuated workers ahead of Tropical Storm Nate.

West Texas Intermediate futures climbed as much as 0.5 percent, erasing a decline of 0.8 percent, after Obama asked Congress to pass a proposal to inject $447 billion into the economy of the world’s biggest oil user. Prices slid yesterday after Federal Reserve chairman Ben S. Bernanke said the nation’s recovery is fragile. Energy companies including BP Plc began evacuating platforms in the Gulf of Mexico, home to 27 percent of U.S. oil output.

“In the next month or so, it’s going to be very uncertain,” said Jeremy Friesen, a Hong Kong-based commodity strategist at Societe Generale SA. “We could see prices continuing to sell-off if the market doesn’t like what the Fed says. But if the market likes that, the physical crude market is reasonably tight, so that should support prices.”

Oil for October delivery gained as much as 45 cents to $89.50 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.21 at 12:11 p.m. Singapore time. Prices are 3.2 percent higher this week and up 20 percent the past year.

Brent oil for October settlement increased as much as 45 cents, or 0.4 percent, to $115 a barrel on the London-based ICE Futures Europe Exchange. The European benchmark contract was at a premium of $25.59 to U.S. futures, compared with the record settlement of $26.87 on Sept. 6.

Nate, Stockpiles

Tropical Storm Nate’s top winds are 70 miles (113 kilometers) per hour, just under the threshold of 74 mph needed to be a hurricane, according to an advisory from the U.S. National Hurricane Center before 11 p.m. East Coast time yesterday. The storm has been lashing Petroleos Mexicanos rigs in the Bay of Campeche and its final track is still in question.

BP and Apache Corp. said they were beginning evacuations of some workers in the Gulf because of Nate. The BP decision affects non-essential workers at the Atlantis, Holstein and Mad Dog platforms, according to a message on a telephone hotline. Apache’s removal of non-essential workers from facilities in the far western Gulf hasn’t affected production, Bill Mintz, a company spokesman, said in an e-mail.

U.S. crude supplies fell 3.96 million barrels to 353.1 million last week as Tropical Storm Lee shut platforms, a report from the Energy Department showed yesterday. They were forecast to drop 2 million barrels, according to the median estimate of 14 analysts surveyed by Bloomberg News. Gasoline stockpiles climbed 199,000 barrels, compared with a median forecast for a drop of 1.4 million barrels.

Global Growth

Oil in New York slid yesterday after Bernanke said Fed policy makers will discuss tools to boost the economic recovery at their next meeting this month. Obama, speaking before a joint session of Congress, demanded that lawmakers act on a plan that would boost spending, stem layoffs and cut taxes.

“The price rise you’ve seen in WTI relates more to Obama’s speech than the weather,” said Friesen. The energy department report “was fairly supportive for crude,” he said.

The Organization for Economic Cooperation and Development cut growth forecasts yesterday for the U.S. and Japan, the largest and third-largest oil-consuming countries. China is the second-biggest user of crude.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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Dollar, Yen Drop as Obama’s Job Creation Proposals Curbs Demand for Safety

By Kristine Aquino and Masaki Kondo - Sep 9, 2011 11:15 AM GMT+0700

The dollar and yen declined against most of their major peers after President Barack Obama unveiled proposals to create jobs and boost the U.S. economy, damping demand for safer assets.

The dollar snapped yesterday’s advance versus the euro after Obama urged Congress to pass his $447 billion plan. The yen slid after Finance Minister Jun Azumi said he will tell his counterparts in the Group of Seven nations that Japan remains prepared to take “bold” action in currency markets. The Australian and New Zealand dollars advanced after a report showed China’s inflation cooled from a three-year high.

“We can say that Obama’s plan is seen favorably in the market, boosting risk appetite and spurring selling of the dollar and yen,” said Daisaku Ueno, president of Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest online currency broker. “Expectations for stimulus measures are strong.”

The dollar fell to $1.3925 per euro as of 12:54 p.m. in Tokyo from $1.3882 in New York yesterday when it rose to $1.3873, the strongest since July 12. It traded at 77.47 yen from 77.51. Japan’s currency dropped to 107.87 per euro from 107.59. The dollar advanced 2 percent against the 17-nation euro this week, while the yen gained 1.1 percent.

Obama proposed a jobs plan that includes infrastructure spending, subsidies to local governments and tax reductions. The centerpiece of the plan is cuts in payroll taxes, which cover the first $106,800 in earnings and are evenly split between employers and employees.

‘Sincere’ Effort

“I think in this case the president is sincere about trying to figure out ways to create jobs,” Robert Sinche, the global head of currency strategy at Royal Bank of Scotland Plc, said in an interview in Singapore. “I think in terms of the U.S., we don’t believe in a double dip.”

Demand for the yen was limited before G-7 finance ministers meet today in Marseille, France, to discuss ways to bolster their economies. Japan’s Azumi said before departing Tokyo that he would appeal to the group to appreciate his concern about excessive yen gains. The Cabinet Office today said Japan’s gross domestic product shrank at an annualized 2.1 percent rate in the three months ended June 30, more than the 1.3 percent contraction reported last month.

G-7 Meeting

Members have indicated intervention “should be done in agreement with the G-7 as opposed to unilaterally,” Rintaro Tamaki, who was a vice finance minister until July and directed two of Japan’s three rounds of yen sales in the past year, said in an interview in Paris yesterday. He was referring to language in an Aug. 8 statement by the G-7 that said officials will “closely consult” each other on currencies.

Japan has intervened three times in the past 12 months to weaken its currency, with the last operation being a 4.51 trillion yen sale in August, the largest monthly amount since March 2004. The yen went on to reach 75.95 per dollar on Aug. 19, a postwar record.

The euro is set for a second week of losses against the dollar on speculation the European Central Bank will lead its counterparts in coordinated monetary easing after it cut its growth forecast for the region this year.

“There are too many problems in Europe: it will be just a drag on growth,” said Derek Mumford, a Sydney-based director at Rochford Capital, a foreign-exchange and interest-rate risk- management firm. “Europe’s diverse governments, different fiscal policies and all the troubles that come with it will take a toll on the euro in the near term.”

ECB Rate

The ECB left its benchmark rate at 1.5 percent and slashed its 2011 growth forecast to 1.6 percent from 1.9 and to 1.3 percent from 1.7 for 2012 at yesterday’s meeting in Frankfurt.

The ECB, the Bank of Japan and the Federal Reserve may implement coordinated monetary-policy easing to tackle weak growth, Morgan Stanley economists wrote in a note to investors on Sept. 7.

The Australian and New Zealand dollars trimmed weekly losses against the greenback after data showed that Chinese consumer prices eased last month, curbing speculation policy makers will take further steps to bring down costs.

China’s inflation “will be less of an issue going forward,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. “We should see more support for the Australian and New Zealand dollars.”

China’s consumer prices climbed 6.2 percent from a year earlier in August, the National Bureau of Statistics said in Beijing today. That was in line with the median forecast in a Bloomberg News survey of economists and compares with a 6.5 percent increase in July. China is Australia’s largest trading partner and New Zealand’s second-biggest export market.

Australia’s currency advanced to $1.0626 from $1.0576 yesterday, paring its weekly loss to 0.2 percent. The New Zealand dollar rose 0.6 percent to 83.54 U.S. cents, set for a 1.5 percent decline since Sept. 2.

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

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Gold Poised for Weekly Decline on Obama Plan

By Glenys Sim - Sep 9, 2011 10:23 AM GMT+0700

Gold headed for a weekly decline on optimism a plan by U.S. President Barack Obama will create jobs and spur growth in the world’s largest economy, trimming demand for safer assets.

Bullion for immediate delivery shed as much as 0.9 percent to $1,853.93 an ounce and was at $1,862.15 at 10:37 a.m. Singapore time. December delivery futures in New York gained 0.4 percent to $1,864.50 an ounce, paring a 0.8 percent advance.

Obama called on Congress to pass a jobs plan that would inject $447 billion into the economy through spending on infrastructure, subsidies to local governments to stem teacher layoffs, and cutting in half the payroll taxes paid by workers and small-business owners.

“The plan reflects the government’s deep concern about the economy, raising the real possibility of another round of quantitative easing, which is supportive of gold,” said Duan Shihua, head of corporate services at Haitong Futures Co. and the top-rated gold analyst this year in an annual poll by the Futures Daily and Securities Times. “We’re just getting some book squaring today as investors digest the news, but that just represents to us a good buying opportunity.”

Spot gold, which reached a record $1,921.15 an ounce on Sept. 6, is down 1.1 percent this week. It rebounded from a two- day, 4.4 percent-slump yesterday after Federal Reserve Chairman Ben S. Bernanke held off from offering new measures to spur growth, boosting demand for gold as a store of value.

Jobless Claims

First-time applications for unemployment benefits rose last week, a sign the labor market is struggling to gain traction. Claims for unemployment benefits rose 2,000 to 414,000 in the week ended Sept. 3, data yesterday showed, adding to signs the U.S. economy is faltering. The median target of economists surveyed by Bloomberg News projected a drop to 405,000.

Gold is still in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors seek to diversify away from equities and some currencies, and hedge against inflation.

Consumer prices in China climbed 6.2 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compared with the 6.2 percent median forecast in a Bloomberg News survey of 31 economists and July’s 6.5 percent gain, which was the highest level in three years.

China’s gold investment demand surged 44 percent in the second quarter from a year ago to 53 metric tons of coins and bars, according to the World Gold Council. That was second- largest after India. Jewelry demand in the country gained 16 percent to 102.9 tons, council data showed.

Platinum for immediate delivery fell 1.1 percent to $1,841 an ounce, trading below gold for a fifth time this week. Cash silver shed 0.2 percent to $42.24 an ounce, while palladium rose 0.2 percent to $760 an ounce.

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

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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Deutsche Bank Risk Seen Rising as Puts Appreciate Most in Europe: Options

By Cecile Vannucci and Jeff Kearns - Sep 9, 2011 11:32 AM GMT+0700

The price of options to protect against losses in Deutsche Bank AG (DBK) shares is rising more than any other European lender as Germany leads the rescue of nations in the region’s shared currency.

Three-month options that pay owners should Frankfurt-based Deutsche Bank drop 10 percent cost 1.3 times the price of contracts betting on 10 percent gains, according to data compiled by Bloomberg. That’s up from 1.14 at the end of July, the biggest increase among financial firms in the Stoxx Europe 600 Index, data using five-day averages show. Stocks subject to bans on short selling were excluded.

While budget deficits in Greece sparked the crisis, attention is turning to Germany, the largest provider of bailout funds in the region, as concern increases that its efforts will fail. The DAX Index plunged 27 percent this quarter, the third- largest decline behind Italy and Greece, while Deutsche Bank has dropped 38 percent. Josef Ackermann, its chief executive officer, said last week that conditions in stock and bond markets are reminiscent of late 2008.

“Deutsche Bank in Europe is kind of an anchor,” Matthias Fankhauser, a fund manager at Clariden Leu AG, which oversees 90 billion Swiss francs ($104 billion), said in a telephone interview from Zurich yesterday. “The pressure recently on Germany, on the DAX, probably had a big impact on Deutsche as well. We saw weakening and quite weak economic data recently, which really shows that the economy was losing momentum at a high speed.”

Falling Euro

The European Central Bank said risks to the economic recovery have intensified, sending the euro down 1.5 percent against the U.S. dollar yesterday. Credit-default swaps on Greek government debt reached a record, signaling a 91 percent chance the nation will fail to meet debt commitments. Germany is the chief underwriter of emergency loans offered to Greece, Ireland and Portugal, contributing about 27 percent of the total because it’s Europe’s biggest economy.

The benchmark gauge of European options prices, the VStoxx Index (V2X), slipped 4.2 percent to 41.63 yesterday. The index tracks prices for options on the Euro Stoxx 50, which rose 0.6 percent. Its U.S. counterpart, the Chicago Board Options Exchange Volatility Index, or VIX, rose 2.8 percent to 34.32.

Investors are betting against Deutsche Bank because of risks from the debt crisis even as the company projects the lender will increase earnings this year, said Dirk Becker, a financial industry analyst at Kepler Capital Markets in Frankfurt who has a “buy” rating on the stock.

Slowing Growth

Deutsche Bank had net sovereign risks related to Portugal, Italy, Ireland, Greece and Spain of 3.67 billion euros ($5.1 billion) on June 30, the company said July 26. Net income will surge 139 percent to 5.53 billion euros in 2011, according to the average analyst estimate in a Bloomberg survey. Growth will slow to 9.2 percent in 2012, the data show.

“It’s one of the most hated stocks in the universe,” Becker said in a telephone interview yesterday. “People believe the European debt crisis may end in some kind of worst-case scenario such as a euro breakup or sovereign default, and if those things happen Deutsche Bank is one of the most interconnected banks and would obviously be one of the big losers. That’s what is being priced in.”

Christian Streckert, a Frankfurt-based spokesman for Deutsche Bank, declined to comment.

The lender has tumbled 49 percent from its Feb. 16 high, including a 35 percent loss since the end of July. The shares sank to the lowest price since March 2009 on Sept. 6. Deutsche Bank had the fifth-biggest drop in the Stoxx 600 Banks Index during the past month, behind three Greek lenders -- EFG Eurobank Ergasias, Alpha Bank AE and National Bank of Greece SA -- and Paris-based Societe Generale (GLE) SA.

Profit Forecast

Deutsche Bank said yesterday that if capital markets and the sovereign debt crisis improve, it will reach its forecast for 10 billion euros in pretax operating profit this year. Ackermann said Sept. 5 that volatility and uncertainty were the “new normal” in markets and banking.

Investors are snapping up Deutsche Bank’s December 22 euro puts, which are priced 12 percent below yesterday’s stock price of 24.89 euros. The number of existing contracts surged eightfold to 9,681 in the past two weeks, the most among the company’s equity derivatives, data compiled by Bloomberg show.

While options traders are becoming more pessimistic about Deutsche Bank, they’re paying less for insurance against U.K. lenders. Put costs have fallen since July 29 in relation to calls for Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc and Barclays Plc, according to data compiled by Bloomberg. The Bank of England said in June that the euro-area debt crisis poses the biggest risk to the stability of the nation’s financial system.

Short-Sale Bans

Deutsche Bank’s options prices may show more pessimism than other lenders because some European countries have curbed short selling, according to Justin Wiggs, who trades financial stocks at Stifel Nicolaus & Co. in Baltimore.

Stocks dropped worldwide on Aug. 25, including a slump of as much as 4 percent by the DAX, as France, Italy and Spain extended restrictions on short selling, which involves the sale of securities borrowed from the owner in a bet they fall. Spain and Italy extended their bans through Sept. 30. France’s Autorite des Marches Financiers said its ban could last as long as Nov. 11. The regulators all said they might lift the bans on short selling of financial stocks when the market stabilizes.

‘Ongoing Pressure’

“The fundamental thing is you can’t do it in other markets,” Wiggs said about the short-sale bans in a telephone interview yesterday. “There could be ongoing pressure on German markets because people want to be short and there could be some pricing skew because of that.”

Deutsche Bank’s core tier 1 capital ratio, a measure of financial strength, would be 7 percent in 2012 if all so-called Basel III rules from the Basel Committee on Banking Supervision were applied, Mediobanca SpA’s Christopher Wheeler said in a report yesterday. That would trail rivals such as UBS AG, HSBC Holdings Plc and Goldman Sachs Group Inc., the analyst said.

The Frankfurt-based bank is “confident” it will meet Basel III capital and liquidity requirements early, Chief Risk Officer Hugo Banziger said in a presentation on June 10.

“For Deutsche, the question always has been do they have enough capital, and that discussion is still going on,” Florian Esterer, who helps oversee about $55 billion at Swisscanto Asset Management AG in Zurich, said in a telephone interview yesterday. “The company always said ‘we don’t need any more capital so quit bothering us,’ but the underlying risk is that they’re not sufficiently capitalized and they will need to raise equity.”

To contact the reporters on this story: Cecile Vannucci in Amsterdam at cvannucci1@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net; Andrew Rummer at arummer@bloomberg.net

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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Sep 09 11 04:26 GMT

As was widely expected no policy changes were announced after either the MPC or ECB meetings yesterday. Despite the decisions votes seemingly being in line with expectations, the markets at least initially reacted with a degree of disappointment to this news. However, ECB Chairman Trichet's subsequent press conference which emphasised that the risks on both inflation and economic growth had shifted caused German bonds to rally and the euro to sell off. As usual there was no statement from the BoE following the MPC meeting and so no evidence as yet as to whether the Committee's thinking has also shifted, although this must be highly likely. The minutes of the meeting, which will be released on the 21st will provide the first information on this. In the meantime, in a further indication of how consensus thinking is shifting the OECD announced a downward revision to its global growth forecasts yesterday.

The August UK PPI figures released today are likely to signal a nearterm easing of inflationary pressures. Last month, sterling's tradeweighted index moved higher, while commodity prices have weakened. Together, these developments point to a fall in input prices. Meanwhile, producer output prices are expected to be unchanged. We still have longer-term concerns about the UK inflation outlook, but given mounting concerns about growth this is unlikely to be at the forefront of policy makers' thoughts for now.

In the euro area today's data on Italian GDP and French industrial production will provide further information on the real economy. Both are likely to be reassuring as they should show slow growth, rather than rapidly falling output. But as they both refer to the period before the current market turbulence gathered pace, they are likely to be seen by markets as old news.

UK remains vulnerable to global price pressures

About the Author

Lloyds TSB Bank

Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Daily Forex Technicals | Written by Easy Forex | Sep 09 11 04:16 GMT

FX Technical Commentary

Euro 1.3925

Initial support at 1.3837 (Jul 12 low) followed by 1.3837 (July 12 low). Initial resistance is now located at 1.4220 (Sept 5 high) followed by 1.4288 (Sept 2 high)

Yen 77.45

Initial support is located at 76.55 (Sep 2 low) followed by 75.95 (Psych level). Initial resistance is now at 77.70 (Aug 25 high) followed by 78.86 (Aug 8 high).

Pound 1.5985

Initial support at 1.5921 (Sep 6 low) followed by 1.5781 (Jul 12 low). Initial resistance is now at 1.6061 (Sept 5 high) followed by 1.6334 (Aug 31 high).

Australian Dollar 1.0625

Initial support at 1.0419 (Aug 26 low) followed by the 1.0363 (Aug 22 low). Initial resistance is now at 1.0666 (Sept 5 high) followed by 1.0734 (Sep 2 high).

Gold 1863

Initial support at 1805 (Sept 8 low) followed by 1757 (Aug 29 low). Initial resistance is now at 1880 (Sept 7 high) followed by 1921 (Sept 6 high).

Oil 89.40

Initial support at 88.00 (Intraday Support) followed by 85.00 (Intraday Support). Initial resistance is now at 90.00 (Intraday resistance) followed by 92.50 (Intraday Resistance).

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.3752	1.3837	1.3925	1.4149	1.4288
USD/JPY	75.95	76.55	77.45	77.70	78.86
GBP/USD	1.5781	1.5921	1.5985	1.6061	1.6334
AUD/USD	1.0363	1.0419	1.0625	1.0666	1.0734
XAU/USD	1757.00	1805	1863	1880	1921
OIL/USD	85.00	88.0	89.40	90.00	92.50

Easy Forex

Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

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U.S. Trade Gap Falls More Than Forecast to Three-Month Low $44.8 Billion

By Alex Kowalski - Sep 8, 2011 7:48 PM GMT+0700
The U.S. trade deficit narrowed more than forecast in July, reaching a three-month low as exports climbed to a record and crude oil imports eased.
The gap shrank 13.1 percent, the most since February 2009, to $44.8 billion from a revised $51.6 billion shortfall in June, Commerce Department figures showed today in Washington. The deficit was less than all projections in a Bloomberg News survey. Exports rose 3.6 percent as companies shipped more capital goods and automobiles to overseas customers.
The global slowdown and Europe’s debt crisis have raised concerns of a diminishing international flow of goods and services the rest of this year. Sustained growth in exports may help U.S. manufacturers weather weaker demand from American consumers and businesses that’s restraining the recovery.
“Trade could add favorably to economic activity during the third quarter,” said Millan Mulraine, senior U.S. strategist at TD Securities in New York. “The slowdown in the global economy may not be as great as we thought a few months ago, which certainly is encouraging.”
First-time applications for unemployment benefits rose last week, a sign the labor market is struggling to gain traction. Jobless claims climbed by 2,000 to 414,000 in the week ended Sept. 3, Labor Department figures showed today in Washington.
Stock-index futures held losses after the reports. The contract on the Standard & Poor’s 500 Index expiring this month fell 1.1 percent to 1,186.3 at 8:48 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.99 percent from 2.04 percent late yesterday.

Economists’ Estimates

The trade gap was projected to shrink from an initially reported $53.1 billion in June, according to the median forecast of 74 economists surveyed by Bloomberg. Estimates ranged from deficits of $55 billion to $46 billion.
After eliminating the influence of prices to render the figures used in calculating gross domestic product, the trade deficit narrowed to a three-month low of $45.3 billion from $50.3 billion. The number was less than the $47.3 billion deficit averaged in the second quarter, indicating trade may add to growth this quarter.
Exports increased to $178 billion, boosted by sales of telecommunications equipment, civilian aircraft, autos and industrial engines. U.S. shipments of capital goods and autos and parts to overseas customers were the highest on record.
Imports fell 0.2 percent to $222.8 billion from $223.4 billion in the prior month.

Petroleum Imports

The figures showed a reduction in demand for crude oil as the price per barrel exceeded $100 in July for a fourth month. The average price of imported crude oil was $104.27 compared with $106 in June, today’s report showed. U.S. companies imported 350,657 barrels in July, the fewest since April.
Imports in July reflected $22.3 billion in shipments of auto parts, the most since February 2008. Parts deliveries from Japan have started to recover after the nation’s March earthquake and tsunami. Automobile-related goods have been entering the U.S. at about 50 percent of the rate before the natural disaster, according to Richard Steinke, executive director of the Port of Long Beach.
A labor market that stagnated in August is weighing on the ability of U.S. households to spend on goods made overseas. Payrolls were unchanged last month, and the unemployment rate held at 9.1 percent, Labor Department figures showed Sept. 2.
“While the economies in our primary markets have generally improved since the lows of the economic crisis, many consumers remain cautious,” Denise Morrison, president and chief executive officer at Campbell Soup Co. (CPB), said on a Sept. 2 conference call with analysts. “The recovery has not progressed at the pace or intensity consumers had hoped for. As a result, consumers remain careful about their purchases and feel the need for resourcefulness and vigilance.”

Campbell Profit

Campbell, the world’s biggest soup maker, said fourth- quarter profit declined 12 percent as sales dropped.
Slower growth in developed countries raises the risk manufacturers will temper production going forward. Gross domestic product in the 17-nation euro area rose 0.2 percent in three months ended June from the first quarter, when it increased 0.8 percent. Economic growth in Canada, the U.S.’s largest trading partner, shrank in the second quarter for the first time since the recession two years ago.
The trade gap with China widened to $27 billion, the highest since September, from $26.7 billion as gain in imports outpaced an increase in exports. The deficit with Canada increased to $3.2 billion from $2.8 billion, while it shrank with the European Union. Exports to South and Central America were the highest ever.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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U.S. Stocks Retreat on Increase in Jobless Claims, ECB’s Economic Outlook

By Rita Nazareth - Sep 8, 2011 8:52 PM GMT+0700

Traders work at the New York Stock Exchange on Sept. 6, 2011. Photographer: Scott Eells/Bloomberg

Play Video

Sept. 8 (Bloomberg) -- Bob Janjuah, the co-head of cross-asset allocation strategy at Nomura International Plc, talks about the global economy and financial markets. Janjuah, speaking in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move Asia," also discusses Federal Reserve monetary policy and the European sovereign-debt crisis. (Source: Bloomberg)

U.S. stocks fell, following the biggest jump in two weeks for the Standard & Poor’s 500 Index, as jobless claims increased and the European Central Bank said risks to the economic recovery have intensified.

Financial and industrial shares fell the most among 10 groups in the S&P 500. General Electric Co. and Bank of America Corp. (BAC) dropped at least 0.6 percent, pacing losses in the Dow Jones Industrial Average. Dollar General Corp. (DG) slumped 4 percent after saying that holders will sell 25 million shares.

The S&P 500 retreated 0.3 percent to 1,194.94 at 9:51 a.m. in New York, paring earlier losses of as much as 0.7 percent. The gauge snapped a three-day decline yesterday. The Dow decreased 8.74 points, or 0.1 percent, to 11,406.12.

“This market is looking for assistance and what it wants is a wheelchair and someone to push it,” Burt White, who helps oversee $330 billion as chief investment officer at LPL Financial Corp. in Boston, said in a telephone interview. “People are hoping that central banks will deliver that. Everyone was expecting the ECB to be on hold and do nothing and yet they were hoping for something. The ECB was really in a tough spot because they made a pretty bad decision in raising rates. It’s a confidence issue in this market.”

The S&P 500 rose 2.9 percent yesterday, the largest gain since Aug. 23, as investors speculated that President Barack Obama’s plan to inject more than $300 billion into the economy will bolster growth. Obama plans to unveil his proposals for promoting job growth in an address to a joint session of Congress today.

’High Uncertainty’

U.S. stock futures extended losses as ECB President Jean- Claude Trichet resisted calls to lower interest rates even after “downside risks” to the euro area intensified. The economy faces “particularly high uncertainty,” Trichet said at a press conference in Frankfurt today. The ECB cut its growth forecasts for this year and next.

“The ECB is marching to its own tune,” Stephen Wood, who helps oversee about $163 billion as the New York-based chief market strategist for Russell Investments, said in a telephone interview. “The real world was expecting more from the ECB given that the ECB is the only entity that could do something. In the U.S., the government can alleviate some symptoms, but it’s going to be difficult in the short-term to address the unemployment issue.”

Stocks maintained losses as jobless claims rose by 2,000 to 414,000 in the week ended Sept. 3, Labor Department figures showed today in Washington. Economists surveyed by Bloomberg News projected a drop in claims to 405,000, according to the median forecast. The number of people on unemployment benefit rolls and those receiving extended payments fell.

Federal Reserve Chairman Ben S. Bernanke is due to speak in Minnesota today on the economic outlook at 1:30 p.m. New York time.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

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

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Bearish Bets May Send Stocks Lower: Bartels

By Nikolaj Gammeltoft and Betty Liu - Sep 8, 2011 12:36 AM GMT+0700

U.S. stocks are likely to extend declines because hedge funds have leeway to boost bets against the world’s largest equity market, according to Bank of America Corp.’s Mary Ann Bartels.

“We still believe that hedge funds have the ability to significantly short the market,” Bartels, head of technical and market analysis in New York at Bank of America said in a Bloomberg Television interview today on “In the Loop” with Betty Liu. “It’s a bearish signal, absolutely.”

The adjusted short interest ratio, a measure of potential buying pressure, is 1.5 for the Standard & Poor’s 1500 Composite, down from 2.4 at the end of July and below its 10- year average of 2.4, Bartels wrote in a report dated Sept 5. While short interest on U.S. equities rose in August, trading volume surged, pushing down the short interest ratio and lowering the number of trading days it would take to cover all short positions in a stock or index.

“Short interest represents a floor,” said Bartels, who ranked third among analysts who study price charts in Institutional Investor’s 2010 survey. “If you have a lot of shorts, you only fall so much, and we don’t have that floor, we don’t have a safety net on the market.”

The proportion of S&P 500 shares outstanding sold short rose to the highest level since the end of November last week, climbing to 3.03 percent on Aug. 29 from 2.37 percent at the beginning of August, according to New York-based Data Explorers, which provides research on short sales and stock lending. Short selling of the gauge reached a three-year high of 5.52 percent in August 2008.

Net Short

Hedge funds and other large speculators were net short 107,913 S&P 500 Index (SPX) futures contracts in the week ended Aug. 30, wagering that the benchmark will decrease in value, according to data compiled by Bloomberg and the U.S. Commodity Futures Trading Commission. The position is the highest since September 2007, when bearish bets reached a record 127,474 contracts a month before the benchmark equity gauge peaked at an all-time high, Bloomberg data going back to 1997 show.

“What we’re most concerned about is the banking system in Europe,” Bartels said. “There is no reason to have a very long position with the positioning of the charts,” she said. Still, “the level of shorts is nowhere near where we saw in 2008 and 2009” in terms of potential buying pressure.

Stocks fell yesterday, giving the S&P 500 its longest slump in almost a month, amid concern that Europe’s debt crisis is worsening. The benchmark gauge for U.S. equities lost as much as 13 percent last month before trimming its retreat to 5.7 percent after the Federal Reserve said it will act to spur growth.

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

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

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Casey’s, Dollar General, Hovnanian, Men’s Wearhouse: U.S. Equity Preview

By Inyoung Hwang - Sep 8, 2011 4:16 AM GMT+0700

Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5 p.m. in New York.

Standard & Poor’s 500 Index futures expiring in September fell less than 0.1 percent to 1,198.9.

Casey’s General Stores Inc. (CASY) : The Ankeny, Iowa- based operator of convenience stores in the U.S. Midwest reported first-quarter earnings of $1.03 a share, missing the average analyst estimate by 3 cents.

Dollar General Corp. (DG) slid 2.8 percent to $36.09. The biggest dollar store chain in the U.S. said in a regulatory filing holders will sell 25 million shares. The Goodlettsville, Tennessee-based company won’t receive any proceeds from the sale.

Hovnanian Enterprises Inc. (HOV) climbed 4.2 percent to $1.72. The largest homebuilder in New Jersey said its loss in the third-quarter was 47 cents a share, less than the 51-cent loss estimated by analysts on average.

Men’s Wearhouse Inc. (MW) declined 1.1 percent to $29.19. The retailer of men’s suits and attire forecast third- quarter adjusted earnings of as little as 64 cents a share, matching the average analyst estimate.

Smith & Wesson Holding Corp. (SWHC) : The handgun manufacturer forecast sales in the second quarter of no more than $96 million, falling short of the average analyst estimate of $107.5 million.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net.

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

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Freeport’s Cerro Verde Copper Miners Start 48-Hour Strike to Protest Wages

By Alex Emery - Sep 7, 2011 10:02 PM GMT+0700

Freeport-McMoRan Copper & Gold Inc. (FCX)’s Peruvian copper miners began the first of a series of strikes planned over pay increases, a union official said.

About 1,200 workers at Freeport’s Sociedad Minera Cerro Verde SAA (CVERDEC1) unit, Peru’s third-largest copper producer, began the 48-hour strike at 8:30 a.m. New York time and will hold a second strike from Sept. 14 if no accord is reached, union official William Camacho said by telephone. Workers at Freeport’s Grasberg mine in Indonesia also may strike starting Sept. 15.

“Freeport unions around the world seek to raise their wages to the same level as the rest of the mining industry,” Camacho said today from Lima. “We seek the company’s respect for the workers as they aren’t complying with our labor pact.”

Workers in Peru, Chile and Bolivia have gone on strike at copper, gold and zinc mines this year for better working conditions and a bigger share of record company earnings. Shougang Corp.’s Peru iron-ore miners began a strike Aug. 31.

Phoenix-based Freeport will continue negotiating a new labor contract, spokesman Eric Kinneberg said yesterday in an e- mailed response to questions. Cerro Verde, which is studying a $3.5 billion expansion to boost annual output 45 percent, boosted first-half output by 4 percent to 161,246 metric tons.

Copper futures for December delivery gained 6.1 cents, or 1.5 percent, to $4.117 a pound at 9:50 a.m. on the Comex in New York. A close at that price would mark the biggest gain since Aug. 31.

Copper Output Decline

Peru is the world’s third-largest copper producer behind Chile and China. Chile, which accounts for a third of global supply, may have lost 8 percent of estimated 2011 output because of strikes at mines owned by Codelco and BHP Billiton Ltd. (BHP), Codelco Chief Executive Officer Diego Hernandez said Aug. 12. Chile produced 5.42 million metric tons of copper last year.

Mine production is set to lag behind demand by 256,000 metric tons in 2011, a second year of deficit, according to Citigroup Inc. Prices have more than doubled since the end of 2008 as demand increased in China, the world’s top consumer.

Freeport rose 66 cents, or 1.5 percent, to $45.02 at 10:36 a.m. in New York trading. Cerro Verde fell 83 cents, or 2.1 percent, to $38.12 in Lima.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.

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Gold May Decline for a Third Day as Stocks Rebound Ahead of Obama Speech

By Glenys Sim - Sep 8, 2011 6:33 AM GMT+0700

Gold may decline for a third day as global equities rallied amid optimism a plan by President Barack Obama will aid growth in the world’s largest economy, eroding demand for haven investments

Gold for immediate delivery was little changed at $1,814.65 an ounce by 6:41 a.m. Singapore time, after earlier falling as much as 0.7 percent. Bullion slumped 4.4 percent in the past two days, dropping from a record $1,921.15 on Sep. 6. Futures in New York were also little changed at $1,819.50.

“The gold price fell as investors embraced risky assets,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, said today in an e-mailed note.

Obama, who is scheduled to address Congress today, plans to propose boosting job growth by injecting more than $300 billion into the economy next year mostly through tax cuts and infrastructure spending, spurring the biggest gain yesterday in the Standard & Poor’s 500 Index in two weeks.

Platinum for immediate delivery rose 0.3 percent to $1,828 an ounce, trading back above gold after the yellow metal’s two- day slump. Cash silver fell 0.2 percent to $41.4863 an ounce while palladium was little changed at $753 an ounce.

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

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net

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Crude Gains a Second Day on U.S. Stockpile Decline as Storms Threaten Gulf

By Ben Sharples - Sep 8, 2011 6:01 AM GMT+0700

Oil climbed for a second day in New York on speculation a storm building in the Gulf of Mexico poses a threat to supply in the U.S., amid shrinking crude stockpiles in the world’s biggest consumer.

Futures gained as much as 0.9 percent after the industry- funded American Petroleum Institute said inventories fell 2.97 million barrels last week. An Energy Department report today may show supplies slid 2 million barrels as Tropical Storm Lee shut output, according to a Bloomberg News survey of analysts. Another cyclone, Nate, formed off Mexico, becoming the third now churning in the Atlantic basin.

“Output outages in the Gulf of Mexico and a low pressure system over Mexico’s Bay of Campeche were the key drivers,” John Peters, a senior economist at Commonwealth Bank of Australia, said in a note today.

Crude for October delivery advanced as much as 77 cents to $90.11 a barrel in electronic trading on the New York Mercantile Exchange and was at $89.87 at 8:47 a.m. Sydney time. The contract yesterday rose $3.32 to $89.34, the highest close since Aug. 3. Prices are 20 percent higher the past year.

Brent oil for October settlement gained $2.91, or 2.6 percent, to $115.80 on the London-based ICE Futures Europe Exchange yesterday. The European benchmark contract closed at premium of $26.46 to U.S. futures, compared with the record settlement of $26.62 on Sept. 6.

DOE Report

The Energy Department will release its weekly stockpile data at 11 a.m. today in Washington. Both the API and government reports are a day late because of the Labor Day holiday on Sept. 5.

Gasoline supplies dropped 871,000 barrels last week, according to API data. The Energy Department report may show they declined 1.4 million barrels, according to the median of 15 analyst estimates in the Bloomberg News survey.

Oil-supply totals from the API and the department have moved in the same direction 71 percent of the time in the past year. The API collects data on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed for its weekly survey.

Nate, with winds of 45 miles (72 kilometers) per hour about 125 miles west of Campeche, Mexico, joins Hurricane Katia and Tropical Storm Maria. Nate is forecast to be a Category 1 hurricane with winds of 75 mph in two days.

Computer models suggest Nate will either go ashore in Mexico south of the oil- and gas-producing region or near Brownsville, Texas, said Travis Hartman , a meteorologist at commercial forecaster MDA EarthSat Weather in Gaithersburg, Maryland.

About 36.9 percent of U.S. oil production and 18.1 percent of natural gas output from the Gulf of Mexico has been halted after Tropical Storm Lee passed through the region, the Bureau of Ocean Energy Management, Regulation and Enforcement said yesterday. The Gulf is home to 27 percent of U.S. oil output and 6.5 percent of the country’s natural gas production.

To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net

To contact the editor responsible for this story: Alexander Kwiatkowski in Singapore at akwiatkowsk2@bloomberg.net

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Gold Prices Rally After Bernanke Hints at Stimulus

By Alix Steel

NEW YORK (TheStreet ) -- Gold prices were staging a rally, shrugging off an almost three-day selloff, after Ben Bernanke left the door open for more monetary easing..

Gold for December delivery was adding $20.70 to $1,783.90 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,800 and as low as $1,759.50 while the spot gold price was adding $4.50, according to Kitco's gold index.

Silver prices were down 35 cents at $40.39 an ounce. The U.S. dollar index was up 0.10% at $74.31 while the euro was flat vs. the dollar.

Federal Reserve Chairman, Ben Bernanke, offered no surprises in his speech at Jackson Hole Friday, but he did leave the possibility for further intervention open. Bernanke said the Fed is willing to step in if needed to trigger a stronger recovery, but barely discussed any monetary policy. The Fed's policy meeting in September is now two days instead of one, which indicates stimulus is on the table but whether or not there will be an agreement or policy shift is a different story.

Vote: Where will gold prices finish in 2011?

Gold prices were still rallying somewhat, something many experts said were expecting if Bernanke announced more monetary easing. Equity markets appear just as confused vacillating between negative and positive territory.

"It's become an annual ritual to expect Jackson Hole to be a momentous occasion in all of these markets," says Jon Nadler, senior analyst at Kitco.com, when the annual meeting had been nothing short of a boondoggle until last year when Bernanke hinted at quantitative easing round two.

Nadler thinks that Bernanke isn't in a position to pump more money into the system just because some macro data is disappointing and the stock market is suffering. There were also three dissenters at the last Fed meeting in early August who disagreed with keeping interest rates low until mid-2013 because of rising inflation, so printing more money seems like an even farther reach.

Nadler says that any disappointment would lead investors out of stocks and into gold, a trend they are dabbling with this morning, but "if it's an across the board selloff in all types of assets that were predicating their further advances on easy money, if we have a wipeout of that nature, it could be a short term across the board sell signal."

Gold prices have corrected 11% in two-and-a-half days, giving up half of its gains from its two month rally which pushed the metal to an intraday high of $1,917 an ounce. The massive selloff could also be igniting bargain hunters wanting to take advantage of "lower" gold prices.

Nadler, who warned of a 35% correction two weeks ago, still stands by that prediction which would take gold prices to $1,247 an ounce.

Many experts, however, think that gold will trend higher as the macro backdrop has not changed. European governments are still struggling with ballooning debt and trying to save Greece from imploding. Germany is now making headlines with rumors swirling about a possible short selling ban and rating downgrade, both of which were denied. With investors so headline skittish, gold is fulfilling that safe haven role.

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Bernanke Doesn’t Signal More Stimulus

By Jeannine Aversa and Scott Lanman - Aug 26, 2011 10:13 PM GMT+0700

Federal Reserve Chairman Ben S. Bernanke said the central bank still has tools to stimulate the economy without providing details or signaling when or whether policy makers might deploy them.

“In addition to refining our forward guidance, the Federal Reserve has a range of tools that could be used to provide additional monetary stimulus,” Bernanke said in a speech today to central bankers and economists gathered at an annual forum in Jackson Hole, Wyoming. He said a second day has been added to the next policy meeting in September to “allow a fuller discussion” of the economy and the Fed’s possible response.

While Bernanke sought to reassure investors and the public that U.S. growth is safe in the long run and that the Fed still has tools to aid the recovery if needed, he stopped short of indicating that the central bank will move ahead with a third round of government bond-buying.

“Although important problems certainly exist, the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years,” Bernanke said in prepared comments at the mountainside symposium hosted by the Kansas City Fed. “It may take some time, but we can reasonably expect to see a return to growth rates and employment levels consistent with those underlying fundamentals.”

Initial Losses

The Standard & Poor’s 500 Index initially extended losses, then erased them, rising 0.3 percent to 1,162.78 at 11:06 a.m. in New York. Stocks rallied earlier this week on speculation that Bernanke would telegraph more monetary stimulus. Yields on 10-year Treasuries fell to 2.2 percent today from 2.23 percent yesterday.

“Economic performance is clearly subpar, and from that standpoint the case for some sort of further economic-policy assistance is just being made by the poor performance,” said Keith Hembre, chief economist and investment strategist in Minneapolis at Nuveen Asset Management, which oversees about $212 billion.

Still, while Bernanke said the Fed has stimulus tools left, “the threshold to utilizing them is going to require fairly different conditions than what we have today,” such as lower inflation or a resurgence in financial instability, Hembre said.

Rate Commitment

The Federal Open Market Committee after its Aug. 9 meeting pledged for the first time to keep its benchmark interest rate at a record low at least through mid-2013 to energize a recovery that’s “considerably slower” than anticipated. The FOMC said that it was “prepared to employ” additional tools “as appropriate” to aid the economy.

In today’s speech, Bernanke, 57, repeated that line from the statement without elaborating on the options, in contrast to last year’s talk at the Jackson Hole event, when he discussed several tools, including asset purchases. “We discussed the relative merits and costs of such tools at our August meeting,” Bernanke said today.

“The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment in a context of price stability,” he said in the last line of the speech.

The next FOMC meeting, originally scheduled to begin and end Sept. 20, will now conclude Sept. 21, Bernanke said.

“The lack of a QE3 outline today, to the extent that is disappointing to some, does not mean that outline is not coming in the future,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, said in a research note, referring to a third round of so-called quantitative easing.

‘Credible Plan’

Bernanke, a former Princeton University economist, repeated his call for Congress to adopt a “credible plan for reducing future deficits over the longer term” without harming U.S. growth in the near term.

He also said that the “extraordinarily high level of long- term unemployment” adds urgency to the need to boost job growth. At the same time, the Fed can’t do it alone: “Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” Bernanke said.

Last year, the Fed chief used his Jackson Hole speech to lay the groundwork for a second round of bond purchases. The central bank decided in November to buy $600 billion of Treasuries through June 2011.

Even with joblessness at 9.1 percent, any push to buy more bonds risks a backlash from critics inside the Fed and in Congress who say the Fed’s policies have done little to spur the economy and may fuel inflation.

‘Stage Is Set’

“The stage is set for a resurgence of inflation if the Fed is not careful,” Senator Richard Shelby of Alabama, the senior Republican on the Senate Banking Committee, said last month.

Less than two hours before Bernanke’s speech, the government reported that the economy expanded at a 1 percent annual rate in the second quarter, compared with an initial estimate of 1.3 percent growth. The reduction reflected a smaller increase in inventories and fewer exports.

“Although we expect a moderate recovery to continue and indeed to strengthen over time, the Committee has marked down its outlook for the likely pace of growth over coming quarters,” Bernanke said today without specifying the forecast.

The housing market, which has been a “significant driver” of U.S. post-recession growth rebounds since World War II, is slowing the “natural recovery process” now, Bernanke said.

Also, “financial stress has been and continues to be a significant drag” on growth, Bernanke said, acknowledging that “bouts of sharp volatility and risk aversion in markets have recently re-emerged in reaction to concerns about both European sovereign debts and developments related to the U.S. fiscal situation.”

Inflation Outlook

The Fed’s Aug. 9 decision means that in what Fed officials judge to be the “most likely scenarios for resource utilization and inflation in the medium term, the target for the federal funds rate would be held at its current low levels for at least two more years,” Bernanke said today.

Bernanke pushed through the decision over opposition from three regional Fed presidents who preferred that the Fed stick with its previous commitment to hold rates for an unspecified “extended period.”

The dissents from the presidents of the Federal Reserve banks of Philadelphia, Dallas and Minneapolis marked the most opposition Bernanke has encountered since he took the Fed’s helm in February 2006.

The FOMC at its August meeting offered a dimmer view of the economy, noting a “deterioration in overall labor-market conditions in recent months” and that household spending had “flattened out.”

Hiring Slows

Hiring has slowed as employers lost confidence in the recovery and governments reduced positions. Average monthly payroll gains dropped to 72,000 in the three months through July, from 215,000 in the prior three months. The jobless rate fell to 9.1 percent in July from 9.2 percent in June as Americans gave up looking for work.

Besides buying government bonds, the Fed could cut the 0.25 percent interest rate it pays bank on the $1.6 trillion in excess reserves parked at the Fed. It also could replace shorter-term securities with longer maturities, which may help lower interest rates on mortgages and other long-term debt. The Fed also could pledge to keep its balance sheet near a record high of $2.86 trillion for an “extended period” or for a specific time period.

Preferred Gauge

The Fed’s preferred inflation gauge, which excludes food and energy prices, rose 1.3 percent for the 12 months ending in June. That’s up from a record low increase of 0.9 percent for the 12 months ending in December.

Bernanke said in June that one difference between this year and last August was that in 2010, “inflation was very low and falling” and deflation was a “nontrivial risk.” The Fed’s asset purchases “have been very successful in eliminating deflation risk,” he said at a press conference.

To contact the reporter on this story: Jeannine Aversa in Washington at javersa@bloomberg.net; Scott Lanman in Jackson Hole, Wyoming, at slanman@bloomberg.net.

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

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