Amazon.com Soars After Sales and Profit Top Estimates

By Joseph Galante

Jan. 30 (Bloomberg) -- Amazon.com Inc., the world’s largest online retailer, gained 15 percent in early U.S. trading after fourth-quarter sales and profit topped estimates, signaling the company is outpacing EBay Inc. and its e-commerce rivals.

Net income rose 8.7 percent to $225 million, or 52 cents a share, the company said yesterday after markets closed. Sales climbed 18 percent to $6.7 billion. That beat estimates of 38 cents in profit and $6.45 billion in sales from a Bloomberg survey of analysts.

Amazon.com had its biggest holiday season ever, using low prices, shipping promotions and product selection to attract shoppers during a recession. At EBay, holiday sales fizzled, with quarterly revenue dropping for the first time in the company’s history. Amazon’s size and customer service gave it an edge, said Scott Devitt, an analyst at Stifel Nicolaus & Co.

“Amazon is a company that treats its customers better than EBay,” Devitt said. The Manassas, Virginia-based analyst recommends buying Amazon.com shares and has a hold rating on EBay. “From a competitive standpoint between the two, I don’t think there’s any turning back.”

Amazon.com, based in Seattle, jumped $7.31 to $57.31 in trading before U.S. exchanges opened, after closing at $50 on the Nasdaq Stock Market yesterday. The shares had dropped 2.5 percent this month before today. EBay, down 12 percent in January, fell 3.7 percent to $12.25 yesterday.

Sales Forecast

Amazon.com outpaced the rest of the e-commerce market over the past two years and that’s likely to continue, according to JPMorgan Chase & Co. Even as the U.S. economy lost 2.6 million jobs last year, the company maintained growth.

First-quarter net revenue will rise to between $4.53 billion and $4.93 billion, an increase of as much as 19 percent, the company said. Analysts had estimated sales of $4.55 billion.

Amazon.com will continue to focus on low prices and free shipping to drive revenue, Chief Executive Officer Jeff Bezos said yesterday. Still, those sales will carry lower profit margins. Operating income, a measure of profitability, will decline as much as 37 percent to $125 million this quarter, from a year ago, the company said.

EBay, an online forum that lets sellers auction items or set fixed prices, reported a 6.6 percent sales decline last week. The San Jose, California-based company blamed the global e-commerce slump.

Listing Fees

Chief Executive Officer John Donahoe had sought to boost sales by changing EBay’s listing fees and bolstering the company’s payments unit. EBay now takes a smaller cut when someone lists a product on its site and a bigger commission when the product sells.

Donahoe is trying to boost the number of fixed-price listings, putting EBay in closer competition with Amazon.com and Wal-Mart Stores Inc.’s Web site. The company also has changed its search feature, which now mixes fixed-price results with auction results. The changes have alienated some merchants.

Amazon.com sells products in more than three dozen categories, ranging from power tools to musical instruments. Once just a book seller, the company opened a site last year that offers more than 300,000 parts and accessories for motorcycles and all-terrain vehicles.

Bezos also has expanded sales of digital media, such as music and video files. The company introduced the Kindle digital- book device in 2007 to encourage book, magazine and newspaper downloads. Kindles have sold out for two straight years ahead of the holiday shopping season.

U.S. online retail sales growth will slow this year to 11 percent, or $156 billion, from 13 percent last year, according to Forrester Research Inc.

Amazon.com has “discounted heavily in order to maintain market share and drive revenue,” Fred Moran, an analyst at Stanford Group in Boca Raton, Florida, said in a Bloomberg Television interview. “Given the environment, that might be the right way to go.”

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

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European Stocks Erase Losses on U.S. GDP Report; Stoxx 600 Gains

By Andrew Rummer

Jan. 30 (Bloomberg) -- European stocks erased losses after a report showed the U.S. economy shrank less than forecast in the fourth quarter.

The Dow Jones Stoxx 600 Index advanced 0.3 percent to 191.38 at 1:34 p.m. in London, having earlier retreated as much as 0.8 percent.

Last Updated: January 30, 2009 08:36 EST



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Brazil Stocks Rise After U.S. GDP Shrinks Less Than Estimated

By Kara Wetzel

Jan. 30 (Bloomberg) -- Brazilian stocks climbed, erasing earlier declines, after the U.S. economy contracted less than economists estimated in the fourth quarter.

The Bovespa Index rose 0.1 percent to 39,690.33 at 8:40 a.m. New York time after falling as much as 1.1 percent earlier. Chile’s Ipsa rose 0.2 percent. The MSCI Emerging Markets Index declined 0.1 percent.

Gross domestic product in the U.S., the world’s biggest economy, contracted at a 3.8 percent annual pace in the fourth quarter. GDP was forecast to contract at a 5.5 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News. Projections ranged from declines of 3 percent to 7 percent.

Last Updated: January 30, 2009 08:41 EST



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European Market Update

Daily Forex Fundamentals | Written by Trade The News | Jan 30 09 10:52 GMT |

ECB's Liikanen says Zero interest rates not necessarily a solution to credit crunch and deflation; Gold moves above $920/oz on speculation that Chinese funds are being told to avoid U.S. Treasury's; Russia Central Bank vows that Ruble will maintain its ceiling of 41 in basket ECONOMIC DATA (IN) India Q1 Annual GDP 9.0% v 9.6% prior (HK) Hong Kong Dec M2 Money Supply Y/Y: -1.35 v -12.1% prior (SP) Spain Nov Current Account: -€8.5B v -€7.5Be (SP) Spain Jan Preliminary CPI - EU Harmonized Y/Y: 0.8% v 1.1%e (IT) Italian Retailer's Confidence: 95.5 v 88.7 prior; Services Survey: -30 v -26 prior (IT) Italian Nov Large Company Employment Y/Y: -1.0% v -0.6% prior (NO) Norway Dec Retail Sales M/M: 0.1% v -1.0%e; Y/Y: 0.2% v-0.6% (CZ) Czech Dec Money Supply: 6.5% v 7.9% prior (UK) Dec Net Consumer credit: £0.3B v £0.7Be; Net Lending: £1.9B v £0.6e (UK) Dec Mortgage Approvals: 31K v 26ke (UK) Dec Final M4 Money Supply: M/M: 1.4% v 1.7% prior; Y/Y: 16.1% v 16.6% prior (IT) Italian PPI M/M: -1.3% v -1.2%e; Y/Y: 0.6% v1.0%e (EU) Euro-zone Jan CPI Estimate: 1.1% v1.4%e; lowest since July 1999 (EU) Euro-zone Unemployment Rate: 8.0% v7.9%e; highest since Oct 2006 SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM Equities: Honda Motor [HMC] Reports Q3 net profit ¥20.2B compared to ¥200B y/y || Kuoni [KUNN.SZ] Guided FY08 Rev CHF4.86B versus 4.96B estimates. It announce that it would reduce its workforce and initiates 3-year CHF106M investment and cost reduction program. || Roche [ROG/sz} Reduced offer for Genetech [DNA] to $86.50/share in cash for the company from $89/shr prior || Kloecker [KCO.GE] Reported Q4 Operating loss of €65M. It FY08 revenues were €6.70B slightly below the €6.84B consensus estimates. It noted that it was impossible to issue guidance for 2009. || Misys [MSY.UK] Reported H1 Adj Op profit £36M versus £35M y/y. its revenues were £280M compared to £230M y/y. Company was conscious of the difficult environment, but remained optimistic that it would achieve full year targets. || Porsche [PAH3.GE] CEO stated that H1 Rev €3B which was lower by 14% y/y as Car sales plunged by 27% to at 34K units. CEO gave no current FY outlook. Company targeted to increase 50.76% stake in Volkswagen to 75% throughout 2009 depending on economic circumstances || Close Brothers [CBG.UK] Provided trading update in which its FY08 AUM was £7.1B compared £7.0B from prior quarter. It noted that the businesses have faced increasingly challenging and unpredictable trading conditions; but expected to benefit from a particularly strong performance in our Securities division || Banco Popular [POP.SP] Reported Q4 Net of €92.6M below consensus of €235M. its FY08 Net €1.05B versus €1.17B expectations. It was not considering a capital increase, to continue paying dividends but will not increase payout || Dexia [DEXB.BE] Announced transformation plan in which it would book net loss of about €3B in 2008. it also announce that it planned to cut 2008 dividends and eliminate 900 jobs (about 2.5% of workforce) || Lufthansa [LHA.GE] Reportedly Cargo Unit strikes an agreement with employees to shorten work week, impacting 2.6K jobs in Germany || Renault [RNO.FR] CEO commented that he saw 2009 Industry car sales down by 14% to 55M units; will be a 'tough' year. He did note pent up demand was strong in emerging markets. Coordinated support needed for European auto makers Speakers: ECB's Liikanen: GDP in developed countries to contract considerable; Zero interest rates not necessarily a solution to credit crunch or deflation. He noted that the deflation risk was smaller in Europe than in US. Deflationary expectation would be detrimental || SNB's Roth noted that the central bank still has the ability to support economy in comments from a newspaper interview. He stated that Swiss banks are among the 'best capitalized banks in the world' but acknowledged that they could face trouble if global economy continued to deteriorate || German Fin Ministry expected the recession to continue for the time being and noted that the job market situation would deteriorate further in next few months. He noted that deflationary trends should not be feared as a slowdown of core inflation was not expected || Russian Central Bank's Ignatyev stated that he would not allow ruble to fall beyond 41 to the basket and would use currency intervention of other monetary tools if necessary ||RBNZ's Bollard: Sees additional room for rate cuts and capacity for cash injection; Expects economy, households, and exports to remain weak through 2009 || Japan MoF: Confirms that did not intervene in the currency markets during January || US Econ Advisor Tyson stated that the Obama administration sought to incresase economic growth in H2 with a front loaded stimulus package. US does not plan long-term nationalization of banks || Swiss KOF: Jan Banking indicator hits lowest level since survey began back in 2000 In Currencies: The USD was mixed against the major pairs. The EUR/USD tested below the 1.2900 level ahead of the European morning as vague rumors circulated that perhaps Greece might withdraw from EMU this weekend. The yield on Greek 10y closed at 247bps over Bund on Thursday, which was below the record 300bps touched on 26th of Jan. ECB's Trichet commented on Thursday that there was no chance of an EMU breakup. The Russian Ruble weakendabove 40 against the basket but remained within recently expanded ceiling of 41. The Russian Central Bank'head Ignatyev was vocal in noting that the Ruble weakness would not go beyond the 41 to the basket and vowed that it would use currency intervention and other monetary tools to ensure that task. Ahead of the NY morning the EUR/USD tested 1.2835 following the lower Euro-Zone CPI estimate and the 8.0% unemployment reading the GBP was firmer against the USD and Euro pairs. BOE's Blanchflowwer commented on Thursday that he was”Bullish on the pound” and saw it as undervalued. EUR/GBP moving below the 0.90 level while GBP/USD probed around the 1.43 handle. The UK mortgage approval data also aided the GBP's cause in the session with its better reading in December. Note that the USD was modestly steady to firmer despite the higher gold prices. Spot Gold broke above the 'key' $920/oz level as dealer chatter suggested that strong gold demand being attributed to speculation that Chinese funds are being told to avoid U.S. Treasury's Reportedly Eurozone seeks that the new US administration to get more involved on currency policy at G7 meetings. The 'source' noted that EU sought to avoid strong fluctuations in FX and keep FX markets calm during times of crisis. It also stated that currency intervention was unlikely; but more cooperation between the US and the Eurozone group could help reduce volatility Fixed income: In fixed income the German yield curve has exhibited a steepening bias this morning, with the long end of the curve selling off in response to yesterday's disappointing T-Note auction and the short end rallying in response to weak CPI and unemployment figures. Better than expected mortgage lending data has eased some of the pressure on Gilts which solidified yesterday after the UK's own weak auction, and expected supply next week, but yields are still higher across the curve , with March Gilts down 30 ticks at 117.30 at the time of writing. In Energy: OPEC Sec Gen El Badri reiterate sit wopuld cut output further at its March summit if market was not balanced. He again urge non-OPEC oil producers to lower supply if current OPEC cuts fail to balance the oil market || IEA's Tanaka: Turkey is an important strategic transit route, notes stability in Middle East is important for investors. NYMEX Mar crude was off 0.30 to move towards $41.oo level. Credit Crisis: JP Morgan analyst: Forecasts German banks to take up to €34B of potential collective write downs and identifies up to €93B of assets 'at risk.' The analyst expected Deutsche Postbank to take €4B in write downs; Aareal bank to take €2B in write downs. Expected Hypo Real estate to take €8B in write downs NOTES What the global leaders need to be aware of is that credit remains more effective than interest rates. Today the attention is focused on the US GDP today and the question is just how negative the reading would be. Below -3% would be the worst since 1982 and below a -6.4% reading would be the lowest since 1980. The global economic front remains dismal following a slew of Japanese data that was all below expectations today. Euro-Zone Unemployment came in at 8.0%. The New Zealand Central Bank stated that it had room to continue its aggressive easing cycle. ECB's Trichet stated on Thursday that no breakup of Euro-Zone would happen, but 'vague' rumors circulated that Greece could pull out this weekend. Looking Ahead: 7:00 (CL) Chile Dec Copper Production: v 442.8K tons prior 8:30 (CA) Nov GDP M/M: -0.4% expected v -0.1% prior 8:30 (US) GDP Q4 Adv Q/Q Annualized: -5.5% expected v -0.5% prior 8:30 (US) Q4 Personal Consumption: -3.5% v -3.8% prior 8:30 (US) Q4 GDP Price Index: 0.4% expected v 3.9% prior 8:30 (US) Core PCE Q/Q: 1.0% v 2.4% prior 8;30 (US) Employment Cost Index: 0.7% expected v 0.7% prior 9:00 (US) Nov RPX Composite 28dy Y/Y: No expectations v -20.14% prior 9:00 (US) Nov RPX Composite 28dy Index: No expectations v 206.73 9:45(US) Chicago Purchasing Manager: 34.9 expected v 35.1 prior 10:00 (US) Jan Final University of Michigan Confidence: 61.9 expected 10:00 (US) Jan NAPM- Milwaukee: no expectations v 30 prior Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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Euro-Zone Inflation Outlook Falls Further, Unemployment Rises For Fifth Month

Daily Forex Fundamentals | Written by DailyFX | Jan 30 09 10:38 GMT |

Euro-Zone Jan HICP inflation decelerated to 1.1% y/y from 1.6% y/y in December. Our median was 1.4% y/y, so data were lower than expected, but the sharp decline was not a total surprise after weaker than expected German and Spanish data. The headline rate has fallen to the lowest level since July 1999, mainly on the back of positive base effects from sharply lower energy prices. Numbers will add to public pressure on the ECB to cut rates again, even though ECB policy has to be forward looking and should not react to historical data. The ECB currently expects inflation to rise again in H2 on base effects. Meanwhile, Euro-Zone December unemployment rose to 8.0% from 7.8% in November. Expectations had been for a reading of 7.9%, but after the marked rise in German unemployment numbers the jump was not a surprise. With the German labor market catching up with the contracting economy unemployment figures are likely to rise sharply this year and the negative impact will counterbalance to a large extent the improvement in real disposable income from lower energy prices. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Jan 30 09 10:35 GMT |

EUR/USD Current level-1.2873 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are rising, and trading is situated below the 50- and 200-Day SMA, currently projected at 1.3292 and 1.4721. The sell-off from 1.3328 is quite strong to be accepted as a corrective one, so we are rather neutral here, and only a break above 1.2929 will switch our view to 'bullish' for 1.3090 and 1.3263. A clear break below 1.2769 will target 1.2683. Resistance Support intraday intraweek intraday intraweek 1.2929 1.3328 1.2748 1.2769 1.3090 1.3749 1.2769 1.2557 USD/JPY Current level - 89.28 The pair has finalized its consolidation above 90.95 at 97.48 and the general downtrend has been renewed, targeting 79.86. Trading is situated below the 50- and 200-day SMA, currently projected at 107.61 and 105.76 Still in the broad consolidation above 87.12 and there are no signs of topping so far. Only below 88.43 the pair will enter a fast downtrend towards 86.31 and 83.01. Intraday support comes at 88.93 and nice resistance on the upside is 91.26. Resistance Support intraday intraweek intraday intraweek 90.83 93.83 88.35 87.12 91.59 97.48 87.12 83.01 GBP/USD Current level- 1.4283 The pair is in a the last phase of the downtrend from 2.0153. Trading is situated below the 50- and 200-day SMA, currently projected at 1.5505 and 1.8341. Monday's break above 1.3911 confirmed, that a local bottom has been set at 1.3506 and currently an uptrend is on the run, towards 1.4620. Keeping in mind, that the internal structure of the rise from 1.3506 is not an impulsive one, but a clearly corrective in nature, we have to accept the current uptrend, being only a corrective phase, a part of the downtrend since 1.5722. Nevertheless, intraday bias is positive, well supported at 1.4220 Resistance Support intraday intraweek intraday intraweek 1.4260 1.4374 1.4020 1.3372 1.4374 1.5727 1.3920 1.30+ DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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Home Prices Fell in 24 U.S. Metro Areas as Foreclosures Rose

By Brian Louis

Jan. 30 (Bloomberg) -- Home prices fell in 24 of 25 U.S. metropolitan areas in November from a year earlier as the recession and tighter lending spurred record foreclosures.

The San Francisco area saw the biggest drop, with the average price per square foot falling 36.8 percent, New York- based Radar Logic Inc. said in a report today. Phoenix had the next biggest decline, falling 34.6 percent, and Las Vegas slumped 32.4 percent. Milwaukee, Wisconsin was the only area where prices rose, gaining 2.4 percent, Radar Logic said.

Sales of existing homes rose in December, propelled by a 15 percent drop in prices, the National Association of Realtors said on Jan. 26. The number of “motivated sales,” such as foreclosure auctions, helped increase November transactions in 13 metropolitan areas of the 25 Radar Logic tracks.

“Motivated sales just represent houses sold at significant discounts,” Michael Feder, Radar Logic chief executive officer, said in an interview. “You get enough buyers at those prices, you get a floor.”

Four metropolitan areas had their largest monthly price declines since the beginning of Radar Logic’s records, which date to 2000. They were: Charlotte, North Carolina; Denver; San Jose, California; and Tampa, Florida.

Purchases of existing homes rose 6.5 percent to an annual rate of 4.74 million in December from 4.45 million in November, the Realtors said. The median price dropped 15 percent from the previous year to $175,400, the biggest decline since records began in 1968. Foreclosure filings jumped 41 percent in December from a year earlier to 303,410, RealtyTrac Inc. said in a report on Jan. 15.

The RPX Monthly Housing Market Report, published by Radar Logic, measures home values using price per square foot. The data reflects a 28-day aggregate, the company said.

The prices are the basis for property derivatives traded on the Residential Property Index. The index allows investments based on the movement of home prices without owning land or physical property.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

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Thailand Has Current Account Surplus as Demand Sinks

By Suttinee Yuvejwattana

Jan. 30 (Bloomberg) -- Thailand had its first current account surplus in six months in December as oil prices fell and demand declined for imported goods. Manufacturing production sank the most ever.

The surplus was $91 million last month compared with a $935 million deficit in November, Amara Sriphayak, a Bank of Thailand official, said today in Bangkok. The median estimate of 14 economists in a Bloomberg survey was for a $100 million surplus.

“In December, we were starting to see that imports of oil and machinery and the like were falling and the domestic economy was slowing,” said Andrew Stotz, head of research at CLSA Ltd. in Bangkok. “We don’t have exports saving us. I think it will be a very, very rough year.”

Thailand and other export-dependent countries are cutting interest rates and boosting spending to buoy domestic consumption as their main markets in the U.S., Japan and Europe contract. Toyota Motor Corp., Seagate Technology Inc. and Charoen Pokphand Foods Pcl are among companies that are cutting jobs or sales forecasts as demand for their goods wanes.

A measure of manufacturing output fell 18.8 percent in December, from a revised 7.7 percent decline a month earlier. The median estimate of 17 economists in a Bloomberg survey was for an 8.2 percent contraction.

Producers Worried

“Producers are still concerned about the worsening global economy, which affect their businesses,” Amara said. “Manufacturing fell in almost all sectors because of a sharp fall in domestic and external demand.”

The baht, little changed at 34.92 per dollar as of 2:52 p.m., is poised for a monthly decline of 0.7 percent. The SET Index of stocks, set for a 2.9 percent retreat this month, added 0.3 percent, paring an earlier gain of as much as 0.6 percent.

Prime Minister Abhisit Vejjajiva, the nation’s third premier in five months, is boosting spending and waiving taxes to spur the economy, which may enter its first recession in a decade this quarter.

The current account comprises the difference between exports and imports of goods, services, investment income and remittances. Trade makes up about 70 percent of the current account, and tourism contributes most of the service industry’s 30 percent component.

Demand Dropping

The trade surplus in December was $496 million, compared with a $896 million shortfall in November, the central bank said.

Exports contracted for a second month, falling 16 percent from a year earlier to $11.5 billion, the central bank said. The decline was 18 percent in November.

Imports fell 8.8 percent to $11 billion in December, compared with 0.2 percent growth a month earlier. Thailand imports almost all of its crude oil, the price of which is 55 percent lower than a year ago.

Tourist arrivals sank 27 percent to 1.1 million in December after an eight-day seizure of Bangkok airports’ by protesters prompted many travelers to cancel airline and hotel bookings.

Business sentiment rebounded from a record low, rising to of 36.9 last month from 34.4 a month earlier. The reading hasn’t exceeded 50, a level that suggests improving sentiment, since April 2004.

Thailand’s gross domestic product may have shrunk 3.5 percent in the last quarter and the contraction may continue until at least the end of April, the Finance Ministry said yesterday. That would put the economy in into its first recession since 1999.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

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Spain’s January Inflation Slowest Since Franco Era

By Ben Sills

Jan. 30 (Bloomberg) -- Spain’s inflation rate fell in January to the lowest since the death of dictator Francisco Franco triggered the country’s return to democracy more than three decades ago.

Falling oil costs and a slump in domestic spending are dragging down prices as Spain sinks into its worst recession for half a century. The contraction, which began in the third quarter, will stretch into 2010, the International Monetary Fund forecast this week.

“It’s excellent news for an energy-dependent economy like ours that oil is back at $40,” Jose Carlos Diez, chief economist at Intermoney SA, Spain’s biggest bond dealer, said.

Consumer prices increased 0.8 percent from a year ago based on the European Union’s calculation method after a 1.5 percent increase in December, the Madrid-based National Statistics Institute said in an e-mailed statement today. Economists expected Spanish price gains to slow to 1.1 percent, according to the median of 15 estimates in a Bloomberg News survey.

“We will have very, very low rates of inflation especially until the summer,” Deputy Finance Minister David Vegara said today.

Franco died in November 1975 after governing Spain since the end of the country’s civil war in 1939. His successor, King Juan Carlos, then steered the country to a democratic constitution, ratified by a 1978 referendum. The country’s inflation rate last dipped this low in June 1969 when prices rose 0.5 percent from the year earlier. The inflation rate has dropped from 5.3 percent in July, the highest in more than a decade, when crude oil peaked at $147.27 a barrel.

“It’s going to be driven predominantly by food and energy price inflation, but we’re also going to be looking for some softening in underlying inflation given the deterioration in the economy,” Nick Matthews, an economist at Barclays Capital in London, said before the release. “There is a chance that we will see some negative annual rates of inflation in the middle of this year.”

The statistics institute will publish a breakdown of consumer-price shifts on Feb. 13.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net.

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Asian Ministers Said to Plan February Meeting on Currency Pool

By Keiko Ujikane and Kyoko Shimodoi

Jan. 30 (Bloomberg) -- Finance ministers from Japan, China, South Korea and 10 Southeast Asian nations plan an unscheduled meeting next month to forge a pact to pool $120 billion of foreign exchange reserves to help defend their currencies.

The grouping plans to increase the pool from the $80 billion proposed last May in Madrid in an expansion of an arrangement that allows only bilateral currency swaps known as the Chiangmai Initiative. The meeting may take place on Feb. 22 in Thailand, according to two Japanese Finance Ministry officials who spoke on the condition of anonymity.

Asian governments have pledged more than $685 billion in fiscal stimulus and injected billions more into their financial systems to spur lending as the global recession worsens. The reserve pool, like its predecessor, is designed to ensure central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea in the 1997 Asian financial crisis.

“It’s not likely that any of the countries will need to tap the fund in this crisis, but it’s there as a safety net if required,” said V. Anantha-Nageswaran, chief investment officer for Asia Pacific at Bank Julius Baer in Singapore. “That said, Asean should be addressing issues pertaining to this current crisis instead of looking at the rear-view mirror.”

Asian economies have largely escaped a credit crunch that toppled banks in the U.S. and Europe and forced others to eliminate thousands of jobs. Still, growth in the region is slowing as demand for exports shrink and developing Asia will probably expand 5.5 percent this year, the slowest since 1998, the International Monetary Fund said this week.

Currencies at Risk

That may put their currencies at risk for further losses as wealthier nations rein in overseas investment. Nine out of 10 Asian currencies tracked by Bloomberg have dropped versus the dollar this year.

Japan, China and South Korea together with the 10-member Association of Southeast Asian Nations have accumulated more than $3.6 trillion of foreign-exchange reserves, about half of the global total.

Depleted reserves during the Asian crisis, which was set off by plunging currencies, forced some countries to turn to the IMF for more than $100 billion in bailouts, and in return the governments had to cut spending, raise interest rates and sell state-owned companies.

Finance chiefs agreed in May 2008 to make at least $80 billion of their foreign reserves available to one another should countries need money to prop up their currencies. Their deputies had discussed expanding the pool to $120 billion when they met in Japan in November last year, the finance ministry officials said.

Leaders were supposed to announce a deal at a December meeting that was canceled because of political unrest in Thailand, the people said.

Asean wants the three partners to help ensure the facility is big enough to help with economic and financial pressures, the bloc’s Secretary General Surin Pitsuwan said Dec. 15.

In May, finance ministers agreed Japan, China and South Korea would provide about 80 percent of the money, while the 10 Asean members would contribute to the rest. They haven’t decided on how much each country will contribute.

Asean leaders are scheduled to meet in Thailand from Feb. 27 to March 1.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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Economy in U.S. Probably Contracted at Fastest Pace Since 1982

By Timothy R. Homan

Jan. 30 (Bloomberg) -- The U.S. economy probably nosedived in the final months of last year, a trajectory that’s likely to continue in early 2009 as soaring unemployment wallops consumer spending, economists said before a government report today.

Gross domestic product contracted at a 5.5 percent annual pace from October through December, according to the median estimate of 79 economists surveyed by Bloomberg News. It would be the biggest drop since 1982 and follow a 0.5 percent decline the previous three months.

The economy is likely to contract further in the first three months of this year as retailers and manufacturers, from Starbucks Corp. to Boeing Co., this week announced plans to slash payrolls and cut production. Today’s report will put pressure on President Barack Obama to win quick congressional approval of a fiscal stimulus package.

“It’s one of the deepest recessions in two generations,” said Roger Kubarych, chief U.S. economist for UniCredit Global Research in New York. “It’s still getting worse.”

The Commerce Department’s GDP report is due at 8:30 a.m. in Washington. Estimates of economists surveyed by Bloomberg News ranged from declines of 3 percent to 7 percent. The report is the first for the quarter and will be revised in February and March as more information becomes available.

The Federal Reserve this week said it’s prepared to purchase Treasury securities to shore up lending and warned inflation may recede too rapidly. It voted to leave the benchmark interest rate as low as zero.

‘Significant’ Risk

Fed officials also said there was a “significant” risk the economy wouldn’t start recovering until 2010.

A lack of credit, record foreclosures and mounting job losses have forced households to retrench. Consumer spending, the largest part of the economy, is forecast to have dropped at a 3.5 percent pace last quarter after slumping at a 3.8 percent rate the previous three months. It would be the first time purchases declined more than 3 percent in consecutive quarters since records began in 1947.

Americans may pull back further as employers slash payrolls. Companies cut 524,000 workers in December, bringing total job cuts for last year to almost 2.6 million.

More cutbacks are on the way. Boeing, Starbucks, Home Depot Inc. and Texas Instruments Inc. are among U.S. companies that announced thousands of layoffs this week.

Retailers are among businesses eliminating workers following the worst holiday shopping season since the International Council of Shopping Centers started tracking data in 1969.

Cutbacks Spread

The economic slump is likely to persist as companies join consumers in cutting back. Orders for durable goods - items meant to last at least three years - declined each month from October through December, signaling businesses plan to cut spending on new equipment.

Residential construction has also taken a turn for the worse as credit dried up. Home starts and building permits both dropped to record lows in December, according to Commerce figures, indicating housing will remain a drag on growth in 2009 and extend the four-year-old housing recession.

Caterpillar Inc., the world’s largest maker of bulldozers and excavators, this week said it’s cutting 20,000 jobs, and profit and sales this year will trail analysts’ estimates.

“We are expecting recessionary conditions to persist in most of the world throughout the year, with no growth in the world economy,” Chief Executive Officer Jim Owens said Jan. 26 on a conference call with analysts. “Quite frankly, the best hope, I think, is a stimulus package in the U.S. and China, driving demand for commodities.”

The slowdown in global demand indicates American exports are unlikely to contribute to growth in early 2009. The world economy will expand 0.5 percent this year, the weakest gain in the postwar era, the International Monetary Fund said Jan. 28.

                        Bloomberg Survey

===============================================================
                              GDP Personal      GDP Core PCE
                           Annual Consump.   Prices   Prices
                             QOQ%     QOQ%     QOQ%     QOQ%
===============================================================

Date of Release              01/30    01/30    01/30    01/30
Observation Period            4Q A     4Q A     4Q A     4Q A
---------------------------------------------------------------
Median                       -5.5%    -3.5%     0.4%     1.0%
Average                      -5.4%    -3.4%     0.6%     1.2%
High Forecast                -3.0%    -2.3%     3.6%     2.1%
Low Forecast                 -7.0%    -4.0%    -2.5%     0.1%
Number of Participants          79       12       36       11
Previous                     -0.5%    -3.8%     3.9%     2.4%
---------------------------------------------------------------
4CAST Ltd.                   -5.6%     ---      3.1%     ---
Action Economics             -6.5%     ---      2.1%     ---
AIG Investments              -6.1%     ---      ---      ---
Aletti Gestielle SGR         -4.5%    -2.3%    -1.8%     0.6%
Ameriprise Financial Inc     -4.8%    -3.1%     0.4%     2.0%
Argus Research Corp.         -4.3%     ---     -2.3%     ---
Banc of America Securitie    -5.2%     ---      0.2%     ---
Bancolombia SA               -5.0%     ---      ---      ---
Bank of Tokyo- Mitsubishi    -6.1%     ---      ---      ---
Bantleon Bank AG             -5.0%     ---      ---      ---
Barclays Capital             -5.5%     ---      0.8%     0.5%
BMO Capital Markets          -5.5%     ---     -0.3%     ---
BNP Paribas                  -6.0%     ---      1.8%     ---
Briefing.com                 -5.5%     ---      0.5%     ---
Calyon                       -5.7%    -3.5%     ---      ---
Castlestone Management LT    -6.2%     ---      ---      ---
CIBC World Markets           -4.8%     ---      0.7%     ---
Citi                         -6.0%     ---      2.8%     ---
ClearView Economics          -4.9%    -3.0%     ---      ---
Commerzbank AG               -6.4%     ---      ---      ---
Credit Suisse                -4.7%     ---     -1.6%     ---
Daiwa Securities America     -5.5%     ---      3.0%     ---
DekaBank                     -5.5%     ---      ---      ---
Desjardins Group             -4.8%     ---      ---      ---
Deutsche Bank Securities     -6.5%     ---     -0.5%     ---
Deutsche Postbank AG         -4.8%     ---      ---      ---
Dresdner Kleinwort           -5.8%     ---      1.2%     ---
DZ Bank                      -4.0%     ---      0.4%     ---
First Trust Advisors         -5.2%     ---      0.2%     ---
Fortis                       -5.5%     ---      ---      ---
FTN Financial                -4.5%     ---      ---      ---
Goldman, Sachs & Co.         -5.9%     ---      1.2%     0.7%
Helaba                       -4.5%     ---      ---      ---
Herrmann Forecasting         -5.8%    -3.5%     ---      ---
High Frequency Economics     -6.0%     ---     -1.0%     1.5%
Horizon Investments          -6.1%     ---      ---      1.0%
HSBC Markets                 -5.6%     ---     -0.1%     ---
IDEAglobal                   -4.5%    -3.5%     3.6%     2.0%
IHS Global Insight           -5.8%     ---      ---      ---
Informa Global Markets       -6.0%     ---      ---      ---
ING Financial Markets        -6.1%     ---      ---      ---
Insight Economics            -3.5%     ---      1.0%     ---
Intesa-SanPaulo              -5.2%     ---      ---      ---
J.P. Morgan Chase            -5.5%     ---      2.0%     ---
Janney Montgomery Scott L    -5.1%    -3.3%     ---      1.0%
Landesbank Berlin            -5.8%     ---      ---      ---
Landesbank BW                -3.5%     ---      ---      ---
Maria Fiorini Ramirez Inc    -5.0%     ---      ---      ---
Merrill Lynch                -6.0%     ---      1.6%     ---
MFC Global Investment Man    -5.8%    -4.0%     0.4%     1.3%
Moody’s Economy.com          -5.0%     ---      ---      ---
Morgan Keegan & Co.          -6.6%     ---      0.3%     ---
Morgan Stanley & Co.         -6.6%     ---      ---      ---
National Bank Financial      -5.4%    -3.5%     ---      ---
National City Bank           -5.4%    -3.1%     0.3%     ---
Natixis                      -5.6%    -3.5%     0.3%     ---
Newedge                      -4.5%     ---      ---      ---
Nomura Securities Intl.      -4.9%     ---      0.6%     ---
Nord/LB                      -3.0%     ---     -1.0%     ---
PNC Bank                     -5.5%     ---     -1.0%     ---
Raymond James                -5.9%     ---      ---      ---
RBC Capital Markets          -6.1%     ---      ---      ---
RBS Greenwich Capital        -4.0%     ---      3.6%     ---
Ried, Thunberg & Co.         -5.0%     ---      ---      ---
Schneider Foreign Exchang    -6.1%     ---      ---      ---
Scotia Capital               -4.5%     ---      ---      ---
Societe Generale             -7.0%     ---      ---      0.1%
Standard Chartered           -7.0%    -4.0%     ---      ---
Stone & McCarthy Research    -4.5%     ---     -2.0%     ---
TD Securities                -5.6%     ---      ---      ---
Thomson Financial/IFR        -4.0%     ---      ---      2.1%
UBS Securities LLC           -4.5%     ---     -2.5%     ---
Unicredit MIB                -5.0%     ---      ---      ---
University of Maryland       -5.0%     ---      2.6%     ---
Wachovia Corp.               -5.3%     ---      ---      ---
Wells Fargo & Co.            -6.0%     ---      ---      ---
WestLB AG                    -5.6%     ---      ---      ---
Westpac Banking Co.          -6.5%     ---      ---      ---
Wrightson Associates         -5.0%     ---      ---      ---
===============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Japan Heads for Worst Recession as Output Tumbles, Losses Mount

By Jason Clenfield and Toru Fujioka

Jan. 30 (Bloomberg) -- Japan headed for its worst postwar recession as factory production slumped an unprecedented 9.6 percent, NEC Corp. said it will cut more than 20,000 workers and Hitachi Ltd. forecast a record loss.

The December drop in output eclipsed the previous record of 8.5 percent set only a month earlier, the Trade Ministry said today in Tokyo. NEC, Japan’s biggest personal-computer maker, forecast its first loss in three years.

The Nikkei 225 Stock Average slumped 10 percent this month, extending last year’s record 42 percent drop as the global recession smothered demand for Japanese cars and electronics. Mounting losses forced companies to fire workers in December, spurring the biggest jump in the unemployment rate in 41 years.

“Japan’s economy is falling off a cliff,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “There’s really nothing out there to drive growth.”

Hitachi forecast a 700 billion yen ($7.8 billion) annual loss and said it may eliminate 7,000 jobs. NEC reversed its full-year projection to a loss of 290 billion yen as demand for chips plunged and the value of its shareholdings tumbled.

Companies that posted quarterly losses today included Mizuho Financial Group Inc., the bank with the biggest subprime writedowns in Asia; Daiwa Securities Group Inc., Japan’s second- largest brokerage; and Nippon Oil Corp. Honda Motor Co. cut its annual profit forecast 57 percent.

“It’s getting scarier and scarier to ponder what will happen around March,” when the fiscal year ends, said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co. “Deeper cuts in capital investment and workforces will probably be needed.”

Steeper Drop

The month-on-month decline in production was steeper than the 8.9 percent economists predicted and the biggest since the figures were first compiled in 1953. Companies planned to lower output a further 9.1 percent in January and 4.7 percent in February.

“There’s a global synchronized recession and manufacturers are responding aggressively,” said Jan Lambregts, head of Asian research at Rabobank International in Hong Kong. “That’s going to have a profound impact” on economic growth.

The jobless rate soared to 4.4 percent from 3.9 percent, the government said. Household spending slid 4.6 percent, a 10th monthly drop, as people grew more concerned about job security.

The Nikkei sank 3.1 percent today, adding to last year’s record 42 percent drop. The yen traded at 89.35 per dollar from 89.99 before the economic reports were published. The currency’s 18 percent gain in the past year has compounded exporters’ woes by eroding the value of their profits earned overseas.

Rising Unemployment

“The jobless rate could rise to around 5 percent, giving us more reasons not to expect consumer spending to support the economy,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo.

The International Monetary Fund said this week that Japan’s gross domestic product will shrink 2.6 percent this year, the bleakest projection for any Group of Seven economy except the U.K. That contraction would be Japan’s worst since World War II.

Nishioka at RBS estimated GDP fell at an annual 14 percent pace from October through December. That would exceed a 13.1 percent drop in the first quarter of 1974 to become the sharpest on record. Economists predict a report later today will show the U.S. economy, Japan’s biggest market, shrank an annualized 5.5 percent pace last quarter, the biggest drop since 1982.

The slump may last more than three years and exceed the 1980 to 1983 downturn to become the longest on record, according to Hiroshi Yoshikawa, a Tokyo University professor who heads a government panel that dates the economic cycle. The panel yesterday said the recession began in November 2007.

‘Very Grave Situation’

“We’re in a very grave situation,” Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo today. “Japan is being hit by this wave of weakening global demand.”

Parliamentary gridlock has stymied the ruling Liberal Democratic Party’s efforts to pass a 10 trillion yen ($111.2 billion) stimulus package. The Bank of Japan, which last month lowered interest rates to 0.1 percent, has little room to counter the slump other than by purchasing corporate debt to ease a credit squeeze, which it started to do today.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Crude Oil May Rise as OPEC Members Cut Production, Survey Shows

By Mark Shenk

Jan. 30 (Bloomberg) -- Crude oil may rise as the Organization of Petroleum Exporting Countries reduces production to counter the recession in major consuming countries.

Twelve of 32 analysts surveyed by Bloomberg News, or 38 percent, said futures will increase through Feb. 6. Ten respondents, or 31 percent, forecast oil will fall and 10 said there will be little change. Last week, 43 percent of analysts expected prices to increase.

OPEC announced a record 9 percent cut in supply targets at a Dec. 17 meeting to bolster prices. The reduction took effect on Jan. 1. U.S. crude oil inventories rose 6.22 million barrels last week to 338.9 million barrels, the highest level since August 2007, the Energy Department reported on Jan. 28.

“Although U.S. crude oil inventories are still climbing, it’s about time for the OPEC production cuts to have an impact,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York.

Crude oil for March delivery has declined $5.03, or 11 percent, to $41.44 a barrel so far this week on the New York Mercantile Exchange. Prices have dropped 72 percent from the record $147.27 a barrel reached on July 11.

The oil survey has correctly predicted the direction of futures 48 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    12         10        10

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

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Australian Power Supplies Cut as Heat Overwhelms Grid

By Angela Macdonald-Smith

Jan. 30 (Bloomberg) -- Australia’s wholesale electricity market operator cut power to some customers in Victoria and South Australia states for a second day after shortages left the system unable to meet record demand amid extreme temperatures.

About 350 megawatts of customer load was reduced from the transmission networks in Victoria and 90 megawatts in South Australia, the National Electricity Market Management Co. said today in statements on its Web site. Hot weather affected power flows through the Basslink cable from Tasmania to Victoria and the output of “a number” of generators was reduced, it said.

The temperature in Melbourne, Victoria’s capital, was forecast to reach 43 degrees Celsius (109.4 Fahrenheit) today, the first time the city has had three consecutive days above 42 degrees, the National Climate Center said. The state government provided free public transport, citing a “once-in-a-century heatwave.”

The cut to Victoria’s power supply were equivalent to 3.3 percent of today’s peak demand of about 10,500 megawatts and 2.7 percent of South Australia’s maximum use. The power cuts affected a combination of households, businesses and industry were implemented by distribution companies, the market manager said.

The Basslink underwater cable, owned by Singapore’s CitySpring Infrastructure Trust, is designed to shut down when temperatures in northern Tasmania reach more than 35 degrees, and also halted operations yesterday. Such conditions are estimated to occur just once in 50 years, Basslink Chief Executive Officer Malcolm Eccles said yesterday.

Power was restored to all customers after about 2 1/2 hours, said Paul Bird, a spokesman for National Electricity.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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Japan’s Gasoline Sales Fall Most Since 1952 on Prices

By Megumi Yamanaka

Jan. 30 (Bloomberg) -- Japan, the world’s third-largest oil user, said gasoline sales in the country fell the most in more than half a century as record prices prompted motorists to drive less.

Sales fell 4.2 percent in 2008 to 57.3 million kiloliters (15.1 billion gallons), the biggest drop since the trade ministry started collecting data in 1952. Sales of oil-based fuels including gasoline fell 5.3 percent, the ministry said in a report in Tokyo today.

Gasoline consumption has been falling since 2006, and the slump accelerated last year as oil touched a record $147.27 a barrel in July, driving up pump prices. An unprecedented collapse in overseas demand led Japanese manufacturers to slash production by a record 9.6 percent last month, deepening contractions in petroleum demand as companies turned off generators and shipped fewer goods.

Japan’s oil imports fell for a third consecutive month in December, declining 6.5 percent to 20.5 million kiloliters, the ministry said in the same report. LNG imports were 6.4 million metric tons, up 3.9 percent from a year earlier, while liquefied petroleum gas purchases fell 6.3 percent to 1.16 million tons. Naphtha imports fell 17 percent to 1.85 million kiloliters.

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.

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ERA Expects to Win Higher Prices for Uranium in 2009

By Angela Macdonald-Smith

Jan. 30 (Bloomberg) -- Energy Resources of Australia Ltd., producer of more than a 10th of the world’s mined uranium, predicted higher average prices for its output this year as spot-price gains through 2007 are reflected in contract rates.

Increased construction of nuclear power plants and efforts to reduce pollution from greenhouse gases contribute to a “strong outlook” for uranium prices over the next two years, Chief Executive Officer Rob Atkinson said today in an interview. Government stimulus packages will also ensure infrastructure is built to meet energy demand, he said.

Energy Resources, controlled by Rio Tinto Group and based in Darwin, today said full-year profit almost tripled to a record, boosted by an insurance settlement for damage and business interruptions caused by storms. Uranium spot prices, down more than 60 percent since surging to a record $138 a pound in June 2007, remain above levels of two years ago.

“We’re certainly confident that given uranium’s uses and domestic electricity needs, the demand is going to be there,” Atkinson said by telephone. Spot prices will probably trend closer toward long-term prices, which are about $70 a pound, said Chief Financial Officer Chris Bateman.

Energy Resources gained 35 cents, or 1.8 percent, to A$19.35 in Sydney trading, its highest close for more than three weeks. The advanced outpaced a 0.4 percent advance in the exchange’s benchmark index.

Beating Consensus

Net income rose to A$221.8 million ($144 million) in the year ended Dec. 31, from A$76.1 million a year earlier, Energy Resources said in a statement to the Australian stock exchange. The result included a gain of A$131.4 million on the insurance settlement and a A$28.6 million loss on U.S. dollar debt. Profit before one-time items rose 56 percent to A$119 million, beating the market consensus of about A$102 million, according to Macquarie Group Ltd.

Sales jumped 91 percent to A$691.7 million on production that was little changed at 5,339 metric tons.

“It was a solid result,” said Brendan Harris, a Sydney- based analyst at Macquarie. “We expect earnings to go much higher again this year as uranium prices slowly ratchet higher as legacy contracts roll off.”

Profit before one-time items may double to A$237.5 million this year, according to the median of 10 analyst estimates compiled by Bloomberg.

The company earned an average price of $32.53 a pound for its uranium oxide last year, 30 percent higher than in 2007. The spot price was $50 on Jan. 23, Denver-based pricing service TradeTech LLC said on its Web site.

Increasing Trend

“What you’ll see in our average realized selling prices is an increasing trend, albeit the numbers are still below the current spot price,” Bateman said. “We’ll continue to see that trend because we’ve been putting contracts in place throughout the rising market.”

Sales volumes sold this year should be “slightly higher” than the 5,272 tons of last year, the company said.

ERA is studying two expansion projects at its only producing site at Ranger in the Northern Territory, Atkinson said. A decision will be made in the second half on the development of a plant to enable the extraction of uranium oxide contained in lower-grade material, while feasibility studies are yet to start on a potential underground mine to produce from the Ranger Deeps 3 area, he said.

Neither project will be in full production sooner than three years, Atkinson said.

Resources at Ranger more than doubled to 115,000 tons of contained uranium oxide after the discovery at Ranger 3 Deeps. Reserves at Ranger fell 11 percent to 43,966 tons, while those at the undeveloped Jabiluka deposit rose 15 percent to 67,700 tons.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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EDF Beats GDF Suez to Build New Nuclear Reactor

By Tara Patel

Jan. 30 (Bloomberg) -- Electricite de France SA, Europe’s biggest power producer, beat off competition from GDF Suez SA to win French government approval to spearhead development of a second new-generation nuclear reactor.

The Evolutionary Power Reactor, or EPR, will be built at an existing nuclear site at Penly, northern France, starting in 2012, French President Nicolas Sarkozy said in an e-mailed statement. EDF, which is based in Paris, will have majority control over a company created to oversee the project. GDF Suez “will be associated” with the venture.

“EDF will have to put cash down to invest,” Chicuong Dang, an analyst at Richelieu Finance in Paris, said by telephone today. “Earnings will come over the longer term. Costs of building the EPR have risen while French power rates remain low.”

The decision ends months of speculation about which utility would pilot the project and where it would be located. EDF began construction of a 1,650-megawatt EPR at Flamanville in Normandy more than a year ago. The reactor was designed by Areva SA, the world’s biggest builder of atomic plants. EDF, which has estimated the cost of the EPR at 4 billion euros ($5.2 billion), plans similar models in the U.K. and the U.S., and has already started developing reactors in China.

Shares Gain

EDF rose 0.9 percent to 39.32 euros as of 10:10 a.m. in Paris. GDF Suez was also 0.9 percent higher at 31.10 euros. The stocks have dropped 6 percent and 12 percent, respectively, since the beginning of the year.

The latest reactor, the country’s 60th, is targeted for completion in 2017 and other investors may also participate, the statement said, leaving open the possibility of a third EPR in the future. “The government acknowledges the willingness of GDF Suez to lead develop and operate the next EPR.”

Both EDF Chief Executive Officer Pierre Gadonneix and GDF Suez SA CEO Gerard Mestrallet had signaled their interest in overseeing the project.

EDF, which operates 58 atomic plants in France, will join up with other investors in the reactor “in particular GDF Suez,” the state-controlled utility said in a separate e-mailed statement today.

GDF Suez operates seven atomic reactors in Belgium through its Electrabel SA unit. The European Commission has put pressure on the French government to increase competition on the national power market, now dominated by former monopoly holder EDF.

Sign Deal

EDF signed a deal with Enel SpA in 2007, giving Italy’s largest utility a 12.5 percent stake in the Flamanville generator and an option to invest in five more plants in France. EDF has put Italy on its list of countries, including China, the U.K. and U.S., where it wants to expand nuclear operations.

GDF Suez has agreements to use power from two French reactors run by state-controlled EDF at Tricastin and Chooz. Mestrallet has said he wants to operate EPRs by 2020 and that France is “obviously a priority.”

French power exports exceeded imports by 46.6 terrawatts hours, 15 percent less than in 2007, according to data published earlier this year by Reseau de Transport d’Electricite, the wholly-owned grid operator of EDF. The utility is also having to rely on imports to meet peak demand during hot or cold spells.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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Tokyo Electric Predicts Narrower Loss on Cheaper Oil

By Megumi Yamanaka and Michio Nakayama

Jan. 30 (Bloomberg) -- Tokyo Electric Power Co., forced by an earthquake to shut the world’s biggest nuclear plant, forecast a narrower loss as lower crude oil prices reduced the cost of fuels used for generation.

Asia’s biggest utility estimated a net loss of 45 billion yen ($503 million) for the year ending March 31, compared with the 220 billion yen loss it forecast on Oct. 31, according to a statement to the Tokyo Stock Exchange today. The figure compares with the median estimate of a 57 billion yen loss in a survey of five analysts and a 150 billion yen loss a year earlier.

Japanese power producers are benefiting from oil’s 72 percent decline from a July record, while the yen’s 20 percent gain against the dollar in the past year has cut the cost of imported crude, natural gas and coal. Lower costs are helping utilities offset slower sales as industrial demand slumps and Japan heads for its worst postwar recession.

“The effects of cheaper oil and the strengthening of the yen will erase the impact of dropping industrial demand,” Tatsuya Tsunoda, a senior analyst at Mizuho Securities Co., said before the announcement.

For the nine months ended Sept. 31, Tokyo Electric’s net loss widened to 138 billion yen from 3.09 billion yen a year earlier. The company posted a pretax loss of 199 billion yen, compared with 157 billion yen a year ago, it said in a separate statement today.

“Because of the oil slump and strong yen, we’ll save about 33.5 billion yen in costs,” Akira Takahashi, general manger at the utility’s accounting department, told reporters today.

Power Sales Drop

The shares rose 1.4 percent to 2,830 today. They’ve lost 0.5 percent in the last six months compared with a 39 percent decline in the benchmark Topix index. The earnings results came after market closed.

Power sales to industrial users fell the most since 1972 in December, with record declines for Tokyo Electric and Chubu Electric Power Co., Japan’s third-biggest generator. Japanese manufacturers cut production an unprecedented 9.6 percent last month, the Trade Ministry said today.

Kansai Electric Power Co., the second-largest power utility, and Chubu Electric joined Tokyo Electric in forecasting a narrower loss today, citing drops in fuel costs.

Kansai, Chubu Electric

Kansai Electric estimated a narrower loss of 28 billion yen compared with the 64 billion yen loss forecast in October, it said in a statement today. Chubu Electric predicted a net loss of 54 billion yen compared with the 78 billion yen loss forecast in December.

Kansai’s shares gained 3.1 percent to close at 2,485 yen and Chubu’s rose 3.2 percent to 2,570 yen. Kansai shares climbed 3.8 percent in the last six month while Chubu increased 3.4 percent. The Topix Electric Power and Gas Index, which tracks 17 utilities, edged up 1.3 percent in the same period.

“The revisions in their full-year forecasts are unlikely to have an impact on the market as the upward changes were expected and have already been factored in,” Tsunoda said. “We can expect improved earnings in the fourth quarter.”

All three utilities made the previous forecasts based on assumptions that crude prices would stay above $100 a barrel in the year to March 31. Tokyo Electric in October pegged oil prices at $110 a barrel. Dubai crude, a benchmark for Japan, was at $43.28 a barrel on Jan. 30.

Tokyo Electric has been hurt the most by high oil prices since an earthquake in July 2007 forced it to close the Kashiwazaki Kariwa nuclear plant, which accounts for around 10 percent of the utility’s capacity. All five of the analysts surveyed by Bloomberg based their estimates on the assumption that at least some output would resume at the plant next fiscal year.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net; Michio Nakayama in Tokyo at mnakayama4@bloomberg.net.

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Nippon Oil Forecasts Wider Loss on Declining Crude

By Megumi Yamanaka

Jan. 30 (Bloomberg) -- Nippon Oil Corp., which will merge with Nippon Mining Holdings Inc. in October, forecast a wider loss as the plunge in the price of crude cut the value of stockpiles held by Japan’s biggest refiner.

The company estimated a net loss of 240 billion yen ($2.7 billion) for the year ending March 31, compared with the 23 billion yen it predicted in October, it said in a statement to the Tokyo Stock Exchange today. It reversed its pretax estimate to a 270 billion yen loss from the previous forecast of 5 billion yen profit.

Oil prices have fallen 72 percent from a record $147.27 a barrel in July, reducing the value of crude inventories, while the yen’s 20 percent rise in a year has trimmed gains from output at fields Nippon Oil owns in the U.S., Middle East and Asia. Declining petroleum demand in Japan has forced the company to cut production for a ninth consecutive month in February and agree to merge with Nippon Mining to reduce capacity and costs.

“Drops in oil and recent gains in the yen against the U.S. dollar weighed on the company’s upstream business,” Hidetoshi Shioda, a senior analyst at Mizuho Securities Co., said by phone before the earnings announcement. Shioda estimated Nippon Oil’s inventory-valuation loss would widen to about 350 billion yen from the 163 billion yen the Tokyo-based company forecast in October.

Shares Decline

The shares have slumped 45 percent in the past 12 months, outpacing the 40 percent decline in the benchmark TOPIX index. They fell 3.2 percent to 396 yen at 2:38 p.m. in Tokyo trading.

Nippon Oil along with Japanese refiners Showa Shell Sekiyu K.K. and Cosmo Oil Co. are incurring valuation losses because of the way they keep accounts, which tends to exacerbate losses when oil prices are falling. Nippon Oil calculates the cost of buying oil based on higher, older prices and evaluates its stockpiles based on current, lower prices.

Nippon Oil today cut its forecast for crude oil prices to an average of $83.70 a barrel from the $97.80 a barrel it predicted in October. It raised its estimate of the exchange rate against the U.S. dollar to 100 yen from the 105.3 yen it predicted in October.

For the nine months ended Dec. 31, the company posted a net loss of 224.5 billion yen from a 136 billion yen profit a year earlier, Nippon Oil said in a separate statement today.

Drops in Demand

Japanese refiners face a shrinking market because of the ageing population and a switch to alternatives fuels. Domestic sales dropped 9.5 percent in November, and consumption slumped by more than 10 percent each month from August to October.

Nippon Oil is reducing capacity and restructuring to cope with weak demand. The company, which absorbed Kyushu Oil Corp. last year, is set to merge with Nippon Mining in October. President Shinji Nishio pledged to cut capacity by more than 400,000 barrels a day, or 24 percent, as part of the merger. It will also close the 60,000 barrel-a-day Toyama refinery in central Japan on Feb. 1, ahead of schedule.

“By reducing output refiners have succeeded in improving their margins for processing fuels,” Shioda said. “Investors are looking to see what benefits the merger will bring.”

To contact the reporter on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.

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