European Stocks, U.S. Index Futures Fluctuate; Intel Retreats

By Adam Haigh

April 15 (Bloomberg) -- Stocks in Europe and U.S. futures fluctuated between gains and losses and Asian shares fell after Intel Corp. said it faces a “fragile” economy and the stronger yen dimmed the earnings outlook for Japanese exporters.

Intel dropped 4.1 percent after Chief Executive Officer Paul Otellini said the world’s largest chipmaker isn’t ready to predict growth this quarter. Canon Inc., which generates more than half of its sales from the U.S. and Europe, slid 2.6 percent. GlaxoSmithKline Plc rose for the first time in seven days, leading gains among European companies whose profits are less tied to the pace of economic growth.

The earnings season is “going to be a reality check,” said Thomas Tilse, Frankfurt-based head of portfolio strategy at Cominvest, which has $65 billion. “We are going to see results that are in the midst of a big recession,” he said in a Bloomberg Television interview.

The MSCI World Index retreated 0.2 percent at 12:17 p.m. in London. The gauge of 23 developed countries has rebounded 25 percent since March 9 as lenders from Citigroup Inc. to Bank of America Corp. said they made money at the beginning of 2009. Investors also speculated that Treasury Secretary Timothy Geithner’s plan to finance as much as $1 trillion in purchases of illiquid real-estate assets from banks will pull the global economy out of its first recession since World War II.

Europe’s Dow Jones Stoxx 600 Index was little changed as European Central Bank council member Axel Weber said reducing the bank’s benchmark interest rate below 1 percent risks bringing the interbank money market to a standstill. The MSCI Asia Pacific Index slid 0.5 percent, snapping a four-day, 5.6 percent rise.

Earnings Season

Standard & Poor’s 500 Index futures added 0.1 percent. Companies from Citigroup to General Electric Co. will follow Intel with earnings reports this week. Analysts estimate that profits at S&P 500 companies decreased for the seventh straight quarter in the January to March period, the longest stretch of declines since at least the Great Depression.

U.S. futures were boosted by CSX Corp., which rose after posting a smaller-than-expected drop in profit.

Intel slid 4.1 percent to $15.35 in pre-market trading in New York. The company still faces a “fragile global economic environment,” Otellini said. The chipmaker’s first-quarter net income plunged 55 percent to $647 million.

UBS Declines

UBS AG, Switzerland’s biggest bank, fell 3.8 percent to 12.77 Swiss francs after saying it will reduce the number of employees globally to 67,500 in 2010 from the previous target of 75,000. UBS reported a loss of almost 2 billion francs ($1.75 billion) for the first quarter.

Financial institutions worldwide have announced almost 300,000 job cuts since the beginning of the credit crisis as writedowns and losses swelled to almost $1.3 trillion.

Japan’s exporters fell as the stronger yen eroded the value of sales generated overseas. The yen climbed as high as 98.15 against the dollar from 99.79 at the close in Tokyo yesterday.

Canon slid 2.6 percent to 3,030 yen. Nissan Motor Co. retreated 5.3 percent to 465 yen.

Rio Tinto Group slipped 4.4 percent to 2,391 pence. The world’s third-largest mining company reported a 15 percent fall in first-quarter iron-ore output as floods cut deliveries from its Australian mines and demand from steelmakers slumped.

Industrial output in the U.S. probably fell 0.9 percent in March, economists forecast before a Federal Reserve report due at 9:15 a.m. in Washington. At 8:30 a.m., figures from the Labor Department are projected to show the cost of living climbed 0.1 percent in March after a 0.4 percent gain the previous month.

A third report, from the New York Fed, may show manufacturing in the state is shrinking again this month.

‘Volatility Bubble’

U.S. equities were lowered to “underweight” at HSBC Holdings Plc, as the bank recommended investors buy into stocks in Asia, emerging markets and Europe to take advantage of falling volatility.

“What we’ve labeled the ‘volatility bubble’ may be about to deflate at last,” Kevin Gardiner, HSBC’s London-based chief equity strategist, wrote in a report. “The non-U.S. markets may do better if risk appetite revives.”

India’s Bombay Stock Exchange Sensitive Index added 3.3 percent. BlackRock Inc., UBS and billionaire Wilbur Ross are betting the measure will continue to climb after posting the best returns in the past month among the world’s biggest emerging-market economies.

Glaxo, CSX

Glaxo, the world’s second-biggest drugmaker, rose 2 percent to 1,028.5 pence.

CSX, the third-largest U.S. railroad company, advanced 6.2 percent to $30.14 in German trading. The company posted profit of $246 million, or 62 cents a share, exceeding the 51-cent average estimate of 17 analysts surveyed by Bloomberg.

EBay Inc. gained 2 percent to $14.67 in German trading after saying it is planning an initial public offering for the Skype Internet-calling unit in the first half of 2010.

Syngenta AG added 6.2 percent to 235.2 francs. Price increases and demand for crop-protection products helped the world’s biggest maker of agricultural chemicals contain the costs of a stronger dollar.

Investors in 10 countries grew less concerned that stocks will keep falling, the first unanimous improvement in Bloomberg’s Professional Global Confidence Survey since it began 17 months ago, after equities posted their steepest increase since April 2003.

Participants turned bullish on Japan’s Nikkei 225 Stock Average, Brazil’s Bovespa Index , Mexico’s Bolsa and Italy’s S&P/MIB, predicting gains in the next six months. They became less bearish in the U.S., France, Germany, Spain, Switzerland and the U.K. The 1,214 responses between April 6 and April 10 followed the biggest monthly rally for the MSCI World Index in six years.

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

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China Stocks Climb for Fifth Day; Neusoft, Software Makers Rise

By John Liu

April 15 (Bloomberg) -- China’s stocks rose for a fifth day, its longest-winning streak in three weeks, as software makers surged on speculation the government will aid the industry.

Neusoft Corp. and Shanghai Baosight Software Co. jumped by the 10 percent daily limit. Huaneng Power International Inc., the listed unit of China’s largest power group, declined 1.2 percent after saying first-quarter output fell. China Southern Airlines Co., the nation’s biggest carrier by fleet size, slid 1.8 percent after reporting its first annual loss in three years.

“There is speculation that the technology industry will be included in a new stimulus plan aimed at boosting domestic consumption,” said Sun Chao, an analyst at Citic Securities Co. in Shanghai.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 8.88, or 0.4 percent, to 2,536.06 at the close after changing direction at least seven times. The five-day gain is the longest since March 24. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, added 0.4 percent to 2,686.99.

The Shanghai Composite’s 39 percent gain this year makes it the second-best performer among the 88 primary stock gauges tracked by Bloomberg globally. Stocks have rallied on optimism the government’s 4 trillion yuan ($585 billion) stimulus package and record new lending will spur a recovery in the world’s third-largest economy amid the global recession. Interest rates were cut five times from September to December.

New Plan?

Neusoft climbed the maximum 10 percent to 20.69 yuan, the highest since March 2008. Shanghai Baosight Software jumped 10 percent to 25.78 yuan. Shandong Langchao Cheeloosoft Co. advanced 10 percent to 13.45 yuan. China National Software & Service Co. climbed 6.2 percent to 32.85 yuan. Shenzhen Kingdom Technology Co., a financial software developer, added 4 percent to 13.27 yuan.

China’s government is considering additional stimulus measures to boost consumption and bolster growth just as the nation shows more signs of recovering.

The government will issue some “guideline” policies and continue to use fiscal and taxation measures to spur an expansion, the official China Securities Journal reported yesterday, citing Gao Huiqing, a researcher at the State Information Center as saying on April 11.

China’s economy probably expanded 6.3 percent from a year earlier in the first quarter, the slowest pace in almost 10 years, according to the median estimate of 12 economists surveyed by Bloomberg News. The statistics bureau is due to release the figure tomorrow.

Foreign direct investment dropped 9.5 percent from a month earlier to $8.4 billion in March, the sixth straight monthly decline, the commerce ministry said at a briefing in Beijing today. For the first quarter, spending fell 20.6 percent.

Huaneng Power

Huaneng Power, the listed unit of China’s largest power group, retreated 1.2 percent to 7.76 yuan. The company said output in the first quarter of this year fell 9.3 percent.

China Southern lost 1.8 percent to 6.17 yuan. The carrier slumped to its first annual loss in three years after natural disasters and an economic slowdown sapped air travel. The loss was 4.8 billion yuan, it said.

“If earnings don’t catch up, I doubt the rally can go much further,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai.

The following companies were among the most active in China’s markets. Stock symbols are in brackets after companies’ names.

Offshore Oil Engineering Co. (600583 CH), a unit of the country’s third-largest oil producer, climbed 5.9 percent to 17.72 yuan after profit for 2008 rose 10 percent to 1.2 billion yuan.

Shanghai Chengtou Holding Co. (600649 CH), which supplies water to parts of the city, gained 2.8 percent to 11.89 yuan. Shanghai’s government plans to raise the price of drinking water for the first time in seven years, the Xinhua News Agency reported yesterday.

Wuhan Iron & Steel Co. (600005 CH), China’s fifth-biggest steelmaker by value, slid 4.5 percent to 7.67 yuan. Wuhan Steel said it had no plans to issue bonus shares and had not held talks with institutional investors on the exercise of warrants.

To contact the reporter on this story: John Liu in Shanghai at jliu42@bloomberg.net

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German Stocks Snap Three-Day Advance; Banks, RWE, BASF Decline

By Julie Cruz

April 15 (Bloomberg) -- German stocks fell for the first time in four days, led by banks, as Switzerland’s UBS AG reported a first-quarter loss and said it will cut more jobs.

Commerzbank AG and Deutsche Bank AG, Germany’s biggest, dropped more than 2 percent each. RWE AG snapped a five-day gain as Goldman Sachs Group Inc. recommended selling the shares. BASF SE, the world’s largest chemical company, retreated 2.4 percent.

The benchmark DAX Index fell 0.6 percent to 4,531.96 as of 12:19 p.m. in Frankfurt. The measure has rebounded 24 percent from this year’s lows, trimming the decline in 2009 to 5.7 percent, as banks from Barclays Plc to Citigroup Inc. fueled speculation the worst of the credit crisis is over. The HDAX Index of the country’s 110 largest companies slipped 0.4 percent to 2,254.44 today.

“There are signs of hope, but the reality is still gloomy,” said Markus Steinbeis, head of equity portfolio management at Pioneer Investments Kapitalanlagegesellschaft mbH in Unterfoehring near Munich. “It’s quite tough to forecast the quality of the balance sheets of the banks. At this stage, there is hope things will get better in the second half of the year.”

Commerzbank fell 2 percent to 4.92 euros, ending two days of gains. Deutsche Bank lost 3.5 percent to 37.35 euros. Allianz SE slipped 1.1 percent to 70.70 euros.

UBS said it will cut an additional 7,500 jobs after reporting a loss and outflows of client funds in the first quarter. The bank will reduce the number of employees to 67,500 in 2010, compared with a previous target of 75,000, UBS said today. It reported a net loss of “almost” 2 billion Swiss francs ($1.75 billion) for the first quarter.

RWE, BASF

RWE retreated 1.2 percent to 56.19 euros. Germany’s second- largest utility was downgraded to “sell” from “neutral” at Goldman Sachs, which “forecast a dividend cut in 2009 followed by a further cut in 2013.”

BASF lost 2.4 percent to 27.06 euros. The company said it’s preparing for short-time work at its Ludwigshafen site, with short time being introduced in production units as of June.

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

Didier-Werke AG (DID GR) added 1.8 percent to 97.80 euros. The German fireproofing-materials maker owned by Austria’s RHI AG said full-year net income rose to 38 million euros ($50.3 million) from 18.2 million euros, as sales increased.

Heidelberger Druckmaschinen AG (HDD GY) fell 3.2 percent to 4.81 euros, ending two days of gains. The world’s largest maker of printing presses was downgraded to “hold” from “buy” at Equinet AG, saying the brokerage’s share-price estimate has been reached.

TUI AG (TUI1 GY) climbed 4.3 percent to 5.94 euros, the highest intraday price in two months. The German owner of Europe’s largest travel company agreed to form a joint venture with Russian billionaire Alexei Mordashov’s tourism assets to expand in the former Soviet Union.

To contact the reporter on this story: Julie Cruz in London at Jcruz6@bloomberg.net.

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AGL Energy Won’t Buy BG Assets, Favors Own Projects

By Angela Macdonald-Smith

April 15 (Bloomberg) -- AGL Energy Ltd., Australia’s biggest power and gas retailer, decided not to exercise options worth more than A$1 billion ($723 million) to buy assets from BG Group Plc, citing higher returns from building its own projects.

Options over the Lacerta and Polaris coal-seam gas fields and the Condamine power plant in Queensland have now lapsed, AGL said today in a statement to the Australian stock exchange. The decision has no effect on forecast earnings, it said.

Since gaining the rights in October AGL has boosted its gas resources with purchases of Sydney Gas Ltd. and of a venture in New South Wales, while Managing Director Michael Fraser said Feb. 25 he will study bids for power assets to be sold by the state. The A$856 million price of the coal-seam gas option “looks expensive” based on an independent valuation last year, Bank of America Corp.’s Merrill Lynch unit said in a March 27 report.

“They’re making the right move keeping the balance sheet capacity,” said Jason Mabee, a utilities analyst at RBS Group Australia Pty in Sydney. “I definitely think that was a pretty ritzy price to pay for that asset.”

AGL slid as much as 40 cents, or 2.6 percent, to A$14.73 on the exchange and was at A$14.82 at 11:06 a.m. Sydney time. The stock lagged behind a drop of as much as 1.7 percent in the exchange’s benchmark utilities index.

‘No Reason’

AGL secured the rights as part of an accord to sell its stake in Queensland Gas Co. to Reading, England-based BG, which is adding reserves for a planned liquefied natural gas venture in northeastern Australia to supply customers in Asia. Fraser said in February that AGL’s purchase of gas assets in New South Wales made the company “reasonably confident” of meeting its target for adding reserves without exercising the options.

“We are comfortable that our medium-term strategic target of securing 2,000 petajoules of equity gas can be achieved from recent acquisitions without the need for Lacerta/Polaris in our portfolio,” Fraser said in today’s statement.

Buying Lacerta and Polaris would cut earnings by about 7 percent in the year ending June 30, 2010, Goldman Sachs JBWere Pty said in an April 6 report. The gas produced at the fields is likely to be used for LNG exports rather than for the eastern Australian gas market, leaving “no apparent reason” for AGL to invest in the assets, Merrill said.

AGL decided its existing 400 megawatts of rights on power produced at the Yabulu and Oakey generators in Queensland and rights held over sites that may host a further 1,870 megawatts of gas-fired power “delivered a superior economic and strategic outcome” than buying the 140-megawatt Condamine plant under construction west of Brisbane, Fraser said.

AGL forecast on Feb. 25 a profit of between A$370 million and A$400 million in the year ending June 30.

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

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Oil Falls a Third Day as Stockpiles Gain on Economic Slowdown

By Christian Schmollinger

April 15 (Bloomberg) -- Oil fell for a third day as U.S. crude stockpiles climbed amid signs of further economic weakness in the world’s biggest energy consumer.

U.S. retail sales unexpectedly fell 1.1 percent in March, the Commerce Department said yesterday. The industry-funded American Petroleum Institute said that oil inventories rose last week to their highest since 1990. The weekly Department of Energy report today will probably show that stockpiles increased to the highest since 1993.

“The fundamentals still don’t suggest any strength,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “The supply levels are still at really high numbers for crude and that’s unlikely to change with the refinery capacity rates still very low.”

Crude oil for May delivery fell as much as 49 cents, or 1 percent, to $48.92 a barrel in electronic trading on the New York Mercantile Exchange. It was at $49.32 a barrel at 10:09 a.m. Singapore time. Oil is up 11 percent this year after tumbling 54 percent in 2008. Yesterday, crude dropped 64 cents, or 1.3 percent, to settle at $49.41 a barrel.

The U.S. used an average of 18.9 million barrels a day in the four weeks ended April 3, down 4.4 percent from a year earlier, according to the Energy Department, the lowest level since October.

Gross domestic product will contract by 3.8 percent in North America in 2009, the International Energy Agency said in a report April 10, dropping an earlier forecast for a recovery in the economy and oil demand in the second half of the year.

Increased Output

As OPEC nations make their biggest oil production cuts on record, Brazil, Russia and the U.S. are pumping more, which may crude back below $50 a barrel as demand slows.

U.S. imports fell by 148,000 barrels a day in January just as America’s production increased by 153,000, according to data compiled by the Energy Department in Washington. More oil is flowing just as the slowing economy causes consumption to contract for the second consecutive year.

Crude’s highest closing price this year was at $54.34 a barrel on March 26, up from a low of $33.98 a barrel on Feb. 12.

“Some of that optimism that we’re turning a corner economically has run its course,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “We’re not seeing enough good news flowing to extend the rally in oil prices.”

Equities Market

An Australian leading economic index fell in February to contract at the fastest annual pace since 1982.

The index, a gauge of future economic growth, dropped 0.3 percent to 248.6 points from 249.4 in January, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 5.1 percent.

U.S. equities dropped for the first time in four days yesterday as declines in retail sales offset optimism from Federal Reserve Chairman Ben S. Bernanke that the pace of the economy’s slump may be slowing.

The Standard & Poor’s 500 Index slipped 1.3 percent to 847.16. The Dow Jones Industrial Average dropped 94.7 points, or 1.2 percent, to 7,963.11.

Asian stocks dropped for the first time in five days as the outlook dimmed for earnings for companies in Japan, the world’s third-largest oil user.

“There are concerns that the equity market gains can’t be sustained now that we’re near 8,000 in the Dow,” said Commodity Warrant’s Hassall. “If we see equities come off after this recent rally it will be difficult for crude oil to stay at this level.”

Inventories Gain

The API reported yesterday that oil supplies increased 6.51 million barrels to 371.2 million last week.

Oil-supply totals from the API and DOE moved in the same direction 76 percent of the time over the past four years, according to data compiled by Bloomberg.

An Energy Department report today may show supplies rose 1.75 million barrels last week, according to the median of 14 responses in a Bloomberg News survey. Stockpiles in the week ended April 3 were the highest since July 1993 as refiners shut units for maintenance and producers outside the OPEC countries increased shipments.

“Obviously we’ve got a big overhang in inventories,” said Commodity Warrants’ Hassall. “Demand still remains very weak.”

Brent crude oil for May settlement declined 18 cents, or 0.3 percent, to end the session at $51.96 a barrel on London’s ICE Futures Europe exchange yesterday. The contract expires today. No trades have been reported so far.

The more-active June contract fell 27 cents, or 0.5 percent, to $52.66 a barrel at 9:55 a.m. Singapore time.

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

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Taiwan’s Dollar Declines After Rating Outlook Cut to Negative

By Bob Chen

April 15 (Bloomberg) -- Taiwan’s dollar weakened on concern the government’s stimulus spending is straining public finances amid a recession.

The local currency snapped two days of gains after Standard & Poor’s Rating Services yesterday cut the outlook on the island’s long-term credit rating to negative from stable, citing a “marked deterioration in the government’s fiscal position.” The jobless rate may exceed 6 percent in the coming months and peak in September, the Chinese-language Commercial Times reported today, citing Vice President Vincent Siew.

“Taiwan’s economic fundamentals haven’t changed,” said Tigr Cheng, an economist at Polaris Securities Co. in Taipei. “We are expecting more bad data to come in May or June, which will take the Taiwan dollar weaker.”

The island’s currency slipped 0.2 percent to NT$33.674 as of 9:58 a.m. local time, according to Taipei Forex Inc.

Taiwan’s government debt is forecast at 142 percent of revenue at the end of 2009, Standard & Poor’s credit analyst Kim Eng Tan said in a statement yesterday. The government is forecasting a NT$134.6 billion ($4 billion) deficit this year, the second consecutive shortfall.

Exports fell for a seventh straight month in March, extending the longest losing streak in seven years. The economy shrank an unprecedented 8.36 percent in the fourth quarter, pushing the island into its first recession since 2001.

The local dollar may drop to NT$34.2 against the greenback by the end of the second quarter, Polaris’ Cheng said. The currency climbed 0.5 percent in the first two days of this week.

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

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Korea Won Falls on Renewed Concern Global Recession Will Deepen

By Bob Chen

April 15 (Bloomberg) -- South Korea’s won weakened for the first time in three days after an unexpected drop in U.S. retail sales fanned concern a global recession is deepening, prompting investors to seek safer bets than emerging-market assets.

Global shares also retreated, dragging the Standard & Poor’s 500 Index from a two-month high and the Kospi index from its best closing level since October. South Korea last month reported an unemployment rate of 3.5 percent for February, the highest in more than two years, and Finance Minister Yoon Jeung Hyun today said the local jobs market is likely to remain weak.

“It’s a modest adjustment, it’s natural given that U.S. stocks were down a bit,” said Thomas Harr, a senior currency strategist at Standard Chartered Bank in Singapore. “It depends a lot on what happens with U.S. stocks and risk appetite generally. Risk appetite is still kind of high” so weakness in the won may be limited.

The won fell 0.6 percent to 1,330.75 per dollar as of 9:57 a.m. local time, according to data compiled by Bloomberg. Foreign investors sold more local shares than they bought for the first time in five days, contributing to a 0.6 percent decline in the Kospi.

The S&P 500 Index of U.S. stocks slid 2 percent yesterday after the Commerce Department reported a 1.1 percent decrease in March retail sales. Economists surveyed by Bloomberg forecast a 0.3 percent gain.

South Korea’s economy will shrink 2.4 percent this year, the first contraction since 1998, the central bank forecast on April 10.

To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net

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Australian, N.Z. Dollars Fall 2nd Day as U.S. Economy Falters

By Patricia Lui

April 15 (Bloomberg) -- The Australian and New Zealand dollars slid for a second day as government reports showed U.S. retail sales and producer prices unexpectedly fell, puncturing optimism that the worst of the global slump is ending.

The currencies weakened against the yen as Asian stocks declined for the first time in five days, reducing appetite for higher-yielding assets. Goldman Sachs Group Inc., which sold $5 billion in shares, dropped 12 percent as Standard & Poor’s said the bank’s better-than-estimated earnings may not be sustainable.

“The Aussie and the kiwi had a strong run up the past few days and it’s not too surprising they are correcting a little especially after softer U.S. retail sales last night and softer U.S. stocks,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. “Commodities are also softer in Asian trading this morning. Those reasons are good enough catalysts for traders to take some profit.”

Australia’s dollar weakened to 71.91 U.S. cents as of 11:13 a.m. in Sydney, from 72.39 cents yesterday. It declined 0.8 percent to 71.05 yen. New Zealand’s currency fell to 57.92 U.S. cents from 58.32 cents. It fell 0.8 percent to 57.23 yen.

Retail sales in the U.S. unexpectedly dropped in March for the first time in three months, declining 1.1 percent, the Commerce Department said yesterday in Washington. The Labor Department said wholesale prices fell last month, indicating that deflation risks remain.

‘A Hammer Blow’

The figures served to temper optimism the world’s largest economy has passed through the worst of its recession, even as Federal Reserve Chairman Ben S. Bernanke said there were “tentative signs that the sharp decline” in the economy was easing. He cited “progress” in stabilizing financial markets, which he said was critical to a sustainable recovery, he said

“U.S. March retail sales were a hammer blow to those who had begun to turn optimistic after recent less-than-horrible economic news,” David Watt, senior currency strategy in Toronto at RBC Capital Markets, wrote yesterday in a note to clients. “Although Goldman had set tongues aflutter with their early earnings release, the aftertaste was rather unpleasant.” while speaking at Morehouse College in Atlanta yesterday.

A leading Australian economic index fell in February at the sharpest pace since 1982. The index, a gauge of future economic growth, dropped 0.3 percent to 248.6 points from 249.4 in January, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 5.1 percent.

“I expect the Australian dollar to go lower in the next week or so, possibly going under 70 to the U.S. dollar before heading higher again,” Grace said.

Stocks Decline

The MSCI Asia Pacific Index lost 0.7 percent to 88.91, snapping a four-day, 5.6 percent advance. The Australian S&P/ASX 200 Index lost 0.15 percent, ending two days of gains, while the New Zealand benchmark Top 50 index fell 0.2 percent.

“We’re seeing a dampening of the positive equity sentiment that was growing since the beginning of March where people were thinking that the world economy may have been reaching a bottom,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “That optimism was getting a bit stretched and the current pullback is a cautious signal the bear-market rally may be coming to an end.”

Australian bonds rose for the first time in three days. The yield on the benchmark 10-year note declined one basis point, or 0.01 percentage point, to 4.60 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security maturing March 2019 rose 0.1, or A$1 per A$1,000 face amount, to 105.12.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, slid to 3.77 percent from 3.80 percent yesterday.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net

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Dollar May Drop to Post-War Low Versus Yen: Technical Analysis

By Shigeki Nozawa and Nate Hosoda

April 15 (Bloomberg) -- The dollar may weaken toward the post-World War II low of 79.75 yen after climbing to about 103 yen in the coming weeks, according to Mizuho Financial Group Inc.

The level of 103 yen is the top of a so-called ichimoku cloud where sell orders may be triggered, causing the dollar to approach 79.75 yen, the post-war low set in April 1995, said Hiroyuki Tanaka at Mizuho Corporate Bank in Tokyo, a unit of Japan’s third-largest lender.

“The real game starts when dollar-yen hits the cloud,” said Tanaka, the bank’s chief technical analyst. The dollar’s path resembles the currency’s movements from March to August 2008 after the near-collapse of Bear Stearns Cos., he said.

The dollar tumbled to a 13-year low of 87.13 yen on Jan. 21 after the previous occasion the greenback failed to break through a cloud pattern. The dollar is entering the cloud for a second time after reaching a “double-bottom” of about 87.10 in December and January, according to Tanaka.

The dollar may rally to 117 yen next year should it break through the resistance level of 103 yen, Tanaka said. The yen traded at 99.07 against the dollar as of 9:12 a.m. in Tokyo from 98.98 late in New York yesterday.

An ichimoku chart analyzes the midpoints of historic highs and lows. A cloud is the area between the first and second leading span lines on the chart and is used to show levels where buy and sell orders may be clustered.

To contact the reporter on this story: Shigeki Nozawa in Tokyo at snozawa@bloomberg.net; Nate Hosoda in Tokyo at nhosoda@bloomberg.net.

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Yen Climbs to Two-Week High on Concern U.S. Recession Deepening

By Ron Harui

April 15 (Bloomberg) -- The yen advanced to a two-week high against the dollar before U.S. reports that may show industrial output and manufacturing contracted, signaling the recession in the world’s largest economy is deepening.

Japan’s currency also climbed to the strongest in two weeks against the euro as Asian stocks fell, spurring investors to reduce holdings of higher-yielding assets. The euro may drop for a second day versus the dollar on concern a German report today will show wholesale prices dropped for a fifth month, supporting the case for the European Central Bank to cut interest rates.

“The markets are returning to reality from an exuberant state,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-biggest bank. “This is a correction, which is leading to some buying of the yen,” he said.

The yen rose to 98.66 against the dollar at 11:16 a.m. in Tokyo from 98.98 in New York yesterday. It earlier reached 98.58, the strongest level since April 2. Japan’s currency gained to 130.68 per euro from 131.25, and advanced to 70.82 per Australian dollar from 71.63.

The dollar traded at $1.3250 per euro from $1.3259, and was at $1.4893 versus the British pound from $1.4895.

The Nikkei 225 Stock Average and the MSCI Asia-Pacific Index of regional shares both declined 0.8 percent after the Standard & Poor’s 500 Index dropped 2 percent yesterday.

‘Negative’ Sentiment

“We are negative on equity sentiment over the short term and accordingly expect euro-dollar to trade lower,” wrote Ashley Davies, a Singapore-based currency strategist at UBS AG, Switzerland’s largest bank, in a research note today.

U.S. industrial output fell for a fifth month in March, dropping 0.9 percent, according to a Bloomberg News survey of economists before the Federal Reserve report today. The Fed Bank of New York’s Empire State index of manufacturing, also due today, was minus 35 in April, a 12th month of contraction, a separate Bloomberg survey showed.

The yen rose the most in four weeks against the dollar yesterday after the Commerce Department said U.S. retail sales fell 1.1 percent in March. The median forecast of economists surveyed by Bloomberg was for a 0.3 percent increase.

The euro may extend declines versus the dollar before Germany’s Federal Statistics Office releases its report on wholesale prices today. Prices fell 7.1 percent in March from a year earlier, after a 5.7 percent drop the previous month, according to a separate Bloomberg survey.

Higher Defaults

Europe’s single currency weakened yesterday as Standard & Poor’s said leveraged buyouts may help push corporate defaults in Europe to a record 14.7 percent this year.

Between 90 and 112 speculative-grade companies in western Europe rated by S&P may default this year, the New York-based company said, increasing an earlier estimate of as much as 11.1 percent. Defaults will be “materially higher” among companies purchased in LBOs, where target firms are loaded with acquisition debt, S&P said.

“The S&P report renews concern over possible defaults at financial institutions in Europe,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “It would be negative for the euro.” The 16-nation currency may weaken to $1.3180 and 130 yen today, he said.

The ECB cut its benchmark interest rate on April 2 by less than economists predicted, reducing it by a quarter-percentage point to 1.25 percent. Policy makers next meet May 7.

Ichimoku Cloud

The dollar may weaken toward the post-World War II low of 79.75 yen after climbing to about 103 yen in the coming weeks, according to Mizuho Financial Group Inc.

The level of 103 yen is the top of a so-called ichimoku cloud where sell orders may be triggered, causing the dollar to approach 79.75 yen, the postwar low set in April 1995, said Hiroyuki Tanaka, chief technical analyst at Mizuho Corporate Bank, a unit of Japan’s third-largest lender.

“The real game starts when dollar-yen hits the cloud,” Tokyo-based Tanaka said. The dollar’s path resembles the currency’s movements from March to August 2008 after the near- collapse of Bear Stearns Cos., he said.

The dollar tumbled to a 13-year low of 87.13 yen on Jan. 21 after the previous occasion the greenback failed to break through a cloud pattern. The dollar is entering the cloud for a second time after reaching a “double-bottom” of about 87.10 in December and January, according to Tanaka.

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

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China’s Soybean Imports May Face Delays at Customs, Center Says

By William Bi

April 15 (Bloomberg) -- Soybean imports into China may face delays after inspectors found diseased beans in recent shipments, a state-backed market information provider said.

The customs authority in Guangzhou found 10 batches of soybeans that contained the bean pod mottle virus, the China National Grain and Oils Information Center said today in an e- mailed report. The unusually high incidence may affect the rate at which future shipments clear customs, the center said.

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

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Copper Drops From Six-Month High in Asia as Rally Deters Buyers

By Glenys Sim

April 15 (Bloomberg) -- Copper fell for the first time in five days on speculation the recent rally may deter purchases from China, the world’s largest consumer of the metal.

Futures also declined after a report showed U.S. retail sales slid 1.1 percent last month from February, triggering losses in equity markets. The benchmark MSCI Asia Pacific Index, which fell for the first time in five days today, is up 16 percent in the past month while copper surged 22 percent.

“Chinese buyers have always been price sensitive,” Pan Jinghua, an analyst at Shanghai Jinpeng International Futures Co., said today. “We definitely see some profit-taking and less physical purchases at these levels.”

Copper for three-month delivery on the London Metal Exchange fell as much as 1.6 percent to $4,623 a metric ton, and traded at $4,720 a ton at 10:05 a.m. Singapore time. The metal used in electrical wiring and pipes soared to $4,925 a metric ton yesterday, the highest since Oct. 20.

July-delivery copper on the Shanghai Futures Exchange fell as much as 0.8 percent to 38,290 yuan ($5,605) a ton, and last traded at 39,310 yuan. The most-active contract slumped the daily limit yesterday.

“We believe that the current high copper price represents an unsustainable stockpiling exercise by China,” Raymond Goldie, an analyst at Salman Partners Inc., said in a report.

China’s State Reserve Bureau has reportedly bought 300,000 tons of copper and may buy a further 600,000 to 900,000 during the remainder of 2009, according to the Macquarie Group Ltd. The country imported a record 374,957 tons of the metal and its products in March as buyers took advantage of low prices to replenish stockpiles.

Among other LME-traded metals, aluminum was little changed at $1,510 a ton, while zinc gained 1 percent at $1,455 a ton. Lead fell 0.3 percent to $1,481 a ton, and nickel slid 1.3 percent to $11,699 a ton. Tin was yet to trade.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

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Gold Advances on Global Stock Retreat, Inflation Outlook

By Glenys Sim

April 15 (Bloomberg) -- Gold gained as a rally in global stocks halted and on investor expectations for inflationary pressures to rebound on government stimulus spending, boosting demand for the precious metal as a store of value.

Equities retreated after U.S. retail sales decreased 1.1 percent last month, while prices paid to U.S. producers decreased in March after two months of gains. Gold has dropped 3.4 percent in the past month while the benchmark MSCI Asia Pacific Index, which fell for the first time in five days today, climbed 16 percent.

“Despite the weight of deflationary data in recent weeks, concerns that quantitative easing and rising fiscal deficits will stoke inflationary pressures remain an important source of support for gold,” James Steel, an analyst at HSBC Securities, wrote in an e-mailed note.

Gold for immediate delivery gained 0.2 percent to $892.42 an ounce at 9:38 a.m. Singapore time. The metal fell yesterday after Federal Reserve Chairman Ben S. Bernanke said there are signs that the “sharp decline” in the economy may be easing, and President Barack Obama said the stimulus package is beginning to “generate economic progress.”

Investment in the SPDR Gold Trust, the biggest exchange- traded fund back by bullion, stood unchanged for a second day at 1,127.68 metric tons yesterday.

Governments are spending trillions of dollars to spur growth in the U.S., Europe, Japan and China. Japan has pledged 15.4 trillion yen ($153 billion), while China has put in place a 4 trillion yuan ($585 billion) stimulus plan.

“Investors’ perception of future inflation levels will continue to influence gold prices,” said Steel.

Among other precious metals for immediate delivery, silver fell 0.2 percent to $12.74 an ounce, platinum gained 0.8 percent to $1,219.50 an ounce, and palladium climbed 1.5 percent to $236.25 an ounce at 8:32 a.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Japan Stocks Fall After U.S. Retail Sales Drop, Yen Strengthens

By Patrick Rial

April 15 (Bloomberg) -- Japanese stocks fell for a second day after an unexpected drop in U.S. retail sales and a stronger yen dimmed the profit outlook for makers of electronics and cars.

Canon Inc., the world’s largest seller of digital cameras, declined 2.9 percent. Honda Motor Co., Japan’s second-biggest carmaker, fell 1.8 percent. Tokyo Electron Ltd., the world’s second-largest supplier of semiconductor production equipment, lost 1.7 percent after chipmaker Intel Corp. said profit plunged. Nomura Holdings Inc., Japan’s biggest brokerage, plunged 6 percent after Goldman Sachs Group Inc. sold shares to repay government loans, prompting a sell-off in U.S. financial stocks.

“The situation in the U.S., combined with the stronger yen point to losses in the local market today,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co., in an interview with Bloomberg Television. “From a technical perspective, investors may be thinking now is a good time to sell.”

The Nikkei 225 Stock Average lost 119.18, or 1.4 percent, to 8,723.50 as of 9:30 a.m. in Tokyo. The broader Topix index retreated 11.38, or 1.4 percent, to 832.04. The Tokyo Stock Exchange’s 25-day Toraku index, a momentum indicator, climbed to 130 yesterday, a reading that signals to some investors that stocks are poised to decline.

The Nikkei remains up 24 percent since dropping to a 26- year low on March 10, buoyed by a proposal for record stimulus spending in Japan, and as signs emerged the global recession is easing.

Canon slid 2.9 percent to 3,020 yen. Olympus Corp., which makes digital cameras and medical equipment such as endoscopes, plunged 5.2 percent to 1,808 yen. Honda retreated 1.8 percent to 2,695 yen.

Yen, Intel

U.S. retail sales fell 1.1 percent in March, the Commerce Department said. Economists forecast a 0.3 percent increase, according to the median estimate in a Bloomberg survey. Auto dealers, electronics stores and restaurants led the decline.

The yen climbed to as high as 98.74 against the dollar from 99.79 at the close of trading in Tokyo yesterday. Japan’s currency gained as much as 2.1 percent versus the euro. A stronger yen erodes the value of sales generated overseas.

Tokyo Electron lost 1.7 percent to 4,060 yen. Toshiba Corp., the world’s second-biggest maker of flash memory chips, retreated 2.7 percent to 326 yen.

Intel, the world’s biggest chipmaker, reported a 55 percent drop in first-quarter profit and falling gross margins, sending the shares 5.1 percent lower in late trading.

Government Funds

Elpida Memory Inc., Japan’s largest computer memory maker, jumped 3.5 percent after public broadcaster NHK said the government may provide funds to the company to bolster capital.

Japan’s financial companies followed declines by U.S. rivals after Goldman Sachs raised capital to pay back government loans and Wachovia Capital Markets LLC said Bank of America Corp. may be forced to raise more funds.

Nomura plunged 6 percent to 608 yen. Daiwa Securities Group Inc., Japan’s second-biggest brokerage, lost 5.7 percent to 517 yen. Shinko Securities Co. sank 7.6 percent to 245 yen, leading declines on the Nikkei.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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Calpers Seeking Opportunities to ‘Participate’ in TARP

By Saeromi Shin

April 15 (Bloomberg) -- The California Public Employees’ Retirement System said it’s seeking opportunities to “participate” in the U.S. government’s Troubled Asset Relief Program.

Calpers, as the largest U.S. public pension manager is known, is also setting aside funds amid the credit crunch and is ready to “deploy capital,” according to the text of a speech by Henry Jones, a Calpers board of administration member, that will be delivered in Seoul.

“We are looking at opportunities to participate in the Troubled Asset Relief Program established by our federal government to purchase assets and equity from financial institutions,” according to the speech. He added that “we’re setting aside billions of dollars of cash to stay flexible and ready to deploy capital.”

Calpers’s cost of managing its investments declined to the lowest level since 2004 after the value of fund holdings fell 27 percent this fiscal year, and it projects its investment costs will fall to $817 million in the 12 months that begin July 1, down from $1.04 billion last year, according to a report that will be presented to the fund’s governing board. That is the lowest since the fund spent $523 million in the fiscal year that ended June 30, 2004.

Calpers, with $175 billion in assets as of April 13, reached a record high of $260 billion in October 2007. The fund provides pension and health benefits to 1.6 million government workers, retirees and their families.

The fund’s real estate holdings, as well as its alternative investment classes such as hedge funds and private equity, were the most expensive, according to the report. The real estate portfolio is expected to cost $362.9 million this fiscal year, with alternative investments at $307 million.

The Sacramento, California-based fund invests 7.6 percent of its funds in cash, a category that calls for no allocation under targets established in December 2007, according to its Web site. The fund’s bond investments represent 24.8 percent of the total, more than the 19 percent target. It’s underinvested in equities, with 53.5 percent allocated there compared with a target of 66 percent.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

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Asian Stocks Decline on U.S. Retail Sales, Yen; Nomura Slumps

By Jonathan Burgos and Patrick Rial

April 15 (Bloomberg) -- Asian stocks dropped for the first time in five days after U.S. retail sales unexpectedly declined and the stronger yen dimmed the earnings outlook for Japan’s electronics and auto companies.

Canon Inc., which generates more than half of sales from U.S. and Europe, declined 3.5 percent in Tokyo as the yen rose against the dollar and the euro. Advantest Corp., the world’s biggest maker of equipment used to test memory chips, sank 2.7 percent after Intel Corp. reported lower earnings. Nomura Holdings Inc., Japan’s largest brokerage, slumped 6.7 percent, leading declines by finance shares, the region’s best performers in the past month.

“This is a reality check,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo, which manages $28 billion. “The collapse the global economy was experiencing has come to an end, but investors moved too quickly in predicting a recovery.”

The MSCI Asia Pacific Index lost 0.9 percent to 88.71 at 11:35 a.m. in Tokyo, snapping a four-day, 5.6 percent advance. The gauge rallied 26 percent from a five-year low reached on March 9 amid speculation government stimulus efforts worldwide will succeed in easing the global financial crisis.

Japan’s Nikkei 225 Stock Average dropped 0.8 percent to 8,768.35, while Hong Kong Hang Seng Index fell 1.7 percent. All markets in Asia declined except China, Indonesia and Vietnam.

‘Economic Progress’

Komatsu Ltd., the world’s No. 2 maker of earthmoving equipment, dropped 4.4 percent in Tokyo after saying it will close two manufacturing facilities. SembCorp Marine Ltd., the world’s second-biggest oil-rig maker, fell 5.8 percent to S$2.09 in Singapore after a customer went into liquidation. Sichuan Guodong Construction Co. slumped 4.4 percent in Shanghai after earnings slumped.

Futures on the U.S. Standard & Poor’s 500 Index dropped 0.6 percent. The gauge slid 2 percent yesterday after the government said the country’s retail sales fell 1.1 percent in March, compared with the 0.3 percent increase economists in a Bloomberg survey had estimated. Prices paid to U.S. producers dropped 1.2 percent, a separate government report showed.

President Barack Obama said yesterday that his economic- stimulus package and plans to rescue banks and bolster housing are starting to “generate signs of economic progress.” Still, he warned of “pitfalls” ahead.

Canon, the world’s largest maker of digital cameras, fell 3.5 percent to 3,000 yen in Tokyo. Toyota Motor Corp., the world’s largest automaker, lost 0.8 percent to 3,770, adding to yesterday’s 3.6 percent decline.

Finance Stocks Retreat

The yen climbed to as high as 98.74 against the dollar from 99.79 at the close of trading in Tokyo yesterday. Japan’s currency gained as much as 2.1 percent versus the euro. A stronger yen erodes the value of sales generated overseas.

“The situation in the U.S., combined with the stronger yen, point to losses in the local market today,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co., in an interview with Bloomberg Television. “From a technical perspective, investors may be thinking now is a good time to sell.”

The MSCI Asia Pacific Index’s rally in the past five weeks has driven the average valuation of companies on the gauge to 18 times reported profit, the highest since Nov. 7, 2007.

Advantest dropped 2.7 percent to 1,541 yen after Intel said first-quarter profit fell 55 percent because of slowing computer demand and signaled sales won’t recover in the current period. Intel shares lost 5.6 percent in extended trading.

Samsung Electronics Co., the world’s largest maker of computer-memory chips, dipped 1 percent to 569,000 won in Seoul. Taiwan Semiconductor Manufacturing Ltd., the world’s biggest maker of customized chips, slid 1.7 percent to NT$51.60.

Komatsu, SembCorp Marine

A measure of finance stocks on the MSCI Asia Pacific Index lost 1.9 percent today. The drop pared the gauge’s gain in the past month to 26 percent, the most of 10 industry groups.

Nomura slumped 6.7 percent to 604 yen, following a 38 percent surge in the month through yesterday. Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, lost 2.8 percent to 522 yen. It climbed 25 percent in the past month.

Komatsu slid 4.6 percent to 1,239 in Tokyo. Declining demand forced the company to close two factories in Japan, the company said yesterday after the market closed. It will shift production and workers to other factories and take a 6.5 billion yen ($66 million) charge for the reorganization.

SembCorp Marine slumped 5.8 percent to S$2.10 in Singapore. Bank of America Corp. and Macquarie Group Ltd. downgraded their recommendations on the stock after PetroPod Ltd., a Singapore- based oil-services provider, went into liquidation. SembCorp Marine is building an oil rig and converting a tanker for PetroPod.

Sichuan Guodong Construction fell 4 percent to 9.57 yuan after the company said 2008 net income declined 48 percent to 31.3 million yuan ($4.6 million).

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.

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Business Inventories Continued to Drop in February

Daily Forex Fundamentals | Written by Wachovia Corporation | Apr 14 09 14:43 GMT |

Businesses continued to aggressively pare back inventories in February as the longest and deepest recession since World War II dragged on. Declines in inventories at retailers (the new information in this report) continued for a fifth straight month, dropping 1.2 percent. We expect inventories to be a major drag on first quarter GDP. Inventories Fell Again Inventories dropped another 1.3 percent in February after a similar sized decline in January. Over the last three months alone, businesses have cut an astonishing $239.1 billion at an annual rate. Retailers pulled back further, as liquidations at bankrupt firms as well as cut backs at ongoing firms continued. We do not expect this trend to let up until at least mid-year. Cuts Across the Board Inventory declines now stretch across all the major sectors. The inventory-to-sales ratio showed its first decline in 8 months as total sales inched slightly higher. Businesses were clearly caught with far too much inventory late last year and have had to cut aggressively to start 2009. We expect the drag from inventories may top three percentage points when GDP figures for the first quarter are released at the end of the month. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

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Retailers Failed to Lure Consumers in March, as Job Losses Mounted!!!

Daily Forex Fundamentals | Written by ecPulse.com | Apr 14 09 14:37 GMT |

Incoming data from the U.S. economy continues to signal that we are still far from recovery, despite that the Federal Reserve Chairman Bernanke is optimistic over the outlook, as he believes that the recent signs from the housing and spending sectors are starting to show some bottoming and that would mark the first step towards recovery. On the other hand the Chairman of the Federal Reserve Bank of Dallas Richard Fisher is being more pessimistic, as he expects the world's largest economy will contract beyond the contraction seen during the last three months of 2008, the U.S. economy contracted by 6.3 percent. Fisher believes that rising unemployment will continue to suppress economic growth in the United States, as Fisher signaled that unemployment might rise above 10 percent this year, the unemployment rate surged in March to the highest level since 1983 at 8.5 percent. Rising unemployment, tightened credit conditions, falling stocks, and declining home values continue to weigh down on economic growth in the world's largest economy amid the worst financial crisis since the Great Depression. Meanwhile data released today continued to signal the persistent weakness in economic activity, as retail sales dropped in March by 1.1 percent following the prior revised rise of 0.3% and well below median estimates of a drop by 0.15, meanwhile retail sales that exclude autos also declined in March by 0.9% following the prior revised estimate of 1.0% and well below median estimates for a flat estimate. Consumers are still hammered by worsening economic conditions and rising unemployment, as apparently retailers failed to lure consumers through discounts and accordingly the worst is still not over, as we might witness further deterioration over the course of this year. Meanwhile the producer price index signaled worrying figures, as the PPI dropped in March by 1.2% following the prior rise of 0.15 reported back in February and well below median estimates of a flat reading, while compared with a year earlier PPI fell 3.5% following the prior drop of 1.3% and well below median estimates of a 2.2% drop. Core PPI was flat in March also below median estimates of a 0.1 percent rise and below the prior reported rise of 0.2%, while compared with a year earlier core PPI rose 3.8% down from the prior and expected rise of 4.0 percent. Downside risks to inflation continue to threat the world's largest economy with deflation, though we are still not there yet, but the fact that deflation might materialize could prove to be challenging, and might indeed lead the Fed to expand its quantitative easing beyond the current $300 billion. The Fed decided to start quantitative easing after monetary policy measures failed to revive lending or economic growth, and accordingly the Fed needed to undertake more drastic and unorthodox measures in a bid to reduce long term interest rates and implicitly fight deflation. Tomorrow the consumer price index should provide further hints on inflation, but seemingly the ongoing recession has managed to suppress prices so far, and should that prove to be an ongoing trend, deflation might become a reality rather than a concern. Meanwhile stock markets declined in today's early trading session on the downbeat data, as the DJIA declined by 75.11 points or 0.93 percent and was last trading at 7982.70, while the S&P 500 index declined by 7.31 points or 0.85% and was last trading at 851.42, and the NASDAQ Composite index declined by 11.33 points or 0.69% and was last trading at 1641.98, data as of 10:23 New York time. Stock markets are expected to fluctuate heavily throughout this week, as a number of companies including JPMorgan Chase and Citigroup will announce their first quarter results and accordingly investors should be careful, as the worst might not be over yet!!! Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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U.S.: Consumer Spending Much Weaker Than Expected

Daily Forex Fundamentals | Written by TD Bank Financial Group | Apr 14 09 14:19 GMT |

U.S. retail sales declined for the first time since December, falling 1.1% M/M. Excluding autos and gas, sales were down 0.8% M/M. The details of the report were simply awful, as spending in almost every category declined U.S. retail sales posted a dramatic 1.1% M/M drop in March, ending two consecutive months of gains. This decline in consumer spending was in stark contrast to the market consensus for a modest 0.3% M/M increase, and comes on the heels of the upwardly revised 0.3% M/M gain (previously reported as -0.1% M/M) the month before. Sales excluding autos were also quite weak, falling by 0.9% M/M. This was also worse than the market expectations for a flat print. Core retail sales, which strip out sale of autos and gasoline were also soft, declining by 0.8% M/M. On a year ago basis, all three measure are down significantly. Despite the massive drop in retail sales, the 3-month annualised trend remains favourable, rising by 4.0% (from -3.8%), while the 3-month annualised trend for sales excluding autos is up 6.9%, from -2.7%. The details of the report were simply abysmal. Spending in almost every category declined, with the exception of spending on food (which rose 0.5% M/M) and health and personal care (rising 0.4% M/M). On the other hand, there were big declines in spending on motor vehicles (down 2.3% M/M), furniture and home furnishing (down 1.7% M/M), electronics (down 5.9% M/M), gasoline (down 1.6% M/M), clothing (down 1.8% M/M) and general merchandise (down 0.2% M/M). Spending at department stores was also weak, falling by 0.3% M/M. Prior to this report, the flow of U.S. consumer reports had all consistently surprised (pleasantly) to the upside, and we were certainly mindful that sales were due for a correction, though tentative indicators for car sales, same store sales and gasoline sales in March had suggested otherwise. Nevertheless, despite this very weak spending report for March, it appears likely that consumer spending may add favourably to U.S. economic activity in the first quarter, due in large part to the strong performances in the first two months of this year. However, this is unlikely to form a platform for a sustained rebound in overall consumer spending in the U.S as the backdrop for the U.S. household remains quite weak. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

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Financials Lead Risk Appetite Higher High Yielders Benefit

Daily Forex Fundamentals | Written by AC-Markets | Apr 14 09 02:38 GMT |

Market Brief The dollar was slammed versus most of the majors based on increased demand for higher yielding assets. The EurUsd rallied strong rising 175pips to the higher range of 1.33, while the UsdJpy slid 16pips settling near 100. The GbpUsd surged 170pips to the mid range of 1.48, based on the general trend of weakness in the dollar. Equity markets closed negative in the US, but ended positive in Europe. The Dow was nearly unchanged on a percentage basis off a mere .32%, but we may be poised for a strong open tomorrow based on strong corporate earnings announced after hours. Bond yields remain constricted with the shorter maturity paper at historically low levels with the 2yr UST at 0.867% and the 10yr at 2.858%. Commodities were mixed with the energy sector seeing a slight pullback, and the precious metals sector gaining strength. Crude oil is trading around $50bbl, which is 4% lower than its previous close. Gold added 1.34% bringing the price to $893oz and silver gained 2.94% to 12.75oz. The trend of rising appetite persists with a shockingly strong earnings announcement from Goldman Sachs. The firm reported a 9.4Bln profit, surpassing estimates of $1.64 at $3.39 EPS (Earnings Per Share). This is a critical piece of information for Traders looking to effectively manage fluctuations in risk appetite. Earnings season will be a strong factor in driving financial markets, as a central concern for investors has been the viability of banks. We see strong signs that the Aussie and Kiwi should benefit from the return back to higher yielding assets, and possibly a re-emergence in the carry trade. The carry trade may be well ahead of us, but the clear interest rate differential between currencies like the AudJpy and NzdJpy. The Euro and Sterling benefited from the shift in risk sentiment, but the near-term economic outlook for these regions are unclear making them less attractive. ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Apr 14 09 03:05 GMT |

EUR/USD closed higher on Monday and below the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below last week's low crossing would confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. USD/JPY closed higher on Monday against the dollar and below the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below last week's low crossing would confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. GBP/USD posted an inside day and closed higher on Monday and below the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below last week's low crossing would confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. USD/CHF closed higher on Monday against the dollar and below the 10-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near-term. Closes below last week's low crossing would confirm that a short-term top has been posted. If it renews last week's rally, March's high crossing is the next upside target. HY Markets http://www.hymarkets.com

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