Wednesday, May 13, 2009

Inpex Forecasts 61% Drop in Net on Oil-Price Outlook

By Shigeru Sato and Yuji Okada

May 13 (Bloomberg) -- Inpex Corp., Japan’s largest energy explorer, said profit may drop 61 percent this year as the global recession reduces oil prices, which peaked in 2008.

Net income may fall to 56 billion yen ($580 million) in the year ending March 2010, from 145.1 billion yen in the previous period, the Tokyo-based company said in a statement to the stock exchange today. That compares with the 80 billion yen profit median estimate of 16 analysts surveyed by Bloomberg. Revenue may decline 38 percent to 669 billion yen.

Inpex expects Brent crude oil, a benchmark for Europe, to average $52.50 a barrel this financial year. Brent has retreated 60 percent from a record $147.50 in London on July 11, leading investors including Japanese trading house Itochu Corp. to withdraw from overseas energy projects. Inpex and partner Total SA are moving ahead with their proposed $20 billion Ichthys natural gas venture in Australia.

“With a slew of distressed oil and gas project assets abroad because of the recession, the question now is whether Inpex will take advantage of the opportunity to buy out some of those stakes before their major Australian project comes on stream,” Futoshi Usui, an analyst at Credit Suisse in Tokyo, said before the announcement. Usui has a “neutral” rating on Inpex’s stock.

Inpex’s profit fell 16 percent in the year ended March 31 and missed the 150 billion yen median estimate of 16 analysts. Revenue decreased 11 percent.

Shares Gain

The shares have gained 59 percent over the last six months compared with a 3.3 percent rise in the benchmark Topix index. They rose 0.8 percent to 726,000 yen on the Tokyo Stock Exchange before the earnings announcement as oil in New York rose for a second day.

Brent, the benchmark for the Caspian Sea oil Inpex produces, averaged $86.22 a barrel on London’s ICE Futures Europe Exchange last year, according to Bloomberg data. It traded at $58.83, up 1.5 percent, at 3:11 p.m. in Tokyo.

Inpex and partner Total SA are moving ahead with the proposed $20 billion Ichthys natural gas venture in Australia. Gas from the project will be transported to Darwin through a proposed 850-kilometer (528-mile) pipeline, with the first shipment of liquefied natural gas scheduled in 2015.

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net.

E.ON Adjusted Profit Falls 2% on Energy Price Slump

By Nicholas Comfort

May 13 (Bloomberg) -- E.ON AG, Germany’s largest utility, said first-quarter profit fell 2 percent on the global slump in energy prices.

Adjusted net income, which excludes writedowns on assets and hedging derivatives, declined to 1.8 billion euros ($2.5 billion) from 1.84 billion euros in the same period a year earlier. That beat the 1.49 billion-euro median estimate of 11 analysts surveyed by Bloomberg.

The world’s worst recession since 1945 has chopped energy use as manufacturers curb production to counter lower consumer demand. That’s prompted Dusseldorf-based E.ON to cut its growth outlook until 2011 and warn investors that profit before writedowns may decline 10 percent this year.

Crude oil plunged more than $100 from its July record. That cut the value of the natural gas E.ON produces in the North Sea, as tariffs for the fuel are pegged to crude.

Net income rose 18 percent to 2.5 billion euros, reflecting the marking to market of derivatives used to guard against price fluctuations. Sales increased 14 percent.

Colder weather in the quarter as a whole increased consumer demand for heating, Energie Baden-Wuerttemberg AG, Germany’s third-largest utility, said last week.

Arctic conditions gripped Central Europe as temperatures in Germany and Poland plunged below minus 25 degrees Celsius (minus 13 degrees Fahrenheit) in January.

Lower Consumption

Still, a drop in power and gas consumption by industrial clients forced the Karlsruhe, Germany-based E.ON rival to sell electricity at a lower price on the spot market after customers were unable to take the volumes they ordered.

E.ON vice chairman Johannes Teyssen said March 10 that power consumption in “some areas” such as carmakers has fallen by up to 20 percent since the recession in Europe’s largest economy began. He didn’t provide further details or an outlook.

The company uses adjusted net income to calculate its dividend as the profit gauge isn’t affected by volatility. Accounting rules state that net income has to reflect the value of contracts for fuel and power at the end of the quarter, which fluctuate from one day to the next.

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

Rubber Gains for First Day in Four as Oil Boosts Rival’s Costs

By Aya Takada

May 13 (Bloomberg) -- Rubber advanced for the first time in four days after oil jumped to a six-month high, boosting the cost of making the competing synthetic product used in tires.

Futures in Tokyo increased after dropping 5.8 percent in the previous three sessions. Crude oil in New York reached the highest settlement since Nov. 11 yesterday on increased imports by China and as a weak dollar bolstered investor demand for commodities as an alternative investment.

“Rubber chased a rally in oil and other commodities,” Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said in a telephone interview today.

Natural rubber for October delivery, the most-active contract, gained 1.4 percent to 170.3 yen a kilogram ($1,772 a metric ton) on the Tokyo Commodity Exchange at 11:48 a.m. local time. The futures often move in the same direction as oil as synthetic rubber is made from naphtha, distilled from petroleum.

Gains were limited as Toyota Motor Corp., the world’s biggest automaker, expects to cut global vehicle production 28 percent this year as the recession hammers demand.

Output will fall to 6.68 million vehicles from 9.24 million in 2008, Hideaki Homma, a company spokesman, said today by phone. Sales will drop 18 percent to 7.34 million vehicles, he said. The figures include the carmaker’s Daihatsu Motor Co. and Hino Motors Ltd. subsidiaries.

“A rally in rubber prices won’t be sustained until we see evidence of a recovery in raw material demand,” Sugata said.

Rubber for September delivery on the Shanghai Futures Exchange, the most-active contract, added 1 percent to 15,505 yuan ($2,272) a ton at 11:08 a.m. local time.

To contact the reporter on this story: Aya Takada in Tokyo at atakada2@bloomberg.net

Rio Shares Drop After $10 Billion Share Sale Report

By Rebecca Keenan

May 13 (Bloomberg) -- Rio Tinto Group, the world’s third-largest mining company, fell in Sydney trading after the Telegraph reported it may drop an investment deal with Aluminum Corp. of China for a 5 billion pound ($10 billion) share sale.

The shares declined 4.4 percent to A$65.50 at 2:25 p.m. Sydney time on the Australian stock exchange. That was its biggest slump since April 21. Rio’s London stock fell 6.9 percent yesterday.

Rio may have drawn up plans for a rights issue to be underwritten by JPMorgan Cazenove Ltd. and Credit Suisse Group AG, the Telegraph newspaper in London reported on its Web site, without citing anyone. The $19.5 billion deal with Chinalco, as state-owned Aluminum Corp. is known, is “teetering on failure”, Citigroup Inc. said in a report this week.

“It’s all to do with rumors in London last night regarding the five billion pound raising,” said Anthony Anderson, a trader at MF Global Ltd. in Sydney. “That would be done at quite a discount and there would be more stock on issue. It makes the market a bit nervous.”

The probability of Chinalco completing the investment in Rio, which includes a bond sale as well as buying stakes in Rio’s mines, is less than 50 percent, Liberum Capital Ltd. said last month, citing a rebound in financial and commodity markets. Rio will consider selling shares, bonds, assets and or reschedule its debt should the deal fail, Chief Financial Officer Guy Elliott has said.

‘Strategic Options’

“We do not comment on market rumor and speculation,” Rio’s Melbourne-based spokeswoman Amanda Buckley said today by phone. She referred Bloomberg to a Rio statement to the exchange on Feb. 12 stating “the Rio Tinto boards have extensively considered a range of strategic options” and decided the Chinalco proposal was superior.

Rio could raise up to $15 billion from a rights issue because of the demand globally for share sales, Citigroup analysts led by Clarke Wilkins said in a May 11 report.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net.

China Resumes 1.4 Million Tons of Aluminum Capacity

By Richard Dobson

May 13 (Bloomberg) -- China, the world’s largest aluminum producer, may have restarted as much as 1.4 million metric tons of capacity in April, according to an analyst at Aluminum Corp. of China Ltd.

The country may produce as much as 12.6 million tons of the metal this year, Ru Xiaojie, an analyst at the company’s Henan branch, said today in Beijing at a conference. Ru said after her speech that the analysis represented her own views.

Alcoa Inc., the largest U.S. aluminum producer, this week said there is still “significant oversupply” in the global market and restarts by Chinese smelters aren’t needed. Chinese smelters may resume output at too many smelters in April and May, which will depress prices, the China Nonferrous Metals Industry Association also said this week.

“Due to a quick restart of idled aluminum smelters in April, the demand for the raw material alumina has increased, leading to restarts of alumina refineries as well,” Ru said.

Aluminum futures in Shanghai rose 0.2 percent to 12,860 yuan a ton at 9:48 a.m. local time. Prices have rallied 12 percent this year after the government bought excess metal to support domestic producers.

The country may have a surplus output of between 570,000 tons and 680,000 tons of alumina this year, Ru said. Domestic production of alumina may reach 22 million tons, and imports may be 4 million tons, she said.

Bauxite is a raw material refined into alumina, which is then smelted into the aluminum metal.

China has about 9 million tons of alumina-making capacity under construction or in planning stages, the China Nonferrous Metals Industry Association also said today.

The country already has 33 million tons of existing alumina capacity, said Lang Dazhan, deputy head of the aluminum division at the association.

To contact the reporter on this story: Richard Dobson in Shanghai at rdobson4@bloomberg.net

Copper Advances as Chinese Imports Drive Investor Confidence

By Glenys Sim

May 13 (Bloomberg) -- Copper climbed for a second day in Asia as investors deemed April’s record Chinese imports a sign of improving demand in the world’s top metals consumer.

China’s purchases of copper and copper products reached a record 399,833 metric tons last month, compared with 374,957 tons in March. Still, a deepening slump in the nation’s exports, which declined 22.6 percent in April from a year earlier, capped the metal’s gains.

“Investors are looking at the positive,” Li Jingyuan, an analyst at Haifu Futures Co., said from Shanghai today. “Last year was an unusually good year for exports, so the numbers look weak, but if you look at the aggregate through the past few years, the numbers were actually not bad at all.”

Copper for three-month delivery on the London Metal Exchange rose as much as 0.5 percent to $4,620 a ton and traded at $4,615 at 10:16 a.m. Singapore time. The contract gained as much as 3.3 percent yesterday.

September-delivery metal on the Shanghai Futures Exchange, the most-active contract, added as much as 1.2 percent to 37,160 yuan ($5,447) a ton, before trading up 0.8 percent at 37,020 yuan.

The dollar fell for a fourth day to a two-week low against the yen and declined for a second day versus the euro after the former U.S. comptroller general David Walker wrote in the Financial Times that the U.S. AAA credit rating may be at risk. Dollar-denominated commodities tend to move in the opposite direction to the currency as investors seek alternative holdings.

“Dollar weakness is helping the entire commodities complex move higher,” Li said. “Individually, industrial metals like copper are benefiting from falling inventories and investors buying back their short positions.”

Among other LME-traded metals, zinc gained 0.3 percent to $1,550 a ton and nickel added 0.4 percent to $13,100 a ton. Aluminum was little changed at $1,545 a ton and lead dropped 1 percent to $1,460 a ton. Tin hadn’t traded as of 10:14 a.m. in Singapore.

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

Oil Gains for Second Day on API Stockpile Drop, Weaker Dollar

By Christian Schmollinger and Ben Sharples

May 13 (Bloomberg) -- Oil rose for a second day after an industry group reported U.S. crude stockpiles dropped for the second week in a row and the dollar declined.

Oil supplies fell 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday. Additional support for crude prices came as the dollar fell to the lowest level against the euro since March, bolstering demand for commodities as an alternative investment.

“We saw some gains in the price in reaction to the API decrease,” said Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo. “$60 is the main resistance so it may be tough to go higher.”

Crude oil for June delivery rose as much as 95 cents, or 1.6 percent, to $59.80 a barrel, and traded at $59.57 on the New York Mercantile Exchange at 1:30 p.m. in Singapore. Yesterday, it climbed as much as 2.7 percent to $60.08 a barrel before closing at $58.85, the highest settlement since Nov. 11.

Oil has climbed from $32.40 on Dec. 19 as the stock market recovery spurred optimism of an economic recovery.

“The major play seems to be the weakening dollar,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “If the dollar continues to weaken to $1.40 euro or worse, oil will be pressured to go higher.”

The dollar fell to $1.3675 per euro at 6:05 a.m. in London from $1.3648 yesterday in New York. It earlier touched $1.3722, the weakest level since March 23.

China Refining

Refiners in China, the world’s second-biggest energy- consuming country, increased crude-oil processing volume by 6 percent last month, the China Mainland Marketing Research Co. said in a faxed statement today.

Gasoline output in April gained 20 percent to 5.76 million tons while diesel production rose 0.7 percent to 10.6 million tons, it added.

The U.S. Energy Department report on inventories is expected to show a 1 million barrels gain, according to an analysts’ survey. Totals from the API and the government moved in the same direction 75 percent of the time over the past four years, Bloomberg data shows.

Supplies rose to 375.3 million barrels in the week ended May 1, the highest since September 1990, the Energy Department said on May 6.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Gasoline Demand

Analysts were split over whether gasoline stockpiles rose or fell last week. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 1.25 million barrels, according to the Bloomberg News survey. The department is scheduled to release its weekly petroleum inventory report today at 10:30 a.m. in Washington.

Gasoline demand in the U.S. is forecast to average 9.07 million barrels a day during the summer, 0.7 percent higher than the same period in 2008, the Energy Department said yesterday in its Short-Term Energy Outlook.

U.S. travel during the Memorial Day holiday will rise about 1.5 percent from last year as lower pump prices encourage vacationers, AAA, the nation’s biggest motoring organization, said yesterday.

Gasoline futures for June delivery rose 2.40 cents, or 1.4 percent, to $1.6919 a gallon at 1:16 p.m. in Singapore on the Nymex. The contract yesterday dropped 1.23 cents, or 0.7 percent, to settle at $1.6679 a gallon.

Brent crude oil for June settlement gained as much as $1.10, or 1.9 percent, to $59.04 a barrel on London’s ICE Futures Europe exchange. It was at $58.67 a barrel at 1:29 p.m. in Singapore. It declined 0.8 percent to end the session at $57.94 a barrel yesterday.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne bsharples@bloomberg.net.

Compass, Land Securities, Sainsbury: U.K., Irish Equity Preview

By Jonathan Browning

May 13 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets today. Stock symbols are in parentheses and prices are from the last market close.

The benchmark FTSE 100 Index fell 9.96, or 0.2 percent, to 4,425.54. The FTSE All-Share Index dropped 0.2 percent, and Ireland’s ISEQ Index rose 0.4 percent.

Amlin Plc (AML LN): The largest Lloyd’s of London insurer by market value is scheduled to publish a trading update. The shares rose 14.75 pence, or 4.2 percent, to 370.5 pence.

BP Plc (BP/ LN): Europe’s second-largest oil company agreed to delay the appointment of a new chief executive at its joint venture TNK-BP International Ltd. after holding talks in Moscow with its Russian partners, the London-based Times reported. The stock rose 2.5 pence, or 0.5 percent, to 517 pence.

Compass Group Plc (CPG LN): The world’s largest catering company is scheduled to publish earnings. The shares rose 2.75 pence, or 0.8 percent, to 332.75 pence.

Dimension Data Holdings Plc (DDT LN): Africa’s largest computer services company is scheduled to publish earnings. The shares were unchanged at 46.25 pence.

Firstgroup Plc (FGP LN): The U.K.’s biggest train operator is scheduled to publish earnings. The stock rose 5.25 pence, or 1.5 percent, to 359.25 pence.

Glanbia Plc (GLB ID): The producer of a third of Ireland’s milk and cheese is scheduled to publish a trading update. The stock fell 20 cents, or 8.9 percent.

Greggs Plc (GRG LN): The U.K.’s largest bakery chain is scheduled to publish a trading update. The shares fell 23 pence, or 0.6 percent, to 3550 pence.

ICAP PLC (IAP LN): LCH.Clearnet Group Ltd. will respond to a takeover offer from a group of banks and ICAP Plc by suggesting joint discussions aimed at reconciling some parts of the bid with its own plans for a new structure, the Financial Times reported, citing Chairman Chris Tupker. ICAP shares declined 22.25 pence, or 5.4 percent, to 387.5 pence.

Johnston Press Plc (JPR LN): The publisher of the Yorkshire Post and The Scotsman is scheduled to publish a trading update. The shares fell 2.75 pence, or 8.2 percent, to 31 pence.

Land Securities Group Plc (LAND LN): The U.K.’s second- largest real estate investment trust by market value is scheduled to publish a trading update. The stock declined 11 pence, or 2 percent, to 539 pence.

Legal & General Group Plc (LGEN LN): The U.K.’s third- biggest insurer is scheduled to publish a trading statement. The shares fell 2.5 pence, or 3.7 percent, to 65.5 pence.

Playtech Ltd. (PTEC LN): The U.K. developer of gambling software for PartyGaming Plc and Paddy Power Plc is scheduled to publish a trading update. The stock rose 2.5 pence, or 0.5 percent, to 474.75 pence.

J Sainsbury Plc (SBRY LN): Britain’s third-largest supermarket chain is scheduled to publish earnings. The shares rose 1.25 pence, or 0.4 percent, to 340.25 pence.

Trinity Mirror Plc (TNI LN): The publisher of the U.K.’s Daily Mirror newspaper is scheduled to publish a trading update. The stock fell 1.25 pence, or 1.7 percent, to 74.5 pence.

VT Group Plc (VTG LN): The U.K. warship builder is scheduled to publish earnings. The shares rose 16.75 pence, or 3.9 percent, to 449.75 pence.

To contact the reporters on this story: Jonathan Browning in London jbrowning9@bloomberg.net

Adecco, Dexia, Enel, E.ON, MLP, Vinci: Europe Equity Preview

By Nadja Brandt

May 13 (Bloomberg) -- The following companies may have unusual price changes in European trading. Stock symbols are in parentheses, and share prices are from the previous close.

The Dow Jones Stoxx 600 fell 0.2 percent to 206.18. The Dow Jones Stoxx 50 Index was little changed at 2,090.60. The Euro Stoxx 50 Index, a benchmark for the nations using the euro, declined 0.4 percent to 2,424.34.

Acciona SA (ANA SM): The Madrid-based builder is scheduled to report first-quarter earnings before markets open. The shares rose 2.95 euros, or 3.7 percent, to 83.70 euros.

Adecco SA (ADEN VX): The world’s largest supplier of temporary workers holds a shareholder meeting. Shares fell 96 centimes, or 2.1 percent, to 44.8 francs.

Air France-KLM Group (AF FP): Europe’s largest airline reported a 2.8 percent drop in passenger traffic for April, while cargo traffic fell 6.4 percent. The shares lost 6.5 cents, or 0.7 percent, to 9.97 euros.

Allianz SE (ALV GY): Europe’s biggest insurer plans to report final first-quarter results. The company in April said first-quarter operating profit fell 41 percent, hurt by the financial crisis and natural disasters, citing preliminary figures. The shares fell 0.4 percent to 75.61 euros.

Assicurazioni Generali SpA (G IM): Europe’s third-biggest insurer plans to report first-quarter earnings. The insurer may say profit fell 89 percent to 100 million euros ($135 million) on writedowns caused by global market turbulence and weaker life insurance sales, according to the median estimate of 10 analysts surveyed by Bloomberg. The shares rose 1.4 percent to 16.93 euros.

Bouygues SA (EN FP): The world’s second-biggest construction company reports first-quarter revenue after the market close in Paris. The shares dropped 89 cents, or 2.7 percent, to 31.91 euros.

Bulgari SpA (BUL IM): The world’s third-largest jeweler reported after markets closed that it had a first-quarter loss of 29.3 million euros compared with net income of 22.8 million euros a year earlier. That was worse than the median estimate of five analysts surveyed by Bloomberg of a loss of 7 million euros. Sales fell 23 percent to 178.1 million euros, missing the median estimate of 212 million euros. The stock fell 2.4 percent to 4.15 euros.

CNP Assurances SA (CNP FP): France’s biggest life insurer reports first-quarter revenue before the market opens in Paris. The shares added 52.5 cents, or 0.9 percent, to 61.99 euros.

Dexia SA (DEXB BB): The world’s largest lender to local governments reports first-quarter earnings before the market opens in Paris. Net income probably fell 70 percent to 88 million euros, according to the median of seven analyst estimates, on asset markdowns. The shares lost 38 cents, or 8.3 percent, to 4.22 euros.

Electricite de France SA (EDF FP): Europe’s biggest power producer reported a 15 percent increase in first-quarter sales to 21.1 billion euros, after colder weather boosted demand for power. The shares rose 13.5 cents, or 0.4 percent, to 34.54 euros.

Enel SpA (ENEL IM): Italy’s largest utility said first- quarter profit more than doubled to 1.908 billion euros. Excluding a one-time 970 million-euro gain, Enel’s earnings slipped 1 percent to 938 million euros after demand in Italy fell amid a recession. That was less than the 981 million-euro median estimate of eight analysts surveyed by Bloomberg. Shares rose 2.4 percent to 4.31 euros.

E.ON AG (EOAN GY): Germany’s largest utility plans to post first-quarter results. The company may say profit fell 19 percent on the global slump in energy prices and a stronger euro, according to analysts surveyed by Bloomberg News. The shares added 0.1 percent to 24.40 euros.

K+S AG (SDF GY): Europe’s largest producer of potash used in fertilizers plans to report first-quarter results. The company may say profit declined as demand for crop nutrients fell, according to analysts surveyed by Bloomberg News. The shares climbed 0.4 percent to 48.45 euros.

Kuehne & Nagel International AG (KNIN VX): the world’s largest sea-freight forwarder by tonnage holds its shareholder meeting. The stock fell 1.75 francs, or 2.1 percent, to 82.35.

Lagardere SCA (MMB FP): The publisher of Car & Driver and Elle magazine reports first-quarter revenue before the market opens in Paris. The shares gained 69 cents, or 3 percent, to 23.80 euros.

Mediaset SpA (MS IM): The television company controlled by Italian Prime Minister Silvio Berlusconi said after markets closed that first-quarter net income fell to 60 million euros from 121 million euros a year earlier. Revenue dropped 12 percent to 967.2 million euros. Analysts in a Bloomberg survey had predicted profit of 50 million euros on sales of 962 million euros. The stock fell 1.6 percent to 4.43 euros.

MLP AG (MLP GY): Germany’s third-biggest financial-services broker plans to release first-quarter results. The company may say profit declined as the financial markets crisis weighs on sales of financial products, according to analysts surveyed by Bloomberg News. The shares fell 4.7 percent to 10.01 euros.

Puma AG (PUM GY): The athletic-shoe maker controlled by PPR SA is scheduled to hold its annual shareholders meeting. The company earlier this month said profit was almost wiped out as the company incurred costs to close stores and that the sportswear market will “remain difficult” in 2009. The shares advanced 1.8 percent to 155.24 euros.

Renault SA (RNO FP): France’s second-largest carmaker said its share of earnings from Japanese affiliate Nisson Motor Co. will reduce its own earnings by 1.15 billion euros. The shares fell 28.5 cents, or 1.2 percent, to 24.60 euros.

Telefonica SA (TEF SM): Europe’s second-largest telephone company is scheduled to report first-quarter earnings and may say profit rose 7.9 percent to 1.66 billion euros, according to the median estimate of nine analysts Bloomberg News surveyed by e-mail. The shares rose 31 cents, or 2.1 percent, to 14.83 euros.

UniCredit SpA (UCG IM): Italy’s biggest bank plans to report first-quarter earnings. The company may say first-quarter profit fell 59 percent to 438 million euros, based on the average estimate of eight analysts surveyed by Bloomberg. The stock fell 0.9 percent to 2.11 euros.

Vinci SA (DG FP): The world’s biggest construction company reported a 2.5 percent decline in first-quarter revenue to 7.07 billion euros and said its outlook for the full year is unchanged. The shares rose 27 cents, or 0.8 percent, to 34 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

Japan Camera, Watch Maker Stocks Rise on Targets; Hitachi Drops

By Masaki Kondo

May 13 (Bloomberg) -- Japan’s makers of precision instruments advanced in Tokyo trading after Olympus Corp. and Citizen Holdings Co. forecast returns to profit. Hitachi Ltd. tumbled after posting a record loss.

Olympus, the world’s top endoscope maker, and watchmaker Citizen jumped 12 percent. Nissan Motor Co. surged 6.5 percent after projecting a narrower-than-expected loss. Hitachi, which makes nuclear reactors and home appliances, tumbled 10 percent. Mitsui O.S.K. Lines Ltd., Japan’s No. 2 shipping line, dropped 5.1 percent after Nomura Holdings Inc. lowered its rating.

“Cost cuts make it possible for some companies to forecast better earnings but a recovery will be limited unless demand picks up,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about $6.1 billion in Tokyo. “A possible earnings rebound is already fully reflected in current valuations.”

The Nikkei 225 Stock Average drifted between gains and losses and was up 66.99, or 0.7 percent, to 9,365.60 as of 12:43 p.m. in Tokyo. The broader Topix index added 4.75, or 0.5 percent, to 890.18, with three stocks advancing for every two that slumped.

Stocks on the Nikkei traded at 44 times average estimated profit for fiscal 2009, compared with the Standard & Poor’s 500 Index’s 16 times, Bloomberg data show. Through yesterday, 28 percent of Nikkei companies had soared by at least half since March 10 when the stock gauge reached a 26-year low.

Olympus, Citizen

Olympus leapt 12 percent to 1,921 yen, poised for the sharpest climb since Oct. 30, after projecting a profit for the year to March 2010. Analysts had anticipated a loss forecast. Citizen, the world’s biggest maker of mechanical watches by volume, surged 12 percent to 525 yen after saying it will return to profit.

Nipro Corp., a maker of medical equipment, jumped 5.2 percent to 1,553 yen after saying in preliminary results that profit for last fiscal year was more than double its estimate. A gauge of precision-instrument makers, which includes the three companies, was the biggest gainer among the Topix’s 33 industry groups.

Nissan soared 6.5 percent to 543 yen. The company forecast a net loss for fiscal 2009 that was almost half the amount analysts had expected. The carmaker plans to slash 20,000 jobs in response to the industry-wide slump in the U.S., traditionally Nissan’s most profitable market.

“The key is how much companies are reducing costs,” said KBC Securities analyst Andrew Phillips in an interview with Bloomberg Television. Following Nissan’s cost reductions, the carmaker “could well be breakeven in the second half.”

Rising Oil

Hitachi dived 10 percent to 343 yen, set for the steepest plunge since Feb. 2. The company projected a loss of 270 billion yen ($2.81 billion) for this year after posting a record 787.3 billion yen deficit for the 12 months ended March 31.

Mitsui O.S.K. lost 5.1 percent to 614 yen after Nomura cut its rating on the stock to “neutral” from “buy,” citing falling demand for car transportation. Smaller rival Kawasaki Kisen Kaisha Ltd. dropped 2.5 percent to 383 yen. A gauge of shipping companies fell the most among Topix groups.

Inpex Corp., Japan’s largest oil and gas explorer, added 2.9 percent to 741,000 yen. Closest domestic rival Japan Petroleum Exploration Co. rose 2.4 percent to 4,300 yen.

Crude oil for June delivery rose as much as 1.6 percent today after climbing 0.6 percent to $58.85 a barrel in New York yesterday, the highest settlement since Nov. 11.

Nikkei futures expiring in June rose 0.4 percent to 9,360 in Osaka and added 0.5 percent to 9,360 in Singapore.

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

FRM Unit Plans $300 Million Investments in Hedge Fund Managers

By Bei Hu

May 13 (Bloomberg) -- FRM Capital Advisors Ltd., a unit of London-based asset manager Financial Risk Management Ltd., plans to make as much as $300 million of strategic investments in hedge funds this year, including its first in Asia.

FRM Capital may invest in six more managers in 2009, with two expected by June and its first Asian deal in the third quarter, Chief Operating Officer Patric de Gentile-Williams said. The London-based company makes strategic investments in hedge funds for two to four years in exchange for a share of their fee incomes for as long as 10 years.

Record losses and redemptions have cut hedge funds’ assets and fee revenue, making them more reliant on so-called seeders like FRM Capital. Some investment banks, insurers and private equity houses have exited the hedge fund seeding business amid the credit crisis, said de Gentile-Williams.

“Many of our top 10 competitors from a year ago have got out of the seeding space for reasons entirely unrelated to seeding but entirely related to their own organizational complications,” de Gentile-Williams said in a phone interview May 12 from London. “The pricing of deals has improved in favor of the seeders. You really get your complete choice of deals. We’re seeing lots and lots of very talented people.”

Investors redeemed a record $155 billion out of hedge funds last year and another $103 billion in the first quarter, according to Chicago-based Hedge Fund Research Inc. The withdrawals contributed to a 31 percent decline in global industry assets to $1.33 trillion by March from a mid-2008 peak.

Better Terms

In late 2006, seeders on average had to invest nearly $4 million in hedge fund managers in exchange for 1 percent of their revenue because fundraising from investors that paid fees was easy and competition was intense among seeding companies. The ratio has since dropped to “well below” $2 million for 1 percent of fee income, said de Gentile-Williams.

FRM Capital’s first investment was $60 million in August in Victory Park Capital Advisors, a Chicago-based hedge fund manager that finances small- and medium-sized companies using their assets as collateral.

It also invested in Beechbrook Capital LLP, a London-based manager of leveraged loans, at the end of last year, de Gentile- Williams said, declining to give the size of the investment.

“We expect on average to make six investments a year,” said de Gentile-Williams. “In 2008, we deliberately slowed the process. We didn’t like the market so we were very cautious. Now we’ve found managers whose strategies are robust to the current environment.”

FRM Capital was established in December 2007 as a division of the $10 billion fund of funds manager FRM. FRM Capital oversees more than $300 million and is seeking to increase the money available to seed hedge funds, said de Gentile-Williams.

Investment Size

Its investments in funds will range from $20 million to $100 million in size, he said. It expects to get 10 percent to 30 percent of the fee income in return, he added.

FRM Capital is in talks with funds run by stock pickers and equity traders that don’t bet on the overall direction of the market, and credit funds. In Asia, it may invest in a manager of Asian stock funds, de Gentile-Williams said, without giving more details.

This year, FRM Capital is looking at profitable funds that have lost assets as investors redeem out of the most liquid pools, he said. It also is seeing more opportunities to give money to hedge fund managers who have been in operation for a few years rather than in startups, de Gentile-Williams added.

“There are plenty of people who’ve done a good job for a couple of years but they’re running $20 million and haven’t managed to get traction with institutional investors,” he added. “They need institutional validation and momentum in their asset raising to get them through some psychological threshold.”

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net

Allianz, E.ON, K+S, Metro, MLP, Puma: German Equity Preview

By Nadja Brandt

May 13 (Bloomberg) -- The following is a list of companies whose shares may have unusual price changes in Germany. Stock symbols are in parentheses, and share prices are from the previous close.

The X-DAX Index advanced 0.9 percent to 4,879.39. The measure, derived from trading in DAX Index futures, provides an estimate of Germany’s benchmark index. The DAX fell 0.3 percent to 4,854.11.

E.ON AG (EOAN GY): Germany’s largest utility plans to post first-quarter results. The company may say profit fell 19 percent on the global slump in energy prices and a stronger euro, based on the median estimate in a survey of analysts by Bloomberg News. The shares added 0.1 percent to 24.40 euros.

Gagfah SA (GFJ GY): The largest publicly traded owner of German apartments plans to release first-quarter results. The shares climbed 2.2 percent to 5.47 euros.

Metro AG (MEO GY): Germany’s largest retailer plans to hold its annual shareholders meeting. The company earlier this month reported a wider first-quarter loss as slumping consumer spending and weaker eastern European currencies hurt revenue. The shares climbed 0.9 percent to 34.87 euros.

Tognum AG (TGM GY): The diesel-engine maker partly owned by Daimler AG plans to release first-quarter results. The shares decreased 1.6 percent to 9.20 euros.

TUI AG (TUI1 GY): The owner of Europe’s largest travel company plans to hold its annual shareholders meeting. TUI this week reported a first-quarter profit on a gain from the sale of the Hapag-Lloyd shipping line. The shares dropped 2.2 percent to 6.80 euros.

United Internet AG (UTDI GY): Germany’s third-largest Web- access provider is scheduled to report final first-quarter results. The company last month said earnings before interest and tax were almost unchanged at 70.7 million euros ($96.5 million) in the first quarter, as sales rose. The shares added 3.7 percent to 7.28 euros.

To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net

Asian Stocks Rise as Olympus, Nissan Forecasts Stoke Optimism

By Patrick Rial and Masaki Kondo

May 13 (Bloomberg) -- Asian stocks rose, resuming a two- month rally, as forecasts from Olympus Corp. and Nissan Motor Co. boosted confidence corporate earnings are recovering from the global recession.

Olympus, the world’s biggest maker of endoscopes, soared 11 percent in Tokyo after unexpectedly forecasting a return to profit this year. Nissan, Japan’s third-largest automaker, rallied 7.1 percent after predicting a narrower loss than analysts estimated. Cnooc Ltd., China’s biggest offshore oil producer, gained 6.9 percent as crude oil rose for a second day. Toyota Motor Corp., the world’s biggest automaker, fell 2.4 percent after saying it expects to cut vehicle production.

“We’ll see a difference in the pace of recovery between businesses that are carrying out deeper cost reduction and those that don’t,” said Naoki Fujiwara, chief fund manager at Tokyo- based Shinkin Asset Management Co., which oversees about $6.1 billion. “A possible earnings rebound is already fully reflected in current valuations.”

The MSCI Asia Pacific Index rose 0.7 percent to 98.57 as of 1:01 p.m. in Tokyo. The benchmark dropped yesterday, ending a six-day winning streak. The gauge has climbed 40 percent from a five-year low on March 9 on speculation the worst of the financial crisis is over.

Japan’s Nikkei 225 Stock Average added 0.6 percent to 9,353.96, while Hong Kong’s Hang Seng Index climbed 0.7 percent. All markets in Asia advanced except Australia and Vietnam.

Hitachi Ltd., Japan’s third-largest chipmaker, sank 9.7 percent on a loss forecast. Santos Ltd., Australia’s third- biggest oil and gas producer, slumped 7.5 percent in Sydney on concern a share sale will dilute the value of existing holdings. China Construction Bank Corp., the nation’s second largest, lost 1.8 percent after an investor sold stock in the company.

Record Loss

Futures on the U.S. Standard & Poor’s 500 Index added 0.4 percent even as David Walker, the former U.S. comptroller general, wrote in the Financial Times that the government should rein in the country’s finances because its AAA debt rating may be cut. The S&P 500 lost 0.1 percent yesterday.

The dollar weakened against Asian currencies today after the FT report. The yen strengthened to as much as 95.79 against the U.S. currency, the strongest level since April 28. A stronger local currency cuts the value of repatriated sales for Japanese exporters.

Olympus jumped 11 percent to 1,919 yen. The company forecast net income of 40 billion yen ($416 million) for the year ending March 2010, the company said yesterday after markets in Japan closed. Analysts expected a net loss of 9.3 billion yen, based on the median of 10 estimates compiled by Bloomberg.

Toyota Production

Nissan rose 7.1 percent to 546 yen after projecting a net loss for fiscal 2009 that was almost half the amount analysts had expected. The carmaker plans to slash 20,000 jobs in response to an industry wide slump in the U.S., traditionally Nissan’s most profitable market.

The rally in stocks in the past two months has driven the average valuation of companies on the MSCI Asia Pacific Index to 31 times reported profit, the highest level since March 30, 2004, according to data compiled by Bloomberg. Analyst estimates for earnings of companies on the stock gauge climbed in April after declining the previous year, the data show.

Toyota slumped 2.4 percent to 3,650 yen. The company expects to cut global vehicle production by 28 percent this year as the recession hammers demand, according to figures provided by Hideaki Homma, a company spokesman.

Cnooc gained 6.9 percent to HK$10.36 in Hong Kong. PetroChina Co., Asia’s biggest crude producer, gained 5.1 percent to HK$8.52. Inpex Corp., Japan’s No. 1 oil company, rose 2.8 percent to 740,000 yen.

South Korea Housing

Crude oil futures rose 0.6 percent to $58.85 a barrel in New York yesterday, after earlier climbing above $60 for the first time since Nov. 11. Oil prices climbed 1.4 percent in after-hours trading.

Hitachi lost 9.7 percent to 344 yen, the biggest slide since Feb. 2, after forecasting a net loss of 270 billion yen for this fiscal year. That was worse than the median loss predicted by analysts in a Bloomberg survey.

Santos slumped 7.5 percent to A$14.59 following a two-day trading halt. The company raised A$3 billion ($2.3 billion) in Australia’s largest share sale since November to help fund a liquefied natural gas project.

Construction Bank lost 1.8 percent to HK$4.89 after an unidentified institution sold shares worth HK$3.6 billion ($465 million), according to a document sent to fund managers. The notice came a day after news that Bank of America Corp. sold part of its stake in the Chinese bank for $7.3 billion to a group of investors.

South Korea’s GS Engineering & Construction Corp. climbed 4.6 percent to 78,100 won. Hyundai Engineering & Construction Co. added 1.9 percent to 69,400 won. BNP Paribas boosted its view on builders to “positive” from “neutral” on optimism for a recovery in South Korea’s housing market.

To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

Tuesday, May 12, 2009

BlueGold, Galena Beat Competing Hedge Funds, Commodity Indexes

By Chanyaporn Chanjaroen

May 13 (Bloomberg) -- BlueGold Capital Management LLP and Galena Asset Management Ltd. extended their winning streak in the first four months, outpacing competing hedge funds and commodities.

Pierre Andurand’s $1.1 billion BlueGold energy fund rose 35 percent through April, two people with direct knowledge of the returns said, declining to be named because the data are confidential. Galena’s $430 million metals fund added 8.6 percent, according to David Mimra, London-based head of sales and marketing.

The Reuters/Jefferies CRB Index of 19 raw materials rose 6.1 percent this year, rebounding from its worst year in a half century, led by a 65 percent gain in gasoline. Assets in commodity-related indexes and exchange-traded funds advanced $18 billion to $172 billion in the first quarter, according to Barclays Capital.

“As commodity prices now appear to be bottoming, we are seeing an increase in investor interest” in funds not governed by index weightings, said Adam De Chiara, fund manager for Jefferies Asset Management’s commodities unit in Stamford, Connecticut.

BlueGold and Galena’s gains compare with an average four- month advance of 4.2 percent for all hedge funds monitored by Chicago-based Hedge Fund Research Inc. Hedge funds returned an average of 3.2 percent in April, the best performance in more than three years, according to Eurekahedge Pte.

The BlueGold fund was started by Andurand, a 32-year-old amateur Thai kickboxer, and Dennis Crema, 49, in February 2008. Both previously worked at commodity trader Vitol Group. BlueGold returned 209 percent last year. Andurand declined to comment.

Commodity Trader

Galena Asset Management, managed by Jeremy Weir, is the investment unit of Trafigura Beheer BV, the third-largest independent oil trader. The company started an energy hedge fund last month, headed by Claude Lixi, who traded oil options at Morgan Stanley.

Clive Capital LLP made 3.4 percent in the first four months, according to investors. The London-based hedge fund, managing about $2.3 billion, returned 44 percent last year. The company declined to comment.

The $1.3 billion Merchant Commodity Fund, run by Singapore- based Aisling Analytics Pte Ltd., returned 2 percent in the first four months, according to investors. The fund was founded by former Cargill Inc. traders Michael Coleman and Doug King.

The rebound in commodities is attracting investors again, on optimism that the worst global recession since World War II is improving. Holdings in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record of almost 1,128 metric tons last month, overtaking Switzerland as the world’s sixth-largest gold holding.

‘Recession is Over’

“We think the recession is over,” said Jan Loeys, head of global market strategy at JPMorgan Chase & Co., in an interview in Hong Kong. “Commodities, materials in particular, are going to be benefiting right now as investors actually start to get worried about future inflation.”

U.S. consumer prices will advance 0.9 percent in the fourth quarter and 1.7 percent in 2010, according to as many as 77 economists surveyed by Bloomberg.

Most of the funds outpaced returns from the CRB index. Copper has been the second-biggest gainer after gasoline, rising 50 percent, as China increased imports to bolster stockpiles.

Paul Touradji’s Global Resources fund returned 0.4 percent in the first four months, according to two people familiar with the matter. Armel Leslie, an outside spokesman for New York- based Touradji Capital Management LP, which manages $2.6 billion, declined to comment.

Vermillion Asset

Vermillion Asset Management LLC’s $850 million Viridian commodity fund lost about 3.5 percent in the period, according to a person with knowledge of the result. The fund, founded by New York-based Drew Gilbert and Chris Nygaard, started trading in June 2005.

The Krom River Commodity Fund retreated 8.1 percent in the first four months, investors said, citing preliminary estimates from the company. The $550 million fund, started by Chris Brodie in 2006, returned almost 37 percent last year. The Baar, Switzerland-based fund manager declined to comment.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising prices and participate substantially in profits from money invested.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net

The Euro Gains Against The Dollar As Investors Believe The ECB Will Not Cut Gain

Daily Forex Fundamentals | Written by Finotec Group | May 12 09 09:18 GMT |

The euro approached a seven-week high against the dollar on speculation European Central Bank officials will signal they plan to keep interest rates on hold, maintaining the allure of assets region. 'As far as growth is concerned, we're around the inflection point in the cycle, that's the sentiment,' Trichet said at a press conference at the Bank for International Settlements in Basel, Switzerland. Europe's single currency also gained after a Chinese government report showed urban fixed-asset investment rose at the fastest pace in more than two years, spurring demand for higher-yielding assets. Central banks will keep using the dollar as the world's reserve currency, Reuters cited Chinese ambassador to the U.S. Zhou Wenzhong as saying last week. He described views the dollar could be replaced with a basket of other currencies as a 'scholarly exploration,' according to Reuters. The EUR/USD is currently trading at $1.3640 as of 8:40am, London Time.

Britain's housing slump eased in April as more prospective homebuyers helped to make price declines the least widespread in more than a year, the Royal Institution of Chartered Surveyors said. The number of real-estate agents and surveyors saying prices fell exceeded those reporting gains by 59.9 percentage points, the strongest result since January 2008, the lobby group said today in London. Enquiries from new buyers rose to the highest since 1999. 'There are tentative signs that the market is starting to pick up,' Jeremy Leaf, a spokesman for RICS, said in the statement today. 'We are unlikely to see significant improvement while money remains in short supply and the employment picture is uncertain.' The GBP/USD is currently trading at $1.5205 as of 8:58am, London Time.

The yen rose broadly on Tuesday to extend gains made the previous day as regional stocks fell after a slide on Wall Street, prompting investors to further reduce investments in risky assets. The dollar edged down against a basket of currencies towards Monday's four-month low but held firm versus the euro, with investors taking profits from gains in other riskier currencies that had been lifted by optimism about the U.S. banking system. The yen drew some support after news that China's exports in April fell more than expected, denting expectations that the worst of the contraction in trade flows triggered by the global financial crisis is moderating. The USD/JPY is currently trading at 97.60 as of 9:05am, London time.

Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous	Previous	Significance
23:50	Current Account	JPY	Mar	0.67T	0.51T
12:30	Trade Balance	CAD	Mar	0.1B	0.5B	***
12:30	Trade Balance	USD	Mar	-26.0B	-29.3B	***
08:30	Manufacturing Production m/m	GBP	Mar	-0.9%	-0.8%	***
08:30	Trade Balance	GBP	Mar	-7.3B	-7.2B	**
05:00	Leading Indicators m/m	JPY	Mar	75.0%	77.1%

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

European Market Update

Daily Forex Fundamentals | Written by Trade The News | May 12 09 10:03 GMT |

European Equity markets shake off weak Chinese exports and lower Indian industrial production

ECONOMIC DATA

(IN) Indian March Industrial Production -2.3% v -0.7%e; largest decline in 16 years

(BE) Belgium Apr Unemployment Rate: % v 7.3% prior

(JP) Japan Apr Prelim Machine Tool Orders: -80.4% v -85.2% prior

(GE) German Apr Final CPI M/M: 0.0% v 0.0%e; Y/Y: 0.7% v 0.7%e
(GE) German CPI - EU Harmonized M/M: 0.1% v 0.0%e; Y/Y: 0.8% v 0.7%e
(GE) Apr Wholesale Price Index M/M: 0.1% v 0.0%e; Y/Y: -8.1% v -8.2%e

(FR) Apr Bank of France Bus Sentiment: 75 v 75e
(FR) France March Central Govt Balance: -€43.7B v -€29.9B prior

(SP) Spain Mar House Transactions Y/Y: -24.3% v -38.6% prior

(CZ) Czech April CPI M/M: -0.1% v 0.1%e; Y/Y: 1.8% v 2.0%e
(CZ) Czech Apr Unemployment Rate: 7.9% v 7.8%e
(CZ) Czech Mar Industrial Output Y/Y: -17.0% v -17.5%e

(HU) Hungarian Apr Consumer Prices M/M: 0.8% v 0.3%e; Y/Y: 3.4% v 2.9%e

(NE) Dutch Mar Industrial Production M/M: 0.1% v -2.2% prior; Y/Y: -12.1% v -12.6% prior; Industrial Sales Y/Y: -19.5% v -27.2% prior

(SW) Swedish Apr CPI- Headline Rate M/M; 0.2% v 0.2%e; Y/Y: -0.1% v -0.1%e
(SW) Swedish Apr CPI - Underlying Inflation M/M: 0.3% v 0.4%e; Y/Y: 1.4% v 1.5%e; CPI Level: 299.3 v 299.4e

(UK) March Visible Trade Balance: -£6.6B v -£7.2Be; Trade Balance Non EU: -£3.3B v -£4.2Be; Total Trade Balance: -£2.5B v -£3.0Be
(UK) DCLG UK House Prices Y/Y: -13.6% v -13.0%e
(UK) Mar Industrial Production M/M: -0.6% v -0.9%e; Y/Y: -12.4% v -12.9%e
(UK) Mar Manufacturing Production M/M: -0.1% v -0.8%e; Y/Y: -12.9% v -14.0%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In equities: Equity markets opened convincingly to the downside following bearish pre-market trading. In themes continuing through from yesterday, risk aversion conversations have made a strong comeback. WSJ stories indicating the potential risk in the European banking sector as compared to the US sector, based on the lack of a comparable 'stress tests' and the failure of European banks to raise capital to the extent seen in the US have added weight to Tier 1 financial names on all three exchanges. Disappointing earnings out of EAD's [EAD.FR], Q-Cells [QCE.GE], Fraport [FRA.GE] and comments regarding debt concerns out of VW [VOW.GE] added to the downside momentum in early equity trading. Better than expected April BRC retail numbers provided lightness to that sector, with Marks and Spencer [MKS.UK] trading higher, but gains remained localized. Bourses dropped to the -1% level by 3:15EST before making a bounce. Markets continued that upward movement with the CAC and DAX recovering all their losses and turning positive by 3:40EST. In that move, banking and financial names recovered, while automotive names in the CAC [UG.FR], [RNO.FR] followed strength out of Fiat [F.IT] in Milan and pushed higher. In the DAX, market chatter regarding Deutsche Telecom [DTE.GE] and continued strength following earnings out of Deutsche Bourse [DB1.GE] rallied that market. European bourses continued their enthusiasm through the first half of 4:00EST, then being aided by better than expected Industrial and Manufacturing data out of the UK past 4:30EST sent markets to their then session highs. Enthusiasm showed some waning past 4:45EST with a slow drift off those post UK data highs. Results in line out of Australia regarding its 2009 budget deficits and GDP forecasts provided little new momentum to European equity markets with a gradually selling continuing through the bourses. By 5:30 the FTSE and CAC had returned to effectively flat on the session with only the DAX holding on to wider gains.

In individual stocks: EAD's [EAD.FR] Reports Q1 Net €170.0M v €158.0Me, Rev €8.5B v €9.5Be, Backlog €413B v €400B q/q, Expects Airbus to capture up to 300 new gross orders in 2009. Revised industrial plans to complete A400M program could lead to substantial charges in H1 of 2009. || Babcock Intl [BAB.UK] Reports FY09 Op Profit £147.3M v £137Me, Rev £1.9B v £1.9Be, raises FY08 dividend 25% to 14.4p. Order book at £5.7B. Chairman: We anticipate increasing pressure for improved efficiency in public-sector spend will further increase the opportunities available to us. || VW [VOW.GE] Peich: Porsche group must lower debt burden before integrating with VW. CEO: Expect combined group to be world's largest automaker. VW-Porsche combination should not include 3rd party investors. Porsche becoming brand of VW is only 1 option open to the firm. See Fiat's moves to combine Chrysler and OPEL as 'unhealthy,' to fail globally. ||

Speakers: Australia's Swan released the details to the 2009 budget with the deficit to be A$57.6B (in line with press speculation). Swan saw GDP contracting by 0.5% in 2009-2010 period. Unemployment seen at 8.25 and rising toward 8.5% by 2011 || S&P stated that Australia's sovereign rating unaffected by budget details of higher deficit and higher debt issuance.

In Currencies: A degree of risk appetite resurfaced during the European morning as traders seemed impressed by US banks' ability to raise capital following the stress test results. Also contributing to the USD's and JPY's soft tone were lingering concerns over the revised US deficit projections issued by the US budget office on Monday. Despite some optimistic economic growth outlook, the Administration widened its deficit projections.

Dealers noting that Fed's Bernanke talked up USD presumably to help funding the massive budget deficits following the US budget office revisions.

GBP sentiment helped by its April RICS house price data. GBP/USD held the 1.5075 level for the second day in a row and probed back above the 1.52 handle during the morning. The production data also provided some upward momentum for the pound. GBP/USD tested the 1.5300 level and EUR/GBP cross dipped towards 0.8930 level during the morning.

Both CAD and AUD related pairs were higher in the session aided by higer energy prices and metals. NYMEX Jun crude futures tested $59.50 and Spot Gold rose back towards the $920/oz area. The AUD did retrace from session highs following the release of the 2009 budget details from Aussy Treasurer official Swan.

In Fixed Income: With equities and commodities catching a bid, a weaker USD and JPY, Government bonds have been offered in Europe this morning, completing the risk appetite scenario. Dealers noted that the belly bearishly leading the way in the session. The UK sold £2.2B in 2030 Gilts with strong results, and the Netherlands successfully sold €3.3B in 2012 DSL. For debt investors hungry for yield, Australian Government Bond markets are set to re-apprear in a big way with today's budget forecasting total issuance of A$60B in the upcoming fiscal year. ||U.K. government's latest gilt auction attractedsolid demand and the June Gilts recovered from session lows as a result. The bid-to-cover ratio came in at 2.24 times, up from 1.37 at the previous auction of this bond. June Gilts near its best levels for the session at 119.00, but still off 11 ticks from Monday's close.

In Energy: IEA's Tanaka reiterated his view that it was unlikely to again cut demand forecast for crude further. Comments are in line with his April 25th view. || Iran first nuclear power plant to commence generating electricity by October according to the Iranian press reports. Etemaad reports the plant in the southern city of Bushehr will start producing power by Oct. 23rd and cites Gholam Reza Aghazadeh, head of the Iran's Atomic Energy Organization. Article noted that Iran started test operations at the 1,000-megawatt plant in late February. Tests at the Russian-built site were expected to last between four and seven months ||

NOTES

China exports decline by larger amount expected. India Mar Industrial production declines by its largest amount in 16 years.

Bank of America raises funds by selling stake in China Construction Bank

Reportedly EU to stress test European banking system by September and tests reportedly not to test individual banks, but rather the systemic nature of system

Equity markets seem to be the main driver in the session with commodities and currencies following their lead.

Looking Ahead:

7:00 (SA) South African Mar Manufacturing Production: M/M: % v -0.6%e; Y/Y: % v -12.3%e

8:20 (US) Fed's Lockhart to speak at conference in Atlanta

8:30 (CA) Canadian March International Merchandise Trade: C$0.5B expected v C$0.1B prior

8:30 (US) March Trade Balance (last -$26B)

8:30 (US) Fed;'s Rosengen to speak in Atlanta

8:30 (EU) ECB's Tumpell-Gugerell to speak in Brussels

10:00 (US) May IBD/TIPP Economic Optimism: 51.0 expected v 49.1 prior

11:00 (EU) ECB's Weber to speak in Munich

11:00 (US) NY Fed to repurchase T-Notes maturing between 05/31/2012 - 08/31/2013

Trade The News Staff
Trade The News, Inc.

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Comments Help Risk Appitite

Daily Forex Fundamentals | Written by AC-Markets | May 12 09 10:41 GMT |

News and Events:

The EUR continues to be helped by recent risk-appetite, supported by equity market rallies and declining VIX and growing credibility to the 'green shoots' theory. In addition, as the market discounts the probability of a 'black swan' event in the financial sector, the flight to safety trades becomes less relevant. With focus being put back on the Fed's massively bloated balance sheet, timing of recovery and clean break of 200d ma, we expect traders are looking to build long position in the EUR. Comments by Bernanke and Trichet have added to the growing optimism surrounding the global recovery. Bernanke attempted to talk up the USD yesterday, stating that 'the USD will be strong because the US economy is strong'. On the comment both EUR and GBP sold off dropping to intraday lows but then quickly recovering, as trader focused/ believing the 'US economy is strong portion' of more than the rational of a strong USD. In addition, Bernanke acknowledged the market's uncertainty with the bank stress test results, yet argued that overall the tests serve a significant purpose of reducing uncertainty in the markets and boosting confidence in the financial system.

Jean-Claude Trichet commented yesterday that the global downturn had bottomed with some large economies already on the path to recovery. Overnight, UK released the RICS house price balance, which showed the slowest decline since Jan 2008 at -59.9 vs last month's reading of -72.1. UK BRC retail sales monitor was also positive at 4.6 % y/y, the largest jump since April 2006. With liquidity conditions improving in Sterling and positive economic readings, the GBP traded up to 1.5294 against the USD. With risk appetite improving, risk-correlated assets have seen a large rally in the past few weeks and look to continue to outperform. Specifically, we see EM Asia as a beneficiary, as a large improvement in terms of trade will provide the currencies with a tangible fundamental rational for buying.

Speaking of Asia, China's exports fell on an annual basis by much more than we and the market expected, down -22.6% y/y in April vs. -15.3% exp. after -17.1% in March. After the initial disappointment a closer look into the details suggests that the underlying momentum is still supportive of the global recovery.

Advanced Currency Markets - Forex Issues and Risks

Today Key Issues:

08:30 GBP Trade Balance £bn mar -7.2 exp,-7.3 prior
08:30 GBP Industrial Production mar -0.8,-12.8 exp, -1.0,-12.5 prior
08:30 GBP Manufacturing Output mar -0.9,-14.0 exp, -0.9,13.8 prior
11:00 ZAR Manuf. Production mar -15.0 prior
12:30 CAD Trade Balance C$ 0.5 exp,0.1 prior
12:30 USD Trade Balance $bn -29.4 exp, -26.0 prior
18:00 USD Budget Balance $bn apr -63.0 exp, 159.3 prior

The Risk Today:

EurUsd Constructive under immediate resistance (Piercing line on daily chart) at 1.3669 (Yesterday's high), consolidation subsides as we head higher, we continue to aim for 1.3740 area, a break past this level would set our sights on 1.3971 within the week. The bias really is for the upside here as the retracement only managed a 38.20% counter. On the downside 1.3557 serves as initial support but real test for bearish bias comes at 1.3507.

GbpUsd dollar weakness continues to shine through as bullish channel persists. Strong double top resistance at 1.5246, decisive push past this level would set sights on 1.5456 via 1.5352 (100% move after 50% retracement). On the downside 1.5180 (50% retracement) holds as soft support for a constructive bearish reversal with a floor on today's moves at 1.5074.

UsdJpy Yen gained against the dollar yesterday as other pairs retraced. We are currently trading particular range, with a double top head and shoulders about to confirm, initial resistance at 97.99 proves crucial, a push past would allow for 98.35 and 99.56 (50% and 100% respectively). A failure to break 98.00 with enough panache would focus morning lows of 97.14 – via 96.35.

UsdChf pair is trading a perfect mirror image to the EURUSD pair, EURCHF holding steady in 1.5080 – 1.5160 range with a bias for the downside would indicate USDCHF is set for further declines (strong recommendation for 3 graph comparison). Yesterday's support at 1.1022 was respected in early hours, we are set to test it again, eyes on 1.0670 (for monthly forecast) via 1.0960. On the upside (while a significant move up is countered by clear rounded top culminating at 1.1109) we see resistance at 1.1133 (38.20%) then 50.00% level at 1.1167.

EURUSD	GBPUSD	USDJPY	USDCHF
1.3971	1.5456	99.56	1.1167
1.3741	1.5352	98.35	1.1133
1.3669	1.5300	97.99	1.1109
1.3658	1.5277	97.68	1.1048
1.3557	1.5186	97.14	1.1022
1.3507	1.5117	96.35	1.1096
1.3469	1.5074	95.64	1.0670
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

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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