German Stocks Fall for Sixth Day; Banks, Siemens, Henkel Fall

By Stefanie Haxel

Jan. 14 (Bloomberg) -- German stocks fell for a sixth day, led by financial shares after Deutsche Bank AG reported a loss in the fourth-quarter.

Deutsche Bank, Germany’s largest bank, and Commerzbank AG, both plunged more than 7 percent. Siemens AG lost 5.8 percent after Europe’s largest engineering company said first-quarter orders dropped “significantly” and Merrill Lynch & Co. downgraded the stock to “neutral.”

The benchmark DAX Index slipped 1.7 percent to 4,556.61 as of 12:54 p.m. in Frankfurt. DAX futures expiring in March lost 1.8 percent. The broader HDAX also fell 1.8 percent.

“Investors are speculating losses at banks may turn out to be bigger than previously expected,” said Olaf Kayser, a Mainz-based analyst at Landesbank Baden- Wuerttemberg.

Deutsche Bank sank 8.8 percent to 22.13 euros. The company reported a loss of about 4.8 billion euros in the fourth quarter after debt and equity trading suffered amid the worst financial crisis since the Great Depression.

Commerzbank, Germany’s second-largest bank, dropped 7.5 percent to 3.99 euros. Deutsche Postbank AG, Germany’s biggest consumer bank by clients, lost 7.7 percent to 13.25 euros.

Siemens lost 5.8 percent to 45.32 euros. Orders through December decreased from a year earlier to about 22.2 billion euros after manufacturers ran down stocks of automation equipment and U.S. hospitals postponed purchases of scanners. Merrill Lynch cut its recommendation to “neutral” from “buy.”

Irish Denial

Irish Prime Minister Brian Cowen may call in the IMF for help, should the economic outlook continue to worsen, broadcaster RTE said. The comments were denied in a statement by the Finance Ministry. Ireland’s economy, the first in the euro area to fall into recession last year, stagnated in the third quarter as construction, investment and consumer spending all slumped.

“Ireland, like Spain and the U.K., is suffering from the burst of its housing-price bubble and is therefore going through a longer and deeper economic downturn compared to the European average,” said Stefan Raetzer, who manages about 1 billion euros at Allianz Global Investors in Frankfurt. “That the country may call in the IMF exacerbates the situation, that wasn’t expected.”

Henkel AG & Co. KGaA declined 3.2 percent to 21.69 euros, a four-week low. Jefferies International Ltd. gave the maker of Loctite glue and Persil detergent an “underperform” recommendation in new coverage.

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

Arcandor AG (ARO GY) fell 5 percent to 2.26 euros. The retailer that controls tour operator Thomas Cook Group Plc said first-quarter sales were little changed in its mail- order and department stores units.

Deutsche Euroshop AG (DEQ GY) climbed 3.3 percent to 22.46 euros, snapping a five-day retreat. Germany’s biggest investor in shopping centers was upgraded to “buy” from “hold” at Equinet AG.

GEA Group AG (G1A GY) plunged 7.2 percent to 10.05 euros. The engineer whose machines milk a third of the world’s dairy cows reported sales may have missed a target and orders were “marginally below” the year earlier.

Separately, WestLB AG cut its recommendation on the stock to “hold” from “add.”

HeidelbergCement AG (HEI GY) tumbled 11 percent to 29.78 euros. Germany’s largest cement maker, an asset of deceased German billionaire Adolf Merckle, faces pressure to sell assets to pay down debt from an acquisition.

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

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U.K. Stocks Fall for Sixth Day; HSBC Declines on Profit Outlook

By Adam Haigh

Jan. 14 (Bloomberg) -- U.K. stocks fell for a sixth day, the longest losing streak in more than two years, on concern HSBC Holdings Plc may need to raise capital and cut its dividend.

HSBC Holdings Plc lost 8.2 percent after Morgan Stanley analysts predicted the U.K.’s largest bank may have to raise as much as $30 billion and halve its dividend as earnings drop. Man Group Plc extended a six-day slide, slumping 6.3 percent, as the biggest publicly traded hedge-fund manager said assets under management fell 21 percent in the last three months of 2008.

“HSBC is the real drag on the market today and it looks like people are moving their positions away from the banking sector as worries about profits persist,” Joshua Raymond, Market Strategist at City Index in London, said in a phone interview. The Man Group results “make you think confidence just still isn’t there.”

The FTSE 100 lost 90.48, or 2.1 percent, to 4,308.67 as of 12:10 p.m. in London. The gauge erased its 2009 gains this week, after tumbling 31 percent in 2008, as concern the economic recession will eat into earnings gained pace.

The FTSE All-Share Index dropped 2.1 percent today and Ireland’s ISEQ Index slid 2 percent.

HSBC slid 8.2 percent to 587.5 pence. The bank’s profit is likely to fall “sharply” this year and won’t recover until 2011 at the earliest, analysts including Michael Helsby and Anil Agarwal wrote in a note yesterday. A stock sale would be the first for HSBC since the financial crisis started in 2007, forcing rival banks and brokers worldwide to raise more than $800 billion.

Great Depression

Stocks on the FTSE 100 extended earlier losses after Germany’s Deutsche Bank AG reported a 4.8 billion euros ($6.3 billion) fourth quarter, a sign the worst financial crisis since the Great Depression is deepening.

Gareth Hewett, an HSBC spokesman in Hong Kong, declined to comment.

Separately, lenders declined across Europe after Deutsche Bank AG, Germany’s biggest bank, reported a loss of about 4.8 billion euros ($6.3 billion) in the fourth quarter after the worst financial crisis since the Great Depression pummeled its debt and equity trading results.

Man Group fell 6.3 percent to 211 pence after saying it had $53.3 billion under management as of Dec. 31, down from $67.6 billion at the end of September and $61 billion at the beginning of November. The stock has fallen 27 percent in the past six days as brokerages from UBS AG to Citigroup Inc. recommended clients sell the shares.

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

Amec Plc (AMEC LN) gained 24 pence, or 4.5 percent, to 561.5. The service provider to energy producers from the Arctic to Australia said full-year pretax profit is likely to exceed 200 million pounds ($292 million).

FirstGroup Plc (FGP LN) tumbled 50.75 pence, or 12 percent, to 370.5 after Britain’s biggest train operator said strong growth rates in the rail industry are being affected by the weakening economy.

JJB Sports Plc (JJB LN) tumbled 2.25 pence, or 16 percent, to 11.5 after saying sales at stores open a year for the five weeks to Jan. 11 declined 6.8 percent, and said it’s expecting a pretax loss of as much as 10 million pounds for the fiscal year ended Jan. 29.

Punch Taverns Plc (PUB LN) slid 11 pence, or 19 percent, to 46.75. The U.K.’s largest pub owner said sales declined as Britons cut back on nights out at bars amid a deteriorating economic outlook.

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

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European Stocks, U.S. Futures Decline; Deutsche Bank, HSBC Drop

By Sarah Jones

Jan. 14 (Bloomberg) -- European stocks retreated for a sixth day and U.S. futures dropped as Deutsche Bank AG reported a fourth-quarter loss and investors speculated financial firms may need to raise more capital.

Deutsche Bank sank more than 10 percent after the German lender said it had a loss of 4.8 billion euros ($6.3 billion). HSBC Holdings Plc tumbled 7.9 percent as Morgan Stanley said Europe’s largest bank by market value may have to raise as much as $30 billion and halve its dividend. Citigroup Inc. fell 2.2 percent in German trading.

The Dow Jones Stoxx 600 Index dropped 1.7 percent to 198.21 at 12:44 p.m. in London, erasing an earlier gain of as much as 0.4 percent. A measure of bank shares slid 5.5 percent, the steepest decline in more than a month.

“It’s like having teeth pulled,” said David Hussey, London-based head of European equities at MFC Global Investment Management, which has about $220 billion in global assets. “There is constant bad news on the screens. We had the first wave of subprime writedowns at the banks and now we are seeing real economy writedowns.”

Europe’s Stoxx 600 has lost 6.6 percent in the past six days as companies from Intel Corp. to Alcoa Inc. and Wal-Mart Stores Inc. spurred concern the profit outlook is worsening and lower commodity prices dragged down oil and metals producers.

The measure is down 45 percent since the beginning of last year as credit losses and writedowns topped $1 trillion in the worst financial crisis since the Great Depression and the U.S., Japan and Europe fell into the first simultaneous recessions since World War II.

National Markets

National benchmark indexes declined in all 18 western European markets except Belgium. Germany’s DAX retreated 1.8 percent as Commerzbank AG tumbled more than 9 percent. France’s CAC 40 lost 1.8 percent. U.K.’s FTSE 100 dropped 2.1 percent as Anglo American Plc led mining shares lower.

Standard & Poor’s 500 Index expiring in March slipped 0.9 percent, while the MSCI Asia Pacific Index rose 1 percent.

Deutsche Bank sank 10 percent to 21.83 euros. The bank had losses after the financial crisis pummeled its debt and equity trading results, according to a preliminary report.

Separately, Deutsche Post AG said it will take a stake of about 8 percent in Deutsche Bank as part of a revised deal to sell its Deutsche Postbank AG unit to Germany’s biggest bank.

Earnings at companies in the Stoxx 600 dropped 16 percent on average in 2008 and will fall 1.2 percent this year, according to forecasts compiled by Bloomberg. Analysts estimate profits at financial firms in the measure slumped 56 percent last year, the worst decline among 10 industries.

Commerzbank, Citigroup

Commerzbank, the country’s second-largest lender, declined 9.2 percent to 3.92 euros. BNP Paribas SA, France’s biggest bank, lost 7 percent to 31.62 euros.

Citigroup fell 2.2 percent to $5.77. Morgan Stanley has bought control of the Smith Barney broker unit of Citigroup for $2.7 billion, two weeks after Bank of America Corp. purchased securities firm Merrill Lynch & Co., widening the shakeout on Wall Street from the worst credit panic in seven decades.

HSBC tumbled 7.9 percent to 589.5 pence. The bank’s profit is likely to fall “sharply” this year and won’t recover until 2011 at the earliest, Morgan Stanley analysts including Michael Helsby and Anil Agarwal wrote in a note yesterday. Gareth Hewett, an HSBC spokesman in Hong Kong, declined to comment.

UniCredit SpA, Italy’s largest bank by assets, decreased 3.2 percent to 1.68 euros while smaller rival Banco Popolare SC dropped 3 percent to 5.33 euros.

‘Underperform’

Exane BNP Paribas downgraded the lenders to “underperform” from “neutral,” citing falling interest rates and rising credit provisions. The brokerage also cut share-price estimates on all Italian banks under coverage by an average 37 percent.

Anglo American led a retreat by mining companies as Citigroup Inc. downgraded the shares and base metal prices declined in London. The world’s fourth-biggest diversified mining company fell 3.4 percent to 1,380 pence. Xstrata Plc, the fourth- largest copper producer, slumped 5.1 percent to 739 pence as Citigroup cut its recommendation for both stocks to “hold” from “buy.”

The brokerage also downgraded shares of Antofagasta Plc and Kazakhmys Plc. Zinc fell in London on speculation that China’s stockpiling of the metal won’t be enough to erode a global oversupply. Copper also dropped.

Siemens AG sank 7.6 percent to 44.45 euros. Merrill Lynch & Co. downgraded the shares to “neutral” from “buy” after Europe’s largest engineering company said first-quarter orders dropped “significantly.”

Man Group

Man Group Plc decreased 6.7 percent to 210.25 pence. The world’s biggest publicly traded hedge-fund manager said assets under management dropped 21 percent to $53.3 billion in the last three months of 2008 as it wrote down two funds linked to Bernard Madoff.

Investors from New York to Sao Paulo have grown less pessimistic about stocks over the next six months on speculation a U.S. stimulus plan and the lowest interest rates on record will revive the global economy, a survey of Bloomberg users from Jan. 5 to Jan. 9 showed. Fewer respondents in the Bloomberg Professional Global Confidence Survey are predicting declines for the S&P 500, Brazil’s Bovespa, the FTSE 100, the CAC 40, the DAX and Spain’s IBEX 35.

Still, concern that stock losses will deepen remains elevated even after falling from record levels. The benchmark index for European options, the VStoxx Index, climbed for a third day, adding 3.1 percent to 47.66. The gauge, which measures the cost of using options as insurance against declines in the Euro Stoxx 50 Index, surged to 87.51 in October, the highest since at least 2001, data compiled by Bloomberg show.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

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Brazil Bovespa Futures Fall on Economy Concern, Metals Retreat

By Alexander Ragir

Jan. 14 (Bloomberg) -- Brazil’s Bovespa stock-index futures fell as metals prices declined and Itau Corretora cut its estimate for economic growth this year.

Bovespa futures fell 217, or 0.5 percent, to 40,050 at 7:11 a.m. New York time.

Itau, the brokerage unit of Brazil’s biggest bank, cut its economic growth forecast to 1.5 percent this year from 2.6 percent, according to a note to clients. The Bloomberg Base Metals 3-Month Price Commodity Index fell 1.9 percent to 115.38.

The Bovespa index gained 5.3 percent this year even as credit losses and writedowns topped $1 trillion in the worst financial crisis since the Great Depression and the U.S., Japan and Europe fell into the first simultaneous recessions since World War II.

Yesterday, Brazilian stocks rose 0.4 percent on speculation the central bank will make bigger cuts in interest rates to boost the economy.

Economists predict the central bank will cut the rate to 13 percent at its next policy meeting on Jan. 21, according to the median of six estimates compiled by Bloomberg. A reduction would be the first since September 2007.

“Forget about decoupling,” wrote Itau’s chief economist Guilherme da Nobrega. “The global crisis is here, and the monetary response will probably come sooner rather than later.”

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

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U.S. Stock-Index Futures Drop; Procter & Gamble, Citigroup Fall

By Adria Cimino

Jan. 14 (Bloomberg) -- U.S. stock-index futures fell on concern a report today will show retail sales declined for a sixth month as shoppers rein in spending amid the worst financial crisis since the Great Depression.

Procter & Gamble Co., the world’s largest maker of consumer products, and General Motors Corp., the biggest U.S. carmaker, retreated. Citigroup Inc. slipped 4.4 percent after Deutsche Bank AG reported a fourth-quarter loss.

Sales at U.S. retailers probably fell in December for a sixth consecutive month as rising unemployment caused consumers to retrench, economists said.

“We’ve seen in the last figures we are on a down move with retail sales,” said Walter Harecker, a fund manager at Constantia Privatbank AG in Vienna, which oversees the equivalent of $13 billion. “Everyone’s looking forward to the data and not very happily.”

Standard & Poor’s 500 Index futures expiring in March slid 1.5 percent to 856 as of 8:15 a.m. in New York. Dow Jones Industrial Average futures lost 1.2 percent to 8,304 and Nasdaq 100 Index futures decreased 1.3 percent to 1,188.75.

The S&P 500 has dropped 3.5 percent in 2009 as companies from Alcoa to Intel Corp. and Wal-Mart Stores Inc. spurred concern earnings will deteriorate amid the recession, while the unemployment rate in the U.S. climbed to the highest level in almost 16 years.

Deutsche Bank Loss

Citigroup slipped 26 cents to $5.64 in trading before the open of exchanges in New York. Banks led declines in Europe after Deutsche Bank reported a fourth-quarter loss after taxes of about 4.8 billion euros ($6.3 billion) as the global financial crisis hurt debt and equity trading.

Separately, Citigroup may sell its CitiFinancial consumer- lending unit and rein in trading with the bank’s own capital after agreeing to cede control of its Smith Barney retail brokerage, people familiar with the plan said.

Procter & Gamble slipped 0.8 percent to $59.01 in Germany. GM dropped 2.2 percent to $3.93.

U.S. retail purchases fell 1.2 percent last month, extending the longest stretch of declines since records began in 1992, according to the median estimate of 77 economists surveyed by Bloomberg News. Sales decreased 1.8 percent in November. The report is scheduled for 8:30 a.m. in Washington.

U.S. stocks gained yesterday for the first time in three days as a rebound in oil prices lifted energy producers and improving credit markets boosted banks.

Cheapest Since 1991

The S&P 500’s valuation slid to less than 15.5 times reported earnings yesterday, the cheapest since 1991. The index is trading at 11.8 times its companies’ estimated profits over the next 12 months, compared with a 2008 low of 9.8 on Nov. 21, when the S&P 500 began its rebound from an 11-year low.

Yahoo! Inc., the owner of the second-biggest search engine, named Autodesk Inc. Chairman Carol Bartz as chief executive officer. The stock climbed 2 percent to $12.34.

H.J. Heinz Co. slipped 1.5 percent to $35.87. The world’s largest ketchup maker, was cut to “market perform” from “outperform” at Sanford C. Bernstein & Co., which said 2010 earnings may be hurt by currency swings.

Blackstone Group LP, the world’s largest private-equity firm, fell 3.6 percent to $5.90 after it was cut to “underweight” from “overweight” by Barclays Plc. The brokerage also downgraded Fortress Investment Group LLC, a private-equity and hedge-fund manager, to “equal weight” from “overweight.”

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

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Major Market Mover: US Retail Sales

Daily Forex Fundamentals | Written by Crown Forex | Jan 14 09 09:00 GMT |

Adjustments took place in financial markets yesterday especially now the word is spreading that OPEC will be considering a reduction in the production levels as they no longer can handle the low crude prices. It is clear that the Credit Crisis contagion turned out to be undefeatable, especially after enormous interventions took place in the prior year. Anchored demand levels that's the main justification used in financial markets which lead to excess of supply in markets, and as the recession fears deepen into markets the deeper prices will sink. In the past two days we witnessed crude breaching the psychological barrier which stands at $40 per barrel, which opened to the path for it to reach a low of $36.10 per barrel yesterday but retrieving back to close at $37.78 per barrel. But as projections augment in markets that OPEC will reduce production crude prices opened at $38.72 per barrel at the Asian session. The improvement in crude prices had managed to bolster indices across the world, where the Dow Jones industrial average lost only 0.30% or 25.41 points reaching 8448.56 levels, S&P 500 index gained 0.18% or 1.53 points reaching 871.79 levels and NASDAQ added 0.50% or 7.67 points reaching 1546.46 levels. The falling crude prices are contributing to ease down the trade balance in economies, where it was evident yesterday when the balance of trade deficit in the United States narrowed down with a total of 29% reaching to the narrowest fall since 12 years. The falling appetite of purchasing in the United States had narrowed down the levels of imports from foreign economies with a total of 12% reaching to $183.2 billion and the exports plunged with a total of 5.8%. We might take the fall in crude prices positively because it's helping in narrowing the trade balance deficits but if we consider the inflationary levels we see that the vast fall in crude prices along with the weakening demand across the globe had managed to ease consumer prices levels to unfavorable levels, so this rapid fall had triggered fear of deflation, as now we can notice that policy makers actions are mainly used to defeat any possibility of deflation. Bernanake along with the Bank of England governor said on various occasions that unorthodox procedures might take place in order to protect their economies from dipping in this agony. Also yesterday Bernanake came out to say that the fiscal bailouts will not be enough to stop the fallouts in the world's largest economy, where for the second time he adds that the Federal Reserve might be purchasing damaged assets to stimulate growth. Markets are waiting for the December retail sales reading; markets project a fall of 1.2% coming slightly better than the previous fall -1.8%, but range falls between the lowest fall of 3.5% and the highest -0.3%;also projections of retail sales less autos falls between a range of -2.6% and -0.4%. December is one of the months that retailers depend on because citizens start to prepare their present lists, but the prior year had changed the situation obligating citizens to narrow down the lists to the extreme because their household incomes was under severe distress from the endless job terminations which reached almost 2.59 million terminated job which is the highest since World War II. Fears of falling earnings and more losses had dominated markets in the past two days, leading to huge losses that wiped out all gaines that were recorded earlier. The Dow Jones industrial average lost 3.74% since the beginning of the year and the S&P 500 also lost 3.48% since the beginning of the year and NASDAQ fell the least to -1.94% since the beginning of the year. The outlook remains gloomy, sales weakened in December which is a result from the endless destructions in the financial markets. 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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German Economy Growth Slumped in 2008 on Global Recession

Daily Forex Fundamentals | Written by DailyFX | Jan 14 09 08:57 GMT |

German real GDP growth decelerated to 1.3% last year from 2.5% in 2007. The breakdown showed stagnating private consumption and a pick up in government consumption of 2.2%. Capital investment rose 5.3% and construction investment 2.7%, which are still robust numbers. Exports were up 3.9%, but this was outweighed by a 5.2% rise in import growth. On a workday adjusted basis the slowdown in overall growth was even more pronounced with workday adjusted GDP rising 1.0%, versus 2.6% in 2007. Consensus expectations had been for 2008 growth of 1.4% and the slightly lower result suggests a sharp contraction in economic activity in the last quarter of the year, as export demand breaks off and the manufacturing sector is facing a slump in demand that is forcing production cuts. Consumption was already weak last year and is unlikely to improve any time soon in the light of rising unemployment. We had been looking for a contraction in overall growth of 1.5%, but the German economy could face negative growth of more than 2% if the government's stimulus package fails to lift confidence soon.

DailyFX

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Daily FX Report

Daily Forex Technicals | Written by Varengold Bank | Jan 14 09 08:34 GMT |

Good morning from beautiful and cold Hamburg. The FOREX market keeps volatile and day after day there circulate more speculations of the ECB rate decision and the U.S. economy. However, we wish you a successful trading day Markets review Having the EUR/USD weakened on Tuesday to a month-low at 1.3141 it rebounded and rose to 1.3281 today. Weak U.S. retail sales and a government report showed that the U.S. trade deficit narrowed the most in 12 years to put pressure on the Greenback. Also the USD fell versus the GBP after FED Chairman Ben Bernanke said fiscal policy alone won't lead to a lasting recovery in economic growth. Yesterday the GBP/USD traded between 1.4470 and 1.4829 and recovered up to 1.4608 today. The EUR/GBP rose for the second day after a report showed that U.K. home sales dropped the most since 1978 and retail sales had the worst December in almost 14 years. The currency pair climbed beyond the 0.91 level again and closed at 0.9092. In early Tokyo trading the EUR/GBP continued its bullish trend and rose to 0.9108 at its high. The EUR/JPY fell on Tuesday from 119.19 at its opening to 117.81 at its closing after reports revealed Japan's corporate bankruptcies rose the most in eight years in 2008. Standard & Poor's revised its New Zealand's AA+ foreign currency credit rating outlook to negative which leaded the NZD/USD to a loss of 3.89 % to 0.5533 at its Tuesday's closing. Technical analysis NZD/USD The NZD/USD recovered and traded till 12th January in an upward trend after it traded for around two month close to a strong bearish trend-line. In the last two days the NZD/USD lost 7.52 % and breached its important support-line at 0.5584. This development could boost the bearish trend. The MACD declined near to its zero-level and let suggest that the currency pair could test its next support at 0.5181. EUR/JPY Since the End of November, the EUR/JPY has been trading in a small trend-channel between middle and upper Bollinger Bands. On the 9th of January the currency pair lost and crossed the middle Bollinger Bands and declined a huge step near to the multi-monthlow. It seems that only the lowest Bollinger Bands could support the EUR/JPY. The Momentum indicator fell to -8.82 and shows a potential risk that the bearish trend will continue. Pivot Points - Daily FX Support and Resistance Levels Daily Calendar & Key FX Events Varengold Bank IMPORTANT NOTIFICATION TO BE READ IN CONJUNCTION WITH THE CONTENTS OF THIS DOCUMENT This document is issued and approved by Varengold WPH Bank AG. The document is only intended for market counterparties and intermediate customers who are expected to make their own investment decisions without undue reliance on the information set out within the document. It may not be reproduced or further distributed, in whole or in part, for any purpose. Due to international laws/regulations not all financial instruments/services may be available to all clients. You should have informed yourself about and observe any such restrictions when considering a potential investment decision. This electronic communication and its contents are intended for the recipient only and may contain confidential, non public and/or privileged information. If you have received this electronic communication in error, please advise the sender immediately, and delete it from your system (if permitted by law). Varengold does not warrant the accuracy, completeness or correctness of any information herein or the appropriateness of any transaction. Nothing herein shall be construed as a recommendation or solicitation to purchase or sell any financial product. This communication is for informational urposes only. Any market or other views expressed herein are those of the sender only as of the date indicated and not of Varengold. Varengold reserves the right to consider any order sent electronically as not received unless it is confirmed verbally or through other means.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Jan 14 09 08:19 GMT |

CHF The assumed test of key supports for the realization of the pre-planned buying positions was not confirmed and marked by OsMA trend indicator attainment of current week high with signs of strong pair overbought and relative bearish resistance rise gives reasons for assumptions about further rate correction period but with preservation of buying planning priorities for today as well. Hence and considering the descending direction of indicator chart we assume the possibility of rate fall to 1.1040/60 supports, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buying positions on condition of formation of topping signals the targets will be 1.1100/20, 1.1160/80, 1.1240/60 and/or further breakout variant up to 1.1300 with targets 1.1360/80, 1.1440/60, 1.1520/40, 1.1580/1.1600. An alternative for sells will be below 1.1000 with targets 1.0940/60, 1.0860/80, 1.0780/1.0800. GBP The pre-planned breakout variant for sells was realized with attainment of basic assumed targets. OsMA trend indicator, having marked relative bullish activity rise but within general activity parity of both parties gives reasons for assumptions about possible rate range movement without definiteness in the choice of planning priorities for today. Hence we assume the possibility of rate return to Low of the current week at 1.4480/1.4520, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buying positions on condition of formation of topping signals the targets will be 1.4580/1.4600, 1.4680/1.2720 and/or further breakout variant up to 1.4780/1.4800, 1.4860/80, 1.4900/20. An alternative for sells will be below 1.4320 with targets 1.4240/60, 1.4100/40, 1.3980/1.4020. JPY The pre-planned positions for sell from key resistance range were realized with attainment of minimal assumed target. OsMA trend indicator, having marked bullish party advantage nevertheless does not give definiteness in the choice of planning priorities for today. Hence and considering the chosen strategy based on assumptions about possible range rate movement we assume the possibility of pair return to 88.80/89.00, 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 89.40/60, 90.00/40 and/or further breakout variant up to 89.40/60, 90.00/40. An alternative for sells will be below 88.40 with targets 87.80/88.00, 87.20/40, 86.80/87.00. EUR The pre-planned breakout variant for sells was realized but with damage to several points in attainment of minimal assumed target. OsMA trend indicator, having marked current week Low by formation of reverse signal with further relative buying activity rise gives reasons for changing planning priorities in favor of buys. At the moment and considering current bullish development cycle according to indicator version we assume the possibility of rate return to close 1.3260/80 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 1.3320/40, 1.3380/1.3400 and/or further breakout variant up to 1.3460/80, 1.3520/40, 1.3580/1.3600. An alternative for sells will be below 1.3200 with targets 1.3140/60, 1.3080/1.3100. FOREX Ltd www.forexltd.co.uk

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Oil Slump Forces Rich Arab Countries to Run Deficits

By Camilla Hall

Jan. 14 (Bloomberg) -- Tumbling oil prices are forcing many of the richest Persian Gulf states to record budget deficits and limit a critical source of foreign investment for poorer Arab countries.

Central bank governors and finance ministers from the 22- member Arab League gather for a week of meetings today on the global financial crisis and Gulf efforts to create a single currency. United Nations Secretary-General Ban Ki-Moon may attend.

Crude is now selling at below the budget break-even point for seven of the Arab world’s 10 top oil producers and Saudi Arabia, the world’s biggest exporter, is forecasting its first deficit in at least seven years. Poorer Arab states are facing a fall in foreign investment with Egypt expecting inflows to almost halve this year, according to EFG-Hermes SAE, the largest Arab investment bank by market value.

“The Gulf won’t be growing so fast, so there’ll be less of a trickle down,” John Sfakianakis, chief economist at Saudi British Bank said in a telephone interview from Riyadh. “The Gulf private sectors are filled by expatriates from other Arab countries. These will be the first people to go.”

Heads of state, including Saudi King Abdullah and Egyptian President Hosni Mubarak, will attend the main sessions of the Arab Economic Summit in Kuwait City on Jan. 19-20 and will hold talks on Israel’s military incursion into the Gaza Strip, the state-owned Kuwait News Agency reported. A meeting of foreign ministers is scheduled for Jan. 16 to discuss the conflict, in which more than 900 Palestinians have been killed in 2 1/2 weeks of fighting.

Recession Impact

Oil prices have fallen almost 75 percent from their July high, as the global economy sank into recession, straining budgets of crude exporters. Most will probably tap into their oil savings to maintain spending and avoid recession.

Saudi Arabia said it will post a 65 billion riyal ($17 billion) deficit this year; Oman said it will record a budget shortfall of 810 million rials ($2.1 billion); while Dubai, the second-largest of the seven emirates that make up the United Arab Emirates, forecasts a shortfall of 4.2 billion dirhams ($1.1 billion).

“If governments cut back on spending they might make the economic slowdown worse,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi PJSC, the U.A.E.’s second- biggest bank by assets. “Policy must be counter-cyclical.”

Saudi Contraction Seen

EFG-Hermes is forecasting that the Saudi economy will shrink by 0.9 percent this year while Kuwait will contract by 1.2 percent. Growth will remain positive in Qatar, Bahrain and Oman and the U.A.E. economy will stagnate.

Saudi Arabia posted a record budget surplus of 590 billion riyals ($157 billion) last year as oil rose to a record $147.27 a barrel in July. That was about the same size as Egypt’s gross domestic product.

“Rising oil prices were the catalyst for exceptionally strong growth over the past six years and falling prices will bring a slowdown in 2009,” Simon Williams, a Dubai-based economist for HSBC Holdings Plc, said by e-mail. “The Gulf can manage the deceleration, but the slowdown is going to be felt across the region and in all sectors of the economy.”

In Arab countries that have depended on their rich Gulf neighbors for investment, the impact may be felt the hardest.

FDI Declines

Foreign direct investment in Egypt is projected to fall to $7 billion this year from $13.2 billion in 2008, EFG-Hermes said in a Nov. 13 report. About 20 percent of the investment came from the Gulf. The 8.6 billion dollars in remittances that were sent home by Egyptians working abroad last year are expected to shrink by 10 percent in the fiscal year starting in June, EFG-Hermes said. Half of that money comes from the Gulf.

The bank expects Jordan’s economic growth to slow to 4.7 percent this year from an estimated 5.7 percent in 2008, in part because of lower remittances and foreign investment from the Gulf.

To help boost regional trade, Gulf Arab leaders on Dec. 30 approved an agreement to create a Gulf central bank and single currency. The accord must now be endorsed by the national governments of Saudi Arabia, Kuwait, Bahrain, the U.A.E. and Qatar. Oman has pulled out of the proposal.

To contact the reporter on this story: Camilla Hall in London at chall24@bloomberg.net.

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South Korean Employment Falls for First Time Since October 2003

By Seyoon Kim

Jan. 14 (Bloomberg) -- The number of South Koreans with jobs fell in December for the first time since October 2003, the latest sign the economy may be sinking into a recession as exports plunge and domestic demand falters.

The number of employed people declined by 12,000 last month from a year earlier, the National Statistical Office said today in Gwacheon. The jobless rate was 3.3 percent, unchanged from November at the highest since July 2007.

Goldman Sachs Group Inc. and Nomura International Ltd. both in the past week reversed forecasts of growth in South Korea this year, predicting the economy will contract for the first time since the Asian financial crisis a decade ago. Vice Finance Minister Kim Dong Soo said today the government is prepared to take further steps to aid an economy that is likely to “hit the bottom” in the first half of 2009.

“The impact of the global slowdown will linger for quite some time and is likely to led to a deterioration in the job market,” said Oh Suk Tae, an economist at Citigroup Inc. in Seoul. “It’ll take more time for stimulus measures to be effective and flow through into the economy.”

South Korea’s weakening labor market is echoed across the region. Australia lost 15,600 positions in November, pushing up the nation’s unemployment rate to the highest in a year. Japan’s jobless rate climbed to 3.9 percent in November from 3.7 percent in the previous month.

Exports from South Korea slumped 17 percent in December, factory production fell by the most on record in November and confidence among manufacturers for January was at the lowest level since the central bank’s sentiment survey began in 1991.

Banks, Automakers

Hana Bank, South Korea’s fourth-biggest lender, said last week it will offer staff early retirement for the first time in five years to reduce costs in a weakening economy. Kookmin Bank, South Korea’s biggest, received requests for early retirement from 400 employees in December.

Ssangyong Motor Co.’s labor union said today it may accept wage cuts and job-sharing after the South Korean carmaker filed for bankruptcy protection. Ssangyong, a unit of China’s largest auto company, has posted four straight quarterly losses as an economic slowdown damped demand for its gas-guzzling sport- utility vehicles.

The Kospi stock index advanced 0.7 percent to 1,175.69 at 2 p.m. in Seoul after falling as much as 1.4 percent earlier today. The won gained for a second day, rising 0.7 percent to 1,344.50 against the dollar.

“South Korea’s economy will hit the bottom in the first half of this year,” Vice Finance Minister Kim said on radio today. “The government will spend most of this year’s budget in the first half to fight against slowing growth and will prepare further policy measures if needed.”

Stimulus Measures

The government has allocated 140 trillion won ($105 billion), or 15 percent of gross domestic product, in tax cuts, extra spending and liquidity injections, according to figures from the finance ministry this month.

The Bank of Korea cut its benchmark interest rate to a record low of 2.5 percent on Jan. 9, marking the fifth reduction since October, the most aggressive easing since it began setting a policy rate in 1999.

The number of people employed in the manufacturing industry fell 2.4 percent in December from a year earlier and jobs at retail outlets, hotels and restaurants dropped 1.1 percent, today’s report showed. The number of people employed in the construction sector declined 2.5 percent from a year ago.

The unadjusted jobless rate rose to 3.3 percent from 3.1 percent in November.

To contact the reporter on this story: Seyoon Kim in Seoul at Skim7@bloomberg.net

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Fed May Look for Global Credentials in Filling Geithner’s Post

By Scott Lanman and Christine Harper

Jan. 14 (Bloomberg) -- The candidates for president of the New York Federal Reserve Bank include several with international experience, indicating officials may be seeking a new leader in the mold of departing chief Timothy Geithner.

Terrence Checki, the New York Fed’s head of emerging markets and international affairs, is a contender along with Paul Calello, chief executive officer of Credit Suisse Group AG’s investment bank in New York, who has held executive positions in Hong Kong, London and Tokyo. David McCormick, the U.S. Treasury’s undersecretary for international affairs, is also in the running, according to a person familiar with the deliberations of the New York Fed’s board.

In addition, New York Fed directors also interviewed Fed Governor Kevin Warsh, New York Fed markets chief William Dudley and H. Rodgin Cohen, chairman of the New York law firm Sullivan & Cromwell LLP, said the person.

Experience with global markets is “absolutely essential,” said Robert Feldman, head of economic research at Morgan Stanley Japan and a former official at the New York Fed. It’s “the key central bank in the U.S. Federal Reserve network and obviously it is the center for international transactions.”

Fed officials are seeking to replace Geithner, who is set to join President-elect Barack Obama’s administration as Treasury secretary next week. Regional Fed bank presidents are nominated by their boards and subject to approval by the Board of Governors in Washington, led by Chairman Ben S. Bernanke. Given the prominence of the New York Fed post, Bernanke’s preference is likely to be decisive.

Geithner Hearing

Geithner met yesterday with members of the Senate Finance Committee considering his nomination to answer questions about his failure to pay self-employment taxes while working at the International Monetary Fund and about a lapse of his housekeeper’s work status as an immigrant. Afterward, Chairman Max Baucus, a Montana Democrat, said he supports Geithner and wants to hold a hearing on his nomination on Jan. 16.

Geithner’s successor must deal with issues including a global recession, currency swaps with other central banks and meetings on financial markets around the world, former Fed officials said. Geithner brought international credentials to the Fed, having served in McCormick’s position under President Bill Clinton and lived in Africa, India, Thailand, China and Japan.

“It’s a huge dimension to the job,” said Scott Pardee, a former New York Fed official for international operations who now teaches at Middlebury College in Vermont. The president of the New York Fed needs to speak regularly with governors of other central banks around the world, frequently at night or on weekends, “so it’s got to be a very personal relationship,” Pardee said.

The New York Fed holds a seat at the Bank for International Settlements in Basel, Switzerland.

Wall Street Ties

International experience alone wouldn’t necessarily qualify someone to be New York Fed president, said Pardee. Relationships with top executives on Wall Street are also important, he said.

Dudley and Warsh have both worked closely with Bernanke and Geithner on the central bank’s response to the financial crisis. Cohen has led hundreds of lawyers at his firm representing financial services companies on work related to the crisis.

Dudley was chief U.S. economist at Goldman Sachs Group Inc. before joining the Fed two years ago.

Checki “was always ‘Mr. Inside,’” said Ethan Harris, a former New York Fed economist who is now co-head of economic research at Barclays Capital in New York. Checki is “heavily involved in fighting financial fires behind the scenes, particularly on the international front,” Harris said.

‘Sensible Stuff’

Checki doesn’t normally attend Federal Open Market Committee meetings and gives few speeches, preferring to operate behind the scenes. He doesn’t even talk much in those private meetings, though when he does, “he always had sensible stuff to say,” said William White, former head of research at the Bank for International Settlements.

Checki “struck me as a person who was more worried about the buildup of all these financial excesses than virtually everyone else,” White said yesterday.

Speaking at a conference in Athens in May 2007, before the financial crisis unfolded, Checki warned that “the recent period of stability may contain the seeds of its own undoing.”

“We know that low interest rates, low volatility and the seeming ability to trade out of almost any risk position create an obvious incentive to build up leverage, often in ways that aren’t transparent,” he said.

Asian Experience

Calello has been chief executive officer of Credit Suisse’s investment bank since May 2007 after spending five years in Hong Kong, where he oversaw the expansion of Credit Suisse’s business in Asia. He joined the bank as a founding member of its derivatives subsidiary in 1990 and has held executive positions in London and Tokyo as well as New York and Hong Kong.

Before joining Credit Suisse, Calello worked in the global markets group of Bankers Trust Co., now part of Deutsche Bank AG, and in the Fed’s monetary and economic policy research group in Boston and Washington.

Calello’s career on Wall Street has given him first-hand experience on how the Fed handles financial crises. In September he was one of the executives who participated in emergency weekend talks at the New York Fed about Lehman Brothers Holdings Inc. before the company was forced into bankruptcy. A decade earlier he represented Credit Suisse in discussions at the New York Fed on the bailout of hedge fund Long-Term Capital Management.

Call for Regulation

Last April, Calello became one of the first Wall Street executives to call publicly for more regulation of the credit derivatives market. Speaking at the International Swaps and Derivatives Association annual conference in Vienna on April 16, Calello said “all players in the market have a critical role in preventing a calamitous chain of counterparty failures and defaults.”

McCormick was appointed undersecretary for international affairs in August 2007. He came to Treasury from the White House, where he was deputy national security adviser for economic policy and humanitarian affairs.

He has led international affairs for Treasury Secretary Henry Paulson, coordinating with the Group of Seven nations and also working on the international environmental issues that have been Paulson priorities, such as the Clean Technology Fund and an energy partnership with China.

To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.

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China’s Economy Overtakes Germany, Revised Data Shows

By Nipa Piboontanasawat and Kevin Hamlin

Jan. 14 (Bloomberg) -- China’s economy overtook Germany’s in 2007 to become the world’s third largest, underscoring the nation’s increasing economic and political clout.

Gross domestic product expanded 13 percent from a year earlier, more than a previous estimate of 11.9 percent, to 25.731 trillion yuan ($3.38 trillion), the statistics bureau said on its Web site today. That topped Germany’s 2.424 trillion euros ($3.32 trillion), using average exchange rates for 2007.

China’s economy is 70 times bigger than when leader Deng Xiaoping ditched hard-line Communist policies in favor of free- market reforms in 1978. After overtaking the U.K. and France in 2005, China became the third nation to complete a spacewalk, hosted the Olympic Games and surpassed Japan as the biggest buyer of U.S. Treasuries.

“This number is just one more piece of evidence that China is one of the most important players on the global stage,” said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.

The figure was released as China faces the weakest economic expansion since 1990 after trade growth collapsed because of the global recession.

China’s economy may now be as much as 15 percent larger than Germany’s, Louis Kuijs, a senior economist at the World Bank in Beijing, estimated today. He confirmed the calculation that it overtook Germany in 2007.

Overtaking U.S.

The U.S. economy is the world’s biggest, followed by Japan’s.

“If China continues to grow at its average rate in the past 20 years and if the U.S. does the same, it will overtake the U.S. in 20 years,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. “There’s no doubt that that will happen -- it’s just a matter of time.”

The nation’s enlarged role in the global financial system was highlighted when it cut rates at the same time as the U.S. Federal Reserve and five other central banks in October to counter the deepening credit crisis. In contrast, Japan stood on the sidelines.

China is the biggest contributor to global growth and underpins demand for metals, grains and the exports of its Asian neighbors. It also has a big stake in the U.S. economy, holding $652.9 billion of U.S. Treasuries, according to Treasury Department data.

Reducing Poverty

Since introducing free-market policies, China has lifted 300 million citizens out of poverty, according to the United Nations.

“We have overcome challenges in the past 30 years, from the breakup of the Soviet Union to facing down global sanctions, from the Asian financial crisis to the current global crisis,” President Hu Jintao said last month in a speech marking the introduction of free-market policies. “Our international profile is rising and we will play an increasingly constructive role.”

The nation hosted the Olympic Games in August last year, did a spacewalk in September and is aiming to land a man on the moon by 2020.

“China’s importance goes beyond even the ranking as number three because it’s one of the only resilient economies in the world today,” said Citigroup’s Huang.

Still, growth is sagging.

The economy grew 9 percent in the third quarter of 2008, the least in five years. The fourth-quarter expansion, due to be announced next week, was 6.8 percent, the weakest since 2001, according to the median estimate of 12 economists surveyed by Bloomberg News.

The nation’s 4 trillion yuan stimulus package, announced in November, may help to limit the severity of the slowdown.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

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U.K. Guarantees 20 Billion Pounds of Business Lending

By Robert Hutton and Mark Deen

Jan. 14 (Bloomberg) -- Business Secretary Peter Mandelson said the U.K. government will guarantee as much as 20 billion pounds ($29 billion) of bank loans to medium-sized companies in order to keep credit flowing during the recession.

Companies with sales of up to 500 million pounds qualify for the support. A second tranche of 1.3 billion pounds is set aside for firms with sales of 25 million pounds or less, the Department of Business said in a statement in London today.

Prime Minister Gordon Brown’s government is stepping up efforts to limit fallout from the global credit crunch after a 50 billion pound bank recapitalization program failed to stop the loan rationing. In October, the government also extended 250 billion pounds of credit lines to banks. A month later, it offered voters 20 billion pound package of mostly tax cuts.

“We know that some companies are struggling to secure the finance they need,” Mandelson said in the statement. “U.K. companies are the lifeblood of the economy, and it is crucial that government acts now to provide real help.”

Companies including Woolworths Group Plc and MFI Retail Ltd. have tipped into bankruptcy as credit dried up, and business lobby groups have said Brown must act quickly to prevent the recession from deepening. Britain’s economy shrank in the third quarter for the first time in almost two decades.

The U.K. is similar to one German Chancellor Angela Merkel approved earlier this week, channelling 100 billion euros ($135 billion) to help support business.

To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.netMark Deen in London at markdeen@bloomberg.net

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German Growth Slumped in 2008 as Recession Set In

By Jana Randow and Christian Vits

Jan. 14 (Bloomberg) -- German economic growth slumped last year as the global financial crisis hurt exports and damped spending, pushing the euro area’s largest economy into a recession in the second half.

Gross domestic product grew 1.3 percent in 2008 after expanding 2.5 percent in 2007, the Federal Statistics Office said in Frankfurt today. Economists expected growth to slow to 1.4 percent, according to the median of 31 estimates in a Bloomberg News survey. Germany had a budget deficit of 0.1 percent of GDP.

Companies are scaling back production and cutting jobs as global economic expansion slows and demand for German exports wanes. Bundesbank President Axel Weber last week indicated the economy may contract more this year than the 0.8 percent forecast by the bank on Dec. 5.

“All data since December indicate that the economic contraction will be closer to 3 percent than to 0.8 percent,” said Holger Schmieding, chief European economist at Bank of America Corp. in London. A decline of more than 0.9 percent would be Germany’s worst economic performance since records began after World War II.

Company investment in plant and machinery rose 5.3 percent in 2008 from a year earlier, the statistics office said, and construction spending increased 2.7 percent. Exports gained 3.9 percent and imports rose 5.2 percent. Consumer spending, the biggest component of GDP, stagnated.

Fiscal Stimulus

Chancellor Angela Merkel’s coalition yesterday agreed to spend an extra 50 billion euros ($66 billion) this year and next, abandoning a drive to eliminate the budget deficit to focus on battling the recession instead.

The European Central Bank has cut its key interest rate by a total of 175 basis points to 2.5 percent since early October as Europe’s economic slump deepened. Investors bet it will lower borrowing costs again tomorrow by at least 50 points, Eonia forward contracts indicate, even as some policy makers signal they’d rather wait.

ECB President Jean-Claude Trichet said last month there’s a limit to how far the bank can cut rates and refused to give any signal for January. Executive Board member Juergen Stark said on Dec. 10 that the scope for further moves is “very limited.”

“The ECB should lower interest rates by half a percentage point this week and one more time thereafter,” Schmieding said. “They have to, should and will do it.”

German business confidence dropped to the lowest in more than a quarter of a century in December and unemployment rose for the first time in almost three years.

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

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Thai Rate Cut More Than Expected on Politics, Slump

By Rattaphol Onsanit

Jan. 14 (Bloomberg) -- Thailand’s central bank cut its interest rate more than economists expected for a second month after inflation cooled to the slowest pace in six years and political protests sent confidence to a record low.

The Bank of Thailand lowered its one-day bond repurchase rate by three-quarters of a percentage point to 2.00 percent. The decision was expected by four of 19 economists in a Bloomberg News survey.

Thailand joins Indonesia, South Korea and Taiwan in cutting borrowing costs this month as the global recession curtails demand for Asian exports. Premier Abhisit Vejjajiva, four weeks into the job, is spending more to counter a slump in tourism and domestic demand after six months of political turmoil.

“The cuts will have to continue,” said Isara Ordeedolchest, an economist at KTB Securities Ltd. in Bangkok who predicted today’s 75-basis point reduction. “The economic numbers are coming down on every front and inflation is slowing sharply.”

The SET Index of stocks swung between gains and losses after the decision at 2:30 p.m. in Bangkok. It fell 0.6 percent as of 3:14 p.m.

“Some investors think if the economy is not in jeopardy, why does the Bank of Thailand have to cut rates so much?,” said Kavee Chukitkasem, head of research at Kasikorn Securities Pcl in Bangkok. “Other investors that see it as a positive are coming to buy again.”

Ammunition

The baht was unchanged at 34.88 per dollar. Two-year government bonds, which have lost 86 basis points since the central bank last lowered borrowing costs, may extend gains on the prospect of more rate cuts, according to DBS Holdings Ltd. Bond yields move inversely to price.

“We still have lots of ammunition,” Duangmanee Vongpradhip, a Bank of Thailand assistant governor, told a press briefing. “Domestic demand continued to soften, both in consumption and investment, partly as a result of fragile sentiment. We can be less aggressive now as we see fiscal measures in place”

Governor Tarisa Watanagase and her six board colleagues unexpectedly reduced Bank of Thailand’s key rate by the most on record on Dec. 3, cutting it by 1 percentage point.

Bank Indonesia on Jan. 7 reduced its reference rate to 8.75 percent from 9.25 percent. Taiwan’s central bank cut borrowing costs last week after an unprecedented decline in exports, and South Korea trimmed its repurchase rate on Jan. 9 to the lowest ever to bolster domestic demand.

Slowing Inflation

Slower inflation gave Thailand’s central bank scope to lower borrowing costs. The pace of consumer-price gains fell by the most in almost nine years in December, when inflation cooled to 0.4 percent from a year earlier. Exports, which make up 70 percent of the economy, slid in November from a year earlier for the first time since March 2002, sinking 18 percent. Tourist arrivals tumbled 22 percent, the most since after the December 2004 tsunami.

Gross domestic product may shrink this quarter and may have contracted in the previous three months, with this year’s growth likely to be the slowest since a recession in 1998, according to the government.

“Fiscal stimulus is on the way but the soonest for the implementation could be in the second quarter,” said Usara Wilaipich, an economist at Standard Chartered Bank Plc in Bangkok who predicted today’s reduction. “In the mean time there is a need for monetary policy to take more of a role to help support the economy.”

Prime Minister Abhisit’s government, the fourth in a year, will implement a 300 billion baht ($8.6 billion) stimulus package later this month to boost domestic demand and purchasing power, he said Jan. 9. The amount matches tourist revenue lost from an eight-day airport seizure that ended early last month.

Business sentiment is at a record low after the global recession sapped exports and six months of political protests in Bangkok that culminated in the airport seizures.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net.

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Kuwait’s Al-Ahmadi Refinery Fire Extinguished, KNPC Says

By Fiona MacDonald

Jan. 14 (Bloomberg) -- A fire broke out early this morning in a storage tank at Kuwait’s Al-Ahmadi oil refinery and has been extinguished, Kuwait National Petroleum spokesman Mohammed al-Ajmi said.

“The fire was in a storage tank that was out of service, and started at around 2 a.m.,” al-Ajmi said in a phone interview today from Kuwait. “It was controlled in less than an hour, no-one was injured and operations were not affected. It has been extinguished.”

Al-Ahmadi, one of three refineries in the Gulf state, has a capacity of 466,000 barrels a day.

To contact the reporter on this story: Fiona MacDonald in Kuwait FmacDonald4@bloomberg.net

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CPC to Restart No. 4 Naphtha Cracker as Market Demand Improves

By Yu-huay Sun

Jan. 14 (Bloomberg) -- CPC Corp., Taiwan’s state-owned oil refiner, plans to restart its No. 4 naphtha-processing plant in Kaohsiung next month after market demand for ethylene improves, a company official said.

The naphtha cracker, shut on Oct. 11 for scheduled repairs, will resume production on Feb. 2 or Feb. 3, said a CPC official, who declined to be identified because of company policy.

The cracker processes naphtha into ethylene, a material used to make plastics and fabrics. Ethylene prices in South Korea and Japan have risen 11 percent this year, according to Bloomberg data.

CPC operates three such processing plants with a combined annual ethylene output capacity of 1.08 million metric tons. The No. 1 and No. 2 crackers are no longer in operation.

The refiner had planned to restart the 350,000 ton-a-year No. 4 plant in late November and extended the stoppage because of weak market demand. CPC has been operating the No. 3 and No. 5 crackers at about 80 percent of capacity, the official said.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

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