Vietnam's Coffee Harvest Delayed by Rainfall, Ea Pok's Tu Says

By Van Nguyen

Nov. 17 (Bloomberg) -- The coffee harvest in Vietnam, the world's biggest grower, may be hampered as an approaching storm adds to heavy rains, according to Cao Van Tu, director of Dak Lak- based Ea Pok Coffee Co.

``We can't harvest the ripe beans,'' Tu said today by phone from the Central Highlands province of Dak Lak, the country's biggest coffee producer and exporter. ``I'm afraid we will not be able to have enough stock for delivery in December.''

Delayed shipments may spur a rebound in the price of robusta beans, which has tumbled by a fifth over the past year. Tropical Storm Noul, the 26th storm of the northwestern Pacific cyclone season, is due to buffet central and southern Vietnam today after the heaviest rains in at least 24 years caused floods last month.

Rainfall in Dak Lak also disrupted harvesting and drying last week, Tu said. His staff had only a few sunny days to dry the crop and some workers were today trying to collect as many ripe beans as possible in the rain, he said.

Robusta futures have slumped 19 percent over the past year, closing at $1,829 a metric ton on the Liffe exchange on Nov 14.

Strong wind and heavy rains from Noul are expected to hit the Central Highlands today, according to the National Weather Forecasting Agency. The region accounts for about 91 percent of the country's coffee production, according to Thoi Bao Kinh Te Vietnam newspaper, citing data from the Ministry of Agriculture and Rural Development's cultivation department.

``We're sitting by the fire as it has been raining all the time,'' said Tu. ``Usually it doesn't rain this much.''

The rains will compound the problems faced by Vietnam's coffee traders, who were already battling high borrowing costs and a shortage of credit to fund coffee purchases, Tu said.

The Southeast Asian nation's lending rates are still the second-highest in Asia at 12 percent after the central bank's two percentage-point rate reductions in the past month. Banks charge clients between 16.5 and 18 percent on loans, the State Bank of Vietnam said in a statement on Nov. 14.

To contact the reporter on this story: Van Nguyen in Ho Chi Minh City at vnguyen23@bloomberg.net

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Gulf Shares Rise on Valuations; Kuwait's Shares Drop After Halt

By Haris Anwar

Nov. 17 (Bloomberg) -- Persian Gulf shares rose, sending indexes in Dubai and Abu Dhabi higher for the first time in eight days, as shares trading at the cheapest relative to earnings in two years lured investors. Kuwait's gauge dropped after a court lifted last week's trading suspension.

Emaar Properties PJSC, the Middle East's largest real- estate developer, surged by its daily limit of 15 percent. Aldar Properties PJSC, the biggest developer in Abu Dhabi, climbed the most in a month, as did Sorouh Real Estate Co. Dubai Group, an investment company, will target Middle Eastern assets including real estate, its chairman said today.

The Dubai Financial Market General Index soared 8.2 percent, the most since Oct. 14, to 2,142.85. The measure slumped 32 percent in the past seven days. Today's fluctuation was the biggest among indexes included in global benchmarks. The Abu Dhabi Securities Exchange General Index added 3.3 percent, and Saudi Arabia's Tadawul rose 0.5 percent.

``Some investors are putting their money back into the market after such a massive decline,'' Motaz Herzallah, senior broker at Emirates Securities LLC in Abu Dhabi, said in a phone interview. ``Valuations are supporting Aldar, Emaar and Sorouh. It's a good time to buy if you think the bottom has been reached.''

Before today's gain Dubai's benchmark index was valued at 4.7 times the earnings of its 29 companies, according to data compiled by Bloomberg, the lowest ratio since at least February 2007, data compiled by Bloomberg show. Abu Dhabi's index traded at 6.8 times earnings, the lowest in the almost three years that Bloomberg has tracked the data. The MSCI Emerging Markets Index is today valued at 7.7 times earnings.

Valuations

Emaar advanced for the first time in nine days, surging to 3.3 dirhams. The shares now trade at 3.1 times earnings.

Aldar gained 8.2 percent to 4.63 dirhams, while Sorouh, Abu Dhabi's second-largest property developer by market value, climbed 8.5 percent to 2.94 dirhams. The shares are valued at 2.7 and 3.2 times profit.

Dubai Group, which manages more than $40 billion assets on behalf of Dubai's ruler, will target investments in Middle Eastern assets including real estate, which Chairman Soud Ba'alawy expects to suffer less.

``There is probably more resilience here. It will continue to grow at 3-5 percent, which will give good opportunities for us,'' he said.

Kuwaiti Trading

Dubai's index has still plunged 64 percent this year, while Abu Dhabi shares have slid 38 percent. Kuwait's benchmark dropped 32 percent. Gulf markets have retreated as oil prices declined, the credit crisis made it more difficult for companies to borrow, and the real-estate market slowed.

The Kuwait Stock Exchange Index lost 1.6 percent to 8,552.7, the lowest close since July 2005.

Trading in Kuwait resumed after a decision by the court for urgent cases yesterday. The bourse had disputed a decision by another court that shut the market on Nov. 13 to protect investors from falling share prices. Kuwait is the only Gulf stock exchange to have suspended trading amid the global economic crisis.

National Bank of Kuwait, the state's biggest lender, lost 8.8 percent to 1,040 fils, falling to the lowest since July 2005. Ibrahim Dabdoub, the bank's chief executive officer, said Gulf states should use their huge financial surplus to minimize the impact of the international financial crisis by pumping liquidity into markets.

Kuwait Finance House, the country's largest Islamic bank, dropped 7.4 percent, the most since March 2005, to 1,260 fils.

The Bahrain All Share Index lost 1.4 percent. Oman's Muscat Securities Market 30 Index rose 0.4 percent and Qatar's DSM 20 Index gained 0.1 percent.

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

Doha Bank QSC (DHBK QD) dropped 3.3 percent to 35.1 riyals. The country's third-biggest bank by assets plans to raise 1.47 billion riyals ($404 million) by selling new shares to the Qatar Investment Authority as it seeks to raise its capital by 20 percent.

International Financial Advisors KSCC (IFA KK) declined 1.9 percent to 204 fils. The Kuwaiti asset-management company said third-quarter profit fell to 2.6 million dinars ($3.7 million) from 5.3 million dinars in the year-earlier period.

National Real Estate Co. (NRE KK) dropped 4.5 percent to 212 fils. The Kuwaiti property company said third-quarter profit declined 51 percent to 5.6 million dinars.

Sultan Center for Food Products Co. (SULTAN KK), a Kuwaiti supermarket and restaurant operator, fell 5.2 percent to 184 fils after it said third-quarter profit declined 57 percent to 2.7 million dinars.

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

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HeidelbergCement Drops on Concern Merckle Must Sell

By Sheenagh Matthews and Angela Cullen

Nov. 17 (Bloomberg) -- HeidelbergCement AG, Germany's biggest cement maker, dropped the most in at least 19 years in Frankfurt trading on concern its billionaire owner Adolf Merckle may have to sell shares to help prop up one of his investment companies.

HeidelbergCement fell as much as 18 percent to 41.89 euros, the biggest intraday slide since at least October 1989. A group of more than three-dozen banks, including Deutsche Bank AG and Commerzbank AG, is trying to reach an agreement on a loan to aid Merckle's closely held VEM Vermoegensverwaltung GmbH, battered by wrong-way bets on Volkswagen AG shares and plunging stock markets, three people familiar with the situation said.

A failure could have repercussions for Merckle's holdings, which span as many as 30 companies in the cement, machinery and pharmaceutical industries, said the people. VEM holds about 25 percent of the Heidelberg-based company, and, including holdings by affiliated companies, Merckle controls at least 86 percent in total, according to Bloomberg data.

``Merckle will have to negotiate very skillfully,'' said Heino Hammann, a Hanover-based analyst at Norddeutsche Landesbank, who has a ``sell'' rating on HeidelbergCement shares. ``Getting financing in times like these is really difficult. There's a general fear in the market.''

Claims Blocked

A group of banks signed a so-called standstill agreement that blocks them from making claims on outstanding loans as they try to hammer out a rescue, according to one of the people.

HeidelbergCement traded down 17 percent at 42.49 euros as of 2:09 p.m. local time. The company has lost 60 percent this year, cutting its market value to 5.31 billion euros ($6.7 billion).

HeidelbergCement owes 15.3 billion euros and is due to repay 6.6 billion euros, or 43 percent of the total, next year, according to data compiled by Bloomberg.

The banks, which also include state-owned Landesbank Baden- Wuerttemberg and Royal Bank of Scotland Group Plc, may agree on a bridge loan by early this week to avoid a potential collapse, the people said.

Merckle, 74, whose estimated $9.2 billion fortune put him 94th on Forbes's list of the world's richest people this year, may be forced to sell his Ulm, Germany-based generic-drug company Ratiopharm GmbH and other assets, said the people.

To contact the reporters on this story: Sheenagh Matthews in Frankfurt at smatthews6@bloomberg.net

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Global Stocks Fall on Recession Concern; U.S. Futures Decline

By Sarah Thompson

Nov. 17 (Bloomberg) -- Stocks fell in Europe and Asia and U.S. index futures dropped, extending the worst slump in global shares in more than three decades, after Japan unexpectedly slid into a recession.

Santander SA, Spain's biggest bank, and BNP Paribas SA of France slipped more than 6 percent. HeidelbergCement AG tumbled 16 percent on concern the cement maker's owner may have to sell shares to help prop up an investment company. Mitsubishi Estate Co., Japan's largest developer by market value, sank 5.4 percent.

The MSCI World Index lost 0.6 percent to 874.04 at 1:25 p.m. in London, pushing this year's retreat to 45 percent. Japan's economy unexpectedly shrank in the third quarter, entering the first recession since 2001, while Britain's biggest business lobby said the U.K. slump may be deeper than earlier predicted.

``We are not seeing any kind of recovery at all in the world economy,'' said Gianluca Tarolli, a Geneva-based equity strategist at Lombard Odier Darier Hentsch & Cie., which has the equivalent of $134 billion under management. ``We are cautious and are underweight equities. We have a lot of concerns about growth overall in Europe.''

Europe's Dow Jones Stoxx 600 Index declined 1.7 percent, with Tesco Plc sliding 4.1 percent after JPMorgan Chase & Co. recommended selling shares in Britain's biggest retailer. The MSCI Asia Pacific Index decreased 0.4 percent. Futures on the Standard & Poor's 500 Index slipped 0.8 percent.

More than $30 trillion has been erased from the value of global equity markets this year as credit losses and writedowns totaled $966 billion in the worst financial crisis since the Great Depression. The MSCI World is headed for its steepest annual drop since records began in 1970.

`Longer' Recession

Gross domestic product in Japan, the world's second-largest economy, shrank an annualized 0.4 percent in the three months ended Sept. 30, compared with 0.1 percent growth predicted by economists.

The U.K. economy will contract the most in almost three decades next year, the Confederation of British Industry, the nation's biggest business lobby, said. GDP will drop 1.7 percent in 2009, the most since 1980, the CBI predicted. The recession is ``likely to be deeper and longer lasting,'' according to CBI.

House prices in the U.K. are falling at the fastest pace since at least 2002, Rightmove Plc said today. The average asking price for a home fell 7.1 percent from a year earlier, the most since records began six years ago, according to the country's most-used property Web site.

Santander, HBOS

Santander, the Spanish bank that owns U.K. mortgage lender Abbey, lost 6.4 percent to 6.11 euros. HBOS Plc, the U.K. bank that agreed to be bought by Lloyds TSB Group Plc, sank 11 percent to 76.7 pence. BNP Paribas, France's biggest bank, dropped 6.3 percent to 43.855 euros.

The cost of borrowing dollars for three months in London increased for a third day as banks balked at lending on concern concern about the severity of the global recession. The London interbank offered rate, or Libor, banks say they charge each other for such loans rose less than half a basis point to 2.24 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, narrowed less than one basis point to 173 basis points.

The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, a survey showed. After growing 1.4 percent this year, the U.S. will contract 0.2 percent in 2009, according to the median estimate in a poll taken by the National Association for Business Economics. A majority of respondents said the U.K., euro area, Japan, Canada and Mexico are either now, or will soon be, in a recession.

Citigroup's Jobs Cuts

Citigroup Inc., the fourth-largest U.S. bank by market value, plans to eliminate 50,000 jobs, or about 14 percent of the workforce as of Sept. 30, and reduce expenses by 20 percent from their peak as the global economy contracts. The reductions were disclosed in a presentation posted on the company's Web site. Citigroup slipped 12 cents to $9.40 in pre-market trading.

President-elect Barack Obama and House Speaker Nancy Pelosi may throw as much as half a trillion dollars worth of stimulus at the economy -- and have little or no growth to show for it. The consolation, economists say, is that without the stimulus, things would be even worse.

In western Europe, national benchmark indexes declined in 17 of the 18 markets. The U.K.'s FTSE 100 slipped 1.8 percent. Germany's DAX sank 2.3 percent and France's CAC 40 lost 2 percent.

HeidelbergCement, Germany's biggest cement maker, tumbled 16 percent to 43 euros on concern its billionaire owner Adolf Merckle may have to sell shares to help prop up one of his investment companies.

Tesco, Bodycote

Tesco lost 4.1 percent to 317.1 pence. JPMorgan said discount grocer Aldi Group poses a ``major threat'' and cut its recommendation to ``underweight'' from ``neutral.''

Bodycote Plc sank 23 percent to 94.75 pence after the U.K. supplier of metal-strengthening services to Ford Motor Co. said it will halve a 260 million-pound ($383 million) payment to shareholders to pay off debt in light of financial market turmoil.

United Internet AG tumbled 10 percent to 5.43 euros after Credit Suisse Group AG cut Germany's third-largest Web-access provider to ``underperform'' from ``neutral,'' citing ``weaker- than-expected'' third-quarter results.

``We believe risk to 2009 conensus could be greater given a worsening European economy and ongoing DSL (digital subscriber line) competition,'' the bank added.

Parmalat SpA fell 5.4 percent to 1.215 euros after Italy's largest dairy company cut its annual profit and sales forecasts as pressure on incomes spur more shoppers to pass up its branded products for goods carrying food retailers' own names.

Nokia

Nokia Oyj climbed 2.3 percent to 10.18 euros after Merrill Lynch & Co. and Sanford C. Bernstein upgraded the world's largest mobile-phone maker.

Merrill Lynch's Andrew Griffin raised his recommendation for Espoo, Finland-based Nokia to ``buy'' from ``neutral.'' Pierre Ferragu at Sanford Bernstein increased his rating to ``outperform'' from ``underperform.''

Hennes & Mauritz AB climbed 2.2 percent to 258.50 kronor. Europe's second-largest clothing retailer said same-store sales fell 2 percent last month. That beat the average analyst estimate in a SME Direkt survey for a 2.6 percent decline. Total revenue rose 9 percent, excluding currency swings.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.

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Immelt’s GE Purchases Signal Sell as Insiders Buy

By Eric Martin and Michael Tsang

Nov. 17 (Bloomberg) -- General Electric Co. Chief Executive Officer Jeffrey Immelt and Citigroup Inc.‘s Vikram Pandit are back to buying their own companies’ shares. That means there may be more stock declines to come.

CEOs, directors and other senior officers at New York Stock Exchange-listed companies purchased $1.37 billion worth of equities in October, according to Bethesda, Maryland-based research firm Washington Service. They snapped them up as the Standard & Poor’s 500 Index fell 17 percent, the most since 1987.

Insider buying, a bullish signal for two decades, lost its prescience this year and now may be a harbinger of a retreat in shares because it signals overconfidence, according to Ben Silverman, director of research at InsiderScore.com, a stock tracking firm in Princeton, New Jersey. The last time officers bought as much was in March 2008, preceding a drop in the S&P 500 a month later, data compiled by Bloomberg show.

“Everyone’s drinking the Kool-Aid,” said Michael Levine, a money manager at New York-based OppenheimerFunds Inc., which oversees $160 billion. “These guys know their companies better than the market, so they think they’ll be right. But the economic slowdown has happened much more quickly and has been much deeper than people expected.”

Insiders stepped up purchases in the past four months, buying $57 worth of shares for every $100 sold in October, from a low of $21 bought in June. The last time the amount of buying increased as much was in March, when executives bought $62 of shares for every $100 they sold.

False Starts

Futures on the S&P 500 lost 0.6 percent today. The gauge gained 7.9 percent from the end of March to 1,426.63 on May 19, before giving up the entire advance the next month. The index has dropped 44 percent since reaching a record in October 2007 as signs of a recession increased and banks lost almost $1 trillion on mortgage-related investments.

Insiders scooped up $2.15 billion of stock in August 2007 as S&P 500 companies reported record quarterly profits. Executives at financial firms such as Wachovia Corp. Chairman Lanty Smith and Washington Mutual Inc. director Michael Murphy accounted for a third of purchases after industry profits reached an all-time high. The S&P 500 rose 6.2 percent from the end of the month until the start of the bear market in October.

“Recent history isn’t on their side,” said Silverman, whose firm tracks insider transactions for more than 325 institutional investors. “We saw in financials last year people fooled by their own imagination. Whether it was hubris or being too close, not being able to see the forest for the trees.”

Best Buy

The S&P 500 lost 6.2 percent last week, dragged down in part by a 14 percent plunge in Best Buy Co., the largest U.S. electronics retailer. The Richfield, Minnesota-based company said last week that profit and sales will fall more than analysts forecast. Founder Richard Schulze bought 1.76 million shares three weeks before the announcement. The purchases were his first in at least five years, according to data compiled by Bloomberg.

A phone message left for Best Buy spokeswoman Susan Busch wasn’t returned.

GE’s Immelt purchased 50,000 shares at prices from $16.41 to $16.45 on Nov. 13, the same day the stock dipped below $15 for the first time since 1996.

Immelt, who took over on Sept. 7, 2001, bought GE stock after the terrorist attacks in New York and Washington four days later. The 52-year-old executive works without a contract and has always exceeded a requirement that he hold shares valued at least six times his salary. With his most recent purchase, Immelt now owns more than 1.62 million GE shares, based on U.S. Securities and Exchange Commission filings.

Immelt’s Confidence

Immelt’s purchase “reflects his confidence in the company,” said Gary Sheffer, a spokesman for the Fairfield, Connecticut- based company.

Pandit, 51, bought 750,000 common shares on Nov. 13, paying an average of about $9.25 apiece, New York-based Citigroup said in a filing with the SEC. He also bought 100,000 preferred shares. In all, he spent about $8.4 million. Citigroup closed last week at $9.52.

“The purchases reflect the belief in the long-term strength and growth opportunities of the company,” said Citigroup spokesman Michael Hanretta.

Nine officers and two directors at Consolidated Edison Inc., including Chief Financial Officer Robert Hoglund, bought the stock at $42.79 on Oct. 3. One month later, the owner of New York City’s biggest utility said third-quarter profit fell 42 percent, more than analysts estimated, on higher operating costs and taxes. The stock dropped 9.2 percent since their purchases.

The Consolidated Edison executives weren’t available to comment, a spokesman for the New York-based company said.

Buy Signals

In the past, insider purchases were a reliable indicator for investors looking to buy. Between 1988 and 2007, executives at NYSE-listed companies were net buyers on eight occasions, monthly data compiled by Washington Service show. In every case, the S&P 500 rallied in the following 12 months, posting an average advance of 21 percent.

Penn Capital Management’s Eric Green still considers buying by company executives to be bullish, especially when U.S. stocks are trading at historic lows relative to profits.

The S&P 500 fetches 9.96 times next year’s estimated earnings from continuing operations, compared with the weekly average of 21.1 times historical operating profit over the past decade, according to data compiled by Bloomberg.

“It’s always bullish when the insiders are buying because they believe in the fundamentals of the company and think the valuations make no sense,” said Green, director of research at Penn Capital Management in Cherry Hill, New Jersey, which oversees $3 billion. “This market could go up very, very quickly, and if you’re not in it you’ll miss it.”

Worsening Fundamentals

So far, fundamentals such as earnings have dropped along with stocks. Profits at S&P 500 companies declined for five straight quarters, the most since 2001. One-third of companies, including Burbank, California-based Walt Disney Co. and Seattle- based Starbucks Corp., missed analysts’ estimates for third- quarter earnings -- the biggest shortfall since 1997, data compiled by Bloomberg show.

“If you’re a company insider, you may not fully appreciate the economic wreckage going on worldwide,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, who helps manage about $60 billion. “From the inside out, the company looks a lot more solid than from the outside in.”

To contact the reporters on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Eric Martin in New York at emartin21@bloomberg.net

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Bank Stocks `Ignoring' Debt-Market Rebound, Morgan Stanley Says

By Michael Patterson

Nov. 17 (Bloomberg) -- The KBW Bank Index's retreat to a 12-year low last week may signal investors in U.S. financial stocks are ``ignoring'' an improvement in credit markets, according to Morgan Stanley.

The financial sector is ``fairly valued to moderately cheap,'' Abhijit Chakrabortti, Morgan Stanley's New York-based head of global equity strategy, wrote in a research note dated yesterday. He recommended shares of Wells Fargo & Co., JPMorgan Chase & Co., PNC Financial Services Group Inc., Bank of New York Mellon Corp. and State Street Corp.

The widening spread lenders earn on the difference between rates on deposits and loans, a drop in interbank borrowing costs, capital injections, industry consolidation and the modification of mortgages to avert foreclosures ``causes us to question whether the BKX should be trading close to prior lows,'' Chakrabortti wrote. BKX is the ticker symbol for the 24- company KBW Bank Index.

``If credit and money markets were to again deteriorate, then the current BKX level could be justified,'' wrote Chakrabortti. ``However, we believe the commitment shown by global policy makers in recent weeks makes this an unlikely scenario.''

The KBW Bank Index has tumbled 45 percent this year as credit losses and asset writedowns at global financial firms approached $1 trillion. The gauge fell to 47.96 on Nov. 12, the lowest closing level since 1996, and ended at 48.40 last week.

Financial companies' financing costs dropped 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 in August 2007, froze after Lehman Brothers Holdings Inc. collapsed on Sept. 15, destroying lenders' confidence they would be repaid.

To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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Cyrela, Gol, Petrobras, Rossi, Vale: Brazilian Equity Movers

By Paulo Winterstein

Nov. 17 (Bloomberg) -- The following companies are having unusual price changes in Brazil trading. Stock symbols are in parentheses, and share prices are as of 8:21 a.m. New York time. Preferred shares are usually the most-traded class of stock.

The Bovespa index dropped 3.7 percent to 34,469.98.

Cia. Energetica de Sao Paulo (CESP6 BS) fell 3.5 percent to 13.22 reais. The power generator and distributor controlled by the state of Sao Paulo reported a loss of 114.2 million reais ($50.6 million) in the third quarter. The company was expected to lose 37.6 million reais, the average of six estimates compiled by Bloomberg.

Cia. Vale do Rio Doce (VALE5 BS) fell 4.1 percent to 23.49 reais. Iron-ore contract prices, at records after six years of gains, may halve next year as demand from China slumps, Australia & New Zealand Banking Group Ltd. said. Vale is the world's biggest ore producer.

Cyrela Brazil Realty SA Empreendimentos e Participacoes (CYRE3 BS) fell 6 percent to 6.96 reais. Third-quarter earnings for Brazil's biggest real estate developer were ``fraught with negative surprises'' including operating profit and a cut in its forecasts. Gafisa SA (GFSA3 BS), the second-biggest homebuilder, dropped 5.5 percent. ``We remain cautious on the Brazilian homebuilders as we expect fundamentals to deteriorate,'' JPMorgan Chase & Co. analyst Adrian Huerta wrote in a note to investors dated today. Rossi Residencial SA (RSID3 BS), the third-biggest builder, slid 6.7 percent to 3.08 reais.

Gol Linhas Aereas Inteligentes SA (GOLL4 BS) declined 6.6 percent to 7.25 reais. Brazil's second-biggest airline posted a third-quarter net loss of 294.3 million reais, Gol said in a regulatory filing. The airline was expected to post a loss of 55 million, the average estimate of three analysts surveyed by Bloomberg.

Petroleo Brasileiro SA (PETR4 BS) slumped 3.6 percent to 20.02 reais. Brazil's state-controlled oil company said its monthly oil production declined in October after reaching a record the previous month. Total daily domestic output fell to 2 million barrels a day in October, from 2.02 million barrels in September.

To contact the reporter on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net.

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U.S. Stock-Index Futures Fall; Boeing, Dell, Lowe's Retreat

By Adria Cimino

Nov. 17 (Bloomberg) -- U.S. stock futures fell, indicating the Standard & Poor's 500 Index will extend a two-week slump, as investors speculated reports today may add to evidence the economy is deteriorating.

General Electric Co. and Boeing Co. retreated before figures on manufacturing and industrial production. Citigroup Inc., the fourth-biggest U.S. bank by market value, slipped 2 percent after saying it plans to cut 50,000 jobs. Dell Inc., the second-biggest personal-computer maker, declined 3.3 percent after Merrill Lynch & Co. cut its recommendation on the stock, saying PC sales will drop. Lowe's Cos. sank 3.9 percent as its fourth-quarter earnings forecast missed analysts' estimates.

S&P 500 futures expiring in December slipped 0.6 percent to 856 at 8:16 a.m. in New York. Dow Jones Industrial Average futures decreased 0.7 percent to 8,309 and Nasdaq-100 Index futures fell 0.4 percent to 1,150.75.

``Everyone knows the data won't be good,'' said Jacques Porta, who helps manage about $180 million at Ofivalmo Patrimoine in Paris. ``The question is about 2009 now, 2008 was a catastrophe.''

A report from the Federal Reserve Bank of New York at 8:30 a.m. local time will probably show its Empire State index in November dropped to minus 26, the lowest level since record keeping began in 2001, according to the median in a Bloomberg survey. The figures on U.S. October industrial production are scheduled for release at 9:15 a.m.

`Fairly Valued'

A 9.9 percent decline in the S&P 500 so far this month left the index valued at 18.8 times earnings, near the lowest since September 2007. U.S. stocks tumbled on Nov. 14, capping a second straight weekly loss, as a record decrease in retail sales and weaker demand for mobile phones raised concern about the depth of the recession.

The KBW Bank Index's retreat to a 12-year low last week may signal investors in U.S. financial stocks are ``ignoring'' an improvement in credit markets since October that's unlikely to reverse, according to Morgan Stanley.

The financial sector is ``fairly valued to moderately cheap,'' Abhijit Chakrabortti, Morgan Stanley's New York-based head of global equity strategy, wrote in a research note dated yesterday. He recommended shares of Wells Fargo & Co., JPMorgan Chase & Co., PNC Financial Services Group Inc., Bank of New York Mellon Corp. and State Street Corp.

The S&P 500 is down 41 percent this year as credit-related losses and writedowns at financial firms worldwide topped $965 billion, threatening global economic growth. The gauge is on course for the steepest annual decline since 1931.

Earnings Watch

Profits slumped 17 percent on average at companies in the S&P 500 that have reported third-quarter results, according to Bloomberg data. Analysts expect an 8.5 percent drop in full-year earnings, based on estimates compiled by Bloomberg.

Boeing retreated 0.8 percent to $40.72 in Germany.

Dell was downgraded to ``neutral'' from ``buy'' at Merrill Lynch, which said PC sales will decline next year as companies cut spending amid a slumping economy. The stock slipped 3.3 percent to $10.53 in German trading.

Lowe's dropped 3.9 percent to $17.51 in early New York trading. The company said it expects fourth-quarter earnings per shares of 8 cents to 16 cents, compared with an 18 cent estimate in a survey of analysts.

Citigroup Cuts

Citigroup Inc. fell 20 cents, or 2.1 percent, to $9.32 in trading before the open of U.S. exchanges. The bank plans to cut about 14 percent of its workforce as of Sept. 30, and reduce expenses by 20 percent from their peak as the global economy contracts.

Chief Executive Officer Vikram Pandit is scheduled to announce the plan to employees today. The reductions were disclosed in a presentation posted on New York-based Citigroup's Web site.

General Motors Corp., seeking a federal bailout as its cash dwindles, climbed 6.3 percent to $3.20. The automaker will raise 22.4 billion yen ($230 million) by selling its 3 percent stake in Suzuki Motor Corp. The Japanese company said it will use cash to buy back its own shares.

McDonald's Corp., the world's largest restaurant company, added 7 cents to $56.20. UBS AG lifted its the recommendation on the stock to ``buy'' from ``neutral.''

``We are increasingly encouraged with McDonald's ongoing strong global trends amid a deteriorating global consumer environment,'' analysts wrote in a note to clients.

The brokerage also upgraded Yum! Brands Inc., owner of the Pizza Hut, Taco Bell and KFC chains, to ``buy'' from ``neutral,'' citing a recent share-price drop and potential for ``meaningful'' earnings-per-share growth. Yum! gained 40 cents to $25.38.

Dubai Group, an investment company managing more than $40 billion on behalf of Dubai's ruler, plans to buy stakes in U.S. real-estate and asset management companies to profit from low prices. The group, which has already spent as much as $3.5 billion in the U.S., is focusing on the world's biggest economy because it has the potential to recover quicker from the global financial crisis than Europe, Chairman Soud Ba'alawy said today in an interview at a conference in Dubai.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.

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US Economy Fears Intensify

Daily Forex Fundamentals | Written by Investica | Nov 17 08 12:18 GMT |

The US deterioration will continue to represent a stern test of dollar confidence in the short term and the underlying US currency risks are liable to increase. The Euro was unable to sustain gains above the 1.28 level on Friday and weakened to lows near 1.26 as Wall Street dipped sharply in late trading. The US data maintained a weaker tone on Friday with a particular focus on retail sales. There was a headline sales drop of 2.8% for the month while there was also a 2.2% underlying decline. The weak data was certainly expected, but the sharp decline in sales will reinforce fears over the economy, especially as the ECRI leading index deteriorated at the fastest rate for 60 years. The University of Michigan consumer confidence index offered some relief with a marginal rise as gasoline prices fell, although it was historically very weak. Discussions surrounding the US auto sector will remain a very important short-term focus and political tensions surrounding the sector are liable to unsettle the US currency. There was some disappointment that the G20 summit concentrated on a general message that further action would be taken rather than announcing any new policy initiatives. The Euro was below 1.26 on Monday before rallying back above this level. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Trading's Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Japan is Officially in Recession; Risk Aversion Seen Intact

Daily Forex Fundamentals | Written by Finotec Group | Nov 17 08 12:16 GMT |

The dollar strengthens in the Asian and European opening on surprising data from Japan that officially went into recession. The economic outlook continued to worsen as Japan joined the euro zone in recession, while U.S. data showed a record fall in retail sales in October. Traders are seeing the greenback as a safe heaven and the gloomy economic data triggered some buys on the dollar. Nevertheless, the futures in the US were trading in positive territory while the EZ trade balance deficit surprisingly narrowed to 5.6B initiating back sales on the dollar that slipped to 1.27 vs. the Euro. The G20 meeting failed to come up with specific action to restore global market confidence the weekend. There's nothing we've had (from the G20) that changes people's view of the global economy or what the likely policy response is to it," said Daragh Maher, deputy head of global foreign exchange research at Calyon in London. "The strategy that people have had has been 'Play strong dollar, play strong yen, buy those on the dips and if it ain't broke don't fix it,'" he added The European share prices reflected the risk averse atmosphere with the leading indexes across the continent trading around 1.5% to 2% lose. Analysts said the current preference for unwinding riskier FX positions, favouring the low-yielding dollar and yen, would stay in focus as investors concentrated on prospects for a prolonged global recession. The main focus for today will be the data released from the US with the N.Y Fed manufacturing (13:30 GMT) and the industrial production (14:15 GMT). The NY Fed manufacturing is expected to show further decent in the economic activity whereas the industrial output might indicate a slight recovery from the previous decent. The data is expected to weight on the equity markets. Finotec Group Inc. http://www.finotec.com/ Disclaimer: FINOTEC Trading's Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

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Covering the Gaps!

Daily Forex Fundamentals | Written by Crown Forex | Nov 17 08 12:14 GMT |

The dilemma in financial markets continues as the outlook continues to be a deeper economic recession as major economies falter through 2009! The hope held for world G20 leaders the beholders of nearly 90% of global growth rather disappointed markets as they tended to focus on preventing a new crisis such as this from reoccurring rather than fix the one at hand! The pledged to reforming the functionality of financial markets with proposals to be handed by the end of 09 first quarter and for the current crisis they pledged actions by governments and all measures to be taken which is practically nothing new preparing markets for more monetary policy easing to be seen. Japan has been added to the list of nations in recession which added more weight to markets as equities are declining in Europe and majors are not covering the gap they have opened to as again nothing has changed and fundamentals are not heavy so technicalities are taking over on the first trading day for this week. The Japanese yen that was weakened with recession has covered its opening gap by rising to set its high today at 97.56 yet failed to exceed that level as it was also pressured down by the 20 days MA; its trading near its intraday lows currently around 96.40s where the pair is reflecting conflicting signals from momentum indicators over various time scales which set the pair to fluctuate further through the day. The pair seems though to acquire downside tendency and breaching its lows set at 96 levels will take the pair to set its target at 95.50-40; while adjusting to the upside the pair needs to steady above 97.50s to manage to breach 98.35 levels which is the 38.2% correction for the latest downside wave and as far as the pair continues to trade below this level we will favor the downside. The pound is heading higher to cover its opening price gap and so far managed to do so; sterling is heavily oversold on daily basis yet over intraday basis the pair is providing mixed signals from momentum indicators, especially as the direction indicators are still negative and have not weakened strongly to indicate the near ending for the downside wave; for that we expect the pair to have peaked for today at 1.4965 and to continue to head lower after that especially that again the 1.50 remained intact and as far as trading is below that level downside targets are valid which now are set at 1.4413 levels. Meanwhile concerning the euro the currency has been as well as other majors fluctuating heavily in the past period, despite the fact that Germany the area's and Europe's largest economy entered recession leading the 15 nation into contraction the euro had fairly responded on better terms versus majors especially with France evading recession slightly hope is seen that the Euro area will bounce back on quicker terms that from other majors! The narrowing trade deficit had little of effect on the euro as much as the currency needed to recover the gap, and optimism regarding European governments and the ECB to act quickly to address the economic weakness. The currency has inclined today to so far set the thigh at 1.2699 and lingers still above 1.26 levels, yet as the momentum indicators are reflecting conflicting signals we do not expect the euro to breach the key resistance for the triangular model which its main resistance resides near 1.3739 levels preceded with the 20 Days MA at 1.2715 and as far as trading is below those levels the downside tendency will be stronger which might take the pair again lower towards 1.24 levels ahead of further lower targets at 1.2324. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Bundesbank President Axel Weber Remains Focused On Growth, Expects Economic Activity to Slow Further as Crisis Deepens

Daily Forex Fundamentals | Written by DailyFX | Nov 17 08 11:46 GMT |

ECB's Weber said he doesn't rule out further rate cuts and added that the central bank will meet weaker growth with appropriate steps. The comments support expectations for another rate cut at the December council meeting. However, Weber also warned that low rates are an incentive for high risks, which ties in with comments from executive board member Stark, who has warned that excessive easing could lay the ground for new excesses in the future. Weber said the crisis has broadened and intensified and that he is not optimistic on fourth quarter growth and sees lower growth potential in the future. In addition, Weber said an unstable financial system threatens price stability and sustainable growth. The Bundesbank president warned against knee-jerk regulation and said that more regulation doesn't necessarily mean better regulation, but also said that the Bundesbank's financial stability role should be law. Weber also said that the belief in the market ability to self-regulate was waned. Meanwhile, ECB's Noyer said interbank markets are showing the first signs of normalization, but added that "there is still some way to go". Noyer also said that the global financial system has been in crisis for more than a year and that the crisis is not over yet. The French central bank head said French banks "aren't sheltered from the crisis", but stressed that they are "solid and robust" and continue to make profits and have "regular sources of revenue". He expressed hope that lower oil and food prices will increase real disposable income, which could contribute to a possible revival of consumption and investment and ultimately "allow a pickup in growth in the course of 2009. 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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Technical Analysis Daily: USD/JPY

Daily Forex Technicals | Written by iFOREX.bg | Nov 17 08 11:25 GMT |

USD/JPY 96.70 USD/JPY Open 96.19 High 97.60 Low 95.95 Close 97.02 Last week Dollar/Yen consolidated, and strengthening above the 100.00/50 area could not be accomplished. On the weekly chart descending pressure continues to remain strong, while the currency pair remains under 101.50. On the daily chart the currency couple remains under decreasing pressure. After reaching a minimum level since 1995 the USD/JPY corrected, but development of further growth is absent for now. The risk of continuation of the downward movement remains high enough, and strengthening under the support 96.10 would give signals in that favor. The nearest resistance is 97.45, followed by 98.75. Technical resistance levels: 97.45 98.75 99.60 Technical support levels: 96.10 95.25 94.40 Trading range: 96.80 - 96.20 Trend: Downward Sell at 96.70 SL 97.00 TP 96.30 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Euro, Pound Rally Despite Toothless G-20 Summit

Daily Forex Fundamentals | Written by DailyFX | Nov 17 08 11:32 GMT |

Talking Points Japanese Yen: Officially Enters A Recession Pound: Rally's Despite Declining Home Prices Euro: Trade Balance Unchanged US Dollar: Industrial Production on Tap Euro, Pound Rally Despite Toothless G-20 Summit The Euro rose over a 140 pips in overnight trading to 1.2704, despite A G-20 summit that failed to deliver a plan of action to combat the slumping global economy by the world's leaders. The single currency managed to hold onto its gains despite a Euro-zone trade balance report that showed the deficit remained seasonally adjusted unchanged at 5.7 billion Euros after Augusts' initial reading was revised higher from 6.1 billion. The headline reading showed a narrowing of the gap from 9.4 billion to 5.6 billion as imports jumped 2.1%. Despite the lack of teeth from the G-20 summit, forex traders are hanging their hat on the fact that talk of a global fiscal stimulus effort is better than the prior denials of a worldwide problem. Expectations are that the Euro-zone will see continued efforts by its individual member governments and the ECB to help reverse the current recession that the region finds itself in. This could add support for the Euro today, and see it continue to trade in its current range of 1.2400 - 1.300. This may be its most likely path until the central bank's next policy meeting on December 6th, where another rate cut and the signal of further easing by President Trichet could lead to a breakout. The British pound jumped nearly 300 pips before finding resistance ahead of the 1.5000 price level. The move came despite home prices falling another 2.9% in November according to property website Rightmove latest index. Although the U.K. housing slump is not new news, that fact that the market continues to shows signs of further deterioration despite the BoE slashing rates to a 63-year low of 3% will be troubling for policy makers. Indeed, expectations that the central bank may need to cut rates to 0% in order to see an ultimate bottom in the sector. The Sterling continues to find trend line support despite the declining interest rate expectations. The next major support level is at 1.4000 and a break there could send the GBP/USD spiraling toward 1.1000. The U.S. economic calendar will unusually provide some event risk to start the week with industrial production and the Empire manufacturing readings on tap. Activity in the New York region for November is expected to have declined further as the impact from the credit crisis continues to plague manufacturers. Although, the national reading for October is anticipated to have seen a 0.2% improvement the lagging indicator may not have capture the full impact of the frozen credit markets. Given the wide misses by the regional indicators during that period it is feasible to expect that production contracted which would only dim the outlook for the U.S. economy and could weigh on the dollar. Also, the prospect of more global efforts could raise investors risk appetite and the inverse correlation could also lead to traders selling the dollar. However, if U.S. investors' view the G-20 summit as another failed attempt by the global community to come together for a common good and that ultimately they will revert back to a protectionist course of action, then the resulting risk aversion could send the dollar higher 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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US in recession, jobless to peak at 7.5%: survey

Updated: 2008-11-17 (China Daily) WASHINGTON -- The US economy is in recession and will contract at a faster pace in the fourth quarter, extending the decline into early 2009 as high unemployment crimps consumer spending, a survey showed.
Joseph Sullivan fills out a form at the Verdugo Jobs Center, a partnership with the California Employment Development Department, in Glendale, California November 7, 2008. [Agencies]

The National Association of Business Economists' poll of 50 professional forecasters released on Monday found that real gross domestic product was expected to fall 2.6 percent in the fourth quarter and slump 1.3 percent in the first three months of 2009.

Preliminary government estimates showed GDP contracted 0.3 percent in the third quarter. The results of the survey, which was conducted between October 28 and November 7 indicated growing pessimism among forecasters.

"Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE President Chris Varvares.

"Credit conditions continue to be tenuous. Despite the hefty liquidity injections by the Fed and the Treasury, the majority of NABE panelists believe that tight credit conditions will continue."

A month ago, forecasters expected the economy to expand 0.1 percent in the fourth quarter, with the growth pace accelerating to 1.3 percent in the first quarter of 2009.

Troubles in the US housing sector, emanating from the extension of loans to homeowners with poor credit history, have engulfed the broader economy, resulting in rising job losses and tight access to credit.

Economy In Reccession

About 96 percent of the NABE forecasters believed that the world's economic power house was already in recession. Half of them estimated the downturn started in the fourth quarter of 2007 or in the first quarter of 2008.

More than a third reckoned the recession began in the third quarter of 2008, and nearly three-quarters believed it could persist beyond the first quarter of 2009. Over 60 percent expected the depth of the recession to be contained, with the decline in GDP bottoming below 1.5 percent.

Overall GDP growth in 2008 was expected to come in at around 0.2 percent and top 0.7 percent next year, according to the survey. This compares with predictions of 1.2 percent and 2.2 percent respectively in October's survey.

"With the recession continuing into 2009, GDP growth next year is expected to be a meager 0.7 percent. This would be the slowest growth over a two-year period since the early 1980s," said Varvares, who is also the president of Macroeconomic Advisers.

Despite the gloomy economic outlook, the Federal Reserve would probably keep its benchmark overnight lending rate steady at 1 percent, raising it by 25 basis points in the last quarter of 2009, according to the survey.

The unemployment rate was likely to peak at 7.5 percent by the third quarter of 2009, according to the survey. In the October poll, the jobless rate was seen topping out at 6.4 in the second quarter of next year.

The unemployment rate rose to a 14-year peak of 6.5 percent in October. With the unemployment situation expected to deteriorate, consumer spending, which accounts for about two-thirds of economic activity, would remain depressed.

With household spending weak, auto sales forecasts were slashed to 13.4 million units this year from October's estimate of 14.0 million. Sales for 2009 were likely to fall to 12.5 million instead of rising to 14.2 million, as had been predicted in the October survey.

On an optimistic note, analysts said the housing sales rout was likely to bottom out by mid-2009, but a lot of uncertainty remains as new home inventories run at 10-months' supply, the survey found. Inflationary pressures would be contained as the economic downturn caps demand for oil, it showed.

The Fed's preferred inflation measure, the core PCE index, was seen rising 1.8 percent over 2009, 0.2 percentage point lower than in the October survey.




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FX: Major Cross Rates Continue To Show Intraday Volatility, But No Clear Directional Trend

Daily Forex Fundamentals | Written by KBC Bank | Nov 17 08 08:45 GMT |

Sunrise Market Commentary US Treasuries move higher on renewed equity weakness and distressed eco data Plunging retail sales, dismal corporate news and renewed equity weakness helped Treasuries to lofty gains on Friday. This week, eco data will remain very weak, but it will be equities, the state of funding markets and maybe Fed appearances that drive the markets. Technical pictures remain bullish at shorter end of the curve, but low volumes traded make us a bit unease. European yield curve steepens further On the European bond market, the steepening continued unabatedly, as 2- and 5-year yields set new cycle lows. The Bund however has still strong resistance ahead at 118.88 before the technical picture becomes outspoken bullish. FX: major cross rates continue to show intraday volatility, but no clear directional trend Major FX cross rates are still driven by the swings in investor's risk appetite on global markets. EUR/USD and USD/JPY lost some ground on the poor stock market close in the US on Friday. EUR/GBP enters calmer waters after the recent sterling sell-off. The Sunrise Headlines US Equities ended the week lower (Dow/S&P -3.82% / -4.17%), as eco data and corporate news was disconcerting. Asian stocks start the week mixed after weak economic data in Japan. The Washington G-20 meeting concluded with a statement that lays down the areas in finance where changes are needed and a timetable for these decisions to be made. They also asked for a broader policy response regarding fiscal stimulus and more rate cuts, but no coordinated action was planned. The Japanese economy sank into a technical recession in the third quarter as growth declined for the second quarter in a row. GDP fell by an annualized 0.4%, while economists predicted the economy would grow 0.1%. Iceland announced it had reached a deal with Britain and other European Union states on how to repay foreign savers. The IMF will vote on a loan package to Iceland on Wednesday. The US Congress starts its debate on an emergency stimulus package in a special post election session. The plan should include help to the carmakers worth up to $25 billion in loans to help Detroit survive the financial crisis. President-elect Obama said the most important thing is that we avoid a deepening recession and we shouldn't worry about the deficit next year or even the year after. Crude oil ($55.93) declined as the OPEC may wait until its meeting on December 17 to make a decision on whether to cut production targets again. The calendar contains the NY Fed and US industrial production. Currencies: FX: Major Cross Rates Continue To Show Intraday Volatility, But No Clear Directional Trend EUR/USD On Friday, EUR/USD trading was again driven by global investor sentiment. The swings between hope and fear continued to set the tone for trading. The Eco calendar in Europe and in the US contained some interesting releases as there were the European Q3 GDP data and CPI and the US retail sales and Michigan consumer confidence. However, those data had only a limited and temporary impact on trading, at best. EUR/USD started Friday's session on a strong footing supported by the gains of US stocks on Thursday and the positive start in Europe. Nevertheless, underlying doubts on the sustainability of this rebound persisted and EUR/USD drifted lower going into the early morning data. The retail sales were again very weak but in line with the market reaction recently, poor eco data from the US were an ambiguous signal for the single currency. US stock markets at first didn't react too negative to these data and this even helped EUR/USD to regain part of the previous intraday losses. However, a late session decline on the US stock markets also hammered EUR/USD and the pair closed the session at 1.2605, compared to 1.2769 on Thursday. Over the weekend, all eyes were on the G20 meeting in Washington. As one could expect in advance, this meeting delivered a long to do list with a lot of good intentions. From a market point of view, it contains too few specific measures to change the course of events on global markets. EUR/USD trades around the closing levels of last Friday at the moment of writing. Today, the European calendar only contains some second tier releases. In the US, the NY Empire state manufacturing survey and the production data are scheduled for release. Especially, the timely surveys are interesting, but we doubt they will have a lasting impact on global trading and on EUR/USD in particular. So, sentiment on global stock markets will continue to be the most important single driver for EUR/USD also today. Already for quite some time, negative eco news and risk avers investor behavior has supported the dollar (and the yen) and has weighed on the single currency. This theme was an important factor behind the decline of EUR/USD from highs above 1.60 to current correction low in the 1.2330 area. We hold on to this EUR/USD negative bias longer term. However, since end October, the single currency has showed more resilient and has since developed a short-term consolidation pressure. The correlation between EUR/USD and the stock markets is not one-for-one, but (the degree of) risk aversion is still the dominant factor for EUR/USD trading. For now, we continue hold on to our view that the pair might continue trading within the barriers of this consolidation pattern within the boundaries of 1.2330 and 1.3297. Whether the bottom holds is highly dependent on whether or not the major stock market indices to avoid another down leg below the current range bottom (840/818 area for the S&P). Considering the large swings at the end of last week, the jury is still out on this item. EUR/USD: consolidation continues Support comes in at 1.2513 (ST low), at 1.2448 (Reaction low), at 1.2388 (reaction low) and at 1.2331/24 (Reaction low). Resistance is seen at 1.2614 (Breakdown), at 1.2796 (Reaction high), at 1.2855 (Reaction high), at 1.2927 (Reaction high), at 1.2976 (MT breakdown), at 1.3116 (Reaction high) and at 1.3294 (Range top). The pair is moving into oversold territory. USD/JPY From a technical point of view, EUR/USD since the last week of September tumbled from the 1.4866 reaction high to levels below the 1.24 mark. High profile intermediate supports have all been taken out with remarkable ease, but over the last two weeks the EUR/USD decline shifted into a lower gear but the pair failed to regain the first important resistance area 1.3259/94 in a sustainable way and gradually returned south. Recently, we favoured a sell-on-upticks approach in case of return action higher in the above mentioned trading range. We hold on to that tactics but we do not yet front run on a break of the downside of the range. In this respect, we still tended to reduce/take profit on EUR/USD short exposure in case of dips towards to range bottom and look to re-buy in a case of return action higher. On Friday, USD/JPY trading again showed some intraday swings, but at the end of the day the changes were rather limited. The pair was traded in the 97.00 area at the start of trading in Europe, it lost some ground going into the start of the US trading session (the correlation with European equities at that time was not really on-to-one) but regained most of the intraday 'losses' later in the session, despite highly volatile trading conditions on the US stock markets at the end of the session. The pair closed the session at 97.14, compared to 97.68 on Thursday. This morning, the (preliminary) Japanese Q3 GDP data came out in negative territory for the second consecutive quarter, sparking a lot of headlines on Japanese recession on the newswires. Negative eco data in theory are no good news for the yen, but this is not the way the markets usually react these days. Bad economic news, a poor start of the Asian stock markets and maybe also some disappointment on the outcome of the G20 supported the yen at the start of trading this morning. The pair was traded in the 96 area early in Asia but regained some ground as Japanese (and some other Asian stock markets) managed to overcome the early weakness. On the charts, global market stress hammered the pair through the key 103.50 range bottom early October and the pair set a new reaction low at 90.93 three weeks ago. An easing in global market tensions sparked a temporary USD/JPY rebound with the pair reaching a reaction high in the 100.55 on November 04, but the rebound ran into resistance. Longer-term, we prefer a scenario of the yen remaining well supported as there is still very little prospect for a sustained improvement in the global economic picture anytime soon. Recently, we indicated that gains beyond the 100.55 reaction high wouldn't be that easy short-term. A sell-on-upticks approach remains favoured as long as the pair holds below the 100.55 mark. USD/JPY: gradual downtrend continues Support stands at 95.88 (Reaction low), at 95.11 (Reaction low), at 94.48 (Last week low), at 94.07 (LT reaction low) at 93.15 (76 % retracement) and at 90.87 (Year low). Resistance comes in at 98.25/30 (Reaction highs), at 98.68 (Breakdown), at 99.47 (Reaction high) and at 100.55 (Reaction high). The pair is in neutral territory. EUR/GBP On Friday, EUR/GBP again showed some wide intraday swings. A lot of market players apparently still had to adapt positions after the recent sell-off of the sterling. There were no important UK data on the calendar and trading was again very much order driven. As was the case in the previous sessions, the sterling came under pressure in the run-up the US trading session. EUR/GBP at that time set an intraday high in the 0.8635 area but Thursday's highs were not really challenged. Ahead of the weekend, this apparently inspired some short-term players to reduce sterling short-exposure; EUR/GBP closed the session at 0.8541 compared to 0.8606 on Thursday. This morning, the Rightmove house prices index showed again a steep decline (- 2.9% M/M, -7.1 % Y/Y). On top of that, the CBI came out with a very negative assessment of the UK economy going forward. However, at least for now this release caused the big swings in sterling trading. EUR/GBP trades in the 0.8545 area at the moment of writing. The aggressive BoE rate cut two weeks ago and the negative assessment from the BoE after the publication of the inflation report pulled the trigger for an aggressive sterling selling wave last week. The quick loss of interest rate support and the very negative outlook for the UK economy going forward made sterling lose all its attractiveness. Wednesday's brake above the high profile 0.8200 resistance area has made the technical picture outright negative for sterling/positive for EUR/GBP After the sterling crash last week, some consolidation/correction is well possible. However, a buy-on-dips approach remains favoured. Longer-term we continue to put the risk for additional sterling losses, even from the current levels. The pair needs to return below the 0.8215 area (uptrend line) to call off the red alert for the sterling. EUR/GBP: to enter calmer waters short-term? Support stands at 0.8492 (Break-up hourly), at 0.8433 (STMA) at 0.8379 (Break-up hourly) and at 0.8215/04 (Uptrend line/MTMA). Resistance is seen at 0.8564 (Boll top), at 0.8634 (Reaction high hourly), at 0.8662 (New high). The pair is in overbought territory. News US: Retail sales plunge sharply Retail sales surprised on the downside in October, falling 2.8% M/M while a decline of 2.1% M/M was expected. The previous figure was downwardly revised from 1.2% M/M to 1.3% M/M. Looking at the details, sales of gasoline stations declined very sharply (-12.7% M/M from -0.4% M/M) and also motor vehicles and parts worsened significantly (-5.5% M/M from -4.8% M/M). Excluding cars, retails sales dropped 2.2% M/M, while the consensus was looking for a more modest drop (-1.2% M/M). In October, both retail sales and retail sales less autos showed the steepest declines in survey history which indicates that consumers are very pessimistic and are delaying purchases of expensive goods. But it is important to note that part of the decline is due to a sharp plunge in oil prices. Import prices dropped by 4.7% M/M in October, after falling a downwardly revised 3.3% M/M In September. On a yearly basis import inflation fell back from 21.4 Y/Y in July to 6.7% Y/Y in October. The details show that most of the drop is due to falling oil prices (-16.7% M/M), but also industrial supplies declined sharply (-11.0% M/M). It might be important to note that prices of goods from China decreased 0.3% M/M (from 0.0% M/M in September and 0.2% M/M in August), which suggests inflationary effects from China are weakening. University of Michigan consumer confidence came out slightly better then expected in November. The headline index showed a marginal improvement from 57.6 to 57.9, while the consensus was seeking for an outcome of 56.7. The economic conditions sub-index rose from 58.4 to 61.4. The economic outlook deteriorated from 57.0 to 55.7, which illustrates that consumers are becoming more pessimistic about the future. EMU: Economy slides into technical recession In the euro zone, third quarter GDP contracted by 0.2% Q/Q, which was in line with the consensus estimate. This is the second consecutive quarter of negative growth which indicates that the euro zone economy slid into a technical recession. On a yearly basis, GDP grew 0.7% Y/Y after 1.4% Q/Q in the second quarter of 2008. This is the first technical recession since the start of the euro zone which signals the need for further (aggressive) rate cuts. The October euro zone CPI figure confirmed the flash estimate; coming out at 3.2% Y/Y, which is in line with the estimate. The month-on-month figure (0.0% M/M) came out lower than the flash estimate. Core CPI stabilized at 1.9% Y/Y. Download entire Sunrise Market Commentary Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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