Nickel Rises to Two-Week High on Outlook for Supply Reductions

By Claudia Carpenter

Dec. 11 (Bloomberg) -- Nickel rose to a two-week high in London on prospects mining companies will accelerate production cuts in line with declining demand. Copper fell.

Production in the past 10 years was more concentrated among a few miners than any of the industrial metals such as copper, allowing producers more leeway to restrain output, according to a BNP Paribas SA report yesterday. Nickel has dropped 59 percent this year as demand led by stainless steel makers slumped, swelling inventories.

Nickel miners “have been optimizing production” better than other metal producers, said Michael Widmer, an analyst at BNP Paribas in London. “Next year I think inventories will not rise as much because of the reduced output.”

Nickel for delivery in three months gained $600, or 5.8 percent, to $10,900 a metric ton as of 10:41 a.m. on the London Metal Exchange, the highest since Nov. 26. Prices have jumped 20 percent this week.

Stainless steel demand is still shrinking and the market may not improve next year, Outokumpu Oyj Chief Executive Officer Juha Rantanen said in a statement today. Nickel supply cuts by miners including OAO Norilsk Nickel haven’t kept pace with slumping demand as inventories in warehouses monitored by the London Metal Exchange climbed to the highest since August 1995.

“The main problem at the moment is on the demand side,” said Eliane Tanner, commodity analyst at Credit Suisse Group in Zurich. “Production cuts are not happening fast enough to compensate for the slowing demand.”

Nickel may trade between $9,000 and $10,000 a ton by the end of the first quarter of 2009 and to a range of $9,500 and $10,500 a ton a year later, Credit Suisse said in a report today.

Aluminum Advances

Aluminum gained on expectations a drop in the dollar will support demand for industrial metals priced in the U.S. currency, Widmer said. Aluminum rose $34 to $1,560 a ton. Copper dropped $5 to $3,300 a ton. Yesterday’s 3.3 percent jump was probably too much given that “nothing fundamentally has changed -- things are pretty terrible,” said Gayle Berry, an analyst at Barclays Capital in London.

Copper inventories fell 750 tons to 302,850 tons, the first decline in a week.

Tin gained $125 to $11,975 a ton, lead jumped $50 to $1,040 a ton and zinc added $1 to $1,105 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 Rises for 4th Day in London as Weaker Dollar Lifts Demand

By Nicholas Larkin

Dec. 11 (Bloomberg) -- Gold rose for a fourth day in London as the dollar weakened, increasing the metal’s appeal as an alternative investment to the U.S. currency. Silver and platinum also gained.

The dollar fell to a seven-week low against the euro as a bill designed to prevent the collapse of U.S. automakers met with opposition in the Senate. Bullion, which typically moves in the opposite direction to the dollar, yesterday gained the most in more than two weeks.

“If the U.S. dollar continues its slide, the only way is up” for gold, Emanuel Georgouras, a precious metals trader at Marex Financial Ltd. in London, wrote today in a note. Still, “it is hard to expect gold to continue its northward journey without some decent profit taking along the way.”

Gold for immediate delivery climbed as much as $13.81, or 1.7 percent, to $824.41 an ounce and traded at $821.47 by 11:06 a.m. in London. February futures gained $13.50, or 1.7 percent, to $822.30 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal, heading for its biggest weekly gain since September, rose to $821 in the morning “fixing” in London used by some mining companies to sell production, from $802.25 at the afternoon fixing yesterday. Bullion has dropped 20 percent from its March record of $1,032.70 an ounce as gains in the dollar and slowing world growth reduced demand for commodities. Gold is down 1.5 percent this year.

U.S. reports later today will show the country’s trade deficit probably narrowed in October to the lowest in three years, while more than half a million workers last week sought jobless benefits for the first time, according to Bloomberg surveys of economists.

‘Hard Assets’

“Hard times are as usual leading investors to prefer hard assets and there is no harder asset than the tangible finite currency that is gold,” said Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin.

The U.S. Dollar Index, which tracks the currency against those of six trading partners, slipped 1 percent. Gold may also have been helped higher as crude oil advanced 4.7 percent to $45.55 a barrel in New York. Some investors buy gold as a hedge against inflation.

Gold may reach $1,000 an ounce next year and “I think you’re going to see the $2,000 level in 2010,” as the global economy heads for a bigger slump than currently forecast, said Philip Manduca, head of investments at ECU Group Plc.

“The world economy has got to get worse before it gets better,” London-based Manduca, who manages more than $1 billion, said in an interview. Investors should “go to cash, buy gold,” as stock markets drop further, he said.

Platinum Gains

Among other metals for immediate delivery in London, silver rose 1.7 percent to $10.41 an ounce. Platinum gained $10.05, or 1.2 percent, to $842.05 an ounce, and palladium was 0.8 percent higher at $182.75.

U.S. Democratic leaders and the administration of George W. Bush are trying to beat a deadline to bail out General Motors Corp. and Chrysler LLC before the companies burn through their remaining cash and are forced to declare bankruptcy.

Automakers account for about a half of global platinum and palladium consumption, according to estimates by Johnson Matthey Plc, a London-based metals refiner, trader and researcher. The figures take recycling into account.

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

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Cocoa Climbs to Highest Since 1989 on Dollar, Supply Concerns

By Marianne Stigset

Dec. 11 (Bloomberg) -- Cocoa rose to its highest since at least 1989 in London as a weaker dollar buoyed demand for commodities and amid concern about supply from Ivory Coast, the world’s biggest grower.

Deliveries to Ivory Coast ports for shipment abroad fell 30 percent in the week ended Nov. 30 to about 45,315 metric tons from 65,000 tons a year earlier, an industry official with access to the information said yesterday. The country’s growers are getting paid 20 percent more for beans than a month ago because prolonged rainfall has reduced supply, according to figures published by the state-run Bourse du Café et du Cacao.

Cocoa is being “supported once more by dollar weakness and as the story continues, an increasingly bullish fundamental forward outlook,” Stephanie Garner, a cocoa trader at Sucden (U.K.) Ltd., said in a report today.

Cocoa for December delivery rose 15 pounds, or 0.8 percent, to 1,840 pounds ($2,745) a ton on London’s Liffe exchange, the highest since at least 1989. Cocoa gained 22 percent last month, the biggest jump since November 2001, and has climbed 76 percent this year. Cocoa futures for March delivery fell $18, or 0.3 percent, to $2,374 a metric ton on ICE Futures U.S. in New York.

Cocoa growers in Ivory Coast are being paid an average of 600 CFA francs ($1.21) a kilogram (2.2 pounds), an increase of 20 percent on last month, according to Bourse du Café et du Cacao.

“The price is going up to at least 600 CFA francs because we are all struggling to get cocoa beans,” Mamadou Bamba, a buyer for the exporting cooperative Kavokiva, said by phone from the central town of Daloa yesterday. “It’s a question of demand and supply, and the competition is fierce.”

Black Pod

Black pod, a fungus that causes cocoa pods to rot, and adverse weather have affected plantations in Ivory Coast, according to Saibou Toure, a buying agent for the exporting cooperative CCPA.

Cocoa production will outpace demand by 21,000 tons in the 2008-09 season, less than half of what was expected a month earlier, Fortis said last month.

Among other agricultural commodities, robusta coffee for January delivery fell $57, or 3 percent, to $1,830 a ton. White sugar for March delivery climbed $1.20, or 0.4 percent, to $319.90 a ton.

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net



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German Stocks Fall, Led by Carmakers; Deutsche Post, SAP Fall

By Stefanie Haxel

Dec. 11 (Bloomberg) -- German stocks declined amid concern a $14 billion bill designed to prevent the collapse of U.S. carmakers may be blocked by opposition in the Senate.

MAN AG, Europe’s third-largest truckmaker, and Daimler AG dropped for the first time in four days. Deutsche Post AG fell 3.4 percent as the Financial Times Deutschland reported Europe’s biggest mail carrier is facing increased competition. SAP AG, the world’s largest maker of business-management software, lost 2.2 percent after the Bitkom industry group forecast Germany’s information technology market will stagnate next year.

The benchmark DAX Index declined 12.38, or 0.3 percent, to 4,792.5 as of 12:22 p.m. in Frankfurt. DAX futures expiring this month fell 0.3 percent. The broader HDAX Index retreated 0.3 percent to 2,375.18.

The U.S. House yesterday approved a loan package to rescue General Motors Corp., Chrysler LLC and others, backed by the Bush administration and Democratic leaders. The measure was sent to the Senate, were opposition is growing.

“The outcome here remains unclear as it faces opposition from Republicans,” Commerzbank AG analysts Daniel Schwarz and Gregor Claussen wrote in a note to clients today. If the bill won’t be passed, this “could trigger a collapse of the U.S. auto industry, which would cause cascading bankruptcies in the supplier industry.”

MAN fell 2.2 percent to 35.80 euros. Daimler, the world’s second-largest maker of luxury cars which has about a fifth of its sales in the U.S., lost 3.8 percent, to 24.915 euros.

Deutsche Post, SAP

Deutsche Post retreated for the first time in four days, sliding 3.4 percent to 10.80 euros. The postal service faces competition from parcel-delivery companies Hermes Logistik Gruppe and DPD, which are considering setting up a joint venture, the FTD reported, citing no one.

SAP sank 2.2 percent to 26.175 euros. Germany’s market for phone equipment, software and online services will show no growth in 2009, Berlin-based Bitkom said during a telephone conference today. In September, the group still anticipated the market to expand 1.5 percent next year. This year, the market will grow 1.2 percent, down from 1.8 percent predicted earlier.

Salzgitter AG, the country’s second-largest steelmaker, dropped 4 percent to 50.48 euros. ThyssenKrupp AG, Germany’s largest steelmaker, slid 0.4 percent to 17.53 euros.

Finish competitor Outokumpu Oyj predicted a fourth-quarter loss, postponed spending and pledged job cuts after a faster- than-expected decline in demand.

Kloeckner & Co. SE, a steel trader, sank 1.1 percent to 11.52 euros.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Escada AG (ESC GY) dropped 4.9 percent to 3.66 euros. Credit Suisse Group AG rated the maker of luxury women’s clothes “underperform” in new coverage, citing the absence of a “convincing positive trigger.”

IVG Immobilien AG (IVG GY) rallied 11 percent to 4.20 euros. WestLB AG confirmed a “buy” recommendation on Germany’s largest commercial property lender following a meeting with the new Chief Executive Officer Gerhard Niesslein.

Niesslein, who took office on Nov. 1, “has an ideal profile to deal with the current situation at IVG,” analysts Georg Kanders and Thomas Effler wrote in a note to clients today.

Pfeiffer Vacuum Technology AG (PFV GY) climbed 1.4 percent to 42.60 euros. WestLB AG raised its recommendation for the maker of vacuum pumps used in the production of DVDs and instant coffee to “buy” from “neutral.”

Q-Cells AG (QCE GY) plunged for a third day, declining 12 percent to 18.59 euros. Germany’s largest solar company was lowered to “sell” from “neutral” at UBS AG after scraping its earnings outlook for 2008 and 2009 on Dec. 9.

The fourth quarter of 2008 “marks the beginning of a several quarters with weak growth, industry over-capacity, pricing pressure and shrinking margins,” analyst Patrick Hummel wrote in a note today. “We think another profit warning for full-year 2009 is virtually inevitable.”

To contact the reporter on this story: Stefanie Haxel in Frankfurt at shaxel@bloomberg.net.

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European Stocks Drop on Economy Concerns; Glaxo, Daimler Fall

By Adam Haigh

Dec. 11 (Bloomberg) -- European stocks fell for the first time in four days as concern the economic slowdown from China to America is deepening overshadowed a rally in oil producers on higher crude prices.

GlaxoSmithKline Plc, the world’s second-biggest drugmaker, and Daimler AG led declines among companies that make more than a fifth of their sales in the U.S. as the dollar weakened against the pound and the euro. BHP Billiton Ltd. and Anglo American Plc slipped more than 1.5 percent after Goldman Sachs Group Inc. cut its growth forecast for China. Royal Dutch Shell Plc, Europe’s largest oil company, climbed 2.5 percent.

Europe’s Dow Jones Stoxx 600 Index retreated 0.9 percent to 203.61 at 12:45 p.m. in London. The measure has slumped 44 percent this year as policy makers and governments worldwide introduced measures to cushion economies from the worst financial crisis since the Great Depression.

“The depths of this recession aren’t in the price yet,” said Philip Manduca, London-based head of investments at ECU Group Plc, where he manages more than $1 billion. “Data are worsening at an accelerating degree and that is concerning. That means everything is getting significantly worse,” he told Bloomberg Television.

The Swiss central bank cut its interest rate to a four-year low of 0.5 percent and said further measures are possible as the economy faces a recession that may be the worst since 1982.

Germany’s economy will shrink 2.2 percent next year and the contraction will continue into 2010, with gross domestic product declining 0.2 percent, Germany’s Ifo institute said today.

U.S. Futures

Futures on the Standard & Poor’s 500 Index swung between gains and losses before a report on jobless claims, following a 1.2 percent advance in the benchmark measure for American equities yesterday.

Figures from the Labor Department may show today 525,000 people filed initial claims for unemployment insurance last week compared with 509,000 the prior week, according to a Bloomberg survey of economists. U.S. employers have cut 1.9 million workers from payrolls so far this year, the government said last week.

Stocks in Asia rose for the fifth day, the longest winning streak in seven months, as South Korea cut interest rates to a record low. The MSCI Asia Pacific Index added 1.2 percent as KB Financial Group Inc. surged 7.8 percent in Seoul.

More than $31 trillion has been erased from the value of global equities and credit losses and writedowns at banks and insurers are approaching $1 trillion.

Ruble Devaluation

In Russia, the devaluation of the ruble gathered pace as the central bank loosened control of the currency for the fifth time in a month after reserves fell $161 billion defending the exchange rate. Investors have taken almost $200 billion out of the country, BNP Paribas SA data shows.

GlaxoSmithKline, which made more than 40 percent of sales in the U.S. last year, retreated 2 percent to 1,175 pence. Daimler, the world’s second-largest maker of luxury cars which generates about 20 percent of revenue in the U.S., dropped 3.6 percent to 24.965 euros.

The dollar fell to a six-week low versus the euro and weakened against the pound as Senate Republicans voiced opposition to the $14 billion rescue for General Motors Corp. and Chrysler LLC.

Democratic leaders and the Bush administration are trying to beat a deadline to save the millions of jobs dependent on the car industry before GM and Chrysler burn through their remaining cash. For GM, that could be in three weeks.

Fiat SpA, Italy’s biggest carmaker, slid 3 percent to 5.595 euros as the stock was downgraded to “underweight” from “overweight” at Morgan Stanley.

Mining Companies

BHP, the world’s largest mining company, slid 1.9 percent to 1,211 pence. Anglo American, the fourth-biggest diversified mining producer, sank 2.7 percent to 1,494 pence.

Goldman lowered its forecast for the Chinese economy by 1.5 percentage points to 6 percent in 2009, citing weakness in exports and investment.

“In China, the slowdown will be greater than during the Asia financial crisis or the 2001 dot-com bust,” the brokerage wrote in an e-mailed report today. “The near-term growth outlook in China is particularly weak.”

Shell added 2.5 percent to 1,798 pence and BP Plc climbed 3.5 percent to 530.25 pence. Crude oil rose for a second day after Saudi Arabia said it is producing near its OPEC target, a sign the world’s biggest exporter is complying with supply cuts agreed by the group in October.

Ericsson, the world’s biggest maker of wireless networks, slipped 3.5 percent to 62.9 kronor after Merrill Lynch & Co. lowered its recommendation to “underperform” from “buy.” The shares have risen 25 percent in the past six weeks and are approaching Merrill’s price target of 67 kronor, Andrew Griffin, a London-based analyst, wrote in a report today.

UPM-Kymmene Oyj retreated 9.8 percent to 9.41 euros. Europe’s second-biggest papermaker said it will miss its fourth- quarter earnings targets because of a higher-than-anticipated drop in deliveries.

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

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Barrick, BCE, Ford, Freeport, GM, Newmont: U.S. Equity Preview

By Eric Martin

Dec. 11 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 7:50 a.m. in New York, unless otherwise specified.

Gold producers rose as the precious metal rallied for a fourth day in London. The dollar weakened, increasing gold’s appeal as an alternative investment to the U.S. currency.

Barrick Gold Corp. (ABX US) rose 3.7 percent to $31.50. Newmont Mining Corp. (NEM US) added 2.3 percent to $36.20. Freeport-McMoRan Copper & Gold Inc. (FCX US) increased 2.2 percent to $23.40.

American International Group Inc. (AIG US): The insurer plans to announce more than $15 billion worth of sales of businesses before the end of the year to raise money to pay government loans, the Financial Times said, citing people familiar with the situation. AIG rose 3.4 percent to $1.81 in trading after the official close of exchanges yesterday.

BCE Inc. (BCE US) dropped 6.7 percent to $17.07. The C$52 billion ($41 billion) takeover of Canada’s largest phone company was terminated by Ontario Teachers’ Pension Plan and a group of U.S. private-equity firms.

General Motors Corp. (GM US) gained 3.3 percent to $4.75. The U.S. House voted 237-170 last night to approve emergency loans for General Motors and Chrysler LLC, sending the legislation to the Senate.

Ford Motor Co. (F US) rose 4 percent to $3.38.

Greif Inc. (GEF US): The maker of shipping and packaging equipment predicted 2009 profit between $3.25 and $3.75 a share. Analysts polled by Bloomberg estimated $4.15 a share on average. Greif slid 1.2 percent to $29.25 in trading after the official close of U.S. exchanges yesterday.

Merck & Co. (MRK US) fell 1 percent to $26.73. The third- largest U.S. drugmaker faces a new trial over the death of a former user of the Vioxx painkiller that resulted in a $32 million award against the company, a court ruled. A Texas state appeals court said it erred in May by throwing out the award and granted Merck’s request for a new trial.

Navistar International Corp. (NAV US): The largest maker of blast-resistant trucks for the U.S. military won a $362.3 million order to build more of the vehicles to protect troops from roadside bombs. Navistar gained 3.2 percent to $24.04 in regular trading yesterday.

Palm Inc. (PALM US): The maker of the Treo and Centro smart phones invited reporters and analysts to a Jan. 8 event at the Consumer Electronics Show in Las Vegas, signaling it may introduce new devices based on revamped software to gain ground on Apple Inc.’s iPhone and Research In Motion Ltd.’s BlackBerry. Palm shares gained 3.1 percent to $1.69 in regular trading yesterday.

Sprint Nextel Corp. (S US): The third-largest U.S. wireless company had its rating on senior unsecured debt lowered to below-investment grade by Moody’s Investors Service, which cited its weakened position in the wireless phone market. Sprint dropped 2.1 percent to $2.37 in trading after the official close of U.S. exchanges yesterday.

XL Capital Ltd. (XL US) rose 7.7 percent to $4.20. The biggest Bermuda-based insurer said it hired Goldman Sachs Group Inc. to explore “value-enhancing opportunities,” and disclosed investment losses of at least $200 million.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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U.S. Stock Futures Gyrate; GM and Ford Shares Climb in Europe

By Adria Cimino

Dec. 11 (Bloomberg) -- U.S. stock futures swung between gains and losses as Democratic leaders and the White House worked to beat a deadline to save General Motors Corp., Chrysler LLC and the millions of jobs dependent on the car industry.

GM climbed 4.3 percent in Germany, while Ford Motor Co. added 1.2 percent. The U.S. House voted 237-170 last night to approve emergency loans for GM and Chrysler, shifting the focus to the Senate, where Republican opposition threatens to delay or kill the legislation. Eli Lilly & Co. slipped 1.1 percent after the drugmaker forecast earnings that trailed analyst estimates.

The Standard & Poor’s 500 Index this week marked a technical end to a 14-month bear market as President-elect Barack Obama stepped up efforts to pull the economy out of a recession. A Labor Department report today may show that more than half a million workers sought jobless benefits for the first time last week.

S&P 500 futures expiring this month retreated 0.2 percent to 894 at 7:32 a.m. in New York after earlier falling as much as 1.1 percent. Dow Jones Industrial Average futures lost 2 points, or less than 0.1 percent, to 8,713 and Nasdaq-100 Index futures gained 0.4 percent to 1,222.

Europe, Asia, VIX

Europe’s Dow Jones Stoxx 600 Index fell 0.7 percent as concern that the economic slowdown from China to America is deepening weighed on automakers, overshadowing a rally in oil producers. The MSCI Asia Pacific Index rose for a fifth day, the longest winning streak in seven months, as South Korea cut interest rates to a record low.

The VIX, which measures the cost of using options as insurance against declines in the S&P 500, has dropped 31 percent since Nov. 20, when it rose to 80.86, the highest in its 18-year history. The S&P 500 added 20 percent since Nov. 20.

The benchmark for U.S. equities has still tumbled 43 percent from its 2007 record as the collapse of the subprime mortgage market curbed earnings for five straight quarters.

The S&P 500’s companies reported an average 18 percent decline in profits in the third quarter, prompting analysts to cut estimates for next year. They now project profit growth of 8.2 percent for S&P 500 companies in 2009, about one-third of their forecast of 23 percent at the end of the third quarter, according to data compiled by Bloomberg.

GM, Ford

GM added 4.3 percent to $4.80 in Germany, while Ford gained 1.2 percent to $3.29. Democratic leaders and the Bush administration are trying to beat a deadline to save the companies and the millions of jobs dependent on the industry before GM and Chrysler burn through their remaining cash. For GM, that could be in three weeks.

A Labor Department report at 8:30 a.m. in Washington may show that, for a fifth consecutive week, more than half a million workers sought jobless benefits for the first time as the job market weakened. U.S. employers have cut 1.9 million workers from payrolls so far this year.

Occidental Petroleum climbed 1.2 percent to $57.96. Crude rose after Saudi Arabia said it is producing near its OPEC target, a sign the world’s biggest exporter is complying with supply cuts agreed by the group in October. The contract for January delivery rose as much as 5.5 percent to $45.93 on the New York Mercantile Exchange.

Eli Lilly retreated 1.1 percent to $34.62. The company forecast 2009 profit that missed analysts’ estimates, the second major U.S. drugmaker to trim expectations as the once recession- resistant industry joins other struggling manufacturers.

Lilly, Merck

Net income excluding one-time items will be $4 to $4.25 a share next year, Lilly said in a statement. That missed the $4.27 a share average estimate of 17 analysts surveyed by Bloomberg. Merck & Co. announced its forecast Dec. 4, driving down shares 5.5 percent.

Merck slipped 1 percent to $26.72 today in Germany. The third-largest U.S. drugmaker faces a new trial over the death of a former user of the company’s Vioxx painkiller that resulted in a $32 million award against the company. A Texas state appeals court in San Antonio today said it erred in May by throwing out the award to Leonel Garza’s family on evidentiary grounds.

A report at 8:30 a.m. may show the U.S. trade deficit narrowed in October to the lowest level in three years as plunging oil prices led to a drop in imports. The gap shrank 5.3 percent to $53.5 billion, the smallest since March 2005, according to the median forecast of economists surveyed by Bloomberg News.

Also at 8:30, a second report from Labor may show prices for imported goods fell 4.9 percent in November, according to the survey median. It would surpass October’s 4.7 percent decline as the biggest drop since records began in 1989.

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

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REFILE-Oils limit losses for Europe shares at midday

(Refiles to correct typographical error in 2nd paragraph)

* FTSEurofirst 300 index falls 0.5 pct

* Banks, autos weigh on index

* Energy stocks benefit from higher oil prices

By Brian Gorman

LONDON, Dec 11 (Reuters) - European shares were down at midday on Thursday, driven lower by financial shares on renewed fears of global economic weakness, and by autos stocks on uncertainties over the proposed U.S. bailout package.

Falls, however, were offset by oil stocks, which tiptoed higher on stronger crude prices.

At 1202 GMT, the pan-European FTSEurofirst 300 .FTEU3 index was down 0.5 percent at 855.68 points, snapping a three-session winning run.

The index has lost more than 42 percent this year, battered by the credit crisis, which has helped push several major economies into recession.

Crude oil futures rose more than 5 percent to $45.74 a barrel, after the International Energy Agency predicted global demand would grow in 2009 and on expectations OPEC would cut supplies at a meeting next week.

Heavyweight energy stocks were outstanding gainers. Total (TOTF.PA: Quote, Profile, Research, Stock Buzz), BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) and Statoil (STL.OL: Quote, Profile, Research, Stock Buzz) rose between 1.4 percent and 5.3 percent.

Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) surged 15.4 percent, boosted by its announcement on new oil finds in Ghana and Uganda.

"I think the commodities sectors are making sense, from the point of view of valuations, with miners down to four times (earnings) and oils down to six," said Philip Isherwood, strategist at Dresdner Kleinwort.

"The industry is waking up to Rio's announcement, and rediscovering self-discipline. We've moved up to 'overweight' on commodities."

Isherwood said the "problem with the policy initiatives is that the response is proportionate to the economic problems. You're getting a lot because you've got a lot of problems."

The U.S. House of Representatives approved a rescue plan legislation on Wednesday to help embattled U.S. automakers, but the plan has to be approved by the Senate where prospects for passage appeared grim.

BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz), Peugeot (PEUP.PA: Quote, Profile, Research, Stock Buzz) and Fiat (FIA.MI: Quote, Profile, Research, Stock Buzz) were down between 1.7 percent and 3.2 percent. Futures for the Dow Jones DJc1, S&P S&Pc1 and Nasdaq NDc1 were between 0.1 percent and 0.5 percent higher.

Among banks, BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz), Banco Santander (SAN.MC: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) were down between 0.9 percent and 1.9 percent.

Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz) soared 20 percent after reports the Belgian government no longer rules out handing its 11.6 percent stake in French bank BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) to Fortis.

BNP Paribas declined to comment, while no one at Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz) could immediately comment.

Insurer Standard Life ST.L fell 4.9 percent.

AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) fell 1 percent after dropping two experimental cancer treatment drugs. Other pharmaceutical stocks continued declines from yesterday, including GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz), which fell 1.3 percent.

INDEX RESHUFFLE

Belgian supermarket group Delhaize (DELB.BR: Quote, Profile, Research, Stock Buzz) was up 1 percent on news it was one of 17 companies being promoted to the FTSEurofirst 300.

Others promoted include Ryanair (RYA.I: Quote, Profile, Research, Stock Buzz), up 0.3 percent. All three Irish banks in the index -- Allied Irish Banks (ALBK.I: Quote, Profile, Research, Stock Buzz), Anglo Irish (ANGL.I: Quote, Profile, Research, Stock Buzz) and Bank of Ireland (BKIR.I: Quote, Profile, Research, Stock Buzz) will be ejected. The index changes will take effect from Dec. 22.

However, the Irish banks were mixed, with Anglo Irish Banks up 16.7 percent.

Negative corporate news weighed on the market, especially on retailers.

Finland's top magazine paper maker UPM-Kymmene Oyj (UPM1V.HE: Quote, Profile, Research, Stock Buzz) said its fourth-quarter operating profit is expected to be less than the same quarter a year ago after sales slowed more than expected. Shares in UPM were down 9.9 percent.

Within the sector, Stora Enso (STERV.HE: Quote, Profile, Research, Stock Buzz) shed 7.6 percent

Shares in Zara fashion store owner Inditex (ITX.MC: Quote, Profile, Research, Stock Buzz) rose 4.9 percent despite the company's nine-month net profit missing estimates.

Across Europe, the FTSE 100 .FTSE index was up 0.5 percent, the German DAX .GDAXI index was down 0.3 percent and France's CAC .FCHI index was down 0.2 percent. (Additional reporting by Christoph Steitz and Sarah Marsh in Frankfurt; Editing by Andrew Macdonald)

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FTSE rises by midday on oils; Tullow rises

* Oils up on firmer crude; Tullow Oil rises on new oil finds

* Insurers down, unsettled by AIG sale delay

* Pharmas extend weakness

By Dominic Lau

LONDON, Dec 11 (Reuters) - Britain's leading share index was 0.4 percent higher by midday on Thursday as gains in heavyweight energy stocks eclipsed weakness in financials and drugmakers.

By 1137 GMT, the FTSE 100 .FTSE was up 16.25 points at 4,383.53, after trading as much as 1.4 percent lower earlier in the session.

The UK benchmark shed 0.3 percent on Wednesday to snap a two-day winning run, and is still down 32 percent for the year.

Energy stocks were the top-weighted gainers as crude prices CLc1 firmed and after Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) announced new oil finds in Ghana and Uganda, which it expects to boost reserves.

Tullow Oil shares rose nearly 17 percent, while BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) and BG Group (BG.L: Quote, Profile, Research, Stock Buzz) advanced between 1.4 percent and 4.7 percent.

Miners were generally higher, with the FTSE 350 mining index .FTNMX1770 up 0.9 percent. Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Wednesday's big gainer on cost-cutting moves, rose 5 percent, while Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Fresnillo (FRES.L: Quote, Profile, Research, Stock Buzz) and Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) were up between 2.1 percent and 8.5 percent.

Bank of England (BoE) policymaker Kate Barker told the Glasgow-based Herald newspaper that Britain's ailing economy would start to recover towards the end of 2009, but that it would be hard to judge how fast that improvement would be. [ID:nLB071051]

A UK economist at Commerzbank, Peter Dixon, said: "Most of the bad news is already in the market. Is it going to get worse? Sure. The economic news is going to get awful worse.

"But the market will only react though if the numbers continue to get worse. In another words, the recession is quite prolonged."

A survey showed British factory orders fell sharply in December as export orders shrank at their fastest pace in more than five years. [ID:nLB28859]

Banks were the main drag on the index, with HSBA (HSBA.L: Quote, Profile, Research, Stock Buzz) falling 2 percent, Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) dropping 3.7 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) shedding 4 percent.

INSURANCE PREMIA

Insurers also languished on uncertainty over AIG (AIG.N: Quote, Profile, Research, Stock Buzz) asset sales and after Goldman dropped Aviva (AV.L: Quote, Profile, Research, Stock Buzz) from its "conviction buy" list.

AIG, which is looking to sell assets around the globe to repay a $152 billion U.S. government rescue package, said difficult markets may force it to delay divestment plans.

Aviva sagged 2.6 percent, Friends Provident (FP.L: Quote, Profile, Research, Stock Buzz) sank 6.3 percent, Standard Life (SL.L: Quote, Profile, Research, Stock Buzz) lost 5.9 percent and Legal & General (LGEN.L: Quote, Profile, Research, Stock Buzz) shed 3.1 percent.

"'Tis the season to be realistic," said Felix Riley, head of binary betting firm ChoiceOdds.

"Domestically, the demise of Woolworths compounds the gloom, and the slump of the pound against the euro is a damning verdict by the markets on the UK economy."

Pharmaceuticals came under pressure, extending previous session's weakness after the European Commission adopted a package of reforms for the sector, which includes concessions to companies reselling prescription drugs.

Also, U.S. drug reviewers presented evidence of life-threatening risks from a class of asthma drugs to an advisory panel considering whether to recommend limits on medicines now used by millions.

The inhaled drugs include one of the world's top-sellers, GlaxoSmithKline's Advair as well as AstraZeneca's blockbuster Symbicort.

GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz), AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) and Shire (SHP.L: Quote, Profile, Research, Stock Buzz) slipped between 0.2 and 1.5 percent.

Among mid-caps, Punch Taverns (PUB.L: Quote, Profile, Research, Stock Buzz) slumped 5.7 percent on renewed fears over the group's debt after Charles Winston, leisure analyst at stockbroker Redburn Partners, advised clients to sell and put a fair value of nil on the stock. (Additional reporting by Jon Hopkins; Editing by Andrew Macdonald)

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Recession to worsen, deflation a risk: report

A trader puts his hands on his head, on the floor of the New York Stock Exchange December 5, 2008.
REUTERS/Shannon Stapleton

By Jim Christie

SAN FRANCISCO (Reuters) - The "nasty" U.S. recession will tighten its grip next year as unemployment rises and weak home and stock prices imperil consumers, finance firms and debt-laden businesses, a UCLA Anderson Forecast report released on Thursday said.

Additionally, a sustained retreat in prices for goods and services is a very real possibility that would further drag on the economy, according to the forecasting unit's report.

"Where only last quarter we were worried about inflation, we are now worried about its very rare opposite: deflation," the report said. Falling prices would cut demand and discourage employers from hiring.

"The record collapse in oil prices has brought with it welcome relief to motorists throughout the country and an effective tax cut of $440 billion in the form of a lower oil import bill," the closely-watched report said. "Nevertheless the swift fall in oil prices is now lowering the absolute level of consumer prices and bringing with it likely declines in nominal GDP over the next three quarters."

Where the forecasting unit in summer had projected a "subprime" outlook for the U.S. economy through the end of next year with growth at just above 1 percent, it now sees the economy facing a winter of discontent.

"The news from the economy is bad," the report said. "The recession that we had previously hoped to avoid is now with us in full gale force."

The UCLA Anderson Forecast unit expects real GDP to shrink by 4.1 percent this quarter and by another 3.4 percent and 0.8 percent in the first and second quarters of next year, respectively, as consumer and business spending weaken and as the foreign trade that had propped up growth much of this year sags.

"Because Europe and Japan are already in recession and China and India are suffering from a significant slowdown in growth, the export boom of the past few years will wane," the report said. "Make no mistake the global economy is in its first synchronized recession since the early 1990s."

By late 2009 the U.S. unemployment rate will hit 8.5 percent, compared with 6.7 percent in November, as employers shed an additional two million jobs over the next year.

The historical long-term trend of 3 percent growth will not resume until 2010, the report said.

The administration of President-elect Barack Obama and Congress should act quickly next year to pass an economic stimulus package, said David Shulman, the report's author.

"They're talking a lot of infrastructure, which makes a lot of sense. They're talking a middle-class tax cut. I think when Congress gets through with this they'll be raining money on the economy," Shulman said.

(Reporting by Jim Christie; editing by Carol Bishopric)



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Rhetoric Increases In Japan

Daily Forex Fundamentals | Written by AC-Markets | Dec 11 08 08:38 GMT |

Market Brief The Usd fell sharply in the Asian session. The EurUsd was range bound for most of the session, but jumped from 1.3050 to 1.3150 as the session came to close. The UsdJpy continued to slide from yesterday's 93.03 highs to 92.27. Market sentiment was unchanged amid signs that the automaker bailout is now in the hand of the Senate. The media has been suggesting that the current proposal could fail in the Senate, as there are both Republicans & Democrats that object to the bailout plan in its current form. Asian regional indexes are slightly lower and European stock futures are pointing to a mixed open. Commodities have gained, as risky assets have rebounded recently with crude trading at $44.41bll and gold at $815.38oz. The Japanese authorities could be ready to intervene in the foreign exchange market to halt Jpy appreciation for the first time in more than four years. Economic conditions have eroded sharply since late October (G7 meeting), when Finance Ministers and central bank Governors expressed anxiety 'about the recent excessive volatility in the exchange rate of the Yen' and gave Japan a green light to intervene at their discretion. Recently, Governor Shirakawa said that the weakness in Japanese domestic economy is escalating and that the effect of FX pricing was being carefully watched. In Europe, the market will be watching the Swiss National Bank's interest rate decision. After cutting 100bp in a surprise move last month, we expect the SNB to hold and evaluate the situation. However, SNB's Roth has made it clear that the bank would reach deep into their bag of tricks to stop the financial turmoil from hurting the Swiss economy. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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Swiss National Bank Cuts 50bp as Policymakers Lower Forecasts for Growth and Inflation

Daily Forex Fundamentals | Written by DailyFX | Dec 11 08 08:55 GMT |

The SNB has cut its target range for the 3 months Libor by 50 bps to 0.00-1.00%. The move was widely expected and brings the mid point of the range to just 0.5%, very close to zero. The central bank has reacted swiftly and decisively to the threat of a protracted economy slowdown and we could well see rates go down to zero next year and the SNB resorting to quantitative easing. Meanwhile, Swiss Franc (CHF) dipped after SNB cut rates by 50 bp, which was widely expected, leaving the 3-month Libor target rate at 0.00-1.00%. The SNB cited deterioration in the intonation environment, citing a decline in the U.S. and European economies, which are strongly impacting the Swiss economy. EUR/CHF is expected to push above 1.5650, although offers expected to be heavily congested around this area, given that the 100-day moving average lies at 1.5640. USD/CHF has found a modicum of support from 1.1900 since the SNB decision, but risk is on the downside for this pairing, with the technical changing working against the dollar amid the losses seen over the last few sessions. Nevertheless, equity markets are likely to driven sentiment, with technical studies lacking reliability in the current choppy trading environment. 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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Forex Technical Update

Daily Forex Technicals | Written by India Forex | Dec 11 08 08:43 GMT |

Euro: Euro gained 166 pips yesterday from the lows of 1.2903 levels. The Major stochastic are overbought. Resistance comes in at 1.3160 (55 daily EMA) where intraday shorts can be considered for 60 pips. If this resistance is broken decisively then Euro may surge upto 1.3290 levels. On the downside 1.2845 (21 daily EMA) is a good support. (Eur/Usd:1.3132). Pound : Cable was seen taking support around 1.4750 levels (short-term rising trendline) yesterday whereas the upside was confined around 1.4878. Cable has strengthened mildly and is expected to first take resistance around 1.50 levels (100 4-hourly EMA & 50% Retracement of the recent fall). However, a break of this level can take cable further up to 1.5290 levels. Shorts should be initiated at resistances cautiously. (Gbp/Usd: 1.4920). Yen: The USD/JPY pair witnessed another range-bound session of 90 pips yesterday as it testing the bids at 92.18. The Daily & 4-hourly charts are hinting further downside while the hourly is getting oversold. Upmove first upto 93.77 (38.2% Retracement) could be witnessed, breaking which the pair can rally upto 94.40 (21 Daily EMA & 50% Retracement). Shorts on the pair can be initiated there for 70 pips. (Usd/Jpy : 92.33) Rupee : After the flat closing on Monday, the local unit showed a rise of 1.21% yesterday which was mainly due to boost in the Indian shares. It touched as low as 48.88 yesterday but closed lower around 49 levels towards the end of the session as dollar buying was witnessed. This strength in rupee is expected to continue as the Indian market looks attractive for the FIIs to invest as the shares holds hopes. Indian Inflation would be the focus today. (USD/Re: 48.55) Swiss Franc : Swissy appreciated against the USD yesterday due to the good Zew data released. It touched the highs of 1.1925 before closing the session around the 21 daily EMA at 1.1979. The hourly & 4-hourly stochastic are oversold while the daily charts still have room to reach the oversold region. Support is seen at 1.1882 (200 4-hourly EMA). Intraday longs on the pair can be considered at those levels. Swiss is expected to cut rates by 50 bps today. (Usd/Chf: 1.1940) Australian Dollar : Aussie traded in a thin range of about 90 pips yesterday holding below the 200 4-hourly EMA (0.6638). The 4-hourly & hourly stochastic are showing further upmove while the daily charts are getting overbought. Intraday shorts can be considered at 0.6640 levels for 60 pips. However, if 0.6640 is broken decisively then next resistance is seen at 0.69 levels (55 Daily EMA). (Aud/Usd-0.6618) Gold : Gold surged $38 yesterday touching the highs of $812 levels proving the most attractive commodity for the investors. It shed some of its gain in late US session to close at $809 due to major profit-takings. Although the stochastic are overbought, further scope for the yellow metal to rise can be seen. Resistance is seen around $828 levels where shorts can be considered. On the downside support comes at $782 levels. (Gold: $812.50) Dollar index: Dollar index is trading at 85.21 levels with the stochastic moving further down at 23.09%. India Forex http://www.indiaforex.in DISCLAIMER These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsible for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Dec 11 08 08:36 GMT |

Good morning from wonderful Hamburg. More than half of the week is over and the weekend comes with big steps closer and closer. We hope that your trading week was successful to date and wish you furthermore prosperous trades. Markets review The EUR/GBP rose on Wednesday to a new all-time-high at 0.8824 due to the fact that the British economy shrank 1 % in the three month through November, declared by a report of the National Institute for Economic and Social Research. Since the opening on December 1st at 0.8266 the EUR/GBP climbed 6.75 %. On Wednesday USD fell against most major currencies excepting JPY. The EUR/USD traded near a two-week high at 1.3070, the weakest since November 26th while the USD/JPY rose at 93.02 to its high from Tuesdays closing at 92.12. But today the JPY recovered against the USD and fell since its opening at 92.72 to 92.32 at Tokyo afternoon as a result of speculation a lack of Republican support for the U.S. automakers bailout will prompt investors to pare holdings of assets funded with Japan's currency. Australia's unemployment rate climbed to a one-year high of 4.4 %. Despite of the report there are no negative effects visible and AUD/USD closed nearly unchanged at 0.6566. New Zealand's home sales dropped 45.4 % from a year earlier near to the 19 year low in August. The NZD/USD rose yesterday to its high at 0.55 from its opening at 0.5405 Technical analysis AUD/USD Since October the AUD/USD rose close to a bullish trend line and it seems to attempt breaking the major resistance at 0.8161. A further indication for a strong market could be the Momentum. It shows that the downward movement of the last two days loses its power. If the Momentum rises over the 0.0 line it could be a signal to continuing the bullish trend GBP/USD The GBP/USD follows a bearish trend since the end of September but kept grounded at the support line of 1.4511. It seems that the GBP/USD could go for a turnaround as shown by the MACD. If the support line stays stable it could be possible to stop the bearish trend Pivot Points - Daily FX Support and Resistance Levels Daily Calendar & Key FX Events Varengold Bank IMPORTANT NOTIFICATION TO BE READ IN CONJUNCTION WITH THE CONTENTS OF THIS DOCUMENT This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational urposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Dec 11 08 08:03 GMT |

CHF The pre-planned positions for sell from key resistance range were realized with attainment of basic assumed targets. OsMA trend indicator, having marked preservation of bearish party advantage but with negative factor of pair oversold and considering the chosen strategy gives reasons for further supporting of bearish planning priority for today as well. Hence we assume the possibility of range rate movement with return to 1.1960/80 resistance range, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.1900/20, 1.1840/60, 1.1780/1.1800 and/or further breakout variant up to 1.1720/40, 1.1660/80, 1.1580/1.1600. An alternative for buyers will be above 1.2060 with targets 1.2100/20, 1.2160/80, 1.2220/40. GBP The pre-planned breakout variant for buyers was realized and attainment of assumed targets is 'supported' by the current bullish direction of indicator chart with general situation of buying advantage preservation. For opened long positions the targets will be 1.5000/20, 1.5080/1.5100 and/or further breakout variant up to 1.5160/80, 1.5260/80, 1.5370/90, 1.5460/80, 1.5600/20. The alternative for sells will be below 1.4740 with targets 1.4660/80, 1.4520/40, 1.4460/80. JPY The pre-planned buying positions from key supports were realized with attainment of minimal assumed target. OsMA trend indicator, having marked minimal advantage of bullish party development supports this direction priority in trading operations planning today as well. But considering the current cycle of bearish development in the stage of its strengthening we assume the possibility of attainment 91.80/92.00 supports, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buying positions on condition of formation of topping signals the targets will be 92.40/60, 93.00/20 and/or further breakout variant up to 93.60/80, 94.20/40, 94.80/95.00. An alternative for sells will be below 90.80 with targets 90.00/20, 89.20/40, 87.40/60. EUR The pre-planned breakout variant for buyers was realized with attainment of basic assumed targets. OsMA trend indicator, having marked strengthening tendency of pair overbought gives risk of further buying positions supports but considering the lack of sustained bearish resistance and considering the chosen strategy there are reasons for supporting bullish planning priority direction for today as well. Hence aiming at decreasing trading risks we assume the possibility of rate return to close 1.3000/20 supports, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buying positions on condition of formation of topping signals the targets will be 1.3060/80, 1.3120/40 and/or further breakout variant up to 1.3180/1.3200, 1.3260/80, 1.3320/40. An alternative for sells will be below 1.2920 with targets 1.2840/60, 1.2780/1.2800, and 1.2420/40. FOREX Ltd www.forexltd.co.uk

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N.Z. Housing, Manufacturing Slump Prolongs Recession

By Tracy Withers

Dec. 11 (Bloomberg) -- New Zealand home sales tumbled in November and the manufacturing industry shrank by the most since at least 2002, suggesting the economy is mired in its deepest recession in 18 years.

Home sales dropped 45.4 percent from a year earlier, the Auckland-based Real Estate Institute of New Zealand Inc. said today. The performance of manufacturing index fell to 35.4 last month from 43.3 in October, Bank of New Zealand Ltd. and Business New Zealand said in a separate report.

The declines follow figures showing export volumes, retail spending and construction work dropped in the third quarter, indicating New Zealand’s economic slump has worsened amid the global credit freeze and contractions in the world’s biggest economies. Reserve Bank of New Zealand Governor Alan Bollard has lowered interest rates by 3.25 percentage points since July to try to kick-start domestic demand.

“The economy is entering the second stage of this protracted recession,” said Stephen Toplis, BNZ’s head of research in Wellington. “Growth of our trading partners is falling rapidly. This has resulted in a sharp fall in commodity prices and slumping disposable income growth is leading to pressure on exports.”

The $130 billion economy began shrinking in the first three months of 2008 amid a slump in housing sparked by record-high borrowing costs and as a drought cut farm production. The recession has been extended by the global slowdown which has cut exports, tourism, consumer confidence and business investment.

Economy Shrinks

Toplis expects the economy contracted in the third quarter and probably will shrink again in the final three months of 2008.

The government publishes third-quarter gross domestic product figures on Dec. 22. Last week, Bollard said he expects a 0.3 percent contraction, and some growth in fourth quarter as the economy embarks on a “shallow recovery.”

Finance Minister Bill English, whose National Party was elected as government on Nov. 8, is counting on lower interest rates and income-tax cuts to stoke spending. Parliament today passed legislation for a NZ$4.4 billion ($2.4 billion) tax package over three years starting April 1.

“The tax cuts we have delivered will stimulate the economy in the short term by putting cash in people’s pockets,” English said. The legislation is designed to “cushion the impact of the recession and increase New Zealand’s economic productivity.”

Production Falters

The manufacturing index fell to the lowest since the series began in 2002 because of a decline in orders, today’s PMI report showed. The index has been less than 50, indicating that manufacturing is contracting, since May.

“The global manufacturing depression has well and truly hit New Zealand,” said Phil O’Reilly, chief executive officer at Wellington-based Business New Zealand. The JPMorgan global performance of manufacturing index posted the biggest slump since it began in 1998, he added.

“Its tough-going for many manufacturers. There’s no clear indication we have yet reached the lowest point for this cycle.”

New Zealand’s home sales fell to 4,279 in November, the Real Estate Institute said. Sales are close to the 19-year low of 4,220 recorded in August.

The median house price dropped 4.1 percent from a year earlier to NZ$337,500 ($183,000). It took 44 days to complete a house sale, up from an average 36 days in November last year.

Still, the time needed to sell a home fell from 47 days in October and 52 days in September.

“People are taking a wait-and-see approach,” said Institute President Mike Elford. “They are also watching for the effect of interest-rate cuts to come into the equation.”

Bollard reduced the benchmark rate to 5 percent on Dec. 4 and called on lenders to pass on cheaper borrowing costs to consumers. Trading banks have lowered the variable home-loan interest rates to about 8 percent.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

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China’s Inflation Slows to Weakest Pace in 22 Months

By Li Yanping and Nipa Piboontanasawat

Dec. 11 (Bloomberg) -- China’s inflation cooled to the weakest pace in almost two years, giving the central bank room to cut interest-rates and shore up growth in the world’s fourth-largest economy.

Consumer prices rose 2.4 percent in November from a year earlier, the statistics bureau said today, after gaining 4 percent in October. That was less than the 3.3 percent median estimate of 18 economists surveyed by Bloomberg News.

China may add to its most aggressive interest-rate reductions in 11 years after food and commodity prices eased. Policy makers, who 10 months ago were battling inflation at a 12-year high, are trying to prevent a spiral of falling prices, profits and consumption as the global recession pushes the economy into a slump.

“Slowing inflation will give more room for the central bank to lower rates to bolster growth,” said Li Wei, an economist at Standard Chartered Bank Plc in Shanghai. “A worst-case scenario for deflation would see producers cutting prices, suffering lower margins and slashing wages, which would eventually damp consumption.”

The CSI 300 Index of stocks fell 0.6 percent as of 1:07 p.m. in Shanghai on the signs of a deepening economic slowdown. The yuan traded at 6.8540 against the dollar, from 6.8550 before the release of the inflation figure.

China’s exports fell for the first time in seven years in November, imports plunged and producer prices rose by the least in two years, the government said yesterday.

Clothes, Pork

Food prices climbed 5.9 percent last month from a year earlier, the smallest gain in almost two years. Non-food prices increased 0.6 percent, the least in almost four years.

Telecommunications prices tumbled 19 percent, pork fell 9.3 percent and garments declined 2 percent.

Goldman Sachs Group Inc. cut today its forecast for China’s economic growth next year to 6 percent from a previous estimate of 7.5 percent. That compares with the nation’s 11.9 percent expansion last year.

Recessions in the U.S., Europe and Japan are sapping demand for exports as weakness in the property market undermines investment, construction and consumption.

“The only thing we have to fear is fear itself,” Premier Wen Jiabao said at an annual economic planning summit in Beijing yesterday, the state-run China Daily newspaper reported today, citing unidentified people. “China has the ability to overcome difficulties.”

‘Increasing Pressure’

The government warned yesterday evening of “increasing downward pressure on the economy” and pledged to boost spending, cut taxes and do more to create jobs to maintain social stability.

The State Council last month announced a 4 trillion yuan ($584 billion) spending package to sustain growth through 2010. The central bank has cut the one-year lending rate to 5.58 percent from 7.47 percent in September and dropped quotas limiting lending by banks.

The yuan’s biggest decline against the dollar in three years on Dec. 1 prompted speculation that the government may use currency depreciation to aid struggling exporters of toys, textiles and furniture.

A mild bout of deflation next year could help China’s economy “as it would help to ease cost burdens for producers and cheaper products may spur consumption and sustain growth,” said Li, of Standard Chartered. “One shouldn’t be surprised if deflation is seen in one or two months next year.”

‘Good Deflation’

Morgan Stanley forecasts that consumer prices will fall 0.8 percent in 2009. Barclays Capital estimates a 0.5 percent increase “with rising risks of deflationary pressure in the next few months.”

The government will need to prevent “good deflation” where reduced commodity and raw-material costs help manufacturers from becoming “bad deflation” leading to falling margins and job losses, said Wang Qing, chief China economist at Morgan Stanley in Hong Kong.

China’s economy grew 9 percent in the third quarter, which was the least in five years. The World Bank is forecasting a 7.5 percent expansion next year, which would be the slowest pace since 1990.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net; Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

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