Nippon Oil, Nippon Mining Said to Delay Merger on SEC Filings

By Megumi Yamanaka and Yuji Okada

Feb. 26 (Bloomberg) -- Nippon Oil Corp., Japan’s biggest refiner, and Nippon Mining Holdings Inc. will delay a plan to merge in October as they need time to submit documents to U.S. regulators, people with knowledge of the situation said.

The two companies underestimated the time they would need to reconcile the differences between Japanese and U.S. accounting standards, and may take several months to complete submissions, said officials involved in the discussions, who asked not to be identified before an announcement tomorrow. The U.S. Securities and Exchange Commission requires the filings from companies that are more than 10 percent owned by U.S. shareholders, they said.

The merger, which will create Japan’s third-largest company by revenue, needs to be approved by stockholders of Nippon Oil and Nippon Mining at their annual general meetings in June. The combined entity will help save 60 billion yen ($613 million) in costs annually as the global slump in fuel demand forces the country’s refiners to reduce output and shut plants.

“It’s an issue for Japanese companies,” Taisuke Igaki, an attorney specializing in mergers and acquisition at Kitahama Partners, said by phone from Osaka. The SEC requires businesses to submit additional information in an F-4 filing before shareholders vote on matters, including mergers, he said.

Spokesmen at Nippon Oil and Nippon Mining declined to comment.

U.S. shareholders hold 31 percent of Nippon Mining, Japan’s largest copper producer, and 9.7 percent of Nippon Oil, according to Bloomberg data.

Share Performance

Under the merger plan announced in December, the companies were to sign a final agreement in March and form a holding company in October under which the two companies will be reorganized in April 2010 into three subsidiaries -- refining and sales, oil exploration and metals.

Shares of Nippon Oil have risen 38 percent since the merger was made public, while Nippon Mining’s shares have gained 22 percent in the same period.

Nippon Oil lost 51 percent of its market value in 2008 and Nippon Mining lost 47 percent. Both companies forecast losses for the year ending March 31 after oil prices slumped 71 percent from a record $147.27 a barrel on July 11.

Domestic fuel demand, already weakened by demographic changes such as a shrinking population, has been damped further by the recession as factories slash operating rates and shipping lines cut container services. Gasoline sales fell the most since 1952 in 2008.

‘Sense of Crisis’

Nippon Oil has taken steps to meet falling demand, shutting a 60,000 barrel-a-day plant in central Japan last month and announcing it will cut output for a 10th consecutive month in March.

“Declining fuel demand has heightened the sense of crisis, and further declines in our earnings will be unavoidable without decisive action,” Nippon Mining President Mitsunori Takahagi said when the merger was announced.

The merged company would cut refining capacity by 400,000 barrels a day within two years of the December announcement, Nippon Oil President Shinji Nishio said at the time. That’s 22 percent of their combined current capacity. The company, which has yet to be named, will have 37 percent of the domestic refining market and a capacity of 17.9 million barrels a day.

The deal will create a business with revenue of 11.9 trillion yen for the year ended March, ranking third in Japan after Toyota Motor Corp. and Honda Motor Co., according to data compiled by Bloomberg employing the U.S. GAAP accounting standard.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.

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RWE Posts Quarterly Profit; Raises Earnings Outlook

By Nicholas Comfort

Feb. 26 (Bloomberg) -- RWE AG, Germany’s second-largest utility, posted a fourth-quarter profit after starting two reactors following repairs, and raised its earnings outlook.

Net income was 347 million euros ($441 million), versus a 167 million-euro loss a year earlier, Bloomberg calculations show. Bloomberg subtracted nine-month results from full-year figures released today by RWE. Company spokesman Harald Fletcher declined to comment on the calculation. Profit missed the 421 million-euro median estimate of six analysts surveyed by Bloomberg.

RWE started two nuclear reactors, which are cheaper to run than coal- or gas-fired plants, boosting profit even as a recession in the euro region cut demand from industry. Profit through 2012 will grow faster than previously forecast as long as RWE can sell advance contracts for German electricity at an average 60 euros a megawatt-hour, it said.

“The mid-term outlook is pretty upbeat,” Bernhard Jeggle, an analyst at Landesbank Baden-Wuerttemberg in Stuttgart, said today by telephone. “That’s surprising. The forecast for 2009 is significantly below consensus.”

Operating profit and earnings before interest, tax, depreciation and amortization as well as recurrent net income will all be on par with 2008, Essen-based RWE said. Sales rose 18 percent in the fourth quarter to 14.5 billion euros, and will be higher in 2009 than in the 12 months through December, it said.

Shares Drop

RWE fell 88 cents, or 1.7 percent, to 51.75 euros in Frankfurt trading at 9:21 a.m. local time, valuing the company at 28.8 billion euros.

Spot prices for power in Germany, Europe’s largest energy market, touched record highs last year as fuel costs rose. They averaged 66 euros in the nine months through September and have dropped 52 percent since then, according to broker GFI Group Inc.

While RWE may earn an additional 900 million euros selling power at about 64 euros a megawatt-hour in 2009, up from 58 euros last year, profit will be sapped by pricier fuel, Jeggle said.

The electricity prices RWE can charge will probably fall below 60 euros in 2011 and 2012, making the mid-term guidance harder to reach, according to the analyst, who recommends investors “hold” shares in the utility.

RWE shares fell 34 percent in last year. That’s less than the 41 percent drop of larger, Dusseldorf-based competitor E.ON AG and the 38 percent decline of the Dow Jones Stoxx Utilities Index, which includes both companies.

Biblis Halts

RWE’s Biblis A and B atomic reactors halted in 2006 to repair screw anchors that didn’t meet regulator specifications. The two plants, which have a combined capacity of more than 2,000 megawatts, were both on line in the fourth quarter.

That meant the utility could ramp up the share of nuclear power it supplies clients and buy fewer carbon-dioxide emission permits. Unlike production at RWE’s lignite-fired plants, atomic generation is almost emission-free.

Operating profit will grow 5 to 10 percent a year through 2012, up from a previous 5 percent goal, based on an average forward power price of 60 euros a megawatt-hour, the company said in the statement. That forecast doesn’t take into account RWE’s takeover of Essent NV, announced last month. Recurrent net income, which RWE defines as net income before one-time items such as charges and writedowns on fuel hedging derivatives, will gain 10 percent on average through 2012.

Gas Price Cut

RWE will cut natural-gas tariffs for its customers by 12 percent from April 1. Including a January reduction, that will trim prices by 18 percent, according to the statement. The heating fuel is pegged to crude oil, which has fallen more than $100 since a record high of $147.27 a barrel in July.

The dividend payout for 2008 will jump 43 percent to 4.50 euros a share, pending stockholders’ approval at their annual meeting in April, the company said Feb. 24.

RWE plans to cut costs by 450 million euros by the end of this year and will trim 1.2 billion euros of expenses from operating profit through 2012, it said in the statement.

Full-year profit fell 4 percent as RWE took a charge related to its U.S. unit American Water Works Co., the company said today.

Net income in the 12 months through December was 2.56 billion euros, down from 2.67 billion euros a year earlier. Full- year sales rose 15 percent to 48.95 billion euros.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

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Japan’s Recession May Deepen After Exports Drop Record 45.7%

By Timothy R. Homan and Jason Clenfield

Feb. 26 (Bloomberg) -- Japan faces its worst postwar recession as the collapse in consumer spending abroad pummels the country’s exports.

Shipments from Asia’s largest economy will contract further this year, analysts predict, after plunging a record 45.7 percent in January from a year earlier. Last month’s slide, reported yesterday by the Finance Ministry in Tokyo, pushed the trade deficit to a record 952.6 billion yen ($9.9 billion). Sales to the U.S. alone fell 52.9 percent.

“We’re set up for a very, very deep contraction in first- quarter exports,” said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. “There’s no way you’re going to reverse this situation. The quarter’s pretty much already written as of January.”

Gross domestic product shrank at an annual pace of 12.7 percent last quarter and won’t do any better in the first three months of this year, Hensley estimates. The slump could force Prime Minister Taro Aso’s government, whose popularity has dwindled to less than 10 percent, to push for more fiscal stimulus. Meantime, factories are closing and workers are losing their jobs.

Japan became more reliant on exports for growth in the past decade, making the economy more vulnerable to the global recession. Manufacturers shipped 21 percent of their goods abroad in 2008, up from 16 percent in 1998, according to the central bank.

Factory Losses

Companies cut output by an unprecedented 9.8 percent in December from a month earlier and the jobless rate climbed the most in 41 years to 4.4 percent. Economists predict a report tomorrow will show factory output dropped 10 percent in January.

Nissan Motor Co. said this month it will fire 20,000 workers and post its first loss in nine years as global car demand plunges. Toyota Motor Corp., forecasting its first operating loss in seven decades, will halve production in the current quarter versus the same period last year.

“Japan is in a serious slump right now, and it’s hard to see them stimulating themselves out of this recession,’’ said Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina. He projects exports will contract through the third quarter, with at least a 10 percent decline in the first three months of the year.

Consumers in the U.S. are cutting back on purchases as job losses mount. Spending will contract during the first half of this year after dropping during the last six months of 2008, according to a survey of economists this month by Bloomberg News. Confidence among consumers plunged to a record low in February, the New York-based Conference Board said this week.

Record Slump Forecast

The Japanese economy’s contraction last quarter was the worst since the 1974 oil shock, and analysts predict the slump will drag into next fiscal year. Output may shrink a record 4 percent in the year starting April 1, according to economists surveyed.

Japan’s shipments to Europe slid 47.4 percent in January from a year earlier, the Finance Ministry said. Exports to China fell 45.1 percent and those to Asia dropped 46.7 percent. Imports fell 31.7 percent from a year earlier.

“Japan remains an economy that is very dependent on trade,” said Lewis Alexander, chief economist at Citigroup Inc. in New York. “The pace of the contraction of global trade is very extreme.”

Currency Impact

The yen’s 23 percent gain against the dollar in 2008 eroded the value of exporters’ overseas sales, exacerbating losses at Nissan and Toyota. Still, the Japanese currency has weakened 7.1 percent this month against the dollar, offering some relief to exporters while indicating investors’ growing pessimism about the economic outlook.

Bank of Japan Governor Masaaki Shirakawa said last week that the economy will remain in a “severe” state next quarter and companies will struggle to obtain financing as investors shun risk. The bank, which lowered the key overnight lending rate to 0.1 percent in December, last week said it will buy corporate bonds for the first time to stem the credit squeeze.

The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Aso is struggling to get approval from the opposition-controlled upper house to spend 10 trillion yen to aid companies and households, whose sentiment is near a record low.

To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

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Asian Currencies Drop, Led by Baht, on Risk Aversion, Exports

By Bob Chen and Patricia Lui

Feb. 26 (Bloomberg) -- Asian currencies fell, with the Thai baht and Singapore’s dollar leading losses on concern prolonged turmoil in global financial markets will deepen the economic slump and delay a recovery in the region’s exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, approached a three-month low. The U.S. Treasury yesterday said America’s 19 biggest banks have six months to raise new capital after a mandatory review of their balance sheets, or they must accept taxpayer money on government conditions. Singapore said today its economy shrank the most in at least 33 years.

“There’s heightened risk aversion on concern that the current financial-markets crisis could extend a bit longer,” said Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore. The tests are “causing some anxiety in the market. The dollar is fairly well bid.”

Singapore’s dollar slipped 0.4 percent to S$1.5336 against the U.S. currency as of 11:06 a.m. local time, and the baht weakened 0.6 percent to 35.99, the lowest level since January 2007, according to data compiled by Bloomberg. Taiwan’s dollar declined 0.2 percent to NT$34.798 and traded near the lowest in more than five years, according to Taipei Forex Inc.

A slump in exports and a weakening financial-services industry pushed Singapore deeper into recession, the trade ministry said today. Gross domestic product declined an annualized 16.4 percent last quarter from the previous three months, after shrinking a revised 2.1 percent between July and September.

Export Dependent

Reports tomorrow will show Malaysia’s and India’s economies expanded at the slowest pace in at least four years, according to economists in Bloomberg News surveys.

Taiwan’s export orders in January tumbled by a record 42 percent and industrial output plunged 43 percent, the most ever, the Ministry of Economic Affairs reported Feb. 24. Taiwan’s central bank slashed the benchmark interest rate to an all-time low immediately after the reports.

“Both these currencies are driven by the fact that they are very export dependent,” Thio said. “In Singapore, the weight will fall on the Singapore dollar to take the adjustment.”

Taiwan’s dollar touched NT$34.862 on Feb. 23, the weakest level since April 2003. BNP’s Thio expects the Singapore and Taiwan dollars to fall to S$1.60 and NT$36 respectively, by the end of June.

Rate Cut

The baht slumped to a two-year low on concern sliding interest rates will deter foreign funds from investing in the nation. The central bank yesterday cut its benchmark rate by half a percentage point to 1.5 percent to buoy demand after consumer prices fell and the economy shrank. Overseas investors sold $71 million more Thai stocks than they bought this month.

Elsewhere, South Korea’s won declined 0.2 percent to 1,519.50 against the dollar. Malaysia’s ringgit declined 0.2 percent to 3.6740 per dollar and the Indian rupee dropped 0.2 percent to 50.055. The Philippine peso slipped 0.1 percent to 48.175 and the Indonesian rupiah gained 0.2 percent to 11,988. China’s yuan and Vietnam’s dong were little changed at 6.8391 and 17,483.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net.

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Korea Sees ‘Lumpy Road’ for Won, Bank Debt-Sale Delay

By Sangim Han

Feb. 26 (Bloomberg) -- South Korea expects continued volatility in the won, the world’s worst-performing major currency in the past year, further delaying bank sales of bonds to global investors, the Financial Services Commission said.

“We’re going to have a lumpy road on the FX side,” FSC Vice Chairman Rhee Chang Yong said in an interview in Seoul yesterday. “Because of the eastern European market situation, I can see that March won’t be an easy month” for commercial banks to raise funds in the international market, he said.

Korea’s $202 billion of foreign reserves will allow the central bank to “smooth” trading in the won, which dropped 37 percent in the past 12 months, Rhee said. The currency this month approached an 11-year low reached in November as the economy headed for a recession and investors fled Eastern Europe, where the International Monetary Fund has bailed out five countries.

“Korea’s foreign liquidity isn’t good and the first quarter also witnessed the unexpected eastern Europe factor,” said Kwon Goohoon, an economist at Goldman Sachs Group Inc. in Seoul. “Still, the won will stabilize in the latter half of this year as Korea may turn to a surplus in current accounts.”

European banks hold 47 percent of the $168.4 billion in Korean banks’ foreign liabilities, according to FSC data. The Seoul Economic Daily yesterday said the continent’s lenders may be reluctant to extend more credit as they deal with losses closer to home.

South Korea’s direct exposure to eastern Europe is negligible, Rhee said, with less than $2 billion of assets in the region.

‘March Crisis’

The risk of a “March crisis” for banks, in which foreign lenders refuse to roll over maturing debt, is also overblown, Rhee said.

About 90 percent of Korean bank debt is being renewed by foreign creditors this year, Rhee said, up from only 40 percent in October and November, after the collapse of Lehman Brothers Holdings Inc. froze global credit markets.

“I can’t say Korea is now in a safe zone, but definitely Korea is not in a red zone, as in October or November,” said Rhee, whose agency supervises banks in Asia’s fourth-largest economy. “Now, our banks are easily extended by three or four months.”

The won fell 0.2 percent to 1,519.20 per dollar as of 1:58 p.m. in Seoul, near the 11-year low of 1,525 reached in November. One-month implied volatility on dollar-won options, a measure of price swings expected by traders, dropped to 30 percent yesterday from as high as 80 percent on Oct. 28. A year ago, it was as low as 5 percent.

Pooling Funds

South Korea has widened its own access to foreign currency, joining Japan, China and 10 Southeast Asian nations this week in setting up a $120 billion pool of foreign exchange reserves. In October, the Federal Reserve agreed to provide a $30 billion swap line to South Korea as part of a broader effort to help emerging markets maintain access to U.S. dollars.

Korean banks have $24.5 billion of foreign-currency debt maturing in 2009, including $10.4 billion due in February and March, the Bank of Korea said on Feb. 19.

Rhee said the country’s export-oriented economy leaves it “intrinsically exposed” to slowing growth and volatile markets in the rest of the world. Foreign creditors granting new loans are offering shorter maturities, he said.

Missed Opportunity

Many South Korean banks missed a window of opportunity to tap global markets in January, before renewed concerns about sovereign defaults and the health of global banks raised the cost of foreign funding.

State-run lenders Korea Development Bank and Export-Import Bank of Korea sold $4 billion of global bonds in January to provide a benchmark, only for other banks to hold back, hoping to pay less as the year progressed.

“Private banks had many reasons not to go in January as they expected international markets will improve in the first quarter,” Rhee said. “For now, we will see if they will go ahead with their plans or delay to April.”

South Korea has offered a three-year guarantee on as much as $100 billion of global bonds sold by banks before the end of June. Rhee said he expects the guarantee would be extended beyond June if markets don’t improve.

‘Shocked’

For now, banks don’t have an urgent need to raise funds after increasing capital by more than 16 trillion won ($10.5 billion) last year, bringing capital adequacy ratios to 12.19 percent as of December, Rhee said.

The government has also set up a 20 trillion won fund which banks can tap to boost capital, and the FSC said yesterday it will start disbursing such funds next month. Korea Asset Management Corp., which bought 111 trillion won of bad loans after the 1997-1998 Asian crisis forced South Korea to seek an IMF bailout, will resume buying bad loans from banks later this year.

“We learned a lot of lessons in 1997,” Rhee said. “Because of those bad memories, many Koreans know what has to be done.”

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

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U.K. Pound Advances, Trades at $1.4218 and 89.37 Pence per Euro

By Neil Maclucas

Feb. 26 (Bloomberg) -- The U.K. pound advanced against the U.S. dollar.

The pound rose to $1.4218 by 6:15 a.m. in London, from $1.4201 yesterday. It also appreciated to 89.37 pence per euro, from 89.56 pence.

To contact the reporter on this story: Neil Maclucas in Zurich at nmaclucas@bloomberg.net

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Australian, N.Z. Dollars Fall Most in Week as Asia, U.S. Slump

By Candice Zachariahs

Feb. 26 (Bloomberg) -- The Australian and New Zealand dollars fell the most in a week after reports in Asia, Europe and the U.S. boosted concerns the global recession is deepening.

The Australian currency rose versus the yen after business investment in the South Pacific nation unexpectedly increased, supporting the central bank’s view that the nation’s economy will outperform its peers. New Zealand’s dollar slid as business confidence fell to the second-worst on record in February.

“In the near-term, the severity and breadth of the global slowdown and the shocking numbers we’re seeing out of Asia means we’re going to see worse numbers” in Australia, said John Horner, a currency strategist at Deutsche Bank AG in Sydney. “We would expect the Australian dollar to decline under 60 U.S. cents in the months ahead.”

Australia’s dollar traded at 64.89 U.S. cents as of 4:31 p.m. in Sydney from 65.36 cents late in Asia yesterday. It fell to 64.85 cents before the business spending report. The currency advanced 0.2 percent to 63.46 yen.

New Zealand’s dollar slid 1.2 percent to 51.02 U.S. cents from 51.66 in Asia yesterday. It bought 49.91 yen from 50.09.

Australian capital spending climbed 6 percent in the fourth quarter from the previous three months, the Bureau of Statistics said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 3 percent drop.

“This is another factor which suggests Australia’s economy should avoid negative fourth-quarter growth which is very different to what we’re seeing in the major Group of Seven economies,” said Richard Grace, a chief currency strategist at the Commonwealth Bank of Australia in Sydney. “The Aussie should grind higher,” he said, using the currency’s nickname.

Interest Rates

Australia’s dollar may gain toward 65.50 cents by week-end, said Grace. CBA had forecast a 2 percent increase in investment and projects the Reserve Bank of Australia will keep interest rates unchanged at 3.25 percent when it meets March 3.

Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S. attract investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits. The central banks of Australia and New Zealand are expected to lower their benchmark rates to 2.75 percent when they meet on March 3 and March 12, respectively.

The currencies fell today as U.S. purchases of previously owned homes slid 5.3 percent to an annual rate of 4.49 million, the fewest since 1997. Economists had forecast resales would rise to a 4.79 million rate, according to a Bloomberg survey.

Germany, Korea

German exports slumped 7.3 percent in the fourth quarter, causing Europe’s largest economy to contract the most in 22 years. In South Korea, Australia’s third largest export market, manufacturers’ confidence stayed near a record low and Singapore said its economy shrank the most in 33 years last quarter.

“Amid worries about the global outlook investors are favoring the relative safety of the U.S. dollar,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington.

A net 20.5 percent of companies surveyed in New Zealand this month expect sales and profits to decline over the next 12 months from the record-low 21.5 percent expecting a fall in December, according to a report released by ANZ National Bank Ltd. in Wellington today. There was no survey in January.

New Zealand Pressure

The survey should keep pressure on the RBNZ to cut interest rates, wrote Su-Lin Ong, an economist at RBC Capital Markets Ltd. in Sydney.

“Should the RBA hold steady next week, it is unlikely that the RBNZ will be brave enough to do much more than a 50 basis point cut,” she said.

Australian government bonds advanced with the yield on 10- year notes falling one basis point, or 0.01 percentage point, to 4.25 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.11, or A$1.1 per A$1,000 face amount, to 108.08.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.27 percent from 3.30 yesterday.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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Yen Falls to Lowest Since November on Concern Economy Worsening

By Ron Harui and Theresa Barraclough

Feb. 26 (Bloomberg) -- The yen fell to a three-month low against the dollar and weakened versus the euro before government reports tomorrow that may show rising unemployment and falling consumer prices in Japan.

The Japanese currency is headed for its worst month against the dollar in 13 years and the poorest versus the euro since 2000 as the deepening recession reduces the yen’s appeal. The euro is poised for a second monthly loss against the dollar on concern financial turmoil in eastern Europe will worsen, backing the case for the region’s central bank to lower interest rates.

“The fundamentals are for the downside to the yen so weaker economic data tomorrow will support the weakening trend,” said Satoru Ogasawara, a foreign-exchange analyst and economist in Tokyo at Credit Suisse Group AG, Switzerland’s second-biggest bank. The yen may decline to 100 per dollar by the end of March, he said.

The yen fell to 97.94 against the dollar as of 7:47 a.m. in London from 97.39 yen late in New York yesterday. It reached 97.97 today, the weakest level since Nov. 14. It dropped to 124.51 per euro from 123.92 yesterday, when it touched 125.15, the lowest since Jan. 9.

The dollar traded at $1.2713 per euro from $1.2723 in New York yesterday. It was at $1.4186 versus the British pound from $1.4201, and traded at 1.1710 Swiss francs from 1.1699.

The ICE’s Dollar Index, which tracks the U.S. currency versus the euro, yen, pound, Canadian dollar, krona and Swiss franc, traded at 87.983 from 87.906. It touched 88.254 on Feb. 18, the strongest since a 2 1/2-year high reached on Nov. 21.

‘Excessive’

Recent fluctuations in the yen have been a “a bit excessive” and the degree of fluctuations in currencies, rather than their levels, warrant close attention, Bank of Japan board member Tadao Noda said today.

“It’s important for companies and households that currencies generally move in a stable manner,” Noda told reporters in Naha, Okinawa.

Japan’s currency is heading for a fifth weekly loss against the greenback after a Cabinet Office report last week showed the economy shrank the most since the 1974 oil shock. The yen reached a 13-year high against the greenback on Jan. 21 after surging 23 percent last year.

Japan’s consumer prices, excluding fresh food, fell 0.1 percent in January from a year earlier, according to a Bloomberg News survey of economists. The unemployment rate probably rose to 4.6 percent last month, the highest level since February 2005, a separate survey showed.

The trade deficit widened to 952.6 billion yen ($9.8 billion) in January from a revised 322.3 billion yen in December, the Finance Ministry said yesterday in Tokyo.

‘Following Suit’

“With Japan’s trade data deteriorating sharply now, the Japanese yen is finally following suit,” Mansoor Mohi-Uddin, chief currency strategist at UBS AG, the world’s second-largest foreign-exchange trader, wrote in a note to clients yesterday. “Japan’s currency potentially has a lot further to slide if investors stop perceiving the yen as a safe haven and trade the currency instead on Japan’s worsening export numbers.”

During Japan’s last episode of deflation that began a decade ago, bankruptcies surged and the jobless rate climbed to a postwar high. Weak consumer spending prompted companies to lower prices, undermining profits and forcing them to reduce wages. Deflation is a sustained decline in prices.

Europe’s single currency also headed for a third weekly decline on speculation European Central Bank President Jean- Claude Trichet will today express increased concern about the euro-region’s financial system and signal an interest-rate reduction in March.

Ukraine, Latvia

Standard & Poor’s yesterday cut Ukraine’s credit rating by two levels after it downgraded Latvia’s debt to junk on Feb. 24. Banks from Austria, Italy, France, Belgium, Germany and Sweden account for 84 percent of the bank loans made in central and eastern Europe.

“The financial crisis in eastern Europe seems to have just begun and will probably be difficult to resolve,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-largest lender. “This is likely to lead to selling of the euro,” which may decline to $1.2670 and 123.50 yen today, he said.

Trichet will speak on European competitiveness at 1 p.m. in Dublin. On Feb. 23, he said the financial system was under “severe strain,” hampering an economic recovery.

Investors maintained bets the ECB will lower its 2 percent benchmark rate at its March 5 meeting. The yield on the three- month Euribor interest-rate futures contract due in March was at 1.685 percent from 1.675 percent yesterday.

Resistance Level

The dollar’s advance against the yen may be tempered as the currency approaches so-called resistance at 98.90, according to Bank of America Securities-Merrill Lynch Japan.

The 98.90 yen level is a 50 percent retracement of the dollar’s decline from the August high of 110.66 yen to the January low of 87.13 yen, said Tomoko Fujii, a rates and currency strategist at the recently merged research division of Merrill Lynch and Bank of America Corp. in Tokyo, referring to a series of numbers known as the Fibonacci sequence. Resistance is a level where sell orders may be clustered.

The “strong” resistance levels will be “98.90, above which there is a psychologically important level of 100.00,” Fujii wrote in a report yesterday.

To contact the reporters on this story: Ron Harui in Tokyo at rharui@bloomberg.net; Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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Rubber Rallies to One-Week High as Yen Decline Raises Appeal

By Rattaphol Onsanit

Feb. 26 (Bloomberg) -- Natural rubber futures climbed to a one-week high in Tokyo, as a weaker Japanese currency versus the dollar boosted the appeal of yen-denominated contracts.

Prices rose as much as 3.8 percent, gaining for a second day, as the yen declined to a three-month low before reports this week that may show Japan’s recession is deepening. Rubber, used in vehicle tires, trades globally in dollars and the futures often move in the opposite direction to the Japanese currency.

“Rubber is getting support from the falling yen.” Rewat Yenchai, an analyst at Bangkok-based AGROW Enterprise Ltd. said today by phone. “That helps counter weak fundamentals, especially when you look at the car industry,” he said.

Rubber for August delivery gained 3.2 percent to 141.4 yen a kilogram ($1,445 a metric ton) on the Tokyo Commodity Exchange at 1:10 p.m. local time. The contract earlier reached 142.2 yen, the highest since Feb. 18.

Nissan Motor Co., Japan’s third-largest automaker, will cut output by more than 70 percent this month, the Nikkei newspaper reported today, without citing sources. The company’s spokesman Mitsuru Yonekawa said later that the carmaker will raise domestic production in March compared with February after lowering vehicle inventory levels to match demand.

The yen declined to 97.79 against the dollar as of 12:09 p.m. in Tokyo from 97.39 yen late in New York yesterday. Japan’s unemployment rate probably rose to 4.6 percent last month, the highest since February 2005, a survey of economists showed. The data will be released tomorrow.

May-delivery rubber on the Shanghai Futures Exchange, the most-active contract, added 4 percent to 13,380 yuan ($1,957) a ton at the 11:30 a.m. local time break.

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

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Palm Oil Price ‘Manageable,’ Malaysian Minister Says

By Ranjeetha Pakiam and Angus Whitley

Feb. 26 (Bloomberg) -- Palm oil has traded at a “manageable” level since Malaysia, the world’s second-biggest producer, introduced measures to cut output last year, the country’s commodities minister said.

Prices in 2009 of between 1,400 ringgit ($381) and 1,900 ringgit a metric ton would be enough to sustain export income from the crop, Peter Chin said in a speech in Kuala Lumpur. That compares to today’s high of 1,930 ringgit.

Palm oil, Malaysia biggest agricultural export, has gained about 19 percent since the country allied with Indonesia in November to reduce production of the edible oil following a price slump. Malaysia needs higher income from overseas sales of palm oil as it attempts to avoid a recession.

“If we are able to continue this sort of range this year, despite whatever global recession there may be, the palm oil industry will be able to provide Malaysia with the export earnings that it needs,” Chin said.

Palm oil for May delivery on the Malaysia Derivatives Exchange traded at 1,906 ringgit a ton at 11:44 a.m., gaining for a second day. The commodity slumped 70 percent between touching a record 4,486 ringgit last March and the year’s low on Oct. 28. The output-cut plan came the next month, on Nov. 6.

Malaysia and Indonesia, the world’s biggest producer of palm oil, agreed in November to replant old estates, cutting annual output by as much as 800,000 metric tons. The two countries account for about 90 percent of global output.

The Indonesian Palm Oil Association expects 2009 output of about 20 million tons, according to a Jan. 21 forecast. Malaysian production this year may be “static or lower” than last year’s 17.5 million tons, Chin said yesterday.

Chin said today he expects Malaysia’s palm oil stockpiles to fall this year. The country’s stockpiles dropped in January to 1.83 million tons, the lowest level in nine months.

To contact the reporters on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net; Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net

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China’s Soybean Processors Cancel Orders; Want New Contracts

By William Bi

Feb. 26 (Bloomberg) -- China, the world’s biggest importer of soybeans, is canceling orders as demand for feed meal drops in the economic slowdown, two Chinese market researchers said.

Buyers canceled at least two cargoes in recent days, the government-backed China National Grain and Oils Information Center said today in a report. Others have also demanded that contracts are renegotiated, said Gao Yingbin at China Cereals and Oils Business Net.

Chinese buyers cut soybean imports, mainly bought from the U.S., by 6 percent in the four months through January as the sagging economy and falling meat prices eroded demand for animal feed. Futures in Chicago have slumped 11 percent this month.

“The effect of the deteriorating economy on oilseed demand is very apparent,” Gao said by phone from Beijing. “Hog prices are sliding, animal diseases are spreading, so livestock raisers aren’t adding herds and are running down feed inventories.”

Soybeans are crushed for meal, which is processed into animal feed, with the oil sold for cooking.

Falling soybean meal prices are fast eroding profits and forcing small and medium crushers to operate at a loss, China Cereals’ Gao said. Before the Lunar New Year holiday in January, crushers make about 300 yuan ($44) to 400 yuan for a ton of beans they process. Now it’s a third of that and falling, he said.

Some traders are now importing soybean oil instead of buying from crushers, the China National Grain and Oils Information Center said. “The import demand for U.S. soybeans will continue to shrink in the next few weeks,” the center said.

To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

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Shanghai Copper Gains for Second Day on China, Economic Outlook

By Jae Hur

Feb. 26 (Bloomberg) -- Copper futures advanced for a second day in Shanghai on optimism that China’s metal purchases and spending by governments to revive economies will boost demand for industrial metals.

China’s State Reserve Bureau bought 100,000 metric tons of zinc yesterday, said four people familiar with the transaction. President Barack Obama this week vowed to use “the full force of the federal government” to shore up the U.S. banking system. Federal Reserve Chairman Ben S. Bernanke said the recession may end this year should the government restore financial stability.

“Industrial metals are very sensitive to the global economy,” said Hiroaki Hama, an analyst at Mizuho Corporate Bank Ltd. in Tokyo. Recent purchases of metals by China, the world’s top consumer, have lent support to the market, he said.

May-delivery copper on the Shanghai Futures Exchange rose 2.6 percent from the previous close to 28,220 yuan ($4,123) a metric ton at 11:10 a.m. local time after touching 28,420 yuan, the highest since Feb. 13.

Copper for three-month delivery on the London Metal Exchange gained as much as 1.4 percent to $3,458 a ton before trading at $3,430 a ton. LME-tracked inventories of copper rose to 548,400 tons yesterday, the highest since October 2003.

The amount of the metal scheduled to be taken out of LME-monitored warehouses, known as canceled warrants, jumped yesterday to 30,375 tons, or 5.5 percent of inventories, from 3.3 percent the previous day. This suggests “some pickup in physical interest,” William Adams, an analyst at BaseMetals.com in London, said yesterday.

Economic Barometer

Copper is widely used in homes, cars and appliances, making its price a barometer of economic activity. The U.S., Japan and Europe were all saddled with recessions last year, the first simultaneous contractions since 1945.

Japan’s copper wire and cable shipments plunged 21 percent to 53,100 tons in January from a year earlier, the biggest monthly drop in more than three decades, the Japanese Electric Wire and Cable Makers’ Association said on Feb. 24.

The country’s output of copper and copper alloy fabricated products, including sheets and tubes, plunged 45 percent in January from a year earlier to 43,390 tons, the lowest level since August 1975, the Japan Copper and Brass Association said on Feb. 24. The monthly drop was the most since December 1974.

Aluminum for delivery in three months rose 0.5 percent to $1,350 a ton and London zinc was down 0.4 percent at $1,140. Shanghai aluminum for May delivery climbed 0.6 percent from the previous close to 11,825 yuan and zinc added 1 percent to 10,390 yuan by 11:10 a.m. Shanghai time.

Among other LME-traded metals, lead added 1 percent to $1,040 a ton and nickel gained 0.3 percent to $10,100 a ton.

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

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Philippine Sugar Stockpiles Rise 30% After State Pares Exports

By Luzi Ann Javier

Feb. 26 (Bloomberg) -- Stockpiles of raw sugar in the Philippines, Southeast Asia’s second-biggest exporter of the sweetener, climbed 30 percent this month after the government curbed overseas sales.

Reserves rose to 733,080 metric tons on Feb. 1 from 565,385 tons a year ago, according to a preliminary report from the Sugar Regulatory Administration obtained by Bloomberg News today.

“We’ll decide whether to allow exporters to ship sugar from the reserves after April,” Sugar Regulatory Deputy Administrator Aida Ignacio said in an interview in Manila today. Sugar milling reaches its highest point in April.

Mounting stockpiles may prompt the government to release the excess supply in the global market to prevent a slump in domestic prices that may discourage planters from boosting cane production. That may rein in a rally that’s made raw sugar the world’s best performing agricultural commodity this year.

Raw-sugar futures prices have gained 14 percent this year in New York amid forecasts India, the second-biggest producer, may become a net importer for the first time in three years. Futures for May delivery rose 2.2 percent to 13.42 cents a pound on the ICE Futures U.S. in New York yesterday.

In the Philippines, the average price of raw-sugar was 29.92 pesos (62 cents) per kilogram on Feb. 16, from 30.24 pesos on Jan. 26, according to the Sugar Regulatory Web site.

Export Allocation

The government earlier this month lowered the allocation for exports to markets outside the U.S. to 2.5 percent of the weekly production from 7 percent in September, to build stockpiles. The allocation was pared after the government cut its annual output forecast to 2.03 million tons.

Output from Sept. 1 through Feb. 1 was little changed at 1.1172 million tons, from a year ago, prompting officials to raise the full year forecast to 2.175 million tons.

Still, the government will wait until after milling peaks in April before deciding to ease exports or release reserves into the domestic market.

The Southeast Asian nation, which supplies to the U.S. and other markets, produced 2.45 million tons in the crop year ended Aug. 31. That’s the highest output in 25 years.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

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Tokyo Grain Exchange Rejects Merger Push, Plans New Products

By Nobuyuki Akama

Feb. 26 (Bloomberg) -- The Tokyo Grain Exchange, which forecasts a net loss this year, is rejecting proposals to merge with other bourses and will boost product offerings to revive profit, Chairman Yoshiaki Watanabe said.

“We can share trading systems, but we won’t combine our organizations,” Watanabe said in an interview, referring to suggestions that the TGE merge with the Tokyo Commodity Exchange, known as Tocom. “A dedicated exchange for agricultural products is necessary,” he said.

Trading volumes at Japan’s four raw material bourses fell 28 percent in 2008, as prices fell from records amid the global recession, after a 21 percent drop the previous year, according to industry data. The country’s Financial Services Agency in December 2007 proposed steps to create a single venue for trading stocks, bonds and commodity derivatives to win a larger share of global investments.

“The TGE should delist futures for coffee, raw silk and other products that have low liquidity and list futures for attractive goods such as rice,” Kazuhiko Saito, chief analyst at Fujitomi Co. in Tokyo, said. The start of new contracts should be delayed because of the recession, he said.

The member-owned TGE which also trades soybeans, corn, coffee, sugar, non-genetically modified soybeans and azuki beans, is forecast to post a net loss of more than 1 billion yen ($10.3 million) for the year ending March 31 and could take two years to become profitable, Watanabe said on Feb. 23.

Rice, Wheat

The TGE may try to list rice, wheat and livestock futures and will focus on gaining business from individual investors, who account for more than 90 percent of trading at the exchange, to boost volumes, Watanabe said. The bourse will cut personnel and operating costs and is completing a draft business plan, he said.

The exchange in October cut margin requirements for trading soybeans. Next month it will revert to the itayose trading system for raw sugar, where prices are determined at several sessions during the day, after in 2008 starting continuous trading.

The Commodity Futures Industry Association this month said the TGE and the Tocom, which trades contracts including platinum, gold and crude oil, should combine as part of a wider overhaul of the exchanges. A merger was favored by 80 percent of brokers surveyed by the association.

Trading Volumes

Trading volumes at the Tokyo Commodity Exchange, TGE, Kansai Commodities Exchange and Central Japan Commodity Exchange dropped to 52.9 million contracts last year, according to the Japan Commodity Exchanges Committee. Volumes at the TGE, the second-largest, fell 57 percent to 8.4 million contracts.

China’s three commodity exchanges traded record volumes in 2008, according to the China Futures Association.

Volumes in Japan were reduced last year because of commodity market volatility amid wider global financial turmoil, Watanabe said. Laws introduced in 2005 to curb aggressive soliciting of retail investors also cut trading, Watanabe said.

“People say that the economy will pick up at the end of the year or next year,” he said. “Given the characteristics of the futures market, we expect to see bright signs this autumn.”

Japan’s economy shrank at an annual rate of 12.7 percent last quarter, the most since 1974, the government said.

The TGE would look at listing rice futures, which had the potential to lead global markets, after a request was rejected by the agriculture ministry in 2006, he said.

Japan, which started futures trading at the Dojima Rice Market in Osaka in 1730, “mustn’t fail to pass on the torch” and should preserve its heritage, he said.

To contact the reporter on this story: Nobuyuki Akama in Tokyo at nakama@bloomberg.net

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Asian Companies to Cut Dividends by Further 25%, UBS Estimates

By Chen Shiyin

Feb. 26 (Bloomberg) -- Asian companies may cut their dividends by a further 25 percent amid slowing earnings growth, even as yields climb to the highest in more than two decades, UBS AG said.

An index tracking dividend yields in Asia, excluding Japan, has dropped 8 percent since its peak, with weaker earnings likely to lead to further reductions, Hong Kong-based strategist Niall MacLeod and Aakash Rawat wrote in a report today. Banks in South Korea, Taiwan and Hong Kong may lead the cuts, the report said.

The MSCI Asia excluding Japan index has dropped 12 percent this year, extending last year’s record 53 percent slump. The decline means regional equities now offer a yield of 4.3 percent, the highest since 1985, UBS estimated.

“In absolute terms, those high yields look attractive,” the strategists wrote. “However there is still, we believe, a very substantial risk from dividend cuts.”

The 4.3 percent yield offered by Asian stocks is higher than both 1998 and 2003, the last time share prices fell to so-called bear-market lows, UBS said. The yield is also about 2 percent higher than that of 10-year U.S. Treasuries, the brokerage added.

In the U.S., a total of 288 companies cut or suspended dividends last quarter, the most since Standard & Poor’s records began 54 years ago. While the S&P 500 is trading at the lowest price relative to earnings since 1985 and all 10 Wall Street strategists tracked by Bloomberg forecast a rally this year, predictions based on dividends show shares are overvalued by as much as 46 percent.

Asian Banks

U.S. equities returned 6 percent a year on average since 1900, inflation-adjusted data compiled by the London Business School and Credit Suisse Group AG show. Take away dividends and the annual gain drops to 1.7 percent, compared with 2.1 percent for long-term Treasury bonds, according to the data.

In Asia, lower payouts by financial companies will hurt the region’s overall yield because banks account for about 25 percent of the dividend index, UBS said.

South Korean banks plan to cut dividends or pay no dividends for 2008 after their profits declined, Financial Services Commission Chairman Chin Dong Soo said on Feb. 23. These companies will probably cut their payout by 50 percent, UBS estimated, without naming any stocks.

“We remain very bearish on the earnings outlook -- the devastating impact of the credit crunch is starting to show up in earnings numbers for 2008 and will likely continue to do so,” the strategists wrote. “The greater risk surrounds dividends from the financials, especially the banks, as they increasingly look to rebuild balance sheets.”

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

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Hong Kong Stocks Fall; Cosco Pacific Drops on Lower Cargo Rates

By Hanny Wan

Feb. 26 (Bloomberg) -- Hong Kong stocks fell on heightened speculation the economic slump will erode global demand and China will exclude real estate from its stimulus program.

Cosco Pacific Ltd., Asia’s third-largest container-terminal operator, slipped 3 percent after cargo rates dropped for a third day. China Overseas Land & Investment Ltd., a developer controlled by China’s construction ministry, retreated 3.1 percent after the Wen Wei Po newspaper said the nation excluded the property industry from its stimulus program.

“More earnings announcements are on the way so do we want to take the risk right now? I don’t think so,” said John Koh, regional investment director at MEAG Hong Kong Ltd., which manages $1.1 billion. “You can argue that things may not be as bad, but you never know. We’re not taking any bets.” He’s favoring government bonds.

The Hang Seng Index dropped 104.34, or 0.8 percent, to 12,900.74 at the 12:30 p.m. break, after rising as much as 0.5 percent. The Hang Seng China Enterprise Index, which tracks so- called H-shares, slid 2 percent to 7,043.80.

The benchmark Hang Seng Index has lost 10 percent this year, dragging its valuation to 10.5 times estimated earnings, down from 18.7 times at the beginning of 2008.

Cosco Pacific slipped 3 percent to HK$5.88, the third- largest drop on the Hang Seng Index. Pacific Basin Shipping Ltd., Hong Kong’s biggest operator of commodity vessels, slid 3.8 percent to HK$3.51.

Cargo Rates Fall

The Baltic Dry Index, a measure of commodity-shipping rates, fell 2.5 percent yesterday, extending its drop in the past three sessions to 6.6 percent.

China Overseas Land retreated 3.1 percent to HK$10.52. China Resources Land Ltd., a government-controlled developer, dropped 3.3 percent to HK$8.80.

China excluded the property industry from its stimulus program because the government wants to prevent housing prices from rising excessively, Wen Wei Po reported, citing people it didn’t identify. On Feb. 23, the Shanghai Securities News reported without elaboration that real estate would replace energy as the 10th sector to get a stimulus program.

More than two stocks on the 42-member Hang Seng Index declined for each that climbed. February futures slipped 0.2 percent to 12,918.

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

ASM Pacific Technology Ltd. (522 HK), the world’s biggest maker of semiconductor-wiring machines, plunged 5.9 percent to HK$22.50. The company’s fourth-quarter profit dropped 90 percent as orders dried up because of waning chip demand. Net income fell to HK$31.8 million, according to figures Bloomberg derived from full-year earnings the company reported yesterday.

JPMorgan Chase & Co. cut its rating on the stock to “underweight” from “neutral.”

Chinese Estates Holdings Ltd. (127 HK) was suspended, pending a release of an announcement. The stock climbed 0.2 percent to HK$8.55 before trading was halted.

Next Media Ltd. (282 HK) surged 9.8 percent to 90 Hong Kong cents after Chairman Jimmy Lai told the Wall Street Journal he plans to invest more than NT$6 billion ($172.5 million) to start two television stations in Taiwan.

Come Sure Group (Holdings) Ltd. (794 HK), a paper packaging products maker, climbed 2.7 percent to HK$1.15 on its debut, after jumping as much as 7.1 percent. The company sold 70 million shares at HK$1.12 each, according to a statement, raising HK$78.4 million ($10 million).

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

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Japan Topix Index Falls, Led by Tiremakers; Steelmakers Gain

By Masaki Kondo

Feb. 26 (Bloomberg) -- Japan’s Topix stock index fell, led by tiremakers and power generators as higher oil prices lowered their earnings prospects. Steelmakers advanced on speculation they will be able to ramp up production.

Bridgestone Corp., the world’s largest tiremaker, sank 4.5 percent after oil jumped to the highest level in a month, raising production costs. Tokyo Electric Power Co. slid 0.7 percent. Advantest Corp., the world’s biggest maker of memory- chip testers, plunged 13 percent after it forecast a loss. Nippon Steel Corp., the world’s No. 2 producer of the metal, climbed 2 percent after saying output has probably bottomed out.

The Topix index slumped 3.09, or 0.4 percent, to close at 742.53 in Tokyo. The Nikkei 225 Stock Average lost 3.29, or less than 0.1 percent, to 7,457.93, after gaining as much as 1.9 percent. About the same number of shares rose and fell on both gauges.

The Nikkei lost 16 percent this year through yesterday as recessions in the world’s largest economies reduced demand for Japanese-made products.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Asian Stocks Fall as Advantest, Telstra Fuel Earnings Concern

By Shani Raja and Hanny Wan

Feb. 26 (Bloomberg) -- Asian stocks fell, led by technology and phone companies, on renewed concern the deepening global recession is hurting corporate earnings.

Advantest Corp., the world’s biggest maker of memory-chip testers, tumbled 13 percent in Tokyo after forecasting a loss. Telstra, Australia’s No. 1 telephone company, slid 2.4 percent in Sydney on lower profit. Daiichi Sankyo Co., Japan’s third- largest drugmaker, slumped 9.5 percent, after U.S. regulators suspended reviews of medicines made by its Ranbaxy Laboratories Ltd. unit. Ranbaxy Laboratories plummeted 17 percent.

“More earnings announcements are on the way so do we want to take the risk right now? I don’t think so,” said John Koh, regional investment director at MEAG Hong Kong Ltd., which manages $1.1 billion. He’s favoring government bonds.

Five stocks advanced for every three that declined on the MSCI Asia Pacific Index, which lost 1.3 percent to 74.55 as of 3:52 p.m. in Tokyo. The gauge has lost 49 percent in the past 12 months and closed at its lowest in more than five years on Feb. 24, as recessions in the world’s largest economies battered earnings in Asia.

Japan’s Topix Index declined 0.4 percent, while the Nikkei 225 Stock Average closed little changed. Hong Kong’s Hang Seng Index dropped 2.3 percent, while South Korea’s Kospi Index fell 1.2 percent. All markets in the region declined except Australia, Taiwan and Pakistan.

U.S. Home Sales

Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, fell 9.5 percent after selling shares at a discount. Nippon Steel Corp., the world’s second-biggest producer, rose 2 percent after saying output has probably bottomed. Australia & New Zealand Banking Group Ltd. gained 4.4 percent in Sydney as it cut dividends to preserve capital.

Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The gauge slid 1.1 percent yesterday as the National Association of Realtors said purchases of previously owned homes dropped 5.3 percent last month to a 12-year low. Economists had predicted an increase. The S&P 500 Index is down 15 percent this year, the worst start on record.

In Asia, China and Australia this month passed policies to ease the financial crisis and bolster slumping economies. In Singapore today, the trade ministry said the city’s economy shrank an annualized 16.4 percent last quarter from the previous three months, the most in at least 33 years.

Lower Profits

Losses on U.S. mortgage investments in the past year have caused banks to rein in lending, hurting global growth. The MSCI Asia Pacific Index’s decline in that time has dragged the average valuation of companies on the gauge down by 7 percent to 13.5 times reported profit.

Advantest tumbled 13 percent to 1,245 yen. The company said yesterday its net loss will probably amount to 78 billion yen ($797 million) in the year to March 31 and that it plans to cut a quarter of its workforce by March.

Telstra lost 2.4 percent to A$3.68 after reporting its first half-year profit decline in two years as sales of traditional phone services fell. Chief Executive Officer Sol Trujillo will step down on June 30, Telstra said, ending months of speculation by the Australian media about his departure.

Daiichi Sankyo fell 9.5 percent to 1,680 yen, while Ranbaxy Laboratories plunged 17 percent to 172.5 rupees.

The U.S. Food and Drug Administration suspended reviews of new products from Ranbaxy’s plant in Paonta Sahib, India, after findings at the facility raised “significant questions about the reliability” of data used to support requests to sell drugs in the U.S., the regulator said.

Demand Recovery?

Fortescue slumped 9.5 percent to A$2.56 after this week selling 225 million new shares to China’s Hunan Valin Iron & Steel Group at A$2.48 each. The stock closed at A$2.83 on Feb. 20, the last trading day before being halted Feb. 23.

Nippon Steel climbed 2 percent to 251 yen. Stockpile reductions by customers, even as demand remained weak, would lead to a recovery in production that may begin as early as next quarter, Executive Vice President Kiichiro Masuda said yesterday in an interview.

Hitachi Metals Ltd., a maker of specialty steel for use in auto and electronics production, rallied 2 percent to 560 yen.

ANZ Banking, bracing for more bad debts as the economy slows, gained 4.4 percent to A$13.05. The company will cut its dividend by about a quarter and increase loss provisions. Earnings in the four months ended January fell 11 percent, the bank said today. The lender has cut jobs and sold government- backed debt to protect the bank’s balance sheet.

Westpac Banking Corp., Australia’s largest bank by market value, jumped 2.9 percent to A$16.65. National Australia Bank Ltd., the country’s biggest by assets, rose 1 percent to A$17.51.

“Banks are assuming the brace position for turbulence ahead and that is prudent,” said Prasad Patkar, who helps manage $647 million at Sydney-based Platypus Asset Management. “As the economy worsens, the pressure on revenues and profits is becoming more and more intense.”

To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net; Hanny Wan in Hong Kong at hwan3@bloomberg.net



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Chi-X CEO Randall Said to Step Down as Competition Intensifies

By Edgar Ortega and Nandini Sukumar

Feb. 26 (Bloomberg) -- Chi-X Europe Ltd. Chief Executive Officer Peter Randall is resigning after three years in charge of the stock-trading platform, which faces growing competition, according to two people familiar with the matter.

A departure date hasn’t been set and a replacement hasn’t been identified, said the people, who declined to be identified because the discussions are private. London-based Chi-X is Europe’s fourth-largest equity market after winning business from London Stock Exchange Group Plc, Deutsche Boerse AG and NYSE Euronext.

Chi-X faces heightened competition from new firms that also offer low fees to capitalize on the growth of computer-driven trading strategies. The six-month-old Turquoise system has captured more business than Chi-X during certain times of the day, while Kansas City, Missouri-based Bats Exchange Inc. says it will be “aggressive” in winning at least a 10 percent share of the European market.

Chi-X, a unit of Nomura Holdings Inc.’s Instinet LLC, handled 10 percent of the total value of shares traded in Europe last month, compared with Turquoise’s 5.5 percent and Bats’s 1 percent, according to data compiled by Bats. Deutsche Boerse handles 15 percent of the value traded, while the LSE and NYSE Euronext execute more than 20 percent.

Julia Streets, a Chi-X spokeswoman at Streets Consulting Ltd., declined to comment, as did Instinet’s Mark Dowd. Randall’s departure was first reported by the Financial Times.

Chi-X is seeking regulatory approval to expand in Asia with electronic equity markets in Australia, Singapore, Hong Kong and Japan. The firm also handles an average of 6 million shares a day in Canada, where it started trading in September, according to data on its Web site.

To contact the reporters on this story: Edgar Ortega in New York at ebarrales@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.

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Areva, APRR, Thales, Natixis, Vallourec: French Stocks Preview

By Heather Smith

Feb. 26 (Bloomberg) -- The following is a list of companies whose stocks may have unusual changes in Paris. Symbols are in parentheses after company names and prices are from the last close.

France’s CAC 40 Index decreased 11.13, or 0.4 percent, to 2,696.92, an eighth decline. That’s the longest losing streak since September 2003. The SBF-120 Index fell 0.2 percent.

Areva SA (CEI FP): The world’s biggest maker of nuclear reactors reported a 21 percent decline in 2008 net income, hurt by a 749 million-euro charge for cost overruns at a plant project in Finland. The company said it has started a plan to reduce costs for purchasing and overhead. The investment certificates dropped 7.05 euros, or 2.2 percent, to 314.38 euros.

Ste. des Autoroutes Paris-Rhin-Rhone SA (ARR FP): France’s second-largest toll-highway operator, reported a 2.4 percent decline in 2008 profit to 333 million euros, hurt by a charge related to swaps contracts from 2005. The shares added 10 cents, or 0.2 percent, to 42.60 euros.

Credit Agricole SA (ACA FP): France’s second-biggest bank by market value said it’s in exclusive talks to buy control of stock custodian Caceis from Natixis SA for 595 million euros. The shares were little changed at 7.46 euros.

Groupe Partouche SA (PARP FP): France’s biggest casino operator said first-quarter revenue fell to 116.7 million euros from 136.2 million euros a year earlier. The shares closed unchanged at 2.45 euros.

Natixis SA (KN FP): The investment bank owned by Groupe Banque Populaire and Caisse d’Epargne reports earnings before the market opens in Paris. The shares rose less than 0.1 percent to 1.04 euros.

Thales SA (HO FP): Europe’s largest defense-electronics provider reports full-year earnings after the market close in Paris. Net income probably fell 30 percent to 619 million euros, according to the media of eight analyst estimates, after capital gains from asset sales weren’t repeated. The shares lost 31 cents, or 1 percent, to 30.49 euros.

Vallourec SA (VK FP): The second-largest maker of steel tubes to carry oil and gas said fourth-quarter profit climbed 13 percent to 275.4 million euros after the company increased sales to the power industry. The shares dropped 78.5 cents, or 1.1 percent, to 69.46 euros.

Vilmorin & Cie. (RIN FP): Europe’s second-largest seed producer reported a first-half loss of 27.4 million euros, little changed from year-earlier levels, and confirmed its full- year forecast. The shares gained 1.30 euros, or 1.6 percent, to 84.50 euros.

To contact the reporter on this story: Heather Smith in Paris at hsmith26@bloomberg.net.

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