Stocks in Europe, Asia Drop on Recession Concern; BHP Slumps

By Adria Cimino

Dec. 19 (Bloomberg) -- Stocks in Europe and Asia declined, led by commodity producers, on concern the deteriorating global economy will sap demand for metals and oil. U.S. futures fell.

BP Plc, Europe’s second-largest oil company by market value, and Total SA sank at least 4 percent as crude headed for its second-biggest weekly drop in more than five years. Cnooc Ltd., China’s largest offshore oil producer, slumped 4.9 percent. BHP Billiton Ltd., the world’s biggest mining company, retreated 8.7 percent on lower metals prices. Palm Inc. plunged 9.5 percent in Europe after reporting a sixth straight loss. UBS AG led banks lower as Standard & Poor’s cut ratings and changed outlooks for 12 U.S. and European financial institutions.

The Dow Jones Stoxx 600 Index decreased 1.7 percent to 194.05 at 12:25 p.m. in London, extending the weekly drop to 2.1 percent. The MSCI Asia Pacific Index slipped 0.8 percent. Futures on the Standard & Poor’s 500 Index sank 1 percent, indicating the measure may decline for a third straight day.

“You could see as we go into January further oil price weakness,” said Bob Parker, vice chairman of Credit Suisse Asset Management in London, which oversees about $600 billion. “First- quarter corporate earnings growth numbers are going to be bad. We could easily see global earnings growth down 30 to 40 percent,” he told Bloomberg Television.

Trading may be more volatile than usual today as options and futures expire across Europe.

The Stoxx 600 has slumped 47 percent in 2008 as credit losses and writedowns at the world’s largest banks surpassed $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II.

‘Worrisome’

“It’s not far from the worst year in a century for stocks,” said Romain Boscher, a fund manager at Groupama Asset Management in Paris, which oversees about $17 billion in stocks. “Rather than only a stock market crisis, it’s an economic and a financial crisis too -- That’s what’s worrisome,” he told Bloomberg Television.

France’s economy, the second largest of the 15 countries sharing the euro, will contract by the most since 1974 this quarter and slip into a recession early next year, the national statistics office Insee forecast.

German producer prices dropped the most since records began in 1949 in November as the cost of oil declined and the global economic slowdown curbed demand. Producer prices fell 1.5 percent from October when they were unchanged, the Federal Statistics Office in Wiesbaden said.

Oil, Metals

Basic-resource shares and oil stocks were the worst performers among 19 groups in the Stoxx 600, with measures for the industries losing 7.9 percent and 4.3 percent, respectively.

BP slid 6.3 percent to 491.25 pence. Total, Europe’s third- largest oil company, retreated 4.6 percent to 38.42 euros.

Crude traded below $36 a barrel in New York as a deepening global recession saps demand, countering efforts by OPEC to boost prices. The contract for January delivery has fallen 26 percent this week, slumping 9.6 percent yesterday.

Cnooc dropped 4.9 percent to HK$7.21. Inpex Corp., Japan’s largest oil explorer, lost 5.9 percent to 586,000 yen.

BHP tumbled 8.7 percent to 1,149 pence, while Rio Tinto Group, the world’s third-biggest mining company, sank 10 percent to 1,372 pence. Newmont Mining Corp., the largest U.S. gold producer, slipped 1.3 percent to $36.70 in trading before the U.S. stock market opened.

Copper is on course for an 9.3 percent weekly drop in London. A Bloomberg News survey showed the metal may decline next week as demand from the housing industry slumps in the U.S., the second-biggest buyer of the metal used in wires and pipes.

Lowered Forecasts

Nickel and copper forecasts for 2009 were slashed by Troika Dialog, a Moscow-based bank, citing an “extreme deceleration of global growth.”

UBS cut its recommendations for Anglo American Plc, Antofagasta Plc and Xstrata Plc to “neutral” from “buy.”

Anglo American, the world’s fourth-largest diversified mining company, lost 12 percent to 1,396 pence. Xstrata, Europe’s largest zinc producer, sank 14 percent to 626 pence and Antofagasta, the copper producer controlled by Chile’s Luksic family, dropped 12 percent to 372.25 pence.

Palm slid 9.5 percent to $1.99 in Germany. The company reported a sixth straight quarterly loss after taxes rose and its Treo and Centro phones faced mounting competition Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPhone.

Earnings for S&P 500 companies are expected to fall about 14 percent this year, compared with 6.6 percent growth forecast six months ago, data compiled by Bloomberg show. Stoxx 600 profits are estimated to decline 16 percent on average, compared with a June projection for a 0.5 percent drop, according to the data.

‘Bank Industry Risk’

UBS, Switzerland’s biggest bank, sank 3.6 percent to 14.12 Swiss francs. Royal Bank of Scotland Group Plc, 58 percent owned by the U.K. government after a bailout, fell 9.9 percent to 41.9 pence. Ratings for both banks were cut to A+ from AA- by S&P.

“The downgrades and revised outlooks reflect our view of the significant pressure on large complex financial institutions’ future performance due to increasing bank industry risk and the deepening global economic slowdown,” S&P said in a statement.

Citigroup Inc., the U.S. bank that got $65 billion in government funds to replenish capital after four straight quarterly losses, had its senior debt rating reduced two grades by Moody’s Investors Service, the first downgrade in a year.

ABB Ltd. dropped 5.1 percent to 15.19 Swiss francs. The world’s largest builder of electricity networks said it will book pretax provisions of $850 million for potential costs related to investigations into alleged anti-competitive practices in the U.S. and Europe.

Stada Arzneimittel AG retreated 3.5 percent to 18.88 euros. Germany’s third-largest generic-drug maker said profit may fall this year after it lost a patent dispute linked to the olanzapin medicine used to treat mental illness.

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

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U.S. Stock Futures Retreat; Palm and Intrepid Potash Decline

By Daniela Silberstein

Dec. 19 (Bloomberg) -- U.S. stock futures fell as results from Palm Inc. and Intrepid Potash Inc. dimmed the earnings outlook for technology and raw-material companies, while Citigroup Inc. dropped after its debt was lower by Moody’s.

Palm slid 9 percent in Germany after reporting a sixth straight loss. Intrepid Potash, the largest producer of the crop nutrient in the U.S., sank 20 percent after saying its sales in the fourth quarter will be less than half what it booked in the previous three months. Citigroup retreated 1.2 percent after having its senior debt rating cut two grades by Moody’s.

The Standard & Poor’s 500 Index yesterday trimmed its weekly advance to 0.6 percent as a deteriorating credit outlook for General Electric Co. spurred concern the financial crisis is worsening. The gauge has posted its biggest drop since 1931 this year as credit losses and writedowns at the world’s largest banks surpassed $1 trillion and the U.S., Europe, and Japan entered the first simultaneous recessions since World War II.

“We’ve seen synchronic recession of all industrial nations over the last few months,” said Marco Huwiler, strategist at Clariden Leu in Zurich, which manages the equivalent of $120 billion. “The current quarter and the outlook for the next one are looking bleak, we’ll see a further contraction.”

Futures on the S&P 500 expiring in March fell 0.8 percent to 885.1 at 12:33 p.m. in London. Dow Jones Industrial Average futures lost 0.8 percent to 8,610. Nasdaq-100 Index futures decreased 1.1 percent to 1,212.

Fed Rates

The S&P 500 has dropped every day this week except Dec. 16, when the Federal Reserve cut its benchmark interest rate to a record low and said it will employ “all available tools” to revive the economy. Speculation that President-elect Barack Obama will also step up efforts to revive growth has helped push the index up 18 percent from an 11-year low on Nov. 20.

Earnings for S&P 500 companies are expected to fall about 14 percent this year, compared with 6.6 percent growth forecast six months ago, data compiled by Bloomberg show.

Palm dropped 9 percent to $2 in Germany. The company posted a second-quarter net loss of $4.64 a share as taxes rose and its Treo and Centro phones faced mounting competition from Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPhone.

Research In Motion gained 0.4 percent to $38.60. The smart- phone maker forecast sales of $3.3 billion to $3.5 billion for the current quarter. That topped the average analyst estimate of $3 billion in a Bloomberg survey.

Oracle, Banks

Oracle Corp., the world’s second-largest software maker, met analysts’ estimates with its second-quarter profit and third-quarter forecast as support contracts made up for slumping orders of new programs. The shares were little changed in Europe.

Intrepid Potash plunged 20 percent to $16.11 in Europe. The Denver-based company’s shares have already lost 60 percent this year in New York trading.

Citigroup fell 1.2 percent to $7.34. The bank’s senior debt was cut to A2 from Aa3 by Moody’s, which cited the company’s “weakened earnings prospects.” Separately, S&P cut ratings or outlooks on 12 financial companies because of increased risks for the whole banking industry.

Goldman Sachs Group Inc. declined 1.6 percent to $78.75. The bank that reported its first quarterly loss earlier this week is among the 12 companies.

General Motors Corp. climbed 6 percent to $3.88. The largest U.S. automaker and Chrysler LLC would get U.S. loans to stay afloat until March under a Bush administration rescue plan that may be unveiled as soon as today, people familiar with the talks said. The companies have said they need $14 billion to stay in business through March and are temporarily idling plants to trim expenses.

Ford Motor Co., the second-biggest U.S. automaker, added 2.8 percent, to $2.92.

To contact the reporter on this story: Daniela Silberstein in Zurich at dsilberstei2@bloomberg.net.

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Madoff Strategy Dwarfed S&P 100 Options in Trades ‘Never Done’

By Jeff Kearns

Dec. 19 (Bloomberg) -- The options trading strategy Bernard Madoff said he used to help produce profits for 17 straight years would have required at least 10 times the contracts that trade on U.S. exchanges.

Madoff, charged with defrauding clients of his $35 billion asset-management business in a “Ponzi scheme,” invested in Standard & Poor’s 100 Index companies and used options to reduce losses, according to marketing materials for his New York-based investment funds. The total number of S&P 100 options outstanding is enough to guard against losses in only $3.25 billion of trades, data compiled by Bloomberg show.

“It was never done,” Michael Schwartz, chief options strategist at Oppenheimer & Co. in New York and a trader since 1965, said of the strategy. “If he did it on an exchange, we would have heard about it, and if he did it over the counter, the person he bought it from would have hedged it on an exchange.”

The 70-year-old founder of Bernard L. Madoff Investment Securities LLC was arrested Dec. 11 and accused of running an illegal money-management operation. Federal prosecutors say Madoff admitted to stealing $50 billion from clients ranging from movie director Steven Spielberg to real-estate developer Mortimer Zuckerman. The alleged scheme ensnared investors from New York to Lucerne, Switzerland, and Bermuda.

Options traders say it should have been obvious that the firm was a fraud. Securities and Exchange Commission Chairman Christopher Cox called on Dec. 16 for a probe of his agency, saying what he has learned about its investigations of Madoff is “deeply troubling.”

‘Staggering’

“If he traded half the amount of options he claims he was, it would have been staggering when he came into the market,” said Al Greenberg, head Chicago Board Options Exchange floor trader at BNY Convergex and a former trader in the S&P 100 pit at the biggest U.S. options market. “Every index across the board would have felt tremors.”

Ira “Ike” Sorkin, Madoff’s New York-based attorney at Dickstein Shapiro LLP, declined to comment except to say that his client’s firm is “cooperating fully with the government.” Madoff is free on bail and hasn’t formally responded to the charges or entered a plea.

Madoff’s marketing documents said he used a “collar” strategy, which limits gains and reduces potential losses. New York-based Fairfield Greenwich Group’s Fairfield Sentry fund, which invested exclusively with Madoff, reported an average annual return of 11 percent and no down years since 1990, according to data compiled by Bloomberg.

Traded Privately

The S&P 100 lost 2.2 percent to 424.31 yesterday. A trade following Madoff’s strategy would involve purchasing a basket of stocks in the index, buying puts with a so-called strike price that’s less than the S&P 100’s current level, and selling calls with strikes above 424.31.

The bearish options, or puts, give the right to sell shares for a certain amount by a given date, providing protection from declines in the stock. Selling calls, which are contracts to buy, is also a bearish bet on the stock.

Contracts trade publicly on seven U.S. exchanges, including the Nasdaq Stock Market. Investment firms also buy and sell options on the over-the-counter market where brokerages execute custom trades that aren’t publicly reported.

Brokers usually reduce risk from over-the-counter transactions by making the opposite trades in public markets. The number of existing options on the S&P 100 at the end of last month would have permitted about $3.25 billion in hedges for the strategy Madoff said he used, Bloomberg data show.

The market for S&P 500 options is 58 times larger than the one for S&P 100 contracts, with 13.8 million contracts. S&P 100 contracts are the 35th most-active options this year, while the S&P 500 ranks third, according to Chicago-based Options Clearing Corp.

“The options market, either listed or over-the-counter, could never come close to handling the trades that this guy said he was doing,” said Jim Vos, who runs the New York-based hedge fund adviser Aksia LLC. “There isn’t enough liquidity.”

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

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Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Dec 19 08 08:42 GMT |

Overview & economic commentary The Bank of Japan voted 7-1 to cut interest rates to 0.1% from 0.3% overnight, and announced new initiatives to improve liquidity and the distribution of credit to the real economy. The Bank will buy commercial paper and may buy as much as 20trn yen of shares held by banks to boost their capital. The Bank also revised down the outlook for the Japanese economy for the second time this year, but made no reference to the strength of the yen. The yen weakened about 2.5% against its major counterparts yesterday after officials at the Finance Ministry refused to rule out intervention in the foreign exchange market. For a country where exports account for roughly 20% of gdp, the strong yen may put off overseas demand and exacerbate the recession. A quiet end to the week in terms of UK economic data saw consumer confidence recover slightly in December. The overnight release reported a rise to -33 from -35 in November, despite grim headlines on the labour market and fears of rising unemployment as companies cut costs. However, some of the pessimism may have been mitigated by sharp falls in interest rates and mortgage costs, and the heavy discounts on the high street and the reduction in VAT. Falls in energy prices should over time help to bring down actual inflation and inflation expectations and help real wage growth to recover. In the euro zone, German producer prices were also published earlier and showed a 1.5% drop in November. Annual PPI inflation slowed to 5.3%. A new all-time low for the German business confidence in December points to a further erosion of pricing power this winter. Currency commentary The dollar reversed some of this week's losses o/n as the correlation with lower oil and gold prices was (briefly) re-established. The move materialised through $/Y after comments by the Japanese Finance Ministry injected some speculation about fx intervention to stop the yen's appreciation. The BoJ cut interest rates earlier this morning but bearish comments on the Japanese economy could give participants ammunition to take profit in yen crosses (if equities don't fall), reversing o/n moves in $/Y below 89.0 and in €/Y below 127.0. €/£ is trading sub 0.95, but as long as EU/UK yields spreads do not narrow, we see no scope for a meaningful correction back towards 0.90. We are also keeping a close eye on £/chf and wonder whether the bounce from the 1.6095 low may have further to go during a Friday squeeze. Today is triple witching (simultaneous expiry of stock index options, stock index futures, stock options) and could exaggerate gyrations in financial markets Major data and events today UK Consumer confidence (GfK) (00:01) Nov -35 Dec (actual) -33 German producer prices (07:00) Oct zero Y-O-Y +7.8% Nov (f'cast) -0.4% Y-O-Y +6.5% Median -0.8% Range -1.4%:-0.2% French business confidence (07:45) Nov 80 Dec (f'cast) 78 Median 77 Range: 75:82 Japan interest rate decision (04:00) Current: 0.30% Actual: 0.10% Canada consumer prices (12:00) Oct -1.0% Y-O-Y +2.6% Nov (f'cast) -0.5% Y-O-Y +1.8% Median -0.5% Range -1.0%:+0.4% Canada consumer prices, core (12:00) Oct -0.2% Y-O-Y +1.7% Nov (f'cast) -0.3% Y-O-Y +1.4% Median -0.2% Range -0.3%:+0.1% Chart of the day: The BoJ cut interest rates to 0.1% earlier today. US and Japanese interest rates are now the lowest in the G7 Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.

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Bank Of Japan Cuts Another 20 Bps. Is Rally In JPY Crosses Over?

Daily Forex Fundamentals | Written by Saxo Bank | Dec 19 08 08:05 GMT |

Commodity currencies looking vulnerable again - has USDCAD put in a bottom? Liquidity making for terrible trading conditions. LATEST HEADLINES UK GfK Consumer Confidence out at -33 vs. -39 expected Bank of Japan lowered target rate 20 bps to 0.10% Germany Nov. Producer Prices out at -1.5% MoM vs. -0.8% expected THEMES TO WATCH - UPCOMING SESSION Canada Nov. Consumer Price Index (1200) New Zealand Q3 Current Account Balance (Sunday 2145) New Zealand Q4 Westpac Consumer Confidence (Monday 0100) Japan Bank of Japan Monthly Report (Monday 0500) Market Comments The EURUSD spike continued out of control early yesterday after the ECB's Stark was out with disingenuous comments that could only be interpreted as very hawkish. The timing was more than strange considering the EUR's aggravated rally to almost new highs on a TW basis. Stark issued a general warning that overexpansive policy could lead to rising inflation and that central banks and governments need to remove easing quickly on the other side of the crisis. Seems awfully premature to worry about the other side of the crisis from where we sit! Regardless, the comments sent EURUSD all the way to its 200-day moving average just above 1.4700, where there must have been a raft of take profit orders and perhaps even new shorts, because it found pronounced resistance there. Later in the day, EURUSD slammed lower as far as 1.4190 after the ECB came out announcing a 100-bp cut in the deposit rate to encourage banks to stop hoarding cash at the ECB and get out and lend. This is not the same as cutting the standard overnight lending rate of 2.50%, which was kept unchanged. It also raised the marginal lending facility rate to the same as the new deposit rate to prevent the easy previous trade that banks engaged in by borrowing funds at the low marginal rate and then keeping them at the ECB at the higher deposit rate. We wonder if this will really loosen up credit markets in Europe considering the US experience, where little lending is taking place either despite the extremely generous Fed. The European banking system may be more leveraged than its US counterpart and while the US has already aired an awful lot of its dirty laundry, it seems the European banks are behind the curve by that measure...and there will undoubtedly be more ugly revelations ahead. In any case, the ECB moves may put a stopper to the EUR rally for the shortest term, especially vs. the JPY (see more below). We've finally had a couple of UK data points that stopped the string of horrific figures lately and manged to surprise positively, but EURGBP continues to spike out of control to the upside. Yesterday's better than expected Retail Sales and the consumer confidence figure overnight make us wonder if the EURGBP spike higher is sustainable. Beisde, the action has become downright parabolic, a sign that it will soon exhaust itself. Have we seen a climax to the rally for now? There's a lot of wood to chop to the downside for sure before we would ever attempt to call a top, but the pound has clearly moved to undervalued levels vs. its mainland counterpart on a longer term basis. USDCAD looks interesting again after rallying strongly off its lows yesterday. The brutal sell-off in crude oil continues, and this could add further upside pressure, especially if equities come under pressure today around the world as well. 1.2000 is nominal support there, and the next key objective is the old low at 1.2160. The calendar today is rather barren, but plenty of activity can result nonetheless with the very thin market conditions. Be aware also that today is the so-called triple witching in the US, when the equity option, equity index future and options on those futures all expire. The technicals are beginning to look a bit ominous in equity-land if we follow through yesterday's lows..... Chart: EURJPY The EUR finally turned tail late yesterday on the ECB's latest moves and the ugly developments in equity markets are pressuring the JPY crosses again, despite the BoJ shaving rates to near-zero levels. It's a bit of hubris, perhaps, to want to find ways to short the strongest currency around, perhaps, but we wonder if EURJPY may have topped out for now and we look for confirmation in the short term that the pair is ready to dive deep back into the old range toward 120.00 to start. Analysis Disclosure & Disclaimer SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated. SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations. The recommendations may expire promptly due tmarket volatility and in general, SaxBank does not anticipate its recommendations tbe valid more than one month. An analysis will be updated if and only if a market development or other issues relevant tthe analysis render a new analysis on the same topic relevant. SaxBanks analysis does not cover any specific financial product over time but only products which SaxBanks strategy team finds it important tcover at any given point in time. In order tprevent conflicts of interest, SaxBank has established appropriate business procedures, incl. procedures applicable tresearch and analysis tensure objective research reports. SaxBanks research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. SaxBank is under supervision by the Danish Financial Supervisory Authority. SaxBank does not engage in corporate finance activities and accordingly, SaxBanks employees, incl. the persons responsible for an analysis, dnot receive remuneration associated with investment banking transactions.

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Daily Forex Analysis

Daily Forex Technicals | Written by FOREXYARD | Dec 19 08 08:31 GMT |

Headlines Dollar Volatility Expected as Traders Weigh-In on Rate Cut As investors continue digesting the dramatic rate cut by the U.S. Federal Reserve earlier this week, the USD has continued to lose ground. For some investors, the Fed's measure has helped to open credits for cash-strapped borrowers. However, for others, the measure has not produced the positive impact that some traders had hoped. Market Trend EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP Daily Trend Weekly Trend Resistance 1.4300 1.5190 90.00 1.2150 0.6930 0.9500 1.4275 1.5165 89.65 1.2125 0.6900 0.9475 1.4250 1.5140 89.40 1.2100 0.6880 0.9440 Support 1.4200 1.5085 88.75 1.2050 0.6830 0.9385 1.4175 1.5050 88.50 1.2025 0.6800 0.9350 1.4150 1.5025 88.25 1.2000 0.6775 0.9325 Economic News USD - Dollar Recovers against the Pound and Euro The U.S. currency experienced heavy volatility throughout yesterday's trading session, and recovered some ground against the EUR after the U.S. markets opened. This was after a sharp decline in the Dollar since the start of the week, which saw a reduction in value of the greenback to as low as the 1.4716 mark reached yesterday. Against the JPY, the greenback also showed some recovery after the Japanese currency reached a 13-year high against the USD on Wednesday. The USD also recovered against the GBP yesterday, as the greenback increased nearly 500 pips against the cable to close at 1.5120. The U.S. Stock market plunged at the end of the trading day, as the Dow Jones registered a fall of more than 200 points. This was largely due to investors continuing to digest the dramatic rate cut by the U.S. Federal Reserve from earlier this week. For some investors, the Fed's measure that sent its Interest Rate to a record low range of 0-0.25% has helped to open credits for cash-strapped borrowers. However, for others, the measure has not produced the positive impact that some traders had hoped. Important economic releases yesterday showed that Unemployment Claims eased, showing a decline of 21,000 from the previous week's 26-year high of a revised 575,000 claims. This data reasserts that the economy is going through one of the worst economic crises since the Great Depression. The Philadelphia Fed Index, which is an indicator for regional manufacturing, and is seen as one of the first monthly indicators of the health of the U.S. manufacturing sector, was better than expected, which improved to -32.9 this month, from -39.3 in November. Today, traders should pay close attention to the equity markets to determine how to continue with USD positions, as well as to the news coming out other global markets in order to place their transactions accordingly with today's developments. EUR - EUR Slides against Dollar and Spikes versus the GBP After continuing a bullish course during most of the week against the USD, the EUR retreated yesterday. Analysts believe that this is due to financial pressure that the Euro-Zone will have to follow the Fed and cut Interest Rates further. EUR/JPY level continued to trade flat, with little fluctuation over the $127.00 level. The EUR did however rise dramatically against the GBP to close at 0.9426, a 1 day rise of 140 pips. The economic events that came out of the Euro-Zone yesterday were the German Ifo Business Climate, which weakened for the seventh month running in December, after falling to 82.6 in December from 85.8 in November. The weaker Ifo reading, which has not been seen since German reunification in 1990, added more signs that the Euro-Zone economy is continuing its deterioration, and may require more cuts in Interest Rates. Looking ahead to today, we see that there is some important economic news that is likely to affect the EUR's volatility. The German PPI figures, which measure the change in the price of goods sold by manufacturers, will be published at 7:00am GMT. This indicator is forecasted to be lower than the previous month's figures. Traders are advised to follow the development of the other currencies, the GBP and JPY primarily, as news coming from these regions is likely to have an impact on the EUR's volatility today. JPY - Bank of Japan Lowers Interest Rates to 0.10% The JPY began losing its momentum yesterday after a long week of steady gains. The Japanese currency experienced its first daily drop against the U.S. Dollar as the Japanese Finance Minister stated that currency intervention in the shape of an Interest Rate cut by the Bank of Japan (BoJ) may be used to keep the Yen from excessive appreciation. The rate cut did in fact happen during this morning's early trading hours. The Japanese Interest Rate now sits at 0.10%, the lowest in the world. Some officials believed that the intervention was necessary considering the recent currency gains and the ongoing global recession which has driven global Interest Rates to new lows. Lowered international rates have consequently pushed the value of the Yen to levels which have damaged Japan's ability to export. Traders may expect a somewhat steady depreciation in the Yen during the coming trading hours in response to this rate cut. Oil - Oil Prices Resume Sliding despite OPEC's Production Cut Oil prices have been on the fritz lately; inexplicably dropping in value after the Organization of Petroleum Exporting Countries (OPEC) announced its supply cut and then quickly rebounding during early trading hours the next day. More recently, the price of Crude Oil has resumed falling back towards $40 a barrel, dipping as low as $41.54 yesterday. Apparently, expectations are low for OPEC to actually follow through with its production cut. If the price of Crude Oil fails to stabilize, the Oil cartel has left the door open for future cuts as they are trying to maintain a price level of $70-80 a barrel; their next policy meeting is scheduled for March 15, 2009, in Vienna. However, OPEC has stated that another emergency session could be called earlier if prices fall below $30 a barrel before March. Technical News EUR/USD The pair is in the middle of a very strong bullish trend and is now traded around 1.4250. The daily slow stochastic is showing that there is still room to run and that 1.4670 is a very strong resistance. If the pair breaches the resistance level, we might see a stronger bullish move that might take the pair into the 1.4900 zone. A failure to breach might bring a moderate corrective move. GBP/USD The cable is still floating around the 1.5120 level and shows moderate bullish momentum. The daily chart it appears that the pair has made a slight bearish correction, however on the 4 hour chart the RSI and the Slow Stochastic oscillators are starting to show first signals of a moderate bullish momentum. It might be preferable to sell on highs today. USD/JPY After bottoming at 87.70 two days ago, the pair now shows local signs of a correction. The 4 hour chart is showing that the bullish move might not have enough steam in it, and that the bearish trend will probably resume before the weekend. Selling on highs might be a good strategy today. USD/CHF The pair has been quite choppy in the past two days yet no clear direction was seen. The daily chart is showing bullish signals as the 4 hour chart is still quite bearish. Traders advised to wait for a clearer signal on the hourlies before entering the market. The Wild Card EUR/GBP The pair is in the midst of a very strong bullish correction move, and seems to have more steam in it. The Slow Stochastic oscillator on the 1 hour chart is also providing bullish signal. This is a great opportunity for forex traders to join a very promising bullish correction. Indicators Date Time (GMT) Country Event Period Previous Forecast 12/19 07:00 EUR German PPI 0.0% -1.0% 09:30 GBP Revised Business Investment q/q -0.2% -0.2% 12:00 USD Core CPI m/m -0.2% -0.2% 12:00 CAD CPI m/m -1.0% -0.7% FOREXYARD

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Dec 19 08 08:25 GMT |

CHF The assumed test of key resistance range for the realization of the pre-planned positions for sell was not confirmed by displayed by OsMA indicator essential bullish activity rise gives reasons for changing planning priorities in favor of bullish party. Hence and considering the descending direction of indicator chart we assume the possibility of rate return to 1.0680/1.0700 supports, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For buying positions on condition of formation of topping signals the targets will be 1.0760/80, 1.0860/80 and/or further breakout variant up to 1.0940/60, 1.1020/40, 1.1100/20, 1.1180/1.1200. An alternative for sells will be below 1.0560 with targets 1.0500/20, 1.0420/40, 1.0380/1.0400. GBP The pre-planned breakout variant for sells was realized with overlap of assumed targets. OsMA trend indicator, having marked preservation of rising bearish advantage tendency gives reasons for the preservation of bearish planning priorities for today. At the moment considering bullish position of indicator chart we assume the possibility of rate return to close 1.5200/20 resistance levels, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For sells on condition of formation of topping signals the targets will be 1.5120/40, 1.5000/40, 1.4860/1.4900 and/or further breakout variant up to 1.4720/60, 1.4580/1.4600, 1.4480/1.4520. An alternative for buyers will be above 1.5300 with targets 1.5380/1.5400, 1.5460/80, 1.5540/60. JPY The pre-planned breakout variant for buyers was realized with attainment of minimal assumed target. OsMA trend indicator, having marked advantage of buying party development gives reasons for assumptions about bullish development phase incompleteness. Hence and considering the descending direction of indicator chart we assume the possibility of rate return to close 88.60/80 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 89.20/40, 89.80/90.00, 90.40/60 and/or further breakout variant up to 91.00/20, 91.60/80, 92.20/40. An alternative for sells will be below 87.80 with targets 87.20/40, 86.80/87.00, and 85.20/40. EUR The assumed test of key supports was confirmed but displayed by OsMA indicator essential bearish activity rise was not favorable for the realization of the pre-planned buying positions. Hence and considering the chosen strategy at the moment there are reasons for changing planning priorities to the bearish direction and taking into account the ascending direction of indicator chart we assume the possibility of rate return to close 1.4340/60 resistance range, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For sells on condition of formation of topping signals the targets will be 1.4260/80, 1.4160/80 and/or further breakout variant up to 1.4100/20, 1.4020/40, 1.3900/20. An alternative for buyers will be above 1.4560 with targets 1.4600/20, 1.4660/80, 1.4700/20. FOREX Ltd www.forexltd.co.uk

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Technical Analysis for Major Currencies

Daily Forex Technicals | Written by Crown Forex | Dec 19 08 08:01 GMT |

EURO Due to the pair failing to close above 1.4620 on the four hour charts, it entered a downside channel that took it back to the 50% correction at 1.4210 - 1.4250 but at the same time price is still within an ascending channel with a key support at 1.4115. Despite us seeing a need for further declines, a rebound from the 1.4210 - 1.4250 to the upside is still possible. The trading range for today is among the key support at 1.3945 and the key resistance at 1.4620 The general trend is to the downside as far as 1.5080 remains intact with targets at 1.2340 and 1.2225 We depend on four hour closings due to the volatility in financial markets and the fluctuations on the intraday basis. From here we see that using the stop loss and confirming the breach of resistance and support levels is based on these closings to overcome the turbulence that resulted from the current global economic conditions Support: 1.4210, 1.4175, 1.4115, 1.4090, 1.4025 Resistance: 1.4250, 1.4285, 1.4315, 1.4380, 1.4485 GBP After updating our recommendation yesterday, the pair did follow our expectations where we now see trading above the 50 percent correction after rebounding from the 61.8% correction at 1.4950 which wasn't breached on the four hour charts. However, the price currently is above the 100 day MA at 1.5040 where we expect trading for today to remain of high volatility. If trading remains below 1.5170, this could keep the pair to the downside. The trading range for today is among the key support at 1.4800 and the key resistance at 1.5460 The general trend is to thw downside as far as 1.9400 remains intact with targets at 1.4435 and 1.4095 We depend on four hour closings due to the volatility in financial markets and the fluctuations on the intraday basis. From here we see that using the stop loss and confirming the breach of resistance and support levels is based on these closings to overcome the turbulence that resulted from the current global economic conditions Support: 1.5010, 1.5065, 1.5000, 1.4950, 1.4885 Resistance: 1.5140, 1.5170, 1.5215, 1.5245, 1.5345 Recommendation: Sell the pair below 1.5140 with targets at 1.5065 and 1.4960 and stop loss with a four hour close above 1.5230 JPY The upside wave was initiated as it was supported by the 87.30 level for the past tast where the pair is currently appreciating but up to this moment, it failed to build a solid base above 89.70. The pair might decline in an attempt to gather bullish momentum once again on the short term as it retests the critical level mentioned above. The trading range for today is among the key support at 86.70 and the key resistance at 90.55 The general trend is to the downside as far as 102.10 remains intact with targets at 84.95 and 82.60 We depend on four hour closings due to the volatility in financial markets and the fluctuations on the intraday basis. From here we see that using the stop loss and confirming the breach of resistance and support levels is based on these closings to overcome the turbulence that resulted from the current global economic conditions Support: 88.75, 88.35, 87.75, 87.50, 87.30 Resistance: 89.05, 89.45, 89.85, 90.15, 90.55 Recommendation: Buy the pair above 88.35 with targets at 89.70 and stop loss with a four hour close below 87.70 CHF The pair witnessed a sharp decline yesterday as it is being heavily oversold whereas the 1.0570 level was strong enough to result in the pair to lose some of the bearish momentum. Due to the minor support levels, the pair failed to close below the key support in the image and is now trading to the upside. The trading range for today is among the key support at 1.0470 and the key resistance at 1.1160 The general trend is to the upside as far as 1.0570 remains intact with targets at 1.2570 and 1.2780 We depend on four hour closings due to the volatility in financial markets and the fluctuations on the intraday basis. From here we see that using the stop loss and confirming the breach of resistance and support levels is based on these closings to overcome the turbulence that resulted from the current global economic conditions Support: 1.1745, 1.6080, 1.6045, 1.0575, 1.0555 Resistance: 1.0810, 1.0840, 1.0895, 1.0995, 1.1075 CAD The pair reached the 76.4% as we expected yesterday but was still trading below the key resistance for the descending channel at 1.2110 but still above the 61.8% correction at 1.2050. Technical indicators still show that the pair will be able to breach the resistance to continue inclining but for the time being, monitor the 1.2050 and 1.1980 level where if it didn't close below these levels, it will confirm the incline The trading range for today is among the key support at 1.1845 and the key resistance at 1.2410 The general trend is to the upside as far as 1.1780 remains intact with targets at 1.3305 and 1.3465 Support: 1.2050, 1.1980, 1.1930, 1.1880, 1.1860 Resistance: 1.2110, 1.2150, 1.2225, 1.2260, 1.2310 Recommendation: Buy the pair above 1.2050 with targets at 1.2225 and stop loss with a four hour close below 1.1950 Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

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Colombia Bank May Keep Rate on Hold, Resisting Calls for a Cut

By Helen Murphy

Dec. 19 (Bloomberg) -- Colombia’s central bank may keep its benchmark interest rate unchanged for a fifth month, resisting calls for a cut to spur the economy as inflation remains above its target.

Policy makers will hold the interbank rate at a seven-year high of 10 percent, according to 18 of 32 economists surveyed by Bloomberg. Twelve analysts expect the Bogota-based bank to lower the benchmark rate to 9.75 percent today and two analysts forecast a cut to 9.5 percent.

Colombian President Alvaro Uribe and Finance Minister Oscar Ivan Zuluaga have called for lower lending rates, saying it would help the economy cope with the worst global financial crisis since the Great Depression. The seven-member board may instead leave borrowing costs unchanged, betting that a cut would stoke expectations that inflation will accelerate.

“Inflation remains high and hasn’t peaked yet,” said Benito Berber, a strategist at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. “It will be a tough decision.”

Policy makers have said that their next change to the rate, when it comes, will be a cut. In the past two meetings, some board members have lobbied for a reduction of as much as a half point on concern that economic growth may slow further. Bank director Carlos Gustavo Cano said in a Dec. 11 interview that he disagreed with the board’s decision to raise rates this year.

Inflation this year peaked at 7.94 percent in October and eased to 7.73 percent last month, above the central bank’s target range for this year of 3.5 percent to 4.5 percent. Still, inflation expectations over the next 12 months fell to 5.36 percent in the central bank’s December survey of economists, from 5.84 percent last month. The bank targets inflation of no more than 5.5 percent next year.

Simultaneous Recession

As the bank battles inflation, it also must contend with slowing economic expansion. The central bank said growth next year could decelerate to as little as 1 percent, dragged down by the first simultaneous recession since World War II in the U.S., Europe and Japan.

Gross domestic product expanded 3.7 percent in the second quarter, the slowest pace since 2003, down from 8 percent in the same period a year ago. Third-quarter GDP figures will be released Dec. 22.

“The economy will shrink very fast next year, and that will impact employment,” said Bertrand Delgado, an economist with New York-based research firm IDEAglobal. “The board will have a difficult time on this decision, but inflation expectations will continue to decline as the economy decelerates rapidly.”

The central bank board, headed by Jose Dario Uribe and Zuluaga, may wait for Christmas shopping to end before cutting rates, said Rupert Stebbings, head of international sales at Interbolsa SA.

The board may also want to see by how much the minimum wage is increased next year to see how that will impact inflation, Stebbings said.

“There are many variables that lead us to expect the rate to be held another month,” said Stebbings, who expects a half- point cut early in 2009. “They will want to play it safe.”

To contact the reporter on this story: Helen Murphy in Bogota at Hmurphy1@bloomberg.net.

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French GDP to Contract 0.8%, Recession to Follow, Insee Says

By Sandrine Rastello

Dec. 19 (Bloomberg) -- France’s economy, the second largest of the 15 countries sharing the euro, will contract by the most since 1974 this quarter and slip into a recession early next year, Insee, the national statistics office, forecast.

Gross domestic product will probably decline 0.8 percent this quarter, the most since the end of 1974, after a 0.1 percent increase in the three months through September, Insee economists said in Paris. The economy will shrink 0.4 percent in the first quarter, and 0.1 percent in the following three- months, Insee predicted.

The global credit crisis is aggravating a world economic slowdown, damping exports and hurting corporate investment. While President Nicolas Sarkozy’s 26 billion-euro ($37.5 billion) stimulus package may combine with slower inflation to provide some support for growth, rising unemployment is likely to put a lid on consumer spending, Insee predicts.

“Almost all developed countries will be in a recession next year and France will be no exception,” Insee’s chief forecaster Eric Dubois said at a briefing in Paris yesterday. “The tightening of credit conditions and a general aversion to risk prompts companies to cut investment and reduce inventories, such as in the car sector.”

Job Cuts

European car sales fell 26 percent in November, the biggest monthly drop since 1999. Auto makers Renault SA and PSA Peugeot Citroen are both shedding jobs and idling plants to confront the slump in demand. Valeo SA, France’s second-biggest maker of auto components, said yesterday it will eliminate 1,600 positions in France and 1,800 in other European countries.

Insee expects the economy to shed 191,000 jobs in the first half of next year, after forecasting a drop of 125,000 in the second half of 2008.

France has already agreed to aid the auto industry and has pledged 1 billion euros of low-interest loans to carmakers’ financing units, of which 779 million euros has already been paid out. The government is also funding 220 million euros in sales incentives on new cars and 100 million euros in assistance to smaller auto-parts suppliers.

Growth in France this year, at 0.8 percent will lag behind the euro region for a third year this year, according to the Insee forecasts.

Stimulus Impact

The government expects expansion of 0.2 to 0.5 percent this year. Under Insee’s forecasts, to get just 0 percent would require growth of 1.4 percent in both the third and the fourth quarter.

Dubois says Sarkozy’s stimulus plan should have a biggest impact in the second half, when he expects the economy to resume growing. He compared the current slowdown with that of 1993, rather than that of 1974-1975.

Insee sees consumer spending rising 0.1 percent this quarter, stagnating in the first quarter, before picking up, increasing 0.3 percent in the following three months.

Corporate investment will fall 1.6 percent this quarter, 1.7 percent next quarter, and 0.8 percent in April-June. Exports will slip 2.3 percent, 1.2 percent and 0.7 percent over the three quarters respectively.

To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net;

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German Producer Prices Drop Most Since 1949 on Oil

By Jana Randow

Dec. 19 (Bloomberg) -- German producer prices dropped the most since records began in 1949 in November as the cost of oil declined and the global economic slowdown curbed demand.

Producer prices fell 1.5 percent from October when they were unchanged, the Federal Statistics Office in Wiesbaden said today. Economists forecast prices would decline of 0.8 percent, according to the median of 27 estimates in a Bloomberg News survey. From a year earlier, prices rose 5.3 percent.

Commodity prices have fallen, eroding demand. At $36 a barrel, the cost of oil has retreated 75 percent from its peak of $147 in July, reducing costs for companies struggling to keep their market share as the global economy contracts and damping price growth. Investors predict that slowing inflation will prompt the European Central Bank to cut interest rates next month.

“The drop is a massive relief for companies and removes pressure on profit margins,” said Joerg Lueschow, an economist at West LB AG in Dusseldorf. “It is highly welcome and gives the ECB room for additional rate cuts. The ECB will lower rates by 50 basis points in January”

The German economy is in its worst recession in 12 years and the Bundesbank expects growth to contract next year. Business confidence dropped to the lowest in more than a quarter of a century in December, the Ifo institute said yesterday.

Lower Inflation

Central banks around the world have lowered borrowing costs to combat a global recession. The ECB has cut its benchmark by 1.75 percentage points since October. The Federal Reserve reduced its main rate to near zero this week and the Bank of Japan cut its benchmark interest rate to 0.1 percent today.

Today’s producer price figures add to evidence that Germany’s inflation rate is declining, giving the ECB additional leeway on monetary policy. German consumer price growth slowed to 1.4 percent under a harmonized European Union method in November from 2.5 percent, falling below the ECB’s price stability threshold for the first time since February 2007.

ECB Executive Board member Juergen Stark warned yesterday that low-rate policies may fuel inflation and create the basis for future crises. “As soon as the current crisis is over, governments and central banks need to change to a restrictive course,” he said.

Policy makers have indicated in recent days that they’re reluctant to lower borrowing costs much further. Still, investors are expecting the bank to cut rates by at least 50 basis points in January, Eonia forward contracts show.

Energy prices fell 3.3 percent in the month and gained 15 percent from a year earlier, today’s report showed. Excluding energy costs, producer prices rose 2.1 percent from November 2007. Petroleum products were 11.5 percent cheaper in the year and 9.8 percent less expensive than in October.

To contact the reporter on this story: Jana Randow in Frankfurt jrandow@bloomberg.net.

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U.K. Consumer Confidence Rose in December as Fuel Costs Fell

By Brian Swint

Dec. 19 (Bloomberg) -- U.K. consumer confidence improved in December as the cost of gasoline fell and the government cut taxes, GfK NOP said.

An index of sentiment, based on a survey of 2,000 people between Dec. 5 and Dec. 14, rose to minus 33 from minus 35. While the figure is still 19 points lower than a year ago and optimism about the economy waned this month, a gauge measuring shoppers’ willingness to make large purchases rose 10 points.

Lower energy costs and discounted goods helped bolster retail sales in November even as Britain struggled with the recession. Prime Minister Gordon Brown has cut sales tax as shoppers look for holiday bargains and benefit from a drop of 3 percentage points in the interest rate in the past quarter.

“There is perhaps a glimmer of hope,” Rachael Joy, a spokeswoman for GfK, said in a statement. “High street deals and the small reduction in value-added tax have improved consumers’ views. The crucial question for the economy is whether the improvement in this index will be translated into activity on the high street.”

The median pay award in 79 salary agreements was for a 3.8 percent raise, the same as for October and higher than the 3.5 percent increase in the previous three months, Industrial Relations Services said in London in a separate report today. That’s higher than the 3 percent increase in the retail price index used by wage bargainers for the first time in more than two years.

Inflation Slows

Consumer-price inflation slowed to 4.1 percent last month after peaking at 5.2 percent in September. Oil prices have fallen by about two-thirds since reaching a record in July, and the government temporarily reduced sales tax to 15 percent from 17.5 percent on Nov. 24.

Retail sales rose for the first time in three months in November, the statistics office said yesterday. The price of a gallon of unleaded gasoline fell to $5.15 last month, down from $9.02 in June, according to AA Motoring Trust Trading Ltd.

Bank of England Governor Mervyn King said this week that the inflation rate may drop below 1 percent next year as the economy contracts. The central bank lowered the benchmark interest rate to the lowest since 1951 this month to help the economy out of the recession.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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Bargain-Crazed Shoppers Lie and Haggle for Cheaper Bags, Uggs

By Allison Abell Schwartz

Dec. 19 (Bloomberg) -- Susana Ortega was shocked when a woman walked into B.O.C., the Manhattan boutique where she works, and asked for $300 off of an $800 purse. In exchange, the woman said, she’d pay cash.

Ortega refused the offer. Other customers have asked her to waive the sales tax in exchange for a cash payment or to throw in extra items like underwear or candles. Some try to negotiate over the phone so they can skip the retailers who won’t give them better deals, she said.

“It’s unheard of,” said Ortega, who’s worked at the store for about a year. “I’m just really amazed that people are just going for it.”

New York boutiques are reeling as bigger Macy’s Inc., Bloomingdales and Saks Inc. offer discounts of as much as 70 percent. The smaller stores, which pay more for merchandise because they buy less, are being forced to match prices and accept eroding profit margins, said Adrienne Tennant, an analyst at Friedman, Billings, Ramsey & Co. in Arlington, Virginia.

Sellers also need to exercise caution because some shoppers lie about or exaggerate the discounts they’ve seen, said Sean Kirsch, 31, vice president at the Shoe Box, a women’s shoe store with four locations in Manhattan.

One customer told a sales associate that a pair of boots his store had for $535 cost $150 at Saks. The sales associate called Saks to confirm and found out it wasn’t true, Kirsch said. Others have also come in saying Bloomingdales had Ugg boots, which retail for $130 to $160, on sale when they weren’t, he said.

‘Let’s Make a Deal’

“It’s almost like Monty Hall, ‘Let’s Make a Deal,’” said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc. Consumers can “say ‘Listen, I just saw something just like this down the street or down the mall, and they were selling it at this price. What can you do?’”

Seventy-two percent of consumers said they have negotiated for a lower price in the last three to four months, compared with 56 percent a year ago, according to poll conducted this month by America’s Research Group.

Consumers are successful in their negotiating about 80 percent of the time, compared with about 50 percent a year ago, said Britt Beemer, chairman of the research firm.

The Shoe Box does match department store prices upon confirmation, Kirsch said, adding that he instructs employees to refuse to haggle.

Meeting the Price

“The department stores are severely discounting and marking down everything -- of course that makes it harder on a small retailer,” said Kirsch. “If we have to meet a price a department store is offering, we’ll meet the price.”

Susan Weiss, 60, a manager at Forreal, a women’s clothing store in Manhattan, says that if a customer is on the verge of walking out of the store after considering an item, she’ll offer an extra discount to make the sale.

While Delfino, a handbag store with three Manhattan locations, matches most department-store discounts upon request, it won’t give additional bargains.

“The store loses credibility,” said Delfino President Harun Keskinkaya. “The second time the customer expects that. It’s better to stick to your principles.”

Lydia Cochran, manager of Purdy Girl, a women’s clothing and accessories boutique with three Manhattan locations, said while the store’s policy is to not bargain, it’s trying to be “flexible” in dealing with customers’ requests.

“Everybody wants to feel like they’re smart shoppers right now,” Ortega said.

‘A Lot of Work’

Making a sale takes more work than it has in the past, Ortega and Weiss said.

“Sales skills are more valuable than ever,” Ortega said. “You have to work with people. You have to accommodate them as much as you can. It’s a lot of work.”

Part of Delfino’s strategy has been to start selling a higher percentage of less-expensive products instead of heavily discounting, according to Keskinkaya. Sixty to seventy percent of the handbags the store carries are priced from $150 to $350, whereas $600 to $700 used to be more common, he said.

Weiss said she is selling some items at less than cost to clear out inventory. Forreal is selling $70 sweaters for $19.99 and $32 Petit Bateau t-shirts for $14.99, less than what the store paid for them.

“The name of the game is, ‘come January and February, the hardest two months, even if you take a loss, you have to get rid of your old merchandise,’” Weiss said.

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.

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Obama to Name Solis to Labor Post, Kirk as Trade Representative

By Kim Chipman and Mark Drajem

Dec. 19 (Bloomberg) -- President-elect Barack Obama is set to wrap up his Cabinet choices by naming U.S. Representative Hilda Solis of California as his pick for labor secretary and former Dallas Mayor Ron Kirk as trade representative, according to Democratic officials and people familiar with the transition.

Solis and Kirk are likely to be named by the president- elect today, along with Representative Ray LaHood, an Illinois Republican, as transportation secretary.

Solis, 51, is a four-term member of Congress with an extensive record on environmental issues and strong backing from labor unions. Kirk, now an attorney with the Dallas office of Vinson & Elkins, was Dallas’s first black mayor. He was an early supporter and fundraiser for Obama.

Obama is moving more quickly than any modern president- elect in lining up Cabinet secretaries and executives of Cabinet-level agencies. He is scheduled to hold a news conference at 2:15 p.m., New York time, today.

Solis, who grew up in a union household in Los Angeles County, is a favorite of labor groups, including the Service Employees International Union.

“We’re thrilled,” said SEIU President Andy Stern, who canvassed door-to-door with Solis when she first ran as a state senator. “She’s been as strong a voice for justice for SEIU workers like our janitors and homecare workers as we’ve ever had.”

Her legislative accomplishments include spearheading a bill to provide workers with training for “green-collar” employment. Such initiatives are a hallmark of Obama’s plan to address the country’s energy needs as well as create new jobs amid a recession.

Labor Battle

The new labor secretary will be in the middle of the battle over legislation, called the Employee Free Choice Act, aimed at making it easier for workers to unionize. The proposal would require employers to automatically recognize a union once a majority of workers sign up to join one. Current rules require a federally supervised election process.

The measure is organized labor’s top priority and faces strong opposition from businesses and Republicans, as well as some Democrats.

Critics say the law would deny employees a secret ballot election and make them vulnerable to union scare tactics. Supporters say company managers are the ones using intimidation to stop employees from organizing.

Solis, whose father was a member of the International Brotherhood of Teamsters and mother a member of the United Rubber Workers, is an advocate of the so-called card check bill. Obama, who was supported by organized labor groups in the election, pledged in his campaign to fight for the measure.

No Surprise

The Chamber of Commerce, the nation’s largest business lobby, is battling against the legislation. Randel Johnson, vice president for labor issues at the chamber, said the organization isn’t surprised by Obama’s pick of a labor ally.

“While we are obviously concerned about her support of the Employee Free Choice Act and her high rating by the AFL- CIO, these are positions consistent with the Obama administration,” Johnson said. “There is a new sheriff in town and we will work with her on some issues and oppose on some.”

She has also been an opponent of free-trade agreements, in step with union positions. Solis voted against a trade deal with Peru last year and against a Central American free trade accord in 2005. Obama also has been critical of trade accords, saying during the primary campaign that he wanted to renegotiate the North American Free Trade Agreement among the U.S., Canada and Mexico to include more protection for U.S. workers.

Trade Backer

Those positions set up a contrast with Kirk, who will be the lead U.S. official responsible for negotiating global and individual trade agreements, pressing other nations to rescind barriers to exports and investment, and litigating cases at the World Trade Organization in Geneva.

After his election as mayor of Dallas in 1995, Kirk vowed to make the city the “capital of Nafta,” according to news stories at that time.

While Kirk doesn’t have broad international stature such as former USTR Robert Zoellick, President George W. Bush’s first appointee to the job, he has one key strength.

“Members of Congress, whose support he will need on a raft of trade issues facing the new administration, are comfortable working with a USTR who has held elected office,” said Cal Cohen, head of the Emergency Committee for American Trade, which represents large U.S. exporters. “They see him as a fellow politician, as one of their own, which will be a tremendous advantage.”

The selection of LaHood, who is retiring from Congress after seven terms, was reported earlier this week. He would be the second Republican in a top administration post, along with Defense Secretary Robert Gates, who is staying on from the Bush administration.

To contact the reporters on this story: Kim Chipman in Chicago at kchipman@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net

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