Canadian Natural, EnCana May Decline; Teranet May Advance

By John Kipphoff

Oct. 15 (Bloomberg) -- Canadian Natural Resources Ltd. may decline, based on bids on the Toronto stock exchange, after crude-oil prices fell on speculation the bailout of the world's banks won't stave off recession and prop up global fuel demand.

EnCana Corp. may also slide, bids indicated, after the company said that it's delaying a planned split into separate oil and gas companies. Teranet Income Fund may rise after its board of trustees withdrew its recommendation that unitholders reject a hostile buyout bid.

The Standard & Poor's/TSX Composite Index jumped 9.8 percent to 9,955.66 yesterday in Toronto, its steepest advance In almost 32 years, after the U.S. outlined plans to invest $250 billion in banks in an attempt to solve the credit crisis and bolster economic growth.

Crude oil for November delivery fell as much as 4.7 percent to $74.97 in electronic trading in New York, slipping below $75 a barrel for the first time since September 2007

Canadian Natural, whose Horizon oil-sands project is scheduled to being production this year, may drop C$3.22 to C$52.01, bids already submitted on the Toronto Stock Exchange showed. The stock jumped 15 percent yesterday.

EnCana may slip C$1.80 to C$49, according to bids. Canada's largest energy company by market value is delaying a plan to split itself into oil and natural-gas producers because of ``uncertainty and volatility'' in financial markets worldwide. The shares gained 17 percent yesterday.

Teranet may add 10 cents to C$10.60, based on bids. The land registry company's board of trustees said that it ``urges unitholders to make their own decision regarding whether they wish to accept'' an C$11-share offer from Borealis Infrastructure Management Inc. ``A superior offer is unlikely to emerge'' before the Borealis offer expires on Oct. 17, the board said.

U.S. stock-index futures extended declines after deeper- than-estimated slumps in retail sales and New York manufacturing heightened concern the economy is in a recession.

To contact the reporter on this story: John Kipphoff in Montreal at jkipphoff@bloomberg.net.



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Abbott, Abercrombie, Home Depot, JPMorgan: U.S. Equity Preview

By Whitney Kisling and Elizabeth Campbell

Oct. 15 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading today. Stock symbols are in parentheses, and share prices are as of 8 a.m. in New York, unless otherwise specified.

Abbott Laboratories (ABT US) gained 4.1 percent to $57. The maker of drugs, medical devices and infant formula boosted its full-year forecast to $3.31 to $3.33, compared with analysts' estimate of $3.27, according to a Bloomberg survey. The company also reported adjusted earnings for the third quarter that beat the average estimate by a penny on increased sales from the anti- inflammatory medicine Humira and its new heart sent Xience.

Abercrombie & Fitch Co. (ANF US): The teen-apparel retailer with more than 1,000 stores was raised to ``outperform'' from ``neutral'' at Credit Suisse Group because ``the current stock price reflects a worst-case scenario.'' The stock fell 4.6 percent to $28.46 in regular trading yesterday.

Altera Corp. (ALTR US) rose 6.1 percent to $17.11. The world's second-largest maker of programmable chips reported third-quarter profit of 31 cents a share, topping the 30-cent average estimate from analysts in a Bloomberg survey.

Apple Inc. (AAPL US) gained 1.8 percent to $105.99. The maker of iPods, iPhones and Macintosh computers was raised to ``overweight'' from ``neutral'' at JPMorgan Chase & Co. JPMorgan also upgraded International Business Machines Corp. (IBM US), saying both companies' stock may hold up better than other technology shares amid ``macroeconomic distress.'' IBM rose 0.7 percent to $94.27.

Dell Inc. (DELL US) was cut to ``neutral'' from ``overweight'' at JPMorgan because most of the company's revenue comes from personal computers, making consistent growth a ``hurdle.''

Ericsson AB American depositary receipts (ERIC US): The world's largest maker of wireless network was upgraded to ``neutral'' from ``sell'' at Goldman Sachs Group Inc. Shares rose 0.6 percent to $7.09.

Genentech Inc. (DNA US) rose 4.9 percent to $83. The biggest U.S. maker of cancer drugs reported third-quarter revenue that topped analysts' estimates on higher sales of its Avastin treatment for colon, lung and breast tumors.

Home Depot Inc. (HD US): The world's largest home- improvement retailer was raised to ``outperform'' from ``neutral'' at Credit Suisse Group AG, which said the company has held up well in ``the most challenging'' environment for retail. The shares climbed 0.4 percent to $21.15.

Credit Suisse also upgraded Lowe's Co. Inc. (LOW US).

Intel Corp. (INTC US) rose 2 percent to $16.25. The world's biggest chipmaker reported a 12 percent increase in third-quarter profit after orders for cheaper computer processors bolstered sales. Earnings per share beat the average analyst estimate by 1 cent, according to a Bloomberg survey.

Jones Apparel Group Inc. (JNY US) fell 4.1 percent to $12.97. The maker of Jones New York clothing and Nine West shoes said its full-year earnings will be lower than previously forecast, predicting profit from continuing operations of as much as 98 cents a share. The company earlier expected to earn at least $1.20.

JPMorgan Chase & Co. (JPM US). The largest U.S. bank by market value reported third-quarter profit that fell 84 percent to $527 million, or 11 cents a share. The average analyst estimate was an 18-cent loss, according to a Bloomberg survey. JPMorgan took $18.8 billion of writedowns, losses and credit provisions before today, less than a third of Wachovia Corp. and Citigroup Inc. The shares slid 0.5 percent to $40.49.

Linear Technology Corp. (LLTC US) fell 15 percent to $22. The Milpitas, California-based chipmaker said it expects second- quarter revenue to drop as much as 20 percent from $310.4 million in the previous three months. Analysts, on average, expected sales to increase to $312.6 million, according to a Bloomberg survey.

Textron Inc. (TXT US): The maker of the Shadow unmanned aircraft said it won a $242.1 million contract to build 17 of the drones for the U.S. military. The shares gained 0.1 percent to $21.60.

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Elizabeth Campbell in New York at ecampbell11@bloomberg.net



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Fed officials see recession risk but no rate cut need

By Braden Reddall and Alister Bull

PALO ALTO, California/MEMPHIS, Tennessee (Reuters) - A pair of top Federal Reserve officials on Tuesday highlighted risks to the U.S. economy from the global credit crisis and liquidity squeeze, but did not hint at more interest rate cuts as a solution.

Janet Yellen, President of the San Francisco Fed, was especially blunt, saying the U.S. economy appeared to be in a recession and would likely contract in the fourth quarter after near-flat growth in the third.

"The outlook for the U.S. economy has weakened noticeably," Yellen said in a speech to the Financial Executives International's Silicon Valley chapter in Palo Alto, California.

"Virtually every major sector of the economy has been hit by the financial shock."

Yellen said while she "strongly supported" last week's coordinated global rate cut to shore up a teetering world economy, rate cuts were not a cure-all.

"Rate cuts are by no means a panacea, but they do at least partially offset the tightening of financial conditions due to higher spreads, reflecting heightened credit and liquidity risk and a marked increase in general risk aversion," she said.

James Bullard, St Louis Fed President, also said the Fed should not pin too much hope on monetary policy.

"Overreliance on interest rate policy in this environment does little to solve the problems at hand," Bullard said in a speech in Memphis, Tennessee.

But the two diverged widely on the inflation outlook. Bullard warned that rate cuts "may cause a new and difficult-to-solve inflation problem" once the current turbulence subsides.

Yellen, often seen as one of the Fed's more dovish members, said that inflation pressures were fading quickly with plunging energy and commodity prices and the slack appearing in the U.S. economy after nine straight months of job losses that have hurt consumer confidence and spending.

"Some prominent forecasters at this stage are concerned that inflation in future years could decline to levels below what is consistent with price stability," she said.

Yellen's assessment was consistent with recent market-based assessments on the inflation outlook. The spread between yields on Treasury Inflation Protected Securities (TIPS) and conventional Treasury notes has collapsed since July .

Neither Yellen nor Bullard are voting members of the Fed's interest-rate setting committee this year.

The Fed, acting in coordination with other central banks in Europe and Asia, cut interest rates a half point last week to 1.5 percent, and warned that the global credit crisis would impact the economy.

Financial markets data suggest the Fed will lower its benchmark fed funds rate by another one-quarter point at its Oct 28-29 Federal Open Market Committee meeting, to 1.25 percent.

In contrast to Yellen's assertion of a clear "feedback loop" between the financial market breakdown and weakness in the broader economy, especially as it concerns a slowdown in credit availability, Bullard was less convinced.

"It is far from clear how financial market turmoil of this magnitude will ultimately affect the real economy," he told the Economic Club of Memphis.

Still, if left unchecked the turmoil could have "severe negative consequences," he said.

Bullard pinned a "significant" slowdown in growth in the third quarter more on the rapid run-up in energy and commodities prices during the spring and summer, at a time labor markets were also weakening.

Crude oil peaked at about $147 a barrel in July, but has since fallen by about 45 percent to around $79 on concern that the economy could slip into recession.

Bullard said that aggressive action by the Fed and the government -- which has pulled together a $700 billion bank bailout package -- could ensure that the country escapes the fate of Japan's "lost decade" of stagnation in the 1990s.

In searching for comparisons to the current episode, Yellen noted that some have termed conditions the worst since the Great Depression of the 1930s.

"But I do not believe that the U.S. economy, in the years ahead, faces a period of economic misery that will begin to rival the suffering associated with that historic economic calamity," she said.

Bullard said "aggressive government policy" could hold the line at a "sluggish" economy and prevent a protracted downturn.

(Writing by Ros Krasny in Chicago; Editing by Tomasz Janowski)

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EU to press for reform, Asia joins bailout bandwagon

By Mike Peacock and Tomasz Janowski

LONDON/SINGAPORE (Reuters) - European leaders will press on Wednesday for an overhaul of the world's financial structures after Asia joined western bastions of capitalism in bailing out banks to avert a financial meltdown.

EU leaders meet in Brussels just days after stumping up 2.2 trillion euros ($3,023 billion) to rescue European banks and jolt frozen money markets -- at the heart worst financial crisis since the Great Depression -- into life.

Southeast Asian nations backed by Japan, South Korea, China and the World Bank, were the latest to join the global rescue effort, agreeing on Wednesday to create a multi-billion fund to buy bad debt and help banks.

The United States put its shoulder to the wheel on Tuesday by offering to take $250 billion worth of stakes in nine top banks, an astonishing move in the home of free market capitalism which suggests an appetite for new regulation even there.

Treasury Secretary Henry Paulson said government part-ownership of banks was "objectionable" but vital to prevent a worsening of the crisis, which began with a U.S. housing market collapse and now threatens economies worldwide.

The Southeast Asian fund, to be set up with $10 billion World Bank backing, will buy up toxic debts and support banks in the region hit by the financial crisis, Philippines President Gloria Macapagal Arroyo said.

Leaders including French President Nicolas Sarkozy and Britain's Gordon Brown say the global turmoil shows the world's post-World War Two financial architecture is no longer adequate.

NEW 'BRETTON WOODS'

As current EU President, Sarkozy will seek the backing of the other 26 EU states to hold an international conference as early as next month on reforming the world financial order put in place by the 1944 Bretton Woods conference.

Prime Minister Gordon Brown, who has seen his woeful domestic opinion poll rating galvanized by his government's rescue efforts, is also advocating a "new Bretton Woods."

Measures should entail a rethink of supervisory rules on markets, banks, mortgage firms, hedge funds and private equity, European Commission chief Jose Manuel Barroso said on Tuesday.

Other reforms in the pipeline range from higher guarantees for bank deposits to clampdowns on executive pay.

However, Japanese Prime Minister Taro Aso said on Wednesday a meeting of world leaders would be pointless without fresh commitments to inject public funds into financial firms.

Even if a banking meltdown has been averted, a recession has not -- a fact markets quickly turned their focus to.

Shares turned lower late in Wall Street trade. Tokyo stocks fell before recovering to end 1.1 percent higher. But most Asian equity markets were 1-3 percent lower and European stocks opened down 0.5 percent.

Two top Federal Reserve officials flagged risks to the world's biggest economy and Bank of Japan Governor Masaaki Shirakawa warned global markets remained under severe strain.

"Growth in the fourth quarter appears to be weaker yet, with an outright contraction quite likely," Janet Yellen, President of the Federal Reserve Bank of San Francisco, said on Tuesday.

Only a handful of countries, including New Zealand, Ireland and Singapore have so far officially slipped into recession but Japan and Germany, the world's second- and third-biggest economies, have said they are on the brink of contraction.

Governments have pledged around $3.2 trillion -- more than the annual output of Germany -- in a variety of schemes that guarantee bank deposits, bank-to-bank lending, and the purchase of new securities to shore up bank capital.

That money is on top of open-ended central bank commitments to inject temporary funds to get interbank lending moving again and a coordinated round of interest rate cuts last week.

On the money markets, overnight dollar deposit rates were quoted around 2.0-2.2 percent in Asia, just above the Fed's 1.5 percent target. In another sign of easing strains, the Bank of Japan refrained from a same-day cash injection for the first time in almost a month.

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EU executive proposes deposit guarantee minimum

BRUSSELS, Oct 15 (Reuters) - Bank deposits in the European Union should be guaranteed up to 50,000 euros ($68,300), rising to 100,000 euros a year after the reform takes effect, the European Commission proposed on Wednesday to reassure investors.

EU governments have agreed in principle to raise the minimum guarantee required under the bloc's rules to 50,000 from 20,000 euros. Many will up it straight away to 100,000 euros to soothe depositors facing the worst financial turmoil since the 1930s.

"Increasing the minimum protection will strengthen Europeans' confidence in the safety of their deposits," EU Internal Market Commissioner Charlie McCreevy said in a statement.

The maximum amount of time for payouts if a bank fails would be three days compared with three to nine months at present. (Reporting by Huw Jones, editing by Dale Hudson)

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Global stocks retreat as risk aversion returns

By Ian Chua

LONDON (Reuters) - Signs of renewed risk aversion surfaced on Wednesday with stocks pressured and gold rising as investors fret the global economy will not escape a recession even after bank bailouts, which have taken the edge off money market stress.

Oil prices held near a one-year trough below $80 set on Friday, while the yen and government bonds climbed as fears about an imminent financial meltdown gave way to economic worries after trillions of dollars were pledged to boost the banking system.

"The panic may have been removed from the market, and financial system meltdown may have be averted by the compendium of measures, but the outlook for earnings ... and the global economy continues to look grim," said Daragh Maher, deputy Head of global FX strategy at Calyon.

Fuelling those concerns was a disappointing outlook from PepsiCo Inc, especially given that soft drink- and snack-makers are usually seen as holding up in tough economic times.

European stocks fell in early trade, with the FTSEurofirst 300 index shedding 2 percent, while Germany's DAX and Britain's FTSE both shed more than 2 percent.

MSCI's main world stock index was down about 1 percent, as the two-day rebound from a five-year low fizzled.

"After the colossal gains achieved at the start of this week, it would seem that the hangover has kicked in and investors have sobered to the reality that recession is here," said Andrew Turnbull, senior sales manager at ODL Securities.

MSCI's measure of Asian stock markets excluding Japan slid 3.4 percent. Japan's Nikkei, however, rose 1.1 percent after spending most of the session in negative territory.

A recent slew of negative euro zone economic indicators including Tuesday's data showing a bigger-than-expected fall in German investor sentiment about the outlook for Europe's largest economy were starting to bite.

Anyone looking for relief is likely to be disappointed with U.S. retail sales data due later in the session expected to show a decline for a third straight month. Forecasts centered on a 0.7 percent fall.

MONEY MARKETS HEALING

Still, measures by governments and central banks aimed at restoring confidence between banks appeared to be helping to kick-start the healing process in money markets, which had literally gummed up after the collapse of Lehman Brothers last month.

Overnight dollar interbank rates were indicated at 1-1.5 percent, slightly below early Tuesday's level, although three-month dollar rates remained around early Tuesday levels, indicated in wider 3.5-5.4 percent range.

"The rescue packages around the world have laid the foundation for market confidence to return. However, experience has shown that confidence recovers only slowly," said Commerzbank analyst Antje Praefcke.

The yen benefited as investors turned risk averse. The dollar fell 0.9 percent to 101.29 yen, while the euro lost 1.2 percent to 137.70 yen.

Weakness in equity markets helped fuel demand for government bonds, driving yields lower. The euro zone 10-year bond yield slipped 3.5 basis points to 4.085 percent, while the U.S. 10-year yield eased 7.2 basis points to 4.013 percent.

Meanwhile, U.S. crude was little changed at $78.70 but not far off the one-year low of $77.09 a barrel plumbed on Friday, weighed by worries that a global recession would hurt demand.

Demand for gold, however, was firm, helping push the precious metal up more than 1 percent to $846.

(Additional reporting by Atul Prakash; Editing by Victoria Main)

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FTSE falls as growth fears hit commodities, banks

* FTSE 100 falls 1.1 pct early

* Global recession fears weigh on commodity stocks

* Banks weak but HBOS, Lloyds and RBS rebound (For more on the financial turmoil, click on [nCRISIS])

By Dominic Lau

LONDON, Oct 15 (Reuters) - Britain's leading share index fell 1.1 percent early on Wednesday, snapping a two-day recovery and tracking weakness in the U.S. and most Asian markets as fears of a global recession intensified.

Commodity stocks led the losers on the FTSE 100 .FTSE, which was down 47.6 points at 4,346.6 at 0737 GMT. The UK benchmark rebounded nearly 12 percent in the previous two sessions after plummeting 21 percent last week -- its second worst weekly fall ever.

Miners took a beating as base metal prices slipped and after Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) warned of slowing Chinese demand for commodities because of the world financial crisis and signalled a possible delay in plans to sell $10 billion in assets.

Rio Tinto shed 5.4 percent, BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz) fell 5.9 percent, Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) dropped 7 percent, Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) lost 7.4 percent and Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) slipped 8.8 percent.

With crude prices CLc1 easing below $79 a barrel on recession and demand concerns, energy stocks languished. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) were down 1.6 to 3.5 percent.

"While we may overcome the immediate financial crisis ... you have got the broader economy to consider. Things are not looking so cheerful," said Tim Hughes, head of sales trading at IG Index. "The broader global economy is still incredibly precarious and facing some huge challenges going forward."

Banks were other standout losers, with the FTSE 350 banks index losing 2 percent. Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) lost between 0.9 and 4.9 percent.

Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) advanced 5.2 percent after the Independent said the government was considering a U-turn that would allow the bank to pay dividends to shareholders while still taking advantage of its 37 billion pounds bank bailout scheme.

The Financial Times also said some of Britain's banks were urging the government to lift the ban on dividend payments imposed as part of the bailout of the crisis-hit sector.

HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), which is to be merged with Lloyds, rose 2.6 percent, while Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) added 1.4 percent.

RBS, Lloyds and HBOS "would be well-served by paying some level of (low) dividend simply to re-enter the dividend list and allow income funds to again hold banks," said Alex Potter of Colins Stewart in a note.

"Beyond that, the payout would likely be limited by the wish to pay the government's equity injection down."

FINANCIALS DOWN

Insurers sagged after the Times said the Financial Services Authority had stepped up its scrutiny of leading life assurers amid concerns that crumbling investment markets are putting their solvency level under pressure.

Prudential (PRU.L: Quote, Profile, Research, Stock Buzz), Old Mutual (OML.L: Quote, Profile, Research, Stock Buzz), Aviva (AV.L: Quote, Profile, Research, Stock Buzz) and Standard Life (SL.L: Quote, Profile, Research, Stock Buzz) sank between 0.2 and 5 percent.

UK employment data, due at 0830 GMT, will provide a further gauge to the health of the British economy as concerns grow that it is heading into a deep recession.

Experian (EXPN.L: Quote, Profile, Research, Stock Buzz) shed 6.3 percent after the credit checking firm reported a 13 percent rise in first half revenue, and said it had decided not to sell its price comparison Web site, Pricegrabber as potential buyers were unlikely to be able to finance acceptable offers in current market conditions. BAE Systems (BAES.L: Quote, Profile, Research, Stock Buzz), which went ex-dividend, slipped 3.1 percent. The defense contractor said trading was in line with expectations. [ID:nWLB2659]

British Land (BLND.L: Quote, Profile, Research, Stock Buzz) and Simth & Nephew (SN.L: Quote, Profile, Research, Stock Buzz) also fell after going ex-dividend.

Autonomy (AUTN.L: Quote, Profile, Research, Stock Buzz) rose 3.7 percent after the software group beat market expectations by posting adjusted pretax profit of $53.7 million for the third quarter, and said it was "confident" about its outlook.

Pearson (PSON.L: Quote, Profile, Research, Stock Buzz) added 3.8 percent. The publishing group said its adjusted 2008 earnings per share should be toward the top end of current market estimates if the dollar maintains gains versus sterling.

Defensive drugmakers were also in demand, with Shire (SHP.L: Quote, Profile, Research, Stock Buzz) gaining 1.8 percent and AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) up 0.4 percent. (Editing by Hans Peters)

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Nikkei ends up 1.1 pct as panic over crisis eases

*Nikkei up 1.1 pct as panic over crisis eases

*Defensive stocks such as drugmakers help buoy the market

*Worries about global economy, corporate earnings weigh

*Mazda tumbles after scrapping plans for US plant (Adds stocks, details)

By Aiko Hayashi

TOKYO, Oct 15 (Reuters) - The Nikkei average reversed course and rose 1.1 percent on Wednesday as a sense of panic over the financial crisis eased, though worries about the global economy and company earnings sent the market lower in earlier trade.

So-called defensive stocks such as drugmakers including Takeda Pharmaceutical Co (4502.T: Quote, Profile, Research, Stock Buzz) helped buoy the market, though exporters such as Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) slid amid worries about the global economy and also after sharp gains.

Mazda Motor (7261.T: Quote, Profile, Research, Stock Buzz) tumbled more than 9 percent after a report that it has scrapped plans to build a second U.S. factory amid deteriorating sales. [ID:nN14171770]

"The worst is probably over for now after the markets confirmed that governments have decided not to let banks fail as they announced a series of measures," said Soichiro Monji, a chief strategist at Daiwa SB Investments.

"The gains are still due to short-covering, but we are likely to see some rebound for a while after the selling climax last week."

The benchmark Nikkei .N225 added 99.9 points to end at 9,547.47. It fell as much as 1.9 percent at one stage.

The Nikkei jumped more than 14 percent on Tuesday, the biggest one-day gain in its 58-year history, after losing 24 percent the previous week.

The broader Topix dipped 0.08 percent to 955.51.

U.S. stocks fell on Tuesday as investors looked past the U.S. pledge to pour $250 billion into major banks and instead focused on the dismal outlook for corporate earnings and the economy. [.N]

Some Tokyo market participants said that while the worst might be over for now, there were likely to be tough times ahead, making further substantial gains difficult. "Attention in the market is now shifting more to the economy and earnings, especially with U.S. bank earnings coming up soon. The market will really be watching those," said Katsuhiko Kodama, a senior strategist at Toyo Securities.

DRUGMAKERS GAIN, EXPORTERS SLIDE

Shares of Takeda jumped 6.2 percent to 4,950 yen, while Astellas Pharma (4503.T: Quote, Profile, Research, Stock Buzz) climbed 3.6 percent to 4,040 yen.

Convenience store Lawson (2651.T: Quote, Profile, Research, Stock Buzz) rose 6 percent to 4,630 yen after saying on Tuesday its first-half operating profit rose to 29.1 billion yen ($287.2 million), up from 25.5 billion yen a year earlier, boosted by a jump in tobacco sales after the introduction of ID-requiring vending machines. [ID:nT236119]

Among the biggest drags on the Nikkei 225 by volume weight were blue-chip exporters.

Sony slid 4.3 percent to 2,665 yen, while Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) dropped 5.2 percent to 2,355 yen and Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) fell 1.9 percent to 3,650 yen.

The president of Toyota said on Wednesday the business environment has deteriorated beyond earlier expectations and predicted the key North American car market would remain sluggish through next year. [ID:nT257805]

Shares of Mazda skidded 9.2 percent to 285 yen.

The Nikkei business daily said the deepening downturn in the U.S. market has forced Mazda to drop plans to produce fuel-efficient mid-sized cars and other models from the first half of the next decade, using a shut-down Ford plant or building a new one with Ford.

Companies with profit worries also came under pressure.

Shares of Elpida Memory (6665.T: Quote, Profile, Research, Stock Buzz) tumbled 14.5 percent to 1,183 yen after it said it would likely post a 40 billion yen half-year operating loss -- a much bigger loss than the market had expected. [ID:nT227061]

Trade was light on the Tokyo exchange's first section, with 2.51 billion shares changing hands, below last week's daily average of 2.92 billion.

Advancing stocks outpaced declining ones 883 to 756. (Additional reporting by Elaine Lies; Editing by Michael Watson)

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Europe shares slip; recession fears centre stage

* FTSEurofirst 300 falls 2.8 pct after two-day rally

* Banks slip, recession fears back in spotlight

* Commodity stocks track weaker metals, oil prices

By Atul Prakash

LONDON, Oct 15 (Reuters) - European shares headed lower on Wednesday to break a two-day winning streak as the euphoria over bold government action to arrest a financial sector meltdown dissipated and recession fears took centre stage.

At 0855 GMT, the FTSEurofirst 300 index of top European companies was down 2.8 percent at 939.10 points, after gaining a record 10 percent on Monday and 3 percent on Tuesday.

On Wednesday, banks were the top weighted sectoral losers, with Standard Chartered falling 6.6 percent, Societe Generale shedding 3 percent, HSBC down 3.2 percent and UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) down 4 percent.

KBC (KBC.BR: Quote, Profile, Research, Stock Buzz) fell 13.7 percent. The Belgian banking and insurance group said it expected a third-quarter loss of up to 930 million euros ($1.3 billion) after Moody's cut the credit ratings on a number of structured investment products that KBC had invested in.

Recession fears returned after trillions of dollars pledged for bank bailouts from Europe to Asia helped allay fears of an imminent financial meltdown.

"After the colossal gains achieved at the start of this week, it would seem that the hangover has kicked in and investors have sobered to the reality that recession is here," said Andrew Turnbull, senior sales manager at ODL Securities.

EU leaders meet in Brussels just days after stumping up 2.2 trillion euros ($3 trillion) to rescue European banks and jolt frozen money markets -- at the heart of worst financial crisis since the Great Depression -- into life.

European leaders will press for an overhaul of the world's financial structures after Asia joined western bastions of capitalism in bailing out banks to avert a financial meltdown.

Southeast Asian nations backed by Japan, South Korea, China and the World Bank were the latest to join the global rescue effort, agreeing on Wednesday to create a multi-billion fund to buy bad debt and help banks. [ID:nSP387433]

The United States on Tuesday offered to take $250 billion worth of stakes in nine top banks.

But concerns remained that the rescue would come at a huge economic cost and do little to repair the damage already done by a 14-month credit crunch, which has slowed the economy.

COMMODITIES STOCKS SLIP

Commodity shares also fell, tracking losses in metals and crude oil prices.

Oil fell 1.3 percent to trade below $78 a barrel, a far cry from all-time highs of around $147 hit earlier this year. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), gas producer BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) shed between 0.1 and 5.9 percent.

Weaker metals prices dragged down mining shares, with BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) and Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) falling between 2.6 and 13 percent.

Global miner Rio Tinto fell 9.2 percent. It warned of slowing Chinese demand for commodities because of the world financial crisis and signalled a possible delay in plans to sell $10 billion in assets.

Indian mining company Sterlite Industries, a unit of Vedanta Resources, said it will not be able to close a $2.6 billion deal to buy U.S. copper miner Asarco out of bankruptcy, due to troubles in the credit markets, an Asarco attorney said.

Vedanta shares were down 11 percent.

Britain's FTSE .FTSE was down 2.7 percent, Germany's DAX .GDAXI fell 2 percent and France's CAC .FCHI slipped 2.2 percent.

The FTSEurofirst 300 index plummeted 22 percent last week -- its worst weekly performance ever, and is down nearly 37 percent so far this year. (Reporting by Atul Prakash; Editing by Paul Bolding)

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Earnings jitters send HK shares down 5 pct

* Blue chips drop on earnings jitters

* Ping An slumps on Fortis carve-up

* China Eastern bucks downward trend on merger talk

(Updates to close)

By Parvathy Ullatil

HONG KONG, Oct 15 (Reuters) - Hong Kong shares slid 5 percent on Wednesday in anaemic turnover as investors locked in gains on a two-day, 14 percent rally amid worries about a slowdown in the global economy and its impact on corporate profits.

Resources stocks were walloped by lower commodity prices, while shippers sank, tracking the hefty 8.5 percent overnight drop on the global freight index .BADI.

But China Eastern Airlines (0670.HK: Quote, Profile, Research, Stock Buzz) avoided the downdraft, climbing 5.4 percent on mainland media reports that the airline's proposed merger with smaller rival Shanghai Airlines (600591.SS: Quote, Profile, Research, Stock Buzz) had been approved in principle by the Shanghai government.

"The rebound is over and the risk of recession as high as ever," said Patrick Shum, strategist with Karl Thomson Securities.

"Governments across the world are cutting welfare spending and issuing more debt to help the financial system. But these measures will create a bigger problem of an economic slowdown."

Governments around the world have pledged roughly $3.2 trillion in schemes that guarantee bank deposits, interbank lending and the purchase of new securities to shore up bank capital. [ID:nLC667557]

The benchmark Hang Seng Index .HSI closed down 834.58 points at 15,998.30. The index has dropped 42 percent so far this year.

"At the current valuations, most of the bad news we have heard so far has been factored in," said Mona Chung, fund manager with Daiwa Asset Management.

Historic valuations of Hong Kong's blue chip stocks still languish at 10 times their price to earnings, the lowest since the Asian financial crisis.

"But people have very different views on what is happening now and what is going to happen, hence the volatility," she said.

After rallying a total of more than 2000 points on Monday and Tuesday, the Hang Seng Index was likely to stay above 15,000 in the short term as the various financial rescue plans were rolled out, said Peter Pak, vice president with BOCI Research.

Mainboard turnover fell to HK$52.2 billion ($6.7 billion) from HK$81.7 billion on Tuesday.

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies slid 6.4 percent to 7,894.06.

Shares in Ping An Insurance (2318.HK: Quote, Profile, Research, Stock Buzz) tumbled 7.4 percent after Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz), in which the Chinese insurer owns a 5 percent stake, was carved up, sending its shares plunging 78 percent after a long suspension. [ID:nLE201918]

The Belgian-Dutch financial group was broken up along national lines this month as governments and investors feared for its viability in the shadow of the liquidity crunch.

Other Chinese financials slid as investors locked in gains on the steep two-day rally in mainland banks and insurers.

Top bank ICBC (1398.HK: Quote, Profile, Research, Stock Buzz) fell 5.9 percent while No.2 lender China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz) shrank 6.7 percent.

Offshore oil specialist CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) dropped 6.3 percent, pulling back from Tuesday's 13.8 percent rally after crude oil prices fell below $80 per barrel, a level critical to market bulls.

Asia's largest oil and gas producer, PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz), fell 6.5 percent.

Shipping stocks were battered by an 8.5 percent slide in the Baltic Dry freight index .BADI overnight on deepening concern over a protracted slowdown in demand for commodities amid a global recession.

Shares in China's largest shipping conglomerate, China Cosco (1919.HK: Quote, Profile, Research, Stock Buzz), plunged 10.5 percent while oil and coal carrier China Shipping Development (1138.HK: Quote, Profile, Research, Stock Buzz) dropped 13.6 percent.

(Editing by Anne Marie Roantree)

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Dollar And Yen Firm Up As Risk Aversion Returns

Daily Forex Fundamentals | Written by GFT | Oct 15 08 09:29 GMT |

Top Stories Nikkei drops sharply post DJIA retreat and rumors of hedge fund liquidation, but rallies on the close Carry pressured as EZ equities trade lower Fed's Janet Yellen - US in a recession Media reports that Treasury Secretary Paulson wants weak hedge funds closed, rest regulated TED Spread, LIBOR remain elevated despite rescue efforts Oil well below $80/bbl at $77 as slide sees no end Gold weaker as well below $850/oz as $800 remains key support Overnight Eco JPY Current Account.9T vs. 1.15T forecast EUR Final CPI -0.1% as expected GBP claimant count bit better but unemployment rate rises EUR CPI 3.6% vs. 3.8% suggesting that itmay have peaked Event Risk on Tap USD Retail Sales markets expects -0.3% USD PPI forecast to contract further to -0.4% Price Action USD/JPY pressured all night long to 101 level as equities go wobbly AUD/USD off 100 points to 6950 as risk appetite wanes GBP/USD holds firm at 7450 employment data mixed EUR/USDpivots 1.3600 as carry selling pressures but real money demand props up below Dollar and Yen Firm Up as Risk Aversion Returns Global equity markets retrenched after two days of strong rallies, pulling high yielding currencies down with them as a touch of risk aversion returned to the foreign exchange market and both dollar and yen firmed. For the first time in more than a month volatility was subdued as traders attention moved away from pure macro concerns to more micro economic factors. On the economic front the employment data from UK was relatively mixed with the claimant count not rising as steeply as the market had forecast at 31.8K vs. 35.5K projected. Nevertheless, the rolls were markedly higher than 6 months ago and the unemployment rate climbed to 5.7% from 5.6% forecast.Cable, however, showed little reaction to the news with prices remaining steady near the 1.7450 level. Pound's relative strength was primarily due the selling in EURGBP which helped prop up the unit on the relative basis. If stock prices continue to slide into the North American open 1.7400 is likely to give way, especially as 1.7500 now stands as key psychological resistance to the upside. Sterling will receive no support from UK fundamentals in the near future given the dour state of affairs in the country's economy, therefore any rallies are likely to be driven primarily by carry trade flows. The EUR/USD tried valiantly to hold 1.3600 for most of the early European session, but the pair was finally battered by risk aversion selling as equities drifted lower across the board.The currency market continues to be uncertain about the impact of the latest G-7 measures to stabilize the global banking system with many key metrics of risk such as LIBOR and TED spread remaining significantly elevated from their normal levels despite the best efforts of monetary and fiscal authorities to inject liquidity and capital into the financial sector. One of the key concerns regarding Europe is the that the region's banks are actually more leveraged than those of the US and still present a very substantial systemic risk should their assets decline further. On the economic front EZ CPI eased to 3.6% from the prior months reading of 3.8% suggesting that inflationary pressures may have peaked and opening the way for ECB to lower rates further before the end of the year. Ironically enough the cooler numbers had no negative impact on the pair because yield is no longer the story in FX.In an environment of universal global monetary easing rate differentials hold less interest for traders while balance sheet strength becomes a much greater concern.In a global economic slowdown return of capital trumps return on capital and to that end the lower yielders with positive Trade and Budget surpluses such as the Swiss franc and the yen should outperform assuming they are able to maintain their net current account surplus conditionfor the foreseeable future. Finally, the North American session sees US Retail Sales and PPI today, but unless the news is markedly different from consensus, the impact should be relatively modest as most traders anticipate softer numbers. After what seems like a lifetime of volatility,equity price movements should become more mutedwith majors likely remaining in reasonably narrow ranges for the rest of the day. FX Upcoming Currency GMT EST Release Expected Prior USD 12:30 8:30 USD Advance Retail Sales (SEP) -0.3% -0.7% USD 12:30 8:30 USD Producer Price Index (MoM) (SEP) -0.4% -0.9% Boris Schlossberg http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.

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Technical Analysis Daily: GBP/USD

Daily Forex Technicals | Written by iFOREX.bg | Oct 15 08 08:30 GMT |

GBP/USD 1.7431 GBP/USD Open 1.7019 High 1.7627 Low 1.7266 Close 1.7388 The British Pound recovered significantly yesterday against the US Dollar from Monday's bottom 1.7266 to Tuesday's top 1.7627, which are the first support and resistance levels respectively for the currency couple today. If the positive trend continues, as we expect for the moment, next resistance for today is expected at 1.7700, the break of which would lead to next target 1.7790. In downward direction next support further down is expected at 1.7190, followed by 1.7100. Technical resistance levels: 1.7625 1.7700 1.7790 Technical support levels: 1.7265 1.7190 1.7100 Trading range: 1.7420 - 1.7485 Trend: Upward Buy at 1.7431 SL 1.7401 TP 1.7471 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Euro-Zone CPI Fails to Impress, ECB to Hold Dovish Outlook

Daily Forex Fundamentals | Written by DailyFX | Oct 15 08 09:24 GMT |

Euro-Zone September HICP inflation was confirmed at 3.6% y/y, unchanged from the preliminary number and down from 3.8% y/y in August. Prices rose 0.2% m/m. Core inflation remained steady at 1.9%, that is slightly below the ECB's upper limit for price stability. The deceleration in the headline rates was mainly due to base effects as a sharp rise in food prices in September last year fell out of the equation and brought annual food price inflation down to 5.7% y/y from 6.2% y/y in August. Energy prices rose 0.3% m/m and the annual rate decelerated to 2.6% y/y from 2.7% y/y in the previous month. Data confirm that inflation peaked in July and with growth slowing down rapidly the headline rate will fall quicker towards the ECB's 2% limit than previously expected. This should give the ECB room for further rate cuts. Some risks of second round effects via higher wage demands remain, however. There is also some risk that governments will try to finance some of the rescue package for financial markets via indirect taxes, which could also push up inflation. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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U.K. Jobless Claims Rises for Eight Consecutive Months, Adding to Growth Fears

Daily Forex Fundamentals | Written by DailyFX | Oct 15 08 09:26 GMT |

U.K. claimant count rate rose to 2.9% in September from 2.8%, in line with expectations and reaching the highest reading since January last year. Meanwhile, claimant count change on the month was 31.8k, slightly better than our survey median for 35.6k and versus 35.7k in August (revised from 32.5k previously). The 3m average ILO unemployment rate surged to 5.7% from 5.2% , hitting its highest reading since March 2000 and recording its largest jump since July 1991. Data hence highlights the rapidly deteriorating state of the U.K. labour market. August earnings data showed a slowdown in wage growth, with the headline 3m y/y rate slowing to 3.4% (median 3.5%) from 3.5% in July, while the measure excluding bonuses slowed to 3.6% (median same) from 3.7%. Meanwhile, U.K. Prime Minister Brown said the government will do everything it can to create jobs in the U.K. economy. Speaking from the EU leaders summit in Brussels, the comments were delivered as fresh labour market data showed the ILO unemployment rate reach its highest level in in over 8 years in August and the claimant count increase showed another net increase of more than 30k in September. These figures are backward looking, however, and we are likely to see a further deterioration of the labour market situation as the fall-out from the past few week's credit crisis intensification will be visible, as well as when school-leavers hit the unemployment registers. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Daily Forex Analysis

Daily Forex Technicals | Written by FOREXYARD | Oct 15 08 09:10 GMT |

Headlines American and European Bank Bailouts Strengthen Markets Following the U.S. announcement on Tuesday that the government would pump $250 billion into banks, similar plans are being executed by governments in Britain, France and Germany. This direct capital infusion is exactly what traders were hoping for. As bank balance sheets are being shored up, the conditions for bank lending are receiving some slack. However, there is still much anxiety regarding the upcoming recession, so traders will have to see if this move produces the desired effect. Market Trend EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP Daily Trend Weekly Trend Resistance 1.3690 1.7560 102.70 1.1500 0.7135 0.7900 1.3651 1.7530 102.35 1.1460 0.7100 0.7860 1.3620 1.7500 102.00 1.1425 0.7060 0.7820 Support 1.3550 1.7400 101.40 1.1320 0.6975 0.7740 1.3510 1.7380 101.00 1.1290 0.6950 0.7700 1.3480 1.7360 100.70 1.1250 0.6910 0.7668 Economic News USD - U.S. Retail Sales on Tap Following the U.S. Treasury's announcement to inject $250 billion into financial institutions this week, the dollar finally appears to have broken its 3-day downward trend against the other major currencies. The dollar was traded at $1.3575 against the EUR at the end of yesterday's trading session after climbing steadily to 1.3767 over the course of the last few days. The previous appreciation of the USD was largely due to the reluctance of banks to lend to one another, which spurred a surge in demand for U.S. currency funding in global money markets. However, the Federal Reserve announced that it would offer European banks as many dollars as needed, and at a fixed interest rate, which has caused the dollar to slip against the other major currencies in recent sessions as an increased supply of USD is expected to ease demand. As a result of the aggressive steps taken to pump cash into troubled banks, investors have started to unwind safe-haven trades in the USD which has also caused a correction to the greenback's recent upswing. However, even after the latest measures by global governments to flood banks with cash, inter-bank lending rates were not expected to fall so quickly. It is still too soon to determine whether this move is going to end up causing bearishness for the USD over the long run, or if it will help stabilize the economic system. Traders have an important day of trading ahead of them today. Starting around 12:30 GMT and lasting throughout the day, a stream of announcements and economic indicators will be released by the American economy followed by speeches from Federal Reserve Board Chairman Ben Bernanke and a speech by FOMC member Donald Kohn about the state of the U.S. economy. With important figures such as Retail Sales and the Producer Price Index (PPI) being released, traders can expect some heavy volatility in USD trading throughout the day. EUR - Euro-Zone Bank Bailout Encourages Investment Lately the EUR has experienced a positive trend against its major currencies as investors are speculating that the European and U.S. government plans to pour cash into troubled banks will help markets climb out of the financial crisis. The European bailout plan gave a strong boost to the value of the various European currencies, primarily the EUR, which climbed out of the hole it found itself in after the USD's bullish run late last week. Following the U.S. announcement on Tuesday that the government would pump $250 billion into banks, similar plans are being executed by governments in Britain, France and Germany. This direct capital infusion is exactly what traders hoped for. As bank balance sheets are being shored up, the conditions for bank lending are receiving some slack. However, there is still much anxiety regarding the upcoming recession, so traders will have to see if this move produces the desired effect. Even though the European Central Bank (ECB) cut its target interest rates by 50 basis points last week, in concert with a global interest rate cut, the markets are expecting further rate cuts by year end. Investors should pay close attention to the release of the Consumer Price Index (CPI) today, as well as the figures coming out of the U.S., as these will be the strongest driving forces in the market throughout the day. JPY - Analysts Forecasting an Appreciation for the JPY Recent speculation that the U.S. Treasury's plan to inject $250 billion into financial institutions would not prevent a recession in the world's largest economy has caused the JPY to rise for the first time in five days against the dollar. The forthcoming data from the U.S. is predicting that the nation's retail sales have fallen at a faster pace recently as job losses and housing slumps hurt consumption, these factors may have strengthened the JPY versus the USD. The Japanese currency could also get support from the stock market decline as it shows that investors aren't completely ready to take on risk. The U.S. and Asian stocks have fallen recently, damping investor confidence in higher-yielding assets. The currency was traded at 101.35, up from 102.07 yesterday. Since Japan isn't as adversely affected as the U.S. and Europe are by the credit crisis, the JPY remains a safe-haven currency and is likely to be bought further in today's trading. It has climbed 9% versus the EUR this month as mounting credit-market losses encouraged investors to shed higher yielding assets funded by low-cost loans in Japan. As market concerns over a U.S. recession intensify, these worries may lead to a buying session for the yen. Oil - Will the Price of Oil Continue to Drop During the Winter Season? Unable to break through the price barrier of 77.80, the price of Light Sweet Crude continues to test its lower limits. How long it will test this price before breaking through, or climbing back to higher levels, is yet unknown. As always with the price of Oil, the USD and the American economy play an important role. With fears of a recession looming over investors countered by hopes of the recent financial bailout package, the market seems confused about which direction to take. One certainty is that recent market anxiety has lowered the demand for Crude Oil, which is showing its effects by the steady drop in price over the last two weeks regardless of supply. As the winter season approaches the northern hemisphere, the price of Crude Oil is typically forecasted to climb as the large industrialized nations of Europe and North America start buying up heating oil for their populations. With the recent slump in demand, however, the price of Crude Oil may indeed continue to fall despite winter demand. For today's trading, investors should continue to keep an eye on the American economic indicators as they will be the market movers throughout the day. Technical News EUR/USD The pair has been range-trading for the last few days, and is now traded around the 1.3620 level. Currently, the Bollinger Bands on the 4-hour chart is tightening, suggesting that a sharp movement is impending, and as all oscillators on the 4-hour chart are pointing down, it appears that the move will be bearish. Traders should wait for the breach and swing. GBP/USD The cable is currently range-trading within a relatively wide range. A doji formation on the 4-hour chart indicates that a sharp movement is forthcoming, and a bearish cross on the Slow Stochastic suggests that the move will be bearish. Traders should wait for the breach and swing. USD/JPY The pair has been range-trading for a while now, with no specific direction. The Daily chart's Slow Stochastic is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today. USD/CHF After peaking at the 1.1485 level, the pair is dropping consistently and is now traded around the 1.1370 level. Currently, as all oscillators on the 4-hour chart are pointing down, it seems that the bearish movement could extend. Going short appears to be the preferable choice today. The Wild Card EUR/AUD There is still a bearish configuration on the daily chart, indicating that the momentum is still down. The Slow Stochastic flows high supporting the notion that there is still room to run for this trend. In the shorter time frame there is a bullish cross forming on the hourleis indicating that there might be a small bullish correction before the bearish move resumes. Forex traders can maximize profits by selling on highs and taking advantage of a current bearish trend. Indicators Date Time (GMT) Country Event Period Previous Forecast Actual 10/15 08:30 GBP Claimant Count Change 32.5K 35.5K 31.8K 08:30 GBP Average Earnings Index y/y 3.5% 3.5% 3.4% 08:30 GBP Unemployment Rate 5.5% 5.6% 5.7% 09:00 EUR CPI y/y 3.6% 3.6% - 09:00 EUR Core CPI y/y 1.9% 1.9% - 12:30 USD Core Retail Sales m/m -0.7% -0.3% - 12:30 USD PPI m/m -0.9% -0.4% - 12:30 USD Retail Sales m/m -0.3% -0.6% - 12:30 USD Core PPI m/m 0.2% 0.2% - 12:30 USD Empire State Manufacturing Index -7.4 -9.0 - 14:00 USD Business Inventories m/m 1.1% 0.5% - 17:15 USD Fed Chairman Bernanke Speaks * * * 18:00 USD Beige Book * * * 22:00 NZD Business NZ Manufacturing Index 45.7 * - 23:00 USD FOMC Member Kohn Speaks * * * 10/16 USD FOMC Member Stern Speaks * * * 07:15 CHF Retail Sales y/y 6.2% 0.9% - 08:00 EUR Italian Trade Balance 2.07B -1.20B - FOREXYARD

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Europe Aim for Global Bank Rules Meets U.S. Objection

By Gonzalo Vina

Oct. 15 (Bloomberg) -- Now that the U.S. is following Europe's lead by buying stakes in banks to shore them up, leaders of France, Germany and Britain are setting their sights on a bigger goal: tightening financial regulations worldwide.

The Americans aren't likely to go along quite so willingly this time, even if European leaders can manage to present a unified front, which also won't be easy.

European Union leaders meet today in Brussels to discuss the next steps in responding to the global market meltdown after committing more than $2 trillion to rescue their own institutions.

French President Nicolas Sarkozy, German Chancellor Angela Merkel and U.K. Prime Minister Gordon Brown are pushing for greater global regulation and an expanded role for the International Monetary Fund. Such a deal would echo the 1944 Bretton Woods agreement that fixed exchange rates and created the IMF and the World Bank.

``Europeans will have some strong points to make because markets have failed,'' said Martin Weale, director of the National Institute of Economic and Social Research in London. ``But the reality is that the U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want.''

The EU leaders are trying to capitalize on the cachet Brown has enjoyed in recent days after Britain's rescue plan was partly copied by U.S. Treasury Secretary Hank Paulson.

European Rescue

Britain is spending 50 billion pounds ($87 billion) on bank stakes and extending another 450 billion pounds in loan guarantees. France, Germany, Spain the Netherlands and Austria together have pledged another 1.3 trillion euros ($1.8 trillion) to shore up loans and buy shares in their lenders.

The U.S. originally planned only to buy soured assets under its $700 bailout plan. Now, people familiar with the matter said, the Treasury plans to acquire stakes in Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., a combined Bank of America Corp./Merrill Lynch & Co. and several other big banks. Later, it will invest in ``thousands of others,'' President George W. Bush's working group on financial markets said.

``The U.S. followed Europe's lead because it wanted to see what the reaction would be and whether it would have the desired effect, and it did,'' said Robbert Van Batenburg, head of research at New York-based broker dealer Louis Capital Markets LP. ``But in this case, I just have a hard time believing the U.S. would relinquish oversight to the IMF. It will open up a whole can of worms. I don't think it's going to fly.''

Out of the `Woods'

Today's meeting of the 27 European leaders won't attempt a complete redo of Bretton Woods, named for the New Hampshire town where the deal was struck. Instead, they will discuss ways to limit contagion in the financial markets after the biggest stock sell-off since 1933.

``While the founders of Bretton Woods devised rules for a world of limited capital flows, we must devise new rules for a world of global capital flows,'' Brown said on Oct. 13.

Alarmed by the quickly spreading contagion -- triggered by Lehman Brothers Holdings Inc.'s failure last month -- European leaders want to replace the disparate banking rules in every nation with global regulations befitting the industry's worldwide footprint.

Brown long has advocated increased IMF economic surveillance and analysis of the global impact of individual nations' policies.

`Good Housekeeping'

``What we do not have is anything other than national and regional supervision'' of financial services companies, Brown said at a briefing in Brussels today. ``The rebuilding of the international financial architecture needs exactly the same vision that we had in the 1940s.''

Brown is pushing for a banking-industry culture change that would allow fewer bonuses and less reliance on high-risk trading. He also wants countries with quick-growing economies to have a bigger voice in the governance of the IMF.

``If you want to prevent crises like these you are going to have to come up with something more than rule changes, because banks will just get around them eventually,'' said Andrew Clare, a former Bank of England economist who now teaches finance at Cass Business School, at City University in London.

Americans used Bretton Woods as a lever to remake Europe's war-ravaged economy along market principles. The pact pegged the dollar to the value of gold -- a standard abandoned in 1971 -- and laid the groundwork for the IMF to become a lender of last- resort to troubled economies. With the West's financial system teetering, Bretton Woods has become a touchstone for today's policy makers.

`Discipline'

``Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline,'' European Central Bank President Jean-Claude Trichet said yesterday in New York, referring to what he called ``macroeconomic discipline, monetary discipline, market discipline.''

As emerging markets boomed in recent years, repaying IMF loans and piling up foreign-exchange reserves, the fund has struggled for a new role. The fund faced criticism from emerging-market policy makers who had chafed under IMF-mandated spending cuts, asset sales and interest-rate increases that were a condition of its loans.

Like Brown, Merkel said she wants a bigger oversight role for the IMF, along with ``stronger'' regulation of markets with new ``international rules.''

Tremonti's Plan

Italy, which takes over the presidency of the Group of Seven nations from Japan next year, will seek a ``new accord like Bretton Woods,'' Finance Minister Giulio Tremonti said on Oct. 13, without providing specifics.

Sarkozy agrees with Brown that emerging economies should have more say in global decision-making. His prescription: including China, India and Brazil in the Group of Eight industrialized nations.

``I will convince the Americans of the necessity'' of expanding the G-8 beyond the U.S., Russia, Britain, Germany, France, Italy, Canada and Japan, Sarkozy said Oct. 12.

``It's possible that the Europeans can now get it together on broader reform of the international financial system,'' said Richard Portes, professor of economics at London Business School. ``Discussions are going to have to be more inclusive than when the U.S. and U.K. called the shots. Brazil, India, China and others will now have to be included too.''

Not all will be easy sailing for the Europeans, who are struggling to forge a new regulatory framework in their own 27- nation bloc. Charles Goodhart, professor of finance at the London School of Economics and former Bank of England policy maker, said the U.S. likely will dismiss any proposal that would reduce its control of its own economic destiny.

``The Americans have been extremely unfortunate,'' Goodhart said. ``The British plan has been very good, but Gordon Brown's call for a new Bretton Woods is complete baloney.''

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net

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