Sugar Rises as Energy Costs Climb, Signaling Demand for Ethanol

By Ron Day

Dec. 16 (Bloomberg) -- Sugar prices rose as energy costs climbed, signaling higher demand for ethanol from sugar cane.

Crude-oil prices rose as much as 2.9 percent. Before today, sugar climbed 6.5 percent this year. Brazil, the world’s biggest producer, makes fuel from cane.

Raw-sugar futures for March delivery rose 0.2 cent, or 1.7 percent, to 11.72 cents a pound at 9:14 a.m. on ICE Futures U.S. in New York.

To contact the reporter on this story: Ron Day in New York at rday1@bloomberg.net.

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Dollar Declines to Two-Month Low Before Fed’s Rate Decision

By Jamie McGee and Kim-Mai Cutler

Dec. 16 (Bloomberg) -- The dollar fell to a two-month low against the euro on speculation the Federal Reserve will cut the target lending rate to near zero today.

The U.S. currency also approached the lowest level in 13 years against the yen as the central bank considered deploying its balance sheet as the key tool for monetary policy. European Central Bank President Jean-Claude Trichet said there’s a limit to how far the bank can cut borrowing costs and signaled it may pause in January.

“People are nervous the Fed will conduct a major policy easing and it will further erode the differential between euro rates and U.S. rates,” said Jessica Hoversen, a foreign- exchange and fixed-income analyst at MF Global Ltd. in Chicago. “The interest-rate differential is supportive to the euro- dollar.”

The dollar slid 0.3 percent to $1.3734 per euro at 9:03 a.m. in New York, from $1.3688 yesterday. It touched $1.3744, the weakest level since Oct. 14. The U.S. currency decreased 0.9 percent to 89.83 yen from 90.65. It reached 88.53 yen on Dec. 12, the lowest level since August 1995. The euro dropped 0.6 percent to 123.38 yen from 124.09.

Futures on the Chicago Board of Trade showed a 66 percent chance the Fed will trim its 1 percent target rate for overnight lending between banks to 0.25 percent, the lowest level on record, compared with no likelihood a month ago. The balance of bets is for a reduction of a half-percentage point.

‘Second Arrow’

Fed Chairman Ben S. Bernanke indicated in a Dec. 1 speech that policy makers will need to focus on “the second arrow in the central bank’s quiver -- the provision of liquidity,” including options such as purchasing Treasuries to inject more cash into the economy.

“You can’t argue you should have a stronger dollar,” said David Bloom, global head of currency strategy at HSBC Holdings Plc, in an interview on Bloomberg Television. “We’re talking about a trillion-dollar stimulus, we’re talking about zero interest rates, we’re talking about quantitative easing.”

The dollar remained lower versus the yen after the U.S. Commerce Department reported today in Washington that construction starts on housing fell last month to an annual rate of 625,000, the lowest level since the government started compiling statistics in 1959.

Consumer prices dropped 1.7 percent in November, the most since record-keeping began in 1947, the Labor Department said. Excluding food and energy, so-called core prices were unchanged from a month earlier.

European Factories

The euro fell earlier against the dollar as reports showed European manufacturing and service industries contracted this month at the fastest pace in at least a decade.

A composite index of factory and non-factory industries dropped in December to 38.3, the lowest level since a survey began in 1998, from 38.9 last month. The index is based on a survey of purchasing managers by Markit Economics in London. A reading below 50 indicates contraction.

The ECB lowered its main refinancing rate three times since October to 2.5 percent to contain fallout from the global financial crisis.

“Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes,” Trichet told journalists in Frankfurt late yesterday. Asked whether the bank will refrain from a further rate reduction next month, he said policy makers want to “concentrate at this stage on getting what we already decided to be really operational.”

The U.S. currency gained 6.5 percent versus the euro and 30 percent against the pound this year on short-term funding pressure and demand for the greenback as a haven.

“The dollar had a big strong rally for several months,” said Jim Rogers, chairman of Singapore-based Rogers Holdings, in an interview on Bloomberg Radio. “It was an artificial rally, in my view. It was caused by everybody being forced to reverse their positions.”

The three-month cost of borrowing in dollars, or London interbank offered rate, fell to the lowest in more than four years today at 1.85 percent.

To contact the reporters on this story: Jamie McGee in New York at jmcgee8@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net

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Gold Little Changed Ahead of Fed Rate Decision; Silver Falls

By Pham-Duy Nguyen

Dec. 16 (Bloomberg) -- Gold, little changed in New York, may rise as the Federal Reserve keeps interest rates low, weakening the dollar and boosting the appeal of the precious metal as an alternative investment. Silver fell.

The dollar fell to a two-month low against the euro on expectations Fed policy makers will cut the benchmark lending rate 50 basis points to a 1958-low of 0.5 percent. Gold rallied to a record in March as rate cuts sent the dollar to an all- time low against the euro.

“If the Fed has to keep rates very low for a long time, that’s going to be awful for the dollar and very good for gold,” said Matt Zeman, metals trader at LaSalle Futures Group in Chicago.

Gold futures for February delivery rose 20 cents to $836.70 an ounce at 9:18 a.m. on the Comex division of the New York Mercantile Exchange. The metal yesterday reached $843.70, the highest price since mid-October.

Silver futures for March delivery fell 3 cents, or 0.3 percent, to $10.59 an ounce.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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Aluminum Falls to 5-Year Low in London After U.S. Demand Drop

By Claudia Carpenter

Dec. 16 (Bloomberg) -- Aluminum dropped to a five-year low in London on signs demand from the auto industry and home builders is falling faster than production cuts. Copper and other metals on the London Metal Exchange also declined.

U.S. aluminum orders plunged 13 percent in November from October, following declines in car output and new home starts, Citigroup Inc. said, citing data from the U.S. Aluminum Association. Aluminum output growth will slow to 2.6 percent next year from 5.3 percent this year after cuts by Norsk Hydro ASA and Rio Tinto Plc, Barclays Capital said in a report Dec. 4.

“Some metals are worse than others and aluminum is probably the worst,” said David Thurtell, an analyst at Citigroup in London. “So far we’ve only seen modest cutbacks by Russian and western producers.”

Aluminum for delivery in three months dropped $32, or 2.1 percent, to $1,463 a metric ton as of 11:22 a.m. on the LME and earlier fell to $1,435, the lowest since Oct. 6, 2003. Prices have dropped 39 percent this year.

Inventories of aluminum in warehouses monitored by the LME gained another 10,100 tons, or 0.5 percent, to 1.94 million tons, the most since Nov. 15, 1994. The inventories have climbed every day since Nov. 7.

Copper decreased $98 to $3,067 a ton after inventories rose 3,800 tons to 318,625 tons, the most since Feb. 16, 2004.

Shipments of copper contained in products such as air conditioners from China to the U.S. have dropped 8 percent this year, BNP Paribas SA analyst Michael Widmer wrote in a report yesterday. China and the U.S. are the largest buyers of copper.

Index of Indicators

The U.S. leading index of indicators for metals including copper and aluminum dropped 9.7 percent in October and the six- month growth rate was the lowest on record, the U.S. Geological Survey said in a report on its Web site.

Nickel declined $300 to $9,925 a ton, lead fell $38 to $987 a ton and tin dropped $210 to $11,150 tons. Tin suffered a “large” demand decline in the past month because of cutbacks in Asia’s electronics industry, according to Peter Kettle, research manager of tin industry group ITRI Ltd. Mining companies have “pretty much” made cutbacks in line with sinking demand, he said.

Zinc rose $5 to $1,085 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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Crude Oil Rises as OPEC Members Prepare to Reduce Production

By Mark Shenk

Dec. 16 (Bloomberg) -- Crude oil rose after Venezuela and Iran said OPEC may need to trim output by 2 million barrels a day at a meeting tomorrow to stop a slump in prices.

The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world’s oil, is ready to make a “big” cut when it meets in Oran, Algeria, Venezuelan Oil Minister Rafael Ramirez said today. Iran supports a reduction of 2 million barrels a day, a delegate from the country said.

“OPEC is expected to cut by at least 2 million barrels tomorrow and we may see them cut even more,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “I wouldn’t be short this afternoon with the impending announcement tomorrow.” Shorts are bets that prices will fall.

Crude oil for January delivery rose 84 cents, or 1.9 percent, to $45.35 a barrel at 9:10 a.m. on the New York Mercantile Exchange. Prices have tumbled 69 percent from a record $147.27 on July 11.

OPEC members and other producers, such as Russia, are under increasing pressure to reduce supplies as oil’s $100-a-barrel collapse cuts export revenue, creating budget shortfalls. World oil demand will fall this year for the first time since 1983 as the recession cuts fuel consumption, the International Energy Agency said last week.

‘Very Strong Decision’

OPEC is asking Russia, the second-largest producer after Saudi Arabia, to cut oil output by 200,000 to 300,000 barrels a day to help revive prices, OAO Lukoil Chief Executive Officer Vagit Alekperov said in Moscow yesterday.

“We have to make a very strong decision,” Ramirez told reporters after arriving in Oran for the meeting. “What’s important is that there’s consensus to cut and that we have to make a big cut.”

Saudi Arabia wants a production cut of between 1 million and 1.2 million barrels a day, Dow Jones reported, citing a person it didn’t identify.

“If this item is true and there is a cut of 1 to 1.2 million barrels, prices are going to drop,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “Anything less than a 2 million-barrel drop would be a disappointment to the market.”

The price slump spurred OPEC to lower output by 1.5 million barrels a day in October, the first reduction in two years. The group, which deferred a decision on further cuts at a Nov. 29 meeting in Cairo, will probably curb output targets tomorrow by at least 2 million barrels a day, or 7.3 percent, according to 18 of 33 analysts surveyed by Bloomberg this week.

OPEC forecasts that demand will shrink next year, the group’s secretariat said in a monthly report today. World oil consumption in 2009 will decline by 0.2 percent to 85.68 million barrels a day, it said. That’s 1 million barrels a day lower than forecast last month.

Brent crude oil for January settlement increased 88 cents, or 2 percent, to $45.48 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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German Stocks Snap Three-Day Fall on U.S. Rate Cut Speculation

By Stefanie Haxel

Dec. 16 (Bloomberg) -- German stocks gained for the first time in four days amid speculation the Federal Reserve will cut interest rates to a record low today to stimulate the economy.

SAP AG and BASF SE both rose at least 3.8 percent. The world’s largest maker of business-management software gets about a third of its sales in the Americas and the biggest chemical maker generates about a fifth of revenue in North America. Infineon Technologies AG gained 5.3 percent as Saxony’s premier Stanislaw Tillich said the German state is “ready to help” Infineon’s reeling Qimonda memory-chip unit.

The benchmark DAX Index climbed 67.03, or 1.4 percent, to 4,721.85 as of 2:58 p.m. in Frankfurt. DAX futures expiring on Dec. 19 rose 1 percent. The broader HDAX Index added 1.3 percent to 2,338.14.

The Fed will probably cut the key interest rate in half, to 0.5 percent, according to the median estimate in a Bloomberg News survey. U.S. President-elect Barack Obama said he is planning the most extensive public-works spending package since the 1950s.

“The exciting part today will be the Fed’s statement, the details on the unconventional measures they plan to take,” said Ansgar Krekeler, a trader at WGZ Bank in Dusseldorf. “Obama’s motto is spend, spend, spend. There may always be some positive surprises for stock markets. No one is looking at budget discipline at the moment.”

The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets. The FOMC, which began meeting yesterday, is expected to release its statement around 2:15 p.m. in Washington.

Copyright Lawsuit

SAP rose 4.2 percent to 25.675 euros, even after a U.S. court denied its bid to dismiss portions of Oracle Corp’s $1 billion copyright lawsuit accusing SAP of stealing software code.

Infineon Technologies AG rose 5.3 percent to 70 cents, a second day of gains. Saxony will lend 150 million euros ($205 million) to Qimonda, which will be matched by a capital increase from parent company Infineon, the state government said in an e- mailed statement today.

BASF rose 3.8 percent to 26.26 euros. The world’s largest chemical maker generated about a fifth of its revenue in North America last year, according to Bloomberg data.

Siemens AG advanced 3.5 percent to 48.79 euros. Europe’s largest engineering company will pay $1.6 billion to settle bribery probes in the U.S. and Germany. Fines “were less than the multibillion fines most were anticipating,” Nick Heymann, an analyst with Sterne Agee & Leach Inc. in New York, said in a note to investors.

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

Arcandor AG (ARO GY) advanced 7.4 percent to 2.63 euros. The German retailer that controls tour operator Thomas Cook Group Plc will buy Deutsche Telekom AG’s majority stake in customer loyalty program Happy Digits, Manager Magazin reported, without saying where it got the information.

Celesio AG (CLS1 GY), Europe’s biggest drug wholesaler, plunged 14 percent to 18.40 euros, the steepest intraday drop since at least January 1996. Laws restricting retailers from owning pharmacies in Germany are justified if the objective is to ensure an adequate supply of medicine, an adviser to the European Union’s highest court said today.

The European Court of Justice is weighing whether to compel Germany to remove rules limiting drugstore ownership, a decision that would make if possible for Celesio to build a pharmacy chain in the country.

HeidelbergCement AG (HEI GY) gained 4.3 percent to 31.52 euros, snapping a three-day drop. Germany’s billionaire Merck family, which controls the country’s biggest cement maker, yesterday said it has moved closer to an agreement with banks after receiving a proposal from its creditors on Dec. 12.

Separately, Exane BNP Paribas raised its recommendation on the stock to “neutral” from “underperform.”

Hypo Real Estate Holding AG (HRX GY) dropped 1.7 percent to 2.94 euros. Moody’s Investors Service cut the bank financial strength rating of the commercial-property lender bailed out by the government to E+ from C-, saying the outlook is negative.

IVG Immobilien AG (IVG GY) climbed 3.3 percent to 4.37 euros. Germany’s largest commercial-property company, sold an office building London to a sovereign wealth fund for 125 million pounds ($190 million).

Pfleiderer AG (PFD4 GY) dropped 2.4 percent to 6 euros. HSBC Holdings Plc lowered its recommendation on the laminate flooring maker with 22 factories on two continents to “neutral” from “overweight.”

Repower Systems AG (RPW GY) rallied 13 percent to 104.47 euros after Suzlon Energy Ltd., India’s biggest maker of wind- turbine generators, set a new payment schedule to buy Martifer SGPS SA’s 22.4 percent stake in the wind-turbine builder.

K+S AG (SDF GY) climbed 1.5 percent to 37.37 euros. Europe’s largest producer of potash used in fertilizers gained as Merrill Lynch & Co. upgraded competitors Potash Corp. of Saskatchewan Inc., Mosaic Co. and Terra Industries Inc. to “buy,” saying “fertilizer fundamentals are nearing a bottom.”

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

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Most U.K. Stocks Rise, Led by Tullow Oil; Carpetright Retreats

By Alexis Xydias

Dec. 16 (Bloomberg) -- Most U.K. stocks advanced. Tullow Oil Plc gained more than 7 percent after the U.K. explorer made a “significant” find in Uganda.

Carpetright Plc and Kesa Electricals Plc declined after the retailers said earnings are suffering as consumers reign in spending.

The FTSE 100 Index increased 13.69, or 0.3 percent, to 4,291.25 as of 1:55 p.m. in London, having gained as much as 1.2 percent earlier. The FTSE All-Share Index rose 0.3 percent and Ireland’s ISEQ Overall Index retreated 0.6 percent.

The FTSE 100 has fallen 34 percent this year as the British economy slips into recession. The decline left the benchmark trading at 7.8 times its members’ reported earnings, near the lowest since at least 1999.

“We expect little prospect for significant near-term recovery of the global economy,” said Robert Brown, chairman of the global investment committee at London’s Watson Wyatt Investment Consulting, an advisory firm. “However, it should be borne in mind that the best buying opportunities are typically before economic stabilization and recovery are clear.”

European indexes pared gains after a report showed U.S. builders broke ground in November on the fewest new homes since record-keeping began, signaling the housing slump will extend into a fourth year.

Tullow Oil Plc rose 7.3 percent to 613 pence. Heritage Oil Ltd. jumped 8.1 percent to 238 pence, a seventh advance. Tullow Oil, the U.K. explorer with the most licenses in Africa, and partner Heritage made a “significant” find in the Buffalo-1 well in Uganda, Heritage said in a statement.

Oil Prices

Crude oil rose after Venezuela and Iran said OPEC may need to cut oil production by 2 million barrels a day at a meeting tomorrow in an effort to stop a slump in prices.

Carpetright plummeted 15 percent to 336.75 pence. The U.K.’s largest carpet retailer said earnings will be “significantly” below current estimates.

Kesa Electricals tumbled 12 percent to 89.75 pence. The owner of France’s Darty electronics stores and Britain’s Comet chain reported a first-half loss after sales of electronic goods stagnated, and said the outlook for Europe remains “very weak.”

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

GoIndustry-DoveBid Plc (GOI LN) dropped 1.12 pence, or 43 percent, to 1.48. The U.K. auctioneer of used industrial machinery plummeted after saying it will miss analysts’ estimates for the full year because sales in December will fail to raise enough cash to compensate for the weak months of October and November.

HSBC Holdings Plc (HSBA LN) fell 20 pence, or 2.8 percent, to 704. The bank may seek to raise $14 billion through a stock sale or rights issue, CLSA Asia-Pacific Markets said. Bangkok- based analysts at the brokerage cut their estimate on HSBC’s Hong Kong shares, adding that the economic slowdown will hurt the business.

PartyGaming Plc (PRTY LN) added 19.5 pence, or 14 percent, to 158.25 after the gambling company said it’s still in talks with the U.S. Justice Department and it’s unlikely to include a criminal plea by the company or a director in any settlement.

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

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U.S. Futures, European Stocks Advance; Shares Decline in Asia

By Adam Haigh

Dec. 16 (Bloomberg) -- U.S. stock-index futures and European shares climbed as speculation the Federal Reserve will reduce interest rates to the lowest level on record overshadowed concern the deepening recession will drag down profits.

General Motors Corp. rose 4.4 percent on optimism that the Bush administration will soon finalize a bailout for GM and Chrysler LLC. Siemens AG and BASF SE added more than 3 percent, leading an advance among European companies that make at least one-fifth of their sales in North America, as investors waited for confirmation that the Fed will also channel credit to businesses and customers.

Europe’s Dow Jones Stoxx 600 Index increased for the first time in four days, adding 0.2 percent to 197.86 at 2:01 p.m. in London, while futures on the Standard & Poor’s 500 Index gained 0.9 percent. Fed Chairman Ben S. Bernanke has indicated he may take new steps to prevent the worst recession in a quarter century from turning into a depression.

“It is a question of what the Fed says with regard to the economy and quantitative easing,” said Gregor Smith, a London- based fund manager at Daiwa Asset Management, who helps oversee $1 billion. “We have become a bit more positive than a couple of weeks ago because we think we might see a bit of a bear-market rally in the short term.”

U.S. futures and European shares pared some of their gains after a report showed U.S. builders broke ground in November on the fewest new homes since record-keeping began, signaling the housing slump will extend into a fourth year.

Goldman Earnings

Earlier Goldman Sachs Group Inc. reported a fourth-quarter loss of $2.12 billion, the first since the company went public in 1999, as asset values and investment-banking fees declined. Goldman shares advanced 2.8 percent to $68.32.

The MSCI Asia Pacific Index lost 0.8 percent as raw-material producers slumped with metals prices.

The MSCI World Index of 23 developed countries dropped 44 percent in 2008 as almost $1 trillion in losses and writedowns at financial firms froze credit markets and sent the U.S., Europe and Japan into the first simultaneous recessions since World War II.

The Fed’s Open Market Committee will probably cut the benchmark rate in half, to 0.5 percent, according to the median of forecasts in a Bloomberg News survey. The central bank may also signal plans to channel credit to businesses and consumers by further enlarging its $2.26 trillion of assets. The FOMC, which began meeting yesterday, is expected to release its statement around 2:15 p.m. in Washington.

Trichet Comments

European Central Bank President Jean-Claude Trichet said there’s a limit to how far the bank can cut interest rates and signaled it may pause in January.

“Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes,” Trichet told journalists in Frankfurt late yesterday. The Stoxx 600 pared its advance after the comments were released this morning.

GM gained 4.4 percent to $4.26. The U.S. Treasury may adopt a plan that would let a car czar or the Treasury Secretary force GM and Chrysler into bankruptcy if the automakers don’t show they can survive without government aid, a U.S. senator said.

The two automakers would be required to submit viability plans by March 31 or lose any further U.S. support, Carl Levin, a Democrat from Michigan, told reporters in Detroit yesterday. The Treasury plan would resemble a measure passed by the U.S. House last week that was rejected by the Senate.

The administration may approve the loans today or tomorrow, Levin said. “Everyone knows it’s urgent,” he said.

Siemens, BASF

Siemens added 3.5 percent to 48.81 euros. Europe’s largest engineering company last year made more than 20 percent of its sales in the U.S. GlaxoSmithKline Plc, which derived 45 percent of revenue from the U.S., gained 3.6 percent to 1,226.5 pence.

BASF advanced 3.2 percent to 26.12 euros. The world’s biggest chemical producer makes more than 20 percent of its sales in North America.

The MSCI World Index has rebounded 15 percent since Nov. 20 as governments and policy makers around the world announced packages to revive economic growth. U.S. President-elect Barack Obama said he is planning the most extensive public-works spending package since the 1950s.

Shell, Europe’s largest oil producer, added 2.1 percent to 1,775 pence. Total, the region’s third biggest, gained 1.3 percent to 40.74 euros.

Crude oil rose after Venezuela’s oil minister said OPEC will reduce production by at least 1 million barrels a day in an effort to stem the 70 percent plunge in prices from July’s record.

Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, rallied 8.1 percent to 617.5 pence after saying it may have made the largest oil and gas discovery in Uganda’s Butiaba region.

BHP, Rio

BHP Billiton, the world’s largest mining company, lost 1.8 percent to 1,238 pence, while Rio Tinto Group, the third-biggest, slipped 3.2 percent to 1,491 pence.

Copper slid 1.4 percent in London as stockpiles of the metal gained. Lead, tin and nickel also declined.

HSBC Holdings Plc slipped 2.8 percent to 703.5 pence after CLSA Asia-Pacific Markets said Europe’s largest bank may seek to raise about $14 billion as increasing bad-loan provisions erode profits. The bank may raise funds through a share placement or a rights offering, CLSA analysts led by Bangkok-based Daniel Tabbush said in a note to clients today. David Hall, a Hong Kong-based spokesman at HSBC, declined to comment on the report when contacted today.

Kesa Electricals Plc slipped 9.1 percent to 92.75 pence after reporting a first-half loss as sales of electronic goods stagnated. The owner of Darty electronics stores in France and Comet outlets in the U.K. also said the outlook for Europe remains “very weak.”

Macarthur Coal, the world’s biggest exporter of pulverized coal that’s used in steelmaking, plunged a record 22 percent to A$2.70 as it cut its profit forecast for the six months to Dec. 31 in half. The company also suspended its dividend, citing a “sudden and unprecedented” drop in coal sales.

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

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Bank of Montreal May Decline on Share Sale; Potash May Advance

By John Kipphoff

Dec. 16 (Bloomberg) -- Bank of Montreal may decline, based on bids on the Toronto Stock Exchange, after the lender announced plans to sell $890 million of discounted stock to shore up capital amid the global financial crisis.

Bank of Nova Scotia may also decline, bids showed, on speculation it may sell bonds in the next three months to bolster its financial strength. Also weighing on Canadian banks may be results from Goldman Sachs Group Inc., which reported its first quarterly loss since going public in 1999, as asset values and investment-banking fees declined.

Fertilizer maker Potash Corp. of Saskatchewan Inc. may advance, bids indicated, on an upgrade from Merrill Lynch & Co. Commodity producers may also benefit from higher oil, copper and wheat prices, and speculation that the U.S. Federal Reserve will cut its main interest rate to a record low today and pledge credit to businesses and consumers to boost spending.

The Standard & Poor’s/TSX Composite Index fell 0.6 percent to 8,461.83 yesterday in Toronto. The main Canadian equity benchmark has fallen 39 percent in 2008, poised for its worst- ever annual drop, on slumping commodity prices and global credit losses of almost $1 trillion.

Bank of Montreal may drop C$2.57 to C$30, bids already submitted in Toronto showed. Canada’s fourth-biggest bank plans to sell as much as C$1.1 billion in stock. About 33.3 million shares will be offered at C$30 apiece in a sale expected to close Dec. 24, the Toronto-based bank said.

Scotiabank may decline 75 cents to C$30.25, bids showed. Canada’s third-largest bank by assets has “capacity” to issue about C$800 million ($648.8 million) in notes, adding about 30 basis points to its so-called Tier 1 capital ratio, Merrill Lynch & Co. analyst Sumit Malhotra said yesterday.

Potash rose C$3.85 to C$89.44 in early Canadian trading. The world’s largest crop-nutrient producer was upgraded to “buy” from “underperform” by Merrill Lynch & Co. analyst Steve Byrne, who said, in a note to clients today, that “fertilizer fundamentals are nearing a bottom.”

Byrne, based in New York, left his “underperform” recommendation on Agrium Inc. (AGU CN) unchanged, saying North America’s third-largest fertilizer company faces a “potential large inventory devaluation in its retail business.” Potash rose 3.6 percent to C$85.59. Agrium was shown adding C$1.66 to C$39.50, based on bids.

U.S. stock-index futures and European stocks advanced on speculation about the Fed’s potential moves today.

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

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Best Buy, Eaton, Mosaic, Smith & Wesson: U.S. Equity Preview

By Elizabeth Stanton

Dec. 16 (Bloomberg) -- The following companies may have unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 9 a.m. in New York, unless otherwise specified.

Bank of Montreal (BMO US) slumped 7.5 percent to $24.40. Canada’s fourth-biggest bank plans to sell as much as C$1.1 billion ($890 million) in stock to bolster its balance sheet. The sale of more stock can dilute a company’s earnings per share.

Best Buy Co. (BBY US) rose 10 percent to $25.91. The largest U.S. electronics retailer said it would offer voluntary severance packages to almost all its corporate workers and slash capital spending as part of a plan to reduce costs.

ConocoPhillips (COP US) added 51 cents to $52.41. The second-largest U.S. refiner said it won’t announce its capital spending budget for 2009 until January. The company said it’s still evaluating plans in light of “significant uncertainties” regarding the outlook for oil, natural gas and refined product prices.

Eaton Corp. (ETN US) fell 7.4 percent to $40.65. The maker of parts for Boeing Co. planes and Volkswagen AG cars reduced its fourth-quarter profit target to $1 to $1.10 a share excluding certain items and said it has cut 3,400 jobs because of weakening automotive markets.

Goldman Sachs Group Inc. (GS US) rose 3.7 percent to $68.90. The bank holding company for the biggest U.S. securities firm reported a fiscal fourth-quarter loss of $2.12 billion that was smaller than some analysts expected. The loss of $4.97 a share in the three months ended Nov. 28 was Goldman’s first since going public in 1999, as asset values and investment- banking fees declined. Glenn Schorr, an analyst UBS AG in New York, estimated in a Dec. 2 note to investors that Goldman Sachs would post a loss of $5.50 a share in the fourth quarter.

Harley-Davidson Inc. (HOG US): Chief Executive Officer Jim Ziemer will retire in 2009 after 40 years at the biggest U.S. motorcycle maker. Ziemer will stay on the job until his successor is in place, the company said. Harley-Davidson shares slipped 0.7 percent to $16.20 in regular trading yesterday.

ITT Corp. (ITT US) rose 1.8 percent to $43.10. The world’s largest maker of night-vision goggles reaffirmed its 2008 earnings forecast and said 2009 profit will be $3.60 to $4 a share, including anticipated restructuring costs.

Johnson Controls Inc. (JCI US): The largest maker of automotive seats forecast a loss for its first quarter, well below the consensus estimate for earnings per share of 20 cents, and withdrew its forecast for 2009. The shares rose 10 cents to $18.32 in regular trading yesterday.

Mosaic Co. (MOS US) rose 6.8 percent to $33.60. The world’s largest maker of phosphates, a crop nutrient, was upgraded to “buy” at Merrill Lynch & Co., which said “fertilizer fundamentals are nearing a bottom.”

Merrill also raised Terra Industries Inc. (TRA US), the biggest U.S. maker of liquid-nitrogen fertilizer, Intrepid Potash Inc. (IPI US) and Potash Corp. of Saskatchewan (POT US), to “buy.” Terra rose 7.6 percent to $15.85. Intrepid climbed 4.8 percent to $19.56. Potash Corp. gained 4.7 percent to $72.50.

Papa John’s International Inc. (PZZA US): The pizza chain said earnings in 2009 could be may be as low as $1.32 a share. Analysts polled by Bloomberg estimated $1.61 on average. The stock dropped 1.9 percent to $16.26 in regular trading yesterday.

Progressive Corp. (PGR US) fell 3.7 percent to $14.20. The third-largest U.S. auto insurer was downgraded to “sell” from “hold” at Citigroup, a day after saying it won’t pay its annual dividend on common shares in 2009 because of investment losses this year.

Smith & Wesson Holding Corp. (SWHC US) plunged 19 percent to $2.16. The 156-year-old gunmaker reported second-quarter profit of 1 cent a share. Analysts polled by Bloomberg estimated 4 cents on average.

STEC Inc. (STEC US) slid 13 percent to $4.10. The maker of memory chips lowered its fourth-quarter sales forecast to a range between $55 million and $59 million because of canceled orders. The company earlier predicted revenue as high as $72 million.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Brazil Stocks Gain on Higher Retail Sales, Slowing Inflation

By Alexander Ragir

Dec. 16 (Bloomberg) -- Brazilian stocks climbed the most in a week as slowing inflation gave the central bank leeway to cut interest rates and retailers jumped on higher than estimated sales in October.

Banco do Brasil SA and Banco Itau Holding Financeira SA, Brazil’s two biggest banks, jumped more than 3 percent as wholesale prices rose less than expected in the past month. Lojas Renner SA led gains on the Bovespa index after retail sales advanced 10.1 percent in October from a year ago. Petroleo Brasileiro SA climbed the most in a week as oil prices advanced.

The Bovespa gained 869.22, or 2.3 percent, to 39,189.41 at 8:23 a.m. New York time. Chile’s Ipsa rose 0.3 percent. The MSCI Emerging Markets Index gained 0.7 percent.

Banco do Brasil jumped 4.2 percent to 15.52 reais. Itau gained 3.5 percent to 28.976 reais.

Wholesale prices advanced 0.03 percent, the Getulio Vargas Foundation’s IGP-10 index showed. That was less than the median estimate of a 0.1 percent gain in a Bloomberg survey of 28 economists.

Lojas Renner gained 4.1 percent to 16.35 reais. Retail sales nationwide surged in October from a year ago, led by a 44 percent jump in computer sales, the statistics agency said. The increase exceeded the forecasts of 26 of 27 economists in a Bloomberg survey and was higher than the 9.3 percent sales growth in the year through September.

Petrobras advanced 3.4 percent to 23.67 reais. Crude oil for January delivery rose as much as 2.2 percent to $45.47 a barrel in electronic trading on the New York Mercantile Exchange.

The BM&FBovespa Small Cap index rose 1.1 percent. The BM&FBovespa MidLarge Cap index gained 2.8 percent.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net;

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U.S. Stock-Index Futures Rise on Rate-Cut Speculation; GE Gains

By Adria Cimino and Whitney Kisling

Dec. 16 (Bloomberg) -- U.S. stock-index futures advanced on speculation the Federal Reserve will cut its main interest rate to a record low and channel credit to businesses and consumers to halt the worst recession in a quarter century.

General Electric Co., the world’s biggest maker of power- generation equipment, climbed 2.1 percent and Microsoft Corp., the largest software company, added 1.3 percent as traders bet the Fed will cut its benchmark rate to as low as 0.25 percent. General Motors Corp. rose on optimism the Treasury may adopt a plan to save the car industry, while Goldman Sachs Group Inc. gained 1.9 percent even after posting a wider-than-estimated fourth-quarter loss.

Standard & Poor’s 500 Index futures expiring in March added 1 percent to 880.6 at 9 a.m. in New York. Dow Jones Industrial Average futures gained 61 points, or 0.7 percent, to 8,642 and Nasdaq 100 Index futures increased 0.7 percent to 1,203.5.

The Fed’s Open Market Committee will announce its decision on interest rates and monetary policy at around 2:15 p.m. in Washington. The announcement comes after the first simultaneous recessions in the U.S., Europe and Japan since World War II dragged the S&P 500 down almost 45 percent from its 2007 record.

“There won’t be a negative surprise,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees $615 million. “What will be interesting and very important is the discourse. Bernanke has given signals that he will innovate in terms of monetary policy since there isn’t much room left for further rate cuts.”

U.S. stocks fell yesterday, wiping out last week’s gains, after manufacturing showed a worsening economy that analysts said will hurt earnings.

Consumer Prices Slide

The cost of living in the U.S. fell in November by 1.7 percent, the most since record-keeping began in 1947, the Labor Department said. Excluding food and energy, so-called core prices were unchanged from a month earlier.

GE climbed 2.1 percent, while Microsoft added 25 cents to $19.29.

GM, the biggest U.S. automaker, added 2.7 percent to $4.19. The Treasury may adopt a plan that would let a car czar or the Treasury Secretary force GM and Chrysler LLC into bankruptcy if the automakers don’t show they can survive without government aid, a U.S. senator said.

GM and Chrysler would be required to submit viability plans by March 31 or lose any further U.S. support, Carl Levin, a Democrat from Michigan, told reporters in Detroit. The Treasury plan would resemble a measure passed by the U.S. House last week that was rejected by the Senate.

Goldman’s First Loss

Goldman added $1.94 to $68.40. The loss of $4.97 a share in the three months ended Nov. 28 was the company’s first quarterly deficit since going public in 1999. It compared with net income of $3.22 billion, or $7.01, in the same period a year earlier, the New York-based company said. The average estimate of 18 analysts surveyed by Bloomberg was for a loss of $3.73 per share.

Some fertilizer companies rallied after the shares were upgraded to “buy” at Merrill Lynch & Co., which said “fundamentals are nearing a bottom.”

Potash Corp. of Saskatchewan Inc., the world’s largest crop-nutrient producer, rallied 4.5 percent to $72.35. Mosaic Co., the world’s largest producer of phosphates, gained 5.1 percent to $33.06, while Terra Industries Inc., the biggest U.S. maker of liquid-nitrogen fertilizer, added 7.5 percent to $15.83. Intrepid Potash Inc., the largest producer of the crop nutrient in the U.S., rose 8.5 percent to $20.25.

Best Buy Forecast

Best Buy Co. climbed 9 percent to $25.59 after affirming its full-year earnings forecast and reporting third-quarter profit, excluding some items, of 35 cents a share, beating the average analyst estimate by 49 percent. The U.S. consumer electronics chain also said it’s offering voluntary severance packages to almost all workers as part of a “significant” cost-cutting plan.

Exxon Mobil Corp., the world’s biggest publicly traded oil company, advanced 40 cents to $80.35. Crude oil rose, erasing earlier losses, after Venezuela’s oil minister said OPEC will reduce production by at least 1 million barrels a day in an effort to stem the 70 percent plunge in prices from July’s record.

Gilead Sciences Inc., the leading maker of AIDS treatments, climbed 2 percent to $45.27. Merrill Lynch & Co. raised its recommendation on the stock to “buy” from “neutral.”

The S&P 500 is poised for its worst year since the Great Depression after losses and writedowns at the biggest global financial companies reached almost $1 trillion and earnings at U.S. companies dropped for five straight quarters, matching the longest streak on record.

To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.

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Euro-Zone Manufacturing and Services Contract for Seven Consecutive Months as Demands Falter

Daily Forex Fundamentals | Written by DailyFX | Dec 16 08 09:21 GMT |

Service-based activity in Euro-Zone contracted for the seventh consecutive month in December as the advanced PMI reading slipped to 42.0 from 42.5. In addition, the manufacturing PMI dropped to 34.5 from 35.6, and led the PMI composite to reach its lowest level since recordkeeping began in 1998 as the index slipped to 38.3 from 38.9 in the previous month. A deeper look into the report showed that new orders declined to 27.4 from 28.8, while the employment component weakened to 39.1 from 41.0. The latter suggests the acceleration in the pace of job cuts, which will add to growth concerns and weigh on consumption trends. Both the manufacturing and services readings were slightly better than expected, but still down from November and firmly below the 50 point no change mark, thus pointing to ongoing contraction in both the manufacturing and services sectors, suggesting that the Euro-Zone may contract at a faster pace in the fourth quarter, and economic activity may remain subdued well into the next year as growth prospects deteriorate. EUR-USD recorded 1.3656 session lows, with profit taking accelerating in to the German and Euro-Zone PMI release. German Manufacturing Contract at Record Pace, Heightening Fears of a Deep and Severe Recession The advanced services PMI reading for Germany unexpectedly rose to 46.2 from 45.1 in November. However, manufacturing activity contracted for the Fifth straight month as the PMI reading plunged to 33.5 from 35.7. This was the lowest reading since the start of the survey in April 1996. The breakdown of the report showed that new orders plunged to 25.8 from 29.1 in the previous month, while the employment component slipped to 40.9 from 43.6. The services reading remains firmly below the 50 point no change mark, thus indicating ongoing contraction in both the manufacturing and services sectors, which backs expectations of another negative GDP number that quarter. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Daily FX Report

etraeDaily Forex Technicals | Written by Varengold Bank | Dec 16 08 09:25 GMT |

Good morning from the north of Germany. We still have a couple of days until Christmas and that means that a lot of people are trying to shop Christmas gifts in these days. We recognize all people which have already finished their errands Markets review In the early session the USD trades near a two-month low against the EUR. Speculations that the Federal Reserve will cut the target rate for overnight lending to a record low today, let the EUR increase 0.2 % to 1.3713. The USD/JPY also dropped down close to a 13 year low after the US Commerce Department reported that the housing starts will fall to the least since records began in 1959. Today the market awaits with excitement the Fed meeting because it may also provide details on whether it will buy government debt to push down Treasury yield and stimulate lending. Although the USD gained 6.3 % against the EUR this year and 30 % against the GBP, market players don't expect a recovery from recent losses because they can't see a sudden turnaround in the weak US economy. The USD weakened against most major currencies in the past weeks as policy makers overflowed the world with $8.5 trillion to bail out financial system and to animate the economy. The GBP rose from an all-time low at 0.9000 against the EUR as investors ranked its losses excessive. After the fifth loss day in a row, Sterling was able to finish the trading session positive. But today in the morning session the GBP decreased 0.2 % and is now trading at 0.8960 Technical analysis CAD/JPY In December the CAD/JPY has reached an all-time low at 70.60. But in the recent week the currency pair recovered and developed a clear upward trend channel. We notice a zigzag movement within the channel limits with explicit turning points. If the trend formation is strong enough, there might be an ongoing bullish trend GBP/CHF In November the GBP/CHF traded in a strong upward trend channel. However the pair crossed the formation and crashed to 1.7548. The chart development in December suggests a horizontal trading range with a resistance at 1.8162. There could be a chance of a trend continuation because the GBP has tested two times the support successful. 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 16 08 08:17 GMT |

CHF The pre-planned breakout variant for sells was realized with attainment of minimal assumed target. OsMA trend indicator, having marked relative bearish activity rise at the break of key supports gives reasons for resuming sells planning priorities for today. At the moment considering the ascending direction of indicator chart we assume the possibility of rate return to 1.1600/20 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 1.1540/60, 1.1480/1.1500 and/or further breakout variant up to 1.1410/30, 1.1300/20, 1.1190/1.1210. An alternative for buyers will be above 1.1700 with targets 1.1740/60, 1.1800/20, 1.1860/80. GBP The pre-planned breakout variant for buyers was realized with attainment of basic assumed targets. OsMA trend indicator, having marked essential bullish activity rise at the break of key resistance range gives reasons for supporting buying planning priorities for today as well. At the moment considering relative strengthening of bearish resistance we assume the possibility of further rate correction period with key supports at 1.5200/40, 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 1.5300/20, 1.5360/80, 1.5420/40 and/or further breakout variant up to 1.5500/20, 1.5580/1.5600, 1.5840/60. An alternative for sells will be below 1.5080 with targets 1.5000/20, 1.4940/60, 1.4820/40. JPY The assumed test of key resistance range for the realization of the pre-planned sells positions was not confirmed and activity fall of both parties as the result of the previous trading day does not give definiteness in the choice of planning priorities for today. Hence at the moment considering the assumptions on range rate movement we assume the possibility of rate return to channel signal '1' at 90.75/91.00, 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 90.10/30, 89.60/80 and/or further breakout variant up to 89.00/20, 88.40/60, 87.20/40. An alternative for buyers will be above 92.00 with targets 92.40/60, 93.00/20, 93.60/80, 94.20/40. EUR The pre-planned breakout variant for buyers was realized with attainment of basic assumed targets. OsMA trend indicator, having marked advantage preservation of bullish party activity as before gives reasons for the corresponding planning priorities preservation. At the moment considering the descending direction of indicator chart we assume the possibility of further rate correction with key supports at 1.3640/60, 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 1.3700/20 and/or further breakout variant above 1.3760 with targets 1.3800/20, 1.3860/80, 1.3900/20. An alternative for sells will be below 1.3560 with targets 1.3500/20, 1.3420/40, 1.3360/80. FOREX Ltd www.forexltd.co.uk

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Global stocks fall ahead of Fed

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Investors sent stocks lower and sold the dollar on Tuesday ahead of a Federal Reserve meeting that is expected to cut interest rates again as well as hint at future unorthodox monetary policies to refloat the U.S. economy.

Oil was trading below $45 but was supported by expectations that OPEC will agree its largest supply cut ever later in the week.

The Fed is widely expected to cut interest rates to just 0.5 percent or lower. Futures markets are setting a two-thirds possibility of a 75 basis points cut to 0.25 percent.

With rates approaching zero, market players are now looking for clarity on what policy measures the Fed will consider using, such as outright purchases of financial assets, to help pull the economy out of a sharp recession.

Buying Treasury bonds, for example, would drive down yields even further.

"While an additional rate cut by the U.S. Fed is widely expected, market reaction to the cut is still very much uncertain, as another rate cut means the Fed is left with one less card to offer," said Lim Tae-gun, a market analyst at Daewoo Securities in Seoul.

Equity markets were generally lower, with MSCI's main stock index .MIDW00000PUS struggling to stay in positive territory for the month. Such a gain would be the first since May for the index, which is down more than 45 percent this year.

The pan-European FTSEurofirst 300 was off 0.5 percent. Earlier, Japan's Nikkei average .N225 closed down 1.12 percent.

In company news later in the day, Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) is expected to report a quarterly loss of as much as $2.5 billion, hit by the falling value of many of its investments.

OPEC TO CUT

Oil steadied after dropping 4 percent on Monday on persistent worries of a deepening economic slump. The weaker dollar, which tends to support commodities, also lent a hand.

U.S. light crude for January delivery was barely changed at $44.44 a barrel.

Oil dropped to a four-year low of $40.50 on December 5 -- more than a $100 slide from its July all-time high -- as global economic turmoil depresses demand in large consumer nations such as the United States and Japan.

"OPEC could achieve limited success on Wednesday. They might do enough to stop prices from sliding further," said UBS economist Jan Stuart.

In an attempt to build a floor under prices, Organization of Petroleum Exporting Countries ministers, who meet on Wednesday in Algeria, are calling for the largest output cuts ever to combat shrinking demand and bulging inventories.

On foreign exchanges, the dollar fell broadly ahead of the likely U.S. rate cuts, at one point hitting a two-month low against the euro.

The euro was flat at $1.3705 after earlier rising as high as $1.3738 on trading platform EBS, the highest since mid-October.

The dollar dropped 0.5 percent to 90.27 yen, above a 13-year low of 88.10 yen hit on Friday.

The interest rate-sensitive two-year Schatz euro zone government bond yield was down 5 basis points at 2.109 percent.

(Editing by Mike Peacock)

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Europe stocks fall, investors await Fed rate decision

LONDON, Dec 16 (Reuters) - European shares fell early on Tuesday as investors took caution ahead of the U.S. Federal Reserve interest rate decision and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) figures, while mining stocks led the losers tracking lower metal prices. By 0814 GMT, the pan-European FTSEurofirst 300 index of top European shares was down 0.2 percent at 825.25 points. The U.S. Federal Reserve is expected to cut interest rates by 50 basis points from the current 1 percent. As rates drop close to zero investors will focus on whether the Fed gives clues on what further easing measures it will take to steer the U.S. economy away from recession.

"While the the Fed will probably cut it is really meaningless at these levels, we are paddling in shallow water and the cut is more symbolic than anything else. Rather the banking system needs to be repaired and banks need to be able to lend again," said Justin Urquhart Stewart, director at Seven Investment Management.

Mining stocks took the most points off the index as copper dropped 1.8 percent and the price of metals retreated.

Xstrata Plc (XTA.L: Quote, Profile, Research, Stock Buzz) was down 2.7 percent as it announced it had shut down half its coking coal production at a mine in Australia.

Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz), BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), and Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz) were 1.9-5 percent lower.

Banking stocks were heavy weighted losers on the index as investors remained nervous ahead of Goldman Sachs figures. The group is expected to report a quarterly loss of as much as $2.5 billion, hit by the falling value of many of its investments.

Europe's biggest bank, HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) lost 1.6 percent after it said about 10 percent of its workforce in Taiwan will leave this year as the economy slows and as it integrates a recently acquired local bank.

Swiss bank Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) slipped 3.3 percent after the group said it has cut its Japan investment banking workforce by more than half and will suspend its leveraged finance business, a person with direct knowledge of the changes told Reuters.

Across Europe, the FTSE 100 index was down 0.1 percent, Germany's DAX was up 0.3 percent and France's CAC 40 was 0.2 percent higher. (Reporting by Joanne Frearson)

(joanne.frearson@thomsonreuters.com; +44 207 542 2773, ReutersMessaging:joanne.frearson.thomsonreuters.com@reuters.net)

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China insurers surge, HK shares end 0.6 pct higher

* China properties lifted on interest rate cut talk

* Mainland insurers rally on likely policy changes

* China Cosco pares losses on Baltic Index rebound (Updates to close)

By Parvathy Ullatil

HONG KONG, Dec 16 (Reuters) - Hong Kong shares ended Tuesday's skittish session 0.6 percent higher as Chinese insurers soared on talk that Beijing is set to introduce new policy measures that will widen their scope of investment.

Non-life insurer PICC P&C (2328.HK: Quote, Profile, Research, Stock Buzz), tipped to be the highest leveraged company in the sector, surged 17.5 percent.

But anaemic turnover, HK$40.3 billion ($5.2 billion), suggested many investors were staying on the sidelines awaiting the interest rate decision from the Federal Reserve.

"It's been a pretty dull day with people just waiting around to see what the Fed decides and the fate of the U.S. carmakers," said Andrew To, sales trader with Tai Fook Securities.

Property counters also rallied on increased speculation over interest rate reductions and tax cuts on property transactions on the mainland. China Overseas Land Investment (0688.HK: Quote, Profile, Research, Stock Buzz) gained 4.5 percent.

Guangzhou R&F Properties (2777.HK: Quote, Profile, Research, Stock Buzz), which operates in southern China, one of the worst affected regions in this year's property price free fall, soared 8 percent. The stock has fallen more than 75 percent this year, far underperforming the 46 percent drop on the main index.

The benchmark Hang Seng Index .HSI ended 83.26 points higher at 15,130.21 but HSBC Holdings (0005.HK: Quote, Profile, Research, Stock Buzz) underperformed the broader market after announcing a potential $1 billion exposure to Wall Street trader Bernard Madoff.

The stock ended unchanged after dropping more than 1 percent at one point as talk swirled about possible capital raising at the bank.

"We are just seeing a lot of window dressing in badly battered sectors. Investors are ready to ignore the bad news and buy up on any excuse like possible support measures from China," said Ben Kwong, chief operating officer with KGI Asia.

"The index will stay around the 15,000-point level as we enter the year-end rally. And the game of musical chairs will continue up until then."

China has aggressively cut interest rates and rolled out an ambitious stimulus plan to bolster its economy as exports slow.

The China Enterprises Index of top locally listed mainland Chinese firms .HSCE rose 0.7 percent to 8,063.75 led by a 3.4 percent gain in top insurer China Life (2628.HK: Quote, Profile, Research, Stock Buzz).

COSCO CUTS LOSSES

China's biggest shipping group, China Cosco (1919.HK: Quote, Profile, Research, Stock Buzz), cut losses to 0.7 percent after opening down nearly 12 percent as the rally in the broad market and another day of gains on the global freight index helped limit the sell-off in the stock after the company announced nearly 4 billion yuan ($584.1 million) in hedging losses.

"If you look at the fundamentals of this company, Baltic Dry Index is still on a downtrend, freight rates are at their lowest in many years and the global economy is still hurting," said Linus Yip, strategist with First Shanghai Securities.

"All signs are pointing to weaker international trade but investors are using the short-term rally in the freight index as an excuse to buy shipping stocks."

The Baltic Dry Index .BADI, which measures changes in the cost of shipping commodities, rose 5 percent overnight, adding to last week's 15 percent rally. [ID:nLF192251]

Chinese carmaker Dongfeng Motor Group (0489.HK: Quote, Profile, Research, Stock Buzz) rose 6 percent on hopes that China will move to protect growth in its auto industry. The government announced it would aid the industry after Chinese passenger car sales in November fell 10 percent from a year earlier, this year's third monthly drop.

China may cut its vehicle purchase tax for passenger cars to aid its slumping auto sector, focusing the cut on stimulating purchases of small cars, the official Shanghai Securities News reported on Tuesday.

(Reporting by Parvathy Ullatil; Editing by Jacqueline Wong)

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Singapore Says 2008 Economic Growth May Miss Forecast

By Shamim Adam

Dec. 16 (Bloomberg) -- Singapore’s economic growth this year may miss the government’s forecast as the global economy worsens amid a credit crisis, Trade Minister Lim Hng Kiang said.

“The economy is very volatile and very vulnerable to global conditions,” Lim told reporters in Singapore today. “We believe that the growth for this year will come slightly below our earlier projections of 2.5 percent because since September there has been an unprecedented drop in world-market conditions.”

Still, the nation’s monetary policy stance is conducive to growth, he said. The central bank in October ended a policy favoring gains in its currency in an effort to support the economy as inflation eased from a 26-year high.

The island’s economy has contracted for two straight quarters and companies such as DBS Group Holdings Ltd. and Parkway Holdings Ltd. have announced job and wage cuts. The export-dependent country has been battered by declining orders from its biggest customers in the recession-hit nations of the U.S. and Europe, as well as emerging markets.

“We are looking at a very difficult trade environment,” Lim said. The World Bank last week predicted international trade will shrink in 2009 for the first time in more than 25 years. Singapore predicts overseas shipments will fall as much as 7 percent this year, and decline by as much as 1 percent in 2009.

The economy may shrink by as much as 1 percent next year, the first contraction since 2001, or grow as much as 2 percent, Lim said, reiterating the trade ministry’s forecasts last month.

Some parts of the economy will withstand the crisis and support growth, Lim said, citing committed company investments and new factories that will start production next year.

Businesses and consumers may also benefit from next year’s government budget, which will be announced on Jan. 22, he said.

“We are looking toward the budget to having a fiscal policy that is also pro-growth,” Lim said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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