Gas Producers Meet in Moscow Amid Russian Dispute With Ukraine

By Lucian Kim and Greg Walters

Dec. 23 (Bloomberg) -- Energy ministers from the world’s largest natural-gas exporters gathered in Moscow today to forge closer ties as Russia threatened to cut supplies of the fuel to Ukraine in a row over unpaid bills.

Prime Minister Vladimir Putin, who turned OAO Gazprom into a global energy company during two presidential terms, will open a meeting of the Gas Exporting Countries Forum, which includes OPEC members Iran, Algeria and Qatar. Western consumer countries have warned against forming a “gas OPEC” along the lines of the Organization of Petroleum Exporting Countries.

“Maybe it’s a bright image, but the mechanisms of OPEC can’t be used on the gas market,” Alexander Medvedev, Gazprom’s chief of exports, said last week. “In this case, it’s not necessary to make comparisons.”

Russia, which supplies a quarter of Europe’s gas through pipelines, is locked into long-term contracts that don’t allow the flexibility and reach of the world oil market. Yet as demand grows for liquefied natural gas -- gas chilled to a liquid for transport by tanker -- a global market is forming that reduces the importance of pipelines and encourages spot trades.

The forum is set to agree on a charter transforming it from a loose, consultative body into a formal organization with a permanent secretariat, as Russia seeks a leading role in the group. This year’s annual meeting was delayed several times amid reports that member nations disagreed over the group’s future.

Ukraine Dispute

The meeting is taking place as Russia has told Ukraine, which ships about four-fifths of the nation’s gas exports to Europe via its pipelines, that it will cut deliveries in the event of a failure to be paid for energy shipments in 2008.

Russia shut off deliveries three years ago amid a price disagreement, and says its neighbor is withholding about $2 billion in payment for gas supplies.

Viktor Zubkov, chairman of Gazprom, said yesterday that Ukraine should be held “fully responsible” for any disruption in Russian gas supplies to Europe as the sides struggle to resolve the dispute by a Jan. 1 deadline.

The Moscow-based Institute of Energy and Finance estimates that each ruble in capital investment adds five rubles to economic growth, meaning non-payment by Ukraine could reduce Russia’s gross domestic product by 301 billion rubles ($10.6 billion), representing lost growth of 0.7 percent, according to the Kremlin press service.

Russian LNG

Gazprom is planning to expand beyond its European client base when it starts loading its first LNG cargo in February, opening up new markets for Russian gas in Japan, South Korea and North America. The state-run company formed a “gas troika” in October with Qatar and Iran for joint exploration and production projects. Together, the three countries hold more than half of the world’s gas reserves.

Four cities are vying to host the Gas Forum’s permanent secretariat, Medvedev said. St. Petersburg will compete for the honor with Algiers, Tehran and Doha, Qatar, he said.

During his presidency from 2000 to May this year, Putin consolidated state control over the country’s oil and gas industry, with Gazprom as the flagship for Russia’s new economic might. The Moscow-based company is pursuing projects from Libya and Vietnam to Alaska and Bolivia.

Yesterday Gazprom said France’s GDF Suez SA may join the planned Nord Stream pipeline, as Russia shores up support for the project by bringing in more foreign partners.

French Investment

Gazprom Chief Executive Officer Alexei Miller discussed the possibility at a meeting with his GDF Suez counterpart Gerard Mestrallet in France yesterday. GDF Suez is “interested in principle” in becoming a minority investor in the 1,200- kilometer (750-mile) pipeline linking Russia to Germany, according to a Gazprom statement.

Gazprom currently owns 51 percent of Nord Stream, with Wintershall Holding AG and E.ON Ruhrgas AG each holding 20 percent and Nederlandse Gasunie NV 9 percent.

After oil prices started tumbling from a record in July, Putin’s deputy, Igor Sechin, began pushing for closer coordination with OPEC, of which Russia is not a member.

OPEC was founded in 1960 by Venezuela, Iran, Iraq, Kuwait and Saudi Arabia. The Gas Exporting Countries Forum held its first meeting in Tehran in 2001. The last ministerial meeting was held in Doha in April 2007. Forum members include Egypt, Nigeria, Malaysia and Trinidad & Tobago.

To contact the reporter on this story: Lucian Kim in Moscow at lkim3@bloomberg.net

Read more...

Yuan to Stagnate Next Three Months as Reserves Slow, UBS Says

By Justin Carrigan

Dec. 23 (Bloomberg) -- The Chinese yuan will “stagnate” between 6.800 and 7.000 per dollar in the next three months, according to UBS AG.

“Reserve accumulation will continue in 2009 for China but at a far slower pace than in 2008,” Geoffrey Yu, a currency strategist in London at UBS, wrote in a note today. “The smaller reserve accumulation would mean reduced buying of U.S. Treasuries from China. This does not portend a start of a trend of yuan weakness.”

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

Read more...

British Pound Falls for a Second Consecutive Day Against Euro

By Justin Carrigan

Dec. 23 (Bloomberg) -- The pound fell for a second day versus the euro.

The U.K. currency weakened to 94.36 pence per euro as of 7:09 a.m. in London, from 93.98 pence yesterday. It was little changed at $1.4820.

To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

Read more...

Asian Currencies Fall, Led by Won, as Economic Concerns Mount

By Kim Kyoungwha and Clarissa Batino

Dec. 23 (Bloomberg) -- Asian currencies weakened, led by South Korea’s won, on concern a deepening global recession will hurt regional exports and prompt international investors to shun emerging-market assets.

Most Asian currencies fell as Taiwan reported a record slide in export orders for November and economists forecast a U.S. government report today will show new home sales in the U.S. reached a 17-year low. The won, which gained in each of the last two weeks, is set for its biggest annual decline since 1997 and the Philippine peso is set for its worst year since 2000.

“Investors are selling assets bought a few weeks ago as recent data show there are more risks, not less,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “Recent gains in the peso and other regional currencies seem to be a bit overdone, considering the market’s view that there isn’t much to support the rally in 2009.”

South Korea’s won slumped 2.3 percent to 1,338 as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. It’s down 31 percent this year, the worst performance in Asia. The peso lost 0.2 percent to 47.425 in Manila, contributing to this year’s slide of 13 percent.

Taiwan’s export orders -- indicative of shipments in one to three months -- plunged by a record 29 percent from a year earlier in November, the Ministry of Economic Affairs announced today. That’s the biggest drop since Bloomberg started tracking the data in 1999 and more than double the decline forecast by economists in a Bloomberg News survey.

Exports Slump

Sales of new homes in the U.S., the world’s biggest economy, fell to an annual pace of 415,000 in November, according to economists surveyed by Bloomberg before a Commerce Department report today.

Japan, China, India and South Korea -- Asia’s four biggest economies -- have all reported drops in exports this month and, with the exceptions of the Philippines and Thailand, benchmark stock indexes fell today across regional bourses open for trading. Japan’s financial markets were closed for a holiday.

Overseas investors sold a net $37 billion worth of South Korean stocks this year and the Kospi stock index plunged 40 percent as a seizure in global credit markets prompted investors and banks to hoard dollars.

The won’s decline may be limited by speculation the authorities will support the currency to help prevent year-end exchange-rate moves undermining balance sheets for companies and banks, according to Park Hae Il, an options trader with Shinhan Bank in Seoul.

“As seen in the past months, the currency market is taking an early cue from stock movements,” Park said. “Nonetheless, the government’s intention to moderate the won’s loss ahead of year-end will be reflected in the market.”

Worst to Best

India’s rupee fell for a third day on speculation importers took advantage of recent gains to buy foreign exchange. The currency fell 1.4 percent to 48.72, paring this month’s advance to 2.8 percent. For the year, it’s down 19 percent, Asia’s second-worst performance.

The won and the rupee will be the region’s biggest gainers in 2009 as a recovering global economy spurs demand for emerging-market assets, according to Sherman Chan, an economist in Sydney with Moody’s Economy.com.

“They have the strongest potential to rebound,” he said. “Any recovery in risk appetite should see capital flowing back in.”

South Korea’s currency will rise 12 percent to 1,185 per dollar by end-2009 and India’s currency will strengthen 3.7 percent to 47 by the first quarter of 2010, Chan forecast.

Intervention

Taiwan’s dollar declined 0.5 percent to NT$33.085 per dollar, after yesterday sliding 1.2 percent, the most in seven years. Last week’s 2.4 percent weekly advance was the currency’s best performance in a decade.

The Central Bank of the Republic of China (Taiwan) bought between $100 million and $200 million last week, seeking to curb the Taiwan dollar’s appreciation, the Central News Agency said yesterday, citing unidentified traders.

“The central bank is taking the opportunity of thin trading activity this week to push the currency to a more competitive level for exports,” said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. “The market thinks that the worst is not over yet. The natural reaction is to offload risky assets.”

The yen was little changed at 90.16 per dollar from 90.25 late yesterday in New York. The Japanese currency reached a 13- year high of 87.14 on Dec. 17.

Rate Cut

China’s yuan traded at 6.8527 a dollar, little changed from 6.8510 yesterday, after the People’s Bank of China cut interest rates for the fifth time since the start of September to spur growth in the world’s fourth-largest economy.

“The rate cut was modest but in line with policy to continue to ease,” said Irene Cheung, a corporate director for local-markets trading at ABN Amro Bank NV in Singapore. “We should position for China eventually allowing the yuan to weaken as exports will deteriorate further into 2009.”

Vietnam’s dong was little changed at 16,987.50 versus the dollar and Thailand’s baht fell 0.2 percent to 34.60. Indonesia’s rupiah rose 1.4 percent to 10,995 and Malaysia’s ringgit gained 0.4 percent to 3.4660.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.

Read more...

November Housing Sales in U.S. Probably Fell to Nine-Year Low

By Bob Willis

Dec. 23 (Bloomberg) -- Sales of new and existing homes in the U.S. fell in November to a nine-year low as a scarcity of credit and falling consumer confidence dissuaded potential buyers, economists said before reports today.

Purchases dropped 1.4 percent to an annual pace of 5.345 million units, according to estimates of economists surveyed by Bloomberg News. Combined sales at that level would show demand weaker than the 5.349 million pace in June that was the lowest since 1999, when the latest series of existing-home sales statistics began.

The U.S. housing recession and credit crisis may extend into 2009, signaling little relief for the broader economy. The Federal Reserve last week dropped its target rate to as low as zero to spur lending, while President-elect Barack Obama has pledged to work to halt foreclosures, boost housing and provide a boost to the economy.

“Underlying demand is still very weak,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. “The worst postwar housing recession has contributed to arguably the worst postwar capital-market crisis and a severe U.S. recession.”

New-home sales may drop to a 415,000 annual pace, the lowest level since January 1991, according to the median estimate in a Bloomberg survey of 65 economists. Forecasts ranged from 343,000 to 435,000.

Existing-home sales may decline to a 4.93 million rate from 4.98 million the prior month, according to 63 economists surveyed by Bloomberg. Estimates ranged from 3.98 million to 5.2 million.

Signed Contracts

New-home sales are a better leading indicator because they track contract signings rather than closings, which occur one or two months later and are reflected in the existing sales figures.

The Commerce Department will report the new-home sales number at 10 a.m. in Washington, and the National Association of Realtors will report existing sales at the same hour.

Sales and home prices have been falling since 2005, when the housing boom peaked. Declining home construction has detracted from economic growth since early 2006, while home prices that have fallen by about a fifth on average sent foreclosures surging to record levels. That touched off a wave of defaults on mortgage-backed securities that infected the global banking system, creating a spiral of falling prices, tighter credit and slumping spending.

“Declining house prices, delinquencies and foreclosures and strains in mortgage markets are now symptoms as well as causes of the general financial and economic difficulties,” Fed Chairman Ben S. Bernanke said Dec. 4 at a conference in Washington.

Bank Failures

Lending has dried up, banks have failed and 1.9 million Americans have lost their jobs this year, as the economy struggles with its first recession since 2001. The Federal Reserve has led coordinated rate cuts around the world to bolster capital markets and revive credit.

Noting that “the outlook for economic activity has weakened further,” the Fed on Dec. 16 cut its key target rate to as low as zero from 1 percent and pledged to “employ all available tools” to restore growth in the flagging economy.

Also today, the Reuters/University of Michigan final index of consumer sentiment will show the gauge rose to 58.8 in December, reflecting falling gasoline prices, from a 28-year low of 55.3 in November, according to economists surveyed. That report will be released shortly before 10 a.m.

============================================
                        New Home  Existing
                           Sales     Homes
                          (,000’s)  (Mlns)
============================================

Date of Release              12/23    12/23
Observation Period            Nov.     Nov.
--------------------------------------------
Median                         415     4.93
Average                        410     4.90
High Forecast                  435     5.20
Low Forecast                   343     3.98
Number of Participants          65       63
Previous                       433     4.98
--------------------------------------------
4CAST Ltd.                     395     4.80
Action Economics               420     4.96
Aletti Gestielle SGR           405     4.80
Ameriprise Financial Inc       415     4.89
Argus Research Corp.           420     4.75
Banc of America Securitie      420     4.80
Bank of Tokyo- Mitsubishi      389     4.98
Bantleon Bank AG               400     4.96
Barclays Capital               410     4.93
BMO Capital Markets            415     4.85
BNP Paribas                    415     4.93
Briefing.com                   425     4.95
CIBC World Markets             400     4.80
Citi                           420     4.90
Commerzbank AG                 415     5.00
Credit Suisse                  380     4.90
Daiwa Securities America       420     4.80
Danske Bank                    409     4.97
DekaBank                       400     4.93
Desjardins Group               415     4.90
Dresdner Kleinwort             420     4.95
DZ Bank                        425     ---
First Trust Advisors           390     4.94
Fortis                         435     4.95
Goldman, Sachs & Co.           422     4.86
Helaba                         420     4.93
Herrmann Forecasting           428     4.93
HSBC Markets                   420     4.90
IDEAglobal                     425     4.85
IHS Global Insight             360     4.88
Informa Global Markets         420     5.20
ING Financial Markets          415     4.95
Intesa-SanPaulo                400     4.90
J.P. Morgan Chase              420     4.93
Janney Montgomery Scott L      406     4.82
Landesbank Berlin              425     5.03
Maria Fiorini Ramirez Inc      410     4.95
Merrill Lynch                  420     4.93
MFC Global Investment Man      410     4.85
Mizuho Securities              411     ---
Moody’s Economy.com            420     4.93
Morgan Stanley & Co.           400     4.90
National Bank Financial        420     4.95
National City Corporation      398     4.90
Natixis                        415     4.83
Nomura Securities Intl.        425     4.95
Okasan Securities              343     3.98
PNC Bank                       400     4.95
Raymond James                  410     4.90
RBS Greenwich Capital          380     4.90
Ried, Thunberg & Co.           410     4.95
Schneider Foreign Exchang      410     4.93
Scotia Capital                 400     4.80
Societe Generale               400     4.90
Stone & McCarthy Research      405     4.96
TD Securities                  420     4.90
Thomson Financial/IFR          428     5.04
Tullett Prebon                 410     4.90
UBS Securities LLC             390     4.88
Unicredit MIB                  425     4.93
University of Maryland         428     4.90
Wachovia Corp.                 410     4.91
Wells Fargo & Co.              420     4.96
Westpac Banking Co.            381     4.93
Wrightson Associates           410     4.95
============================================

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

Read more...

Dollar Falls Versus Euro as Report May Show Home Sales Slumped

By Ron Harui

Dec. 23 (Bloomberg) -- The dollar weakened for a second day against the euro before a government report that economists estimate will show sales of new U.S. homes declined to the lowest level in more than 17 years.

South Korea’s won declined the most in a month versus the U.S. currency and India’s rupee fell for a third day on concern that the global economy will slow further, hurting demand for Asian exports. Japan’s currency headed for its largest annual gain in more than two decades on speculation the credit crisis will spread. HFA Holdings Ltd., an Australian hedge fund, said the company halted redemptions from three of its funds.

“The U.S. dollar is going to go through a period of weakness over the next few months or so,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia Ltd., the nation’s biggest mortgage lender. “The economy is very weak and it might go into a period of deflation.”

The dollar declined to $1.4000 per euro at 7:53 a.m. in London from $1.3944 late in New York yesterday. It slid to $1.4719 on Dec. 18, the weakest level since Sept. 25. The yen was quoted at 126.28 per euro following a 1.3 percent loss yesterday. It traded at 90.26 per dollar after falling 1 percent. The Japanese currency reached a 13-year high of 87.14 on Dec. 17.

Against the greenback, Korea’s won fell 2.3 percent to 1,338. India’s rupee declined 1.3 percent to 48.64. The MSCI Asia- Pacific Index of regional shares dropped 1.2 percent.

Housing Reports

Commonwealth Bank now predicts the U.S. currency will fall to $1.4200 per euro by March 31, compared with its previous forecast of $1.1800.

Currency trading may be more subdued than usual today because of a public holiday in Japan, Capurso said.

New-home sales in the U.S. dropped to an annual pace of 415,000 in November, the lowest level since January 1991, from 433,000 in October, according to a Bloomberg News survey of economists. The Commerce Department releases the data at 10 a.m. in Washington.

Home resales fell 1 percent from the previous month to an annual pace of 4.93 million in November, a separate Bloomberg survey shows. The National Association of Realtors issues the report at 10 a.m.

“We remain of the view that the dollar is in a multi-year downtrend,” analysts led by Callum Henderson, head of global currency strategy at Standard Chartered Plc in Singapore, wrote in a research note yesterday. “It is clear that policy in the U.S. will continue to be ultra aggressive.”

The Federal Reserve cut the target overnight lending rate to between zero and 0.25 percent from 1 percent on Dec. 16, and said it is likely to keep rates low for “some time” while considering the potential benefits of buying longer-term Treasury securities.

Best Annual Performance

Standard Chartered, the U.K. bank that makes most of its profit in Asia, forecasts the dollar will weaken to $1.50 per euro and 75 yen by the end of March.

For the year, the dollar strengthened 4.1 percent against the euro, 34 percent versus the British pound and 28 percent against the Australian dollar as investors bought the greenback to flee riskier assets and repay dollar-denominated loans from lenders reining in credit.

The yen may extend this year’s 24 percent advance against the dollar, its best annual performance since 1987, on concern a deepening credit crisis will convince investors to avoid buying higher-yielding assets. Japan’s benchmark interest rate is 0.1 percent, compared with 4.25 percent in Australia and 5 percent in New Zealand.

“Japan is not in the mood to invest offshore and we don’t blame them,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “We’re bullish on the yen in the short term.”

The yen may strengthen to 85 against the dollar in a month, Callow forecast.

HFA Holdings

HFA Holdings said in a statement to the Australian stock exchange today that the halt from the HFA Diversified Investments Fund, HFA Octane Fund and HFA Octane Fund Series 2 took effect yesterday. It cited “deteriorating liquidity in underlying investments.”

A stronger yen contributed to a record 27 percent drop in Japan’s exports in November from a year earlier, a Finance Ministry report showed yesterday. Toyota Motor Corp., the world’s second-largest automaker, yesterday forecast its first operating loss in 71 years because of plunging sales and a surging yen.

“Dollar-yen around 90 really creates a problem with regards to Japan’s export market,” said Sharada Selvanathan, a currency strategist at BNP Paribas SA in Hong Kong, in an interview with Bloomberg Television. “I don’t think the Japanese officials are going to be very happy with the level of dollar-yen.”

Bank of Japan Governor Masaaki Shirakawa said yesterday that a strong yen will have a negative effect on economic growth in the short term, and added that foreign-exchange rates are one important factor influencing the economy. Finance Minister Shoichi Nakagawa last week signaled Japan is ready to intervene in the currency market for the first time in four years.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

Read more...

Palm Oil Futures in Malaysia Drop on Demand, Stockpile Outlook

By Claire Leow

Dec. 23 (Bloomberg) -- Palm oil futures in Kuala Lumpur dropped amid concern demand may not pick up enough to offset record stockpiles during the typically low-demand Northern Hemisphere winter period.

Malaysian stockpiles in November climbed to a record 2.27 million tons even as exports rose a second month to 1.35 million tons, according to the country’s palm oil board Dec. 12.

“Demand really needs to pick up steadily to reduce the stockpiles,” said Ong Chee Ting, a plantation analyst at Aseambankers Malaysia Bhd. That’s unlikely to happen as demand typically slows during the Northern Hemisphere winter as the tropical oil clouds over, he added.

March-delivery palm oil dropped as much as 2 percent to 1,557 ringgit ($447) a metric ton on the Malaysia Derivatives Exchange. It was at 1,562 ringgit at 11:06 a.m.

Palm oil futures have slumped two-thirds from a record 4,486 ringgit a ton in March as the global recession cut demand. The commodity now trades at a 34 percent discount to soybean oil, from 6.1 percent on March 31, according to Bloomberg data.

Soybean oil traded in Chicago dropped 0.4 percent to 31.13 cents a pound at 11:09 a.m. Singapore time in after-hours trading.

While the discount of palm oil to soybean oil may lure buyers, since vegetable oils can be used as alternative fuels, a lot depends on the price of crude oil, Ong added. It’s hard to project profitability for bio-fuel producers with crude oil so volatile, affecting the outlook demand for bio-fuel feedstock, he said.

Crude oil has extended a five-month decline to November, after trading above a record $147 a barrel in July. Crude oil for February delivery fell as much as 71 cents, or 1.8 percent, to $39.20 a barrel. It was at $39.27 a barrel at 11:13 a.m. Singapore time on the New York Mercantile Exchange.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net

Read more...

Indonesia May Ship as Much as 1.5 Million Tons of Rice in 2009

By Naila Firdausi

Dec. 23 (Bloomberg) -- Indonesia, the world’s third-largest rice producer, may export as much as 1.5 million metric tons of rice next year, said Mustafa Abu Bakar, president of state-run food company Bulog.

To contact the reporter on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net

Read more...

Vietnam Coffee Farmers Increase Sales as Harvest Ends

By Nguyen Dieu Tu Uyen

Dec. 23 (Bloomberg) -- Coffee farmers in Vietnam, the biggest producer after Brazil, are selling more of their crops as the harvest nears completion and banks increase credit to traders to purchase stocks from growers.

“It’s easier to buy coffee from farmers these days,” said Bui Hung Manh, head of business department at Tay Nguyen Coffee Investment, Import and Export Co., the nation’s biggest supplier known as Vinacafe Buon Ma Thuot.

An increase in supplies may weigh on prices of the bitter- tasting robusta variety used in instant coffee by Nestle SA and Kraft Foods Inc. Futures have slumped 32 percent since the end of June as world production increased and the credit freeze cooled demand for commodities including coffee.

“We have received offers from local exporters, though the quantity is less than expected,” said Nguyen Ngoc Thu, a trader in Ho Chi Minh City for Madrid-based Icona Cafe, which is among the 10 biggest importers of Vietnamese produce. “Probably the decline in international prices has discouraged them to sell.”

Robusta coffee for March delivery dropped 1.7 percent to $1,603 a metric ton yesterday in London, extending last week’s 2.7 percent decline.

Domestic coffee companies now have more funds to stockpile beans as banks have boosted credit to agricultural businesses, Vinacafe’s Manh said. The Bank for Investment & Development of Vietnam, the country’s second-biggest, said yesterday it would give more loans to companies to buy beans and expand warehouses.

Rate Cut

Vietnam’s central bank yesterday cut its key rate by 1.5 percentage points, the most this year, to 8.5 percent to spur lending in an attempt to combat an economic slowdown. The economy may expand next year at the slowest pace since 1999, according to the International Monetary Fund and the Asian Development Bank.

Export prices for February delivery at Ho Chi Minh City port are now around $1,460 to $1,500 per ton, down from $1,700 a year ago, according to Hua Thanh Hong, business manager of the Sept. 2nd Import-Export Co. Prices dropped to 24,500 dong ($1.4) per kilogram in Dak Lak this week, from 28,000 dong in the year-ago period, Hong said. The Dak Lak-based company is among the three biggest Vietnamese coffee exporters.

The harvest is nearing the end in the central province of Dak Lak, the country’s largest growing area, as rains cleared since the start of this month, Manh said. Two weeks of rains in November delayed the picking of berries and hampered efforts to dry the crop. Buon Ma Thuot, capital of Dak Lak, got no rainfall between Dec. 11 and Dec. 21, and may not receive showers in the next 10 days, the provincial weather bureau said yesterday.

“Harvesting is almost finished and the Lunar Tet Holiday is coming next month, prompting farmers to sell more,” Manh said.

Vietnam’s Tet Lunar New Year festival begins Jan. 26.

Production may total 17 million bags, down from a previous estimate of 17.5 million bags to 18 million bags, the Vietnam Coffee and Cocoa Association said earlier this month.

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.

Read more...

Gold Declines as Crude Oil’s Drop Reduces Investors’ Demand

By Jae Hur

Dec. 23 (Bloomberg) -- Gold declined for the third day in four as a drop in oil prices reduced the appeal of the precious metal as a hedge against inflation.

Crude oil extended losses on speculation that the global recession is cutting energy demand faster than producers can reduce output. Gold, used by some investors as a store of value against declining assets and currencies, dropped even as the weakening U.S. economy depressed the dollar against the euro.

“Falling oil prices will keep gold gains at bay and should drag gold prices lower,” said Mark Pervan, senior commodity strategist at Australia and New Zealand Banking Group Ltd. There’s “a set of conflicting factors there. A weak U.S. dollar is helping gold, while a weak oil price is not helping.”

Bullion for immediate delivery declined as much as 0.7 percent to $842 an ounce, and traded at $843.47 at 1:25 p.m. in Singapore. It rose 1.2 percent yesterday. Silver for immediate delivery fell 0.4 percent to $10.80 an ounce.

“Gold appears to be treading water ahead of the Christmas holiday period,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

Gold has gained almost 10 percent this month as the dollar fell and metals, including copper and aluminum weakened. The precious metal reached a record $1,032.70 an ounce in March.

February-delivery gold lost 0.4 percent to $843.90 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Crude for February fell as much as 2.2 percent to $39.05 barrel in New York after plunging 5.8 percent yesterday. The dollar traded at $1.3979 per euro from $1.3944 late in New York yesterday.

Immediate-delivery platinum rose 0.4 percent to $854 an ounce at 12:56 p.m. Singapore time. Markets in Japan are closed today for a public holiday.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net

Read more...

Shanghai Zinc Rises to 3-Week High on Speculation State May Buy

By Li Xiaowei

Dec. 23 (Bloomberg) -- Zinc futures rose to the highest in more than three weeks on speculation that Chinese government may buy the metal soon to boost strategic reserves and to help producers amid economic slowdown.

The State Reserve Bureau may buy zinc from producers after the New Year holiday ends Jan. 4, Sherry Zhu, an analyst at CBI China Co., said without providing details. China is the largest producer and consumer of the metal used to galvanize steel.

China reiterated last week it would increase reserves of “important” raw materials at a conference by the Ministry of Industry and Information Technology. Officials from the state- controlled SRB, which holds reserves of commodities to regulate supply, were not immediately available for comment.

“Zinc is bolstered by a tightness in domestic ore supply, which has narrowed because of low prices and chilly winter,” said Wang Zhouyi, an analyst at China International Futures Co.

Zinc for March delivery rose as much as 0.8 percent to 9,780 yuan ($1,427) a ton. It jumped the daily limit yesterday to 9,785 yuan, the most since Dec. 27.

The metal dropped 1.3 percent to $1,165 on the London Metal Exchange at 10:38 a.m. Shanghai time, bring this year’s plunge to 51 percent.

Among other LME-traded metals, copper rose 0.4 percent to $2,970 a ton and aluminum slid 0.2 percent to $1,555.

To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net

Read more...

Crude Oil Falls as Asian Demand Declines on Deepening Recession

By Christian Schmollinger

Dec. 23 (Bloomberg) -- Crude oil fell for a second day in New York on speculation that a deepening global recession is reducing fuel demand in Asia, undermining OPEC's efforts to boost prices by cutting production.

Japan's crude imports and South Korean fuel demand dropped in November, and slumping Chinese growth prompted the nation's central bank yesterday to cut rates for the fifth time in three months. The Organization of Petroleum Exporting Countries is ``determined'' to stabilize oil markets, Saudi Arabian Oil Minister Ali al-Naimi said Dec. 21.

``Even if OPEC cuts, and it still stays bearish on demand, it will require further cutbacks in supply,'' said Mark Pervan at Australia & New Zealand Banking Group Ltd. in Melbourne. ``We've still got more weak demand data to come out and that will put more downside risk for price.''

Crude oil for February delivery fell as much as 86 cents, or 2.2 percent, to $39.05 a barrel. It was at $39.47 a barrel at 3:25 p.m. Singapore time on the New York Mercantile Exchange. Prices have dropped 73 percent from a record $147.27 on July 11.

January futures, which expired last week, plunged 6.5 percent to $33.87 a barrel on Dec. 19, the lowest settlement for a contract closest to expiration since Feb. 10, 2004. Oil has declined 27 percent in December and dropped 59 percent this year, snapping six years of gains.

U.S. supplies climbed in 11 of the past 12 weekly reports from the Energy Department as consumption dropped. Inventories probably rose 900,000 barrels last week, according to the median of analyst responses in a Bloomberg News survey. The department is scheduled to release its next report at 10:35 a.m. tomorrow in Washington.

Carmakers Cut

Carmakers are slashing output as auto sales slump. Toyota Motor Corp., the world's second-largest automaker, yesterday forecast its first operating loss in 71 years as demand for vehicles plummeted. Hyundai Motor Co., South Korea's largest automaker, and affiliate Kia Motors Corp. yesterday said they will reduce output in December.

``The problems that Toyota is having underlines the problems we're seeing in the world today,'' said Jonathan Kornafel, director for Asia at Hudson Capital Energy in Singapore. ``The drop in consumer spending is not just being felt in the U.S., it's being felt everywhere. And that's a big part of why crude oil is trading at $40.''

Mitsubishi Motors Corp. said today it will scrap night shifts at two domestic factories to reduce planned output by 110,000 vehicles in the year ending March because of tumbling sales in Japan, the U.S. and Europe.

Asian Imports

Japan's crude-oil imports plunged 17 percent to 3.71 million barrels a day last month, the country's finance ministry said yesterday. South Korea's oil demand declined 12 percent in November from a year earlier, Korea National Oil Corp. said.

Japan is the world's biggest oil importer after the U.S. and Germany, according to the U.S. Energy Department. South Korea is the fifth-biggest importer.

China lowered borrowing costs for the fifth time in three months yesterday after trade growth collapsed because of recessions in the U.S., Europe and Japan. The one-year lending rate will drop by 0.27 percentage point to 5.31 percent and the deposit rate by the same amount to 2.25 percent, the People's Bank of China said on its Web site.

Brent crude oil for February settlement fell 72 cents, or 1.7 percent, to $40.73 a barrel on London's ICE Futures Europe exchange. It was at $41.03 a barrel at 3:25 p.m. Singapore time. The contract yesterday declined $2.55, or 5.8 percent, to settle at $41.45 a barrel.

To contact the reporter on this story: Christian Schmollinger in Singapore at Christian.s@bloomberg.net

Read more...

Taiwan Stocks Post Worst Two-Day Drop in Two Months on Economy

By Chen Shiyin

Dec. 23 (Bloomberg) -- Taiwan’s stocks fell, sending the key index to its biggest two-day drop in almost two months, on concern the global economic recession is hurting demand for exports. The island’s dollar also declined for a third day.

Hon Hai Precision Industry Co., the world’s largest contract electronics manufacturer, slumped 3.9 percent, leading losses before the release of government reports today that may show exports and industrial production fell in November. The currency slipped as much as 0.7 percent, after declining by the most in seven years yesterday when a report showed that the island’s jobless rate rose to the highest in more than four years.

“The economic data is evidence that Taiwan’s economy will face a tougher time in the fourth quarter of 2008 and the first quarter of next year before we see a recovery,” said Michael On, president of Beyond Asset Management Co. in Taipei. “Demand is weak and manufacturers are undergoing inventory adjustment, so that’s hurting stocks right now.”

The Taiex index dropped 129.68, or 2.9 percent, to 4,405.86, the lowest close since Dec. 5. The benchmark measure, which yesterday slumped 3.4 percent, rounded off its largest consecutive retreat the two days ended Oct. 27.

Taiwan’s dollar traded at NT$33.033 as of 11:58 a.m. local time, after falling to NT$33.155, the lowest level in the past week, according to Taipei Forex Inc. The currency weakened 1.2 percent yesterday, the steepest drop since May 28, 2001.

Hon Hai retreated 3.9 percent to NT$61.50, its lowest close since Dec. 5. The shares slumped 6.6 percent yesterday after the company said it’s cutting jobs globally amid the recession. AU Optronics Corp., Taiwan’s largest liquid-crystal display maker, dropped 5.2 percent to NT$21.80, the largest loss since Nov. 17.

Export Orders

Stocks fell before the release of November export orders and industrial production at 4 p.m. local time. The indicator of actual shipments over the next one to three months probably fell 13.6 percent from a year earlier, the biggest slide in seven years, according to a Bloomberg survey.

Industrial production fell 15.7 percent in November from a year earlier, also the biggest drop since September 2001, a separate survey showed.

Powerchip Semiconductor Corp., a maker of computer-memory chips, declined 6.9 percent to NT$3.67 after the Economic Daily News reported the company applied to the government for a bank- loan rollover and financial aid.

Taiwan’s Taiex has dropped 48 percent this year, poised for its worst year since 1990, as the government on Nov. 20 forecast the economy will enter its first recession in seven years. The measure is valued at about 8.9 times reported earnings, down from 20 times at the start of 2008, Bloomberg data shows.

‘Offload Risky Assets’

The economic slump prompted Taiwan’s central bank to slash its benchmark interest rate by the most in 26 years earlier this month. The island has cut borrowing costs five times in two months, joining central banks from the U.S. to China in lowering rates.

“The central bank is taking the opportunity of thin trading activity this week to push the currency to a more competitive level for exports,” said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. “The market thinks that the worst is not over yet. The natural reaction is to offload risky assets.”

A Statistics Bureau report yesterday said the seasonally adjusted jobless rate climbed to 4.62 percent in November, the highest since February 2004.

Cathay Financial Holding Co., the island’s largest listed financial-services company, fell 4 percent to NT$33.80, the largest loss since Dec. 12. Chinatrust Financial Holding Co., Taiwan’s fourth-largest financial-services company, dropped 3.7 percent to NT$12.90.

To contact the reporter on this story: Chen Shiyin in Singapore at schen37@bloomberg.net.

Read more...

Hong Kong Stocks Decline to Two-Week Low; Shaw Brothers Soars

By Hanny Wan

Dec. 23 (Bloomberg) -- Hong Kong stocks fell, dragging the benchmark index to the lowest level in more than two weeks, on concern a smaller-than-expected interest-rate cut in China will fail to prevent the nation’s economy from slowing.

Aluminum Corp. of China Ltd., the nation’s No. 1 producer of the metal, tumbled 9.3 percent. Cathay Pacific Airways Ltd. declined 2.2 percent after the South China Morning Post said the airline posted lower sales. Shaw Brothers (Hong Kong) Ltd., which controls the city’s largest broadcaster, rallied 55 percent after saying its largest stockholder offered to buy all the shares it doesn’t already own.

“It’s relative -- compared with the rate cuts in the U.S. and Japan, China’s rate cut is less than expected,” said Desmond Tjiang, chief investment officer for Asia excluding Japan at Fortis Investments, which oversees $6.5 billion. “It probably changes views for the very short-term investors.”

The Hang Seng Index fell 460.21, or 3.2 percent, to 14,162.27 as of 2:36 p.m. local time, set for its lowest close since Dec. 5. The measure has lost 49 percent in 2008, on course for its worst annual performance since 1974, as the global financial crisis dragged economies worldwide into recessions.

The Hang Seng China Enterprises Index, which tracks so- called H shares of mainland companies, retreated 4.7 percent to 7,757.23.

Slowing growth has prompted central banks worldwide to lower borrowing costs. The Bank of Japan reduced its benchmark rate to 0.1 percent from 0.3 percent on Dec. 19, three days after the U.S. Federal Reserve lowered its main interest rate to as low as zero. Hungary’s central bank cut its key interest rate by half a percentage point to 10 percent yesterday.

Global Rate Cuts

The People’s Bank of China cut interest rates for the fifth time in three months after trade growth collapsed because of recessions in the U.S., Europe and Japan. The one-year lending rate will drop by 0.27 percentage point and the deposit rate by the same amount from today. Citigroup Inc. and HSBC Holdings Plc had anticipated a 54-basis-point reduction.

“Given the slowdown in exports and manufacturing, China will cut rates aggressively going forward,” Tjiang said. He favors property and construction stocks in China, and the less- than-expected rate cut hasn’t changed his view on mainland developers because he expects “more plans from the government to support the sector,” he said.

Chalco, as Aluminum Corp. is known, tumbled 9.3 percent to HK$4.11, the sharpest drop on the Hang Seng Index. China Overseas Land & Investment Ltd., a developer controlled by China’s construction ministry, declined 4.9 percent to HK$10.64.

Property Developers

Hong Kong’s developers also fell after the Hong Kong Economic Times said Cheung Kong (Holdings) Ltd. expects property sales to slow to more than HK$10 billion ($1.3 billion) next year, half of the 2008 figure. The report cited Justin Chiu, an executive director at the company.

Cheung Kong, the city’s No. 1 developer by market value, declined 6.9 percent to HK$71.70. Sino Land Co., a Hong Kong- based developer, plunged 6.7 percent to HK$7.77.

Cathay Pacific, Hong Kong’s largest carrier, fell 2.2 percent to HK$8.30. Cathay Pacific’s first- and business-class sales plunged 26 percent in week ended Dec. 13 as a global recession damps demand, the South China Morning Post said, citing comments made by the airline’s Chief Executive Officer Tony Tyler in an internal e-mail to staff.

Shaw Brothers soared 55 percent to HK$12.60. The stock resumed trading today after a six-day suspension. A trust controlled by Shaw Chairman Sir Run Run Shaw, now holding 74.9 percent of Shaw Brothers stock, will offer HK$13.35 in cash for each remaining share, according to a statement yesterday.

All but three stocks on the 42-member Hang Seng Index declined. December futures slipped 3.9 percent to 14,123.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Oil producers: Cnooc Ltd. (883 HK), China’s biggest offshore oil producer, slipped 35 cents, or 5 percent, to HK$6.65. PetroChina Co. (857 HK), the nation’s largest oil producer, declined 35 cents, or 5.1 percent, to HK$6.46.

Crude oil futures dropped 5.8 percent to $39.91 a barrel in New York yesterday. The contract was recently at $39.63 in after-hours trading.

China Life Insurance Co. (2628 HK), the nation’s biggest insurer, dropped 90 cents, or 3.8 percent, to HK$22.60. American International Group Inc. may list its American International Assurance unit in Hong Kong after selling a minority stake to strategic investors, Ming Pao Daily News reported, citing an unidentified person. China Life is keen to buy shares in AIA to expand its earnings base outside its home nation to more than half of Asia, Ming Pao said.

ESun Holdings Ltd. (571 HK) surged 8 cents, or 12 percent, to 75 Hong Kong cents. The stock resumed trading today after being suspended yesterday. The company, building a studio and casino complex in Macau, said yesterday it has been restrained by a court order from a planned sale of shares and warrants to fund its media and entertainment businesses.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

Read more...

China’s Stocks Drop Most in Five Weeks as Rate Cut Disappoints

By Zhang Shidong and Fabio Alves

Dec. 23 (Bloomberg) -- China’s stocks slid by the most in five weeks, led by developers and energy companies on concern the latest interest-rate cut wasn’t deep enough to keep the world’s fourth-largest economy from weakening.

China Vanke Co., the nation’s biggest publicly traded property developer, lost 4.9 percent and Poly Real Estate Group Co., the second largest, retreated 6.4 percent. China Petroleum & Chemical Corp., the country’s second-biggest oil company, dropped 4.3 percent and China Shenhua Energy Co., the nation’s largest coal producer, fell 4.7 percent on concern a deepening recession will reduce the demand for energy.

The CSI 300 Index, the benchmark gauge of companies traded in Shanghai and Shenzhen, sank 98.59, or 4.9 percent, to 1,918.95 at the close, the biggest drop since Nov. 18. Only 5 stocks rose on the 300-member measure.

“If the economy was in a good shape, there wouldn’t be so many rate cuts, the effect of which is subsiding now,” said Yi Yangfang, a fund manager at Guangzhou-based GF Fund Management Co., which oversees the equivalent of $12 billion. “The market is worried that first-quarter earnings could be still ugly.”

China lowered borrowing costs for the fifth time in three months yesterday after trade growth collapsed because of recessions in the U.S., Europe and Japan. The one-year lending rate will drop by 0.27 percentage point to 5.31 percent and the deposit rate by the same amount to 2.25 percent, the People’s Bank of China said yesterday after the market closed.

To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net; Fabio Alves in New York at falves3@bloomberg.net.

Read more...

Asian Stocks Fall as Global Recession Deepens; Hyundai Retreats

By Sarah Jones and Shani Raja

Dec. 23 (Bloomberg) -- Asian stocks fell for a third day after Toyota Motor Corp. forecast a loss and China cut interest rates by less than some economists expected, fanning concerns the global recession will deepen.

Hyundai Motor Co. led automakers lower, falling 10 percent in Seoul as Toyota predicted its first operating loss in 71 years. Bendigo & Adelaide Bank Ltd. lost 5.4 percent after selling shares at a discount to boost capital. PetroChina Co. paced declines among energy producers as crude fell amid concern China’s rate cut will fail to boost demand.

“Investors are cashing in,” said Lim Chang Gue, who helps manage about $42 billion at Samsung Investment Trust Management Co. in Seoul. “We’re continuing to witness negative news flow, all of which is confirming that global economic activity is tapering off quickly.”

The MSCI Asia Pacific excluding Japan Index dropped 2.8 percent to 238.03 at 3:46 p.m. in Hong Kong. Japan’s markets are closed for a public holiday. China’s CSI 300 Index declined 4.9 percent, while South Korea’s Kospi Index fell 3 percent. All other markets retreated except the Philippines and Thailand.

Trading was slower than average with Japan closed two days before Christmas. Stock worth A$2.15 billion ($1.5 billion) traded in Australia today, the lowest since New Year’s eve.

HFA Holdings Ltd., an Australian hedge-fund manager, lost more than half its stock value after halting fund redemptions. Shaw Brothers (Hong Kong) Ltd., controller of the city’s largest broadcaster, rose by a record after its largest stockholder offered to buy the company. New Zealand’s Fletcher Building Ltd. fell after the country’s economy contracted for a third quarter.

Raising Capital

The broader MSCI Asia Pacific Index, which includes Japan, has lost 44 percent in 2008, the worst annual performance in its two-decade history, as the credit crisis dragged the world’s biggest economies into recessions.

Global growth will be 2.2 percent next year, down from 3.7 percent this year, the International Monetary Fund said on Nov. 6. The IMF has said that a growth rate of 3 percent or less is “equivalent to a global recession.”

U.S. stocks fell yesterday, dragging the Standard & Poor’s 500 Index down by 1.8 percent, amid signs of declining earnings. Goldman Sachs Group Inc. said the recession will hurt profit at Monsanto Co., the world’s largest producer of seeds.

“Everyone’s still pretty nervous,” said Chris Hall, who helps oversee about $3.7 billion at Adelaide, South Australia- based Argo Investments. “The big concern for Asia is exports. If your major export markets are in recession, it’s very difficult to sustain economic growth on internal demand alone.”

Debt Downgrade

The decline on the MSCI Asia Pacific Index this year has taken the average valuation of its constituents to 13 times estimated earnings, about a quarter below the level at the start of this year. The S&P 500 is at 12 times profit, while the Dow Jones Stoxx 600 Index, the benchmark gauge for European equities, is at 8.9 times.

Toyota’s American depositary receipts slumped 5.4 percent in New York yesterday after the company said it will post a 150 billion yen ($1.7 billion) loss in the year through March. It previously forecast profit of 600 billion yen. Bridgestone Corp., the world’s largest tiremaker by sales, also slashed its earnings forecast yesterday.

Hyundai Motor, South Korea’s largest automaker, plunged 10 percent to 41,000 won. Kia Motors Corp. dropped 15 percent to 6,710 won. Sales this year will reach about 4.2 million vehicles, missing an earlier projection of 4.8 million, the automakers said yesterday.

Also in Seoul, Hynix Semiconductor Inc., the world’s second-largest computer-memory chipmaker, tumbled 6.2 percent to 7,700 won after its debt rating was cut by Moody’s Investors Service, which cited a “challenging” operating environment.

China’s Rate Cut

Bendigo & Adelaide Bank declined 5.4 percent to A$11.11 after the Australian regional lender sold A$175 million ($120 million) of shares at A$10 apiece to boost capital. The price is a 15 percent discount to yesterday’s close of $11.74.

HFA, which has $5.8 billion in assets, plunged by a record 55 percent to 4.3 Australian cents. The company halted redemptions from three of its funds because of “deteriorating liquidity.”

The financial crisis, the worst since the Great Depression, has caused institutions worldwide to declare $1 trillion of writedowns and losses from credit-related investments.

PetroChina, the nation’s largest oil producer, slumped 4.6 percent to HK$6.50. Crude futures fell 0.6 percent in New York, extending yesterday’s 5.8 percent slump. Woodside Petroleum Ltd., which last year made more than 80 percent of its sales in Asia, slid 1.8 percent to A$32.16.

Shaw Brothers

Chinese stocks also dropped amid concern the central bank’s interest-rate cut will fail to buttress the world’s fourth- largest economy. The People’s Bank of China lowered the one-year lending rate by 0.27 percentage point, less than the 54 basis points expected by Citigroup Inc. and HSBC Holdings Plc.

Citic Securities Co., the nation’s biggest brokerage by market value, sank 7.4 percent to 19.46 yuan in Shanghai. China Mobile Ltd., the world’s biggest phone company by market value, lost 2.7 percent to HK$74.90 in Hong Kong.

“This rate cut is an indication that economic activity in China is slowing much faster than anticipated,” said Roberto Lampl, who manages $4 billion in emerging-market stocks, including Chinese shares, at ING Investment Management in The Hague. “Chinese authorities are using monetary policy to reignite demand because of this weaker-than-expected economic environment.”

Shaw Brothers climbed 56 percent to HK$12.70. A trust controlled by Chairman Sir Run Run Shaw, now holding 74.9 percent of Shaw Brothers stock, will offer HK$13.35 in cash for each remaining share, according to a company filing to Hong Kong’s stock exchange yesterday.

Fletcher Building, New Zealand’s largest building materials supplier, fell 2.1 percent to NZ$5.97. Gross domestic product declined 0.4 percent in the three months ended Sept. 30 from the second quarter, when it fell 0.2 percent, Statistics New Zealand said today.

To contact the reporters for this story: Sarah Jones in Sydney at sjones35@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

Read more...

Premiere to Sell EU450 Million of New Shares in Financing Deal

By Angela Cullen

Dec. 23 (Bloomberg) -- Premiere AG, Germany’s biggest pay-television company, renegotiated debt facilities of 525 million euros ($734 million) with banks on condition that it sells 450 million euros of new shares in rights offers backed by shareholder News Corp.

Under the terms of the agreement, News Corp. would be exempted from German rules requiring a company to make a mandatory takeover offer if it reaches or exceeds a threshold of 30 percent, Premiere said in a statement to the stock exchange today.

The German company has reported four consecutive quarterly losses as costs increased and sales were hurt by hackers gaining access to its broadcasts. A new encryption system that restricts its programs to paying subscribers increased hardware costs. Premiere is predicting a loss this year and sales of more than 1 billion euros.

To contact the reporter on this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net

Read more...

European Stock Futures Retreat; Air Liquide, Rio Tinto May Drop

By Adria Cimino

Dec. 23 (Bloomberg) -- European stock-index futures fell, following declines in Asia, as a weaker dollar damped the earnings outlook for exporters and lower oil and metals prices weighed on commodity producers.

Air Liquide SA and Royal Philips Electronics NV, which make more than 20 percent of sales in North America, may drop. U.S.- traded securities of StatoilHydro ASA, Norway’s largest oil and natural-gas producer, slipped with crude prices. Rio Tinto Group, the world’s third-biggest mining company, retreated in Asia.

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 0.8 percent to 2,394 as of 7:35 a.m. in London. The U.K.’s FTSE 100 Index may decrease 20, according to Cantor Index, a betting firm.

“What’s weighing on European stocks is the strong gains in the euro,” said Jacques Porta, a fund manager at Ofi Patrimoine in Paris, which oversees about $615 million. “That explains why the market can’t take off.”

U.S. stocks fell yesterday, erasing last week’s advance, as a deteriorating outlook for corporate earnings and real estate offset expectations that government efforts to revive the economy will succeed.

Standard & Poor’s 500 Index futures expiring in March added less than 0.1 percent today, while the MSCI Asia Pacific excluding Japan Index sank 2.8 percent.

The Stoxx 600 Index has slumped 47 percent this year, the worst annual performance on record, after credit-related losses and writedowns at financial firms worldwide topped $1 trillion and the U.S., Europe and Japan entered the first simultaneous recessions since World War II.

Earnings Forecasts

Analysts have slashed their earnings forecasts, predicting a 16 percent drop in full-year profits at Stoxx 600 companies, compared with 11 percent growth estimated at the start of the year. Earnings in 2009 are expected to rise 0.1 percent, according to data compiled by Bloomberg.

The dollar fell for a second day against the euro before a U.S. report that may show sales of new homes declined to the lowest level in more than 17 years in November. The U.S. currency traded as low as $1.4018 versus the euro.

American depositary receipts of Air Liquide, the world’s biggest maker of industrial gases, lost 2 percent from the stock’s close in France. ADRs of Philips, Europe’s largest maker of consumer electronics, retreated 0.5 percent.

ADRs of Statoil lost 1.4 percent. Crude oil fell for a second day, with the contract for February delivery declining as much as 2.2 percent to $39.05 a barrel in electronic trading on the New York Mercantile Exchange.

Metals Prices

Rio Tinto sank 5.2 percent in Australia. Gold dropped in Singapore, while copper, lead and nickel fell in London.

UniCredit SpA may move after Italy’s biggest bank by assets was downgraded to “hold” from “buy” at Deutsche Bank AG, saying that “the macro picture is sharply deteriorating, prompting a deep cut in estimates.”

Associated British Foods Plc, owner of British Sugar, was reduced to “neutral” from “buy” at Goldman Sachs Group Inc.

SSAB Svenskt Staal AB might be active as the world’s largest supplier of high-tensile steel was lowered to “hold” from “buy” at Deutsche Bank.

“The prospect of recessions in the U.S. and Europe as well as a significant slowdown in emerging markets will lead to cuts in global steel prices and volumes,” the brokerage wrote in a note to clients.

Premiere AG may move. Germany’s biggest pay-television company renegotiated debt facilities of 525 million euros ($734 million) with banks on condition that it sells 450 million euros of new shares in rights offers backed by shareholder News Corp.

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

Read more...

GM Investors Bet U.S. Lifeline Isn’t Enough to Keep It Afloat

By Greg Bensinger

Dec. 23 (Bloomberg) -- General Motors Corp. Chief Executive Officer Rick Wagoner said the biggest U.S. automaker got “what we asked for” with $9.4 billion in U.S. loans over the next 24 days. Investors bet that it’s not enough.

GM tumbled the most in more than a month yesterday in New York trading, while credit-default swaps on the company’s bonds jumped 2 percentage points in a sign of increasing concern that the Bush administration’s bailout may end in a default.

The stock-price slide all but erased the 23 percent gain on Dec. 19, when Detroit-based GM received a federal aid package to help it stay in business until March 31 while crafting a plan to shut plants, shed brands and reduce debt.

“It’s almost impossible for a management that invested in the assets, that hired the people, that put forth the strategy, to change so dramatically in such a short period of time,” Edward Altman, a New York University finance professor who created the Z-score formula to measure bankruptcy risk, said in a Bloomberg Television interview.

There is a “high” likelihood of a GM bankruptcy, Standard & Poor’s said yesterday in reducing the rating on the company’s unsecured debt to C, or 11 grades below investment quality. Robert Schulz, an S&P analyst in New York, said creditors can expect “negligible recovery” should the automaker default.

GM has slashed output and won union concessions since saying Nov. 7 it may run out of operating cash by year’s end. The automaker said it would need as much as $18 billion in aid or face a possible bankruptcy.

Aid Timetable

President George W. Bush promised $4 billion by Dec. 29 and an additional $5.4 billion by Jan. 16, enough for GM to survive at least until President-elect Barack Obama takes office on Jan. 20. Should Congress release more funds from the Troubled Asset Relief Program, GM will receive $4 billion more by Feb. 17.

The loans are “going to get us through this rocky period,” Wagoner told Detroit radio station WJR yesterday. “The funding that we received is what we asked for.”

He spoke before GM fell 97 cents, or 22 percent, to $3.52, the biggest decline since Nov. 10. The drop was the most among the 30 stocks on the Dow Jones Industrial Average.

Shareholders may be “wiped out” by the restructuring needed for the bailout, analyst Christopher Ceraso of Credit Suisse AG said yesterday. He cut his rating to “underperform” from “neutral” and slashed his target price in half to $1.

Credit-Default Swaps

The upfront price on GM credit-default swaps rose 2 percentage points to 81 percent, according to CMA Datavision. That’s in addition to 5 percent a year, meaning it would cost $8.1 million initially and $500,000 a year to protect $10 million of GM bonds for five years.

GM’s 7.7 percent note due April 2016 lost 2.1 cents to 16 cents on the dollar, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 56 percent.

Wagoner said last week that having secured the federal loans, GM’s biggest challenges would be working with debt holders on debt-for-equity exchanges and negotiating cost-saving agreements with unions.

He told WJR yesterday that he had “done a significant amount of thinking” about a new plan to keep the U.S. funds, though “it’s fair to say a lot of that work will start up in earnest at the beginning of next year.”

United Auto Workers spokesman Roger Kerson didn’t return calls yesterday seeking comment. The Canadian and Ontario governments also pledged GM C$3 billion ($2.46 billion) in aid last week.

Sales Slump

GM is struggling with a 22 percent plunge in U.S. sales this year, worse than the 16 percent industrywide slide, and is considering paring its Pontiac lineup to one model from six and is trying to sell its Saab and Hummer franchises.

“Every aspect of the business is being examined and re- examined and re-examined,” Wagoner said in the radio interview. “If we keep doing that, we can find ways to squeak out some more costs that aren’t essential for customers and do things differently.”

“It’s not without some pain,” he said, without providing details.

That’s being optimistic, said Credit Suisse’s Ceraso, who is based in New York. The “best-case scenario” may be the “complete or near-complete elimination” of GM’s equity value, assuming that bondholders and the UAW agree to concessions under the bailout plan, he said.

Should those parties not reach an accord, “GM may still end up in bankruptcy court,” he said.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Read more...