Yen Advances as Drop in Stocks Reduces Higher-Yield Demand

By Daniel Kruger and Agnes Lovasz

Nov. 12 (Bloomberg) -- The yen rose for a third day against the dollar and advanced versus the euro as a drop in global stocks encouraged investors to sell higher-yielding assets and pay back low-cost loans in Japan.

The pound fell to a record low against the euro for a third day after the central bank said the British economy will shrink through most of next year as a result of the global credit freeze. The dollar touched a two-week high against the euro on increased demand for the safety of U.S. assets.

``The correlations look high enough between negative equities and upside dollar and yen moves,'' said Dustin Reid, senior foreign-exchange strategist at RBS Greenwich Capital Markets in Chicago. ``It seems to be a solid enough trend.''

The yen increased 1.1 percent to 96.57 per dollar at 9:20 a.m. in New York, from 97.65 yesterday. Japan's currency increased 1.2 percent to 120.79 per euro from 122.27. The euro was at $1.2503, compared with $1.2522, after reaching $1.2477, the lowest level since Oct. 28.

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Agnes Lovasz in London at alovasz@bloomberg.net

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European Money Rate Falls to Lowest Since Credit Crisis Began

By Gavin Finch

Nov. 12 (Bloomberg) -- The cost of borrowing euros in London for three months fell to the lowest level since before the credit squeeze began, and dollar rates slid, as central banks sought to counter a collapse in lending that's battering the global economy.

The London interbank offered rate, or Libor, for euros fell 5 basis points to 4.27 percent today, the lowest level since Aug. 1, 2007, British Bankers' Association data showed. That's 102 basis points above the European Central Bank's key interest rate, compared with 40 basis points more on Aug. 9, 2007, when BNP Paribas SA halted withdrawals on three funds, sparking the crisis. The three-month dollar rate fell for the 23rd consecutive day.

``Central bank cash auctions are really starting to have an impact on money rates,'' said David Keeble, the London-based head of fixed-income strategy at Calyon, the investment-banking unit of France's Credit Agricole SA. ``There's a lot of very cheap cash coming into the system. We're still at elevated levels. The lending side isn't picking up too much.''

Interbank rates fell from last month's peaks as central banks provided unlimited dollar funding and governments offered bailouts and guarantees to financial institutions. Credit markets, which began seizing up after the BNP Paribas decision, froze after Lehman Brothers Holdings Inc. collapsed on Sept. 15, shattering lenders' confidence they would be repaid.

`Not Functioning'

``The money market is still not functioning properly and banks are not willing to lend to each other,'' ECB Executive Board member Lorenzo Bini Smaghi said yesterday. ``The rates that banks charge each other are still too high.''

Three-month dollar Libor slid almost 5 basis points to 2.13 percent, the lowest level since Oct. 27, 2004. That's still 113 basis points more than the Federal Reserve's target rate for overnight bank loans. The average is 16 basis points in the seven years to August 2007.

Banks yesterday lodged 142 billion euros ($178 billion) in the European Central Bank's deposit facility at 3.25 percent, down from 209.5 billion a day earlier. The daily average in the first eight months of the year was 427 million euros. Financial institutions borrowed 7.3 billion euros from the ECB at the emergency overnight marginal rate of 4.25 percent, compared with 11.4 billion euros the day before.

The global credit crisis that started with the collapse of U.S. subprime mortgages caused banks worldwide to record $918 billion in writedowns and losses since the start of last year. That prompted financial institutions to freeze lending and sent corporate borrowing costs to records.

Asia Rates Drop

U.S. House Speaker Nancy Pelosi threw her support behind the premise that General Motors Corp., the largest U.S. automaker, is too big to be allowed to fail. In urging Congress to enact emergency aid for the ailing auto industry, Pelosi rejected calls to let GM collapse and sided with the company and its allies in trying to prevent a ``devastating'' domino effect that would cost millions of jobs.

A GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from a 14-year high of 6.5 percent in October, and produce a recession comparable in length to that of 1980-82, according to Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts.

The three-month rate for Hong Kong dollars, known as Hibor, dropped almost 6 basis points to a five-month low of 2.04 percent today after the city's monetary authority added funds.

Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a daily survey by the BBA before noon in London.

The Libor-OIS spread, which former Fed Chairman Alan Greenspan said in June should serve as a measure for determining when markets have returned to normal, was at 166 basis points. The spread measures the difference between the rate banks charge for three-month dollar loans relative to the overnight indexed swap rate.

It compares with 87 basis points on the last trading day before Lehman declared bankruptcy, and an average of 11 basis points in the five years before the onset of the financial crisis.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Garfield Reynolds in Sydney at greynolds1@bloomberg.net

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Copper, Aluminum Fall to Three-Year Lows on Bulging Stockpiles

By Claudia Carpenter

Nov. 12 (Bloomberg) -- Copper and aluminum fell to three- year lows in London as bulging stockpiles heightened speculation that miners need more output cuts to match slowing demand led by China, the world's biggest buyer of both metals.

Aluminum inventories in warehouses monitored by the London Metal Exchange have jumped 67 percent this year to the highest since 1995 and copper supplies are the highest since 2004. China's aluminum demand may grow 2 percent or 3 percent next year, the slowest pace since 1997, Wang Feihong of Beijing Antaike Information Development Co. said in Beijing today.

``Inventories are going up and China's not looking great,'' said Jon Bergtheil, an analyst at Citigroup Inc. in London. ``That's what's worried the market in copper for the last two or three weeks.''

Copper for delivery in three months fell as much as $70, or 1.9 percent, to $3,570 a ton, the lowest since Sept. 19, 2005, and was at $3,620 a ton as of 12:05 p.m. local time. Aluminum dropped as much as $29 to $1,919, the lowest since Oct. 24, 2005.

European industrial production declined 2.4 percent in September from a year earlier, the biggest decline since February 2002, the European Union's statistics office in Luxembourg said today. From the previous month, production dropped 1.6 percent, led by Germany, the world's biggest third-largest copper user after China and the U.S. in 2007, according to the International Copper Study Group in Lisbon.

``It's more or less the same for all the industrial metals: they're suffering from economic slowdown, inventories are recovering and demand is coming down,'' said Jochen Hitzfeld, an analyst at UniCredit SpA in Munich. ``We will see a lot of production cuts coming in the next few months'' that will slow the declines, he said.

Aluminum Forecasts

UniCredit forecasts aluminum will average $2,150 a ton next year, down 22 percent from this year's average, and copper at $5,000, 33 percent lower.

``Aluminum is now between 20 and 30 percent below production cost -- they will cut back,'' Hitzfeld said.

Codelco, the world's biggest copper producer, has cut surcharges for metal sold next year in Europe, Japan and South Korea to keep market share as global growth slows. Codelco lowered its surcharge for metal sold next year to $65 a ton in Japan and $64 a ton in South Korea, according to four industry executives who saw the notice to clients today. In Europe, the fee will be $80 a ton.

Stockpiles of copper gained 4,625 tons, or 1.7 percent, to 270,100 tons, the 16th consecutive increase. Aluminum stockpiles jumped 6,125 tons to 1.56 million tons, the most since Jan. 31, 1995.

Lead for three-month delivery was unchanged at $1,280 a ton and tin dropped $225 to $13,950 a ton. Nickel gained $95 to $10,800 a ton and zinc rose $15 to $1,125 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net

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Gold Declines in London as Crude Oil Drops, Dollar Rebounds

By Nicholas Larkin

Nov. 12 (Bloomberg) -- Gold fell in London, erasing earlier gains, as crude oil dropped and the dollar rebounded against major currencies, reducing bullion's appeal as an alternative investment and hedge against inflation.

Oil slipped to a 20-month low on forecasts that U.S. crude inventories grew for a seventh week as the worsening economy erodes energy demand. The dollar rebounded against a basket of six currencies, heading for a fifth daily gain. Bullion typically moves in the opposite direction to the U.S. currency.

``The sentiment is still pretty negative,'' Narayan Gopalakrishnan, a Geneva-based trader at MKS Finance, one of Switzerland's four bullion refiners, said by phone today. ``With dollar firmness and oil not helping,'' gold may head toward $680 an ounce in the near future, he said.

Gold for immediate delivery lost $3.45, or 0.5 percent, to $728.25 an ounce by 1:19 p.m. in London. It gained as much as 1 percent earlier. December futures declined $6.90 to $725.90 an ounce in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal fell to $731.50 in the morning ``fixing'' in London used by some mining companies to sell production, from $733.75 at the previous afternoon fixing.

Oil for December delivery fell as much as much as 2.8 percent to $57.70 a barrel and last traded at $58.66 on the New York Mercantile Exchange. The ICE futures exchange's U.S. Dollar Index added 0.3 percent after earlier slipping 0.5 percent.

Hampered by Dollar

Bullion has lost 29 percent since reaching a record $1,032.70 an ounce in March as investors liquidated their commodity holdings to raise cash amid the global credit crisis.

``Gold and silver should continue to be supported by strong physical offtake, although the strength of the U.S. dollar is hampering attempts by the metals to trade up,'' John Reade, an analyst at UBS AG in London, wrote in a note today.

Among other metals for immediate delivery, silver lost 1.6 percent to $9.59 an ounce. Platinum added $6, or 0.7 percent, to $828.50, and palladium was unchanged at $218.25 an ounce.

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

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Oil Falls to 20-Month Low on Forecast U.S. Data Will Show Slump

By Grant Smith and Christian Schmollinger

Nov. 12 (Bloomberg) -- Crude oil fell to a 20-month low on forecasts that a report will show U.S. crude inventories grew last week as the worsening economy wears down energy demand.

U.S. stockpiles of crude probably increased for a seventh week, while supplies of gasoline and distillate fuels also accumulated, according to a Bloomberg survey before tomorrow's Energy Department report. The International Energy Agency said it's ``more than likely'' to reduce its global oil demand growth estimate for a third month tomorrow.

``Oil prices remain under downward pressure,'' said Christopher Bellew, senior broker at Bache Commodities Ltd. ``Tomorrow's data are expected to continue the pattern of building stocks, compounding the picture of falling demand coming out of economic data.''

Crude oil for December delivery fell as much as $1.63, or 2.8 percent, to $57.70 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since March 20, 2007. The contract traded at $58.15 a barrel at 1:01 p.m. London time.

Yesterday, oil lost $3.08, or 4.9 percent, to $59.33 a barrel, the lowest close since March 20, 2007. Prices have tumbled 60 percent from a record $147.27 reached on July 11.

The Organization of Petroleum Exporting Countries, which announced a 1.5 million barrel-a-day supply cut last month to staunch the price drop, may meet again before its next scheduled meeting in December if futures keep declining, Iranian OPEC governor Mohammad Ali Khatibi said in a phone interview from Tehran today.

U.S. Inventories

Prices have fallen too far based on the costs of production, the International Energy Agency's executive director Nobuo Tanaka said at a conference to launch the agency's 2030 outlook in London today.

Prices of $80 a barrel is need to ensure future supplies, The agency's Chief Economist Fatih Birol said at the same event.

U.S. crude stockpiles probably increased 750,000 barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 12 analyst estimates before the Energy Department report.

Gasoline stockpiles probably increased 200,000 barrels from 196.1 million barrels the week before, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 127.8 barrels the week before, the survey showed.

The department is scheduled to release its weekly report tomorrow at 11 a.m. in Washington. The report is being delayed by a day because of yesterday's Veterans Day holiday.

`Pull Back'

``The market works on emotions and fundamentals and both are still pointing to lower prices,'' Stephen Schork, president of energy analysts Schork Group in Philadelphia, said in an interview with Bloomberg Television. ``We do know that we are in a recession and demand is pulled back greatly.''

The IEA already has cut its 2008 forecast by about 1.3 million barrels a day in seven revisions this year. Last week it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million barrels a day.

Brent crude oil for December settlement was at $55.38, down 33 cents, on London's ICE Futures Europe exchange at 12:23 p.m. London time. It earlier fell as much as $1.43, or 2.6 percent, to $54.28 a barrel, the lowest since Jan. 30, 2007.

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

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Lithuania, Serbia `Frontier' Label May Lure Investors

By Michael Tsang

Nov. 12 (Bloomberg) -- Lithuania and Serbia may see increased interest from money managers who oversee more than $3 trillion after MSCI Inc. places them in its benchmark index for frontier markets this month.

The two nations, whose companies have a combined capitalization of $1 billion, will be added in the 19-country MSCI Frontier Markets Index after the close of trading on Nov. 25, according to a statement released on the New York-based index provider's Web site yesterday.

``The move to the MSCI frontier-market index helps put these countries on the map,'' said Viktor Broczko, who helps oversee about $800 million in emerging-market equities at Progressive Developing Markets in London.

The MSCI Lithuania Index, valued at $855 million based on shares that are freely traded, includes just two stocks: AB TEO LT, the country's biggest communications company, and AB Rytu Skirstomieji Tinklai, the operator of power grids in eastern Lithuania. Shares of both Vilnius-based companies have fallen 41 percent and 51 percent, respectively, this year.

TEO lost 2.8 percent at 1:22 p.m. London time today and Rytu declined 2.2 percent.

Two banks make up the MSCI Serbia Index, which has a market value of $166 million on a so-called free-float adjusted basis. Belgrade-based Komercijalna Banka AD, Serbia's biggest bank by market value, has lost 72 percent of its value this year. AIK Banka AD has dropped 73 percent in 2008.

Ghana, Botswana

Komercijalna retreated 2 percent today and AIK Banka slipped 3.4 percent.

In addition, Ghana, Botswana, Jamaica and Trinidad & Tobago may gain so-called ``frontier market'' status by May 2009, the index provider said. The classification was created by MSCI for stock markets that have less-developed economies and financial markets than emerging markets, and that typically have more restrictions on foreign stock ownership.

Ghana's All-Share Index is the world's best performing stock benchmark this year and one of only three tracked by Bloomberg globally that has advanced in dollar terms. Shares in the country of 22.5 million, sandwiched between Togo and Ivory Coast, has gained 31 percent in 2008 in dollars.

The Botswana Stock Exchange's Domestic Company Index, which includes 16 companies valued at about $3.5 billion, has declined 3.7 percent this year. Standard Chartered Bank of Botswana Ltd., the country's third-biggest lender and the biggest stock in the index, has gained 1.3 percent.

Frontier markets have plummeted 46 percent this year, as the worst financial crisis since the 1930s buffeted companies in markets typically less correlated to industrialized economies.

To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net

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Gulf Shares Fall on Real-Estate Concern; Tamweel, Emaar Drop

By Haris Anwar and Ayesha Daya

Nov. 12 (Bloomberg) -- Persian Gulf stocks fell, sending Dubai's index to its biggest five-day slump since at least 2003, as mortgage company Tamweel PJSC had to borrow from the United Arab Emirates central bank amid a property market slowdown.

Tamweel, the U.A.E.'s second-biggest mortgage provider, dropped to the lowest level since its listing in July 2006. Emaar Properties PJSC, the region's largest developer, sank to a four-year low as it gave buyers the option to defer payments on new homes. HSBC Holdings Plc said Dubai and Abu Dhabi real- estate prices fell in the month to October.

Dubai is bracing for a downturn in the property market as economic growth slows, reducing demand for real-estate. HSBC and Lloyds TSB Group Plc, two of the largest U.K. banks operating in the U.A.E., yesterday said they would tighten mortgage lending in the Gulf state.

``The real-estate sector is in the focus because people think we're going to see a decline in the property prices, and the credit crunch will hit banks,'' said Chamel Fahmy, senior regional sales trader at Beltone Securities Brokerage in Dubai. ``We're still 20 percent to 25 percent away from the bottom.''

The Dubai Financial Market General Index tumbled 5.5 percent to 2,214.8, bringing the five-day slump to 24 percent, its biggest such decline since at least December 2003, when Bloomberg started tracking the measure. The Abu Dhabi Securities Exchange General Index dropped 5.7 percent.

Credit Crisis

Dubai's benchmark index has lost 63 percent this year as concern deepened that the global credit crisis and slumping oil prices will slow the region's property market. Tamweel and Emaar led the decline, losing more than 75 percent each.

Today's drop left Dubai's benchmark index valued at 5.3 times the earnings of its 29 companies, the lowest level since at least February 2007, data compiled by Bloomberg show. Abu Dhabi's index trades at 6.9 times profit. The MSCI Emerging Markets Index is valued at 8.2 times earnings.

Oil fell to a 20-month low on expectations that U.S. fuel stocks grew for a seventh week as the worsening economy wears down energy demand. The Organization of Petroleum Exporting Countries' Gulf members, which produce almost a fifth of the world's oil, have used record crude income to embark on infrastructure projects including man-made islands and the world's tallest tower. Oil for December delivery fell as much as $1.63, or 2.8 percent, to $57.70 a barrel in electronic trading on the New York Mercantile Exchange.

Property Prices Decline

Tamweel lost 9.4 percent to 1.26 dirhams. Tamweel's Chief Financial Officer Gaurav Agarwal said yesterday the company received money from the country's central bank after the cost of financing rose amid volatility in credit markets.

Emaar fell 9.9 percent to 3.37 dirhams, the lowest since October 2004. The company created options for buyers to defer payment on new homes as mortgage loans become more difficult to obtain. Buyers can pay 25 percent of the value of a new Emaar property up to five years after handover.

Dubai property prices, including villas and apartments, fell 4 percent in the month to October, while in Abu Dhabi they declined 5 percent, HSBC said in a report today. HSBC and Lloyds restricted lending after house prices in Dubai quadrupled in the last five years, fueling concern that a sharp fall is imminent. The Central Bank of the U.A.E. held discussions with the finance ministry on measures to support real-estate lending amid the global financial crisis.

DFM Drops

Sorouh Real Estate Co., Abu Dhabi's second-largest property developer, declined 9.5 percent to 2.68 dirhams, bringing the five-day slump to 35 percent.

Borse Dubai Ltd., the parent of Dubai Financial Market PJSC and the Dubai International Financial Exchange, is in talks to refinance $4.2 billion of loans at interest rates tied to the price of credit-default swaps, raising the cost of the debt, said three bankers with knowledge of the transaction. Dubai Financial Market, the only bourse listed in region, dropped 2.8 percent to 1.75 dirhams.

The Kuwait Stock Exchange Index fell 2.3 percent, Oman's Muscat Securities Market 30 Index lost 3 percent, while in Qatar the DSM 20 Index retreated 4.7 percent. The Bahrain All Share Index fell 2.3 percent. Saudi Arabia's Tadawul All Share Index gained 0.4 percent.

Zain dropped 2 percent to 1,000 fils. The Kuwait-based phone company with units in 22 African and Middle Eastern nations said it will base its African business in Nairobi and plans further acquisitions on the continent.

The following stocks also rose or fell in the region. Stock symbols are in parentheses after company names:

Bank Sohar SAOG (BKSB OM), the Omani bank that started trading in Muscat last year, declined 3.1 percent to 0.16 rial after the company appointed Mohamed Kalmoor as temporary chairman after the serving chairman resigned.

Gulf Cement Co. (GCEM UH), the U.A.E.-based cement producer, plunged 7.1 percent to 3.79 dirhams after it said third-quarter profit fell 97 percent on losses from investment income.

To contact the reporter on this story: Haris Anwar in Dubai on Hanwar2@bloomberg.netAyesha Daya in Dubai adaya1@bloomberg.net



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U.K. Stocks Rise, Led by Sainsbury; BOE Signals More Rate Cuts

By Adam Haigh

Nov. 12 (Bloomberg) -- U.K. stocks rose after the Bank of England signaled it is prepared to cut interest rates again, profit at J Sainsbury Plc beat estimates, and Dresdner Kleinwort said the peak of the financial crisis has passed.

Sainsbury, the third-largest U.K. supermarket chain, added 5.1 percent, the most in three weeks. Scottish & Southern Energy Plc gained 4.7 percent after the U.K.'s second-biggest energy supplier raised its interim dividend and predicted a full-year dividend of at least 66 pence.

The benchmark FTSE 100 Index added 27.73, or 0.7 percent, to 4,274.42 at 12:54 p.m. in London, bringing its loss this year to 34 percent. More than $2 trillion has been erased from the value of U.K. equities, as credit losses and writedowns totaled $918 billion worldwide in the worst financial crisis since the Great Depression. Shares on the benchmark index yesterday traded at 7.6 times estimated earnings against a 27.6 average over the last 10 years, a 72 percent discount.

``This is a once in a blue moon buying opportunity,'' said Greg Smith, managing director of investment adviser Fat Prophets U.K. Ltd. in London. ``It's difficult for us to see how you can't come out of this well, if you are buying for the long term.''

Bank of England Governor Mervyn King said policy makers are ``certainly prepared to cut bank rate if that proves to be necessary'' to hit the central bank's 2 percent inflation target. He indicated the central bank would be prepared to push its benchmark to zero if necessary.

BNP Paribas SA, Barclays Capital and JPMorgan Chase & Co. said the U.K. central bank will bring the main rate to 2 percent from the current 3 percent at the next scheduled decision on Dec. 4.

Equities Upgraded

Inflation will fall ``well below'' the bank's goal from the middle of 2009 and gross domestic product will contract by an annual 1.8 percent in the first three months of the year, forecasts by the Bank of England released today in London show. The predictions are based on market expectations of the interest rate just above the current 3 percent in the next quarter.

Dresdner Kleinwort raised its recommendation for European and U.K. equities to ``neutral'' saying the financial crisis may have peaked last month.

Sainsbury climbed 5.1 percent 286 pence. Profit rose 5.6 percent in the first six months as price cuts drew shoppers seeking to spend less.

Scottish & Southern added 4.7 percent to 1,209 pence. Pretax profit for the first half was 302.6 million pounds, in line with the 302.5 million-pound median estimate of six analysts surveyed by Bloomberg News. The company said it will raise its interim dividend 9.4 percent to 19.8 pence a share and predicted a full- year dividend of at least 66 pence.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

Amec Plc (AMEC LN) gained 1.2 percent to 499 pence. The provider of services for the world's largest energy companies expects a group margin for earnings before interest, tax and amortization ``in excess of 6.5 percent'' for 2008 amid continuing strength in demand.

Charter International Plc (CHTR LN) tumbled 87.25 pence, or 22 percent, to 302.5 after saying 2008 results will miss its previous targets on weaker orders for welding and cutting tools.

Morgan Crucible Co. (MGCR LN), which provides body armor to the U.K. Ministry of Defence, rallied 6.7 percent to 99 pence after saying it will cut costs and make ``selective'' job reductions at units serving industrial clients as the economic slowdown crimps demand.

Moss Bros Group Plc (MOSB LN) surged 9.25 pence, or 59 percent, to 25 pence after Philip Green, the billionaire owner of U.K. retailer Arcadia Group Ltd., bought a 28.5 percent stake in the U.K.'s third-largest suit seller.

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

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European Stocks Fall, Led by BHP, ENRC; U.S. Futures Decline

By Sarah Jones

Nov. 12 (Bloomberg) -- European stocks fell for a second day as declines by commodity producers and insurers overshadowed speculation of more interest-rate cuts and better-than-expected results from UniCredit SpA and J Sainsbury Plc. U.S. index futures and Asian shares also retreated.

BHP Billiton Ltd., the world's largest mining company, slipped 3.2 percent as copper and aluminum slumped to three-year lows. Eurasian Natural Resources Corp. dropped 8.7 percent after saying capital spending this year will be ``significantly'' below its earlier forecast. UniCredit rose 5.4 percent, and Sainsbury climbed 5.1 percent.

Europe's Dow Jones Stoxx 600 Index lost 0.4 percent to 211.26 at 1:05 p.m. in London. The gauged earlier rose up to 1.7 percent and then fell as much as 0.9 percent.

``Markets are going to remain volatile for the rest of the year,'' said Kevin Lilley, a London-based fund manager at Royal London Asset Management, which oversees about $63 billion. ``The macro picture continues to deteriorate but much of that is priced into the market already.''

Futures on the Standard & Poor's 500 Index fell 0.5 percent, and the MSCI Asia Pacific Index dropped 1.3 percent.

More than $29 trillion has been erased from the value of global equity markets as credit losses and writedowns totaled $918 billion in the worst financial crisis since the Great Depression. Europe's Stoxx 600 has lost 42 percent in 2008, headed for its worst year since records began in 1987.

Earnings for the 1,320 companies in western Europe that reported results since Oct. 7 declined 14 percent on average, trailing expectations by 5 percent, Bloomberg data show.

Russia Risk

Russia's RTS Index fell for a second day and the cost of protecting against a default by Russia soared after the country's central bank widened the ruble's trading band and lifted its benchmark interest rate to stem record capital outflows.

The RTS Index dropped 13 percent before trading was halted. Credit-default swaps on Russian government debt jumped 103 basis points to 7.17 percentage points, according to CMA Datavision Prices.

In western Europe, national benchmark indexes fell in 11 of 18 markets. The U.K.'s FTSE 100 climbed 0.5 percent after BOE Governor Mervyn King said the bank was ready to cut rates as low as needed. Germany's DAX rose 0.3 percent, and France's CAC 40 slipped 0.2 percent.

BHP, the world's largest mining company, slid 3.2 percent to 986.5 pence as copper and aluminum fell as bulging stockpiles heightened speculation that mining companies need more production cuts to match a slump in demand.

Anglo American Plc, the world's third-biggest, fell 4.9 percent to 1,327 pence. Vedanta Resources Plc, the largest copper producer in India, retreated 6.7 percent to 637.5 pence.

ENRC, Swiss Life

ENRC lost 8.7 percent to 258.5 pence, extending yesterday's 9.9 percent tumble. The Kazakh ferroalloy producer is reviewing the timing of expansion projects and said full-year capital expenditure will be ``significantly'' below the $1.7 billion previously targeted after demand weakened.

Tullow Oil Plc lost 5.2 percent after the explorer cut its full-year production target.

Swiss Life Holding slumped 15 percent to 93 francs after Switzerland's biggest life insurer said full-year profit won't meet the 1.8 billion to 1.9 billion Swiss franc ($1.6 billion) target announced in August.

The company plans to halt a share buyback after market turmoil eroded the value of investments. Excluding a one-off gain of 1.5 billion francs from the sale of units, the insurer said it will report a full-year loss from continuing operations.

UniCredit, Sainsbury

UniCredit climbed 5.4 percent to 1.96 euros. The bank reported a 54 percent drop in third-quarter profit to 551 million euros ($694 million) that still beat analysts' estimates of 428 million-euros.

Sainsbury jumped 5.1 percent to 286 pence after the third- largest U.K. supermarket chain said first-half pretax profit of 272 million pounds before one-time items beat the 267.9 million- pound estimate of 12 analysts. The company raised its first-half dividend by 20 percent to 3.6 pence a share.

Hammerson Plc, a U.K. shopping center owner, climbed 5.2 percent to 659.5 pence. British Land Co. Plc, the U.K.'s second- largest real estate investment trust, rallied 4 percent to 578.5 pence.

BOE Governor King said policy makers are prepared to cut rates as low as needed to prevent recession from fueling deflationary pressures. The central bank slashed its key rate by 1.5 percentage points on Nov. 6 to the lowest since 1955.

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

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U.S. Stock Futures Retreat, Led by Energy Producers; GM Gains

By Lynn Thomasson

Nov. 12 (Bloomberg) -- U.S. stock-index futures retreated, indicating equities will post a third day of declines, as falling oil and metal prices dragged down commodity producers.

Standard & Poor's 500 Index futures expiring in December fell 0.2 percent to 891.10 at 7:58 a.m. in New York. Dow Jones Industrial Average futures retreated 35 points, or 0.4 percent, to 8,602.

Exxon Mobil Corp., the biggest U.S. energy company, fell 0.2 percent to $72.50. Crude oil slumped 1.7 percent to $58.33 a barrel in New York. General Motors Corp. rallied 9.9 percent to $3.21 after House Speaker Nancy Pelosi urged Congress to support the auto industry, rejecting calls to let the country's largest carmaker collapse.

The S&P 500 has dropped 39 percent this year on concern the credit crisis sparked by a surge in U.S. mortgage defaults will drag down the global economy. President-elect Barack Obama may inherit the worst U.S. downturn in three decades, according to economists surveyed by Bloomberg News.

The benchmark for U.S. stocks yesterday fell for a second day as a deteriorating outlook for American industry and oil's drop signaled the economic slump may deepen.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

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Stock Bears Fade in U.S., U.K., Brazil on Credit Market Thaw

By Alexis Xydias

Nov. 12 (Bloomberg) -- Investors in the U.S., U.K. and Japan grew less convinced that stocks will fall over the next six months as the freeze in credit markets started to thaw, a survey of Bloomberg users showed.

Respondents still expect the Standard & Poor's 500 Index, the U.K.'s FTSE 100 Index, Japan's Nikkei 225 Stock Average, the Swiss Market Index and Spain's IBEX 35 Index to drop, according to the Bloomberg Professional Global Confidence Survey of 2,799 users. They grew more bearish in Italy, Germany and France than they were in October as Europe's economy moved closer to a recession. Only in Brazil did investors turn bullish and predict gains. In Mexico, investors were split, the survey, taken Nov. 3 to Nov. 7, showed.

The MSCI World Index of 23 developed markets advanced 8.2 percent since Oct. 27 after trading at 10.5 times the profit of its 1,728 companies, the cheapest level since at least 1995. Money-market rates in London yesterday dropped to the lowest level since 2004 after central banks cut interest rates and provided unlimited dollar funding, while governments offered $3 trillion in bailouts and guarantees to financial institutions.

``As we see the implementation of rescue plans and lower interest and money-market rates, this brings down the risk of holding equities,'' said Alberto Espelosin, who helps manage the equivalent of $7.7 billion at Zaragoza, Spain-based Ibercaja Gestion and participated in the survey. ``Stocks were priced in for the worst outlook.''

Credit Losses

Indexes in all 10 nations have still plunged more than 30 percent this year as concern that frozen credit markets will trigger a global recession and snuff out profits erased almost $30 trillion in value from stocks worldwide. Financial firms reported more than $918 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.

Policy makers in Australia, China, the U.K., Japan, the U.S., India, Taiwan, South Korea and the euro region cut borrowing costs in the past three weeks as the International Monetary Fund predicted global growth will slow to 2.2 percent in 2009. That would mean a world recession under the fund's informal definition -- growth of 3 percent or less.

The rate cuts helped send the London interbank offered rate, which banks charge each other for three-month loans in dollars, lower for 22 straight days to 2.18 percent through yesterday, data from the British Bankers' Association show.

Third-quarter earnings shrank 21 percent for MSCI World Index companies that posted results, according to data compiled by Bloomberg. Companies from Chicago-based Boeing Co. to BNP Paribas SA in Paris and Beijing-based China Mobile Ltd. reported profit that missed analysts' estimates.

`Overwhelmingly Negative'

``Caution remains the watchword, despite attractive equity valuations,'' said David Shairp, London-based global strategist at JPMorgan Asset Management, which oversees $1.2 trillion. ``The data flow is overwhelmingly negative and suggests considerable earnings risks.''

Investors turned bullish in Brazil after the benchmark Bovespa Index slid to a level of 6.99 times the earnings of its companies on Oct. 27, the cheapest since at least 2001, according to data compiled by Bloomberg.

Brazil's Bovespa surged 27 percent since Oct. 27 as the country's central bank halted six months of interest-rate increases and the Federal Reserve gave the Latin American nation a $30 billion swap line to help overcome the credit crisis.

The Bloomberg confidence index in the country climbed to 55.66 from 41.39 in October, while in Mexico it increased to 50 from 36.81. A reading below 50 indicates investors expect stocks to retreat in the next six months while a reading above 50 signifies a potential rally.

Japan's reading advanced to 43.87 from 34.07. The result for Spain's IBEX 35 climbed to 34.96 from 33.44, while the measure for Switzerland's SMI Index improved to 45 from 43.23. The U.K. gauge increased to 32.3 from 28.89.

Recession

In the U.S., it rose to 35.67 from 34.25. The survey was conducted the week that Barack Obama was elected the 44th U.S. president. He will inherit the worst recession since Ronald Reagan's second year in the White House, economists said, as figures showed last week that U.S. payrolls plunged by more than half a million the past two months.

It's ``easier in the U.S. to get out of this situation because while they have one president with legislative support, here in Europe we have more than a dozen heads of states trying to agree,'' said Pedro Alves, a fund manager at Braga, Portugal- based Spot Gestao Financeira who participated in the survey. ``I am more positive on the S&P 500. The U.S. economy is a bit messy but I bet they can turn around things quicker than in Europe.''

France, Germany

Sentiment fell the most in France, to 36.54 from 43.06. The country's economy will contract 0.1 percent next quarter, according to economists' forecasts compiled by Bloomberg. The index for Germany slid to 34.35 from 38.25, while Italian investors returned to a bearish stance of 46.88 from 53.16.

Economic growth in the euro area will slump to just 0.1 percent next year, the worst performance since 1993, the Brussels-based European Commission forecast on Nov. 3. It said the economy, which contracted in the three months through June, will probably continue to shrink in the second half of 2008.

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

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Crisis deals under pressure, no let up for economies

A man uses a laptop next to a stock quotation board outside a brokerage in Tokyo November 4, 2008.
REUTERS/Toru Hanai

By Jeremy Gaunt and Alex Richardson

LONDON/SINGAPORE (Reuters) - A number of deals designed to cure the global financial crisis were in danger of unraveling on Wednesday, with losses mounting at banks and economies deteriorating.

The International Monetary Fund withheld official backing for a $6 billion bailout plan for Iceland, the Financial Times reported, putting loans to the North Atlantic island nation at threat.

Some of British banking giant Barclays' biggest shareholders have threatened to vote against a planned 7 billion pound ($10.83 billion) capital raising unless it improves the terms of the deal, British newspapers said.

The latter follows a row over the crisis-driven planned purchase of British lender HBOS by Lloyds TSB with leading banking figures arguing a more competitive deal should be sought.

Aides to U.S. President-elect Barack Obama, meanwhile, were playing down reports of tension with the Bush administration over help for the stricken car industry.

A feud within Japan's cabinet over whether rich people should get payouts as part of a stimulus package looked set to be put aside after delaying the plan for weeks.

Questions are also beginning to be asked about just how much help governments can give.

"The U.S.' financial resources are already stretched and a flood of news demands may overwhelm a government already staring down at a record budget deficit next year," UBS economists said in a note.

Financial markets were rocked again under the combined pressure of a global economic downturn and the worst financial crisis in 80 years.

European shares rose 1.6 percent after losing more than 4 percent on Tuesday, reflecting the sharp volatility currently infecting investors.

There were more corporate profit warnings with General Motors shares falling on Tuesday to levels not seen since World War Two.

"Whether it's economic indicators or company news, it's just too awful," said Takashi Ushio, head of the investment strategy division at Marusan Securities in Tokyo.

DECLINE AND FALL

The financial industry showed more pain with Dutch group ING posting its first-ever quarterly loss as impairments on stocks and bonds, counterparty losses and property writedowns ate into its income.

ING Group NV had projected the loss in October before agreeing to a 10 billion euros ($12.7 billion) cash injection by the Dutch government to shore up its core capital.

Its net loss for the third quarter was 478 million euros ($603.4 million), after writedowns totaling 1.5 billion euros. ING posted a profit of 2.3 billion euros a year earlier.

Insurer Swiss Life said third-quarter premium volumes fell 11 percent to 3.075 billion Swiss francs ($2.61 billion) and warned it would not meet its full-year net profit guidance.

This came against a background of continuing decline in world economies.

China's retail sales data on Wednesday pointed to slowing consumption and the World Bank said more countries were seeking its help. The head of the Organization for Economic Cooperation and Development, Angel Gurria, said there was room for further interest rate cuts in the stagnating euro zone.

World Bank President Robert Zoellick said global trade may drop next year for the first time in more than a quarter of a century as the worldwide credit crisis cuts into trade financing.

"It is our estimate that trade could actually fall, not grow more slowly or have growth fall, but actually fall next year, for the first time since 1982," Zoellick said in an interview with Reuters ahead of a meeting of world leaders.

Zoellick said the bank expected its lending to increase to $35 billion this year from $13.5 billion last year, adding that countries such as Mexico, Indonesia and Colombia were tapping its contingency financing fund amid worries about access to credit.

Investors, meanwhile, were looking to a summit of world leaders in Washington on Saturday for solutions.

President-elect Obama, however, is steering clear of the meeting.

"I think he wants to have a free hand after the inauguration," Dale said. "If he gets too closely associated with the summit, he might find himself associated with views with which he might not necessarily agree," said Reginald Dale, a scholar at the Center for Strategic and International Studies.

(Reporting by Reuters bureaus worldwide)

(Editing by Elizabeth Piper)

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Treasury considers private capital role in TARP: report

Secretary of Treasury Henry Paulson leaves the New York Stock Exchange October 21, 2008.REUTERS/Shannon Stapleton

(Reuters) - The Treasury Department, signaling a new phase in its $700 billion financial rescue plan, is considering requiring that firms seeking future government money raise private capital in order to qualify for public assistance, the Wall Street Journal said, citing people familiar with the matter.

The move is not expected to apply to the existing $250 billion capital-purchase program, which is already injecting money into banks, the paper said.

Treasury is considering attaching such conditions to any of its future capital investments, the people told the paper.

At the same time, Treasury is unlikely to conduct any auctions to purchase bad loans and other troubled assets, the original intention of the $700 billion rescue plan, the paper said.

Instead, Treasury is expected to continue focusing its firepower on injecting capital directly into the financial sector, the people told the paper.

Treasury Secretary Henry Paulson may outline some of these changes Wednesday, when he provides an update on Treasury's Troubled Asset Relief Program (TARP), the paper said.

Treasury could not be immediately reached for comment by Reuters.

The Journal also reported that U.S. bank regulators could announce guidelines this week designed to encourage U.S. banks to remain active lenders as financial markets are squeezed.

The regulatory guidelines could also address sensitive issues of bank dividend payments and executive pay, the paper said.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Ben Tan)

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Oil falls to 20-month low

By Christopher Johnson

LONDON (Reuters) - Oil fell more than 2 percent on Wednesday to trade below $58 a barrel for the first time in 20 months as expectations of weaker energy demand more than offset news of reductions in supply.

The move extended a fall of 5 percent on Tuesday and analysts said the mood in the market was so bearish that prices could keep falling toward $50 a barrel.

News that OPEC could cut supplies by an additional 1 million barrels per day (bpd) when it meets in Algeria next month did little to prevent the downward spiral that has knocked 60 percent off oil's value from a record high of over $147 in mid-July.

U.S. crude for December delivery hit a low of $57.90, down $1.43 by 0903 GMT, before rallying to around $58.40 at 0930 GMT. In the previous session, the market settled down $3.08 at $59.33 a barrel, its lowest settlement in 20 months.

London Brent crude shed $1.20 to $54.51 a barrel.

"Fear that the global recession is worsening day by day is driving this market down," said Rob Laughlin, senior oil analyst at brokers MF Global. "Demand for oil is deteriorating week by week."

Analysts expect the International Energy Agency (IEA) to downgrade its forecasts for demand in its monthly oil market report to be published on Thursday.

"BEARISH NEWS ALL AROUND"

"It's bearish news all around. I expect the IEA to further revise down the energy demand forecasts," said Tobias Merath, head of commodities research at Credit Suisse in Singapore.

"Even the new set of industrial production numbers due from China and Japan this week should be having a bearish undertone."

China's industrial production growth slowed to about 8 percent in the year to October, the first time it has been in single digits since the end of 2001, an official familiar with the data said earlier this week. The official data is due on Thursday.

In a research note, Credit Suisse added the U.S. Department of Energy would probably cut its one-year WTI price forecast when its publishes its Short Term Energy Outlook on Thursday.

The World Bank has slashed its 2009 forecast for developing countries and has offered new financing of more than $100 billion over the next three years to help cope with the financial crisis.

It revised downward its growth forecast for developing economies to 4.5 percent for next year, from 6.4 percent projected in June, on a combination of financial turmoil, slower exports and weaker commodity prices.

An OPEC source said on Tuesday the group might cut oil output by a further 1 million barrels per day when it meets next month in Algeria because of slowing world demand.

OPEC agreed last month to cut production by 1.5 million bpd from November 1 after the sharp fall in oil prices.

But Qatar, one of OPEC's smallest members, has told at least two term buyers in Asia it would not cut its crude oil supplies to them for November and December, sources with the lifters said on Wednesday.

This came even after Energy Minister Abdullah al-Attiyah told Reuters last week that Qatar had cut crude oil exports to Asia by about 40,000 bpd from this month in line with the OPEC agreement.

U.S. weekly inventory data was expected to show an 800,000-barrel rise in crude stocks last week as demand continues to slow, a Reuters poll of analysts found.

Distillate stocks should rise by 500,000 barrels and gasoline by 800,000 barrels, the poll showed. The data will be released on Thursday, a day later than usual due to the U.S. Veterans' Day holiday on Tuesday.

(Additional reporting by Sambit Mohanty in Singapore; Editing by James Jukwey)

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GLOBAL MARKETS-European shares edge up, dollar dips

* European shares rise, oil hovers near 20-month lows

* MSCI world equity index down 0.23 percent at 223.47

* Dollar dips, sterling hits 12-year trade-weighted low

By Carolyn Cohn

LONDON, Nov 12 (Reuters) - European stocks recovered some ground on Wednesday after steep losses in the previous session and the dollar dipped, but oil hovered near 20-month lows on ongoing worries about a slowdown in global demand.

Weak corporate earnings dragged down U.S. stocks and Asian shares followed, with shares of General Motors (GM.N: Quote, Profile, Research, Stock Buzz) sliding to a 65-year low on Tuesday on mounting worries about whether it can avoid bankruptcy.

But European mining shares tracked firmer metals prices and banks advanced after recent losses. Gold rose and platinum gained more than 3 percent, helped by a weaker dollar.

The FTSEurofirst 300 index of top European shares rose 0.29 percent to 886.13, after falling more than 4 percent on Tuesday. The index has lost about 40 percent this year, hit by the global credit crunch and resulting economic slowdown.

"The markets are still being buffeted by growth concerns, equity market weakness and risk aversion," said analysts at Calyon in a client note.

"Whilst perhaps not in the crisis situation of a few weeks ago, nervousness continues to undermine risk appetite."

World Bank President Robert Zoellick warned global trade may drop next year for the first time in more than a quarter of a century as the global credit crisis cuts into trade financing. [ID:nN11546001]

Russia's RTS share index .IRTS fell 7.8 percent, dragged down by U.S. and Asian markets and falling oil. The more liquid MICEX index was suspended limit down until Thursday.

U.S. crude oil CLc1 fell 90 cents a barrel to $58.41, close to its lowest since March 2007 and down more than $80 from record peaks hit in July.

The dollar dipped after earlier hitting two-week highs against the euro , to trade around half a percent lower at $1.2577. It steadied against the yen at 97.75 .

POUND SLIDES

Sterling hit 12-year lows on a trade-weighted basis <=GBP> on worries about a UK recession and expectations of further monetary easing, after a shock 150-basis point UK rate cut last week.

"Overall, sentiment is negative for sterling as weak data have intensified recession fears and on expectations of continued aggressive rate cuts by the Bank of England," said Commerzbank currency strategist Antje Praefke in Frankfurt.

The Bank of England will release its quarterly inflation report at 1030 GMT and is expected to slash its growth forecast and warn that inflation may undershoot its 2 percent target next year.

Euro zone government bonds were under pressure on the prospect of absorbing the day's sizeable new issuance.

Germany will offer 7 billion euros of new 10-year Bunds, with a $25 billion auction of 3-year notes in the U.S. to follow.

Two-year euro zone government bond yields were up 3.4 basis points and 10-year yields were up 1.9.

The MSCI global emerging equities index .MSCIEF fell 1.28 percent and emerging sovereign debt spreads widened by 7 basis points to 599 bps over U.S. Treasuries 11EMJ. (Editing by Mike Peacock)

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HK shares close 0.7 pct lower as properties fall

* Hong Kong shares fall on bleak economic outlook

* Li & Fung jumps on outsourcing agreement

* Hutchison Telecom soars on cash dividend

(Updates to close)

By Jun Ebias

HONG KONG, Nov 12 (Reuters) - Hong Kong shares fell 0.7 percent in a volatile session on Wednesday as local developers slid on a grim economic outlook, but Li & Fung (0494.HK: Quote, Profile, Research, Stock Buzz) jumped after it signed an outsourcing agreement abroad.

Other export-oriented stocks also gained, with sports shoemaker Yue Yuen Industrial Holdings (0551.HK: Quote, Profile, Research, Stock Buzz), supplier to the likes of Nike, up 7.5 percent and Foxconn International Holdings (2038.HK: Quote, Profile, Research, Stock Buzz), which makes mobile phones for Motorola, up 5 percent.

Consumer goods exporter Li & Fung (0494.HK: Quote, Profile, Research, Stock Buzz) gained 11.6 percent after it won a contract with fashion retailer Liz Claiborne Inc (LIZ.N: Quote, Profile, Research, Stock Buzz). [ID:nWNAB1564]

But Hong Kong's top developer, Sun Hung Kai Properties (0016.HK: Quote, Profile, Research, Stock Buzz), fell 4 percent, while smaller rivals Hang Lung Properties (0101.HK: Quote, Profile, Research, Stock Buzz) shed 2.8 percent and billionaire Li Ka-shing's Cheung Kong (Holdings) (0001.HK: Quote, Profile, Research, Stock Buzz) down 3.7 percent.

Hong Kong may have tipped into a recession in the third quarter for the first time since the SARS outbreak in the spring of 2003, half of the economists in a Reuters poll said. [ID:nHKG306628]

"We are going to see more volatility in the market, with more negative news expected from the U.S. this week. The market tends to react very quickly to anything negative and is very sceptical about any good news," said Howard Gorges, vice chairman at South China Securities.

The U.S. Commerce Department is due to release October retail sales on Friday, a key indicator for the state of the economy.

The benchmark Hang Seng Index .HSI ended the session down 101.81 points at 13,939.09, led by a 2 percent drop in HSBC (0005.HK: Quote, Profile, Research, Stock Buzz) on bad loan worries. [ID:nLA296008]

A total of HK$47.2 billion ($6 billion) changed hands, down from HK$54.4 billion on Tuesday.

Hutchison Telecommunications International Ltd (2332.HK: Quote, Profile, Research, Stock Buzz) surged 11.4. The stock rose as much as 31 percent earlier, its biggest one-day percentage gain ever afer it declared a bigger-than-expected special dividend. [ID:nHKG189764]

Alibaba.com (1688.HK: Quote, Profile, Research, Stock Buzz) rose 9.4 percent after China's biggest e-commerce firm said its board of directors had approved a plan to buy up to $258 million worth of shares. [ID:nHKG178202]

Coal producer China Shenhua Enery (1088.HK: Quote, Profile, Research, Stock Buzz) lost 2.1 percent, while offshore oil producer CNOOC (0883.HK: Quote, Profile, Research, Stock Buzz) shed 1.3 percent, after crude oil prices settled below $60 a barrel in Asian trade. The China Enterprise Index .HSCE of top locally listed mainland Chinese companies was steady at 7,134.54.

But China Merchants Holdings (0144.HK: Quote, Profile, Research, Stock Buzz) lost 6 percent after JP Morgan cut its target price on the company to HK$16.50 from HK$24.00 and its earnings forecast by 24 percent for 2009.

Insulator maker Vitar International (0195.HK: Quote, Profile, Research, Stock Buzz) rose 10.5 percent on its trading debut. The company issued 28 million new shares at HK$2.1 each, raising HK$58.8 million ($7.5 million).

Stocks due to be added to the MSCI China Standard Index .MICN00000PHK this month traded higher.

Beer maker Tsingtao Brewery (0168.HK: Quote, Profile, Research, Stock Buzz) gained 6.3 percent and juice maker China Huiyuan Juice Group (1886.HK: Quote, Profile, Research, Stock Buzz) rose 2.8 percent.

(With additional reporting by Donny Kwok; Editing by Anne Marie Roantree)

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Nikkei slips on grim outlook for earnings, economy

*Nikkei slips 1.3 pct in lightest trade since Oct 1

*Stronger yen, worries about company results, economy weigh

*Commodities-linked firms suffer as oil below $60

*Trade thin as investors nervous before G20 summit (Adds details, stocks)

By Aiko Hayashi

TOKYO, Nov 12 (Reuters) - The Nikkei average fell 1.3 percent in light trade on Wednesday, hurt by a firmer yen and fears about a global recession, with commodity-linked stocks sliding as lower oil and copper prices sparked earnings concerns.

Inpex Corp (1605.T: Quote, Profile, Research, Stock Buzz) fell more than 5 percent after the oil and gas field explorer cut its full-year outlook on a drop in oil prices and a stronger yen, while Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) and other trading firms slipped after oil CLc1 tumbled to settle below $60 on Tuesday for the first time in 20 months. But chemicals firm Mitsubishi Rayon Co (3404.T: Quote, Profile, Research, Stock Buzz) bucked the trend and surged 11.4 percent after the maker of synthetic fibres and other chemicals said it will acquire unlisted British chemicals producer Lucite International for $1.6 billion in cash [ID:nT46372].

"The worst of the financial crisis may be over, but we now face this problem that we don't know how much worse the economy will deteriorate and where it will find a floor," said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments.

"Also, it's hard to buy sectors that had benefited from the recent commodity boom as they could post a huge drop in earnings next business year. Demand is falling as the global economy worsens much faster than expected."

Still, some market players said that buying from pension funds and retail investors who opened accounts as stock prices continued their slide appeared to emerge at the lows and kept the market supported.

In the lightest day of trade since Oct. 1, the Nikkei .N225 shed 113.79 points to end at 8,695.51. It has gained 1.3 percent so far this week, after diving 24 percent in October, the biggest monthly fall in its 58-year history.

The broader Topix .TOPX declined 1.6 percent to 875.23. Fears of a global slowdown grew after shares in General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) plummeted to a 65-year low on Tuesday, extending recent steep declines on concerns the automaker could run short of cash by early next year. [.N]

U.S. House of Representatives Speaker Nancy Pelosi sought legislation on Tuesday to bail out failing automakers, saying she was confident an emergency measure would be approved next week. [ID:nN11538789]

Many investors were also jittery ahead of this weekend's summit of the G20 group of wealthy nations and large emerging economies in Washington to discuss steps to address the global financial crisis.

"The previous G7 summit was mainly aimed at dealing with the credit crisis, but this one is now struggling to tackle the issue of slowing economies, with the market hoping for some kind of joint international action," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"If nothing emerges, there's likely to be a huge shock, so nobody is buying at this point."

TRADING FIRMS DROP AS OIL FALLS

The dollar was little changed against the yen at 97.69 yen after dropping as low as 97.15 yen earlier.

Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) slid 3.5 percent to 3,040 yen, while Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) shed 4.2 percent to 2,145 yen to become the top drag on the Nikkei 225.

Trading firms were hit as oil inched lower on Wednesday, after falling 5 percent a day earlier to close below $60 for the first time since March 2007, as weakening energy demand more than offset news of more supply reductions. [ID:nSP343335]

Mitsubishi, Japan's largest trading house, lost 8.1 percent to 1,387 yen and Mitsui & Co (8031.T: Quote, Profile, Research, Stock Buzz) fell 4.6 percent to 928 yen. Trading houses are major dealers in energy and have stakes in oil and gas projects.

Mining stocks such as Nippon Mining Holdings (5016.T: Quote, Profile, Research, Stock Buzz) tumbled after Shanghai copper futures fell to their weakest in almost four years on Wednesday on gathering gloom about the global economy. [ID:nSP362581] The shares tumbled 9.5 percent to 256 yen.

Hakudo Co (7637.T: Quote, Profile, Research, Stock Buzz) lost 10.5 percent to 682 yen after the specialist trader for nonferrous metals cut its annual outlook. Slowing capital spending at auto, microchip and flat display makers has led to sluggish demand for raw materials such as aluminium and copper used in car-, chip- and panel-making equipment.

Shares of all five stocks picked to join the MSCI Japan Index .MSCIJP in a routine reshuffle gained on the news, with ABC Mart Inc (2670.T: Quote, Profile, Research, Stock Buzz) adding 4.7 percent to book its highest close this year. [ID:nT68421]

Shares of Inpex dropped 5.4 percent to 510,000 yen, while Mitsubishi Rayon rose to 245 yen.

Trade was light on the Tokyo exchange's first section, with 2.08 billion shares changing hands, compared with last week's daily average of 2.55 billion.

Declining stocks beat advancing ones by more than 2 to 1. (Reporting by Aiko Hayashi; Editing by Sophie Hardach)

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European shares advance; miners, banks support

LONDON, Nov 12 (Reuters) - European shares rebounded in early trade on Wednesday after slipping in the previous session as mining stocks tracked firmer metals prices and banks advanced after recent losses.

At 0815 GMT, the FTSEurofirst 300 index of top European shares rose 1.7 percent to 898.15 points, after slipping more than 4 percent in the previous session. The index has lost about 40 percent this year, hit by the credit crisis and resulting economic slowdown.

Mining stocks followed metals prices. Spot gold rose about 1 percent, platinum was up 2.5 percent, zinc advanced 1.7 percent and copper was up 0.5 percent.

BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) and Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) rose 0.7-4.8 percent.

Banking shares also rose, with Lloyds (LLOY.L: Quote, Profile, Research, Stock Buzz) gaining 2.3 percent, HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) advancing 1.6 percent, UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) rising 4.1 percent and Standard Chartered Bank (STAN.L: Quote, Profile, Research, Stock Buzz) up 3.3 percent.

But investors remained cautious despite a rise in European stocks on mounting concerns of a deep global recession.

Surveys by business consultancy Deloitte showed that Europeans will limit spending on Christmas as they braced for a tough 2009, though shoppers in eastern countries were more optimistic than those in the west. [ID:nLB505510]

"It's going to be a bit soggy today," said Justin Urquhart Stewart, director at Seven Investment Management.

"People are assuming things are bad, and they're having their assumptions thoroughly fulfilled."

Shares in Holcim (HOLN.VX: Quote, Profile, Research, Stock Buzz), the world's second-largest cement maker, fell 4.3 percent after it posted a 17 percent drop in third-quarter net profit and warned that business would be weak in the final quarter as global construction slows.

But France's electricity group EDF (EDF.PA: Quote, Profile, Research, Stock Buzz) rose 4.4 percent after it said nine-month sales were 45.6 billion euros, up 6.9 percent, and added it maintained full-year earnings target.

(Additional reporting by Brian Gorman)

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