Australian, N.Z. Dollars Rise to January Highs on G-20 Pledges

By Candice Zachariahs

April 3 (Bloomberg) -- The Australian and New Zealand dollars rose for the fifth week, trading near the highest since January, as commodities and equities gained after world leaders pledged more than $1 trillion of aid to fight the global slump.

The Australian dollar strengthened to the most since October against the yen as leaders of the Group of the 20 nations tripled the firepower of the International Monetary Fund, which has been inundated with requests for loans from troubled economies including Hungary. The South Pacific nations’ currencies also gained after China, Australia’s largest trading partner, said yesterday the nation’s manufacturing is expanding.

“The G-20 giving the IMF all that extra money means they’re going to have a go at fixing the issues in Eastern Europe,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. “Aussie’s got very little downside and it could target 76 U.S. cents by the end of the month,” he said referring to the currency by its nickname.

Australia’s currency advanced for a fourth day, rising 0.2 percent to 71.64 U.S. cents as of 12:29 p.m. in Sydney, from 71.52 cents late in New York yesterday. It touched 72.29 cents, close to the highest since Jan. 7. The currency gained 1.2 percent to 72.01 yen, trading near the strongest since October.

New Zealand’s dollar advanced 1.3 percent to 58.53 U.S. cents and reached as high as 59 cents, near the strongest since Jan. 12, from 57.76 in New York yesterday. It bought 58.92 yen and touched 59.03, the most since Nov. 10.

New Zealand’s currency may trade between 55.50 U.S. cents and 59 cents through April, Allen said.

IMF War Chest

The IMF was told its war chest will be boosted by $500 billion and it will receive another $250 billion in special drawing rights, the agency’s synthetic currency. Multilateral development banks including the World Bank will be enabled to lend at least $100 billion more.

The currencies gained as the UBS Bloomberg Constant Maturity Commodity Index rose the most in two weeks after crude oil and copper rose on speculation the worst of the slowdown is over. Asian equities extended a global equity rally after the Standard & Poor’s 500 Index advanced the most since March 23.

China’s Purchasing Manager’s Index rose to a seasonally adjusted 52.4 in March from 49 in February, the Federation of Logistics and Purchasing said yesterday. A reading above 50 indicates an expansion.

“The rise in commodity prices in response to improved sentiment towards global economic growth is supportive of the Australian dollar,” wrote John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd. in a note today. “The spanner in the works could come from tonight’s U.S. non-farm payrolls report for March.”

The jobless rate in the world’s largest economy probably climbed in March to a 25-year high of 8.5 percent, according to the median estimate of 79 economists polled by Bloomberg News. The Australian dollar will find sellers at 72 U.S. cents and then 72.50 cents, wrote Kyriakopoulos.

Deficit, Bond Sales

Australia’s services industry shrank last month at a slower pace, with an index rising 3.4 points from February to 35.6, Commonwealth Bank of Australia and the Australian Industry Group said in Sydney today. The index was below 50 for a 12th month, indicating the sector is contracting.

In New Zealand, the cash budget deficit was wider than the government forecast at the end of February amid slumping tax receipts. It was NZ$6.61 billion ($3.8 billion) in the eight months ended Feb. 28, or NZ$1.71 billion wider than previously forecast, the Treasury Department said today. Tax receipts were NZ$1.86 billion less than forecast.

Australia today sold A$599 million ($430 million) of securities maturing May 2013 at a weighted average yield of 3.84 percent. The so-called bid-to-cover ratio at the auction was 3.4.

Australian government bonds snapped four days of gains. The yield on 10-year notes rose six basis points, or 0.06 percentage point, to 4.43 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.48, or A$4.80 per A$1,000 face amount, to 106.51.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.92 percent from 3.84 yesterday.

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

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Yen Weakens Above 100 per Dollar as G-20 Aid Saps Safety Demand

By Theresa Barraclough and Ron Harui

April 3 (Bloomberg) -- The yen weakened to above 100 per dollar for the first time in five months as the Group of 20 nations pledged to revive economic growth and on speculation the Federal Reserve will step up efforts to counter the U.S. slump.

The yen also fell to a five-month low against the euro and the Australian dollar as stocks rallied, increasing demand for higher-yielding assets. The euro is poised for a weekly gain against the dollar on speculation a European Central Bank official will signal the bank is done cutting interest rates after yesterday lowering them by less than economists expected.

“The market thinks the world is suddenly a better place,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “That is largely reflected in increased risk appetite.”

The yen touched 100.18 per dollar and traded at 99.71 as of 10:55 a.m. in Tokyo, after falling 1 percent yesterday. Japan’s currency weakened to 134.04 per euro, from 133.98 yesterday in New York, when it dropped 2.6 percent, the most in five weeks. The yen is set for a 3.1 percent slide versus the euro this week.

Europe’s single currency traded at $1.3446, up 1.2 percent this week. Australia’s dollar rose to 71.39 yen, after reaching 72.33, the highest since Oct. 21, as a report showed the nation’s services industry shrank last month at a slower pace. The New Zealand dollar advanced to 58.43 yen, after reaching 59.03, the highest since Nov. 10.

Group of 20

The yen weakened against all 16 major currencies this week as world leaders agreed on measures to fight the global recession.

Policy makers from the Group of 20 nations called for stricter limits on hedge funds, executive pay, credit-rating firms and risk-taking by banks. They also tripled the firepower of the International Monetary Fund and offered cash to revive trade to help governments weather the turmoil resulting from the surge in unemployment.

“The G-20 summit could mark a turning point in the global financial crisis,” wrote analysts led by Callum Henderson, global head of foreign-exchange research at Standard Chartered Bank in Singapore, in a note today. “This should be supportive for high-yielding currencies such as the Australian dollar in the near term.”

Asian stocks jumped, with the regional benchmark index headed for its fourth weekly advance, following a rally yesterday in U.S. stocks that pushed the Dow Jones Industrial Average above 8,000 for the first time since Feb. 10.

Further Steps

Japan’s currency fell for a second day versus the greenback on expectations Fed Vice Chairman Donald Kohn may add to measures to revive the world’s second-largest economy, reducing demand for the currency as a shelter from the global crisis. Kohn speaks at 9:10 a.m. in Ohio.

The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock price changes that’s used as a measure of risk aversion, fell 0.6 percent yesterday, the third day of declines.

The euro gained against the yen as European policy makers cut the target lending rate by a quarter-percentage point to 1.25 percent, compared with a half-point reduction expected in a Bloomberg survey. Benchmark rates are 0.1 percent in Japan, 0.5 percent in the U.K. and between zero and 0.25 percent in the U.S.

“Interest-rate differentials between the euro zone and other nations such as the U.S. are still favorable for the euro,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This makes it easy to buy the euro,” which may rise to $1.3550 and 135.00 yen today, he said.

‘Increasingly Benefit’

ECB President Jean-Claude Trichet indicated at a press conference in Frankfurt following the decision that the economy should “increasingly benefit” from the measures the central bank has taken.

Executive Board Member Lorenzo Bini Smaghi last month said European interest rates are lower than those in the U.S. when making a comparison of real inter-bank lending, adding to the argument against further reductions in the benchmark. He speaks at 11 a.m. in Rome.

Declines in the yen may be limited before a U.S. Labor Department report shows the world’s biggest economy lost more than half a million jobs for a fifth month, reducing the appeal of the greenback.

“There’s a risk of position adjustments before the U.S. labor report, which may prompt buying back of the yen,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader.

U.S. Unemployment

U.S. employers probably eliminated 660,000 jobs last month, following a reduction of 651,000 in February, according to the median forecast of 80 economists surveyed by Bloomberg. The Labor Department is scheduled to release the report at 8:30 a.m. in Washington.

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, decreased 0.1 percent to 84.368, and is poised for a 1 percent weekly decline.

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

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BHP, Boustead, GMA, GS, HSBC: Asia Ex-Japan Equity Preview

By Ian C. Sayson

April 3 (Bloomberg) -- The following companies may have unusual price changes in Asia trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise.

Alumina Ltd. (AWC AU): The partner in the world’s largest producer of the material used to make aluminum had its credit ratings cut by Standard & Poor’s Ratings Services to BBB- from BBB+ with a negative outlook, on concern forecast lower earnings may affect debt repayment. The stock rose 5.2 percent to A$1.41.

BHP Billiton Ltd. (BHP AU): The world’s largest mining company said it won a $643 million dispute with the Australian Tax Office over its closed Boodarie iron plant in the country. The stock increased 4 percent to A$33.38.

Boustead Holdings Bhd. (BOUS MK): The Malaysian property and oil palm plantations company plans to sell assets, including land, valued at between 500 million ringgit ($139 million) and 600 million ringgit this year, the Malaysian Insider Web site reported, citing Managing Director Lodin Wok Kamaruddin. Boustead rose 2.4 percent to 3.42 ringgit.

Filinvest Land Inc. (FLI PM): The fourth-largest Philippine builder by market value said its profit before extra-ordinary items increased 28 percent in 2008 to 1.87 billion pesos ($38.91 million). The stock increased 5.6 percent to 38 centavos.

First Philippine Holdings Corp. (FPH PM): The owner of the nation’s biggest power retailer and non-state power producer said 2008 profit fell 73 percent as financing costs reduced earnings at its units. The stock rose 2 percent to 25.50 pesos.

GMA Network Inc. (GMA7 PM): The second-largest Philippine broadcaster by revenue said earnings growth may accelerate this year driven by increased market share and subscriptions at its overseas operations. The company said it increased this year’s dividends by 40 percent. The stock was unchanged at 4.25 pesos. Its depositary receipts (GMAP PM) gained 1.2 percent to 4.25 pesos.

GS Engineering & Construction Corp. (006360 KS): South Korea’s third-largest builder by market value said an order to build a refinery in central Russia was canceled. The stock jumped 11 percent to 68,600 won.

HSBC Holdings Plc (5 HK): Europe’s largest bank by market value doesn’t rule out further job cuts this year, said Sandy Flockhart, the company’s Asia-Pacific chief executive officer. The stock rallied 15 percent to HK$49.40.

ITC Corp. (372 HK): The Hong Kong-based provider of investment and financial services said its shareholders approved a capital reorganization. The stock rose 2.5 percent to 4.1 Hong Kong cents.

Nanya Technology Corp. (2408 TT): The unprofitable computer-memory chipmaker said its board hasn’t discussed a capital reduction. Nanya made the statement in an exchange filing in reaction to a report by the Commercial Times that parent company Formosa Plastics Group may reduce the unit’s capital by half to boost Nanya’s per-share value. The stock decreased 4.1 percent to NT$7.95.

PCCW Ltd. (8 HK): Hong Kong’s High Court will deliver its ruling on Chairman Richard Li’s bid to buy out PCCW on Monday, Judge Susan Kwan said. The judge adjourned the court case until April 6 after hearing two days of submissions. PCCW, Hong Kong’s biggest phone company, rose 1.3 percent to HK$3.98 before it was suspended from trading.

Powerchip Semiconductor Corp. (5346 TT): Taiwan’s biggest memory-chip maker said it is seeking to revise terms on $157.9 million of convertible bonds due in June. The stock increased 6.4 percent to NT$5.01.

Resorts World Bhd. (RNB MK): The Malaysian casino and hotel operator said it bought back 2 million shares for 1.99 ringgit each. Resorts rose 3.2 percent to 2.23 ringgit.

SM Prime Holdings Inc. (SMPH PM): The Philippines’ largest mall developer said it completed the sale of 5 billion pesos ($104 million) of debt to fund expansion and general expenses. The stock was unchanged at 7.30 pesos.

Stockland (SGP AU): The property trust and Stockland Group had their A-2 short-term ratings affirmed by Standard & Poor’s Ratings Services. The debt rating company kept a negative outlook, citing “volatility of earnings.” The stock jumped 9 percent to A$3.41.

Taihan Electric Wire Co. (001440 KS): South Korea’s second- biggest cable and wire maker said it received a 190.7 billion won ($143 million) order from Kuwait for electric cables. The stock advanced 5.9 percent to 19,000 won.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net

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Japan Stocks Jump, Set for 4th Weekly Gain, on Recovery Hopes

By Masaki Kondo

April 3 (Bloomberg) -- Japanese stocks jumped, headed for their fourth weekly advance, on optimism that efforts by governments and regulators to halt the global recession are taking effect, helping send the yen to a five-month low.

Toyota Motor Corp., the world’s biggest automaker, rose 4.6 percent as world leaders agreed on measures to combat the recession and the weaker yen lifted the value of its overseas sales. Komatsu Ltd., which counts China as its fastest growing market, climbed 3.7 percent as China’s production expanded for the first time in six months. Mitsubishi UFJ Financial Group Inc. gained 3.4 percent on speculation a change in U.S. accounting standards will ease writedowns at financial companies.

The Nikkei 225 Stock Average climbed 138.74, or 1.6 percent, to 8,858.52 as of 9:48 a.m. in Tokyo, nearly erasing its loss on the year. The broader Topix index rose 14.51, or 1.8 percent, to 841.0. The Nikkei is set for a 2.1 percent gain this week, while the Topix is poised to add 1.9 percent.

“There’s growing optimism that the world economy has reached a bottom,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television. “We’ve seen a fairly fast rally lately, and people will likely start getting wary of its pace.”

The Group of 20 policy makers, meeting in London yesterday, pledged more than $1 trillion to the International Monetary Fund to rescue recession-stricken nations. Leaders from the world’s most powerful countries called for stricter limits on hedge funds, credit-rating companies and risky investment by banks.

Weak Yen

Toyota jumped 7 percent to 3,690 yen, while Hondo Motor Co., climbed 4.6 percent to 2,860 yen. Sony Corp., the world’s No. 2 maker of consumer electronics, jumped 4.7 percent to 2,430 yen, the highest since Nov. 5. Olympus Corp., a maker of endoscopes that gets more than a quarter of its sales in Europe, jumped 7.6 percent to 1,930 yen.

The yen depreciated to as much as 100 to the dollar today for the first time since Nov. 4. Japan’s large manufacturers based their fiscal 2009 business plan on an average exchange rate of 97.18 yen per dollar, according to the Bank of Japan’s Tankan quarterly survey. A weaker yen increases the value of overseas sales for Japanese companies.

Komatsu increased 3.7 percent to 1,226 yen, the highest since Jan. 9. Hitachi Construction Machinery Co., which gets 14 percent of its sales in China, added 3.1 percent to 1,412 yen. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron- ore ships, jumped 5.5 percent to 541 yen.

Accounting Change

China’s Purchasing Manager’s Index rose to a seasonally adjusted 52.4 in March from 49 in February, exceeding the 50 threshold that divides expansion and contraction for the first time since September.

Mitsubishi UFJ, Japan’s biggest listed bank, rose 3.4 percent to 546 yen, while No. 2 Mizuho Financial Group Inc. jumped 3.9 percent to 216 yen. Nomura Holdings Inc., the nation’s largest brokerage, jumped 4.3 percent to 587 yen.

The U.S.’s Financial Accounting Standards Board agreed to relax fair-value, or mark-to-market, accounting that requires banks to revalue assets each quarter to reflect market prices. Writedowns and credit losses have amounted to $1.29 trillion at global financial companies since the collapse of the American home-loan market.

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

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Asian Stocks Rise on Recovery Optimism; Mitsubishi UFJ Gains

By Masaki Kondo

April 3 (Bloomberg) -- Asian stocks jumped, sending the regional benchmark index toward its fourth-straight weekly advance, as world leaders agreed on measures to fight the global recession and manufacturing grew in China.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, gained 3.4 percent on speculation a change in U.S. accounting standards will boost bank profits. Komatsu Ltd., a machinery maker that counts China as its fastest growing market, jumped 3.6 percent in Tokyo as China’s production expanded for the first time in six months. BHP Billiton Ltd. climbed 3.7 percent in Sydney after oil and metals prices rose.

The MSCI Asia Pacific Index gained 1.2 percent to 87.33 at 8:48 a.m. in Tokyo, taking its advance this week to 2.2 percent. The gauge has climbed 24 percent from a more than five-year low on March 9 amid speculation governments will succeed in easing the global financial crisis. A 20-percent gain is the technical level that indicates stocks may have entered a bull market.

“There’s growing optimism that the world economy has reached a bottom,” Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion, said in an interview with Bloomberg Television. “We’ve seen a fairly fast rally lately, and people will likely start getting wary of its pace.”

Japan’s Nikkei 225 Stock Average climbed 1.6 percent to 8,858.52, erasing its decline for this year. Australia’s S&P/ASX 200 Index rose 1.4 percent. South Korea’s Kospi Index added 0.6 percent. All markets open for trading advanced.

Accounting Standards

Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 2.9 percent yesterday as Group of 20 policy makers meeting in London pledged more than $1 trillion to the International Monetary Fund to rescue recession-stricken nations. Leaders from the world’s most powerful countries called for stricter limits on hedge funds, credit-rating companies and risky investment by banks.

The U.S.’s Financial Accounting Standards Board also agreed to relax fair-value, or mark-to-market, accounting that requires banks to revalue assets each quarter to reflect market prices. Writedowns and credit-related losses at financial institutions have swelled to $1.29 trillion.

Mitsubishi UFJ jumped 3.4 percent to 546 yen. National Australia Bank Ltd., the nation’s largest by assets, rose 4.2 percent to A$22.40.

Komatsu, Asia’s largest maker of earthmovers, surged 3.6 percent to 1,225 yen. China’s Purchasing Manager’s Index, which was released yesterday, rose to a seasonally adjusted 52.4 in March from 49 in February, exceeding the threshold of 50 that divides expansion and contraction for the first time since September.

BHP rose 3.7 percent to A$34.63. Rio Tinto Group, the world’s third-largest mining company, gained 3 percent to A$59.69. Crude oil soared 8.8 percent to $52.64 a barrel in New York yesterday, the steepest leap since March 12. Copper futures rose 2.2 percent to the highest since Nov. 4.

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

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G-20 Nearing Pact on Tightening Market Rules as Meeting Starts

By Tony Czuczka and Edwin Chen

April 2 (Bloomberg) -- World leaders neared an agreement to tighten rules on financial markets, crack down on tax havens and channel more cash to the International Monetary Fund as they narrowed differences over how to fight the deepest global recession since World War II.

“You’ll see a substantive and ambitious outcome, serious moves and steps put in place to accelerate our recovery from this recession,” U.K. Business Secretary Peter Mandelson said today in a Bloomberg Television interview.

Leaders of the Group of 20 nations gathered today in London a day after German Chancellor Angela Merkel and French President Nicolas Sarkozy sparred with President Barack Obama and British Prime Minister Gordon Brown over how to avoid repeating the financial market collapse that caused the recession.

At the top of the agenda is a regulatory framework to rein in risky trading practices and executive pay. The leaders also moved toward compromise on naming tax havens and how far to go in overseeing hedge funds.

“I don’t think President Sarkozy will be disappointed,” said Mandelson. Brown will announce the summit’s conclusions today at 3:30 p.m.

The summit marks a “unique chance” to “thoroughly” change the financial system, Merkel, who faces elections in September, said at a news conference in London yesterday. “That’s why we’re being a bit tough.”

Officials signalled they will endorse $500 billion in new cash for the IMF, bringing its resources to $750 billion. They also moved closer to Brown’s goal of providing $100 billion in credit lines to support trade after Japan pledged $22 billion.

“I am very confident that we will significantly increase the IMF resources,” U.K. Chancellor Alistair Darling said in a Bloomberg Television interview. “People have talked about doubling and perhaps we can go further than that. We want to make sure the IMF has as much money as it need and critically that it can intervene earlier.”

Geithner’s Effort

U.S. Treasury Secretary Timothy Geithner wants to bring hedge funds, private-equity firms and derivatives markets under federal supervision for the first time. A new systemic-risk regulator would have power to force companies to increase their capital or cut their borrowing, and authorities would be able to seize them if they came unstuck.

“There is a very strong consensus for broader, stronger, higher standards so the world never faces a crisis like this again,” Geithner said in a Bloomberg Television interview yesterday. “The approach that all these countries are going to come together and support is that we agree on higher common standards for oversight.”

Protests continued today after demonstrations yesterday in London’s financial district. Activists clashed with police outside the Bank of England and broke into a Royal Bank of Scotland Group Plc branch. Police in riot gear, on horseback and with dogs moved in to surround members of the crowd that smashed at RBS, which is now mostly-owned by the U.K. government.

Sarkozy said yesterday the summit draft doesn’t do enough to attack tax cheats and there must also be a “global decision” to crack down on traders’ bonuses. Another concern of the euro-area’s biggest countries was that not enough hedge funds will be subjected to oversight.

The recession has worsened since the G-20 leaders last met in November in Washington.

Slump Forecast

The Organization for Economic Cooperation and Development said in Paris that the economy of its 30 members will contract 4.3 percent this year and predicted unemployment in the Group of Seven will reach 36 million late next year. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent.

“The only thing I wish for is that all the presidents gathered here have the maturity to understand the every day that passes without a solution to the crisis, more people are going to suffer,” Brazilian President Luiz Inacio Lula da Silva told reporters after arriving in London.

G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union. Officials from Spain and the Netherlands are also present.

To contact the reporters on this story: Edwin Chen in London at echen32@bloomberg.net; Tony Czuczka in London at aczuczka@bloomberg.net

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ECB Cuts Rate Less Than Forecast as Recession Deepens

By Gabi Thesing

April 2 (Bloomberg) -- The European Central Bank cut its benchmark interest rate less than economists forecast, reducing it by a quarter point to 1.25 percent, even as the euro-area economy sinks deeper into recession.

The decision by the Frankfurt-based ECB was predicted by just four of the 55 economists in a Bloomberg News survey. Forty-nine said the key lending rate would be lowered by a half point. The rate for overnight deposits at the central bank was cut to 0.25 percent from 0.5 percent.

“They’re playing with fire,” said David Kohl, deputy chief economist at Julius Baer Holding AG in Frankfurt. “They want to give a signal that they’re approaching the low point in rates and that’s why they’re choosing smaller steps.”

As rates edge closer to zero, officials are debating the merits of following the Federal Reserve and the Bank of England in buying assets. While Vice President Lucas Papademos says the ECB could purchase corporate debt, council members Juergen Stark and Axel Weber have signaled they’re opposed to such a move, suggesting the council is split on the scope of new measures.

The euro rose almost a cent against the dollar after today’s decision to $1.3422. It pared its drop versus the pound and gained against the yen.

Trichet holds a press conference at 2:30 p.m. He may face questions on whether the ECB will offer financial institutions longer-term loans after Papademos and three other officials said they may lengthen maturities from the current six-month limit.

Record Low

At 1.25 percent the main rate is the lowest since the ECB took charge of monetary policy in 1999.

“Today’s press conference will be the most eagerly awaited in a long time,” said Juergen Michels, chief euro region economist at Citigroup Inc in London. “Hopefully we will get an indication where policy will go from now on, but I doubt they’ll be ready to start on non-conventional measures before the summer.”

Today’s decision came as leaders from the Group of 20 nations met in London to discuss ways to rescue the global economy. The euro-region economy may shrink as much as 4.1 percent this year, faster than the ECB expects, according to the Organization for Economic Cooperation and Development.

Europe’s manufacturing industry contracted more than initially estimated in March and unemployment jumped to a three- year high of 8.5 percent February, reports yesterday showed.

Policy Shift?

Asset purchases would mark a shift for the ECB, which has stood aside as central banks in the U.S., the U.K. and Japan pump money into their economies by buying government and corporate debt after cutting their key rates to almost zero.

With 70 percent of the euro region’s corporate financing coming from banks, the ECB has so far focused on trying to revive interbank lending.

It loans banks unlimited amounts of cash for up to six months and has allowed its deposit rate to steer short-term market borrowing costs.

The ECB “is a different animal to all the other central banks, but has in fact be quite creative in terms of how it tackled the crisis,” said Astrid Schilo, an economist at HSBC Holdings Plc in London said.

Today’s smaller-than-forecast reduction may stoke speculation that the ECB hasn’t yet reached the end of its cutting cycle.

That in turn could delay the introduction of loans with longer maturities, said Ken Wattret, an economist at BNP Paribas in London. Banks won’t be tempted to borrow long term from the ECB if they think rates are set to fall further, he said.

“Longer maturities come with a snag.”

To contact the reporter on this story: Gabi Thesing in Frankfurt gthesing@bloomberg.net.

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Oil Rises Above $50 on Signs Economic Slump May Be Stabilizing

By Grant Smith

April 2 (Bloomberg) -- Crude oil rose the most in two weeks, climbing above $50 a barrel on signs the world economy is stabilizing as leaders of Group of 20 nations meet in London to address the financial crisis.

OPEC Secretary-General Abdalla El-Badri said at a conference in Paris oil prices are “bottoming out,” while Goldman Sachs Group Inc. raised its 2009 Brent forecast on evidence that demand destruction has peaked. U.S. Treasury Secretary Timothy Geithner yesterday noted “encouraging signs” of a recovery in financial markets.

“Demand is not going to fall as much as some of the doom- sayers have been saying,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd. in London. “What we’re seeing now is the rate of decline in demand in developed economies decelerating, which of course has to happen before a recovery.”

Crude oil for May delivery advanced as much as $3.14, or 6.5 percent, to $51.53 a barrel in electronic trading on the New York Mercantile Exchange. It was at $50.95 a barrel at 12:32 p.m. in London. Oil is up 14 percent this year.

Stocks in Europe and Asia rallied, driving the MSCI World Index higher for a third day, while the Group of 20 summit convenes today in London. U.S. durable-goods orders and home sales rose in February, Chinese urban investment surged 26.5 percent in the first two months of the year, and German investor confidence in March reached its highest level since July 2007.

Inventories Rise

“You’re seeing encouraging signs of improvement in our markets,” Geithner said yesterday in a Bloomberg Television interview in London, where he is attending the meeting with President Barack Obama.

Still, other data is showing that global oil inventories are rising as fuel demand falters because of the recession.

U.S. crude inventories climbed 2.84 million barrels in the week ended March 27 to the highest since July 1993, the Energy Department said. Gasoline supplies unexpectedly rose by 2.23 million barrels to 216.8 million barrels.

Total daily fuel demand averaged over the past four weeks was 18.9 million barrels, down 4.4 percent from a year earlier, the report showed. It was the lowest consumption for a four-week period since October.

Goldman Sachs said Brent crude oil prices may reach $50 a barrel this year, up from an earlier estimate of $45, because of OPEC’s production cuts.

The Organization of Petroleum Exporting Countries cut oil output by 1.2 percent to an average 27.395 million barrels a day last month, according to a Bloomberg News survey of oil companies, producers and analysts. The 11 OPEC members with quotas, all except Iraq, pumped 25.06 million barrels a day, 215,000 more than their target of 24.845 million.

Ailing Economy

OPEC, in a meeting March 15 in Vienna, decided against cutting production targets further because of concern higher prices might harm an ailing global economy. Ministers pledged to tighten compliance with their quotas after crude oil fell more than $100 a barrel from the July record.

Brent crude for May settlement rose as much as $3.20, or 6.6 percent, to $51.64 a barrel on London’s ICE Futures Europe exchange. It was at $51.36 a barrel at 12:23 p.m. London time.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.

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China to Boost Yuan Swaps, Payments on Dollar Concern

By Bob Chen and Judy Chen

April 2 (Bloomberg) -- China’s leaders, increasingly concerned about the nation’s $740 billion of U.S. Treasuries, are making it easier for trading partners and consumers to do business in yuan.

The People’s Bank of China has agreed to provide 650 billion yuan ($95 billion) to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through so-called currency- swaps. More such arrangements are being planned so importers can avoid paying for Chinese goods with dollars, the central bank said. In Hong Kong, which has pegged the currency to its U.S. counterpart since 1983, stores from Park’n Shop supermarkets to jewelers accept yuan.

Chinese officials are using the Group of 20 meeting, which begins today in London, to call for reducing the dollar’s role and the creation of a new global reserve currency. Premier Wen Jiabao has said he’s concerned that a weaker greenback will erode the value of China’s Treasuries as the U.S. tries to spend its way out of the longest recession since the 1930s.

“China has learned from this financial crisis that we must reduce reliance on the dollar and promote the yuan as a regional or international currency,” Zhang Ming, secretary general of the international finance research center at the Chinese Academy of Social Sciences said in a March 31 interview in Beijing. “We need to shield our economy from any more turmoil in the U.S.”

The yuan has risen 21 percent to 6.8349 per dollar since the central bank scrapped a fixed exchange rate in July 2005. China has limited its advance to 2.7 percent in the past year as a stronger currency made the nation’s exports less competitive at a time when the economy is growing at the slowest pace in seven years. Gross domestic product will expand 6.5 percent in 2009, from 9 percent last year, according to the World Bank.

Anxiety Increased

Wen said on March 13 that China, the world’s biggest holder of foreign exchange reserves, wants guarantees for the safety of its U.S. assets. The Fed last month announced a $1.15 trillion plan to buy Treasuries and mortgage-related bonds, boosting supply of the currency.

Anxiety increased in the past year because the dollar’s gains were driven in part by investors fleeing riskier assets after the bankruptcy of Lehman Brothers Holdings Inc. in September froze credit markets. The PBOC said March 31 its swaps were designed to help developing nations running short of dollars “cope with the current crisis.”

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rallied 18 percent in the past year. It dropped 2.9 percent last month as the Fed started buying Treasuries.

The yuan’s 12-month non-deliverable forwards rose 3.7 percent from a month earlier to 6.75, showing traders expect the currency to appreciate, according to data compiled by Bloomberg.

Super Currency

PBOC Governor Zhou Xiaochuan asked the International Monetary Fund on March 23 to expand the use of so-called Special Drawing Rights, which are valued against a basket of currencies, and move toward a “super-sovereign reserve currency.” G-20 members Russia and Indonesia supported the proposal, which would reduce the volatility of reserves.

China and its Asian allies will adopt a “mild approach” on the plan to avoid driving down the value of U.S. investments, said Lee Chi Hun, deputy director at Korea Centre for International Finance, a Seoul-based government research agency.

“A rapid collapse in the dollar system will cause damage to those who hold the most dollar assets,” said Lee. The proposal is “a strong warning for the U.S. to protect the value of Chinese assets,” he said.

Dollar Dominance

The dollar made up 64 percent of the world’s $6.71 trillion foreign-exchange reserves at the end of last year, down from 64.4 percent in September and 72.7 percent in June 2001, IMF data shows. The yuan can’t be a reserve currency because it isn’t fully convertible.

“It’s very premature to think the U.S. dollar can be replaced,” said Diane Lin, a Sydney-based fund manager at Pengana Capital, which oversees about $1.9 billion. “The Chinese yuan will eventually become a convertible currency internationally. But we are talking about a timeframe of over five years.”

China, the world’s second-largest exporter after Germany, according to the World Trade Organization, is turning to other strategies to reduce its dependence on the U.S. currency.

Yuan Trials

Bank of China Ltd., the nation’s largest foreign-exchange lender, has started trials for the yuan settlement program in Shanghai and Hong Kong, President Li Lihui said in Beijing last month. While China allowed the currency to be used for trading goods and services in December 1996, it had to be converted before cross-border payments were made.

Controls on buying or selling yuan for investment are also being eased. The government said on Dec. 9 it will triple the amount of domestic securities that overseas funds can buy under the qualified foreign institutional investors program to $30 billion, without giving a timeframe.

“The next step will probably be to allow use of yuan in trade with more regions or nations,” said Chan Wing Kee, managing director of Hong Kong-based Yangtzekiang Garment Ltd., which makes GAP and Levi’s clothes. “I’m pretty sure the yuan has more potential to strengthen than the dollar, the euro, the pound and the yen.”

Indonesian companies will be able to buy Chinese goods using yuan for the first time after last month’s 100 billion yuan currency swap, Bank Indonesia Deputy Governor Hartadi Sarwono said yesterday in Jakarta.

Reducing Pressure

“Importers don’t need to use dollars and they can directly pay their import bills with yuan,” Sarwono said. “This will reduce pressure in the dollar market and help stabilize the foreign-exchange rate.”

Hong Kong banks have been able to accept yuan deposits since 2004 and stores have increasingly welcomed payment in China’s currency since 2003, when a relaxation of visa controls led to a surge in the number of mainlanders visiting the city.

“A lot of tourists were bringing nothing but cash for purchases so we had to adapt as retailers,” said Caroline Mak, chairman of the Hong Kong Retail Management Association. “Watch, even jewelry shops, they all take yuan now.”

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net

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U.K. Bonds Decline as Home Prices Increase, Stocks Advance

By Kim-Mai Cutler and Gavin Finch

April 2 (Bloomberg) -- Gilts fell after an industry report showed the country’s home prices unexpectedly climbed last month and as U.K. stocks advanced for a third day, supporting investor appetite for riskier assets.

Government bonds declined as the FTSE 100 Index climbed above 4,000 for the first time in almost six weeks. Nationwide Building Society said today U.K. house prices had their first increase since October 2007. Gilts stayed lower after the government successfully sold 2.25 billion pounds ($3.3 billion) of 30-year bonds.

“U.K. economic news has been quite encouraging,” said Orlando Green, assistant director of capital markets in London for Calyon, the investment-banking arm of Credit Agricole SA. “The way the markets have been behaving is fostering confidence.”

The yield on the 10-year note rose 10 basis points to 3.23 percent by 11:20 a.m. in London. The 4.5 percent security due March 2019 fell 0.89, or 8.9 pounds per 1,000-pound face amount, to 110.74. The 30-year yield rose 10 basis points to 4.20 percent. Bond yields move inversely to prices.

The 30-year bonds sold today were the longest-dated securities offered since the Debt Management Office failed to find enough buyers for 1.75 billion pounds of 40-year bonds last week. At today’s auction, the government agency received 1.59 times as many bids as securities offered, it said.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

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Euro Advances After ECB Cuts Interest Rate Less Than Forecast

By Anchalee Worrachate

April 2 (Bloomberg) -- The euro rose against the dollar and the yen after the European Central Bank lowered its benchmark interest rate by 25 basis points, less than forecast.

The 16-nation currency also strengthened versus the Swiss franc as the central bank cut the main refinancing rate to 1.25 percent, compared with the 50 basis points economists expected. ECB President Jean-Claude Trichet may say at a press conference at 2.30 p.m. in Frankfurt whether policy makers are ready to use unconventional measures such as printing money to drag the economy out of its worst recession since World War II.

“The ECB has always been a little reluctant to follow in the footsteps of the Anglo-Saxon central banks” on rates cuts, said Neil Mellor, a strategist in London at Bank of New York Mellon Corp., the world’s biggest custodian of assets. “More importantly, people will want to hear if they will start talking about other measures” to help the economy, he said.

The euro rose to $1.3361 as of 12:48 p.m. in London from $1.3249 yesterday. It climbed to 132.75 yen from 130.52 yen.

The ECB lowered its key interest rate by 300 basis points since early October as confidence fell to an all-time low and unemployment rose to the highest level in almost three years.

The ECB may “play it cautiously today in regard to signaling any imminent shift toward some form of quantitative easing,” Derek Halpenny, London-based European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., wrote in a client note today. “A cautious ECB should help relative yield developments underpinning the euro” against the dollar.

Yen Declines

The yen fell, approaching 100 per dollar for the first time in five months, as stocks advanced on speculation the worst of the global economic slump may be ending, boosting demand for higher-yielding assets.

“Some kind of optimism is returning to the market and that’s putting pressure on the yen,” said Lutz Karpowitz, a Frankfurt-based currency strategist at Commerzbank AG, Germany’s second-biggest bank. “The ECB cut is widely expected and we’ll be watching the statement. There could be more upside potential for the euro.”

Japan’s currency depreciated to 99.90 per dollar, the lowest level since Nov. 5, and was at 99.46 yen, from 98.53. It may reach 100 per dollar in the next week and 105 by the end of June, Karpowitz said.

Economic reports suggest the pace of economic decline may be easing and credit markets are showing signs of recovering, curbing demand for the yen as a refuge. U.S. Treasury Secretary Timothy Geithner said yesterday there are “encouraging signs” in markets. American auto sales rebounded from a 27-year low this month, while durable-goods orders and home sales rose in February. Chinese urban investment surged 26.5 percent in the first two months of the year.

Pound’s Gain

The pound rose a third day versus the dollar, to $1.4646 from $1.4468, after Nationwide Building Society said the average cost of a British home climbed 0.9 percent from February, the first increase since October 2007. The U.K. currency reached 90.85 pence per euro, the strongest level since March 9, and was at 91.28 pence.

“The pound is very sensitive to the fortunes of the domestic housing market,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London.

The Bank of England cut its benchmark interest rate to a record low of 0.5 percent last month and started buying assets with newly created money to fight Britain’s first recession since 1991.

Trade Surplus

Australia’s dollar rose to 71.12 U.S. cents from 69.93 cents as optimism the global slowdown may be easing revived demand for the currencies of commodity-exporting nations and the Australian newspaper reported Prime Minister Kevin Rudd plans a third round of economic stimulus in next month’s budget.

The nation’s trade surplus expanded to A$2.11 billion ($1.5 billion) from a revised A$926 million in January, the Bureau of Statistics said in Sydney today. The median estimate of economists surveyed by Bloomberg News was for A$700 million.

“The trade surplus was a surprise on the topside and that gave a boost to the share market and the Aussie dollar,” said Timothy Connors, head of foreign exchange at Custom House Global Foreign Exchange in Sydney. The currency may advance toward 72.50 U.S. cents over the next week, he said.

The MSCI World Index of 23 developed countries climbed 2 percent, bringing its advance since March 9 to 21 percent. The Nikkei 225 Stock Average rose 4.4 percent, and Europe’s Dow Jones Stoxx 600 Index jumped 3.2 percent. U.S. stock futures rose.

G-20 Meeting

The Group of 20 summit convenes in London today to search for a global approach to ending the economic crisis as some reports suggest the pace of economic deterioration is easing. They may agree on boosting financial aid to the International Monetary Fund and to avoid protectionism, according to National Australia Bank Ltd.

“Increased funding for the IMF to support emerging economies in trouble and an anti-protectionist consensus would support sentiment toward the global economy, possibly weighing on the dollar at the margin,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a note today.

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, declined to 84.899, from 85.503 yesterday.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net;

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Goldman Sachs, Hertz, MGM Mirage, UniFirst: U.S. Equity Preview

By Rita Nazareth

April 2 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses.

Allstate Corp. (ALL US): The largest publicly traded U.S. home and auto insurer cut Chief Executive Officer Tom Wilson’s bonus 76 percent after failing to meet 15 of 18 “key strategic, operational and financial measures” last year.

Biogen Idec Inc. (BIIB US): The world’s largest maker of multiple sclerosis medicines nominated four directors and urged shareholders to reject a slate offered by Carl Icahn, the billionaire investor who is seeking control of Biogen.

Blackstone Group LP (BX US): The world’s largest buyout firm was rated “outperform” in new coverage by Credit Suisse Group AG, which cited longer-term franchise positioning and valuation.

Continental Airlines Inc. (CAL US): The fourth-largest U.S. carrier said revenue from each seat flown a mile fell as much as 19.5 percent in March for the third straight decline.

Goldman Sachs Group Inc. (GS US): The largest U.S. securities firm to convert to a bank was rated “outperform” by Credit Suisse, which cited its “strong” position in the market and balance sheet.

Hertz Global Holdings Inc. (HTZ US): The second-largest U.S. publicly traded rental-car company said it won the right to purchase some assets of Advantage Rent A Car. The purchase price is about $33 million and is subject to court approval.

Legg Mason Inc. (LM US): The mutual-fund manager, which is suffering the biggest outflows in its history, sold structured investment vehicles valued at about $49 million from its balance sheet, after removing all of the troubled debt from its money- market funds last month. Legg Mason also repaid debt and amended debt agreements.

MGM Mirage (MGM US): Colony Capital LLC has held talks with MGM, the casino company controlled by Kirk Kerkorian, and about a possible investment in its City Center project in Las Vegas, the Wall Street Journal reported on its Web site.

Morgan Stanley (MS US): The fifth-biggest U.S. bank by assets was rated “neutral” by Credit Suisse, which said Morgan Stanley was “modestly profitable in the calendar first quarter but did not grow book value over the four month period.”

UniFirst Corp. (UNF US): The uniform provider reported second-quarter profit excluding some items of 94 cents a share, beating the average analyst estimate by 40 percent.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.

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Alfa, Cementos Argos, Cencosud, Usiminas: Latin Equity Preview

By Hugh Collins

April 2 (Bloomberg) -- The following companies may have unusual price changes today in Latin American trading. Stock symbols are in parentheses and share prices reflect the previous close.

The MSCI Latin America Index rose 2.5 percent to 2,226.21 yesterday. In Brazil, preferred shares usually are the most- traded class of stock.

Markets in Argentina are closed today for a holiday.

Brazil

Cia. Energetica de Minas Gerais (CMIG4 BS): Shareholders of Brazil’s largest combined power generator and distributor will vote April 29 on a plan to distribute one new share for every four held by investors. Cemig rose 3.4 percent to 35.67 reais.

Usinas Siderurgicas de Minas Gerais SA (USIM5 BS) and Cia. Siderurgica Nacional SA (CSNA3 BS): Brazilian auto sales jumped 17 percent in March, the first increase in six months, said a person with knowledge of the sales figures. Usiminas, the biggest provider of steel to Brazil’s auto industry, rose 1.7 percent to 29.99 reais. CSN, the second-biggest, rose 3.2 percent to 35.50 reais.

Chile

Cencosud SA (CENCOSUD CC): Chile’s biggest retailer said it bought the shares it didn’t already own of Colombian home- improvement store Colombiana Easy SA, acquiring Casino Guichard- Perrachon SA’s 30 percent stake in the venture. Cencosud rose 1 percent to 975 pesos.

Colombia

Cementos Argos SA (CEMARGOS CB): Colombia’s biggest cement maker completed the sale of coal mines and railroad rights to Cia. Vale do Rio Doce. Vale had agreed to pay as much as $373 million for the assets when the acquisition was announced in December. Cementos rose 0.9 percent to 6,480 pesos.

Mexico

Alfa SAB (ALFAA MM): The world’s largest maker of aluminum engine heads and blocks said the company’s automobile parts unit had “much better” results in March. Alfa fell 1.5 percent to 21.62 pesos.

To contact the reporter on this story: Hugh Collins in Mexico City at Hcollins8@bloomberg.net

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U.S. Stock-Index Futures Advance; Citigroup, GM, Alcoa Gain

By Daniela Silberstein

April 2 (Bloomberg) -- U.S. stock futures climbed, indicating the Standard & Poor’s 500 Index may rise for a third day, as the Group of 20 met amid growing speculation the worst of the global recession may be over.

Citigroup Inc. and Bank of America Corp. rallied at least 7.2 percent before a vote on an overhaul of fair-value accounting that may improve profits at banks by more than 20 percent. General Motors Corp., the largest U.S. automaker, advanced 18 percent as car sales fell less than analysts estimated. Alcoa Inc. and ConocoPhillips climbed with higher oil and metal prices.

Futures on the S&P 500 expiring in June added 1.9 percent to 824.3 as of 7:56 a.m. in New York. Dow Jones Industrial Average futures increased 1.7 percent to 7,852 and Nasdaq-100 Index futures gained 2 percent to 1,276. European and Asian shares also rallied.

“Economic data shows that hope has returned and that we haven’t fallen off the cliff and that the stimulus packages have helped as well,” said Rudolf Buxtorf, who manages about $114 million at RBS Coutts Bank in Zurich. “Recent pessimism was exaggerated and there are optimistic signs that this rally will continue over the next few weeks. The G-20 leaders are making an effort to give a positive perspective.”

The G-20 summit convened in London as some reports suggest that the world economy is stabilizing after months of freefall. U.S. stocks yesterday advanced as sales of existing homes unexpectedly increased and a manufacturing gauge topped economists’ estimates, bolstering optimism that the worst of the recession is over.

The European Central Bank cut its benchmark interest rate less than economists forecast, reducing it by a quarter point to 1.25 percent.

S&P 500

The S&P 500 has climbed 20 percent from its 12-year low on March 9 as banks from Citigroup to JPMorgan Chase & Co. said they made money in the first two months of 2009 and Treasury Secretary Timothy Geithner unveiled plans to finance as much as $1 trillion in purchases of financial firms’ distressed assets.

The Financial Accounting Standards Board prepares to hold a final vote on proposed changes to fair-value, also known as mark-to-market, accounting. The changes would allow companies to use “significant judgment” in valuing assets and reduce the amount of writedowns they must take on so-called impaired investments, including mortgage-backed securities.

Citigroup, which has received about $45 billion in government rescue funds, surged 11 percent to $2.97. The stock, which has fallen 80 percent since Oct. 31, is being snapped up by individual investors who sense a bargain, the Wall Street Journal reported, citing online brokerage houses.

Bank of America

Bank of America, the biggest U.S. bank, increased 7.2 percent to $7.56. Wells Fargo & Co., the second-largest home lender, added 5.4 percent to $15.25.

Goldman Sachs Group Inc. rose 2 percent to $112.50. The largest U.S. securities firm to convert to a bank was rated “outperform” by Credit Suisse Group AG, which cited its “strong” position in the market and balance sheet.

GM rose 18 percent to $2.28. U.S. auto sales dropped 37 percent in March, less than analysts estimated, as record incentive spending helped blunt the effect of job losses and low consumer confidence.

Ford Motor Co., the only U.S. automaker not taking federal aid, gained 7.7 percent to $2.95.

Alcoa, the largest U.S. aluminum producer, rallied 4.7 percent to $7.96. Freeport-McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper producer, increased 3.9 percent to $41.25. Copper gained for a third day in London. Aluminum and lead also advanced.

Monsanto

ConocoPhillips, the third-biggest U.S. oil company, added 2.1 percent to $40.65. Crude oil advanced the most in a week on optimism that the world economy is stabilizing, improving the outlook for fuel demand.

Monsanto Co. climbed 6.4 percent to $86.95. The world’s biggest seed producer is due to report earnings today.

Corn climbed on speculation that wet, cool weather may delay crop planting in the U.S. Midwest. Soybeans and wheat also advanced. Cheaper crops threaten to reduce U.S. farm income and curb purchases of Monsanto’s corn seeds.

Agrium Inc., North America’s third-largest fertilizer producer, rose 2 percent to $38.36.

Dow Chemical Co. rallied 5.6 percent to $9.30. The biggest U.S. chemicals maker agreed to sell its Morton Salt unit to K+S AG, Europe’s largest salt maker, for $1.68 billion in cash to help finance the acquisition of Rohm & Haas Co.

A Labor Department report due at 8:30 a.m. in Washington will probably show 650,000 fired workers filed first-time claims for jobless benefits last week as companies strove to stem the drop in profits, according to a Bloomberg survey of economists.

Another report from the Commerce Department at 10 a.m. is expected to show factory orders rose for the first time in seven months, adding to evidence that the worst of the manufacturing decline may have passed. Orders increased 1.5 percent in February, after a 1.9 percent drop the prior month, according to a Bloomberg survey.

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

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Hong Kong Stocks Jump; Hang Seng Index Erases This Year’s Loss

By Hanny Wan

April 2 (Bloomberg) -- Hong Kong stocks jumped, erasing the benchmark index’s losses in 2009, as better-than-expected U.S. economic reports bolstered confidence global growth will recover.

HSBC Holdings Plc, which got 24 percent of its revenue from North America in 2008, surged 15 percent as U.S. Treasury Secretary Timothy Geithner said he sees “encouraging signs” in financial markets. China Resources Land Ltd., a government- controlled property developer, soared 14 percent after China Business News said Shanghai’s residential property sales climbed. China Petroleum & Chemical Corp. advanced 6.2 percent as Goldman Sachs Group Inc. recommended investors buy the stock.

The Hang Seng Index rallied 1,002.43, or 7.4 percent, to close at 14,521.97. The surge, the most since Dec. 8, left the gauge up 0.9 percent for the year. The measure has soared 28 percent from a four-month low on March 9 as governments widened measures to ease the financial crisis and banks such as Standard Chartered Plc reported strong starts to 2009.

“People are chasing the rally because previous forecasts were too negative, and they suddenly realize that the rate of deterioration isn’t as fast as they had expected,” said Pauline Dan, chief investment officer at Samsung Investment Trust Management in Hong Kong, which oversees $64 billion in assets. “However, risks still remain and things will at best stabilize at this level.”

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, rose 6.1 percent to 8,572.20.

Economic Uncertainties

Futures on the Standard & Poor’s 500 Index gained 1.9 percent in trading today. The gauge advanced 1.7 percent yesterday as the Institute for Supply Management said its factory index increased to 36.3 last month, a third consecutive advance. U.S. pending home resales rose 2.1 percent in February, exceeding economists’ forecasts.

HSBC jumped 15 percent to HK$49.40, its highest close since March 2. Bank of Communications Co., part owned by HSBC, climbed 7.7 percent to HK$5.75. Bank of East Asia Ltd., which reported in February its first loss in four decades, rose 8.2 percent to HK$16.42.

“The chance of a global recovery does exist. Markets will improve in the short term, and that will trigger funds to add exposure to equities,” said Chris Leung, a Hong Kong-based portfolio manager at Taifook Asset Management Ltd., which oversees $500 million. “If the engine of the banking system re- starts, the economy could get a boost, but it’s going to take time.” Leung said he is buying financial stocks.

‘Encouraging Signs’

A gauge tracking financial shares on the Hang Seng Index accounted for 61 percent of the measure’s gain as Geithner said a recovery is emerging in the banking sector.

“You’re seeing encouraging signs of improvement in our markets -- we want to reinforce that,” Geithner said yesterday in a Bloomberg Television interview in London, where he is attending the Group of 20 leaders summit. “I’ve never seen this much support around the world.”

All but two stocks on the 42-member Hang Seng Index advanced. April futures added 8.3 percent to 14,560.

Shares on the measure are valued at an average 13 times estimated profit, down from 18.6 times at the beginning of 2008. The gauge tumbled 48 percent last year as the global slowdown deepened.

China Resources Land surged 14 percent to HK$14. Guangzhou R&F Properties Co., the biggest property developer in the southern China city, rallied 18 percent to HK$11.54.

Home sales in Shanghai totaled 1.5 million square meters in March, a 91 percent increase from the previous month, Shanghai- based China Business News said.

Casino Revenue

Sinopec, as China Petroleum is known, jumped 6.2 percent to HK$5.47. Goldman Sachs raised its rating on the company, Asia’s biggest oil refiner, to “buy” from “neutral” on optimism fuel-price reforms in China will boost earnings.

Macau gaming stocks gained on speculation casino earnings will improve. Gross casino revenue dropped 6 percent in March from a year earlier, Portuguese news agency Lusa reported yesterday. That compared with a 15.5 percent decline in February and a 17 percent fall in January, Lusa said.

Melco International Development Ltd., controlled by the son of billionaire Stanley Ho, jumped 18 percent to HK$2.98. Galaxy Entertainment Group Ltd., controlled by billionaire Lui Che-woo, gained 11 percent to HK$1.39.

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

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